tesco farm value lines

Tesco own label “Farm” range – one less reason to leave

Tesco appear to be dusting off an old favourite with the launch of “Farm” branding, priced to compare to Lidl and Aldi, every day low priced produce and fresh meat. The branding is not overtly positioned as value but sits comfortably within the Tesco hierarchy as “Nightingale Farms”, “Rosedene Farms” amongst others.

tesco farm in store marketing

The changing face of food retail in the UK is an ever present media story where the next big thing is continually sought. Tesco’s new range is hardly a revelation in food retailing, but it does tap into the customer’s state of mind, waiting for the next opportunity to save money.

Aldi and more recently Lidl have been leading the curve over the last four years. They may not have the market share of the big 4 but the impact they have had has been titanic. They have made the British food shopper more promiscuous and made saving money on their faux brands a subject of inverted snobbery, you’re not cool if you’re not saving money. Well done, but every action has a reaction and whilst Sainsburys look to diversify, purchasing Argos and a relationship with Netto, and Morrisons and Asda engage in price wars, Tesco seem to be following the mantra, ‘if you can’t beat them join them’.

tesco farm shelf edge

This route was tried previously under the much maligned Philip Clarke era but this time we believe it is not the only response, it is could be just one tactic of many. So far the “Farm” range consists of unprocessed products, meaning the complexity and cost is not only much easier to manage but the end product is also much less likely to be compromised in quality. Something that the previous “discounter brands” failed in delivering.

tesco farm value pricing

It remains to be seen if the value “Farm” range is enough for the customer to forego their trip to the discounter. As long as the quality is retained and the price is as competitive as it is now [Baby new potatoes 89p, Celery 49p, Back bacon £1.35, bag of 4 peppers 79p, strawberries punnet £1.19] then the chances are slightly better than they were before. If the volume on these lines is big enough, margin can be healthy, as there is little production to add cost.

It all sounds like a good idea and having sampled two of the lines they are as good as I get at my local farm shop, so no complaints. My one concern would be the fact that this alone is not enough, it might be step one in operation “recover discounter leakage” but they are going to need some more steps. All big journeys start with that single step however and it looks like the right path is being chosen, keep crunching the gravel Tesco.

Sainsburys footfall

Sainsburys, confidence and objectivity pays off

Quarter 4 has historically been weaker for Sainsburys against its competitors, trading better in summer months than winter, however the trend has been improving with each quarter of this financial year and today did not disappoint.

 

sainsburys q4

Like for like sales are improved from Q3 and shows Sainsburys strength and ability to retain the increasingly promiscuous customer. This is in part due to the cracks in Tesco and Asda’s performance recently but the achievement to hold its position against the discounters should not be taken away from the strong leadership at Sainsburys.

This puts the grocer in a strong position to increase its bid for Argos and we doubt we will be disappointed by the deadline at the end of the week. However we are not yet convinced an increased bid of £1.5bn will be enough to secure a win against its rival bidder Steinhoff.

The advantages of a Sainsburys owned Argos have been spelled out by Coupe but there is a real risk that this could become too much of a distraction to the day to day business of serving and retaining the customer. While the last 2 years have proved Sainsburys is a confident and objectively led business, it is the next two years that will see them earn their corn.

And if Sainsburys is unsuccessful with its bid, what is plan B?

Sainsburys can tick the box for online and convenience retailing, the two high growth aspects of grocery in the UK, but that does not solve the problem of big boxes with a space issue. General merchandise, and we include clothing in that, is lacking. Looking at the range we can see that the buyers can source a good product at a good price. It is the in store execution that lacks conviction and consistency. If the Argos bid fails, Sainsburys must finally grasp the margin rich opportunity of TU in store and not leave money on the shop floor. It’s not as if Sainsburys doesn’t have the capability, it does, so when will this be addressed?

sainsburys mission format clothing

The next financial year could see Sainsburys move up another gear, all the signs are there: quality, price and promotional positioning. Sainsburys just needs to maintain its steady strategic path. Oh, and please sort out clothing in store.

bhs productivity modelling

How BHS could benefit from productivity modelling

As Darren Topp, CEO of BHS, explained in an interview with Retail Week, BHS do not have a sales problem, but they do have a cost problem.

One of the biggest cost that any High Street retailer has is rent and the fact that BHS plans to enter into Company Voluntary Arrangements with many of its landlords is evidence of that, fix the biggest problem first. The other major cost is payroll. BHS is looking at its payroll and making big cuts in head office and in stores, cuts that might be necessary but may be misplaced.

At Retail Remedy, we have designed a productivity modelling tool that takes the operations of each store individually, identifies ‘What Good Looks Like’, and then models resource to deliver it. Our model has a proven track record of savings which are either used to boost profit or are reinvested in customer service to build the business further.

We understand that the rent needs to come down for some BHS stores, but the other opportunity available to BHS for those struggling stores, but also for the stores that are profitable, is productivity modelling, to safeguard against future store closures and job losses.

productivity model inputs

The productivity and process improvement model starts by looking under the bonnet, identifying what you have and relating that to what you want to have. We identify where the inefficiencies lie through financial analysis and then relate that back to front line retail teams, distributing resource fairly against real tasks in real stores with each store’s individuality considered. Budgets are set and outputs specified to deliver operational consistency across the business.

Productivity Model Calculator

At BHS, there is a risk that the business has assumed one size fits all, which it rarely does. Profitable stores could be more profitable, mediocre stores could be high performing with a rent reduction and consistently allocated resource, and poor stores could be closed for all the right reasons, not just because rent is too high.

It is reassuring that there is a clear strategy that BHS is pursuing, with store makeovers in progress, rolling out of convenience food offers and cafes supported by Bookers and Compass. According to Topp, ranges are being reviewed and rationalised where needed, price architecture is being overhauled to offer great value, and there is a focus on ecommerce.

What might have been considered a purely financial transaction by the conglomerate that bought BHS, looks like it is more for the medium term. We would like to see BHS reach its 100th anniversary in a healthy position, not for nostaligia’s sake, but because there is a place on the High Street for a department store offering relevant everyday ranges at good value. The Retail Remedy productivity model could be just the answer.


Watch the productivity and process improvement video and then give us a call to see how it could help your business be more profitable.