Alistair Stone, Buying Exec From ‘Experiential’ Retailer Waitrose, Explains The UK’s Increasingly Polarized Retail Environment And The Opportunities The Transformation Creates At The Global Trade Symposium Of The New York Produce Show And Conference
Jim Prevor’s Perishable Pundit, November 23, 2014
It is commonplace now to hear experts declare that businesses must seek new markets, the so-called BRIC countries — Brazil, Russia, India and China — are often the focus of opportunity. Of course, recent restrictions on trade with Russia have taken the bloom off that particular rose and exposed some of the risks of dealing with new markets.
The other truth, though, is that although en masse the produce industry or a particular commodity may have to find new countries to handle increased volume, it is also true that most individual players don’t have such substantial market shares in so-called “mature markets” that they can’t win big by gaining market share. The problem in a settled market, of course, is that it is very hard to displace existing vendors. That is why the consulting community is just recommending that one should pursue the BRIC countries.
This perception of developed markets as “mature” or “settled” is not, however, an accurate assessment. We live in a world where new technologies such as Internet shopping and new retail formats — upscale, deep discount, warehouse and produce sections in drug stores, gas station mini-marts, ethnic retailers and many others — are causing a shattering of the status quo.
This is happening all over the world, including America, but it is in Britain — the grand pappy of mature markets, the elder statesman of standard-setting — that this fragmentation of the marketplace is taking place harder, faster and sooner than in America.
This vortex of change is opening new opportunities in the UK. Some of these are in foodservice, and we have a great presentation by Tony Reynolds to explain that transformation.
We also have a wholesale panel to talk about how the wholesale sector can be an international portal to transforming independent, ethnic and restaurant markets. Our panel includes Chris Hutchinson of Spitalfields Market, Stefanie Katzman of S. Katzman Produce, Gary Marshall of the New Covent Garden Market, Alan Siger of Consumer Fresh Produce, a Coosemans Worldwide company and Jin Ju Wilder of Valley Fruit and Produce.
At The New York Produce Show and Conference, we bring in a retailer from outside of the country each year, whose role is to provide a perspective different from the many US retailers at the show. This year, we are fortunate to have a UK retailer living at the vortex of incredible change.
Alistair Stone of Waitrose will be appearing on our “Thought Leaders” Panel at the Keynote Breakfast and give an important presentation on UK retailing at The Global Trade Symposium, as well as providing counsel to the students participating in the University Interchange Program.
We asked Pundit UK Editor Gill McShane to find out the agenda:
Buying Manager – Fresh Produce
Q: Most foreign suppliers have long concluded that there were really only four retailers to sell to in the United Kingdom: Tesco, Sainsbury’s, Asda and Morrisons. In reality, there are upmarket retailers, like Waitrose, the discounters, like Aldi and Lidl, and thriving wholesale and foodservice industries to supply. Why do you think this theory has come about?
A: For many years, the UK grocery market has been dominated by the big four retailers, with a combined share of well over 60%. They have scale and are good at satisfying their particular demographic. But those same consumers have become more demanding about where they shop in recent years, which is starting to challenge how loyal people are to their favorite grocer.
Q: Can you describe then what’s been happening in UK food retailing?
A: We are seeing the biggest change since the first supermarkets came onto the scene in the late 1950s. The market has been very much dominated by four retailers, who all have their differences but are still quite homogenous. We are starting to see increasing polarization coming into the market. At one end, you have experiential retailers like Waitrose, Marks & Spencer (M&S) and Whole Foods Market, and at the other end there are the value retailers, such as Aldi, Lidl and also Asda/Wal-Mart to a degree. Both ends of the scale are doing pretty well and growing market share. In the middle, however, the big four retailers are being squeezed and therefore need to demonstrate why customers continue to shop with them.
There’s also change in terms of the pace of technology and the demand for new channels. UK retailing has been multi-format for a while with town-centre shops, out-of-town superstores, convenience outlets and online — we have an online-only grocer called Ocado, who Waitrose has close ties with. Much of the market growth now is coming from eCommerce and convenience; it’s not coming from the traditional big superstores. One challenge here is that these es.
Q: Just how different is the UK retail shopper today?
A: This immense change in the UK retail industry is being manifested in decreased consumer loyalty. The big shop once a week is not dead but it’s nowhere near as prevalent as it was three or four years ago. There has been an increase in the frequency of shopping and shoppers are more promiscuous — they’re shopping up to four times a week at different stores whereas it used to be once or maybe twice a week and usually only in one or two stores. So retailers now have to work hard to develop loyalty and create a point of difference.
Waitrose is exciting for consumers because of the experience of seeing wonderful products and trusting that they’re going to be lovely to eat, plus they’re priced very competitively and sold in an environment which is relaxing and offers great customer service.
Q: Despite being relatively small, Waitrose packs a punch and is proving successful. How do you fit into the market?
A: Our area of specialism is fresh food, and we can really drive a lot of volume on these lines, so long as they constantly delight the customer. Waitrose may only have a 5% share of the UK grocery market, but in fresh produce our share is about 8% and for certain categories like asparagus it’s well into double-digits. My team is composed of traders, and so they are always looking to buy well, but we are also always looking to find something that gives us a point of difference. We have a level of loyalty with our consumers because we sell a lot of really good quality products.
Waitrose also doesn’t wait for someone to come up with the next wonderful product. We may deal with the brokers, importers and marketing agencies, but we have very strong relationships with the growers and seed houses too, so we’re already there working with those who are actually developing new products, explaining what we think our consumers need. It’s very well forward-planned because it takes eight to 10 years to develop a new potato variety, for example, or a new type of apple. As an experiential retailer if we’re not doing that, we will lose our points of difference in the future. At the same time, we look to give our customers the day-to-day value they expect.
Q: In view of the need for UK retailers to create loyalty and develop a point of difference, what are UK retailers looking for in their international supply?
A: Standard-setting and specifications are big things in the UK. It’s a challenge to get people to meet not just European standards but actually the expected level for the UK, which is probably even higher. At Waitrose, we set the bar very high; we have good relationships with our growers and they know we expect a certain level of quality — we aim to source the best.
Q: What opportunities are there, then, in UK retail beyond the big four for those willing to work to achieve them?
A: Overseas suppliers have got to offer us something that we can’t get anywhere else and be doing something different to their competitors. There’s got to be a strong reason for us to go overseas if we can already get the same product from the UK or Europe. As you would expect, Waitrose buys a lot of produce from the UK and Europe because shipping is easier and prices are therefore cheaper. So if we go further afield, what’s the point of difference and why is it better?
Why our consumers would look for products from somewhere else, like the U.S. or Canada, would normally boil down to better quality, varieties, availability and perceived value. For me, the biggest single thing is having innovation in our categories, and the leaders in genuine innovation will be in demand.
Q: As you mention, Waitrose is a strong supporter of British produce. Where does that leave international suppliers? Is there room for both?
A: Of course, I want to buy British, but I will only buy if it’s good enough quality because I think it would damage the UK market by selling poor produce. Therefore, when I can’t get what I need from home, I’ll look elsewhere. UK consumers also expect to buy all types of fresh produce all year around. We don’t really have any gaps in supply, certainly not in vegetables and salads, although there are some gaps in some fruit categories, such as stone fruit and cherries. These gaps though are starting to close as we work closely with our suppliers on developments in stretching seasons.
Although Waitrose doesn’t work with lots of suppliers, those we deal with will be able to source from a worldwide network to fill those gaps. There are lots of produce items that UK farmers can't grow such as citrus, avocados, exotics and certain apple varieties. We procure from around the globe all year because shoppers expect availability of these items every day.
Q: With such high demands, do you think foreign suppliers are put off from selling to UK retailers?
A: It probably puts off those who don’t already have a good understanding of the UK market. Those that have traditionally supplied the UK are a lot closer to understanding what our requirements are, and, from a category management point of view, what the characteristics of individual businesses in the UK are, and what we’re looking for.
I don’t think it’s difficult to supply any market as long as you’re clear about what that market is looking for. Of course, there are some retailers in the UK that are more concerned about prices, but fundamentally it’s about doing what others aren’t. As a Waitrose buyer, I’m not solely focused on making higher margins or selling more volume, it’s about pleasing the consumer by selling better quality.
Q: Why should global exporters not eschew the UK retail market? What are they missing out on?
A: Fresh food sales are increasing in the UK as there is a lot of focus around health. I anticipate that the health trend will become more and more important in the future. For the best products, supermarket buyers will look to pay the right money, but they have to be consistently good so the consumer will buy it — consistency is vital.
As I said earlier, you also have to do what others aren’t doing. Just because you’ve got a really good product or brand in your domestic market, the odds are that in the UK or Europe there will already be someone doing a great job. So, you have to understand your competitors and where the gaps are because there will always be gaps.
Supplying the UK is also a great advert for businesses to supply a well-developed market that’s very discerning. I have suppliers overseas that highlight in their company literature that they supply Waitrose as a badge of honor. They use it in their marketing — the fact that if they’re good enough to supply the UK, they’re good enough to supply pretty much anyone.
Q: The upmarket retailers are doing well in the UK and you point out that Waitrose offers incredibly high quality, so are UK consumers really willing to pay more for better quality fresh fruits and vegetables?
A: Definitely, but you have to really demonstrate to them why products are worth the extra. People in the UK love food and they will trade up if it’s significantly better. UK consumers are becoming more demanding. Obviously they don’t want to eat anything that doesn’t taste good. They are increasingly conscious about waste and hate throwing food away too.
Over the past three or four years, food waste has reduced significantly in the UK, according to a report by WRAP, a non-governmental organization in the UK. People are only buying what they want. So, if food doesn’t taste good on the first purchase shoppers won’t buy it again. People will still always want value but as an experiential retailer, we want consumers to have a fantastic eating experience, even with a bargain.
Q: With so many changes taking place, how do you see the future retail landscape in the UK?
A: Whoever is selling food in the UK has to be aware of the trends such as shopper promiscuity and the role of technology as they’re only going to increase. Mobile devices are where people are going to do their shopping, so it’s only going to become more prevalent. The bigger, out-of-town shops won’t disappear, but there is probably too much floor space so it either has to be mothballed or become more experiential, with cafés and bakeries or wider assortments of non-foods, to make the stores more appealing to visit. Waitrose has spent a lot on hospitality, and our cafés are absolutely flying. We’ve also introduced ‘grazing,’ so shoppers have the opportunity to stop within the aisles to eat or drink — and we see that as a real trend coming down the line.
Growth in the UK will come from those channels where we are seeing movement right now, like eCommerce and convenience. The concept of ‘Click and Collect’ is developing too, because it is making life more convenient for time-poor people who are working longer hours. So, retailers with the best customer service will win, through options such as picking up groceries at tube stations or airports, or having no substitutions in online deliveries. Customer service will be absolutely key.
The UK retail market will be very different over the next two to three years, and those supplying the UK will have to embrace the changing relationships and demands too. It’s very exciting if you’ve got a clear strategy. At Waitrose, I believe we do — we’re about being experiential and offering wonderful food, customer service and value.
What this is all saying is that there is opportunity in change. Growth in sectors such as “experiential retailing,” “hard discounting” and “online” is obvious, but even more so, these trends lead to change among more conventional operators as they struggle to find ways to evolve and compete successfully.
It is a fascinating thought that there are large untapped markets even in the most developed of countries, and one can learn how to approach such issues at The Global Trade Symposium, co-located with The New York Produce Show and Conference.
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