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Supermarket trends

The supermarket groups have all completed or are busy with big investments in the two most significant strategy trends of the past 10 years: centralised distribution and convenience retailing.

Centralised distribution gives chains greater efficiency: one truck delivers most supplier products from one well-positioned depot. This has led, or is leading, to fewer out-of-stock situations. Empty shelves are a retailer’s worst nightmare.

Convenience shopping gives busy consumers either a neighbourhood store on the way home from work or a prepared meal to pop into the microwave. Or both, in the case of Woolworths.

However, a third trend towards private labels has lagged in this country, with the exception of Woolworths. House brands allow supermarkets to increase margins as it is difficult to negotiate lower buying prices with the owners of the country’s, and the world’s, most powerful brands.

Until Woolworths made a go of it, private label was a dirty word for consumers, associated with poor quality. It was possibly only successful among the very poorest in even bleaker economic times than now. Consumers simply did not buy the “you don’t pay for expensive packaging” line.

Woolworths showed that house brands could be taken up-market if the quality is good and they look the part. That may have worked during the consumer boom, but for now it is a tough time in the cycle for the company.

Spar and Pick n Pay are following suit with private label products that are not quite premium but are not as substandard as something out of Soviet retail 101. They have yet to prove themselves.

Shoprite seems to be in a comfortable spot without too many distractions. Could it be the next to up the ante, and offer a decent private label brand that the consumer trusts and yet is affordable during these times of high food prices?