6 p's of discount retailing
TRANSCRIPT
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The 6 P’s of Discount RetailG r o c e r y I n s i g h tN o v e m b e r 2 0 1 5
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The 6 P’sDe v e lo p e d b y G r o c e r y I n s ig h t a s
a m o d e l t o a n a ly s e D is c o u n t . Th is i s t h e d i s c o u n t b lu e p r in t f o r e a c h t e r r i t o r y t h e y e n t e r – t h e y a d o p t a Ch a m e le o n l i k e s t a n c e .
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1. Provenance
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ProvenanceT o o v e r c o m e t h e i n t r i n s i c l i n k b e t w e e n l o w p r i c e s
a n d p o o r q u a l i t y – l o c a l / n a t i o n a l s o u r c i n g i s v i t a l .
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ProvenanceF r e s h c a t e g o r i e s ( p r e d o m i n a n t l y o w n l a b e l ) a r e k e y f o r d i s c o u n t – a s l o c a l s o u r c i n g i s p r e f e r r e d b y c u s t o m e r s .
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ProvenanceI t i s n ’ t j u s t s o u r c i n g ; p r o v e n a n c e e x t e n d s t o w e l f a r e o f
a n i m a l s – l o w p r i c e s m e a n g o o d w e l f a r e a n d g o o d q u a l i t y i n d i s c o u n t .
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Key TakeawaysP r o v e n a n c e
Local, National and Responsible sourcing
The challenge for discounters is to marry up the low prices with a high quality item, locally and responsibly
sourced.
Discount work hard with the official bodies and trade schemes – Red
Tractor Week for example alongside adopting official welfare standards too.
Their advertising is the key element, relentlessly advertising their
membership / usage of welfare schemes and highlighting British meat.
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2. PR
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PR / Public RelationsW i t h i n t h e U K m a r k e t , A l d i a n d L i d l h a v e w o r k e d
e x t r e m e l y h a r d t o ‘ s h a k e o f f ’ t h e i r G e r m a n r o o t s , a l m o s t t o t h e p o i n t c u s t o m e r s m a y n o t k n o w .
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PR / Public RelationsL i d l v e r y r e c e n t l y a n n o u n c e d a p a r t n e r s h i p w i t h t h e
F o o t b a l l A s s o c i a t i o n t o s u p p o r t y o u t h f o o t b a l l , A l d i a r e s p o n s o r i n g ‘ T e a m G B ’ i n t h e O l y m p i c s .
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PR / Public RelationsA n y a w a r d s w o n a r e h i g h l i g h t e d , b o t h i n s t o r e
a n d i n t h e m e d i a – r e l e n t l e s s l y .
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Key TakeawaysP R
Momentum – Low price, high quality, local sourcing
Discounters have the enhance their offer to remain compelling, however within a limited SKU model – that’s
difficult.
So they relentlessly advertise any awards that are won, almost as if the
awards are a surprise. Can be self deprecating almost – ‘unbelievable’.
Wider PR efforts to enhance the reputation of the chains – supporting Team GB, Grassroots
football and sponsoring ‘Pr ide of Br itain’ awards help the wider profile.
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3. Price
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PriceS i m p l e l o w p r i c e m e t h o d o l o g y – l i m i t e d S K U
a s s o r t m e n t , l o w p r i c e s = f a n t a s t i c v o l u m e s - > l o w e r b u y i n g p r i c e s .
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PriceL i d l o f f e r s o m e m u l t i b u y s w h e r e a s A l d i p r e f e r a
c l a s s i c ‘ e v e r y d a y l o w p r i c e ’ s t r a t e g y .
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Price‘ T r e a s u r e h u n t i n g ’ – P i c k o f w e e k i s S u p e r 6 b u t i n L i d l – w i t h S p e c i a l B u y s o f f e r i n g d i f f e r e n t i a l .
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Key TakeawaysP r i c e
Momentum – Low price, high quality, local sourcing
Low price is a huge part of the discounter methodology, as important as the l imited assortments. The latest trend is premium
which is cheaper than larger rivals.
The comparison between own label discounter lines and branded products,
with subsequent lower prices means that customers can budget effectively.
That low volati l i ty, alongside the absence of promotions (bar Super 6 fortnightly on Produce) means there is a great level of
stabi l i ty in the prices customers pay.
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4. Private Label / Products
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Private Label / ProductsT h e r e a r e s o m e b r a n d s w i t h i n t h e a s s o r t m e n t , h o w e v e r t h e s e p r o v i d e s e c u r i t y t o c u s t o m e r s . A l d i a r e g r o w i n g
t h e i r b r a n d e d r a n g e i n s t o r e .
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Private Label / ProductsA c o r e p a r t o f t h e s t r a t e g y , h i g h q u a l i t y , l o w p r i c e d –
b r a n d e q u i v a l e n t l i n e s ( i n b o t h t a s t e a n d a p p e a r a n c e ) .
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Private Label / ProductsD i s c o u n t a d v e r t i s i n g c a m p a i g n s h a v e b e e n i m p l e m e n t e d
t o h i g h l i g h t s i m i l a r i t y b e t w e e n b r a n d a n d o w n l a b e l , w i t h g r e a t s u c c e s s .
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Private Label / ProductsT h e n o t e w o r t h y p r o g r e s s i o n i n t h e d i s c o u n t o f f e r i s t h e
e m e r g e n c e o f p r e m i u m l i n e s , a t l o w e r p r i c e s t h a n l a r g e r r i v a l s .
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Private Label / ProductsW i n e i s a n a r e a o f p r o g r e s s i o n f o r d i s c o u n t e r s –
s o m e r e a l l y s t r o n g o w n l a b e l d e v e l o p m e n t s a n d P R .
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Key TakeawaysH i g h Q u a l i t y , L o w p r i c e o w n l a b e l .
Momentum – Low price, high quality, local sourcing
Imitation brands are all part of the charm of a discounter, comparing the
discounter products versus the brands.
Discounter brands are extensively advertised versus their branded
cousins, showing the customer that they are equal in quality / taste.
Both discounters have developed advertising campaigns, based on
customer feedback showing that there is no difference in taste, only the price.
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5. Place (Location)
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Place (Location)D i s c o u n t e r s w o u l d l o c a t e t h e m s e l v e s n e a r a l a r g e r
r i v a l t o f e e d o f f s e c o n d a r y f o o t f a l l . E v e n t h i s s t o r e h e r e i n B r a d f o r d h a s e x t e n d e d t o c o p e w i t h f o o t f a l l
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Place (Location)D i s c o u n t e r s a r e a l s o h a p p y t o b e o p e n i n g a d j a c e n t t o e a c h o t h e r – c o m p e t i n g a g a i n s t e a c h o t h e r b u t t a k i n g
f o o t f a l l f r o m l a r g e r r i v a l s .
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Place (Location)L i d l a r e o p e n i n g s t o r e s i n G r e a t e r L o n d o n h i g h s t r e e t s ,
o p e r a t i n g a s m a l l e r s t o r e – r e a l e v i d e n c e o f t h e i r p r o g r e s s i o n .
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Key TakeawaysL o c a t i o n i s k e y , o r i s i t ?
Is location everything?
Often the discounters open near their larger rivals, feeding off secondary footfall – at least in the early days.
That location works for them now, with the bulk of the shop (c.75%) and then
additional lines purchased at the larger rival.
Upmarket locations are now being targeted, with the smaller footprint of a
store able to fit in these locations.
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6. Productivity
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ProductivityM i x e d c a s e s – s o l d a s ’ o n e ’ b u t t h e m a n u f a c t u r e r w i l l
p u t t h e v a r i a n t s ( 3 f l a v o u r s ) w i t h i n t h e o n e c a s e .
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ProductivityD i s c o u n t o p e r a t e w i t h a l i m i t e d r a n g e , r e d u c i n g
c o m p l e x i t y a n d s p e e d i n g u p t h e b u s i n e s s .
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ProductivityP r o d u c t s a r e t y p i c a l l y w i t h i n s h e l f r e a d y c a s e s ,
e n a b l i n g o n e t o u c h r e p l e n i s h m e n t .
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ProductivityW i t h b u l k p a l l e t s u s e d f o r l a r g e r , h e a v i e r i t e m s t o s p e e d u p r e p l e n i s h m e n t a n d m a i n t a i n a v a i l a b i l i t y .
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ProductivityT h e f r o n t e n d / c h e c k o u t s a r e v i t a l t o e f f i c i e n c y , w i t h c o l l e a g u e s s c a n n i n g 3 0 + i t e m s p e r m i n u t e , c u s t o m e r s
p a c k a w a y f r o m t h e c h e c k o u t i t s e l f .
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ProductivityI n n o v a t i o n i s v i t a l g i v e n t h e h i g h t r a d e l e v e l s f o r
d i s c o u n t i n t h e U K – s e l f s e r v i c e c h e c k o u t s a n d b e l t d i v i d e r s ( a l l o w i n g a c u s t o m e r t o b e s e r v e d w h i l s t o n e
p a c k s ) a r e u s e d .
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Key TakeawaysP r o d u c t i v i t y
Lowest cost to serve
Productivity is everything to discount, their model relies on a quick turnover of
stock, a low cost to serve and tight margins to deliver profitability.
Everything is measured and aligned in discount retail – each line has to justify its
inclusion into the range. Aldi have started to grow the range which can affect the overall
discount model.
Aligned to this are the efficiencies around display with bulk pallets and
shelf ready packaging. Alongside a well trained, hard working team in store.
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Discounter Overview6 P ’ s b u t a l s o d i s c o u n t i n 6 w o r d s
Momentum – Sales growth is with
discount.
Convenience – small store size means ideal
for top up.
Fresh – Doing a strong job on Fresh
Foods and Meat.
Operations –Formulaic business
but Aldi complicating.
Rivals – No one has yet grasped how to
defeat discount in the mass market.
Netto – ‘new kid on the block’ – future
growth possible for them?
Discount in 6 words
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Thank YouG r o c e r y I n s i g h tN o v e m b e r 2 0 1 5