Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Learning from the discounters - you can’t beat simple, focused and seamless...

Supermarkets that continuously innovate in the area of customer engagement will be those that survive. Those who see customers before channels [multi-channel not multi-ple-channel] will lead. The retailers who get us talking and raising awareness of their overall brand, while moving us from one channel to another seamlessly, will be winners. Retailers need to tie their channels together in a seamless experience. Here we explore who is doing this well in the market, and what lessons can be learned.

Pop-up grog shops

Aldi’s introduction of a pop-up wine shop in Shoreditch is quite an innovative play by one of Britain’s fastest growing discount supermarkets. This pop-up ‘grog’ shop, opened to coincide with the May Day bank holiday and was aimed at raising awareness of its online wine offering. A clever multi-channel move seeking to bring in new online customers (who don’t live near an Aldi shop) by tempting customers through a short-term physical location.

Innovative? Yes. But original? Other supermarkets have used temporary storefronts to attract new customers. As a play to attract new customers for Christmas 2014, Lidl opened a pop-up restaurant serving only Lidl products. The pop-up shop, masquerading as a hip Shoreditch eatery for two weeks, proved successful in increasing footfall to its shops for the festive season.

What is notable in both cases is the use of one channel to attract customers to another channel; Aldi to push its online wine offering to new customers, and Lidl to drive footfall to its stores. Which channel is most effective for which purpose? For example, which channel is best at generating customer interest vs. retailer revenue vs. gaining market share? Understanding channel effectiveness and purpose is important, as it drives investment decisions and vested effort.

Online shoppers

So, in multichannel each channel serves a purpose and supports others; the brand attracts customers through its octopus reach across many channels. However, in our digital age, the assumption is still that a big proportion of new customers are gained through the online channel, which in turn is driving growth in the supermarket sector (11% of shoppers in 2015 claimed their main shop is now done online).

It will be interesting to see how Amazon will fare in an already crowded marketplace given its move into online grocery. The partnership with Morrisons to offer products under its Amazon Fresh brand, will be an interesting story to watch unfold, particularly the impact this partnership may have on Ocado. 

Back to basics

Bricks and mortar shouldn’t be written-off so quickly though. The Local Data Company reported that 1,487 shops were opened across the UK by discount supermarkets over the last five years (an increase of 52%).Compare that to the opening of 570 shops by the larger and more established supermarkets and it shows an imbalance in the quest for physical space. Discount supermarkets have certainly been aggressive in opening new shops. Furthermore, their success is also attributed to the way in which their shops are managed.

Winning and retaining customers has been key to their ongoing success. As noted in a report on UK Customer Experience Excellence, Aldi has realised that ‘industrious and well-equipped staff members are best placed to deliver a more bespoke individualised customer experience’. Furthermore, they have sought to keep their customers content by keeping things simple. While larger supermarkets stock upward of 30,000 items, Aldi makes the shopping experience easier by restricting selection to a mere 1,000 items.

It seems the focus discount brands have given to the more traditional shopping experience, combined with a play for the more savvy shopper of today has won them market share. This all comes at a time when the bigger players seem to have been more focussed on building an online presence. In the meantime, the discounters have gone back to basics and seem to beating their larger rivals.

Yet, is online really the knight in shining armour to prop up the more established supermarkets? Not when you consider Aldi and Lidl grew by 11.4% and 14.2% respectively over the last 12 weeks, while the entire grocery market only grew by 0.1% in the same period.

Which channel wins?

So, innovative, new channels are certainly a means to gaining new customers, but are they a distraction? Pop-up shops and using them as a marketing opportunity garner interest from those who may have dismissed certain brands before, but they don’t last. Investment in new channels is necessary to continue reaching customers in new ways, but taking the eye off traditional channels can have repercussions.

There is never an easy answer; each channel should be used by retailers as a way of attracting customers to the brand. Ultimately it is only customers who will decide which channel(s) best suits them. To attract and retain customers, and to gain market share, requires investment in and across all channels, and consistency in the brand that ties them together seamlessly. Retailers cannot afford to depend on any one single channel any more. Customers do not see channels, they see one brand, and focussing on the basics is never a bad thing. 

About the author

Freddie Pragnell
Freddie Pragnell
Freddie is an Associate Consultant in the Operational Excellence Practice, with a focus on Performance Improvement. His experience lies within the Financial Services Industry, and he maintains an active interest in the Retail Industry.

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