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

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 .

1. Provenance

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 .

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 .

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 .

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.

2. PR

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 .

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 .

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 .

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.

3. Price

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 .

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 .

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 .

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.

4. Private Label / Products

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 .

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 ) .

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 .

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 .

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 .

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.

5. Place (Location)

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

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 .

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 .

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.

6. Productivity

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 .

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 .

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 .

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 .

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 .

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 .

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.

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

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