What do McDonald's, The co-operative and Aldi have in common? At first glance, maybe relatively little, yet all these retailers feature in our Ten to Watch 2009, and each tells a story about how retailers are structuring to achieve success in today’s trading environment.
 

Innovation vs. best practice

In a time when many companies are refocusing their proposition to meet shopper demand for value and low prices, innovation may be the last thing on your mind. In an industry survey conducted in August 2008, only 46% of respondents felt innovation would be among the most important industry trends in the next five years, compared to 64% of survey respondents holding this belief in 2007.

Yet here at IGD we still believe innovation has a role in retail trading success – just look at the way in which many multinational suppliers are changing pack sizes to meet evolving shopper budgets, and consider the fact that many businesses are introducing a more innovative approach to promotions.

Once again, IGD has analysed retailers from around the world and selected ten that stand out

Nevertheless, perhaps such changes should be seen less as pure innovation and more as adoption of best practice and tweaking of existing models. Innovation itself is frequently presented as the solution to every challenge our industry faces – added differentiation, stronger brands and a miracle cure to reinvigorate the bottom line – yet often when we look for innovation, it is best practice and simplicity that we find at the heart of the matter.
 

Identifying success stories

For the last four years, our market intelligence experts have got together annually to select ten retailers from around the world that they feel are demonstrating an innovative or exciting approach to grocery retailing. Our analysts regularly travel worldwide and meet with leading industry figures, enabling us to form a view about which retailers to select.

Identifying ten retailers that meet our criteria is no mean feat – especially in a turbulent economic environment. In order to be selected, retailers or fascias must either be delivering, or showing the potential to deliver, a strong commercial performance. Alternatively, those selected must offer a proposition which adds value – be it in terms of their expansion strategy, brand strength, strategic direction or commitment to sustainability.

Retailers may also be featured in the list because they have reached an interesting point in their development. For example, Alliance Boots was shortlisted for the series this year because of the point it has reached in terms of its development, yet did not make the final cut despite much debate around its potential inclusion.

IGD's Ten to Watch 2009   Retailer Domestic Market Aldi Süd Germany Chez Jean France Dia Spain Edeka Germany GourmetCITY India Marketside USA McDonald's USA Pro's Ranch Markets USA Simply Market France The co-operative UK

Getting back to basics

Retailers or fascias that are selected could also be doing the basics extremely well – the best innovations are often the simplest, removing rather than adding complexity. This certainly applies to the likes of Aldi Süd and Dia. Both feature in the Ten to Watch 2009, and both demonstrate strong commitment to exceptional operational efficiency.

Yet it is not just from an operational perspective that retailers are getting back to basics. Take the example of Auchan’s Simply Market, which, having established its brand presence since 2005, is now being rolled out across France, Spain, Italy and Poland. By placing strong focus on own label in a discount-supermarket model, converted stores have delivered sales uplifts of 13%, and the simplicity of the shopping experience is seen as a key strength of the fascia by the Simply Market team.

The best innovations are often the simplest, removing rather than adding complexity.

And don’t forget Marketside, which also made the Ten to Watch this year. Our analysts visited Wal-Mart’s new format on a recent trip to the US West Coast and were impressed by what they saw. Not only does it draw on Wal-Mart’s EDLP heritage, it also puts freshness and convenience at the centre of its model – a winning combination, which some analysts suggest has the potential to deliver $10bn annual sales in the long-term.
 

Drawing out the learning points

Price communication at Marketside

Ten to Watch 2009 offers many learning points for both retailers and suppliers, touching on a range of industry issues. For example, many of those retailers included this year are using strong communication to emphasise their brand strength and to ensure fascias have the correct positioning in shoppers’ minds. Not necessarily revolutionary in itself yet it provides a clear starting point for marketing professionals to work from.

And one of the other key points to consider is that even in the current trading environment, where price and value are emerging as key, the really successful retailers are delivering something beyond this – be it the excellent food-to-go proposition demonstrated by Chez Jean, Edeka’s 50+ store targeted at older shoppers, or even McDonald's renewed focus on sustainability, sourcing and ethics.

So in a time when new product development (NPD) budgets may be under threat and new ideas may be increasingly challenged internally, perhaps success for retailers and suppliers is as simple as telling a story that shoppers find compelling - one that embodies price and value but also goes beyond it and offers shoppers something additional in their hour of need.
 

More information:

Ten to Watch 2009

The latest instalment in IGD's Ten to Watch series, which annually identifies ten grocery retailers worldwide demonstrating strong commercial performance and innovative best practices. Our analysts can come to your business and deliver an interactive and highly informative session, drawing out the key learning points specific to your business. Alternatively, we can provide just a slide deck complete with notes that you can use as part of your internal business planning sessions. To find out more about this service and to discuss your requirements, please contact us for more information.

------------------------------------------------------------------------------------------------------------

Jonathan Gunz is a Senior Business Analyst at IGD and is an expert on innovation and global retail trend analysis. He has authored many articles and contributed to numerous reports at IGD, with his latest work published in March 2009 as part of IGD's 'Ten to Watch' series.

Jonathan is also a regular presenter on the international stage and has delivered many briefings on global trends and key account strategies. In addition, Jonathan manages IGD's research programme in Western Europe with particular focus on France and Carrefour and travels regularly in Europe and beyond to stay abreast of the latest trends.