Co-op strategic shifts illustrate dynamics of retail industry

Despite the potential threat from supply chain disruption to its core formats, the Co-op’s UK grocery business is developing channels that require frequent re-stocking, going direct to workplaces and pursuing same-day delivery.

Why it matters

Convenience matters to modern retail. For the Co-op, a leader in this space, a rise in homeworking was good news, as sales grew almost 10% in 2020 compared to pre-pandemic levels. While macro issues are hitting profitability, the Co-op continues to innovate and appears to have looked to innovations significant in Asia, viewed through the lens of proven marketing theory by selling more online and selling closer to their customers.

Chinese firms like Alibaba have really led the way in terms of powering online and back-office operations of smaller retailers as far back as 2018. But they have shown how physical presence and experience can strengthen a digital business. With other rising stars like Shopify and giants like Amazon manoeuvring into a similar platform position, established brands are joining rather than attempting to compete. The question now surrounds whether this sales driver translates into longer-term profitability.  

The moves

• Last week, the Co-op opened its first food-to-go “micro-supermarket” in the head office of Numatic (maker of Henry the Hoover), Retail Gazette reports. The store will be open 24 hours, cashless and self-service with food to go, ready meals, and hot drinks.
• The idea is to bring the shop closer to workers, allowing the Co-op “to have a Co-op presence in locations that aren’t suitable for our traditional stores”, head of new channels Martin Rogers told the Gazette.
• Along with recent news that it is continuing to push into the on-the-go format with a new store on London’s Baker Street, the Co-op clearly believes it needs to be physically present where workers are should they come back to offices in greater force.
• It’s not betting the house on a return to the office, however, as the firm is targeting a 185% increase in online sales from its current £70m to £200m through a partnership with Amazon Prime that will bring customers nationwide same-day deliveries by the end of 2021.

Key quote

“Our commercial strategy is focused on getting closer to where they are to provide what they need, however and wherever they choose to shop with us” – Jo Whitfield, Chief Executive of Co-op Food, in a statement.

Sourced from Retail Gazette, Convenience Store, BBC, Co-op. Image: Co-op