Grocery strategies for convenience and online create opportunities for suppliers, IGD Retail analysis

Posted by AFN Staff Writers on 2nd October 2012

Moves by one of the world’s leading grocery retailers, the Dutch-listed international Ahold group, demonstrate strategic thinking in the convenience supermarket and online grocery sectors that, according to IGD Retail Analysis, create opportunities for suppliers.

In an analysis provided by IGD Retail Analysis about the Ahold group’s moves in convenience and online, Ahold’s strategic moves to bolster convenience retailing are reviewed for the effect on suppliers. The developments include:

  • New store designs target shoppers’ changing missions
  • Pick up at store to help Drive online engagement
  • Smartphone penetration to help Ahold cut queue time
  • Pushing the boundaries in convenience and online
  1. 1.      New store designs target shoppers’ changing missions

In the Netherlands, the introduction of the AH to Go format enhanced Ahold’s convenience  credentials and have established a format that is believed can grow with  a number of markets in Europe. In the Czech Republic, Ahold continued the expansion of its new compact hypermarket format, with a similar approach being taken in the US, in order to improve customers’ shopping experience in some of its larger stores.

As the company extended into Germany in September 2012, with the AH to Go format, Ahold said that its customers spent on average only two minutes in its stores, underlining the importance of getting the format’s ranging correct, but also of encouraging frequent visits from shoppers.

For suppliers, according to IGD Retail analysis, the evolution of Ahold’s formats puts ranging under the spotlight and requires them to think about whether or not they are truly thinking differently for each channel. Ahold’s format development does give new merchandising opportunities, but suppliers will need to bear in mind Ahold’s growing and associated focus on private label given the space difficulties of a smaller store format. According to the IGD Retail Analysis, this will require them to think about how to differentiate their products to demand a presence in a store where speed of shopping is key.

2. Pick up at store to help Drive online engagement

IGD Retail Analysis says the roll out of a Drive concept in the US, in conjunction with Peapod, and speculation linking it with a similar step in its home market, Ahold widened its online offering strongly during 2012. The Drive concept is being favoured as it enables customers the ease of shopping online and flexibility of when to pick up their goods.

The pick up at store concept is expected by IGD Retail Analysis to be a better fit with Ahold’s operations internationally, especially as it looks to expand into urban locations in Belgium and Germany where such an offer could give it a competitive edge relative to the discount model employed by some of the leading retailers in both countries.

For suppliers, according to the IGD Retail Analysis, the Drive concept’s growth for Ahold could attract a new set of, especially younger, customers. By market, suppliers will have to understand the Drive shopper and how his or her demands are different to store-based shoppers.

As such concepts grow in importance Ahold is expected by IGD Retail Analysis to become accepting of ideas from suppliers and, therefore, brand owners will need to think if there is scope to develop a more online centric range. Finally, in markets where suppliers have worked with retailers in relation to their online or Drive concepts, IGD suggests there will be lessons to  tell their colleagues about how Ahold’s moves into these new concepts could help their operations in the Netherlands and US.

3. Smartphone penetration to help Ahold cut queue time

Improving time-poor customers’ shopping experience and minimising queue time has driven innovation at Ahold, much of it oriented around smartphones. In the US it has run the ‘SCAN IT! service’ for a number of years, while in the Netherlands it, in September, added a service that enables customers to scan and pay using their mobile phones.

The integration of scanning technology in its stores is helping Ahold to cut queuing times for shoppers. The company is clearly already looking forward to when shoppers more fully integrate online and apps into their shopping trips, with customers scanning at home.

In the short term, according to the IGD Retail Analysis, suppliers will need to showcase their products in a different way and think about the opportunities provided to retailers through enabling them to suggest customer-specific offers and promotions. In the longer term, scanning in-store could encourage scanning at home, which could benefit brand owners as shoppers could be encouraged to make top-up purchases more often for their favourite brands.

4. Pushing the boundaries in convenience and online

In-store, IGD Retail Analysis points out that Ahold is offering shoppers convenience through adding to its range of meal solutions, while also presenting a strong choice of time of day merchandising, with lighting and music changing three times a day to reflect changes in the food for now offer. This step is best evidenced in the AH to Go format, which has supported the company’s expansion into Germany.

Online, Ahold’s purchase of Bol.com and the subsequent expansion of its product range, addition of a marketplace for both new and second hand goods and the relaunch of its mobile store highlights its attempts to extend its e-commerce presence.

Together these initiatives are set to meet shoppers’ in-store and online shopping needs, making the shopping process more convenient in both, and  according to the IGD Retail Analysis, suppliers these moves provide an opportunity to bring new products to Ahold. At Bol.com the marketplace initiative provides suppliers with a strong route to market and audience for their products that may not have been available to them previously.

In-store, innovations around on-the-go or convenient meal solutions are likely to be welcomed by Ahold.  According to the IGD Retail Analysis, the suppliers, therefore, will need to think about how their products, individually or in conjunction with another brand or product category, can help the company win with convenience.

Focus on convenience expected to grow in medium term

IGD Retail Analysis emphasises that Ahold’s strategic aim to win with convenience globally is likely to become more focused as initiatives are rolled out in conjunction with its associated aim of establishing internal systems and processes that enable it to roll out IT functions on a global basis in a more streamlined way. The IGD Retail Analysis says that as the  convenience marketing grows, there will be further opportunities for suppliers to leverage their expertise with Ahold across a number of additional markets.

The continuing 6 pillars

Australian Food News points out that in November 2011, under the leadership of Dick Boer, who was appointed CEO in March 2011, Ahold announced a new phase of its growth strategy, “Reshaping Retail.” This strategy has six pillars – three designed to create growth and three to enable this growth. The six pillars are: “increasing customer loyalty, broadening our offering, expanding geographic reach, simplicity, responsible retailing, and our people”.

Broad market reach

Ahold has strong retail brands across Europe and the United States. In Europe, its brands are especially strong in the Netherlands, Belgium, Czech Republic, Slovakia. In the United States, its stores are well-known under such brands as Giant, Stop and Shop, Martin’s, Peabod, and Food Source.