More than you might think!
We are familiar with discount retailers such as Aldi and Lidl operating successfully in many parts of Europe. Since the start of the global recession back in 2008 or thereabouts, these retailers have made inroads on the more established retailers such as Tesco, Carrefour, Ahold and so on.
We are also used to harsher versions of discount retailing such as Poundland. This retailer has made great play of its ability to offer items in its outlets for one pound sterling.
In a wider context many of us have flown with EasyJet, the low-cost airline originally established by that Greek entrepreneur, Stelios Hajl-Ioannou, in 1995. Along with Ryanair and other smaller European airlines it has redefined the price of airfares for many people in Europe.
Since this launch, Stelios launched further “easy” concept businesses such as easyGym, EasyHotel, EasyBus and easyMobile. One or two earlier concepts such as easyCinema have fallen by the wayside. In early 2016 he launched what might be described as the ultimate discount retail concept store: “easyFoodstore”.
The basic principle behind this value proposition is that it offers around eighty items in its spartan stores for 25p. The retailer’s slogan is “No expensive brands. Just food honestly priced.”
Frozen foods, tinned food and dry food in general make up the merchandise that is available in the store. The concept takes the term “spartan” to even more extremes than the likes of Aldi and Lidl. A recent article described it as WA grim, concrete warehouse-like space, no bigger than a small corner shop, which more recalls a Soviet-era ration store than the glossy aisles of today’s supermarkets. (Daily Mail; February 3rd, 2016).
So far the shop has attracted many different categories of shopper; from charity workers to families and people who simply urn up to gawk at the concept.
The concept was undoubtedly prompted by the change in shopping patterns that has been brought about by the recession. People generally have become more conscious of the need to save money on their food shopping and have become more responsive to low-price operators and bargains than ever before. People shop more often and make smaller purchases than before. Stelios tried to launch this concept in 2013 but failed to get planning permission.
At the end of February the special price point of 25p will move upwards to 5op. At present it does not carry fresh food or fruit and vegetables.
The new store is being supplied by Euro Shopper, a brand produced by Dutch non-profit buying alliance AMS.
In a recent article published by Retail Week (10th February 2016) it described it as looking more like a stock room than a shop.
What future does this concept have? Plans are afoot to open similar stores and to increase the number of items (SKU’s) carried in the store. The price of items will rise as mentioned earlier. Will people come in sufficient numbers and buy in sufficient quantities to generate a meaningful profit for the operation?
If it lasts for a year or so, will it provide a viable threat to Aldi, Lidl and the “Big Four” food retailers? The trend in the last couple of years is for the latter retailers to reduce price and engage in price wars in order to be as competitive as possible.
Some people feel that Aldi and Lidl are beginning to trade up to more expensive items. Aldi recently introduced some champagne brand and more expensive wines to its product range. Is it possible that they will leave a bigger “space” at the bottom end of the discount spectrum? Is it possible that the easyFoodstore could step up to the plate and address this potential gap?
In its present state, this is unlikely. Carrying around 100 items is not going to send the pulses racing among shoppers. People are likely to put up with spartan shopping conditions and facilities as long as they can make some meaningful purchases across a range of product categories. Aldi and Lidl typically carry around 3,000 to 4,000 items in their stores. The likes of Tesco, Morrisons, Asda and Sainsburys carry many thousands of items more than that.
If we “buy into” the Wheel of Retailing theory we would accept that Aldi and Lidl trading up to more expensive items is proof that such a concept still applies. What if easyFoodstore gradually moves its prices up and increasing its product range to a point where it is clearly charging less than Aldi and Lidl? It is too early to say what might happen. Let’s review it again in a year’s time.
What do you think?