We review the top five grocery retailers in Europe – Carrefour, Tesco, Schwarz, Auchan and Aldi - and the tactics they are employing to drive growth and stay at the top of their game.
Although Europe’s leading retailers operate across a range of channels and markets, their short-term strategies are seeing them focus increasingly on the region’s shoppers and in order to help differentiate themselves from rivals.
This is seeing companies striving to get closer to shoppers through building convenience stores and adopting multichannel strategies; focusing on price; and offering regional differences to meet local shopper demand.
1. Focus on price
With the region’s shoppers facing poor economic news on a daily basis – six successive quarters of shrinking GDP, high unemployment and spending cuts – most are seeking value every day. This mindset has boosted the performance of Aldi and Lidl, while the discounters’ growth has encouraged other leading retailers to focus even more on price.
Auchan has begun to deliver on its 'discount price policy', in which it ran a campaign promoting fresh produce at prices less than €1. A similar initiative has also been seen at Carrefour, where it has shifted away from seasonal promotions towards an EDLP model, focusing on constant low prices on a number of brands.
Meanwhile, the biggest price-focused initiative this year has come from Tesco with the launch of its ‘Price Promise’, a price comparison system that refunds the difference to shoppers if products could have been bought for less at its competitors. Significantly, the new scheme covers branded and private label products, enabling the company’s UK managing director to say ‘It [Price Promise] gives our customers complete confidence that they won’t lose out by shopping at Tesco’.
2. Boost presence of convenience stores
Shoppers’ desire to purchase their groceries closer to home, buying little but often, has encouraged Europe’s five largest grocers to place a greater spotlight on smaller stores.
The region’s three multichannel retailers have all announced expansion plans to grow within the channel. Tesco is trialling a franchise model with independent retailers for its One Stop chain to expand its convenience store presence, while Gérard Dorey, Carrefour's executive director for convenience, said that the retailer would add 350 new stores, with franchisees also playing a key role.
However, the biggest waves could be felt by Aldi’s first foray into convenience retailing in the UK with its small format store in North West London. Marrying ‘standard’ convenience-oriented ranges – like food-to-go – with its consistent low price message, Aldi’s debut store caters for convenience shopper missions at discounted prices.
3. Grow multichannel expertise
Looking beyond just their online offer, the top five are placing more emphasis on making sure their offer is similar across all channels, be it small or large stores or through their e-commerce sites.
For Tesco, the belief in a multichannel future has become central to its strategy and forms the basis of statements from its management team. This conviction is seeing the retailer position itself for how people will shop in the future, with a strategy to fuse its store assets with the internet to create a seamless experience for customers. However, it is also making its existing stores work for shoppers too. The acquisition of the Giraffe restaurant chain and expansion of the Harris + Hoole coffee chain, along with other initiatives, are likely to help drive footfall at its largest stores, with its new store in Woolwich underlining how these new initiatives are being combined with great success.
Auchan, meanwhile, has launched a new concept, under the Arcimbo fascia, close to one of its Drive outlets. It is hoped that Arcimbo’s focus on fresh produce will complement the purchases of dry or bulk goods made by customers using the Drive service, thus driving incremental spend.
Carrefour, specifically in relation to online, has evolved a strategy that is termed the ‘one code, one consumer’ policy, which will see it provide a more cohesive approach between its online and Drive banners.
4. Offer regional differences
Although more prevalent in France, retailers’ desire to segment shoppers to meet different tastes and needs by region or city has become more pronounced in 2013. Carrefour has been at the forefront of this strategy in an attempt to become more agile and differentiated by moving towards greater decentralisation. The change will enable store directors to decide on how much space to dedicate to seasonal products and which products to put on promotion, offer more freedom to allocate resources and tailor ranges to the local catchment.
In the UK, Tesco’s appointment of Andrew Yaxley as its first managing director for its London stores highlights the importance of offering a tailored approach. A key part of Yaxley’s brief is to develop and personalise stores to meet the demands of the capital’s diverse shoppers, something Tesco is doing by upgrading all of its formats to make them more compelling.
A great example of this is the remodelling of its flagship superstore in affluent Kensington with a much stronger focus on fresh food and the inclusion of a new Euphorium bakery.
5. Invest in their home market
Among all these initiatives, though, all of the leading grocery retailers in Europe will be placing renewed efforts behind operations in their home markets. As second and third placed companies mirror market leaders’ strategies and close the gap on them, the leading retailers will be ensuring that growth at home remains strong.
For Aldi and Schwarz-owned Lidl, Germany will be a focus as the pace of store growth slows and a spotlight is placed on other elements of their strategy, such as growing their share of sales within the health & beauty category, communicating the quality credentials of their private label products and introducing leading brands in specific product categories.
For Tesco, the company’s chief executive, Philip Clarke, has described the effort in the UK as 'Herculean', but that he believes there is five more years' worth of work to come over the year ahead. While for Carrefour the divestment of operations has put further focus on France and the retailer’s portfolio in other Western European markets.
Competition to remain fraught in 2013
Competition remains fierce and the focus on these elements by the region’s leading retailers is set to continue for the short term future. As Europe’s second tier retailers chase ever harder, it is likely that those at the top will have to maintain their levels of innovation in order to stay ahead of the game.
