We were all nervous but overall the grocery sector had a good Christmas trading period. We are still waiting for Asda to report which will bring the average down, but with the other Big 4 retailers all in positive territory there is reason to cheer.
Taking the discounters, Iceland, M&S food and Waitrose into the mix, we can see a few commonalities that are worth noting. (Sean Clarke, take note).
Aldi scored well on sales for premium ranges, as did Morrisons. Sainsburys has been the grocer to trade up to, but this year the grocers delivered a good enough premium range themselves to negate that need to go elsewhere. Sainsburys didn’t deliver a compelling-enough reason to coax shoppers away from lower prices and suffered a weaker like-for-like sales growth as a result.
M&S food sales growth was also at the lower end of the range. While the grocers have been developing range at very competitive prices, M&S have taken their foot off the gas. Waitrose delivered strong sales too, but Waitrose 1 which launched this year has helped add sales to the top line.
Takeaway: Premium sector is out-performing total grocery. Develop unique ranges building on current trends like free-from, invest in its branding and marketing. Don’t rely on price in this sector.
In our Christmas store visits we saw some shocking examples of availability with Morrisons topping the leader board. They moved to sales based ordering in 2016 which is never an easy transition and suffered as a result.
Despite that they delivered a remarkable like-for-like sales growth. Imagine what it could have been if the ordering process had been further embedded. Waitrose too had patchy availability throughout the store leading up to Christmas.
The missed opportunity should be quantified and made into a screensaver for everyone in the businesses.
Takeaway: Quantify the missed opportunity each week from poor availability and use it as a motivator for process improvement.
All the grocers saw a boost from general merchandise and clothing, building grocery transaction size with additional purchases whether it was a Christmas jumper of the must have toy of the season. Tesco saw a fantastic lift in toys, outperforming the market by 17%. Argos saw a 4% like-for-like sales growth which makes Tesco’s seem all the more remarkable at this competitive time of year.
Morrisons had a very strong seasonal aisle and Sainsburys reported 10% like-for-like growth on TU clothing. This all plays into the supermarket’s core strengths: the space to stock broad ranges and in depth where needed and feature merchandising in store for key ranges.
Takeaway: Build on customer shopping missions and support them with ranges that are merchandised and marketed well. Don’t be tempted to try to increase range in convenience stores to take advantage of GM growth when it will compromise shopping mission.
Tesco admitted that they lost sales to dropping the clubcard boost on general merchandise compared to a year ago, and Sainsburys all but eliminated promotions pre-Christmas.
Meanwhile Waitrose did one day only timed category promotions that drove sales early in the season. These promotions were advertised on till receipts through the week. There was minimal incremental workload as a result as whole categories were promoted and did not have to be moved.
Takeaway: while a strategy that is based on EDLP is right for the market, there are seasonal events that need the lift to remain competitive. Remain flexible and consider mechanics that stay true to the strategy but also true to customer needs.
As mentioned earlier, Asda are yet to report but we envisage similar learnings to come from their trading update. Availability wasn’t always consistent, excitement and promotions were lacking and there is a gap where trade-up and premium could sit.
Christmas planning for 2017 will be underway already and these lessons will be taken on board. The landscape will continue to subtly shift in the meantime, the economic climate will see a not-so-subtle shift at some point, making it another interesting year of retailing. But we wouldn’t have it any other way.