Welcome to this week's supermarket retail round up of news. Grocery retailers want to get closer to their customers at the same time they reduce personal service. Confusing? Read on...

This is not just a bank. This is M&S bank

M&S will be launching in-store banking services from July this year.

It hopes that its trusted brand and a more personal service will help encourage take up, although the fact it is backed by HSBC may see some banking customers reluctant to transfer to the retailer.

The first branch to open will be at the its flagship Marble Arch store in London, although it plans to open another 49 over the next two years.

The decision to enter the banking sector is part of a trend of supermarkets to do this. Tesco announced in 2008 plans to launch a banking service, although it announced in February this year that it is delaying what was going to be an autumn launch of a current account service until next 2013.

Another attraction will be longer opening hours than conventional high street banks, and it is likely that whilst some customers are doing their banking, they will take the opportunity to do additional shopping that they might otherwise do elsewhere

Tesco buys WE7

In other news about how supermarkets are extending beyond their core business, Tesco has bought the digital music service We7 for £10.8m, taking a 91% share in the company.

We7 has a catalogue of 11m music tracks, and is available on iPad, iPhone and Android apps as well as on the internet.

If the service is taken up by people, the purchase will see Tesco take another step in becoming part of people’s everyday entertainment repertoire. It comes on the back of Tesco’s acquisition of the online movie rentals firm Blinkbox in April 2011.

Personalised services do not always mean a personal service

NCR is launching software in July this year that will recognise customers when they swipe their loyalty cards, and adjust itself to their personal preferences.

Although this will give customers a more personalised service, the main objective of the software is to significantly streamline the supermarket checkout process. Every second a major retailer shaves from the checkout process, annual profits are reduced by £1m, according to NCR’s vice-president for western Europe.

This is one reason why, according to the FT, the number of self-scan tills will increase from 130,000 this year to 325,000 in 2016. According to studies by NCR, self-scanning reduces queues by up to 40%, and increases customer throughput by 20%.

The point here is that supermarkets need to be careful not to confuse personalised service with personal service. At the same time that the likes of M&S and Tesco want to get ‘closer’ to their customers through banking and entertainment, they are outsourcing key processes to customers. Research shows that whilst some people like using self-service tills and so on, other people prefer the kind of personal service that many supermarkets are accused of lacking in the first place.

The ups and downs of retail performance

On Monday, Tesco reported a drop in underlying British sales of 1.5% in the thirteen weeks to May 26, its fiscal first quarter. Some of the press describes Philip Clarke, Tesco’s chief executive, as having to defend his £1bn recovery plan in the face of this. But given his plan was only recently released, this sales drop illustrates just how necessary much his plan is.

In contrast to Tesco, the professional services group, BDO announced this week that high street sales bounced back in May as shoppers stocked up on summer clothes and garden furniture during our (all too) brief heat wave. According to its figures, sales from medium sized stores open at least a year rose 1.3% in May, compared with the same month in 2011.

Moving onto June, Sainsbury sales in stores open at least a year rose by 1.4% in the 12 weeks to 9 June 9. Although this included the Jubilee weekend, this was a slowdown in sales and came in below analysts’ expectations.

On its own, the Jubilee week was good news for the supermarkets. According to Nielsen, grocery trading during the week saw a sales rise of 12.5% per cent. This is a good sign for the supermarkets in the run up to the Olympics. Tesco performed best during the week, taking 28.1% of the grocery market share.

Despite this, the voucher and promotional spend continues to impact profits. According to Nielsen, promotional spend remains at 35% of overall basket sales. Vouchers and promotional sales are becoming significant expectations of shoppers, and it will be difficult for supermarkets to shift these.

Sources: Guardian FT Retail Gazette Retail Week

Good afternoon

Included in this week's Supermarket Sweep of News - Jubilee celebrations, ASDA doing mobile shopping, PayPal payments on the UK high street, Morrisons in London.

Jubilee Weekend

In the run up to what is forecast to be a sun drenched weekend, a few of the major grocer brands have put together some Jubilee experiences and offers for their shoppers.

Impressively, Sainsbury’s has organised the Jubilee Family Festival in Hyde Park this weekend. The event includes special performances from BBC One's Strictly Come Dancing, The National Theatre's War Horse, and a 'Magic of Disney' finale, plus bands, dance troupes, orchestras free activities from partnering brands.

ASDA is going to offer customers the opportunity to pen a personalised message to the Queen, which will the supermarket will send directly to Buckingham Palace. And while they are at it, they can take advantage of a £5 off voucher for any spend over £40.

In the meantime, online shopping site, mySupermarket, has introduced a ‘Street Party Shelf’, which features some of the party-food on offer across the five big online supermarkets. If savvy shoppers can use mySupermarket to turn back time to 1977 prices by making the most of the offers and promotions available, as the company claims, then it’s likely many of them will leave happy.

Talking about winding the clock back, Sainsbury’s is also launching 14 products inspired by its British heritage, in celebration of the Diamond Jubilee. These include vintage sweets such as Liquorice Allsorts and Dolly Mixtures, and classic marmalade and jam conserves.

Morrison expansion

Morrisons has given more detail about its plans to expand stores in London and the South East. Morrisons property director, Terry Hartwell has said this week that about two-thirds of all its openings of full supermarkets would be in the south of the country from next year. This contrasts with 15 per cent last year. By the end of 2012, Morrisons plans to open 20 full stores, with more than half of these located in the south.

Morrisons’ new-format stores will feature an expanded range of fruit and vegetables, florist shops and sandwich bars, which Philips hopes will enabled the supermarket to compete with its more established competitors in the south.

Chief executive, Dalton Philips, says that the London expansion plus an online grocery offer and smaller convenience stores could help add £1bn of sales from the UK capital.

Retail bringing online and offline together

ASDA expects big increase in mobile traffic

Yet more signs that people are going to their mobiles to investigate products and do shopping.

The supermarket ASDA reported this week that right now, 6% of its online traffic comes from mobile phones. Half a million people have downloaded the retailer’s transactional app, while Asda has 10 million registered online customers. However, Asda expects the number of customers ordering groceries with a mobile to double by the end of the year.

If people have the technology and the experience is easy and quick, this seems completely reasonable.

Good service likely to encourage people online

According to figures from lifestyle research company Cotton Council, 42 per cent of UK people now use the internet to compare product price and quality prior to purchase, and online clothes shopping has increased by 10% in two years.

The research also shows that people want quality and a good price. Forty per cent of respondents said that they only buy clothes that are discounted by at least 20 per cent all or most of the time. Yet almost 60% are happy to spend more money on items that will last.

This is reinforced in a separate report by Leapfrogg, which shows that two thirds of the 1,000 people it surveyed reported they would not reduce their online spend for more luxury items during the second half of this year.

The research also reveals people want quality of service as well online – once considered the domain of the high street. One fifth said they would be likely to spend more online if they felt they were valued more by retailers, and 30% claimed that better service online has encouraged them away from the brand’s physical store.

Littlewoods creates hour long online programme

In a sign of growth advertiser funded programming, Littlewood.com has partnered with Laurence Llewelyn-Bowen to create a one hour ‘Littlewoods Live’ show hosted by the designer, to be aired on Wednesday June 13th 2012 at 9pm. The show will be available on Facebook and mobile, and will include four ad breaks focusing on electrical and homewares products.

Shoppers can now pay by PayPal on the high street

As from 31 May, shoppers who have downloaded the PayPal inStore App will be able to pay for products at all Aurora stores, which include brand names such as Oasis, Coast and Warehouse.

Available on iPhone and Android devices, people can use the app to scan a barcode in order to take payment from their PayPal account. It even works when there is no mobile or Wi-Fi signal. One reason I believe that this will take off is that the process is simple for customers, and retail partners do not need to install any new systems in order to make in-store mobile payments. It’s also secure, with people having to enter a PIN in order to use it.

Together, these four pieces of news show that any distinctions we make between online and offline are quickly becoming invalid. Once upon a time we talked about digital consumers and ‘normal’ consumers, online brands and the high street, and the virtual and the real. I don’t think we can separate these things out any more. People tend not to. Neither should we.

Have a good break.

Steve

 
Sources:
RetailGazette.co.uk
RetailTimes.co.uk
TheGrocer.co.uk
FT.com

This week’s Supermarket Sweep of News sees a growth in mums’ worries, and big increases in sales by the discounters.

Added to this is research about an increase in the supermarket own label market.

Taken together, some people are undoubtedly abandoning the established supermarkets in favour of Aldi and Lidl. However, the greater trend is of people splitting their shops between stores and shifting more purchases to own label products.

Mums worried about the future as much as the present

ASDA released its latest findings from Mumdex this week, the supermarket’s study of mums’ attitudes and behaviour.

Top line is that its optimism index has dropped significantly, from -8% to -16% since February this year.

Digging deeper, the research also shows that mums are balancing two sets of concerns – day to day pressures, and the future of their children.

Future job prospects for their children are high on their list. Over one third fear there will be a great deal fewer opportunities for their children, compared with their generation.

Mums are also concerned with squeeze on disposable income. This is matched with a desire to spend more quality time with family. Forty percent report finding more enjoyment in spending quality time with the family than on expensive gifts and events.

Disposable income falls, discounter sales rise

Mums’ worries are well founded. Also according to ASDA’s research is that the typical UK household had a 4.2% reduction in its weekly wage packet during April this year, compared with April 2011r. The average UK family had £144 a week of disposable income in April, the lowest level since November 2008.

Not only do labour market conditions continue to constrain income growth, the cost of food over the year has risen by 4.3%, and petrol prices have increased 4.9% month on month. This is despite the ongoing discounting and promotions across some of the major supermarkets.

It is therefore not surprising that according to the latest rankings from Kantar Worldpanel Aldi sales grew by more than a quarter in the three months to 13 May over the same period in 2011, to reach an all-time high 2.8% of the market. Lidl also grew ahead of the market, with sales growing by 11%.

Own label market continues to grow

For the first time, new own label products surpass big brand labels on supermarkets shelves, according to Mintel .

In 2011, 54% of new products were own label. In addition, the market for own label food and drink reached £37bn in 2011, a 24% increase since 2006. At the same time, shoppers report finding that own label products are now better than they used to be. 57% of shoppers think this, while 52% prefer them to traditional brands.

More than 80% of shoppers believe that own label products provide value for money. This compares with just 16% for brands. Furthermore, 80% of shoppers report buying own label products.

People spending more in the run up to Jubilee weekend

At the same time that sales at the discounters have grown, so have sales at the more upmarket Waitrose.

According to Kantar Worldpanel, Waitrose sales grew by 7% in the three months to 13 May over the same period in 2011. This is against a backdrop of increased sales by Waitrose owner, John Lewis, which saw an increase in sales of 16.6% year on year, to £62.2m in the week to May 12.

John Lewis sales were driven by sales in the electricals and home technology category, which jumped by a massive 39%, helped by iPad sales.

M&S cuts sales forecast

As a further indicator of an economy in poor shape, Marks and Spencer has scaled back its ambitious growth targets.

M&S CEO Marc Bolland, set a goal in November 2010 to increase sales by between £1.5bn and £2.5bn over three years. It is now targeting sales expansion of between £1.1bn and £1.7bn over those three years, which would take 2013-14 annual sales to between £11.1bn to £11.7bn.

This is against a backdrop of poorer than anticipated financial results. Pre-tax profits for the 2011-12 financial year to March 31 was £658m, down 16% on the £781m posted last year.

 

Sources:

Retail Gazette http://bit.ly/KWSOOe, http://bit.ly/LiKiG8
Reuters http://reut.rs/M9TZcb
This is Money http://bit.ly/LiIU6e
FT http://on.ft.com/K3KLPY