Supermarket Success

Many people are quick to be critical of Supermarkets based on the negative impact they have had on Great Britain’s High Streets. The way we purchase our groceries has changed substantially in the last couple of decades. In fact a massive 90% of our UK grocery shopping is done in our Supermarkets. 3% of these sales are now on-line for local delivery; this is a rapidly growing trend. So whilst people are critical of these companies, they continue to shop with them. The likes of Tesco, Sainsbury’s, Asda and Morrisons have become hugely successful companies, but how do they do it?

Gregg-Wallace_1851584bI watched Autumns Supermarket Secrets with Masterchef presenter Greg Wallace last week. This was the second part in a series which gives an insight to the operations of these huge companies. I was intrigued to understand a bit more about how companies like Tesco operate. Tesco is the largest retailer in the UK and second in the world. Wal-Mart is the largest globally; they own Asda who are the 3rd largest in the UK. These are big business’ with ever increasing turnover and profits.

In the programme they looked at the design/ layout of supermarkets and also customer spending trends. Some interesting facts are;

1. The Fruit and Vegetable aisles are always at the front of the store as its a soft way to encourage the customer into the “retail experience”. The items are generally loose and full of different colours. The aisles are really wide because people are in a transition into the store, therefore they are most likely to leave their trolley as they wander around.

2. We love ‘British’ produce. The challenge is how can the supermarkets put fresh British produce on the shelves all year-round? Working with their suppliers they have developed lots of ways of both growing and storing fruit and veg to keep it going longer.

3. The central spine aisle is the prime retail zone where the highest footfall and sales are generated. Therefore the ends of the shopfittings (called gondolas) have all the promotions and multi-purchase deals.

4. The freezer aisles are the least attractive/ engaging area of the store. Because its cold and you have to open doors or lean over into freezers. Therefore people spend the least time there. That’s why they are at the end of the store.

5. It’s logical to consider that it might be best to arrange the store according to how you fill your trolley (i.e. large/ solid/ boxed items first with softer/ loose/ compressible items last). However if they did this, people wouldn’t spend as much!

6. Every thought to yourself; this supermarket ‘own brand’ product probably comes out of the same factory as a similar independent ‘premium brand’ product? Well they actually do often come from the same factory. However, the content of those products is changed to suit the price point. Therefore its not just the packaging that differs.

6. It would seem that the UK have become obsessed with ‘ready meals’! We consume 1 in 3 ready meals across the whole of Europe. Convenience is no doubt a major driver in our spending trends as people lead increasingly busy lifestyles.

Whilst on holiday in a fairly remote part of Yorkshire last week, we saw numerous Tesco vans navigating the tight lanes. The emergence of home delivery must be a real game changer for rural locations. Likewise the supermarkets are driving their operational development to facilitate home delivery. In addition to the conventional ‘home delivery’ from your nearest store, a number of supermarkets have now got online warehouse facilities to pack the boxes which arrive at our front doors. These are just like a supermarket, but without all the customer promotional signs etc! The boxes travel around the store aisles on a conveyor belt and stop at predetermined locations to be filled. Staff at each ‘station’ scan a bar-code to see what needs to go in the box. The shelves are arranged in priority of frequency of items purchased, so the regular items are right in front of the operator whilst the more infrequently purchased items are down the aisle. Clever stuff!

dotcomcentreSo what can we take from all this? Well these companies have a very clear strategic focus on all aspects of their activity. Their objective is clearly to sell more and generate increased profits. They do this by analysing in detail what their customers want and how they buy it. Then they also push the boundaries in terms of maximizing their efficiency in how they get the products to the customer.

A simple reminder/ lesson for us all;

1. Properly understand and deliver your customer needs/ aspirations.
2. Know which products are in demand (and as importantly which aren’t!)
3. Maximise your profile/ offer through appropriate marketing.
4. Make sure that whatever you provide is efficient and effective from an operational perspective.

Strategic thinking. Every little helps…

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