This report aims to evaluate the current strategies implemented by Waitrose. These strategies will be explored using the strengths, weaknesses, opportunities and threats derived from the previous report.
The generic strategy that Waitrose focus on is Differentiation, this is evident through the offerings of different own brand products that are available. Furthermore, Waitrose own brand grew sales by 5.6% outperforming the market which is clearly evident as 18% of total sales belonged to Waitrose own brand products (Johnlewispartnership, 2016). Waitrose boast a unique “shopping experience”, which is implemented by highly trained staff as part of their generic strategy. This differentiation strategy has allowed them to overtake competitors in the supermarket industry.
(Drummond and Ensor)
The strategy that will be evaluated and discussed in this report is Market Development. According to a report published by the John Lewis partnership in 2015, Waitrose has opened 13 core branches and 20 convenience stores in 2014/2015.
Waitrose will be opening 14 new stores of which 7 will be (little Waitrose) convenience stores in 2017.
Consumers are increasingly looking for convenience in all aspects of their grocery buying habits. This is the reason for such a huge shift in shopping habits over the last 5- 6 years. The trend of buying when needed has become increasingly popular especially amongst younger consumers. (Mintel, 2016).
With shopping habits continuously changing, supermarkets have needed to move with the times, in terms of becoming accessible to deliver customer satisfaction. According to IGD’s ShopperVista, shoppers in the UK make 24 food shopping trips across an average of 3.9 channels per month of which 34% use 5+ channels (IGD, 2014). In 2013 the UK convenience market was worth £36 billion (Mintel, 2015), by 2016 this figure has increased to £37.7 billion (Armstrong, 2015). Waitrose strategic retaliation to these changes in consumer shopping habits has prompted the opening of little Waitrose stores in the UK.
Waitrose opened its first convenience store in 2008, these stores where then re branded in 2011 and have since been known as Little Waitrose (Smithers, 2012). In the year 2012 there were 30 little Waitrose stores across the UK, this number is predicted to be increased to 300 by the year 2020. The retailer also extended its partnership with oil company Shell in 2014, opening four new Little Waitrose stores at Shell petrol stations in Roehampton, Battersea, Sevenoaks and Bracknell (Mintel, 2015). A spokesman for Waitrose stated in 2013 that little Waitrose has enabled them to become more accessible to customers due to high street locations. (Bulletin, 2013)
Figure 1- demonstrates the rise in little Waitrose outlets from 2009 – 2013, the 4-year period in which 35 stores have been opened (Mintel, 2015)
What is the strategic Rationale behind this strategy?
The main reason that Waitrose is implementing this strategy is to become more accessible to their consumers. Due to the rise of the convenience store, Waitrose who already operate in a niche segmented market, could loose potential sales due to their lack of availability to consumers who are on the go. This is the main reason behind the decision to expand their market presence in this segment. This strategic decision is not an attempt to take on the big players in the market, but rather to offer their existing products in a new market. The new market in this case being the convenience stores.
This strategy is an example of market development; this is evident through the fact that Waitrose are bringing their existing products and services into the convenience store market (Drummond and Ensor).
Waitrose does not look to compete with bigger firms such as co- operative who are the market leaders in this sector.
Waitrose are looking to become available to their targeted customers, whom they have a threat of loosing out to in locations such as high streets and petrol stations. For example, if your average Waitrose shopper requires products on a need to buy basis as the change in trends suggests, then becoming available in certain demographical locations is advantageous (Drummond and Ensor). Further evidence of this strategy is in the demographics for these little Waitrose stores. Little Waitrose store locations are subject to higher consumer earning and spending. There are 30 little Waitrose stores in London alone.
Upon further investigation, it can be noted that even the stores which are available in London have been targeted in specific areas of the capital city. Notting hill Gate, Watford, Marble arch are few of the strategically placed locations for these little stores. (Laurence, 2013)
Placing these stores in locations such as this, demonstrates the type of consumers Waitrose target. Shoppers in these areas tend to be wealthier, as the local demographics show that rent prices are high in these areas, which in turn means the people living around these areas are earning more. According to Savills, properties located within the same postcode as a Waitrose outlet are on average 25% more expensive than the average property in their county. (Laurence, 2013)
The expansion into the convenience market will exploit a gap that has been created by local convenience stores. The biggest opportunity this strategy offers for Waitrose is the ability to bring their upmarket products to the high street (refer to appendix 1- opportunities and threats). This will defeat the advantage that convenience stores have had. The dramatic change in shopping habits has largely been attributed to the close proximity of these stores to big chain supermarkets. Therefore, Little Waitrose stores can potentially defeat this threat by becoming more accessible. However, as mentioned above this strategy is not based on the need to compete with the big chain convenience stores, it is based more on the fact that if Waitrose customers do not have access to their preferred products and services on a need to buy basis, they will more than likely have to explore other options such as M simply food outlets.
In terms of competitors, the main rival for Waitrose is M foods. Currently M have 450 convenience stores (Sembhy, 2015). A decline in sales prompted the entry of the major retailer in to the convenience store market. However, M & S are looking to replace mid size store expansion in replacement of convenience stores.
When M initially opened their smaller stores in 2000, it was due to the decline in sales at the time. Therefore, these stores where opened to rival stores such as Tesco metro and Sainsbury’s local (Parkinson, 2000).
Due to the late entry of Waitrose into this market, M&S have gained a significant advantage as they now have more convenience stores than main rivals Waitrose. Furthermore, the expansion in this market by M&S is largely due to falls in sales in their major retail stores, this has prompted them to close more stores in order to replace them with the smaller convenience outlets. Waitrose however continue to grow and expand in both markets at a more or less equal expansion rate. For example, they are opening 14 new stores, 7 of which will be core stores and 7 will be little Waitrose convenience stores.
Another point that can be noted is the demographics of the simply food outlets are not the same as little Waitrose. This is evident through the placement of these stores in most town centers and also in service stations and train stations.
In regards to gaining an advantage over rival competitors Waitrose have a long way to go in this market. This is due to the fact that they have significantly lower amounts of convenience stores available due mainly to the late entry in to the market.
However as mentioned previously, Waitrose intend to expand into this market on a larger scale by 2020 (Smithers, 2012). On a further note, Waitrose have not closed down any stores due to lack of sales, whereas M&S have had to re model their entire business strategy, to focus more on food.
Figure 2 – demonstrates that waitrose is the leading supermarket ahead of its rival M&S (Marketforce, 2015)
The constant changes in shopping habits are a key factor that need to be considered by Waitrose. In the pestle analysis (appendix 2) it can be noted that one of the main social factors affecting the supermarket industry is the change in shopping habits. Furthermore, it has been stated that due to the trend of buying on a need to buy basis, there has been a reduction in waste. In referral to the environmental factor in the pestle analysis (appendix 2) which suggests that Waitrose works closely with schemes to prevent waste, this factor suggests that this strategy will be quite suitable to Waitrose business ideology.
Due to the high level of investment that Waitrose are putting into their new shops along with other factors such as price matching, building their online presence, technology and one off items, there is a hold back in Operating profits in 2014/2015 as suggested by the report published by John Lewis. (Johnlewispartnership, 2016). Operating profit were down by 23.4% to £237.4m and the year on year impact on profits due to these factors was £30m and £27m.
As part of Waitrose differentiation strategy, they offer a specific experience in store, for which their staff are highly trained. In light of this the daily mail suggests that Waitrose is the UK’s favorite supermarket.
A survey conducted by market force suggests that Waitrose is the leading supermarket in 5 out of 6 attributes. One of which includes cashier courtesy.
Figure 3 demonstrates the level to which Waitrose is viewed by consumers. (MarketForce, 2015)
If we refer to the value chain (Appendix 2), it can be noted that one of the key advantages Waitrose has is the ability to make items available very quickly. The first primary activity is ‘inbound logistics’ which Waitrose owns, this gives them the capability to quickly implement changes to delivery schedules and place allowing them to deliver more effectively, by owning the logistic capabilities this gives them differential advantage (Doyle and Stern, 2006).
Waitrose has in place the resources and capabilities to expand into the market for convenience stores. This is mainly due to their experience in their larger stores in terms of staff training and their in bound logistics that will allow them to deliver a good customer service as well as the ability to produce and deliver high quality fresh products as and when required. Bringing this concept to the high street and other locations such as train stations and service stations, make this strategy highly feasible.