Grocery retailing is big business and all indications are that it’s going to get even bigger.
In the US the top 50 grocery retailers generated €315 billion in 2006, a 10 per cent increase on the previous year. In Europe a relatively saturated grocery market grew by a modest 2.2 per cent in 2006 to €857 billion, and the UK saw growth of four per cent on 2006 at €185 billion. With figures like these its clear to understand why trends in this sector have a significant impact on consumers – in the US, after housing and transport, food and grocery accounts for nearly 50 per cent of every dollar of retail spend.
Initiatives by the supermarkets to cut carbon emissions and reduce packaging are pleasing messages to consumers, but action needs to follow words. Excessive packaging is one of the most visible irritants to shoppers, however achieving a reduction is far from simple and requires great attention to health and food safety regulations, as well as close cooperation with suppliers. Often there are branding and shelf exposure issues to take into account, but surely, something has to give.
The grocers are responding to changing lifestyles and choices too. Sales of organic produce are increasing substantially, and in keeping with ambitions to reduce the carbon footprint of products, more goods are being sourced locally, such as vegetables and dairy products. But perhaps even more significant to distribution patterns is the move of the big supermarkets into the convenience store sector – this is in response to a time poor, but more affluent urban consumer. There is an impact here on city centre logistics, where smaller delivery vehicles are needed.
But the two great strategic initiatives continuing with great gusto are diversification of the product mix, with everything from clothing to TVs and microwaves, and the international expansion of the big global retailers, Tesco, Wal-mart and Carrefour. Tesco has opened up shop in the US with the Fresh and Easy brand, Wal-mart has made moves in India and Carrefour has 345 stores in China, all bold actions which must be taxing both the marketing talents and supply chain expertise of their management teams.
On the point of diversification, in the UK Tesco is putting the pressure on Argos with its successful launch of Tesco Direct. Trading since September 2006 Tesco Direct already has revenues of around €290 million. And if you want to find out just how good their supply chain really is, read our judges’ review of the winner of the Retail and Distribution category of the European Supply Chain Excellence Awards 2007, in the November issue or on www.supplychainstandard.com.