Analyst View. The Secrets of Europe s Most Productive Grocers

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1 The Secrets of Europe s Most Productive Grocers

2 Executive Summary Sales per square metre (also referred to as sales density) is a common measurement for success in the retail world. Some grocers across Europe really excel in this area, being way ahead of their competitors. But what is it that makes them so productive? What do they all have in common? To answer this question LZ Retailytics compared the most productive grocery banners in Europe to figure out the secret behind their success. We discovered that all grocery channels have the potential to reach outstanding productivity, that macro and retail landscape factors give countries like the UK an edge, and that reaching a certain level of sales volume plays an important role. When it comes to the top 10 most productive banners, they all have a proven record for reacting quickly and resolutely to changes and trends in their markets. Their common profile is that of a format specialist offering unique and constantly evolving concepts to their markets. High service orientation, private label penetration and price aggressiveness are other common traits. Start your free trial now trial-access

3 There are certain superstars of the grocery retail world that every retailer aspires to. These highperformers typically sport outstanding profit margins and sales per square metre (also referred to as sales density or productivity). The question is where the secret lies behind their success. What are their common denominators? Using our Report Builder Tool, LZ Retailytics listed and compared the most productive banners in Europe to find answers to these questions. The Main Enablers First off, our data shows that all major grocery channels have the potential to gain high productivity, as seen in the pie chart below, even if discounters and supermarkets still have a clear lead. The data also underlines the importance of broad brand awareness and recognition, but also that productive concepts have the means to expand. On average, the top 100 productive banners had retail sales of approximately EUR4.6bn and an average total sales area of 450,000 sq m. We also found that certain countries macroeconomic and market specific competitive factors can provide banners with a boost in sales density. Europe: Top 100 Productive Grocery Banners, Split by Channel, Of the top 100 most productive banners, 23 come from the UK and 11 from Switzerland. The Netherlands, Italy and France all have seven each. In the list we included only the main grocery channels and set a minimum total sales area of 40,000 sq m to exclude very small banners. Europe: Top 10 (+#100.) Productive Grocery Banners, Sales per Sq m (EUR), 2018 Supermarket Esselunga 17,084 Aldi Süd Ireland 17,029 Colruyt 16,769 Superstore Esselunga 15,617 Aldi Süd UK 15,528 Sainsbury's Local 14,722 Tesco Express UK 14,540 Lidl Ireland 13,972 Azbuka Vkusa 13,910 Morrisons 13,408 #100. Ica Nära 0 7,772 4,000 8,000 12,000 16,000 Europe s ten most productive grocery banners sell twice as much per square metre than most others. Ica Nära at place 100 illustrates this. Different Approaches of Top 10 When comparing the top 10 from the list mentioned earlier with Ica Nära, which is still very productive at rank 100, it becomes clear just how outstanding these banners are. 18 Esselunga s top positions are largely explained by the Italian retailer s excellent record for proactivity, leading to customer satisfaction. Time and again it manages to pick up on trends and quickly implement changes convincingly throughout its entire store network Discounters Supermarkets Hypermarkets Minimarkets Cash and Carries All channels are represented among the 100 most productive grocery banners in Europe but discounters and supermarkets claim the most spots. In the top 100 ranking, Lidl s and Aldi Süd s different country operations claim 15 and 7 spots respectively. This owes much to their format expertise and specialisation. In Ireland and the UK they are especially productive as their popularity has sky-rocketed there in recent years, without being matched by a corresponding store expansion.

4 Most are also unique to their markets and have significant experience as format specialists. This highlights the importance of identifying gaps in the market, but also shows that dedication and continuous improvement over a long period are instrumental for reaching ultimate productivity. It s also clear that they all excel at offering a consistent brand experience, providing differentiation through a medium-to-high private label penetration and innovating through technology. Further, they manage the balance between price aggressiveness and quality perception and provide excellent service(s). Productive is not always beautiful: Colruyt fully utilises its sales surface, which contributes to its high sales density. Colruyt is the Belgian market leader and mainly trades through its unique mix of a supermarket, a discounter and a cash & carry. In a no-frills environment, it sells low priced groceries and nonfood to professionals and end-consumers alike, often in bulk and on shelves reaching all the way to the roof (ladders are provided). Sainsbury s Local and Tesco Express make the most of the UK trend towards top-up shopping. By selling small packs of essentials and food-to-go items in prime locations, these banners achieve a very high assortment turnover. Their private label lines and lunchtime meal deals make them stand out from other UK convenience chains, which are very productive in general. Azbuka Vkusa operates a network of premium supermarkets in Russia and has among the highest gross margins of all Russian retailers, due to its unmatched own production and premium assortment ranges. Morrisons superstores combine high quality with favourable prices and a focus on local, fresh and own produced items. Similar Characteristics Looking at the table to the right, we can see that most of these banners are very good at detecting and responding quickly to trends. An implication from this is the importance of investing in technology to better understand customers and trends. Most of these traits may not be the best-kept secrets of the retail world but rather common sense. Even so, they show that there are no shortcuts and only long-term investments and an agile organisation will earn you a ranking among the very best. Europe: Top 10 Productive Grocery Banners, Concept Assessment (2018) Unique concept Trend proactive Format specialist >25% Private labels Low price focus Strong service focus High innovation level Supermarket Esselunga Aldi Süd Ireland Colruyt Superstore Esselunga Aldi Süd UK Sainsbury's Local Tesco Express Lidl Ireland Azbuka Vkusa Morrisons Europe s top ten most productive grocery banners share certain common denominators. The assessments were made by LZ Retailytics analyst team. AUTHOR Daniel Johansson Retail Analyst

5 Advisory & Training LZ Retailytics brings innovative, interactive workshops direct to your company Deepen the insight across your teams Contact Us Björn Weber Head of LZ Retailytics Train your teams based on high-quality data and insights from LZ Retailytics' analysts. Benefit from our special expertise on: Market Developments: Nordics, Baltics, Italy Minimarket Channel Insights Private Label Trends Daniel has more than four years of experience in analysing developments in the European grocery retail markets. Over this time, he has built up comprehensive expertise in the areas of the Nordics, Baltics, Germany and Italy. He has used his insight to contribute to several projects for large FMCG manufacturers, technology vendors and retailers. Daniel also regularly comments on global private label trends and has delivered custom projects on this topic. Daniel Johansson Retail Analyst Daniel is to deliver a webinar later this year focused on the minimarket channel and convenience/proximity trends.