A French invention
In 2014, the drive marks its 10th anniversary. The first site to be opened was a Chronodrive at Marcq-en-Barœul in the suburbs of Lille (France). The idea is that customers order their food shopping via the Internet and collect their orders two hours later from a pick-up point, specifically organised with cars in mind: a terminal, a dedicated line for loading the vehicle, etc. One particularity of the French-style drive is that the order preparation is free of charge. The prices paid by the customers are identical to the store prices, with no preparation fees. This accounts in no small measure for their success!
For preparing customer orders, there are two possible types of organisation:
- Dedicating a specific warehouse of approximately 1500 m² in which the products are geolocated per item
- Preparing the order in the store (right photo), which limits investment but also reduces productivity.
The 500th Leclerc Drive opened in Toulouse in May 2014. In 2013, the company invested around €300 million in drives.
World wide drive...
The drive is now a success worldwide! French companies have exported the concept: Casino in Brazil, Auchan in China, Leclerc in Poland and Slovenia, Carrefour and Cora in Belgium, etc. Yet the international retailers have also converted to drive mode. Tesco has set up “Click & Collect” points on the car parks of its stores; Peapod (Ahold) operates 200 drives on the east coast of the USA; and Walmart is testing 30 or so sites in Denver, Colorado.
A Few facts...
- As of 1 September, there were 3125 drives in France: more than the number of hypermarkets. In 2013, drives accounted for €3.8 billion in sales, a rise of over 50%.
- Two groups dominate the drive market: Leclerc (€1.5 billion in sales) and Auchan via its Auchan Drive and Chronodrive brands (€1 billion).
The end of a model?
Historically, hard discount has involved small-scale (<800 m²) food stores proposing a limited range of goods (several hundred products only). In other words, it is a concept that optimises the distribution costs, hence the minimum effort expended on the layout! Yet the times are changing. To maintain their development and win over customers put off by the original concept, the hard-discounters are reviewing their strategy in every country (albeit at different rates): more expansive ranges, more spacious and more comfortable premises, showcasing of products, etc.; to the extent that Lidl, for example, has officially declared that it is no longer a hard-discounter! This would have been unthinkable a few years ago.
How Lidl has given up hard discount
- The "big" brands
Illustration of the expanded offer: the arrival of the "big brands". Lidl proposes several hundred product lines, varying from country to country in Europe.
- Premium products
Lidl is now quite happy to propose premium products. Indeed, it has even come up with a specific premium brand: Deluxe!
- Shelf layout
To leave behind the spartan image of the hard discount store, Lidl now pays attention to how it presents its products. Wine therefore has its own specific shelving, offering more attractive showcasing than regular gondolas.
- A new section: bread
To give its clients reasons to come more often, Lidl has developed genuine bakery sections, with bread baked on-site.
Like Lidl, Aldi (the other German hard-discounter!) is also pursuing a strategy to move upmarket. Firstly, this involves expanding the product range. Examples: three lines of banana (whereas Aldi only proposes one several years ago), and these local beers in Catalonia (whereas previously only national beers were on offer). Aldi is also working on the atmosphere in its stores, as illustrated in these photos.
A few facts...
- Hard discount was conceived in Germany in 1948 at the initiative of the Albrecht brothers who created Aldi. Germany was also the birthplace of the other major hard discount brand: Lidl.
- Germany is still the number one market for hard discount. With 10,000 stores, its market share in that country exceeds 40% (vs 12% in France and less than 10% in Italy). Yet the number of points-of-sale is stagnating.
War is declared
In the world's major retail markets, and in Europe in particular, the level of competition is today at its highest. This results from the dual effect of a relative stagnation in consumption and the continued expansion of commercial premises. As a consequence, in order to attract an increasingly "price-sensitive" clientele, the supermarket chains are in stiff competition, with the focus on price comparisons. In France, all the chains are doing this. In the UK, Tesco guarantees, for example, the automatic reimbursement of the price difference. In the USA, price comparisons are commonplace.
- Winco Foods, in the States, systematically compares the prices on the shelves, for several thousand products in each of its stores.
- In France, comparative shopping trolleys at the entrance to stores are mushrooming. Here is an example in Lyon, at Carrefour and Auchan.
- Going still further in the price war, Leclerc proposes an application that enables shoppers, when in a competitor store, to know the Leclerc price, and to find out - as in the present case - that the price is NOT unbeatable!
- In the UK, Tesco has come up with the "Price Promise" program. At the checkout, Tesco compares the prices of its customers' items with the prices of Tesco's competitors. If there is a difference, Tesco spontaneously issues the customer with a voucher to make up the difference.
- In the UK, Asda (subsidiary of the US Walmart) guarantees its customers that they will pay at least 10% less than elsewhere! To verify this, customers can go to a specific website and enter their checkout receipt number. Immediately, via mysupermarket.com, the interface compares the prices in the customer's shopping basket. If it turns out that there is not a 10% difference, the customer is credited with a voucher for the price difference.
A few facts...
- On the mature markets, there is little movement in the development of food consumption: – 0.7% in Europe, + 0.2% in the USA according to Nielsen (to end June).
- At the same time, the sales portfolio continues to grow with the enlargement of existing stores and the construction of new ones. Example in France: an extra 450,000 m² authorised in 2013.
- Even more "belligerent" in the price war, Leclerc proposes an application that enables shoppers, when in a competitor store, to know the Leclerc price, and to find out - as in the present case - that the price is NOT unbeatable!
The Western offensive
The Amazon Fresh experiment was launched discreetly in Seattle in 2007, targeting selective parts of the metro area for deliveries. Its roll-out picked up in 2013, with the opening of two new zones: San Francisco and Los Angeles (partial coverage). In the mid-term, according to the drip-feed of information coming out of the company, 15 to 20 cities have already been targeted, both in the United States and beyond. Indeed, Amazon Fresh is casting its gaze at all high-density metropolitan areas where a significant proportion of the population have above-average earnings. Greater London or the Paris region would slot quite naturally into their list! In each case, real market upheaval ensues in the wake of this product aggregation.
The 3 types of Amazon Fresh offering
- Groceries and fresh supermarket products (17,000 items)
- Industrial offering
Ready-made restaurant meals, luxury cheeses, fine wines, patisseries, etc. Local produce (marketplace logic)
500,000 items from the Amazon.com website
The Amazon Fresh organisation for the “Local Favorites”
- The customer orders, say, some parmesan from the site before 10 AM on a given day
- Amazon transmits the order to The Cheese Store at the end of the morning
- The Cheese Store prepares the order before 5 PM
- Amazon picks up the order at the end of the day
- The order is stored in the warehouse where it may be incorporated in the "grocery" order
- The customer receives delivery the following day at a time of their choosing (7 AM to 10 AM)
All the "Local Favourite" products come from local traders from whom Amazon Fresh collects the goods before delivering them to the customers. The trader partners are designated by name and the prices remain identical.
A few facts...
- Amazon Fresh operates as a "cyber-grocer". Customers order online and receive their goods at home.
- The originality of Amazon Fresh comes from the aggregation of widely differing products: groceries and fresh industrial products on the one hand, traditional produce or ready meals on the other (the "Local Favourites" in Amazon jargon).
- Home delivery is "free", but customers must pay an annual subscription ($299 per year) and spend at least $35 per order.
Time for a revamp
To address the development of drives and e-commerce, store chains are all engaged in revamping the in-store shopping experience, to give customers fresh reasons for frequenting their stores. In this context, the market zone (fruit and vegetables, butchers, bakers, etc.) is most frequently targeted: new presentation techniques, new human skills, and products selected with even greater care. Everything counts when turning supermarkets into genuine marketplaces!
The first stage in revamping the market zone is bringing together all traditional fresh products.
The revamping of the market zone sometimes leads to the development of foodservice offerings in the sales area. Either for eating in, or for take-away. Either way, the idea is to promote the "home-made".
In order to adopt the traditional codes of the market stall, products are increasingly unpackaged and displayed in bulk.
A few facts...
Supermarket chains use three particular levers:
- Staging of their displays, with the ambition of making their shelves look more like traditional market stalls.
- Moving the product offering upmarket: matured cheeses, ripened fruit, quality label meat, etc. Objective: attaining the quality level of the best traditional food makers.
- "Home-made". This is the case in the patisserie and delicatessen sections, where many stores are reverting to on-site production, a guarantee of "ultra-freshness".
A growing number of consumers carry smartphones on their persons. These are terminals which, in terms of power, constitute genuine remote-controls for consumption, capable of seeking information (including promotions), receiving information, interacting with the store and even replacing the self-scanning terminal. At the moment, no mode of usage has come to prominence and all companies are still in R&D mode. The risk here is of backsliding. For example, Walmart, which had begun a self-scanning trial using cellphones in several stores in California and Colorado, has decided to drop the trial.
- What if the mobile phone took the place of the bank card? The technology is available in the form of NFC (Near Field Communication) which enables contactless communication between the phone chip and the trader terminal.
- Thanks to the smartphone, consumers can obtain additional information while browsing the shelves. Customers can scan the product or place the phone close the label, and the product datasheet (for example, details of allergens) appears on-screen.
- The smartphone can manage the shopping lists of customers (by scanning the items at home). Once in the store, and based on the floor plan, the smartphone can guide customers towards their items.
- This is the dream of all retailers: transforming their customers' smartphones into barcode scanners. Doubly advantageous: no more investment in terminals and lower checkout costs.
- Another retailer "dream": store multiplication by means of "product walls" on which customers scan the items to order them online.