It is not just the Coop’s banking arm that faces problems,
food is struggling too albeit not on the same disastrous scale.
In the 6 months to July 26th food sales were down
0.4%, despite food inflation running at well over 3%, and profits declined from
£119m to £117m. Market share is dropping,
and Kantar Worldpanel figures for the latest twelve weeks show share at 6.6%
compared with 6.8% in the previous year.
The performance is made more depressing by the fact that
changing habits mean a boom in shopping in smaller local stores, territory on
which the Coop has operated for decades. Shoppers are weighing up the savings on time
and petrol costs that shopping locally offers, and recognising that shopping
only to buy what is needed for immediate consumption can help keep costs under
control.
The Coop realises that it needs an overhaul.
It has recruited senior staff from Tesco, Asda, and Sainsbury,
and drafted in the former Morrisons finance
director. Prices have been sharpened, and it is trying to improve its own brand
quality. It is setting up farming groups to get closer to suppliers.
It acknowledges the rise of on line grocery shopping and
recently announced that it is trialling four different ways of delivering an
online service to its customers. In perhaps the most memorable quote yet made
on the issues surrounding a move into online, Steve Murrells CEO said “Evidence
shows it replaces bricks and mortar sales and is margin eroding. But if you are
not prepared to eat your own children someone else might.”
Intensifying competition means that attention to price and
quality alone is unlikely to be enough to generate growth. All of the major supermarkets are going local.
Sainsbury has announced that it plans to open 100 new convenience stores a
year. Morrisons has got in on the act, albeit belatedly, and will have 100 M
Local stores open by January 2014. Asda is using its Netto acquisition to
experiment with different types of smaller store retailing, and Tesco just
wants to be the biggest in every sector.
So now the Coop has to work out what it can offer that will
persuade customers to walk past a local store from one of the “big four”, past
a local operator such as Budgens, and choose to enter a Coop.
The Institute of Grocery Distribution offers helpful advice to smaller store owners. It
boils down to having a deep understanding of why shoppers go to a particular
local store. There are basic requirements of quality and value, but thereafter
shopper needs can differ by customer age, whether or not they have children, age
of children, type of locality, and time of day. One size is unlikely to fit
all.
The Coop will need to be more analytical, flexible and
faster to respond to shopper needs than it has been hitherto.
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