Uncategorised

Traditional grocers must act like consumer brands to retain market share

Traditional Australian grocers must respond to customers’ demands or risk losing market share to value-retailers and online grocers, warns The Boston Consulting Group (BCG).

Well-established grocers must re-evaluate their strategy for private-label products, according to the new Why grocers need to start operating like consumer brands report. The report argues traditional grocers should offer products customers truly want rather than products they’ll settle for, and outlines key steps to retain their market share.

Traditional grocers have tried to keep up with competition by launching different tiers and lines of their own private-label products – at low-, mid- and high-level price points – which has led to higher overall sales but makes the supply chain more complicated.

Value retailers, however, are more selective with their products, driving volume through fewer items, reducing operating costs and maintaining quality standards. While this approach has long been recognised as an opportunity for established grocers, they have been slow to act – allowing value retailers to gain a foothold in the market.

“Value retailers like Aldi and IGA are acting less like shop keepers and more like consumer brands that develop products based on what customers want,” said Gavin Parker, Partner and Managing Director in BCG’s Sydney office.

“Using customer insights and efficient, end-to-end value chains, value-retailers are driving quality improvements and operating at cost advantage so it is economically difficult to compete with if you’re operating on a traditional three-tiered structure,” added Parker.

To help well-established grocers retain market share, the report outlines several key steps:

  • Define a clear vision and strategy. Leadership team must establish the aspiration for how the private-label business will fit into the organisation and overall brand architecture.
  • Understand customer needs and build a strong R&D and innovation function. Grocers need to map and prioritise customer demands so they can more effectively meet those needs.
  • Establish a clear value proposition for each quality tier or brand. Companies need to rethink the value proposition for each of their own brands.
  • Consolidate and build scale at the level of individual products and brands. To generate and capitalise on their scale, grocers should consolidate sourcing, testing, quality control, packaging and design, and other functions that apply across categories.
  • Explore partnerships and alliances. Grocers should explore alliances with other players in areas like sourcing and product development.

 

 

JOIN OUR NEWSLETTER

JOIN OUR NEWSLETTER
Close
Send this to a friend