Retail surgery: The grocers are expanding their non-food ranges and eating into our market share. How can we compete with them?

The short answer focuses more on what you shouldn’t do. AlixPartners director Dan Murphy points out that when grocers move into non-food categories they generally focus on high volume lines at unbeatable prices.

As most specialists can’t compete against these prices, they should avoid trying to tackle the grocers head on and instead focus on what differentiates them - service, knowledge, width of range, back catalogue, environment, and so on.

Murphy highlights Threshers as an example of a retailer that thought it had to compete on price. In the end, its margin model simply could not sustain the downward pressure on retail pricing and promotions.

He explains: “Customers certainly do their main weekly shop from the supermarket, but for weekly infill purchases or distress occasions, like the odd mid-week bottle of wine, they would go to their local Threshers. This was not a price-based purchase, but Threshers failed to leverage this properly.”

Murphy adds there are plenty of examples of retailers out there that charge more but succeed, focusing on personal relationships, product knowledge and service.

He says another example of this is in footwear, where the traditional specialist space is increasingly being eaten into by the general fashion retailers, discounters and grocers.

In contrast, Murphy says in Germany successful specialist footwear retailers offer very high quality products and are unapologetic about the higher prices they charge.