It’s all about location, location, location... That’s the mantra of estate agents the world over, but location intelligence services provider Gamma believes that it should also be the primary consideration for Ireland’s grocery retailers. CEO Feargal O’Neill updates Maev Martin on their service offering and identifies some key and emerging trends
We all know that the requirement for convenience is a big trend in grocery retail.
However, O’Neill maintains that, while retailers know this, they do very little about it. “They say the big challenge is online but the big difference between online and physical stores is convenience,” he says.
As multi-branch retailers globally, and in Ireland, look to make informed decisions on the redistribution and reformatting of their assets, omnichannel location analysis is now a key tool for retailers to ensure that they survive and thrive.
“Firstly, with this type of analysis the retailer needs to understand its market, map it out, and see how customers are engaging through each channel.,” he says.
“They then need to identify where their customers are, at what times, and overlay this information with their stores.
Once this is achieved, the retailer can model and score its brand convenience in every neighbourhood. Using these insights, an optimum network that satisfies the retailer’s convenience goals can be built.
Retailers have been doing a lot to respond to consumer demand for convenience in-store, but in terms of their online offering they don’t always consider their location, or track and measure the impact of their location, and it is the most important factor in determining which store a consumer goes to.”
The growth of CX is another big trend.
“Retailers have been busy changing spaces in stores, rolling out less product, and enhancing the customer’s experience of those products in-store,” he says.
“The layout changes that retailers have been making in their stores reflect what people want to spend their time doing when they are in a store. I’m also seeing the growth of a lot of services associated with retail, such as click and collect delivery services.
In addition, I can see convenience stores offering a lot more services apart from grocery in the years to come, and not just click and collect, but services such as banking, which is a sector that is diverting massively and will divest even more in the future.
There will be far fewer bank branches over the next decade, so I can see even more terminals in convenience stores.
Retailers will realise that their location, not what they sell, is their key differential, their USP.”
He also predicts massive changes to every forecourt chain in the country over the next decade.
“Forecourt chains have already experienced a massive structural change and in the next decade people will spend more time in these locations charging their electric vehicles, so we will see more and more Quick Service Restaurants in these spaces,” says O’Neill.
“Gamma are currently carrying out research to see where electric vehicle charging points need to be located and where forecourts need to be located to take advantage of them.”
How convenient are you to customers?
Gamma can tell retailers how convenient they are to customers.
“We employ gravity modelling which models the flow of spend from consumer to retailer based on distance and attraction,” he says.
“We created a brand model for grocery which estimates the likely market share that each retail brand has in each block of 100 houses in an area, so we can go to a retailer and tell them how they are performing and who they are performing against.”
So, what are the key mistakes that retailers make when they are establishing or growing their store networks?
“Retailers rely too much on their gut feeling and ignore the data that is available,” he says.
“They don’t think strategically. Up to 10 years ago, we network planned based on physical stores only, and now we have to take the omnichannel view. A physical store drives online business. That has been a key finding of studies in the US.
The average spend online per customer is a lot more when it is close to where that retailer has a physical store. When retailers are planning an expansion programme or a divestment programme, they have to assess the impact on all of their channels, both offline and online.”
The supermarket model
A study carried out by Gamma last year, as part of its Location Insights Series, highlights the use of convenience modelling to estimate the relative strength of supermarket retailers. By calculating travel time from every neighbourhood to every supermarket, the study reveals the supermarket grocery brand closest to the most people in the Republic of Ireland.
SuperValu scored the highest, even though it didn’t have the most stores.
However, by having a presence in convenient locations, it was closer to more people than its competitors. “This shows that volume isn’t everything and that the strategic placement of physical stores is what really matters,” says O’Neill.
“We are planning to repeat this survey in 2020 and we are working on other models,” he says. “For us, it is all about leveraging location intelligence in order to divest risk for our clients.
Our research also shows that for most FMCG retailers, there is a very strong correlation between a brand’s neighbourhood convenience score and its market share,” he says.
“If you can understand your convenience blind spots and the available market in those locations, you may also understand where you can increase your market share.”
Key clients
Gamma have been working with Musgrave for a long time, both in the Republic of Ireland and in Northern Ireland. “They are excellent at store planning,” he says. “We also work with Bank of Ireland.
In addition, retailers with smaller networks of say 20 or 30 locations often come to us to assess where they should put their next 5 or 10 locations. We have worked with Dunnes Stores in the past, and also with Fresh The Good Food Market. We also work with smaller, individual stores. We ran a workshop with some of the smaller operators a few years ago which allowed store owners to see areas where they weren’t achieving high spend. We also advise retailers on strategies for acquisitions and mergers.”
Online shopping
Tesco and SuperValu are offering online shopping and Lidl are offering an online service via Buymie.
Will other grocery retailers move into this space over the coming decade?
“They will all have to offer online shopping eventually, and it is quite possible that they will do it through intermediaries, perhaps via a grocery version of Deliveroo, but it will have to happen,” he says.
“Online grocery shopping will rise exponentially over the next decade and we will increasingly see the ambient ranges moving online and being delivered to peoples’ homes.
Making physical retail, online, and click and collect all work together with the consumer at the centre is the winning formula for the today’s grocery retailer.”
Best sellers
Gamma is broadening its focus beyond the retailers to FMCG brands with the launch of a new product called Prospector, which is about leveraging location intelligence in relation to brands.
It is linked in to their Storecast product, which is used by Musgrave and Bank of Ireland. “Prospector takes customer data, in conjunction with Eircodes, and shows you the areas where categories of products or individual brands are doing well,” he says.
“You can select areas where you are doing well or badly, and Prospector also allows you to target those areas via mail or social media. This product is for anyone in marketing, whether they are selling over the counter or online.
Its USP is that it allows retailers to control or target all of their channels and pick the best channel, as the system also tells you the best channel to use, so it reduces the marketing spend and avoids wasteful advertising. We hope to have Prospector live in the first quarter of 2020.”
© 2020 Checkout – your source for the latest Irish retail news. Article by Maev Martin. Click sign-up to subscribe to Checkout.
