Andy Bolton, client director at consultants srcg, looks at the challenges facing the Co-op as it merges the Somerfield estate
With the merger last year of United Co-op and the Co-operative Group, the Manchester-based convenience chain has recent experience of bringing together different fascias.
The challenges presented by the Somerfield merger will be broader and more complex.
The cost of integrating the store estates and operating systems will have a dramatic short-term effect on profitability (think Morrisons and Safeway three years ago) but presents huge opportunities for increased buying power and economies of scale in the medium to long term.
Putting the corporate challenges to one side, I decided to put my ‘under-cover’ hat on and visit five Co-ops within a two-mile radius of my home to get the shopper perspective on their current retail performance.
The most obvious starting place is the fascia itself – three stores proudly displayed the new ‘Co-operative Food’ fascia, but two of the five stores still bear the ‘Co-op Welcome’ fascia and so the consistency is lacking to begin with.
From the shoppers’ perspective, this may not be an issue – their requirements really don’t change much from c-store to c-store regardless of fascia, banner or brand; basic hygiene, speed of service, availability, customer service and price are the key factors in delivering customer satisfaction.
Co-op are continuing their store refurbishment juggernaut this year with more than 1,000 stores updated to the Co-operative Food banner in just over a year. With the speed of roll-out likely to be maintained throughout 2009 it will not be long until Co-op Welcome completely disappears.
General store standards of cleanliness and hygiene were good but all of the stores had the feeling of being a little cluttered – high shelving and more promotions/dump bins than you can shake a stick at!
Somerfield sites tend to have a bigger footprint with extra space and higher staffing levels giving the stores a more pleasant and relaxing ambience.
Availability was a mixed bag across the stores with gaps a-plenty across most categories.
This continues to be the chimera haunting c-stores across the country, not just the Co-op – a lot of shoppers are using the store because they have run out of something at home, they don’t expect the stores to have run out too!
The extra space Somerfield stores offer will present considerable challenges to the Co-op ranging and merchandising team and place additional pressure on the supply chain with a greater density of chilled space and large deli counters in many Somerfield sites.
Customer service was generally good across the Co-op sites with fast speed of service, and basic p’s and q’s from all.
The shopper profile for Somerfield is somewhat older and more BC compared with CD1 for the Co-op. The Somerfield acquisition will give the Co-op greater exposure and access to the expanding grey market which can only be a good thing for the future, but we all know shoppers get more demanding as they get older; think Victor Meldrew and you’re on the right track!
I visit a lot of stores in my day to day job and have seen everything from the truly leading edge to the Neolithic; it’s safe to say that the Co-op sites I visited fit somewhere in the middle.
The Co-op lead the way in environmental and ethical issues; they know their shopper and were the first retailer to develop a good loyalty scheme. That said, they have never been leading edge and I have never been wowed when visiting their stores.
The general consensus in the trade press and amongst industry experts is that the Co-op will do a competent job in integrating the Somerfield estate to the Co-op banner, and I tend to agree.
Without doing anything spectacular they will quietly go about their business and become the biggest player in the UK convenience market.
But if their aim is to be the number-one small-format retailer in the UK with the standards to match, their aspirations and their execution will need to stretch beyond overseeing a successful merger.
