Non-food diversity

Annette Lacey, managing director, Service Innovation Group

Grocery multiples are set to capitalise on the new opportunities offered by a networked society. The advent of social media, android devices and 3G internet access has rapidly changed consumer behaviour, diversifying the high street into a real and virtual phenomenon.

According to figures published by retail analysts Columino, almost 11% of all UK retail sales this year will occur online, an increase of nearly 300% since 2005. Subsequently grocery multiples are looking to channel consumers’ ever-increasing online footprint, through a range of ‘smart’ initiatives, to non-food products.

The new environment calls for an astute balancing act. The evidence suggests that consumers make little distinction between a supermarket’s online services and its physical presence. Without the brand loyalty derived from convivial in-store experiences which encourage consumers to browse, try out new products and meet friendly staff, online sales would suffer. On the other hand, an excessive physical footprint merely increases costs and reduces revenue as armchair shopping via smart phones and tablet computers becomes increasingly common.

The potential to leverage brand loyalty, generated through in-store experiences, in order to encourage online browsing and purchasing of both food and non-food items has not been lost on economic strategists who are increasingly concerned about a maturing food market. Although supermarkets account for less than 15% of the UK’s non-food market, non-food transactions are growing at more than three times the rate of food sales. This explains the aggressive expansion of firms such as Tesco and Sainsbury’s (who have announced a planned 45% increase by 2020) into non-food brands. Moreover, the growth of E-commerce has increasingly offered supermarkets the opportunity to diversify into non-food products by marrying traditional loyalty programmes with innovative virtual coupons, social media discount offers and the convenience of supermarket apps to create a one-stop shopping experience.

Therefore the future seems bright for grocery multiples as they appear set to embrace the digital age by deploying a broad range of social levers, whilst diversifying their products in order to build their customer base.