Product: Product mix may differ from area to area because of varying consumer tastes. For example, the Canary Wharf store is tailored to meet the needs of its affluent customer base as they offer designer breads, a sushi bar, a wine bar, a steak and oyster bar, and an exclusive wine cellar offering vintage wines.
Product mix may also vary in relation to what Waitrose’s competitors are doing, as Waitrose may feel they have to supply certain products just to keep up to date and in competition with it’s competitors.
Additionally, Waitrose’s product mix may vary due to the size of the store and the space allocation of products. Waitrose may choose to supply certain products in certain areas as they are good sellers and so the bigger store the more they may sell. Sales data is a good way of identifying where certain products should be situated between branches and a process of achieving sales data is by the use of electronic data interchange (EDI). Varying the product mix is part of an efficient consumer response system (ECR). By focusing on the efficiency of the supply system and thereby reducing cost enables Waitrose to offer products tailored to a region.
A major advantage of own brands is their extremely short maturity process. Since own brands are commonly exact imitates of branded manufacturer’s products. They benefit from this, by being immediately familiar with the customer.
Most popular own brand products are those that show little difference to branded products, so-called inferior goods, where there is little room for differentiation.
Retailers have the advantage of tracking market needs fast and react to the change in social life style (take away, healthy eating, alternatives food, exotic, ethnic foods) that encourage expanding in new own brand categories. ‘The retailers have often been quicker than the major branded producers to respond to consumers tastes, as it tends to be easier and quicker to alter lower volume, private label products specifications than higher volume manufacturer branded products.
Ranked List of respondents Preference 2002
Promotion: Promotional offers may differ from store to store for numerous reasons. Promotional offers may be carried out within certain stores to help grow specific lines which do not sell well, in hope of increasing sales, and matching sales targets of other stores, while encouraging shoppers to increase their spend within the store. Another reason for promotional offers to contrast between stores is so that they can compete against their local competitors offers in aim of keeping and gaining (counter competitor activity). A new store may also have promotional offers running at different times to other stores a means of winning customers, and increasing awareness of the new store. Different levels of store traffic can also have an effect on promotional offers, as stores with low traffic may carry out promotional offers in an attempt to increase the number of people visiting the store. An alternative motive for the variation in promotional offers between stores can be to stimulate customers switching to own brand products, as certain stores may have low own brand sales.
Place (location): Waitrose is located mainly in the south east of the UK with stores only as far north as Newark. The typical Waitrose Store is located in town centres next to other major shopping facilities. The average Selling Space of a Waitrose Store is under 1500 sq meter, which is fairly small. However newly opened stores tend to be of at least 2000 sq meters and preferably 2500 sq metres. With the introduction of its ‘food & home’ store format, Waitrose has also started to build in out of town locations, however, this account for only a very small share.
Waitrose has also been affected by the change in shopping patterns. Changes in opening and closing hours have been a direct result of a change in lifestyles and work practices thereby influencing when people can shop. Not only is Thursday night now a late night but also Friday, as people are now shopping as close to the weekend as possible. Indeed, Friday is now becoming the most popular day for regular grocery shopping as 19.6% (TGI data) of adults shop on this day. Also Sunday opening has now become common practice. A year ago Waitrose in Kingston did not open on a Sunday but due to this consumer demand they now open on Sundays whilst also opening earlier and closing later on Thursday, Friday and Saturday nights.
Importance of Store Location
‘You can be the best retailer in the world, but if you set up your shop in the wrong place, you’ll never do much business. If you operate from the wrong properties, you start with your hands tied behind our back’ (Chairman of Waitrose).
Before choosing a location, retailers should take into consideration all of the following: their distribution and warehousing network, target market, availability and cost of labour, competitor location, rent and rates, consumer spending power, population density, transport links and overall accessibility, planned developments, space availability, capital availability, and ease of gaining planning permission.
Store location is so important for Waitrose specifically for reasons such as customer base and proximity to their warehouse/distribution outlets in Bracknell and Northampton. Store location determines the sales that will be generated. The particular location is the key towards maximum sales and ultimately maximum profit. It would be advisable for Waitrose to build a store where it has been established that a large proportion of it’s target market exists and where there are no or few competitors. It must be carefully analysed to see if sales in the long term are going to exceed the cost of buying the land, building the store, paying the staff etc.
There are a number of factors that influenced the sitting of the Waitrose store in Kingston:
• This particular store is central to many main roads; for example, the A310 to Twickenham, the A308 to Sunbury, the A240 to Surbiton, and the A307 to Richmond. Kingston itself is also within a few miles of the A3 which is a good main road to take if one is coming either from Central London (10 miles away) or from the M25 (8 miles away). Wimbledon is also really close.
• People can Park and Ride from Chessington World of Adventures.
• Another significant advantage is that the central bus stops for Kingston are within easy walking distance. There are 40 bus routes altogether spanning Greater London and Surrey.
Heathrow Airport is a 40 minute bus ride.
• Kingston Railway Station operates frequent trains from Richmond, Hampton Wick, Norbiton,
New Malden, Berrylands, Surbiton, Hampton Court, Worcester Park, Motspur Park, Malden Manor, Tolworth and Chessington. The nearest London Underground stations are Richmond and Wimbledon which are within 30 minutes of Waterloo in Central London.
• Kingston is a very popular shopping location.
• Kingston offers ample parking with 1,185 spaces in the Bentall Centre, 710 in John Lewis, and 2,914 in others, making a total of 4,809 spaces.
• Waitrose is situated in the same building as John Lewis, therefore making it an even bigger attraction.
• Kingston is a University town.
• Kingston has a tremendous ‘cultural standing’.
• Kingston has a new theatre and a new 14 screen multiplex cinema.
• New Wimpey Apartments, Royal Quarter Apartments and Riverside Apartments all within easy walking distance, Nicholas King Apartments within a 15 min bus ride.
• Kingston is renowned, internationally, for it’s extensive range of shops, with a justified title of ‘Premier Retail Centre within the South East of England’.
• Average incomes in Kingston have risen from £33,700 in 2000 to £36,500 in 2002 which is a change of 8.3% (Wealth of the Nation, 2002). This can be compared to a national average of £26,200 in 2001.
• Kingston has a high population of around 145,000 of which 32% are aged between 15 and 32.
This is good for a supermarket like Waitrose since it relies on part-time workers, who are generally within this age bracket.
• Kingston has a workforce of around 70,000 who are of a high calibre with 58% at NVQ level 3 and above (Labour Force Survey, 1998). Also, GCSE results for the area are well above the national average with 58.6% of pupils achieving Grade C and above against a national average of 46.3%. This is good for new recruits since many are highly likely to be of above average intelligence.
• Kingston is the 7th largest retail centre in the UK.
• It is clean, safe, and an attractive setting being right next to the river.
• It has plenty of places to eat and drink stretching to nearly 100.
The key points from the list above are: accessibility, which is justified by the main roads going into
Kingston, and the bus and train links, parking facilities, average incomes, citizen profiles, population ages, and new housing developments. All these points clearly justify why Kingston is an excellent place to locate a store.
BMRB International's 2002 Target Group Index (TGI) survey found that ‘89.8% of households used
High Street supermarkets (52.7%) or out-of-town supermarkets (37.1%) for their regular grocery shop’. This is a positive indication for Waitrose since the majority of our stores are high street supermarkets.
Generally, the search for a location should begin at the ‘most general assessments of geographical areas through to the detailed evaluation of specific site characteristics. One of the Waitrose Managers in Bracknell introduced a sequence that could be an ideal strategy for finding a location. However, it must be noted that this method needs certain time and retailers are often not in the position to hesitate with their decision for too long.
1. Search: the identification of geographical areas that may have potential for new outlets. (market selection)
2. Viability: finding the best sites available within the given areas and forecasting the store turnover that may be derived from these (area analysis)
3. Mirco: examination of all the detailed features of a specific site that are relevant to potential store performance.
Retailers have various options as far as the techniques that can be used to evaluate potential locations:
1. Experience: Experience can only be gained through practices and longer learning. The first impression of a possible site will certainly be evaluated through experience or ‘gut feel’, comparison with other cases. Experience can help imagining the changes that might occur and transform a location’s future value. It is not scientific, yet used and certainly cheap.
2. Checklists: Having been developed 40 years ago this method is quite traditional and unspectacular.
Each retailer’s checklist tends to be different and there is no standard procedure for this method.
Factors important to a retailer will be listed and ticked should the location fulfil the demands.
Essentially the checklist is the confirmation of certain conditions that are desirable for a retailer to be present.
3. Mapping techniques look at trade area density, competition levels and drive time bands.
4. Geographic information systems provide information relating to a particular location. There are four main systems; ACORN, which classifies residential neighbourhoods, CACI, which provides data on road types and congestion levels, MOSAIC, which classifies residential neighbourhoods, and, ‘Shopping Centre Planners’ that identify competition in a particular area.
5. The analogue method is based on actual historical sales performances. It would look at other stores with common features, quantify the key features of these stores, and ‘extrapolate from these analogue stores to estimate the likely turnover and profitability of a store at the proposed location.
6. Multiple regression analysis suggests that ‘there are seven main factors relevant to location decisions:
(I) population in the surrounding area (ii) spending power of this population (iii) overall average spending on the product (iv) quality of transport links to site (v) average distance from site to population (vi) competition (vii) average distance from competitors to population’.
7. Spatial interaction models show that ‘the aggregate movements of shoppers are positively related to the attractiveness of a shop/centre and inversely related to the distance, or some other ‘deterrence, measure.
The economic views of Own Brands at Waitrose:
The most persuasive reason for retailers to stock own brands is the fact that own brands can be bought in more cheaply and can consequently be sold at a higher margin. Figure 11 shows a typical build up of the cost of branded products. It might not be valid for all cases but general tendencies can be spotted. The retailer can save money in several places. Advertising and transport costs can be reduced. Fixed manufacturing, research and development and the sales force cost will decrease. These costs are covered by the wholesaler that supplies the retailer with its own brand products. On average margins tend to be 5-20% higher for own brands.
UK Grocery Market
The Market consists mainly of the major chains, led by the big four Tesco, Sainsbury’s, ASDA and
Safeway. Together with Somerfield, Iceland and Waitrose these companies take by far the largest share of the market (see table).
The food and grocery market is typically very robust and recession proof. Food sales are at the core of the supermarkets and spending on food has been growing year on year since 1990. Non foods sales account for an increasing share of Supermarkets income.
New planning legislation introduced by the Labour government means that out of town superstores are increasingly more difficult to realise. Therefore retailers concentrate on smaller convenience stores. The liberalisation of opening times has resulted in later opening hours. Most retailers now also offer online shopping
UK Supermarkets by Market Share by Value (%), 2002
Graph 1: Waitrose Market share %: 2001/2002
Graph 2: Region Market Size (£m), 2001/2002
Graph1 above illustrates the regional distribution of Waitrose stores in numbers across the UK.
Waitrose’s UK average Share in the retail market amounts to 3.3%. However Waitrose operates mainly in the south east area and has a considerable presence there (Southwest: 9%, London: 6.7%, East Anglia: 4.8%, southwest: 3.4%. This is important because it shows that in the markets that Waitrose actively competes in it can achieve a much higher share than the UK average of 3% might make one think.
Graph 2 states the individual market sizes and shows that Waitrose’s strongholds are already in the biggest markets. It also shows which markets offer the greatest potential for expansion.
The Map on the next page shows the geographic distribution of Waitrose stores in the UK. Waitrose is currently bound to its south east location because there are only two major regional distribution centres in place (Bracknell & Northampton). Although further expansion north and west is planned, Waitrose has no plans to expand overseas, unlike its bigger competitors.
Waitrose PEST Analysis:
Political: The Department of the Environment, Transport and the Regions (DETR) (2000): “The Government remains firmly committed to the objectives of PPG6, which seeks to sustain and enhance the vitality and viability of our existing city, town, district and local centres and to make them the focus for retail investment” …means that it is very difficult to get planning permission for out-of-town stores. ‘The Competition Commission’s report “The Supply of Groceries from Multiple Stores in the United Kingdom”, published in 2000, stated that the leading supermarkets do not operate as a cartel to keep food prices unduly high.’ (Key Note, 2001, Supermarket Services) Although some questionable practices were found (selling product at a loss, lower prices in areas of high competition), the Commission did not recommend any corrective actions.
EU Competition might not be as generous as the Competition Commission and therefore might order changes. If the introduction of the congestion charge is successful in London, it is likely that this kind of scheme will be extended to other big cities.
Economic: The likely takeover of Safeway is an indicator that competition is getting more intense with fewer but bigger players.
Social: Demand for organic and healthy foods has increased and most retailers have responded to that trend. Today customers are less prepared to pay a premium price for organic foods, which is why retail chains have started to offer own brand organic products. Waitrose has long been offering these kinds of products. Busier lifestyles increased the demand for convenient foods/ ready meals. Also notable is an increasing demand for exotic and ethnic foods from consumers.
The public has become more environmentally aware and Waitrose’s strategy fits well into this
Almost 70% of women are working and working times are longer than in any other European Country. However, women are still doing the majority of the shopping.
More than 75% of shopping trips are made by car. Public transport links are even declining as a percentage.
Technological: Online shopping is a major new opportunity for retailers and the UK offers a good market for this with the highest percentage of people online across the EU. And ‘already more British food shoppers have converted to online grocery shopping than in any other country’ (Keynote, 2001, The Internet Grocery Market) Tesco is now the world’s biggest Internet grocer.
Information technology and Communication has enabled more sophisticated store management, with detailed statistics of products sold being made available, thus facilitating the ordering of new stocks. More attributes of the store can be steered centrally such that costs are reduced, margins increased and sales enhanced.
Waitrose SWOT Analysis
Internal Strengths: Waitrose was the first to introduce self-scanning (Quick Check) in some stores, which demonstrates a willingness to innovate and offer a high service and reducing costs.
The partnership with John Lewis gives Waitrose tested supplier links and economies of scale. The partnership also functions as a conglomerate therefore diversifying risk. The association with John
Lewis improves Waitrose’s reputation. After Marks & Spencer Waitrose was one of the first retailers to develop Own Brands. Own brand lines carry over 16.000 products. In 2001 ‘Perfectly Balanced’ was introduced, a new range of 117 lines including cereals, sandwiches and fresh meals. It is promoted for a fresh and healthy lifestyle.
According to a survey by Which Waitrose is the leading supermarket chain in food quality and range. Only ASDA was rated better than Waitrose for value for money.
Also Waitrose was the first ever winner of the title Organic Supermarket of the Year and a five times winner of the accolade Supermarket Wine Merchant of the Year
Strong culture of co-ownership: Staff are generally well motivated because they are partners and profits ultimately come back to them. Various other benefits (pension schemes, etc…) along with this make Waitrose a good employer, which satisfied employees.
Waitrose has specialised in the sale of wines, delicatessen, fish and meat that can be bought in store from special counters.
Along with the recent redevelopment of their new corporate identity, a new store image and layout has been developed. Gerry Maverick, Senior Development Manager says: “The changes we have made have given us a fresh new image. The new colour emphasises the quality and freshness of the business and the food we sell
Internal Weaknesses: In conjunction with the threat of the introduction of congestion charge in other major conurbation areas this appears to be a weakness because it will increase the operating cost and give retailers with out of town store an advantage.
Own labels are main segment within their product mix (55%). Thus Waitrose is very dependent on this product range. As are meanwhile most retailers.
External Opportunities
North-west expansion is planned, however, for this purpose a new warehouse has to be built. The north-west is the biggest market not yet entered by Waitrose. (See map and Figure 3) Waitrose has an elaborate online shopping facility in place; however, this as well is subject to regional limitation. Sale of Non-food products: with the introduction of the new home & foods store format, Waitrose has begun to sell non-foods products. Those are mainly products that can usually be bought from John Lewis and therefore making the access to the products straightforward. Retail Partnership (see Sainsbury’s and Boots) could be applied. This could help Waitrose to diversify into other non-food products other than those that John Lewis already offers. Mark four is a new store format that will concentrate on even fresher food products. Yet little has been seen of this format.
External Threats
Marks & Spencer, Tesco and Sainsbury’s have identified the sales of premium own brands as a lucrative segment with high margins. This is a major threat for Waitrose who have built up a major part of their strategy on the sales of these products. However since Tesco and Sainsbury’s are also advertising on price they can’t convince consumers of their product quality as much as Waitrose.
ASDA has been acquired by Wal-mart and can draw from a waste pool of resources. This has intensified the competition in the UK market. In comparison to the competition from Tesco and
Sainsbury’s, Waitrose can offer little resistance in terms of bargaining power.
If the congestion charge is introduced successfully in London, it is likely that this scheme will be extended further to other big cities. This would be very threatening for Waitrose since most of their stores are located in conurbation areas. Consequently the cost of travelling to Waitrose via car (car used for 75% of shopping) would increase dramatically, diversifying traffic to out of town stores.
Segmentation
Market segmentation allows Waitrose to ‘identify different groups of buyers who share similar definable needs and behaviours.’ (Debbie Anderson) Whilst Behaviouristic responses are fundamental to segmenting Waitrose’s market as factors such as usage rates, impulse purchases, loyalty, and sensitivity to marketing mix factors allow for conclusions and positioning within consumer markets. Waitrose seems to segment its market based on simple variables such as incomes and Geographic’s (geodemographics). This has been identified by associating the number of Waitrose stores in the south of England with the average incomes, showing that Waitrose is aiming at the higher income earners at the upper end of the market, and segmenting itself toward the social groups of A, B and C1. There are no Waitrose stores in areas such as Newcastle, Middlesbrough, Liverpool and Bradford, Britain’s poorest regions indicating that Waitrose would not benefit financially from these areas. The use of Geo demographics is a fast and efficient way of identifying trends within certain geographical areas, allowing Waitrose to divide a market into different groups based on social class and lifestyle characteristics.
Waitrose Ansoff’s Matrix; Growth Vector Components
‘The most’ commonly used model for analysing the possible strategic directions that an organization can follow is the Ansoff’s matrix’6 shown in Figure 6. ‘This matrix shows potential areas where core competencies and generic strategies can be deployed. There are four broad alternatives.’6
Market penetration: Following this strategy Waitrose would try to enhance its core competencies by improving their product and service quality. Considering Waitrose’s success withdrawal is unlikely.
Market development: This would involve entering new markets, while employing existing products:
Waitrose already plans to expand further north-west. Waitrose also entered the online market.
Product development: Waitrose has recently made use of this strategy by introducing their new store format “home & food” in which also non-food goods (from the John Lewis partnership) are sold.
Diversification: This strategy would consist of business growth through new products in new markets; Waitrose is unlikely to pursue this strategy.
Positioning map, major UK Retailer, Quality- Price
The positioning map shows how the main five grocery retailers are perceived by consumers. You can see that Waitrose is positioned quite highly up the quality and price lines, distinguishing our segmentation towards higher income earners. Whilst we would define our market as the higher income earners who are quality conscious, with price being less significant. Thus Waitrose concentrates on providing high quality own brand products (55% of products being own brand), helping to also illustrate the image of exclusivity and elitism.
From the positioning map you can see that Tesco, Sainsbury’s and ASDA are all positioned very close to each other indicating the enormous amount of competition through price and quality. All three grocery retailers segment themselves towards new and growing families, as they are huge sector of the market, with much money to be made from. As you can also see Marks and Spencer’s is positioned at the top end of the scale for both price and quality, showing that they are perceived as a grocery retailer which provides a high standard of products at high prices, segmenting themselves as an sophisticated grocery retailer.
Life-stage segmentation also plays a vital role in defining and segmenting Waitrose’ market because it looks at family characteristics and whether they match that of Waitrose. Whereas Waitrose’s competitors focus on new family, post-and pre-family groups Waitrose inclines towards post family, older couple and single groups, as these groups are more able to afford their prices.
One could say that the typical Waitrose shopper is the typical Classic FM listener; affluent, interested in culture, travel, fine foods and wine. The account card, Waitrose and John Lewis loyalty scheme, support this by offering reduced tickets to concerts and invitations to wine evenings for example.
Waitrose’s own magazine “Foods Illustrated” also targets this group and functions as an effective PR tool in drawing these kinds of customers into the shops.
Waitrose’s association with John Lewis also helps to reinforce its segment within the market as John Lewis represents high class giving the perception that Waitrose is also of a high calibre. Waitrose holds a Royal Warrant for their services and supplied goods to Her Majesty the Queen which has been regarded ‘as a mark of excellence and quality’ (waitrose.com) symbolising Waitrose’s stature of high class.
The implications of this definition are that it restricts the market share that Waitrose is able to gain control of. As Waitrose is aiming at more of a niche area (higher income earners) within the market it reduces the number of customers who use and buy Waitrose products. Many people believe that it is cheaper to shop at one of Waitrose’s competitors such as Tesco. This can also create a bad stigma and put many people off shopping at Waitrose.
Waitrose forte of providing high quality own brand products to gain its market share is now facing increasing competition from many other grocery multiples as they have started to establish their own premium product lines. This strategy is being employed to obtain more of the market share from the likes of Waitrose and Marks and Spencer.
The implication of the above definition is that Waitrose has to be very careful when evaluating potential locations so as not to target too poor an area.
Waitrose’s Marketing Strategy
Waitrose’s aim is “to provide the convenience of a supermarket with the expertise and service of a specialist food shop”; its watchwords are “freshness, quality, choice and value”.
Waitrose is recognized for its focused differentiation strategy targeting the upper market with a wide range of quality and fresh products.
Indeed Waitrose has a good reputation for stocking quality products but this has led to a perception of being quite expensive (“honestly priced”).
Waitrose has concentrated on the food and drinks market, choosing not to diversify as much as the big four retailers. Their market share cannot really be improved dramatically unless they build more stores all over the UK. It can be argued that the key to Waitrose’s continued success will be expansion of their current markets.
Major competitors include Tesco, Sainsbury’s and especially Marks and Spencer who also target the upper market.
Consumers will generally buy their groceries at the most convenient place with the lowest price, and since the products they buy are identical in every chain they don’t mind which shop they buy their goods from.
Whereas retail chains competing primarily on price are trying to establish switching cost by the introduction of reward/ loyalty schemes/ cards, Waitrose tries to build up brand loyalty by offering differentiated, high quality products. Although Waitrose has an account card in place it is not advertised very much does not include monetary benefits to the extent others do. Instead the account card will enable customers to receive “Foods Illustrated” or to receive tickets for concerts at reduced prices, which indicate its upmarket target market.
They are not renowned for reaching really broad target audiences unlike Tesco for example. Waitrose focuses on in-town stores, offering a wide range of food products and attracting the upper socioeconomic groups. These target audiences can be linked with those associated with John Lewis.
Waitrose is undertaking a range of activities to maintain their green image (e.g. Bag For Life, Environmental Report, Fairtrade Bananas). A wide range of social programmes are sponsored.
Waitrose actively promotes its commitment to providing British products and offers products through partnerships with farms and dairies.
Being part of the John Lewis Partnership means that profits generated are paid back to all employees. The whole partnership proactively operates as environmentally friendly, honest, fair and ethical as possible.
