David Rees: Editor's comment

All posts from: May 2018

Adapting the gantry

Posted by: David Rees Thu, 31 May 2018

At a time when we are being inundated with GDPR-related opt-ins and opt-outs, it is a clear reminder of the amount of new legislation that retailers have had to comply with in recent years.

New regulation abounds in almost every aspect of a store’s operation, but none more so than in tobacco. Following the requirement for closed gantries came the introduction of plain packaging and a ban on small packs. But our research indicates that retailers, and consumers, have simply got used to these inconveniences and carried on.

I don’t want in any way to underestimate the impact of this legislation. Some retailers have lost valuable revenue, and pretty much every wholesaler is reporting a dip in tobacco sales. And, of course, the number of people smoking is in long-term decline, so sales are being lost somewhere. But the point is that the sector has read the situation, and adapted to it.

Many retailers have used the requirements of the new legislation to make changes to the way they stock and sell tobacco, by reducing the number of skus and/or employing below-the-counter or electronic merchandising solutions. And let’s not forget the challenges faced by manufacturers either, but at least some of the incentive schemes offered for maintaining a good stock position on key lines has proved to be a welcome boost to profitability.

Soon there will be more compliance issues to deal with. Tobacco ‘track and trace’ technology will require retailers to apply for a unique indicator code before they can purchase tobacco, and require wholesalers to scan the products as they go through the supply chain. It’s another complicating factor for the trade, but I’m banking on it to once again find a solution.

Welcome to the new world

Posted by: David Rees Wed, 16 May 2018

The completion of the Co-op’s takeover of Nisa signals the start of a whole new way of doing business, not just for Nisa retailers but for Costcutter stores, too.

Retailers in both groups can now look forward to better prices, new branded SKUs and the option to sell Co-op own labels. While only time will tell how this will turn out, most of the retailers affected will regard this as a growth opportunity: after all, more than 75% of Nisa members voted in favour of the takeover, and for Costcutter it could hardly be worse than it was before.

The new regime goes beyond the sale of product, however. Where Nisa retailers were once shareholders as well as customers, now they are customers alone. There have already been questions asked about whether Nisa retailers are getting as good a deal as Costcutter, but they no longer own the business so their voice is less powerful.

Being a customer is still an important status, and I am sure the Co-op Group will aim to be as even-handed and transparent as possible, but for Nisa retailers the terms of engagement are very different now.

A merge too far?

Posted by: David Rees Wed, 2 May 2018

I’m guessing that the three most common phrases uttered in c-store boardrooms and back offices in recent months have been: “Wages have gone up again?”, “I wish the sun would come out” and “I think the CMA needs to have a look at that”.

After a year of mergers, closures and takeovers, the latest grocery event that the CMA needs to examine is the proposed merger of Asda and Sainsbury’s. In previous years, we would call this a bombshell. But in the context of what has been happening we should probably view – the proposal at least – as inevitable.

Most retailers I know are welcoming consolidation and increased scale in the convenience sector, but I have also had conversations with others who think that the Tesco-Booker merger should not have been allowed to go through. That obviously set a precedent for Nisa and the Co-op, but Asda and Sainsbury’s is a different thing altogether. It’s all retail, and despite the widely-quoted north-south split of the two, there are areas where they have superstores in the same catchment, not to mention the much larger footprints covered by online shopping and home deliveries.

Competition in the grocery market remains intense, with a fast-changing landscape and the rise of new and growing players. But this merger is basically proposing that Asda and Sainsbury’s will no longer compete with each other, with the benefits gained to be funded by suppliers faced with the threat of a business-terminal delisting, and I think that the CMA needs to consider very carefully whether that is in the best interests of shoppers and the market as a whole.

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