Co-op’s Retail Media Activities Boosting Brand Sales In Neighbouring Grocery Stores

Research by Co-op – in partnership with Circana – shows retail media activity for brands in its convenience stores not only boosts its own sales but also generates up to four times more sales in surrounding grocery outlets.

Brands seem to benefit from a halo effect when advertising in Co-op shops, which can boost sales in the longer term. Circana found a ‘global beer brand’ RM Co-op campaign increased sales by 12% in Co-op stores + a 3% uplift in nearby non-Co-op stores.

The non-Co-op stores uplift was 4x total incremental sales value in Co-op stores. Circana said the impact on total sales due to halo stores where the sales uplift occurred and the larger pack sizes bought in those stores.

Dean Harris, Head of Co-op Media Network, commented: “The Co-op Circana results show when brands activate campaigns with Co-op, there is an immediate positive sales impact [not only] in our store, but also with competitors in the surrounding area. As an RMN, our main goal for the brands that advertise with us is to generate sales regardless of where that customer purchases the product.”

Convenience is a frequently shopped channel for top-up missions, often in addition to a bigger shop. The data showed that Co-op shoppers engage the most with other grocers, which provides convenience retail media with an extra amplifier effect on halo sales.

Harris continued: “The analysis of the beer campaign shows that by influencing brand purchase decisions in other non-Coop stores, the retail media activation is able to generate higher incremental sales by tapping into larger pack sizes available in supermarket stores.

“This halo effect data is incredibly insightful and gives further confidence to talk to our clients about the power of retail media in the convenience setting.”

Mark Hurst, EMEA Head of Retail Media at Circana: “As the advertising industry continues to expand traditional retail media inventory and accelerate digital and addressable channels and privacy regulations limit traditional measurement methods, retailers are increasingly in need of more agile and accurate ways to measure campaign performance across channels and tactics.

“Being able to analyse media lift through a range of sales-based measurement approaches, including Test & Learn, tactical comparisons and mid-campaign analysis, results in faster and more cost-effective decision making, enabling retailers like the Co-op to demonstrate brand impact and how it drives incremental value.”

Co-op launched its retail media network early this year, claiming it was the first in the convenience sector.

NamNews Implications:

• Think of the halo-impact when several mults are advertising the same brand via retail media…
• “(Our Goal) to generate sales regardless of where that customer purchases the product.”
• i.e. A compelling sales proposition.
• Begging the question: Who needs blunt traditional media?

#RM

Aldi Still UK’s Cheapest Supermarket, Even When Compared To Loyalty Pricing Schemes

After including loyalty prices for the first time in its monthly grocery goods price comparison, consumer group Which? found that Aldi still came out cheaper than Tesco and Sainsbury’s.On a basket of 65 items, Aldi’s total came to £118.41. This was £14.49 cheaper than Sainsbury’s and £12.49 cheaper than Tesco for an equivalent list of items, even when discounts from their respective Nectar and Clubcard Prices schemes are included.

Julie Ashfield, Managing Director of Buying at Aldi UK, said: “With many households still struggling to make ends meet, we’re more committed than ever to remaining the UK’s cheapest supermarket. This latest Which? analysis shows that Aldi prices just can’t be matched, even with a loyalty card!

“At Aldi, we’re dedicated to having clear, consistently low, prices so shoppers know how much they’re spending long before they get to the till. And we’re really proud of the award-winning quality of the products we’re providing at these amazing prices.”

Aldi has seen its sales performance weaken this year as Tesco and Sainsbury’s step up their efforts to combat the discounters by expanding their price match schemes. Aldi has also faced price matching on new fronts in 2024, with Asda and Morrisons launching their own versions that also match Lidl.

In response, Aldi has ramped up its marketing activity and pledged to reduce more prices in 2024 than in any previous year, with it expecting to top the £380m investment it made in 2023.

NamNews Implications:

• But why the slowdown in growth?
• Aldi are determined to keep this ‘Cheapest Supermarket’ title’
• ..."by reducing more prices in 2024 than in any previous year...
•  …with it expecting to top the £380m investment it made in 2023"
• Watch this space…

#Aldi #CheapestSupermarket

Morrisons Develops App So Wholesale And Franchise Partners Can Top Up In Its Supermarkets

Morrisons is to allow its wholesale and franchise partners to top up on food and drink lines in its supermarkets at prices based on agreed terms.

According to trade magazine The Grocer, a newly developed app allows retailers within the Morrisons supply network to scan the items they need in stores using their smartphones.

Once they have completed their shop, they check out with a duty manager. However, rather than buying at normal in-store prices, the wholesale customer is invoiced on their existing agreed terms, with an electronic delivery note sent to their store EPoS systems and email.

Morrisons wholesale division currently stocks a range of over 9,000 products for delivery, supplying more than 1,600 stores across five countries. The top-up solution is seen as an extra tool for its customers, who will continue to be serviced by the existing delivered model.

NamNews Implications:

• Morrisons have, in effect, increased their wholesale/franchise distribution points…
• …to include all of their retail branches as a top-up facility.
• Neat!
• And probably makes them the best UK wholesaler in terms of coverage…

#Wholesale #Cash & Carry #Morrisons

Morrisons Rolls Out WIGIG Range

Morrisons ‘when it’s gone it’s gone’ (WIGIG) range has been rolled out to nearly all its supermarkets.

Having first been introduced in February, trade magazine The Grocer reveals that the chain’s WIGIG range has now reached its 450th store. It offers shoppers discounted general merchandise, similar to the offer in Aldi and Lidl’s middle aisle.

Morrisons is said to be working with several new suppliers to offer a range of products, including cookware, toys, homeware, electricals, garden, and car care. Some health & beauty, household cleaning, and food & drink lines have also been featured.

The offers are displayed on wooden crates with ‘When it’s gone it’s gone’ signage. They are live in store for three weeks at a time, with new products added weekly.

Speaking to analysts last week, Morrisons CEO Rami Baitiéh said: “Our trading mentality is growing – and nothing illustrates this more clearly than the way the whole company has got behind our range of outstanding value WIGIGs.

“For us, WIGIG is not a gimmick. It’s a strategic lever for sales growth and customer delight. The offers have to be great quality… but at genuinely outstanding prices. And while we build our strength in WIGIG, we are also building up muscle, experience and supplier relationships in GM and home & leisure… which is an area where we under-index.

“We are still at the start of our WIGIG journey, but the best traders in Morrisons now see the potential, have got behind it, and we are improving every day.”

Last month, Morrisons delivered another “solid quarter of progress” as Baitiéh implemented his recovery plan, which has focused on improving the chain’s product availability, loyalty scheme, and price competitiveness.

NamNews Implications:

• When shoppers fully understand WIGIG…
• …it becomes an opportunity and incentive to buy ‘before stocks run out’.
• With Morrisons becoming a source of once-only bargains…
• …‘providing great quality… but at genuinely outstanding prices’.

#Morrisons #WIGIG

Aldi Starts Testing Its First Loyalty Scheme

Following long-running rumours that Aldi has been developing a loyalty programme, it has been reported that the discounter has started trialling a digital-based scheme in Belgium.

The platform is accessible through an updated Aldi app, which enables shoppers in 70 stores across the West Flanders and northern Hainaut regions to earn points on purchases by scanning a QR code at the checkout. These points can then be redeemed for free products or discounts.

A spokesperson for Aldi Nord told a local news agency: “We are adapting to changing customer preferences. This digital card complements our existing discounts and promotions, offering loyal customers a way to save even more.”

Reports stated that the test is being co-led and monitored in Germany by Aldi Nord with a view to a possible international launch.

Last month, Aldi said that it had no plans to launch a loyalty app in the UK after scanners identical to those used by Lidl for its rewards scheme were spotted at its checkouts. Aldi stated that the devices had nothing to do with a potential new scheme and were instead for electronic gift cards. However, the report noted that the new scanners were only in some of the discounter’s stores.

Members of the Lidl Plus scheme scan the app at checkouts to claim discounts and personalised rewards. The app has been credited with helping Lidl become the fastest-growing bricks & mortar supermarket in the UK over the last 10 months.

In contrast, Aldi’s sales growth has lagged behind its rivals in recent times after facing tough comparatives with its strong performance last year and increased price competition.

Marc Houppermans, executive partner at Discount Retail Consulting and a former Aldi Netherlands board member, told trade publication The Grocer last month that Aldi was working on an answer to Lidl’s app at an international level but “will do it differently as many Lidl customers complain that they do not get the same discounts if they do not have the app”.

NamNews Implications:

• Truly a Reward for Loyalty and should work well on that basis.
• Unfortunately, given the low % of brands in the Aldi model...
• ...the discounter will miss out on the key benefit of branded data i.e. First Party Data that can form the backbone of optimising Retail Media Revenue
• Thereby placing Aldi at a significant disadvantage to the Mults.
• In other words, Aldi will need to radically change the % of Branded vs Aldi Surrogate brand...
• ...(say 50/50, minimum) to restore parity with the mults.

#AldiBusinessModel

Realistic Optimism, a keynote for the New Norm…

Success in business in unprecedented times means being able to accept the realities of the ‘here & now’ and going back to basics while rivals await a return to the old normal… 

As we approached the fourth (!) anniversary of Lockdown, and my family celebrated Mother’s Day in our favourite local restaurant, crowded to capacity with an eight-person queue awaiting tables, it struck me that despite the havoc wreaked by Lockdown fallout, good businesses that consistently delivered more than it says on the tin, have never had it so good. 

In fact, those businesses that refused to fall into a rabbit hole in search of Lockdown causes, but instead focused on dealing with the effect, going back to the basics of establishing what business are we in, agreeing consumer need, defining how we could meet that need consistently, and meet it better than available alternatives, every time, are doing well…

Recognising that the greatest casualty of Lockdown was trust, in that shell-shocked consumers now believe nobody. Trust was further diminished via a succession of moves by brands trying to cope with unprecedented cost increases. These moves, including shrinkflation, skimpflation i.e. ingredient dilution and drip-pricing, saw brand owners dilute hard-won brand equity by insulting the intelligence of their most loyal and increasingly savvy consumers in their assumption that the changes would not be noticed…

Moreover, when challenged, the use of Letter-of-the-Law defences, such as ‘full indications‘ of value re weight/volume declarations on pack, simply drew attention to the fact that consumers make their decisions to purchase based on perception, Spirit-of-the-Law ‘facts’, and retaliate via ‘tell-a-friend’ complaints to their social networks.

Thus years, even decades of building trust in the brand, that guarantee of consistency in offering, was traded for a theoretical gain in product profitability, as brand loyals switched to more trustworthy rivals and even own-label. Moreover, big, powerful brands that increased prices way above inflation ‘because they could’ are now experiencing loss of demand as consumers resist the scale of the brand premium and switch to own-label, find it comparable in quality and then have to be won back to the brand at extra marketing cost…

For the latest insights re the extent of Lockdown fallout, a stroll down any High Street will reveal rows of barbershops that are empty, save for a single barber consulting his mobile as he awaits a possible ‘walk-in’. Adjoining them will be pubs with too few drinkers for time of day, interspersed with restaurants that have more staff than guests…

The pattern is repeated amongst shops and supermarkets that are trying to cope with diminished demand, attempting to serve the needs of uncertain but increasingly savvy shoppers that demand demonstrable value for money, every time.

Meanwhile, the new Big Four mults are Tesco, Sainsbury, Aldi and Lidl, as Morrisons and Asda try to compete under the extra constraints of servicing excessive debt.

The evidence of Lockdown Fallout is all around us. This is our market in the here and now.

As practical business people, we need to optimise our business model within a context of these new realities. 

Welcome to doing business in the New Norm…

The one positive aspect emerging from the Lockdown turmoil is that in times of unprecedented market disruption, business opportunities abound, in that with many rivals awaiting a return to normal, those businesses that can accept market conditions ‘as is’, re-engineer their offering to meet the real needs of savvy consumers, better than available alternatives, and deliver more than it says on the tin, every time, have to win…

In short, those businesses that can ‘park’ issues like the cause of Lockdown and instead focus on managing its effect, have more chance of success in optimising the available opportunities.

Given that trust was the greatest casualty of Lockdown, the restoration of consumer trust in brands, both supplier and retailer, has to be a priority. Consumers should not have to second-guess at every stage of the buying journey. Moreover, given that the FMCG model is based on the fact that causing the consumer to make their first purchase of a brand is such an expensive process, the sale is made at a loss. It is only when the user’s expectations are exceeded by brand performance that they make a repeat purchase with less inducement that we break even on that second sale. Then, with luck, the second purchase leads to a third, at which point some profit is made. Trust is the basis of this process and has to be preserved above all else…

Given that in flat-demand markets, any growth comes at the expense of rivals – doing basic things better than the available alternatives has to be the way forward. This means being completely open-minded re assessing business and brand attributes in terms of need satisfaction compared with competitor offerings of their Product, Price, Presentation and Place combinations. Only if we can conclude that we have some competitive advantage (or can adjust the elements of our marketing mix to deliver a difference that satisfies a consumer) can we proceed…

The next reality has to be the current state of the customer base. We have to accept that the new Big Four mults are now Tesco, Sainsbury’s, Aldi and Lidl, as Morrisons and Asda slowly succumb to the market realities of servicing debt that became excessive when interest rates suddenly reverted to a more normal 5%+ after decades of artificially maintained near-zero costs of borrowing.

Although private equity-owned companies are measured in multiples of EBITDA, i.e. pre-tax Net Profit is less important, until it comes to refloating or selling the company, trying to grow market share by investing in price reduction makes servicing debt even more challenging. Excessive financial re-engineering only adds to the doubt…

The quick answer can be to sell off assets to help reduce debt; meaning reduce the size of the estate to a point where the company is more suited to the New Norm private-equity business model.

Add radical changes of company culture/management style resulting in the loss of key people and the result can mean that recovering lost share and growing the business becomes near impossible…

Post-Lockdown retailing was made for the discounters. Aldi and Lidl are each significantly larger than Tesco globally and are privately-owned with low levels of debt. They are thus capable of optimising UK market conditions in terms of growing sales and market share via good quality and low prices.

Furthermore, when necessary, they can choose to run their UK operations at a loss to achieve their ambitions. They will continue to grow share at the expense of Asda and Morrisons without fear of adequate retaliation…

Taking a longer view, the advent of retail media will radically change the financial dynamics of UK retailers. The sale of first-party data allowing access to a brand’s shoppers in the aisle will generate significant incremental and high-margin revenue for retailers that can supply good quality data via a large assortment of branded goods.

However, in the process, this will limit retailers’ ability to optimise the potential of consumer demand for own-label by causing them to have to maintain their current 50/50 split of brand and own-label in their assortments. This Retail Media revenue can be used to supplement the bottom line, allowing retailers to compete aggressively on price…

However, retail media growth will cause problems for the discounters in that with the 10/90 split of brand and surrogate label, they will not have sufficient brand data to sell. They will, therefore, have to radically change the business model to something closer to a 50/50 split by offering more brands in their assortments, or experience loss of market share as the price wars intensify…

All of these are the new realities and must be factored into business strategies. Above all, given that the uncertainties will continue, suppliers need to carefully monitor the financial health of their main customers, keeping in mind that bankruptcy happens very slowly and then too suddenly to allow any remedial action. This means continuously calculating the incremental sales required to recover losses when a customer goes bust.

There is still considerable Lockdown fallout damage lurking within supplier and retailer businesses, and it is crucial that you take remedial action before you read about another ‘unexpected’ casualty in your morning’s NamNews bulletin.

Realistic optimism means effectively managing these market realities in the New Norm, better than the next guy by applying the basics…

Tesco Must Change Clubcard Prices Logo After Losing Lidl Trademark Appeal

Tesco has lost its appeal against a ruling that it infringed Lidl’s trademark, with it now facing a costly rebranding of its Clubcard Prices scheme.

In April 2023, the discounter won a legal case against the UK’s biggest grocery retailer over the use of a yellow circle on a square blue background to promote its ‘Clubcard Prices’ offers.

Lidl had originally sued Tesco in 2020, shortly after it adopted a colour scheme that was similar to the German firm’s company logo.

After the case was heard at London’s High Court last year, the Judge issued a ruling that said Tesco had taken “unfair advantage of the distinctive reputation” for low prices held by Lidl’s trademarks.

Weeks after Lidl won the legal battle, the High Court ruled that the discounter could have an injunction to stop Tesco from copying its logo.

Tesco’s lawyers argued it was unnecessary to impose an injunction and that its infringement of Lidl’s trademark could be resolved by paying a small amount of damages. It was highlighted at the time how difficult it would be for Tesco to remove all the Clubcard Prices logos in its stores, with the cost estimated at nearly £8m.

Tesco sought to overturn the trademark infringement ruling at a hearing last month, but today, the Court of Appeal kept with the original decision. The court did overturn a decision on copyright in Tesco’s favour, but the group will now have to stop using its Clubcard Prices logo in the current form.

A Lidl spokesperson welcomed the decision, saying: “We expect Tesco now to respect the court’s decision and change its Clubcard logo to one that is not designed to look like ours.”

Tesco stated that it planned to update the logo shortly, with a spokesperson saying: “We are disappointed with the judgment relating to the colour and shape of the Clubcard Prices logo but would like to reassure customers that it will in no way impact our Clubcard Prices programme.”

NamNews Implications:

• Fortunately, the Clubcard Prices idea is now so embedded…
• …Tesco can take the £8m hit…
•  …produce a ‘modernised’ logo sufficiently distant from Lidl…
• …and get on with what really matters.

The Changing Retail Landscape: Reversible Trends or Permanent Shifts?

The past four years since the first Lockdown have seen fundamental changes and unprecedented trends develop that materially affect supplier and retailer businesses everywhere.

Whilst it can be left to others to (hopefully) explain the cause and purpose of the global Lockdown, pragmatic business people have to focus on how to cope with and optimise business opportunities amidst the resulting fallout. A key step has to be identifying the main trends emerging, where they are headed, how they affect us, and what to do about it…

Given that the greatest casualty of Lockdown was trust, we now have to deal with a world in which no one takes anything at face value, be it supplier, retailer or brand, and they want demonstrable value for money vs. available alternatives. Moreover, we have to deliver more than it says on the tin every time, to ensure profitable repeat purchases. If the consumer has to second-guess every element of the offering from a brand using letter-of-the-law rather than spirit-of-the-law assurances, then an alternative offering will probably appear more attractive…

Therefore, trust has to form the bedrock of all our relationships with consumers (See our August Editorial - Trust in the brand.

Shift from Brand to Own-Label:

Given the unprecedented increases in the cost of living arising from inflation-based price increases, it was inevitable that consumers would have to compromise on their need for brands and ‘settle’ for equivalent own-label products.

Brand owners were traditionally able to capitalise on a perceptible difference in quality by charging a brand premium. The problem for brand owners is that a consumer forced to settle for own-label may find the product was ‘not as bad as they were led to believe’. They may begin to query the size of the brand premium and may require extra inducement to return to the brand when things ‘revert to normal’…

Therefore, to maintain the current 55% (brand) to 45% (own-label) relationship, brands will have to moderate shelf-price increases in the face of retail brand improvements, and also advertise more effectively to brand loyals in the aisle via retail media, rather than via increasingly wasteful traditional media.

Meanwhile, it will be in retailers’ interest to try to preserve current brand/own-label relative shares in order to attract incremental retail media revenues. Thus, it is unlikely the current 55/45 split will reverse in the new norm…

Shift from Mults to the Discounters:

Again, unprecedented cost of living pressures has caused mult-loyals to move from major retailers ‘down’ to Aldi and Lidl in a search for more economic purchases via cheaper surrogate labels. As with own-label, many found the discounter experience was not ‘as bad as expected’, represented real value for money and helped them challenge the premium associated with shopping in the mults. All this on a brand / surrogate label balance of 10/90…

As long as current levels of inflation continue, it is unlikely that the appeal of the discounters will diminish, so they will continue to grow share at the expense of the mults.

Moreover, given that Lidl and Aldi are each bigger than Tesco globally (global sales: Aldi £123bn, Lidl £86bn, Tesco £65bn), each of the discounters can afford to sell at a loss in order to drive their UK market shares, if necessary…

However, with the advent of retail media, another dynamic enters the mult/discounter relationship. As you know, retail media networks are driven by the availability of good quality first-party data i.e. insights derived from measurable shopping behaviour arising from retailer loyalty card-based purchases of national brands. This means that for the mults, purchasing behaviour of their shoppers can be more valuable than basket contents. If necessary, the incremental revenue arising from the sale of this access to shoppers in the aisle can be used to cut shelf prices and retrieve share from the discounters.

In order to compete by securing retail media revenue, the discounters will have to adjust their brand/surrogate label balance to something like 50/50 from the current 10/90. It is probable the discounters will make this change before they surrender market share. It all depends on their global willingness to run local UK losses to maintain current momentum…

Shift from Primary Routes to Omnichannel Routes to Consumer:

Given that Lockdown has radically changed consumer value systems, we are in a consumer-centric new norm. In other words, those consumers who have survived, albeit under enormous pressure re their jobs, homes, increasing cost of living and constant uncertainty, they know their value. In return for their custom, they want to be able to buy anytime, anywhere, any place, in whatever way they require. This means suppliers will have to make their products available via every possible route to the consumer or suffer a loss of share to more flexible rivals. Suppliers will have to find ways of balancing fulfilment costs by supplying direct or via outsourcing, managing all prices & terms harmoniously in the process.

Either way, it is inevitable that the cost-to-serve will increase, making diminishing net margins a feature of the new norm. And having experienced omnichannel convenience, it is unlikely that new norm consumers will revert to limited access…

Shift from Offline to Online:

Success online means living with Amazon, operating to their standards of consumer-centricity, and still losing money… Many organisations entered online without realising the true cost of online fulfilment, with consumers unwilling to pay more than £5 delivery fees for drops that cost up to £25 to reach their front door. Meanwhile, Amazon was allowed by the market to take 30 years to gain a degree of coverage that enables it to make up to three parcel drops with each van stop, while rivals have to drive perhaps ten miles between stops.

These online rivals, along with traditional bricks & mortar retailers, also have to compete with Amazon’s 500m-strong catalogue in terms of available range. And as far as retail media revenues are concerned, Amazon are already achieving $40bn+ per annum.

When it comes to categories like healthcare, Amazon is in a position to offer diagnosis based on a combination of data from wearable tech, their knowledge of consumer lifestyle, consumption habits, food & non-food, and fulfil prescriptions to fit, deliver to patients’ homes and check progress. Compare that with a pharmacy’s current capabilities…

Moreover, with Boots currently for sale again, a £6bn acquisition could give Amazon an opportunity to provide a full national healthcare service at a stroke…

Shift from Providing More Than it Says on the Tin to Shrinkflation, Skimpflation and Slack-filling:

One of the more ominous trends arising from Lockdown fallout is the tendency of established brands to trifle with the trust of brand loyals by attempting to disguise price increases via a combination of shrinkflation, skimpflation and slack-filling. Regular readers will be aware of the ‘rationales’ put forward to justify the moves and defend against inevitable criticism.

Brand owners continue to point out that pack details give all necessary information, thus meeting letter-of-the-law requirements, ‘forgetting’ that consumers are driven by perception, the spirit-of-the-law i.e. their expectation based on years of brand loyalty, causing them to become increasingly aggrieved at their perception of being short-changed by a hitherto trusted favourite brand.

This anger may even result in them telling-a-friend: “Please me, and I will tell one friend. Disappoint me and ten friends will learn of my displeasure”. But in the new norm of social media influencers, multiply this impact by ten or even thousands to gauge the potential damage to brand franchise…

Shift from Near Zero Interest Rates to Current Normal Rates:

Following decades of artificially based near-zero interest rates that mis-footed private equity purchases of large retailers when suddenly faced with new norm borrowing costs, it was inevitable that the change to reality would cause tensions in some businesses. Recent startups, based on the assumption of continuing low rates, fell into the same trap. These positions will be difficult, if not impossible, to unwind.

And of all the trends outlined above, it is highly unlikely that current interest rates will revert to near-zero levels in the next decade, if ever. Too much damage has been done by Lockdown, and we are now in repair mode for the foreseeable future.

Overall, it appears that these unprecedented changes and trends are irreversible, and suppliers taking the risk of forecasting beyond one year ahead might benefit from acting on that basis…