How premium retailers are driving growth

Date : 25 January 2017
How premium retailers are driving growth

Market polarisation has been one of the defining trends of recent years. We have seen the ‘big four’ (Tesco, Morrisons, Sainsbury’s, Asda) lose ground to discounters and premium retailers. While discounters’ role is well documented, it’s worth taking a closer look at why premium retailers like Booths, Waitrose and Whole Foods Market are doing well.

Their growth is not down to luck. They have focused on three factors: investment in the core business, competitive pricing, and new services. Our senior business analyst Chris Kirkland looks at these factors in more detail.

1. Investing in the core business

Premium retailers concentrate on what makes them unique: providing high quality or specialist products in upmarket stores. They balance this with supplying the leading brands that shoppers want. Even during tough economic times, they resist the pressure to tone this identity down.

Booths runs branded supplier tastings and showcases suppliers’ stories in-store

Waitrose takes sampling to a new level with its upgraded juice bars

Premium retailers will need to continue raising standards – in product quality and store experience – to protect their point of difference. You will need to understand retailers’ plans and where your products fit in.

2. Being competitive on price

Even though premium retailers naturally attract affluent shoppers, they still need to be competitive on price. They recognise that not all their shoppers have higher incomes, and offer options like own label ranges or ‘pick your own offers’ to meet their needs.

The Essential Waitrose range of own label products helps reassure shoppers on affordability

Booths’ price match campaign against Tesco

We expect to see promotions evolve further as retailers move away from deep discounts. You will need to explore the benefits of taking part in new promotional mechanics.

3. Launching new services

Premium retailers are investing in services to meet rapidly changing shopper needs and create new streams of revenue. These range from Whole Foods Market’s one-hour home delivery, to Waitrose’s in-store cookery schools and wine bars. Eat 17, in London’s Hackney, is even opening a cinema on its premises.

Waitrose wine bar

Eat 17, Hackney

We expect premium retailers to continue developing their service offers. This will bring extra challenges for suppliers, for example pressure on space, ranges, stock planning and fulfilment. You will need to stay close to retailers as they evolve with the shopper.

Chris Kirkland

Chris Kirkland

Senior Retail Analyst UK