PLUS supermarkets - Case Study Report

PLUS BRILLIANT 2.0 Bianka Apostolova (S2710714) Maria Djigovska (S2695146) Mariam Talakhadze (S2818353) Weixiang Wang (S2509652)

22/10/14 University of Groningen, Retail Marketing, Tutorial Group 3B4 1

Contents • Leading Market Trends

• Benchmarking & SWOT Analysis

• Strategy Choice

• BrandBox

• Customer Relevancy Framework

• Core Proposition

• Destination Categories

• Business Improvement Ideas

• References


4 7

11 15 17 18 21 24 28

Introduction • Problem #1: Market Share Growth troubles;

• Problem #2: Perceived High Price;

• Problem #3: Competition from international hard discounters;

• Problem #4: Competition from national supermarket chains;

“PLUS is a number 5 retailer in the Netherlands with total of 254 stores, operated by independent store owners”. (EFMI BS case, 2014)


LEADING TRENDS IN RETAIL MARKET OF NETHERLANDS


Consumer trends in the Netherlands Quality, Choice and Advantage are most important motivation

factors for shoppers when choosing a supermarket;

Full Service and Service Discount formulas get

highest score of shoppers;

Switching behavior of shoppers between supermarkets has

increased;

Promotion pressure: • Number of promotion seekers

increase; •  customers have more control

over promotions (effect of digitalization).

Online channel for food is growing and has high

growth potential.

Customers value helpfulness, courtesy,

kindness and friendliness of

personnel;

Friendliness and Customer Satisfaction are becoming highest

scores for service-oriented supermarket formula

types;

Consumers are becoming more and more concerned

about their health and strive for healthy food.


Reference: Consumenten trends 2014, EFMI Business School, Leusden/Leidschendam, juni 2014; Top trends to watch in 2014, IGD 2014

Current Situation Analysis •  Location of the stores – in areas

where there are no other shops, serve the neighborhood;

•  Prices – medium price, but perceived as high;

•  Categories and Assortment - Main concentration on food products; own winery, bakery, butcher, own brand, fresh meat, fruits, vegetables; well organized product assortment in large quantities;

•  Promotions - on different products, marked on a red stand “Actie” and at a visible place.

•  Competitors – MCD, Emte, Poiesz, Vomar, AH, Dekamarkt.


BENCHMARKING & SWOT Identification of Possible Strategies


Number of Stores & Sales per Square Meter

3131

254 455 379

Albert Heijn

PLUS JUMBO LIDL

Number of Stores (October, 2014)

Stores 180

145

190 175

Albert Heijn

PLUS JUMBO LIDL

Sales per Square Meter (2014)

Sales per Square Meter (2014)

PLUS has the smallest number of stores compared to its main competitors.

Sales per Square Meter is also the lowest among competitors.


Market Share & Price Level

48%

9%

30%

13%

Market Share, % (September, 2014)

Albert Heijn

PLUS

JUMBO (incl. C1000) LIDL

4% 3%

-4% -5%

Albert Heijn

PLUS JUMBO LIDL

Price Level on National Brands compared to

Industry Standard


PLUS has the smallest market share and slow growth rate.

The price level is only 3% higher than the industry standard, but perceived price image is even higher.

SWOT 22/10/14 University of Groningen, Retail Marketing, Tutorial Group 3B4 10

Strengths S1: Fresh merchandise & wider than average assortment; S2: Nice employee attitude & considerate service; S3: Community adaptation & great access; S4: Solid financial position & nice in-store decoration; S5: Special Wine and Cheese sections and in-store Bakery

Weaknesses W1: Relatively low market share (5.9% in 2014) & market growth (since 2010 1%-2% per year); 1

W2: Comparatively higher price image than competitors (5%-10% higher than Jumbo);2

W3: Negative customer reaction on commercials (31% satisfaction level in 2014);3

W4: Weak awareness of private labels; W5: Fewer stores (254 PLUS vs. 3131 AH);4

W6: Online delivery does not work;

Opportunities O1: Quality and alternative scale are the top priority for customers;5

O2: Increasing awareness on authenticity & organic foods; O3: Customer confidence (-34 to -2) & household purchase power increase (-1.2% to 1.5%);6

O4: Trend of online Shopping increasing; O5: Customers’ increasing enjoyment of hedonic shopping experience; 7

Threats T1: Pressure from national competitors (e.g. Jumbo) T2: Pressure from foreign competitors (e.g. Lidl) T3: Unemployment level (7%) and price elasticity are still high;8

T4: Decreasing EBIT-margins (3.9% to 3.6% from 2012 to 2013);9

T5: Promotional pressure increases (>20%);10

Internal External

Strengths S1: Fresh merchandise & wider than average assortment; S2: Nice employee attitude & considerate service; S3: Community adaptation & great access; S4: Solid financial position & nice in-store decoration; S5: Special Wine and Cheese sections and in-store Bakery

Weaknesses W1: Relatively low market share (5.9% in 2014) & market growth (since 2010 1%-2% per year); 1

W2: Comparatively higher price image than competitors (5%-10% higher than Jumbo);2

W3: Negative customer reaction on commercials (31% satisfaction level in 2014);3

W4: Weak awareness of private labels; W5: Fewer stores (254 PLUS vs. 3131 AH);4

W6: Online delivery does not work;

Opportunities O1: Quality and alternative scale are the top priority for customers;5

O2: Increasing awareness on authenticity & organic foods; O3: Customer confidence (-34 to -2) & household purchase power increase (-1.2% to 1.5%);6

O4: Trend of online Shopping increasing; O5: Customers’ increasing enjoyment of hedonic shopping experience; 7

SO strategies SO1: (S1,S4,O2) Improve the shelf display and visibility for in-store sustainable products; SO2: (S1,S5,O1,O3) Optimize in-store marketing mix on different category clusters; SO3: (S1,S2,O1) Attract more buyers to visit by carrying more local consumer favored brands in store SO4: (S2,S3,O4,O5) Launch home delivery of fresh products within community or in-store self-pickup; SO5: (S5,O1,O3) Excel Wine and Staple categories (e.g. bread) in quality and assortment;

WO strategies WO1: (W2,W3,O2) Combine organic foods with high price images in advertisement; WO2: (W2,O3) Decrease negative price image by excelling services, quality levels and reducing unit prices with high purchase frequency WO3: (W1,W4,O1,O3) Manipulate the unfamiliar brands (e.g. private labels) to look disorganized or out-of-stock to increase purchase intentions;8

WO4: (W5,W6,O4,O5) Create better online shopping experience;

Threats T1: Pressure from national competitors (e.g. Jumbo) T2: Pressure from foreign competitors (e.g. Lidl) T3: Unemployment level (7%) and price elasticity are still high;8

T4: Decreasing EBIT-margins (3.9% to 3.6% from 2012 to 2013);9

T5: Promotional pressure increases (>20%);10

ST strategies ST1: (S1,S4,T3) Providing more shelf space for items with high space elasticity to stimulate impulse buying; ST2: (S1,T1,T2,T3) Optimize the assortment management to affect stores choice and sales; ST3: (S2,S3,S5,T1,T2) Differentiate position from competitors by greater service as well as higher quality;

WT strategies WT1: (W4,T4) Improve PLUS private labels on quality, position, and display; WT2: (W2,T5) Launch elaborate promotional programs to local consumers;

SWOT


SWOT STRATEGIES 22/10/14 University of Groningen, Retail Marketing, Tutorial Group 3B4 12

SO strategies SO1: (S1,S4,O2) Improve the shelf display and visibility for in-store sustainable products; SO2: (S1,S5,O1,O3) Optimize in-store marketing mix on different category clusters; SO3: (S1,S2,O1) Attract more buyers to visit by carrying more local consumer favored brands in store SO4: (S2,S3,O4,O5) Launch home delivery of fresh products within community or in-store self-pickup; SO5: (S5,O1,O3) Excel Wine and Staple categories (e.g. bread) in quality and assortment;

WO strategies WO1: (W2,W3,O2) Combine organic foods with high price images in advertisement; WO2: (W2,O3) Decrease negative price image by excelling services, quality levels and reducing unit prices with high purchase frequency WO3: (W1,W4,O1,O3) Manipulate the unfamiliar brands (e.g. private labels) to look disorganized or out-of-stock to increase purchase intentions;8

WO4: (W5,W6,O4,O5) Create better online shopping experience;

ST strategies ST1: (S1,S4,T3) Providing more shelf space for items with high space elasticity to stimulate impulse buying; ST2: (S1,T1,T2,T3) Optimize the assortment management to affect stores choice and sales; ST3: (S2,S3,S5,T1,T2) Differentiate position from competitors by greater service as well as higher quality;

WT strategies WT1: (W4,T4) Improve PLUS private labels on quality, position, and display; WT2: (W2,T5) Launch elaborate promotional programs to local consumers;

STRATEGY CHOICE According to IE Matrix Model


Internal Factor Evaluation: IFE Matrix Internal strengths Importance (0-1) Rating (1-4) Weighted score

1. Merchandise & Assortment 0.12 4 0.48

2. Employees & Service 0.10 3 0.30

3. Location & Access 0.12 4 0.48

4. Finance (Strong Cash Flow) 0.08 3 0.24

5. In-store Facilities 0.04 3 0.12

Internal weaknesses

1. Market Share & Growth 0.15 1 0.15

2. Price Image 0.19 1 0.19

3. Advertising Activities 0.1 2 0.20

4. Awareness of Private Brands 0.03 2 0.06

5. Fewer Stores 0.05 1 0.05

6. Unfeasible Delivery 0.02 2 0.04

Major Weakness (1), Minor Weakness (2), Minor Strength (3), Major Strength (4)

Total 1.00 2.31 IFE Matrix is a popular strategic management tool for auditing or evaluating major internal strengths and internal weaknesses in functional areas of an organization or a business. http://en.wikipedia.org/wiki/IFE_matrix “Implementing the Balanced Scorecard: a Supermarket Chain's Experience” Vilma T. Mellado, Marisa A. Sanchez 2012


External Factor Evaluation: EFE Matrix External opportunities Weight

(importance) Rating

(effectiveness) Weighted score

1. Awareness of health 0.10 3 0.3

2. Customer confidence & purchase power 0.05 2 0.1

3. Online shopping 0.05 2 0.1

4. Hedonic shopping experience 0.15 3 0.45

5. Quality and choices preference 0.08 4 0.32

External threats

1. National competitors 0.20 2 0.4

2. Competitors from adjacent countries 0.15 2 0.3

3. Unemployment level & price elastics 0.02 1 0.02

4. Decreasing EBIT-margins 0.10 3 0.3

5. Promotional pressure increases 0.10 2 0.2

Poor (1), Below Average (2), Above Average (3), Superior (4)

Total 1.00 2.49

EFE Matrix is a popular strategic management tool for auditing or evaluating major external opportunities and external threats of an organization or a business. http://www.maxi-pedia.com/IFE+EFE+matrix+internal+factor+evaluation “Implementing the Balanced Scorecard: a Supermarket Chain's Experience” Vilma T. Mellado, Marisa A. Sanchez 2012


IE Matrix

Strong Average Weak(3.0 to 4.0) (2.0 to 2.99) (1.0 to 1.99)

High I II III(3.0 to 3.99)

Grow

Grow & Maintain

Maintain

Medium IV V VI(2.0 to 2.99)

Build(2.31; 2.49)

Build & Harvest

Harvest

Low VII VIII IX(1.0 to 1.99)

Hold

Hold & Digest

Digest

In the IE Matrix, we can see that PLUS locates in cell V which suggests to apply Build and Harvest strategies. Such as, market penetration and product development.

The Internal External Matrix or short IE matrix is based on an analysis of internal and external business factors which are combined into one suggestive model. http://www.maxi-pedia.com/internal+external+IE+matrix “Implementing the Balanced Scorecard: a Supermarket Chain's Experience” Vilma T. Mellado, Marisa A. Sanchez 2012

EFE Total Weighted Score

IFE Total Weighted Score


BRAND BOX – PLUS

What the customer wants:

Choice

High quality

Convenience

EmoUonal experience

Access

Personal aXtude

What the customer gets: Broad assortment

Availability and freshness of products

Surprises every day

InspiraUon and enjoyment of the

shopping experience

Serving the neighborhood, online

channel

Customer-‐friendly personnel

Brand essence:

Excellent Service and Quality

What feelings does the PLUS brand evoke?

What does the PLUS brand tell about me?

Cozy atmosphere

EmoUonal SaUsfacUon

InspiraUon

Amiability

Helpfulness

Open-‐minded Promise Evidence

Inspiring experience

Superior quality

Neighborhood oriented

Inspiring environment

Professional aXtude

High quality products

EmoUon seeker

Quality oriented

Locally involved

CompeUUon:

High discounts (Lidl, Jumbo); Price-‐oriented (Lidl)

Introducing on-‐line shopping (AH);

Customer-‐oriented (AH);

Licle high emoUonal experience offered to customers as a whole

Target groups:

Explorers – core moUvaUon: discovery, new experiences, ideas, challenge

Succeeders – very organized, self-‐confident, strong goal orientaUon, core moUvaUon: control

Reformers – core moUvaUon: enlightenment, have their own judgement, anU-‐materialisUc (considered as intellects)

Values of the brand: High quality performance

Community oriented responsibility

Reliability

Organized

Customer insights

Customer benefits

Reference: Brand box model: http://www.canicas.nl/visie/proposities-en-merk-dna/; The target groups are made based on Young & Rubicam 4C model for segmentation (4Cs - Cross cultural consumers characterization in which customers are divided into 7 groups: explorer, aspirer, succeeder, reformer, mainstream, struggler, resigned), http://prezi.com/ckjx3qg5k-tw/young-and-rubicam-4-cs/


Differentiate on Experience � Dominate on Service

3 3 3

5

4

ACCESS PRODUCT PRICE SERVICE EXPERIENCE

Customer Relevancy Framework Customer Relevancy Framework

The most important is to focus on high quality service and differentiate providing unique emotional experience. And the other three categories - access, product and price has to be on par with the competition.


“EXCELLENT SERVICE AND SUPERIOR QUALITY” Core proposition - the main brand promise to the customers


RETAIL POSITIONING

Excellent service

•  Customers treated as special guests. They are greeted when they enter the store;

•  Easier (digitalized) search; •  More efficient consultants; •  Professional advice and

performance from employees; •  Personal attitude; •  Faster service - being able to

shop faster; •  Better cashier work;

Superior quality

•  Always fresh products •  Goods from the highest quality

manufacturers; •  Introduction and implementation of

total quality management system; •  Satisfied customers; •  Nice stores; •  Nicely dressed employees; •  Smell, music and Color marketing;


Core proposition

Unique selling point towards competition

• Unique emotional experience – ‘celebrating’ while shopping;

• Customers – treated as special guests, not just clients;

• Surprises every day - Small gifts to the loyal

customers -  Free food samples -  Free lunch boxes from time

to time -  Free coffee and tea


Unique selling point towards competition:

Unique “Surprising” Experience

DESTINATION CATEGORIES


Destination Categories PLUS will excel in the following categories: •  Bread – bakery, own private label •  Fruits and vegetables – fresh and

natural, high assortment •  Wine – “wine from our wine

producers”; awards (Wine marketing award, Super wijn gids 2010)


-  Maintaining consistent, superior quality;

-  Broadest assortment; -  Always organized shelves. -  Evoking a feeling of being in a

specialty store – e.g. bakery, winery.

Preferred categories - effective for increasing sales volume

Promote greater assortment, manipulate shelf display and private label penetration. •  Cheese – “from our

cheesemonger” •  Meet - “from our

butcher” •  Beer •  Dry food

Convenience categories

(e.g. detergents, office supplies) •  encourage multi-point

in-store display and focus on fewer brands


Sustainable categories (e.g. organic foods) - provide smaller specially decorated shelf space (small but distinctive, green color), commercials will target more educated people

Other Categories

BUSINESS IMPROVEMENT IDEAS

University of Groningen, Retail Marketing, Tutorial Group 3B4 22/10/14 25

Category Management

Reduce the unit price with high purchase frequency items, probably by cutting off margins or designating

category captains;

Offer more locally popular brands and household’s favorite ones, reducing the number of Stock-Keeping-Units

(SKU); Delist low-demanded items with lowest gross margins. This will indirectly increase consumer

satisfaction by increasing search efficiency and improve price image.

Managers could focus on pricing tactics that decrease prices in some categories (e.g. staples like grains,

potatoes, rice, oil, sugar, flour)

The prices should stay the same in the destination categories, wherever

PLUS strives to excel;

Promotions: NOT SO MANY. Seasonal price promotion,

Add more shelf space for high space-elasticity products (e.g. cake, candy) to increase impulse buying behavior.

Increase space for brands or categories and then cut them back

systematically.

Familiar brands and ingestible products (e.g. bread, fruits,

vegetables) -organized and fully-stocked.

Unfamiliar brands and non-ingestible products (e.g. PLUS private labels, detergents) - better to be left limited

and looking out of stock.

Increase the number of facings for fair trade products and keep facings for

organic products at the optimum.


“Too large of an assortment may influence retail customers to refrain from buying products because of the high search complexity” (Sloot, Fok, Verhoef, 2006)

Service Improvement

Better checkouts: 1. The products - packed by the cashier or a consultant; 2. Three types of checkouts: fast, normal and digital self-

checkout (like at IKEA);

Efficient Consultants – if customers need personal

help, there is a button to press at each department and a

consultant comes to advise them;

Finding the products – a touchscreen machines in

several spots of the supermarket, keyword

searching; Search results can refer to the shelf and

department of the store;

Professional advices in the Destination and Preferred

category departments (wine, cheese, meat);

To-Go Section in bigger shops Online Shop and Home

Deliveries (within 30 minutes if in the neighborhood)


THANK YOU FOR YOUR ATTENTION! We are ready for your questions!
