OPINION: Why low prices shouldn’t be your priority

On a visit to a Spar store last week I cheekily parked my car for two hours in the Co-op next door.

To pass as a customer I bought two croissants for a pound. Leaving the car park I visited Lidl across the road for a spot of competitive shopping. It offered five croissants for £1.

Entering the Spar, a store packed with great theatre, I checked out the croissants. It was one for 65p. The owner told me I would get two for £1, but I missed any signposting of this.

This shows how competitive the convenience world is. But it is a great market to be in, according to the experts at Planet Retail, who have just unveiled their six future trends for global retailing report.

For the next five years there will definitely be “very, very strong growth”, senior retail analyst David Gray said last week when he was challenged about how confident he was in Planet Retail’s projected 5.5% a year growth (surpassed only by the discounters at 5.6%).

Contrast this with the mood across town where Asda unveiled another grim quarterly trading result. Like-for-like sales were down 5.7% in the first quarter. Asda chief financial officer Brett Briggs said: “Improvements in price and availability throughout the quarter were not enough to overcome the traffic and food volume declines in our large format stores.”

This shows how competitive the convenience world is. But it is a great market to be in, according to the experts at Planet Retail, who have just unveiled their six future trends for global retailing report

Asda chief executive Andy Clarke promised he would win back that market share. However, Asda has lost its lowest price position to Aldi and Lidl.

The convenience opportunity is not low price – at least not for the next five years. Planet Retail describes it as an “often high margin” channel. For independent operators, the challenge is this means major supermarkets are investing in smaller stores.

Even worse, Aldi has launched a 600sq ft ‘food to go’ convenience store in London.

Of the five drivers of convenience growth, four really matter in the UK: the rise in people aged over 60; the rise in smaller households; lower birth rates; and time-poor lifestyles. These undermine the benefits of large format stores. Better prices and availability are not winning shoppers back.

But the challenge for independents is about differentiation.

Foodservice and health are two areas Planet Retail promotes. An example of foodservice it gives is a display in a Spar in Ireland that changes according to the time of day and the meals shoppers want.

Health could be about selling in partnership with Holland & Barrett – another Spar initiative. Every local shopkeeper needs to think about these two opportunities all the time. What you need to look for is products with higher margins, and that are not available in every multiple competitor.

Planet Retail says to watch out for the connected store, which may simply be about offering a parcel collection service. Shoppers are increasingly trusting of technology and will expect to use it in your store.

There’s a famous unmanned store in Sweden where the shopper uses an app to scan products and then gets a bill at the end of the month.

Gray says the downward pressure on margins towards the 1%-2% in the discounter model and the rise in wage costs will encourage retailers to try models like this.

The last trend was franchising. From Planet Retail’s point of view, this was a capital-light way for major brands to increase market presence.

To return to the Spar store I visited, its owner’s strategy is to find stuff his shoppers want that multiples don’t do. His shops are doing it daily. That’s probably the best strategy.