Essentially, as ‘money machines that happen to sell groceries’, the grocery multiples have debugged much of the mystique associated with food provision, meeting consumer needs by bringing to our tables a variety of foods that were traditionally kept scarce and priced accordingly by specialist retailers.
Providing variety and quality at prices that constantly represent demonstrable value for money, the multiples’ ability to match consumer need is continually demonstrated by the high proportion of satisfied customers coming back for more, and often telling their friends…
They continually monitor degrees of shopper satisfaction, and use loyalty card data to fine-tune their offering to match and even anticipate new consumer need. As their retailing expertise has grown, they have been driven to constantly refine the business model in pursuit of increased efficiency. They constantly challenge their supplier-partners to help them in their attempts to sell anything that can be legally sold to shoppers. Having captured most of the high ground in food provision, they have now progressively cherry-picked non-food categories in pursuit of optimised profit, better than most.
Meanwhile, given the succession of own-goals scored by traditional bankers over the years, it is surprising that the grocery multiples have taken so long to enter the financial services arena.
These ‘unsophisticated money-shopkeepers’ will make a major impact on the sector by simplifying finance for the layman-shopper, removing the mystique and over time they will educate their public in the appreciation of financial value-for-money, in a refreshingly transparent environment.
The grocery multiples have the capability of becoming money-shops where speed-of-transaction drives efficiency and cost reduction, reflected in competition-based lower prices. Apart from reaping the benefits of anti-banking media coverage, the multiples’ efficiencies and their ability to negotiate good wholesale terms will ensure that they can always compete on price with traditional banks.
This will be in marked contrast with traditional banking, with their opaque business offerings, where ‘slowness’ is regarded as a virtue, deadlines are measured in weeks rather than minutes, where secrecy prevails over openness and transparency, all at the customer’s expense, in a cosy club of like-minded practitioners, all intent on maintaining parity in the provision of financial services. Thankfully, this year’s virtual collapse of the banking system coupled with unprecedented economic turmoil has violently de-stabilised the status quo, creating in the process one of the largest windows of opportunity ever made available to good money-shopkeepers…
From a supplier’s point of view, the multiples’ entry into financial services, with an agenda aimed at securing 15-25% shares of the category, will have significant implications for their traditional supplier-partners. Apart from the distraction of competing in an exciting new category with little real opposition, the multiples’ development of the financial services category will bring with it a fundamental change in their corporate culture.
The renewed focus upon money and financial performance will not only help in presenting a competitive offer on shelf, but it will also cause the retailer to reassess all aspects of the supplier-retailer relationship in financial terms, to an unprecedented degree of detail. In practice, all members of the decision-making-unit will become more financially aware, measuring input-output in financial terms, constantly. As a result, there will be a growing appreciation of the brand’s potential contribution to their profitability, and an increasing interest in maintaining a financial dialogue with their multifunctional supplier-partners.
In view of this requirement for a change in financial perspective, it is crucial that suppliers develop skills in driving their own financial agendae via an appreciation of the costs and value of each element in the trading relationship. It is also important that the supplier be able to demonstrate the financial impact of the brand on the retailer’s bottom line. This comparison will need to be made not only with other brands in the category, and with other traditional grocery categories, but also in competition with the growing appeal of the financial services category.
Multiple retailers have refined a very efficient, needs-based financial model. They have managed to offload much of the risk and cost, offering the resulting savings advantages as value-for-money for their customers. Finance-savvy suppliers now have an opportunity to make a real difference…
