Making shopping easier for today’s family

Shopping for food is an activity that all of the UK’s 23 million households regularly have to carry out. Providing food stores for these households is a very competitive business that has seen the rise of a number of national grocery retailers offering a wide range of goods and services within their stores. Their influence is measured by the increase in the market share of the multiple retail grocers, rising from 44% in 1971 to over 80% in 1995. The typical household will now shop with multiple retailers and, again, typically, this will be done at one of the supermarkets owned by a national business such as Safeway.

The challenge for companies in this sector is to provide a service that will regularly bring customers back to their stores. So they have to pay the closest attention to what their customers want and ensure that this is delivered, every day, to a consistently high standard.

Safeway 2000 – the rationale for change

By 1993, however, new planning restrictions imposed by the Government were making it much more difficult for all the large supermarket chains to go on expanding their sales simply by opening new selling spaces. The focus of the competition was shifting to customers’ perception of value for money, and it soon became clear to Safeway’s management that, in this area at least, the company’s performance stood in need of improvement. Under the banner ‘Safeway 2000,’ a fundamental review of the business was initiated and completed within 18 months.

Through this review, the company identified the following weaknesses:

1. Price perception was poor – Safeway was seen as too expensive.
2. Product ranges lacked real focus.
3. In-store availability of products was not reliable enough.
4. It was strongest with the under-30s, particularly single people and pre-family couples, but lost too many of these customers to its competitors once they started their families.

Safeway then went back to the first principles to formulate a strategy that would strengthen its competitiveness. It refocused the Safeway ‘offer’ on families, particularly those with young children. From here, the emphasis moved on to restructuring the business and changing its predominant style of management in order to deliver the new offer to its customers.

Key decisions

The continued survival of a company is not inevitable. What is clear is that for any company to survive, it has to anticipate and adapt to changing circumstances. For a food retailing chain, the following issues are critical:

Retail positioning

This involves choosing the target market and differentiating the brand from the competition. The benefit of targeting is that it allows the retailer to focus the marketing mix (including product assortment, service levels, store location, prices and promotion) on the needs of the chosen segments. Differentiation provides the reason to shop at one store rather than another. Creating and keeping a competitive advantage requires innovation – a constant stream of new ideas for products and services aimed at the target customers.

Store Location

The store location is critical to consumers as it provides convenience, which is a powerful influence on the decision of where to shop. Identifying suitable locations depends on factors such as the disposable income of the catchment area and the presence of other competitors, as well as individual site conditions such as access to major trunk roads or motorways and space for parking.

Product range and services

Supermarkets, if they are big enough, are likely to offer a wide range of non-food products, together with customer services such as coffee shops, as well as their normal range of fresh, chilled and frozen foods and packaged groceries. The choice is determined by the positioning strategy of the company as well as customer expectations. As price differentials have narrowed, especially on ranges of ‘essential’ or commodity goods in supermarkets, retailers have sought to differentiate themselves on customer service, not simply at the check-out but around the store itself. Customer research shows that many people regard supermarket shopping as a chore, so retailers are taking a range of initiatives to make the experience more attractive.

Price

For some customers, price is a key factor in choosing a store, particularly on basic commodity foods where the advantages of bulk buying come into play and are passed on to consumers in the form of lower prices. A small number of supermarket chains focus on offering a relatively narrow range of commodity food products at low prices. The big national chains, however, combine everyday low pricing on certain commodity products with frequent promotional activity on a range of other lines. Promotions are important because they encourage impulse buying.

Store atmosphere

Design, layout and in-store signage are carefully planned to meet customers’ needs. Colour, the width of the aisles and lighting are all important when providing an atmosphere conducive to comfortable and enjoyable shopping.

Safeway 2000 – The results

The Safeway customer offer is now aimed directly at family shoppers. This offer has two major elements – getting the basics right every time and making shopping more convenient and extra special. Both elements are crystallised in Safeway’s strapline – “lightening the load”.

“Getting the basics right every time” means:

• offering excellent value
• providing helpful, friendly service
• making sure products are in stock
• offering a wide choice of products and services
• ensuring Safeway’s products are fresh and of the highest quality
• making things easy to find
• keeping the stores clean.

“Making shopping more convenient and extra special” means:

• helping to take the stress and effort out of shopping.
• reducing the time it takes.
• delighting customers with specially targeted products and services.
• finding new ways to be pleasantly surprised.

Delivering the offer

Delivering the offer. Getting the basics right has resulted in:

• An economy-priced range of commodity food lines, ‘Safeway Savers’, was launched, covering over 100 products. Several new Safeway-branded products (for example, Select Cola, Oracle dental care and Vecta household cleaners) have also been launched, offering better value than the relevant brand leader. Loyalty cardholders with a child under the age of one can now get 10% off their shopping at Safeway. In addition, Safeway has recently introduced a £20 million Price Protected campaign – if customers buy a comparable product cheaper at a major competitor within three miles, Safeway will give it to them for free. Price Protected covers over 650 of the most popular everyday products at Safeway.
• A review of the entire product range to eliminate marginal performers and focus on giving the target customers better value.
• A sustained effort to communicate the offer to customers more effectively, both through Safeway’s award-winning ‘Molly’ advertising campaign and by better point of sale material. The advertising campaign, featuring a small girl called Molly (and more recently her baby brother Joe), has been and remains a particularly powerful form of communicating Safeway’s emphasis on families to its target customers. The campaign has achieved levels of recall which arguably make it the most effective ever seen in the retail sector.

A goal of making shopping more convenient and extra special is being achieved by several innovations:

• Providing crèches in stores where mothers can leave their children in professional care while they do their shopping.
• Launching the Safeway loyalty (or ‘ABC’) card, which enables customers to accumulate points and then gives them a choice between straight cash savings or a range of other, attractive products and services. With around 6.5 million cardholders, Safeway now has a powerful database which will enable the company to target individual customers with product and service offers which are likely to be of interest to them. As an extension of ABC, Safeway has also teamed up with Abbey National to offer the ABC Bonus Account, a debit account designed to take the hassle out of household budgeting. Customers can use the ABC Bonus Card to pay for their shopping at Safeway and 70,000 other stores across the UK.
• Pioneering time-saving technology such as ‘Shop & Go’, a field in which Safeway is the world leader. The system greatly reduces time spent queuing at checkouts by avoiding the need for unpacking and repacking purchases. By the end of this year, 165 Safeway superstores will be equipped with ‘Shop & Go’. Safeway customers can also pay for their shopping at Easy Pay terminals, avoiding the traditional checkout altogether. In addition, Safeway is trialling an information kiosk that can interact with customers.
• Extending the own-brand product range to include children’s clothes and babywear.

Organisational change

Equally important, the basic processes and structures of the business were redesigned and simplified to help Safeway people implement these changes and get new ideas to the market place as quickly as possible. These changes included the structure and organisation of all Safeway stores as well as its central services. These changes in roles and structures resulted in 3,500 redundancies or early retirements but also opened up new or substantially different roles for 9,000 people and promotion for a further 3,000.

Measuring progress

Safeway’s declared aim, announced in 1995, was to increase average sales per square foot from £12.86 to £15.00 within 3 years. Safeway achieved that target, one year ahead of schedule. Equally important, Safeway’s market share has increased, – an improvement which has been broadly based, covering the entire store portfolio and across all product ranges. Total sales in 1996/97 grew by 10% to stand at £6.627 bn. Progress in delivering the customer offer during 1996/97 can be summarised as follows:

• The proportion of target customers who did their main shopping with Safeway grew from 17.1% in 1995/96 to 17.8%. The proportion of sales which these shoppers, spending over £40, represent grew from 23.6% to 25%.
• Value perception improved significantly, with around half of Safeway’s customers buying at least one ‘Savers’ product.
• Safeway’s own-brand range of Vecta household cleaners gained a 25% market share and Oracle mouth care products a 20% share of their respective markets in Safeway. The Company also launched a range of kids’ toys and an innovative range of produce for children. Over the Vehicle journeys down by 3.9 million kilometres No of fleet vehicles reduced by 5% Sales up to £15 per sq ft Improving quality of service Total sales up by 10% to £6.627 bn year as a whole, Safeway launched or upgraded around 3,200 product lines.

Improving efficiency

The Company set itself the target of reducing operating costs by £60 million in a full year by reshaping the organisation and achieving efficiency improvements.

Within its distribution network, the strategy has been aimed at improving the quality of service while reducing the cost base. The distribution network is now centred on six major sites, supported by a similar number of smaller ones. The new structure has produced important benefits for the business, including annual savings of 3.9 million kilometres in vehicle journeys and a 5% reduction in the number of vehicles in the fleet.

The supply base is also being consolidated as suppliers fall increasingly into two categories: volume producers with relatively large shares of Safeway’s business, who are both low cost and innovative in product development and specialists who provide the range, quality and innovation needed for regional and local markets. Within this framework, the aim is to achieve the closest possible match between demand and supply. This has to be done by accurate sales forecasting, effective communication with suppliers, using electronic data interchange to transmit orders, moving products through the depots as fast as possible and reducing waste in the stores.

Making a difference

In the food retailing sector, most attempts by any one of the major players to gain a competitive advantage over the others can be quickly copied or bettered. It is much more difficult, however, to minimise genuine differences in the way in which people behave, both towards customers and each other. The “Make a Difference!” programme introduced by Safeway in 1995 is aimed at seizing this advantage.

This programme means changing the way people work together and moving towards a style of leadership which is both more involving and supportive, and yet demands high standards of performance. It also means an increased investment in training and development to ensure that all staff know what the business is trying to achieve and are clear about their role within it.

Maintaining progress

From the initial recognition of its shortcomings in the marketplace through to the full implementation of its new strategy, Safeway shows how a large food retailing business can fundamentally change the way it works and reinvent its brand offer, experience intensive and disruptive reorganisation and simultaneously improve its sales and profit performance. But its competitors have not been standing still and the battle to attract and retain customers has become even more intense.

Safeway 2000 was a major restructuring and repositioning of the brand to prepare the business for the next century, but delivering the longer-term benefits will require further, continuous improvement. Clarifying and communicating the company’s goals and strategy was the critical first step in the process of change, but implementation is where success or failure is achieved. By focusing most of its current effort on delivering the customer offer, Safeway recognises that the ultimate arbiters of its success are the millions of customers who visit its stores every day.