Let Them Eat Aldi

All the retailers I deal with at the moment are concerned with these days is how to stop their market share being eaten away by the discounters. And who can blame them - in the 12 weeks to January 5th, Kantar Worldpanel's data showed Aldi and Lidl had gained 1.3%pts of share compared to the same period in 2013. Combined, they're now at 7.1% market share - bigger than Co-op and with considerably less stores.

I must confess that I've become a convert myself - Aldi in particular is a great store which suits my top-up shopping ways. Their fresh food is good quality and, as a self-confessed Germanophile, I revel in the choice of imported cold meats and schnitzels. For top-up shopping, the alternatives are fighting my way round a 50,000 sq ft (or larger) superstore or a cluttered and poorly ranged c-store (independent OR multiple owner), the latter usually coming along with a price hike too. I've also mentioned previously that I rate Aldi's no-nonsense approach to their own-label products - match the brand or stock the brand if you can't - and this further boosts their appeal.

But, once you get past the basics, they aren't perfect. A bit like TK Maxx, you have to go in with a mindset that you might not get exactly what you want, but you will get something and that it will be a bargain. For example, I do a lot of stir-fries at home and Aldi sell incredibly good value straight-to-wok noodles at around 65p - none of the big four comes close to this price, and not all even bother with private label versions. I can also get soy sauce (though not the light one I prefer), good meat and veg but, I always sprinkle Chinese 5 Spices liberally over my creations and Aldi's small, confusingly mixed-case offering of herbs and spices doesn't deliver anything more exotic than chilli powder.

Discounters are full of these examples, and this is one of the problems facing the big traditional supermarkets. Shoppers who have enjoyed unprecedented access to the best ranges of food in Western Europe in some of the best looking and certainly most organised supermarkets in the world over the last decade are "down-sizing". They are happy to go into a small, cheaply-fitted store with a very edited range and checkout service that prioritises speed over niceties. Actually, on the service part, I have NEVER had a problem at the tills in an Aldi - the staff are consistently friendly, efficient and responsive to changes in queues. I certainly have not heard them moaning to each other about the unfairness of where they work, or a manager on the shopflooring wailing about his hours being cut to his team. If they roll-out self-scan, I bet the voice in the machine won't be as smug either.

Aldi and Lidl's share gains are a mix of "savvy shoppers",who are using them for their core basic shopping needs and using indies and superstores for the "nicer" things, and the poorer in society who are coming to depend on them - largely due to a well-thought out location strategy. This will particularly hurt Asda and Morrisons whose core shoppers are a very close demographic and lifestyle match to those flocking to the discounters. Morrisons probably have more about them to stem the tide, particularly as M Local expands and they move online. Asda, however, have already shot the online bolt and are cranking their one lever - price - so hard it's going to come in their hand soon. I'm hearing about more "value" bays and a policy that sounds like "Less is more" coming back to Asda - policies that lost them middle-class customers in the past and just make their stores look like larger and more expensive versions of Aldi. 

Tesco aren't out of the firing line, but they're also battling the High Street discounters. As I've mentioned previously, the High Street lobbyists always conveniently forget the huge investment Tesco have made into High Street sites, mainly through their Metro format but also with some Express stores and also as superstore anchors in town centre developments. Here, Tesco are battling with the likes of Home Bargains, B&M, Poundland, Poundworld, 99p Stores and so on. These guys are hard and fast to compete with. They trade with the industry very hard with all their focus on margin with no handcuffs of keeping shoppers happy through range choice. At best, we have price-marked packs engineered to hit a £1 price point to a set margin, at worst we have short-coded stock and grey-market imports.

Ironically, Tesco and Asda have both run trials in the past that could help them now. In 2005, Tesco setup Metro stores in Sheffield and Edgware as "discount convenience" concepts. This saw a dramatic cut in SKU count and staff and sought to address new insights from deep cover research into very low affluence households. The challenge as always when targeting these shoppers is that the tend to focus on core grocery lines which, due to their high volume status, also tend to have wafer thin margins. The "choice" lines that help create a better margin mix for retailers become far less relevant so you have to look at reducing store operational costs - less products to fill, less staff. 

The following year, with more shouting to the media, Asda launched the first 2 of a 200-strong chain of Essentials stores. These own-label stores were an unmitigated disaster with the Northampton store closing less than 6 months after opening amidst rumoured weekly turnover of less than £7000. The concept was sound in theory, but poor choice of locations and an own label offering nowhere near the strength of "Chosen by You" meant the enterprise was doomed from the start.

So perhaps the answer is already out there for the mults, possibly in the form of a new fascia that sets out a stall of a simpler "edited choice" range and a bigger emphasis on own label products. It would be a bold move, however, and you have to question whether any of the current chief execs would take the risk. Asda have the sites most suitable for this with their former Netto stores and a successful implementation could mean they wouldn't need to hide that group of stores' underperformance behind legacy stores roped into the Supermarket banner. I'm sure Tesco could do well too - stores like Edmonton Green which haven't been refitted or rebadged for over 30 years would certainly benefit from a lick of paint to stop their terminal decline. And what about Morrisons? Well, maybe Preston is a step down that very path.

Whatever the answer, the UK grocery scene looks certain to continue in an entertaining way indefinitely. We are seeing the biggest shift in shopping behaviour since the advent of self-service. These interesting times will show us who the best are at adapting.

Sanity on Sunday

Well, it was inevitable really - after a few weeks of relaxed Trading Laws on Sundays, naive industry experts are calling for the change to be made permanent to help the industry. Asda's Andy Clarke has also weighed in claiming his shoppers are asking for it. The fact that Asda is the only one of the Top 5 UK Grocers who don't have stores under the magic 3,000 square foot barrier is I'm sure a coincidence, as was his choosing to talk about this on the day Asda announced sluggish Q2 LFL sales and a clear slowdown from Q1.

So, would an extra 18 hours a week trading really make a difference? Evidence would suggest otherwise - this sign was outside Tesco Seacroft Extra back in July...

And this sign was outside today...

After just one month, a typical hypermarket with a genuinely wide catchment area has already decided that it doesn't need 6 of the extra hours on offer. It's a fair assumption to suggest that the hours at the other end of the day aren't the busiest of the week either.

The fact is that there's already 150 hours of trading available during the week and additional hours on a Sunday can only spell worsening quality in our shops. From a grocery point of view, 24 hour trading has been a disaster for store standards and Sundays provide a brief respite for stores. Overnight filling is still the most efficient replenishment method and should help manage inventory, both physical and recorded. Having to be conscious of customers wandering around restricts a store's ability to really crack on with a big delivery.

From the shopper's perspective, shopping when the twilight crew are about isn't the best experience as anyone who has had to shop an aisle filled with roll cages can testify to. Add in the checkout balancing act between having staff doing actual work and managing queues and you're not looking at the most efficient operation. I recently did a large trolley shop at 6.30 in the morning and had to use the self-scan tills. There was no one nearby so when the carrier bag scales finally gave up under the strain, I was left waiting for help. It was only by chance than an off-duty member of staff was also passing through at the same time and put his over-ride code in. At least that showed me Tesco do have staff that care even when they're off-duty!

I've also heard the libertarian view that government has no right to state when businesses can trade. Free market thinking and deregulation brought us the banking crisis so it's hardly a great starting point for an argument. This is a wonderful view for middle-class managers in comfy ivory towers, but a 24/7 culture puts added pressure on working class families. I absolutely agree with the right to open on Sunday and am certainly no religious person - I remember crossing lines of bible-bashers when my store first started opening back in the early '90s. Justin King has it right when he calls the current laws a "British compromise" and we should be proud of that. The current system guarantees many some down-time, something that's valuable in times like these where we all need to be working hard the rest of the time. There's no extra money to be spent, so what good would an extra 18 hours do?

It's not just the mults, my local Home Bargains has been trading 1 hour extra - last week at 4.40pm, there was me and some very bored looking staff. Busy? Not since 3 love came the reply.

Perhaps we should looking at shortening them, not lengthening them?

Tesco Pride

Yesterday morning, I had the privilege of walking through the doors of Tesco Prestwich. Perhaps it was the fact that it was a bright sunny day and already warm that was putting me and the store staff in a good mood, or perhaps it was the smell of freshly installed wood.

Yes, Prestwich has been refreshed. For those of you who don't know the store, it has been as grim as the M60 which it overlooks for as long as I can remember. With its location, it used to have one of the broadest geographical spread of Clubcard users in the country and so could be seen as a bellwether store who Tesco.

The refit has literally just finished and store staff were still putting up the signs to proclaim this when I entered. But they were all smiling - I kept looking to see if there was a camera crew filming the latest motivational video as it's not something you see enough of in Tesco, or any other grocer, these days.

As with the Refresh My Superstore programme about 8-10 years ago, the refits are not really radical, but just a subtle updating and some TLC for tired old stores. Prestwich now boasts the usual excess of wood, but also a stunning entrance foyer with a clear Food To Go and Tobacco area, acres of space for the shoppers and a great view into the produce department. Of course, it's only a matter of time before that space gets filled with pallets but we'll all enjoy it while we can.

One of the subtle elements of the refits is the communication. Posters proclaiming things like "Thanks For Not Changing Your Store While We Changed Ours" hit good notes with shoppers, and having a big sexy foyer display with a photo of one of the store's own managers on it really does personalise the experience and place the store back in the community.

Most retailers and retail-geeks will know the package for the refits now and there's no evolution of note in Prestwich, but as Carrefour showed with their stalled "Planet" programme, it's one thing to land a great trial but rolling out can be harder. I've worked on a roll-out with Tesco - 150 Metro refits in 18 months - and its tough, so I can appreciate just what Tesco are doing with this current programme. What must be worrying their competitors is that it seems to be a reawakening of the "machine" - and key to the machine, as always, are its people. And people seem to be making a difference again.

As a walked around Prestwich, I got the same buzz off the staff as I did when I visited Hertford and Barking stores not long after their refits. A real sense of pride is creeping back into Tesco - there's been a few years of negativity flooding through the business with increased centralisation, a new generation of store managers trained to implement rather than trade and, crucially, shops that are opened and left to fall apart. A few miles away from Prestwich lies a former concept store in Irlam and there's great evidence of what happens when you don't regularly revisit and update your shops. A refit gives the staff something to believe in - working in shops is hard, always has been, so you need a good environment to work in and a shop that your proud to be a part of.

But will this be enough? It will certainly stop more shoppers leaving to other retailers, and word of mouth is still powerful and could bring back some lapsed Tesco shoppers. Of course, there's a growing "big must be bad" cabal fueling an "Anyone-but-Tesco" mentality and better shops alone will not fix that, if anything. However, its a very good start and the gusto with which Tesco are tackling their stores must be causing worries in Leeds, Bradford and Holborn.

Our High Streets Are Becoming Yellow Brick Roads

You know the story of "Wizard of Oz?" - a group of disparate losers band together, pulled together by faith in sham guru? And that sham guru somehow keeps the naming rights?

As the Minister For Portas proudly proclaims that there will be a second wave of "Portas Pilots", the media-friendly reality TV star has to deal with a PR crisis in Margate. It is a real pity that the governments attempts to revive our High Streets is being dragged down to this level, but when you see an "expert" turn a presentation to a government committee into a public pitch to a television company, what do you expect?

If I were Grant Shapps, I'd be a bit worried. If Mary Portas wasn't such a darling in the press, I'm sure they'd be pointing out that her forthcoming TV series is a serious breach of the Civil
service Code. OK, so she's not on the government payroll, but her report and subsequent puts her into a special adviser bracket, and directly profiting from government work in this way is at the very least incredibly unethical. And that's before the alleged threats to Margate.

Despite the recent problems government ministers have had with special advisors (and indeed people who write for newspapers), Mr Shapps has just let the bandwagon (or should that be gravy train?) roll on. By the way, I have publicly challenged him on this issue via Twitter, but have been roundly ignored. I'm open to giving him a right to reply but not sure if he will have time between TV appearances.

One good thing that has come out of this has been unifying councils and retailers, albeit as they scramble for the pitiful sums of money on offer. As in
the "Wizard of Oz", the main characters didn't actually need the guru as by working together, they had already achieved what they wanted to.

Councils and retailers should have been working together already anyway. Retailers shouldn't be in awe of someone who has proved that, with a nationally aired prime time TV show, you can open a shop - they should be looking to be the best they can be. That's what Tesco do, there's nothing stopping them.

Meanwhile councils should be taking fully holistic views of developments - is the extra space needed? What happens to displaced units? Is there enough parking and transport links? Rather than the developer pay for a new roundabout and some hanging baskets, could they fund a park & ride?

The answers are all out there. Our toes have great retailers, big and small, there are great ideas out there like Independents Day (4th July - go support your local indie!!!). Every retailer can become their own guru - every town just needs a couple to work together. And will TV exposure make a difference? Surely winning back the local people who are driving past currently will be enough! Unless of course it's your town that has the outrageously camp guy or bimbo who the TV company give unequal airtime to. And lets face it, they won't hang around too long as they'll be on the next "Celeb Big Brother"

So High Streets of Britain, beware of false gurus - roll up your sleeves now and get on with becoming great! It's in YOUR hands!

Tesco To Shut 2000 Stores!

After many years of Tesco results day being nothing more than an exercise in counting how many zeroes were at the end of the profit figure, it looks like every update now is to be accompanied by the deafening sound of sharpened knives being stuck in by analysts and commentators. Even Mary Portas gave her opinion by commenting via Twitter this morning that Phil Clarke should “listen to towns who don’t want you”. Not entirely sure where these towns are, but we shouldn’t really pay much attention to someone who uses a government committee to pitch for a new television series, should we?

The figures, while disappointing for the UK, are actually a vindication of Tesco’s overseas adventures. Part of the reason why Tesco first started to look abroad was that they knew you couldn’t get growth from the UK business ad infinitum. It’s a credit to the business that they’ve kept growing in the UK for so long and, given just how good their competitors have got in the last few years, just shows that there’s plenty of life in the business yet.

Phil Clarke’s plans are the right ones and if they can roll-out the features from Hertford and Tooley Street alongside the “Future 3” service initiatives, then they should be able to sure up the business. It’s a big “if” though – for a long time, morale has been declining in stores as hours have been cut. This coupled with a generation of store managers who have been trained to implement and follow process rather than run a shop is a big blocker to the world class execution needed to fulfil the promise of the ideas. And there’s still evidence that they are out of touch with what a great customer experience is – the new tills in my local store now have a huge wall between me and the cashier which forces me to scan my own Clubcard, thus depriving the cashier of a chance to engage with the customer.

I also think customers come to expect more from a Tesco than other retailers and this leads to greater disappointment. It was interesting to hear some of the comments from listeners on Radio 5Live this morning, commenting on the poor standards in some Express stores. I agree that they aren’t exactly the jewels in the crown for Tesco, but if you compare them to their peer group in the C-Store sector, they are no worse than a typical Nisa, Costcutter or even JS Local. And they are miles ahead of most Co-ops.

The pictures from Hertford store show that a lot of store design influence is coming from Tim Mason and Fresh&Easy. I’ve said on a number of occasions that Tim is the secret weapon at Tesco – no one in the senior ranks is more obsessed with the customer than Tim and that is exactly where Tesco need to focus.

It doesn’t matter what analysts, consultants and commentators think in the end (even me!), it’s down to what the customers think. Let’s hope Tesco listen to them, more than they listen to the experts.

Fresh Is The New Black - Profit Warnings Follow Shortly

Sainsbury's Mike Coupe, in an article for Retail Week, has stated that Fresh is the future. He's not alone in this view - Morrisons reinvention of their stores is centred around fresh food, early noises from Tesco suggest they see this area as key to their recovery strategy, while Asda have recently revamped their fish counters.

There's no denying that fresh food departments can define a store for shoppers. Even if you're not buying into the categories well-presented and bountiful produce fixtures, fresh counters and bakery departments, can help make you feel that you're in a great store. But, this can come at a cost if not enough customers get wowed so much that they put the products in their trolley. If they don't, you're suddenly looking at the most expensive POS materials in the industry.

The problem with Fresh is having kahunas big enough to wait for the shoppers to take to the new range. My photo of Asda (left) desperately trying to clear product from their fish counter just after the relaunch sums this up perfectly.

With ambient products, you have a lot longer (although judging by the out of code Hershey's products found by fellow blogger Dresserman, even that's not long enough sometimes!). You're lucky to get a week's code in store, so you have to ensure you're stocking winners. There's no room for slow-moving range perception driving lines in fresh.

Most retailers will have guidelines for stores on how long they must stock a poor selling fresh SKU before they can make a local call to switch off reordering. However, canny store managers know that their boss won't give them a rollicking for saving the waste budget. And while big displays of sexy new fresh products may look great when they first come in, bulging Reduced To Clear bays or large sections of the aisle covered in reduced stickers can be very counterproductive in terms of making your shop look appealing.

So, how do you make fresh work for you? Well, good old fashioned smoke & mirrors is a good place. Morrison's new sexy produce kit makes a small amount of stock look bountiful. JS also get a good effect from good use of signage and angled trays in their produce departments. Both of them also keep to the traditional location of produce - at the entrance. Full-looking and colourful displays of produce set the scene for a store in ways that pallets of heavily discounted stock will never do.

Bakeries are also key. Asda and Morrisons both have spectacular Bakery offers and continually innovate in this area. Good use of kit in this area can also create an artisan feel even to customers walking past and purchasing their Kingsmill rather than Rustic French Country Baguettes. Although Tesco do make efforts in this area, even in Metro stores with the pastry offer, the operational simplicity is exposed to the customer and the range is often uninspiring. JS departments look great but I must say I'm always disappointed by the choice. It is a credit to their PR department that they got more exposure for their Tiger bread than the other retailers, despite Asda probably leading the way in the product!

Another thing that they need to do - and I'll be honest in saying I don't know how they can - is to make shoppers feel that it's THEY'RE fault when their chosen item is out of stock. M&S used to have this perfectly - they probably still do on the Dine In For £x deals they run. Generating some "When It's Gone, It's Gone" exclusivity is hard, but essential for avoiding excessive stock heading for the clearance bay.

My final suggestion is value-adding. Asda have been doing this for years with their Pizza Counters and the Fish initiative is pretty much along the same lines. Value-adding allows you to spread the risk on each case coming into the store by offering to more customers more ways. If done well, it also adds an extra service connection with the customer and another chance to delight them and make them loyal to your store.

When you look at these points, you start to realise that Tesco have the furthest to go. Many of their counters have been replaced by "grab and go" points which remove the service element. The manned counters that remain have relatively short opening times, leading to customer disappointment. Meanwhile, Produce departments have been shifted to the middle of the stores for both operational reasons (most replenishment during day, so bring the department closer to the warehouse) and strategic reasons (enter in Non-Food).

Fresh is definitely a hot topic at the moment, but will Coupe and his peers hold their nerve when the waste bills start piling up? Only time will tell

I

Andre Villas Brasher

So another of the legendary triumvirate is ushered out with the shock departure this week of Richard Brasher. Like Chelsea's ex-Manager, Brasher faced the unenviable task of overhauling an ageing team (stores) set up by a club legend and mentor (Leahy). In the end, his boss sensed public disaffection and took steps to avoid the heat landing on his own door step.

I'm a big admirer of Brasher. My first job in New Tesco House was as an administrator in possibly the greatest retail marketing team ever assembled. At its helm was Richard Brasher, sat in his goldfish bowl office in the middle of the mezz floor. He treated everyone with the same respect, listened to everyone's views and wore his heart on his sleeve. He once told us of his pride that 75 people in his marketing team were running rings around the better-funded and heavier manpowered opposition. This team had taken Tesco to number one and the foundations they laid helped to establish a market dominance unseen in the UK. These were glory days.

Philip Clarke possibly made a big mistake putting Brasher in charge of the UK business. Running that unit is all about shops and Brasher was very much an office man. Clarke has got form with the UK business and I would expect him to focus on the ops side of things while he has the UK reins.

Clarke shares many similarities with his namesake up in Leeds. Both are clearly entrenched in the history and cultures of their respective businesses, yet neither seem to have the loyalty and respect internally that you'd expect. They are both struggling to get away from looming shadows from past leaders (Archie Norman and Terry Leahy) and, tellingly, both have well respected former colleagues lurking on the other side of the Atlantic.

While Dave Cheesewright has new international remits that will allow him to meddle in UK affairs, Phil Clarke has Tim Mason to potentially worry about. Like Cheesewright, Tim seems to be enjoying North American life and certainly seems to be enjoying the challenges of making a success out Fresh & Easy. Tim is a great retailer who obsesses about the customer - a key element that's needed to turn round the UK business. However, Fresh & Easy looks to be gaining momentum and after the investment pumped in, Clarke may be happy to keep Mason working his magic several thousand miles away from Cheshunt.

Clarke's priorities are many in the UK. He needs first and foremost to get the stores right, but he also needs to fundamentally reshape the PR team as well. The healthy paranoia that drove Tesco's success (assume someone else is doing your job better than you are somewhere) has become an unhealthy one and nowhere moreso than in the PR department. To hear a spokesman get hammered by 5Live's Peter Allen over the Workfare debacle was shocking - rather than do good PR and highlight the amazing opportunities that Tesco gives hundreds of thousands of employees, he went into a full-on "no comment" and avoidance tactics. On this form, they'd invent a cure for cancer and turn it into a PR disaster!

It's a big 6 months coming up for Clarke - starting with Easter. Who knows what will happen if Brasher has sacrificed himself in vain....

Tesco Need Kwik-Refit Refitters

It was bound to happen eventually, but Refits seem to be back as the must-have essential for any successful retailer. JS and Morrisons have showcase stores which are refits in the shape of Heaton Park and St Albans, while Asda have been very quietly applying some of the new store designs used in the supermarkets format to freshen up their larger stores. And now, the talk is all about Tesco embarking on their biggest store investment programme since Refresh My Superstore over 10 years ago.

Many in the industry obsess on the latest new stores and fantastic new designs, but the average shopper generally only cares about the handful of stores they use regularly and is often unimpressed by the stuff that us retailing geeks get excited about.

There are numerous stores around the country left to trade alone with prototype kit that was sexy at the time, but became unviable once the value engineers got their hands on the roll out programme. Whilst I love the love level produce kit Morrisons have been playing with, I'm reminded of similar gondola units at the front of JS Central in Tottenham Court Road when it first opened. And how many times have we been told Olive Bars are the future?

In one of their many anti-Tesco rants, a Guardian writer showed her narrow knowledge of their stores by accusing them of popping up with fake clock towers everywhere. Now, that design of store hasn't been built for over 15 years butane so this serves as a great example of how the public perceives the big retailers - through the lens of their local stores.

And this is what Tesco need to be wary of. Morrisons are in a position where they have some fun in a couple of stores before deciding what are the bits to take around the country while Tesco need something that can roll out to 800+ shops quickly, cheaply and with minimal customer impact. Not an easy brief it has to be said.  Carrefour have tried an ambitious project with their "Planet" concept and progress has been halted as they have discovered roll-outs aren't the same as trials. Personally, I'd tie Tesco down to 5 key points.

1. Put Produce back where it belongs
Look at Morrisons and JS - a strong Produce department is still the best way to greet your customers. Hidding it halfway round the store just doesn't work. You don't even need to go as far as Morrisons - good simple signage and kit like JS use will work. In fact, the green kit used by Tesco for well over 10 years is actually very good if laid out and planned well. Let's get back to seeing a big bountiful and colourful display of fresh produce and flowers as we walk in.

2. Give shoppers some room
The thing that stood out for me in recent JS refits as well as landmark stores such as Welwyn Garden City is the width of the aisles. Everyone seems to have been obsessed with maximising yield in store layouts in recent years which has resulted in cramped unpleasant stores. This is often made worse during tough trading times as more shippers and dump bins are added in. With non-food returns per square foot dropping and most grocery halls at optimum space, now is the time to invest in space for the customer.

3. You only need one seasonal aisle
Or to put it another way, before adding a second make sure you've got enough credible customer-focused events to fill the space for 12 months. "£1, £2, £3" and World Food Events may seem like a good idea when projected from Powerpoint, but they don't work in store.


4. More soul in the signage
Tesco signage has got more and more clinical over the last few years. And to make it worse, the modern colour palette seems to be inspired by 1950s hospital wards. They need to look at JS for directional signage and Morrisons for feature signage inspiration. And most importantly, remember that carpet-bombing a store with colours and signs isn't the way to do things. Good stores are simple with pockets of personality.


5. Keep your boxes in the warehouse
Shoppers don't want to see your overstocks nor do they do feel reassured that the item with no stock on the shelf has a case out of reach. It cheapens the feel of the store with the impact being that you feel an impulse to trade down on your item choice. For snobbier shoppers, you may even trade out to a store which makes you feel better about yourself.

These 5 points assume the basics are there as well - sensible space allocations, proper customer-focused flows and great implementation at store level. It's time to get back to basics for Tesco - especially as when they are doing the basics, they have generally done them way better than anyone has done previously. That's the every little that helped them get where they are today

The People's Supermarket Seek A Bailout

My local butchers is a fantastic shop. It's been there for generations and is a true local hub - local society notices are on the walls and everyone in there knows each other so well, it feels quite daunting the first time you visit. Not that you should worry, the staff make you feel at home and even if they didn't, the food is of such high quality you wouldn't mind. Their commitment to local suppliers is second to none - they've joked with me in the past that they could even tell you the name of the chicken. Now, they've achieved this through hard graft and with nothing more than a brief mention on Terry Wogan's old radio show a few years back. They didn't have a "celebrity" chef and a Channel 4 programme to promote them and furthermore, they've never asked for handouts from the local council.

For those of you who don't know about The People's Supermarket, it was a project started by Arthur Potts Dawson two years ago. It's aims are very noble and centre around a self-sustaining community-driven supermarket. The nation's attention was drawn to the project through a prime-time Channel 4 series during which we saw Arthur and his team try to get a grip on basic retailing while meeting potential suppliers. It fell into a typical "Islington Left" hairshirt programme showing us just how "nasty" big retail is to farmers. It even wheeled up the Tyrrell's Crisps founder as someone so hurt by evil capitalism that he'd sold his business to private equity. We saw Arthur growing herbs behind his London restaurant, telling us it was eco-friendly. This is true of course, but it also helps the profit margins of his business.

Now, if pushed I'd come out as a left-leaning person politically and because of that I'm actually a supporter of what they're trying to achieve. It's good to see a retailer reaching out to local community projects (like Asda do) and investing heavily in training to help people better themselves (as the large number of Tesco managers who started as trolley boys are testament to). I also love their ideas about reducing food waste - especially creating in-store "ready meals" with fresh food nearing it's code life end.

But I also believe in fairness and their campaign against paying due rates is something I can not agree with. When challenged on Twitter, they seem to believe that "bad" businesses like Tesco should pay more rates than "good" businesses like local bakeries and, of course, themselves. This is the type of nonsense that you'd expect to read in the Dave Spart column in Private Eye. Like it or not, Tesco and the other big mults are an integral part of a healthy local retail community. They are just as relevant to communities as a small bakery because the community decides where they hang out, where they use, who wins and who loses. The old arguments about keeping the profits in the community is also being rolled out. I never quite get this old chestnut - all it ever does is bring one level of supply chain closer. Unless of course, all the flour and ingredients for the local bakery are grown, milled and processed within 5 miles. My local greengrocer is owned by someone who lives over 20 miles away. In years gone by, the wealthiest Walthamstow market traders moved away to the leafy affluent climes of Chingford. In retail, there's always someone somewhere making a profit and quite often, they don't want to live where they're making their money.

If I was still living in London, I would be offering my support to TPS and hopefully using my retailing knowledge to make them a success. They need to approach things with more pragmatism - focus on the concept of community-owned aspects rather than the dogma-driven ones. Rates are a reality and they should have been working on ensuring this didn't come and bite them. Furthermore, putting themselves up for martyrdom won't help anybody, especially when they could have been highlighting just how much retail rates have become for EVERYBODY.

So, I hope TPS do survive but through people rallying round to pay the rates bill rather than a bailout from Camden Council. I urge all my readers to do as I've done this morning and donate to them - use this link http://www.thepeoplessupermarket.org/home/support-us/ or visit their website.

They are worth saving, but not on their terms.

Co-op Wield The Axe

It's always sad to see fellow retailers facing redundancy, especially in times like these and my sincere best wishes go to those at the Co-op who received the wrong kinds of letters in Manchester today.

Mass redundancies can leave long lasting scars on businesses - I joined Asda less than 6 months after their 2005 "cull" and emotions were still raw. For some, they were still haunted by that dark day when I left 5 years later. You can't help feel that today's cuts were inevitable following the merger with Somerfield. My understanding is that there were still senior managers travelling between Bristol and Manchester which can hardly have helped the two groups of workers bond. But while a restructure was overdue, there are two key issues that I don't believe the Co-op has resolved yet - Range Complexity and Store Compliance.

There's no denying that Co-op has an incredibly diverse portfolio of stores. Their capping on square footage has put the brakes on format proliferation but they still have a phenomenal array of ranging routes for their stores. I've heard of a category with around 500 different planograms to cover the estate. I'm all for targeting ranges to local needs, but how do you ensure that every plan is accurate and consistent? And just how much does a small range in their core size c-stored need to vary? My experience is that only shopper mission makes a massive difference to the core range - shoppers of all pockets still buy Heinz Baked Beans and Walkers Ready Salted Crisps.

Another problem with this strategy is that unless you have a stable period with a base range in your estate, you have no robust sales data on which to make decisions about which products matter more to different shopper groups. Without good data, you're left with retailer hunch - a valuable input to any good range selection process, but dangerous as the primary or sole driver.

With so many senior changes at the Co-op coupled with disappointing sales, you'd expect strategy to be reviewed. Steve Murrells brings a huge pedigree with him when he joins from Tulip later in the year. He was highly regarded at Tesco and his CV would seem to make him perfect for the business. Hopefully, he will bring some of the old Tesco simplicity to their ranging processes and, perhaps make life a little easier for his merchandisers!

I'm certain that complexity at the centre doesn't help the stores, and it shows. Most Co-ops I visit are consistent only in being huge disappointments once I go through the door. Their branding is superb, externally they look amazing in the bright green livery, but once you go inside, it might as well be my old local Chelmsford Star from 30 years ago. There are some exceptions, notably Marple which I visited earlier in the week. When the store team genuinely care about their store and put the effort in, the branding comes alive and creates a wonderful store environment.

However, some of the stores I've visited are inhabited by staff who have no passion for their stores. I wonder sometimes if Co-op suffer from the same problem as Asda do with their stores and try too hard to be a "happy place" to work - if you don't stretch and challenge your store staff enough, some will take advantage. Sad, but true!

I appreciate that the systems aren't as slick as other retailers, but that's no real excuse. Good retailers deal with what they have to hand and cherish their stores. Untidy, poorly merchandised and basically scruffy shops that seem totally at odds with the slick branding and marketing. They don't appear to be good with anything, let alone good with food. This lack of consistent execution in the stores is inextricably linked to the first issue and reaffirms my belief that what Co-op need first and foremost is a much simplified ranging strategy to establish firm foundations for the next 5-10 years. If this was coupled with much improved store training that taught their stores had to be great traders, then credible local decisions could be made without the need for hundreds of centrally-driven variations to range.

Co-op does have a lot going for it - strong brand equity, great store locations, good store models. They now need to knuckle down to becoming operationally slicker. If they can achieve this, and do it during a downturn, they stand a big chance of becoming a true major player in the UK retail environment in the future. Good lucky to them, and even more luck to those who sadly won't be able to make the journey with them after today.

2012 - Bring It On

When I was visiting London last month, I got stopped on the Millenium Bridge by a German TV News crew who asked the question “what are you looking forward to most in 2012?”. My answer was simple – 2013.

There’s no question that 2012 will be tougher than 2011. For all the hype about cuts last year, many only started taking affect halfway through and many more will hit us this year. There’s also a lag in consumers reigning in their spending. I feel the penny may have dropped at last that those credit card bills do actually need more than the minimum payment.

An even higher percentage of “leisure” time will be spent in supermarkets this year and a higher proportion of disposable income will be spent on food and drink. The paradox of this is that those above average household incomes will possibly be spending more on grocery than last year, irrespective of inflation.

So how will the mults react? Tesco and Asda seem obsessed with price, even more than their customers at the moment. You can understand it with Asda as it has long been their only lever and hard-coded into their DNA. But with Tesco, they seem to have forgotten what made them the behemoth they are now. During the 1990’s, they invested in price AND shops – now their shops are increasingly looking tired and unloved. Pictures are flying around twitter of items with the wrong coloured shelf-edge labels and even a complete lack of them – a surefire sign of store cuts biting.

Tesco will also face mixed impacts from their formats – Extras will surely struggle with non-food space returns falling but Metro and Express will both benefit from shoppers switching to top-up shopping and shorter journeys in their cars. Asda also claim to have formats, but the Supermarket format lacks a crucial element that Metro has – good location. Shoppers who prefer smaller stores tend to arrive by foot or public transport – much of the Netto estate was on retail parks and other cheap rent locations and not really set-up for this. I await the next set of Kantar data with interest as Andy Clarke’s assertion that Asda can now “do small stores” looks increasingly similar to George Bush’s declaration of victory in Iraq 8 years ago.

I personally can’t understand Sainsbury’s at the moment. I genuinely felt this time last year that were well placed to take the number 2 food spot away from Asda but it never quite materialised. Certainly the refit and opening programme is creating some stunning looking stores which invest a lot of space to the shopper, there’s still a slight issue convincing the crucial mid-market shoppers that they can get their full shop there. JS have incredibly strict shelf inventory rules which make it harder for them to offer breadth of range compared to their competitors. This will probably hamper their ability retain big trolley shoppers until a solution can be found. There could be an element of slow burn with JS though and I start the year in the same way I did last year, expecting them to get good growth and at the very least make the good folk of Leeds a tad nervous.

No such problem at Waitrose though – they suffer no problem with squeezing in range in their increasingly ambitious looking shops. They’ve also got the “buzz” around them amongst shoppers – a kind of aspiration that used to be reserved for M&S food before it appeared everywhere with Simply Food. They will have some big sales numbers to lap from last year which might point to a slight slow-down in their growth. Online will certainly help, and the early figures from them suggest a cracking Christmas period. There’s a good chunk of Ocado business they will pick-up as the early teething problems become a distant memory while the snobbier amongst us will surely look forward to a nice looking Waitrose van parking up outside the house to wind-up the neighbours.

Morrisons had an amazing year last year and I fully expect that to continue. They seem to have a great balance at the moment, with shoppers seeing them as cheap without such over t marketing as Asda and Tesco. Although a large proportion of their estate still looks dated and reminds me of my old Tesco in the early 1990’s, they’ve shown with their store development programme that they understand what the modern shopper wants from a store. Plus in M Local, they have a unique take on convenience which I think will work well, especially when they get brave and tackle the London shopper antipathy that has surrounded the brand since they took over the Londoner’s beloved Safeways.

Finally onto the Co-operative. They have marketing sewn up, even finding the only accent in the world that can rhyme “Good” with “Food”, and my experiences with them suggest there are a lot of great ideas and projects coming out of HQ. But, and it’s a big but, this just isn’t showing up in their stores yet. Their showpiece city centre new stores are great, but the vast majority of their estate is dated, messy, badly laid out and generally a poor experience. The business needs to be dragged kicking and screaming into the modern age, something that can be done without losing the ethical and community USP. The business needs to be brave and accept 2 or 3 years of pain and poor growth. But I’m confident that if they hold their nerve, there’s a cracking business there.

2012 will be incredibly tough for everyone, but I’ve personally never ducked a challenge. There will be a lot of whinging and bad decisions made over the next 12 months, but good businesses will always survive tough times.

See you on the other side!

28 Hail Mary’s

At last the Portas Review is here!

I must admit I had some reservations about her appointment. Using someone who demonstrated during “Queen of Frocks” a distinct lack of basic retailing skills made it seem that her appointment to head up the government’s High Streets review was like setting Jeremy Clarkson the challenge of presenting a plan for rebuilding the British car industry.

But throughout the review, Portas has bucked the trend on this kind of activity and maintained visibility throughout the process. OK, some of this may have been driven by ego, but she has gone out to a diverse set of towns to meet real people and not just the vested interests. She has come in for a lot of criticism from various groups who felt that they were missed off the list, but having met shoppers, small businesses and key figures like Richard Brasher, I believe she has probably collected a truly diverse set of views. The problem with Portas is that she doesn’t do herself any favours – the leak of the report appeared first in The Telegraph, a paper that she contributes to, for example.  But enough about the person, what about the report?

Her cover note speaks in a tone that aligns with my beliefs – “High Streets must be ready to experiment, try new things, take risks and become destinations again”. Too much of the debate has been around others doing stuff – this puts the emphasis on EVERYONE doing stuff. There are some really great ideas in there such as larger retailers mentoring smaller ones, Town Management Teams, disincentives for leaving units empty and an “affordable shops” quota.

Some of these disappoint in not going far enough. For example, major FMCG businesses have a massive potential role to play in upskilling small retailers, rather than just selling to them. A better framework to support this would be a massive winner, potentially with wholesalers taking more interesting in generating healthy indies. The empty units debate, as my Twitter followers will be aware, is a big bugbear of mine with percentages always used and no spotlight shone on an irresponsible increase in units. It was probably outside the remit of this investigation, but I’d still like to see policies supporting old units being converted to housing as part of new development plans. In Leeds, for example, when the new Trinity shopping centre opens in the town centre in 2013, it’s likely that a nearby street (Albion Street for those who know the area) will become largely vacant as current inhabitants such as Next move into the shiny new units.

Councils need to up their game, that’s very clear – one fear over Town Management Teams is that the same old bureaucrats will turn up rather than real retailers and marketers (my CV is attached!). The whole parking issue is a red herring though. Parking needs to be restricted for congestion and pollution reasons – would you really want to put more cars into crowded town centres like Bradford, Colchester and Chester? No, what is needed here are more shopper-focused public transport initiatives. Trams would be ideal, but expensive, so Park & Ride schemes need to be increased and tied into Town Management marketing.

Now the government is working on how to adopt the report, we can expect the lobbying to start in earnest. I had to switch the radio off on the day of the report as the various interest groups were all digging trenches and not embracing the spirit of the report. Mary Portas has produced a worthwhile and intelligent report – watch now the British disease as we turn it into some destructive. My fear is that the government, facing increasing popularity, will try and turn all the guns on the big retailers in the name of the High Street in a similar way to the Blair government’s “Rip-off Britain” campaigns. To do so would seal the fate of many High Streets.

I really hope I’m wrong.

So This Is Christmas...

Any way you look at it, it’s going to be an eventful final 6 weeks to Christmas for our grocers. A tough year could get worse or turnaround completely. At the very least, the big 4 will be looking to emerge unscathed from the battle, with no embarrassing piles of stock left to clear at reduced prices to the scavengers in January.

Tesco probably have the most to lose. The Big Price Drop has probably come under more scrutiny than any of the myriad of “We’ve made £x million cuts” claims from the grocers over the last 10 years,  but can sometimes be easily dazzled. Their success may come from leveraging their non-food position – Double Up Vouchers are heavily focused on non-food this month and the queues at Direct collection desks suggest that things may be picking up on that front. My worry for Tesco is that will their stores be able to cope with the peak – recent visits suggest that even in this calm before the storm period, their replenishment and service levels are at an all-time low. My Twitter followers were treated to a live stream of updates when I recently tried to collect my Direct delivery – one person manning the desk during an evening peak, with stock piled up around her, products not booked in properly and apparently one depot running over 24 hours behind. Even if they get the money this year, poor fulfilment may make people think again about returning.

Asda traditionally struggle during Q4 as people tend to “trade up”, i.e. shop at nice feeling stores. With the effort put into Supermarkets this year, they may see this exaggerated as even those shoppers who remain loyal to a brand tend to ditch their smaller local stores for the hypermarket versions. Although the headline figure of 45% growth after conversions from Netto is good, it’s not a good return on the investment in store look and feel and increase in SKUs. Furthermore, even if they are not deserted, could the tightly-pack fixtures cope with extra demand? Asda do have an ace up their sleeve though in George clothing, which always does a great job with the party season and the now legendary Tuxedo’s. If George have a winning collection, that might be enough to drive in the footfall that Asda needs to make a poor year slightly better. The latest Kantar results suggest they got their usual Halloween boost so perhaps there is life in the old dog yet.

Sainsbury’s are all set up to do “ok” as they have done all year. You get the feeling that there’s a lot of pent-up growth with Sainsbury’s and I stand by my assertion that they will knock Asda off the number 2 position soon – just not in 2011 as I originally suggested. Without the Jamie effect, they will need to get food credentials from other sources, although the Taste The Difference brand has enough weight to see them through. Their new superstar, Gok Wan, may come good for them too as his populist glamour has the potential to take some of the George party clothes shoppers away from Asda. Brand Match's instant appeal should ensure they retain some price credibility to add to their usual picking off of competitors' customers treating themselves to a trip to JS to trade-up.

Morrisons have been the retailer to watch during 2011 and I’d expect this to continue. Although they’ve kept price in their communication, it’s been a lot more subtle than their peers and instead they’ve really ramped up their message on provenance. This will, I believe, prove to be a winning strategy this Christmas and they could find themselves stealing business from the likes of M&S if they get their quality credentials across. The recent relaunch of ready meals under the M Kitchen banner has been a resounding success and clearly demonstrates that product is king again. This Christmas could be their time and a just reward for their hard work during the year. There's a lot of chatter about Morrisons who are gaining their new reputation through word of mouth. Whether or not that converts to an even bigger step-on in sales remains to be seen, but I believe they are best placed of the big four this Christmas.

So that's my opinion - why not vote for your favourite to win this Christmas using the poll to the right!

Non food

Asda’s announcement that 4 of its 25 Asda Living stores were potentially closing and Tesco's redundancies in its Non-food trading team makes it a good time to look at the world of Non-food in grocers.

Not too long after Tesco closed it's last few standalone Home & Wear stores, Sir Terry Leahy took Tesco on a journey to a promised land where 50% of their turnover came from non-food. Last year, Andy Bond announced a rare aspirational target of making Asda number one in non-food. But with Tesco hinting in their interim statement that non-food was behind the UK slowdown and Andy Clarke announcing that Asda's Living format expansion was being slowed down (or halted as some cynics would say), has the non-food dream ended?

It's probably worth starting with a look at why food retailers got into this in the first replace.

Leahy's vision when opening the first Extra hypermarket at Pitsea in 1997, was to create one-stop destination shops. To do this, non-food was key. It's incredible to think now when you at Tesco's incredible electrical departments that only 14 years ago, it was a ramshackle collection of grey market tellies being sold off white grocery shelves. Clothing was limited to last season brands off the grey market and the shortlived "T for Tesco" label. Now Tesco are a top 5 clothing retailer thanks to the Florence & Fred range.

Of course, maximising the proportion of consumers disposable income spent in your stores has its benefits as does changing your margin mix. The ability to add in higher value products which deliver relatively huge margins has help Tesco and Asda effectively cross-subsidise lower prices on core grocery lines and provided fuel for the price wars of the last 10 years.

When the credit crunch hit in 2008, Tesco and Asda must have started rubbing their hands. Rick Bendell boldly claimed that Asda would “rebuild Britain” through Darren Blackhurst’s obsessive volume drive on basic non-food items. The theory was that selling Dinner Sets at £3 would drive huge volumes and that these volumes would bring better factory prices. It also assumed that the disposable age, where shoppers would think nothing of replacing homewares and electricals on increasingly frequent cycles, would go on forever.

The resulting recession and lack of return to strong growth in the economy has instead made them retreat to old habits. Rather than spend £250 on a PL television which won’t have the latest spec and may not last much past its warranty, we’d now rather put our trust in a Sony or Samsung and spend £350. And even then, we won’t be doing that on a whim anymore. In times of trouble, brands are seen as a safe harbour and homewares are seen as in investment of sorts.

The other big dark cloud is the exchange rate; non-food deals are generally done in $US and getting your forecasts on the rate wrong can have disastrous circumstances, losing you money before the stock has even been pulled off the boat. Add in volatile cotton prices and potential inflation in China and it no longer looks such an easy buck.

The earliest non-food plays were Home Entertainments and Books of course. The grocers have done much to lower prices on these products, arguably contributing to the demise of High Street specialists, but will now themselves be suffering from the march of digital. Even selling the hot DVD launches at a big loss to drive footfall isn't as effective as it used to be. And what happened to CDs, then DVDs, now looks to be happening on Books with the expansion of Kindles and their kind. Games is the last island of hope but that won't last forever - enjoy those midnight queues for the latest Call of Duty release while you can.

The reality now facing Tesco and Asda in particular now is that they have a large proportion of space dedicated to products their shoppers no longer want and often on mezzanines which are notoriously hard to get shoppers up to to. People looking for non-food bargains are happy to put their trust in the ever-improving Wilkinsons stores, leaving the grocers high and dry.

All can not be total doom and gloom though - clothing is still strong, although in Primark you have a tough market leader for budget fashion. In George and F&F, there are some brands while JS is starting to gain momentum with Tu, helped by some injection of credibility from Gok Wan. Morrisons have chosen to go with Peacocks which makes sense, even as an interim stop-gap to free up the space and establish their larger stores as a one-stop shop alternative.

Click-&-Collect may also prove to be a saviour. Tesco's catalogue operation looks slick and must be hurting Argos while it's only a matter of time before Asda actually manage to get their act together with their Direct website.

I believe there is a future for Leahy's vision in terms of getting all you need under one roof - petrol prices alone suggest it makes more sense than ever - but it will look very different. 50:50 space splits in 100,000 square foot stores will surely come to an end - and hopefully customers might start to get some space to breath in cramped mezzanines. After all, who wants to chose stuff for their home in a 5ft wide aisle with a load of people with trollies around them?

Asda and EDLC (Every Day Lost Cash)

It’s been well documented that Asda have been struggling with availability for some time now – not just on well established retail blogs like Steven Dresser's but even some of the reports from industry bodies on the Supermarkets format have gaping holes on the shelves.

Asda backrooms are like no-one elses in the industry. Things have improved since I joined Asda in 2005, when I was shocked to find floor-to-ceiling racking and forklift truck being used in an 18k sq ft store taking around £150k per week, but they are still too big and too full. Unfortunately, they’re not tending to be full of the product that’s needed on the shopfloor. On a recent visit to Trafford Park Supercentre, poor availability on many grocery SKUs looked odd next to overflowing potato bins full of yellow-sticked stock reduced to clear.

Asda colleagues may not always be hot on service, but they do work bloody hard, so I don’t believe the problem lies in the final 5 yards. Stories emerged last week about consultants being drafted in to help, something that is also happening at parent company Wal-Mart. One of the solutions being mooted is the use of top-stock shelves similar to those rolled out by Tesco in the last couple of years.

Top-stocking does make your shop look awful. Those with long memories may recall the hoppers used by Asda in the 1980's, but nowadays it's just a wall of cardboard and barcodes. The theory behind them is that it brings one-way stock closer as cases that won't fit on the shelf can at least be stored down the aisle. With the product down the right aisle, should a line go out of stock then any passing store assistant can immediately plug the gap. The reality is different - take a look at any Tesco and you'll find at least one over-ordered SKU that has about 5 shelves of stock, as well as out of stocks with the case sitting on the top-stock shelf. That store assistant is busy elsewhere and the theory has fallen over. And of course, if your ordering and supply are working perfectly, your left with empty shelves and the customer perception is that you have gaps!

Tesco's reasons for introducing top-stock shelves were also linked to freeing up warehouse space, rumoured to be needed for more click & collect desks or space for their bank, not just replenishment.

Back to Asda, it is systems not physical movement of stock that is the problem. A product‘s replenishment profile can be impacted at all points of the supply chain. These changes can vary from fudging the capacity in-store to applying sweeping factors centrally. Everyone involved is doing the right thing, for their part of the chain at least, and because the various bits of sticky tape and string have worked for so long, no one’s challenged the actual system. Recently, it looks like the quick fixes are unravelling.

Another problem is the culture of Asda. Not the shiny, happy clappy world where all are equal and no one has an office, no the bit that is purely weekly target driven with no one taking accountability for the impacts down the line.

The depot manager will reject deliveries or push out stock if their inventory or service levels are under threat for that week. Meanwhile, the store team will be looking to fudge what they can to hit their targets to ensure that they get a bonus. The obsession with weekly targets, coupled with the pseudo-utopian culture which ensures too many people have a say yet no one takes accountability, creates an environment that even Kafka would think convoluted. If there is a problem somewhere, the primary objective for many is to make sure that it gets passed on somewhere else.

The systems themselves are also in need of a major overhaul, but they are essentially a WalMart system designed around keeping their US model full. The UK market is a very different beast and needs flexibility that they don't currently offer - amongst the reasons why Asda have never done c-stores and probably behind the slow pace of development for the Living format.

So, what's the solution? It would have to be a multi-streamed and well co-ordinated approach starting with Andy Clarke being a strong leader and holding people accountable. Assuming there would be no money for systems, the focus would be on building robust processes with the customer at the heart of them. This may mean Asda lose their claim to have the lowest cost-to-sales distribution network in grocery, but what good is that claim if your shelves are empty?

The process needs to map all the key stages and assign owners to each of them. People need to held accountable to keeping the shops full, not their own narrow weekly targets.

It will take a big effort all through the Asda business and will need some brave people to put their necks on the line. Taking accountability needs tough people - I just hope Asda still has enough good people willing to do their duty.

Every £500m helps

Every £500m Helps…

Hey, you remember that guy at Tesco? No not Phil Clarke, the other one? Richard Brasher. Well, the so-far virtually anonymous new Chief Exec of the UK business finally surfaced this week to flag up £500m of price cuts. As a veteran of the price wars that broke out in the late 1990’s, I’m getting a strange sense of déjà vu – not least because a talented Marketing Director by the name of Richard Brasher was leading the charge for Tesco.

The impacts of “We’ve Cut Out Prices” and “We’ve Cut Our Prices…Again” (originally briefed as “F*** me, We’re Cheap”!) were big at the time and the new £ and Scissors logo became iconic. Coupled with investment in stores, both new sites and bringing older stores into the 20th century through the Refresh My Superstore and Metro programmes, Tesco were able to ensure WalMart’s entry to the UK market was not as dramatic as they hoped, put further daylight between them and JS and ultimately lead to the deathknell for Kwik Save. They showed that you didn’t need to compromise your shopping experience to get great value and the shoppers bought it in their droves.

So can returning to basic price cuts really help Tesco out of its rut?

Kantar data is suggesting the two businesses who continue to invest in store experience with only subtle price communications are winning. As household disposable income becomes squeezed, a higher proportion of it will be spent on food. This means grocers will be need to provide the “hit” of leisure shopping that moved to non-food operators on Retail Parks and big malls when times were good. A voxpop from piece of research carried out at Tesco when I was involved on the price campaigns has always stuck with me – “I don’t like all these signs telling me how cheap you are – I know that. If I wanted signs reminding me how tight my budget is, I’d be shopping at Kwik Save”.

I’m sure that’s even truer now that it was 13 years ago. As a nation, we got hooked on easy credit and leisure shopping. We still want that drug – Westfield Stratford clearly showed that – but we’ll need to get it when we buy the food we depend on. Step forward Waitrose and Morrisons – they want you to come into their shops and feel good about it.

Nothing new from Waitrose – their shops have always been a bit special, although the hand-painted wallpaper in the Leeds store café is perhaps a tad excessive. Now they are more accessible with more stores and a really strong private label in the form of Waitrose Essentials, they are gaining share of just the kind of people who want to feel good about themselves.

Morrisons are coming from a different perspective as frankly the majority of their stores are horrible overcrowded places which remind me of the store standards that we in place when I was a spotty youth over 20 years ago. M Local and Kirkstall have changed that – they are creating retail experiences that we’ve not seem in the UK before,  or at least not since Tesco refitted Pitsea as an Extra and put in dancing penguins on top of the freezers.

What both Morrisons and Waitrose are doing is putting product at the heart of their store concepts. If you go back to our shopping mentality when budgets are tight, we’ll look more to food to treat ourselves with, paying a pound or so more for something a bit special to go with our Smart Price Orange Juice and Pasta.

Bringing this all back to Tesco, experience suggests that we won’t know if this has worked for a while, and probably after more cuts from Tesco and their competitors are announced. Asda’s PR team (my biggest fans!) went on a grapeshot offensive on Twitter in the wake of Tesco’s announcement, but we’ll have to wait and see if Asda have got any real news for their PR team to fire out. It took JS to bring a bit of decorum to proceedings by pointing out that stopping double Clubcard points will save Tesco £350m.

The last couple of years have proven that none of us really know what will happen in retail, so for us retail geeks all we can do is grab a nice glass of wine, sit back and watch the carnage unfold during the Golden Quarter.

Too Many High Streets?

My home town is a small dormitory town in Essex. It has a thriving High Street and always has, yet there are still empty units and more than its fair share of charity shops. If I look at the units in use, there’s two supermarkets plus an Iceland, several bakers, estate agents, coffee shops, a record store, clothing shops, newsagents, a library – pretty much everything you need. It thrives despite very poor public transport and pretty poor parking facilities.

So, all types of shop are covered, there’s plenty of shoppers but there’s under-used or empty units about. Is this an indication of tough times in the economy? No, but to the casual observer empty units and charity shops hardly contribute to making us feel good about our local shopping areas. The same could be said of my local community shopping centre where I live now just outside of Leeds – a 1960’s mall full inside of great shops and lots of shoppers but lots of empty units on the outside. Drive past and you’d think the place was condemned and deserted – inside, you’ll be knocked over by the swarms of pensioners on their mobility scooters!

Britain over the last 20 years has gone retail space crazy. Every small scale development seems to create more and more units with no prospective tenants. These assume that new entrepreneurs will pop up from nowhere and existing ones will upsticks for the usually more expensive shiny new premises. Both assumptions have little basis in reality and actually can damage existing businesses by making their end of town look less attractive. In some extremes, the units lay dormant – near the very run-down district of Burmantofts in Leeds, an overly ambitious developer has built a block of apartments with 12 units on the ground floor - less than a two minute walk from a scruffy but well established shopping area called Lincoln Green. Only one unit is let, to an estate agent trying to sell the apartments. All other units now have overstickers on their To Let signs promising “ALL OFFERS CONSIDERED”.

This is being repeated across the country, I’m sure.

Meanwhile, we apparently have a housing shortage (Call for action on housing 'crisis' 30th August http://www.bbc.co.uk/news/business-14708841) as the big builders want to get back to ripping up greenbelt in the name of helping society. Surely the answer lies on our High Streets? The clear excess of retail stock would often make ideal space for regeneration and conversion to housing, often reverting back to older buildings’ original purpose. Not only would this provide an improvement in the aesthetics of an area, but also support the remaining retailers by providing them with a larger local population. True, some of the units may not be suitable for our househunters – parking , for example, could be an issue – but none of the problems would be any worse than those faced by new residents of the shiny new blocks springing up across our cities.

Perhaps what we need is a social housing style deal for developers. I'm not against regeneration as despite protestors against larger schemes, it's only carrying on something that has been going on for centuries - many High Streets were formed after markets were "developed" into permanent shops. However, councils need to be able to tie in developments better as part of a grander plan for their towns and cities. Limits should be placed on the net increase in retail units in towns where occupancy rates are below, say, 80% while a certain ercentage of any new development should be small units at rents no more than 10% above the town average for existing similar space. There was a trend for something like this at the end of the 1980's - even Basildon's Eastgate Centre, a testament to Thatcher era excess, had its "Galleries" floor which created space for small businesses. Locking it in by law would perhaps give us all a sense of pride in our towns and cities again and avoid the way we create retail wastelands outside the walls of our shiny new developments.

Mary Portas's review is due out soon and the lobby groups are either asking for more freedom in development or more support for businesses. As with many issues in the UK, we have a very polarised set of viewpoints and some frankly poor quality stats that create a scarry vision of the world. The Local Data Company's report on vacancy rates reports as a percentage, which continues to increase. However, when you consider the non-big 6 retailers who have their outlet data shown on Retail Week's Knowledge Bank, they've increased their units by over 57%, many of which will be new builds.

Do I have the solution? Of course not, I'm just a lowly retail professional. But I do realise that a different kind of solution is needed to first of all solve the existing problem and then ensure we break out of the cycle of building new space and discarding the old space without any thoughts for what will become of it.

Just another couple of bits about Asda

It's been a while since my last blog - I was already to have a look at the indie grocers when the riots made the story out of date so here I am looking for another subject.

Now, I don't want to make this blog JUST about Asda. For one, they aren't the most interesting retailer at the moment and for two, I don't want to further upset their PR team who don't like criticism from anonymous bloggers who don't have any "facts"

It's true - I don't have "facts" but I do have grounded opinion. In fact, Andy Clarke's statement last week about the scaling back of the Living format expansion on the grounds of it being the wrong economic environment actually backed up my blog's opinion on the slow progress towards the 150 stores promised last year by Andy Bond to Walmart investors. Of course, a time of large vacancies on retail parks and a general downsizing of home and clothing spending in the UK is obviously the worst time in history to open a low cost home and clothing retail park format. Especially a year or so after heavily investing in a revamped store fit-out in their Stratford-upon-Avon and Teesside stores. Readers - you decide.

As for Supermarkets, two figures came out from Asda last week - turnover in converted Netto's is up 50% and SKU count is up from 2,500 to 10,000 on average. That's 50% more sales from 300% more products. According to Retail Week's Knowledge bank, an average Netto was taking £74k a week. Now, let's be generous and say that this year its £89k (ok, VERY generous). 50% increase in turnover is therefore an extra £44.5k per week in every converted store. That's £5.90 per SKU per store per week. That's not very good in anyone's books.

The shops themselves are fantastic and show that Asda now get the idea that offering low prices doesn't mean you have to make your customers suffer from a bad shopping environment. But the poor return from the new SKUs suggests they need to review their range selection strategy. Offering a full weekly shop to customers in small format stores isn't about pumping every single SKU into a shop, it's about getting the RIGHT SKUs that drive perception in. If you limit the SKU count, but get the right SKUs then you won't cause yourself availability problems either. Simple.

Andy Clarke clearly read the last blog though (note to Asda PR - this is a "joke") as he announced that he "wanted" 250 Supermarkets in the future. This is absolutely the right thing to do. I just hope it doesn't fall under the usual Asda policy of promising many stores - 100 Essentials in 2006, C-Stores in 2007, 150 Asda Livings in 2010 - which fail to materialise. One positive sign is that the latest incarnation of small stores at Asda was born out of the embers of the Essentials store in Pontefract which trialled the Supermarket format ahead of the acquisition.

A final footnote is a big "nice work" to Asda for the local music initiative. I do hope this is a genuine project that rolls out to more locations quickly. At the moment, it's a one store trial which could let more cynical people than me think it's a bit of diversionary spin released in a week of bad news. Asda used to be great at this stuff, forging links with their communities and generating genuine feel-good PR stories. Rolling out the local music is such a simple no-brainer and something close to my heart. Let's hope it works. If it does, perhaps it can improve the run-rate in the Supermarkets....

Next blog will be both quicker than this one was and also very much NOT about Asda - promise!

Interesting Times At Asda

Just what is going on at Asda? Two big hitters have left in the last month, one after just 6 months on the exec board while the steady stream of mid-ranking foot soldiers continues, with over allegedly 60 alone moving to Yorkshire rivals, Morrisons in the last year. The latest Kantar figures show their total share including Netto dropping off again - JS now getting closer to reclaiming 2nd spot.

In a period where Asda should be making strides and eating up market share, they're actually going backwards. Rick Bendall, their Marketing Director, said at the beginning of the recession that Asda would "rebuild Britain" and there were cries of "this is our time" all around Asda House.

Unfortunatly, they got it horribly wrong and failed to learn from the template for downtown period trading from Tesco's performance in the early and mid-1990s.

Tesco, through thorough shopper insight, realised that just because people were tightening up their budgets, that didn't mean they were all suddenly wanting to buy Tesco Value brand products in stripped down shops. Quite the contrary in fact, because British shoppers are inherently snobs. I've sat myself on Shopper focus groups for stores where 15% of volume comes from the opening price point brand and the question of "what do you think of the opp brand?" is pretty much answered along the lines of "oh, it's good that you have it, but I never buy it".

Asda took one look at the downturn in 2008 and went straight to the bottom. Shoppers during tight times don't want price ramming down their throats, constantly reminding them of the harsh realities. Shopping for food is a necessity and they want to feel a bit loved when they walk through the doors. JS have played a blinder in this respect with their shops continuing to look and feel indulgent while Jamie Oliver has been helpfully pointing out that you don't need to be on a banker's salary to feed your family there.

With the innovation coming out of Morrisons too, there's signs that they get that shoppers want quality value, not not just value. You only have to visit Kirkstall or the new M Local format to see that. They were the big share winners in the July Kantar figures showing that shoppers are switching on to their more traditional approach.

So will Netto save Asda in the end? They hardly had the best property portfolio in the UK market and certainly would not give Asda access to more ABC1 customers, reinforcing their position as a low demographic retailer in a world where you have to be mass market. In smaller shops, location is key as the percentage of shoppers arriving by foot or public transport is key. With a high percentage of Netto's located on low-footfall retail parks, this is hardly a good start.

The conversions I've visited however, are really great little shops. The switch to 1m wide bays makes space planning more effective while the design of the fit-out is almost luxurious and indulgent, particularly on fresh areas. Range selection is perhaps a little too skewed towards suppliers who were allegedly paying for distribution points, but mostly hits the need of small supermarket formats to deliver the perceived choice of a hypermarket in a tenth of the space. If Asda could make its superstores look and feel as good as their Supermarket format, they might start improving their fortunes. Some of the design elements can be seen in larger stores, such as repainting the perimeters a deep maroon colour, but the "Everyday Low Cost" mentality value engineers the effect out somehow and the effect is lost.

 If Asda are serious about this format though, there needs to be a pipeline of new sites coming through to strengthen its need for specific supply chain and operational solutions. An Asda Supermarket opening on a declining High Street could be just the injection that area needs and would certainly be more welcomed than if Tesco was after the same site currently.

Their other big format for growth, Asda Living, continues to expand at a snails pace. Only last year, WalMart analysts were shown the future and Andy Bond confidently boasted of 150 stores by 2013. One year later and only one more store has opened and a couple of potential buys, Focus DIY and T J Hughes, have passed untaken. For a long time, Matalan was rumoured as purchase to hit scale but with Darren Blackhurst now at the helm, I'd suggest that he'd strongly resist overtures from a business he left under a dark cloud. The format went through a major transition last year with completely new fixtures and layouts put into two stores (Stratford and Teesside), but the lack of positive PR releases from Leeds would suggest they are yet another failure. Since Walsall opened in 2004, the 26 stores now have had 4 different solutions to trading. Given that Living was Andy Bond's big idea, how much resource will be dedicated under Clarke is debatable. The stores also need scale to become profitable and with WalMart tightening up the belt, this is looking less likely.

Asda could and should be doing better. There are some of the best retailers I've ever worked with currently sat in Asda House. What they need is some leadership as strong as Archie Norman's to unleash their potential. I personally doubt that Andy Clarke has the ability to do that - the question is how long WalMart will give him to get his feet under the table. He will never have faced a more important Q4 than this year and anything less than maintaining second place will probably see him moved to another part of the empire.