Retailers must adapt to survive: Jeremy Rockett

In the early 1990s red kites were reintroduced to the Chiltern Hills, having being hunted to extinction in the late 19th century. Now they’re established, conservationists advise residents not to feed them – they want the numbers of birds to be in equilibrium with their natural food source.

Too much artificial feeding will increase numbers, causing hungry birds to act in desperation – even swooping in on unsuspecting picnickers. That doesn’t mean the numbers stay the same – they will of course fluctuate as food becomes more plentiful or scarcer. Nature isn’t sentimental, it just adapts.

Similarly, the number of stores selling us food and wine will be in balance – or thereabouts – with demand. I say thereabouts because we usually have oversupply, and competition is good for keeping prices in check. The number of store fascias available to us has changed over the years, from the post-war expansion to the consolidation of recent decades. Among the many that have fallen by the wayside are Somerfield, Safeway, Threshers, Victoria Wine, Unwins and Kwiksave.

During the years of consolidation suppliers talked about a 1% erosion of margin every year, as the number of buying points decreased and the power of individual buyers increased. It may have simplified supplier businesses to have fewer customers and buyers to deal with, but it didn’t make for an easy time, with each relationship being more important than ever.

Unlike red kites, consumers are subject to influences that make their shopping behaviour change. We’re told the switch to smaller, more frequent shopping trips was a result of the recent recession but, whatever the reason, we are seeing a redistribution of market share. Aldi and Lidl are the obvious beneficiaries, but we’ve also seen an increase in the number of independent specialists, as well as the less-visible growth of online retailers. This brings new complications for supplier businesses – more buying points, more credit risk and smaller average delivery sizes.

But new entrants are often filling niches that the big four can’t compete with, giving more opportunities to smaller and specialist suppliers. It may be tough for Tesco, Sainsbury’s and Morrisons, but it’s surely better for the consumer to have a greater choice of stores and products. We’d got used to the status quo of ever-larger stores and more consolidation, but our behaviour has changed the game and, like nature, we should adapt.

Jeremy Rockett has worked in marketing for González Byass UK, Marks & Spencer and William Grant and has his own consultancy business, Rockett Science

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