My report from the conference covers the presentation on Brexit and Beyond – retail change in context, by James Walton of The Institute of Grocery Distribution (IGD)
The research and training charity’s Chief Economist gave a tour-de-force presentation on Brexit and its implications. He started by pointing out that most grocery leaders – like 55% of UK citizens – had no experience of life outside the EU, and that the drivers of the vote for Brexit would still remain, eg hostility to elites, the erosion of prosperity for a significant bulk of the population and a resulting perception of unfairness. European nations faced ongoing challenges that the EU to date had been unable to provide solutions to, including: weak banking sector, low productivity, persistent low growth, geo-political issues such as Syria, sovereign debt and a limited will on behalf of the EU institutions to reform.
Indeed, he suggested that we were facing what he called a 6-D future, involving Debt, De-globalisation, Dogfighting, Disillusionment, Democracy and Disobedience, where the benefits of historical change were fading and the sources of 50 years of growth were drying up as they were ‘one-off’s (ie women’s participation in the labour market, joining the EU in the first place). The grocery business had 8 big issues it needed to address: deflation, food service/ food to go, operating costs, promotions, health, volume, large store traffic and behavioural shifts in terms of customer loyalty. Brexit is another complication in addition to these, with the UK grocery market of course reliant on global connections.
Among the population there is a general lack of trust in business and co-ops can’t assume that shoppers are onside. It was therefore vitally important to align business interests with community interests – which is very good news given our Co-op’s repurposing and our new membership proposition and strategy around community. Some key issues facing shoppers as a result of Brexit and being outside of the ‘EU bubble’ include will include a more competitive labour market, and incomes erosion of income if inflation takes off. This comes after three years of falling prices in food, a period of deflation that has not happened before.
A result of this has been the process of ‘commoditisation’, which is the general tendency for expensive goods to become cheaper. One possible response to this is for suppliers is to seek to de-commoditise the market, by creating products that justify a price premium. A good way of doing this is by driving emotion into purchasing decisions, ie providing a non-price reason to buy. The rise of ‘Food to Go’ is an inspiration here and an effective way of adding value to the basics, in a branding package that makes it aspirational and desirable. The discounters have done well in challenging the supermarkets for shoppers’ affections, bringing products to market cheaply alongside an emotional pitch based on quality, authenticity, service and convenience. Whilst they are gaining ground, there is still plenty of room left for growth in convenience.
Technology presents key opportunities and risks: eg how we access products and the sort of products we buy. A key question will be: how loyal are people to the Co-op?
Stratford-upon-Avon, 3-5th March 2017