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 space. The focus of 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:
- Price perception was poor - Safeway was seen as too expensive.
- Product ranges lacked real focus.
- In-store availability of products was not reliable enough.
- 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 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.
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:
- 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. Store location is critical to consumers as it provides convenience, which is a powerful influence on the decision 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.
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 everytime” 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 surprising.
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 the Safeway 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 store 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 card-holders, 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 in queuing at check outs 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.
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.
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.
From the initial recognition of its shortcomings in the market place 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 re-invent 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 everyday.