K E N P A R S O N S

A rapidly changing market -how should village shops

adapt to survive?

A FAIRLY SAFE PREDICTION General Election May 2015

THEGROCERYMARKET2015

WHO LIVES IN RURAL AREAS?

Usual resident population by ageEngland and Wales

2011 PercentageAge Urban Rural0-14 18.0 16.215-29 21.1 14.830-44 21.2 17.745-59 18.8 22.360-74 13.6 19.675+ 7.4 9.4Source: Office for National Statistics

YOUR POTENTIAL CUSTOMERS 3/10

UNDER 30

4/10 30-59

3/10 60 AND OVER

MAJOR MARKET TRENDS

Overall market slight decline Price deflation Discounters doing very well Big 4 losing business Top end of market doing well Internet growing strongly Total convenience sector flat Multiple convenience growing Own label outperforming

GROCERY PRICE INCREASES IN RECENT YEARS

2008 9% pa peak2011 6% pa2013 4% pa2014 now

negative

40% of all sector sales on promotion

HOUSEHOLD GROCERY SHOPPING BEHAVIOUR

No massive change – “movement at the margin”

Average customer makes 4 grocery shopping trips per week

Average of 3.25 different fascias visited per 4 weeks

Average basket size fallen a bit Average pack size fallen a bit

MARKET SHARE CHANGESData 12 weeks to November 2014

Aldi +25% Lidl + 17% Waitrose +6% Asda 0% Co-operative -1% Sainsbury’s -3% Morrisons -3% Tesco -4%

Pincer challenge to the major multiples from both sides

The Discounters

Aldi basket size has now caught up with Tesco

Aldi average trip includes a lot of different product groups

Aldi and Lidl are building loyalty Discounters’ share of trade is

highest on Thursdays, supermarkets’ at weekend

Aldi now has average shopper profile

Tesco & Asda share losses to discounters most marked amongst higher earners

YOUNGER DOWN MARKET

Asda

YOUNGERUP MARKET

OLDERDOWN MARKET

MorrisonsLidlCo-operativeIndependents

OLDERUP MARKET

SainsburysWaitroseMarks & Spencer

AVERAGE

AldiTesco

Discount share across Europe

Germany 25% Spain 18% Netherlands 15% Italy 14% France 12% Britain 7%

The rapid growth of discounters is the mirror of the pattern that happened in Germany, France & Spain.

IS IT A WATERSHED?

Discounters now acceptable to mainstream shoppers

Supermarket chains peaked, now declining. Future of giant bricks & mortar???

Supermarket diversification into on-line and convenience

Morrisons decline may be terminal – the Big 3?

Increased threats to branded products

MILK

* For 4 pints

“When we dropped our milk price to 89p* it was all funded by our business and it was at a substantial loss. It’s the most emotive product – it’s the one that gives the most reaction to footfall because it is a daily purchase…..in a tough industry, we have to invest in the products that drive the best footfall….”

Nigel Broadhurst, MD, Iceland

EGGS Six medium free range eggs:89p at Aldi and Asda£1 at Tesco, Waitrose and Morrisons£1.25 at Sainsburys Farm gate prices fell by over 10%

between quarter 1 of 2013 andquarter 3of 2014.

PRICE Economic conditions – falling

real incomes Market research findings suggest

rising importance of price Rise of discounters Price differences between stores

increasing Proportion of goods sold on offer

increasing

SO HOW IMPORTANT ARE PRICES TO YOUR STORE???

HOME DELIVERIES

Now about 7% of the market More in remote rural areas? Delivery cost coming down Ease of use of sites increasing Fits with 24/7 lifestyle

CONVENIENCE SECTOR

Customers shopping more frequently

Customers shopping more locally Customers shopping for fewer

items per trip Customers buying smaller pack

sizes

Major investments from supermarket chains

PREDICTIONS FROM RURAL RETAILERS

WINNERS

On-line Discounter Specialist retailers Vending machines

Chilled foods Food to go Bread & cakes Fresh fruit & vegetables Local products Health & beauty E-cigarettes

PREDICTIONS FROM RURAL RETAILERS

LOSERS

Superstores Smaller supermarkets

Tobacco News & magazines Stationery Post Office

WWW.RURALSHOPS.ORG.UK

Village shops – from Surviving to Thriving

THRIVING Financial – reasonable profit Job satisfaction – enjoy what you

are doing - worthwhile The community benefits from

having a shop

Surviving into the long term

THE WORLD IS CHANGING

EMBRACE CHANGE

PLAN FOR CHANGE

FINANCIAL

Turnover

Gross Profit margin

Costs

THAT’S ALL THERE IS TO IT!

TURNOVER

Consciously rebalance the store towards growth ranges and away from declining product categories

Special offers, PMPs, deals Maximise space utilisation Use EPoS data to spot winners

and losers

WINNERS? Chilled foods Fresh fruit & vegetables Food to go Bread & cakes Local products Health & beauty E-cigarettes

PROFIT MARGINIt is not a dirty word

Review suppliers – including symbol group membership

Maintain GP margins – negotiate with suppliers

Pressure on wholesalers – resist the “waterbed effect”

Optimise range Take a margin Know when not to Demand good fresh

COSTS Energy Staffing Property acquisition

COMMUNITY

Shopping is an emotive activity

Customers need to like you and your staff – loyalty

Local staff Local suppliers Community involvement Communication – newsletter,

website, Twitter, Facebook Special events – added interest Opening hours

BUTIt is a two way relationship

THRIVING Widen appeal to more age groups A huge target – most village shops

have a small local market share Change means opportunity as

well as threat Waitrose shows that it is not all

about price Customers have fallen out of love

with supermarkets, behaviour is changing

Some trends in shopping favour local shops

WWW.RURALSHOPS.ORG.UK