Premium retailers make their point

The fixation with price continues to dominate grocery retailing in many parts of Europe. Yet there is another way – one that is proving increasingly popular and successful.

That was the message from Joanne Denney- Finch (IGD) when she opened a session on premium retailing. She said that while the price squeeze topped retailers’ list of concerns, premium retailers were succeeding by cultivating exclusivity and serving customers who were happy to pay for it.

“They focus on style and quality,” she said. “And they represent a threat to the mainstream retailers. Don’t think of them as a niche. A small niche is what the discounters were once seen as.” Referring to a McKinsey study of European consumers, which differentiated between “foodies” and “fuelies” – “fuelies eat to live, foodies live to eat” – she added: “My belief is that too many supermarkets have focused on the fuelies rather than the foodies”.

One UK retailer that unashamedly serves the foodies is EH Booth & Co, a supermarket business with 26 outlets in the north-west of England. Its chairman, Edwin Booth, explained how he family-run business, now nearly 160 years old, operates.

Relationships

“At Booths, consumers are called customers,” he said.

There were in excess of 20,000 SKUs in a typical Booth store, and more than 80 per cent of the fruit and vegetables were UK sourced, with many of the growers based locally.

An “immense amount of effort” went into sustaining relationships with the suppliers. During the fuel crisis, for instance, the company had paid its tomato supplier more to help him keep going. Often, too, the suppliers were invited to in-store promotions to meet the customers.

“We place a high level of trust in our suppliers. Our cauliflower supplier, for example, tells us when to promote his cauliflowers – that way we optimise sales.” Customers appreciated the quality of these and other products, such as the hand-raised pies and the Continental loaves baked by a local master baker, and were prepared to pay extra for them. Sales of the premium-priced milk from a local dairy herd, for instance, were growing by more than 20 per cent a year. “We pay a premium for this milk and pass it on to the customer,” he said.

Store staff too had an important role to play in selling the products and building a rapport with the customers – even to the point of writing recipes to coincide with promotions. “Our stores are smaller and more intimate than others and we make more time for our staff and customers,” Booth added.

Growing

But premium retailing is not the exclusive preserve of small family-run businesses, Denney-Finch insisted.

Elsewhere in the UK,Waitrose and Marks & Spencer were successfully pursuing a policy based on quality rather than price, and in the US, the Wholefoods operation, with its emphasis on style, fun and informality, was doubling in size every three years. IGD analysis showed that premium retailing was growing in other parts of Europe as well, notably in France, Germany, Sweden, Turkey and Russia “where a new class of wealthy young people are emerging”.

Denney-Finch suggested major suppliers should plan for the growth in premium retailing, if necessary by exploring new markets in other parts of the world, such as Asia. Evidence that they were already moving into the premium quality sector could be seen, for example, in L’Oréal’s takeover of the Body Shop and Cadbury’s acquisition of the Green & Black chocolate brand.

Meanwhile, at each end of the retail spectrum, the discounters and premium retailers could be expected to continue focusing on their respective markets, leaving the mainstream retailers in the middle to adapt accordingly.

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