Upmarket retailer Waitrose has emerged from the economic downturn as – currently – the fastest-growing retailer in the UK. Katy Humphries examines the key to its success.
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It doesn’t seem that long ago when just-food’s pages were filled each day with gloomy news, not least for upmarket supermarket chain Waitrose.
The economic picture in the UK was bleak, consumer confidence was at rock bottom and the much touted premiumisation trend was receding as consumers became increasingly price conscious.
With its high-end positioning in the UK, Waitrose appeared out of step with the consumers more worried about the spectre of rising unemployment and meeting loan and mortgage repayments than the ethical credentials or high-quality offered by their grocer.
And, what’s more, those consumers still swayed by values as well as value begun to find ever-greater choice in where to shop as the Co-operative Group and Sainsbury’s upped their ethical wares.
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By GlobalDataIndeed, in March, Waitrose posted a 5.7% drop in full-year profits, which fell to GBP214.6m (US$295.7m).
Fast-forward to today (24 September), however, and we have quite a different picture.
The economic situation is looking considerably less bleak, consumer confidence appears as if it could be slowly starting to return and Waitrose has been crowned the country’s fastest-growing retailer.
According to TNS, Waitrose’s growth outstripped the other UK multiples over the 12-weeks to 6 September with sales of 11.2%.
“Food remains a manageable proportion of most household budgets by historical standards and, it could be argued, the grocery sector suffered from an over-reaction at the end of 2008 when Aldi posted year-on-year sales growth of 26% and Waitrose saw a sales decline,” Ed Garner, director, TNS Worldpanel, said.
However, it would be a disservice to Waitrose management to suggest that the group’s rising fortunes are the sole consequence of “recession-panic” ebbing.
Responding to the pressure the recessionary environment was putting on its sales and profits, the retailer sprang into action. The challenge was clear: across the UK, the battle was on to be ‘Britain’s biggest discounter’ when Waitrose was anything but.
Waitrose needed to offer something appealing to the value end of the market without sacrificing its quality credentials.
This was neatly achieved through the launch of its own-label ‘budget’ range, which recognised that value was about more than low-prices.
The ‘Waitrose essentials’ line, which purported to offer Waitrose quality at a more accessible price, has proved a hit.
The mid-priced range consists of staple grocery products in white packaging, many of which were already available under the Waitrose brand. Waitrose essentials will cover 1,400 staple grocery products by October.
The launch was backed by a nationwide advertising and marketing campaign that increased consumer awareness and significantly contributed to the sales gains Waitrose was able to reap, Waitrose said.
In June, Waitrose said that sales of own-brand products that had been rebranded Waitrose essentials jumped by more than 17% year-on-year to account for 13% of total sales.
“The launch of our essentials range has made our brand more relevant. It has considerably broadened our appeal,” a spokesperson for Waitrose tells just-food.
A second factor that the spokesperson identified as a key growth driver was its move to scrap online delivery charges.
“We also became the first UK retailer to get rid of online delivery charges and that was an important factor boosting online sales,” the spokesperson says.
Announcing the move in April, Waitrose said that it hoped to extend its appeal and improve its competitive price positioning without compromising on quality.
Moreover, in a move to further extend its own-label offering, earlier this month, Waitrose revealed a tie-up with Duchy Originals, the not-for-profit organic company founded by the Prince of Wales.
This deal will allow Waitrose to develop the good-better-best model, with Waitrose essentials standing as its entry-point range, Waitrose-branded products representing ‘standard’ and Duchy Originals from Waitrose sitting at the premium end of the scale.
Waitrose also claims to be positioning itself for future growth by developing new formats, increasing the number of stores it operates and forming strategic partnerships.
A major factor in the group’s increased sales over the past three months has been its acquisition of 13 Somerfield stores, Chris Longbottom of TNS tells just-food. “They’ve acquired a number of Somerfield stores and that has certainly helped build the business,” he suggests.
Longbottom also says that the company’s tie-up with Boots UK, which was unveiled this morning (24 September), is another “very interesting” step that will likely prove mutually beneficial to both companies.
The agreement will see Waitrose rebrand the Boots-owned pharmacies in its stores as “Boots Pharmacy”.
Waitrose and Boots are also in talks to sell selected product ranges in each other’s stores. The deal would see Waitrose supply food to the Boots, while Boots would provide health and wellness products to Waitrose.
“It seems like an eminently sensible thing to do,” Longbottom says.
Waitrose also said today that it will expand its franchise agreement with motorway service provider Welcome Break.
Welcome Break currently operates one Waitrose store in its Oxford service station on the M40. The companies have now agreed to roll the franchise model out to nine other locations.
With Marks and Spencer representing the only competition in this format, the deal with Welcome Break could well represent an important revenue-driver for Waitrose.
These initiatives, coupled with Waitrose’s slow-but-steady expansion in the convenience store, with the opening of a number of smaller-format stores planned for the new year, means that we could well expect to see Waitrose post continued strong sales for some time.
