Napoleon might have uncharitably dubbed Jersey a pustule on Albion's backside', but when it comes to food retailing, the nation of shopkeepers could learn a thing or two from the grocers on the Channel Islands. Indeed, when Sainsbury was looking to develop a new small store format in the late 1990s, Jersey was the first port of call. The top brass were so impressed by the local co-op's Fresh Food Locale' stores, they shipped the Sainsbury's Local team across the Channel to get some inspiration. With average sales per square foot of £20, compared with local rival Le Riche Group's £12 and Safeway's £17 national average, the Channel Islands Co-operative Society was more than qualified to offer some friendly advice. When work was completed on its new 30,000 sq ft Grand Marché superstore in St Helier, Jersey ­ a "completely new concept in food retail" ­ retail manager Jim Hopley was expecting other UK food retailers to arrive in their droves. The store is the latest in a series of major retail developments on the islands as the big boys ­ Le Riche, Safeway and the co-op ­ stake their claims on spare floor space before the market reaches saturation point and new stores merely cannibalise existing sales. The next stage, which has begun in earnest, is refurbishment to defend market share and squeeze as many sales as possible from existing space as opportunities to expand dwindle. Most believe that the last significant development to gain approval from island authorities will probably be the co-op's site at the Bridge in Guernsey due to open in 2005/6. By then, key players, except Safeway, will operate a large store and a series of smaller stores on each island. If this polarisation process began on the mainland a decade ago, it is only just beginning on the Channel Islands, where the hypermarket is still a relatively new concept. In fact, shoppers at Le Riche Group's new 52,000sq ft Checkers superstore in Admiral Park, Guernsey, still wander round the store ­ vast by Channel Islands standards ­ with baskets rather than trolleys, and visit several times a week. Safeway, with a 27,000 sq ft superstore on Guernsey and a 14,500sq ft supermarket in Jersey, had the largest stores on the islands until this year. "Until now," stated the October issue of the chain's in-house magazine, "we've had a monopoly as the only superstore in Guernsey. But a rival is opening up in the form of a 52,000 sq ft Checkers, almost double the size of our own. Forewarned is forearmed and our team plan to fight them all the way." A week after Checkers opened, all sides were claiming victory. Safeway and the co-op insisted the immense new store had barely touched their takings, and Le Riche was adamant sales at its other stores on the island hadn't felt the pain. Unless sales had nosedived at Guernsey's independent stores, it is safe to assume that at least one of the big boys was telling a few fibs. Given that there are only 65,000 inhabitants in Guernsey and 87,000 in Jersey and a handful of retailers competing for their custom, rivalry is intense, though good natured. The co-op's Hopley says: "If Checkers had 30,000 customers on the first day ­ as claimed by Le Riche ­ they must have been bussing them in from France." Raymond Shead, a wine specialist who sources cheeses and wines from Continental Europe for several retailers on the islands, says dirty tricks and tactical marketing are standard, but things rarely get nasty because the industry is so incestuous there's nowhere to hide if someone oversteps the mark. He says that although the opening of two large new stores ­ Checkers and Grand Marché ­ has stirred things up, the pricing environment on the islands is relatively benign compared to the margin-eroding madness on the mainland. While there is a broad cross section of consumers on both islands, there is plenty of money around, and a large contingent of what he describes as "Waitrose-type shoppers", with large disposable incomes and a penchant for olives and sushi. In addition, earnings in the financial sector ­ a major employer ­ are "stratospheric" says Shead. Although Safeway and the co-op offer own label products, branded penetration is far higher than on the mainland. While Le Riche Group sources many goods from Nisa central distribution, it has also developed a successful relationship with Waitrose and Iceland to supply it with selected chilled, frozen and ambient lines, especially ready meals. Remaining products are sourced locally or directly from the continent. While all parties say their prices are keen, Le Riche Group's pricing strategy is more understated than competitors. Kevin Keen, md of Le Riche's Stores, says the promotional strategy is "more Sainsbury than Safeway...all Safeway has to talk about is price". In the first week of trading at the new Checkers in Guernsey, promotions on gondola ends were still well stocked on the Saturday ­ the busiest day ­ while the ducks and quails eggs further down the aisles were "flying off the shelves" says Andrew Bagot, Le Riche's head of retail operations. "That only goes to show there are more important things to our customers than price." And with like-for-like sales up 8% for the half-year ending October 6, the figures speak for themselves. Managers at the nearby Safeway are not convinced. Deputy md Paul Robertson says: "We have to cater for all sections of the community and our pricing strategy does that. We are by far the cheapest store on the island. We don't have to deal with middlemen for everything as Le Riche does. Own label also gives us a competitive advantage." Conversely, the co-op claims its unique loyalty scheme, which offers members a double dividend of 8% on purchases on a Tuesday and Wednesday, makes it "easily the cheapest operator in the Channel Islands". All sides agree the islands have a large quota of affluent customers. For a start, there is a two-tier housing market. On the the open market ­ the only one available to outsiders' ­ homes are prohibitively expensive.To all intents and purposes this bars all but the well off, or those who hitch up with a local, from moving to the islands. The second is the local' market for existing residents where prices are considerably cheaper. Entry systems are baffling to outsiders, and barely more comprehensible to some residents. Guernsey Checkers store manager David Evans, recruited from Sainsbury on the mainland, has a licence to stay for two years. After that he has to demonstrate that he is indispensable to the business ­ or board the first ferry back. As a result, retailers are keen to train islanders to take senior management roles. A far greater challenge, however, is recruitment and retention of shopfloor staff. Unemployment is virtually nil and wages are 25% higher than on the mainland. "There are probably about 45 unemployed people on Guernsey," Evans says. "And many of those are unemployable." Jobhunters, meanwhile, are laughing all the way to the bank, wooed by generous employment packages, good staff canteens, profit sharing, training and hefty staff discounts. The co-op's Hopley says: "Everyone is suffering from wage inflation. It's the biggest challenge in terms of margins." He says terse calls were exchanged between the big three over claims of poaching top staff to fill new stores, and there are anxious moments when competitors advertise for staff to fill new stores. Distribution also poses particular problems for Channel Islands retailers positioned on the other side of the most expensive stretch of water in the world, says Hopley. Transportation costs are so high that local sourcing on the islands is less a gimmick than a necessity. Safeway gets daily deliveries to each store from a regional distribution centre in Aylesford, Kent. Produce is sourced locally where possible, and there is also a long standing relationship with an ice cream manufacturer on the tiny island of Sark. The co-op has warehouses on both islands catering for ambient and selected chilled products plus distribution agreements with local firms for frozen and shorter life dairy goods. Le Riche Group's Keen admits the logistical side of the business could be more sophisticated and a major review of ordering and distribution has begun. A key step has been outsourcing wines and spirits distribution to a warehouse run by a third party in Portsmouth, from which store deliveries are picked each day. "This motivated us to look at other opportunities to simplify our processes," says Keen. One option being explored is consolidating fresh and chilled deliveries to a warehouse in the UK and introducing sales-based ordering. Surprisingly, given the islands' history of shuttling back and forth under French and British control, there is no significant French influence in terms of product ranging, although the cheese and wine departments are more comprehensive than those on the mainland. Signage in the new Checkers is subtitled in patois French, but staff admit this is more a marketing stunt. More significant in terms of product ranging is the large Portuguese contingent on the islands. Estimates range from between 5,000 and 10,000 Portuguese on Jersey and between 2,000 and 5,000 on Guernsey. All retailers cater for them and the pungent aroma of the Portuguese national dish, salted cod, is never far away, along with more exotic specialities. Literature for retail staff is in both languages. Le Riche Group and the co-op claim to have drawn inspiration from Continental retailers, especially Ahold, when building new stores or refurbishing. Checkers is big on instore theatre, with wide, roomy aisles and customer services such as internet kiosks, free ice, Sky news on plasma screens and a superb instore restaurant. It has also recruited the head chef at the island's Royal Hotel to display his skills to customers in an instore kitchen. The co-op's new Grand Marché superstore in Jersey is built in the round, with shelves spreading from a central atrium, a strong hot food offer, large fresh produce and deli counters, an extensive Portuguese range, a Treasure Island area, car valeting service, post office and pharmacy. Duty on tobacco and alcohol is a fraction of that on the mainland and wine sales in particular are traditionally buoyant, says Checkers manager David Evans. Each island has its own parliament, licensing laws, taxation and the status of a peculiar' of the Crown in that it owes allegiance to the sovereign rather than the government of Britain. Stores in Guernsey can't sell petrol or alcohol on Sunday and stores in Jersey are barred from selling a range of items, from cut flowers to candles. Hopley admits: "The logic totally escapes me." Checkers' David Evans recalls having to call the local constable to get permission to cook rotisserie chickens in his new store, while an 18th century law forced him to apply to the island's Royal Court for a licence for the ovens in his instore bakery. However, the suggestion that Jersey and Guernsey are islands that time forgot is robustly dismissed by its retailers. "We might be out in the sticks," says Hopley, "but we are building new concepts in food retailing." He scoffs at the UK multiples' posturing over loyalty: "We've been doing this for years." The double-divi is the "supreme weapon" in the co-op's armoury and even competitors concede it has them on the run mid-week. A walk along the main street in St Helier is enough to dispel any illusion that convenience retailers are somehow behind counterparts on the mainland. When Channel Islands Wholesale Group (CIWG) md and former Le Riche director Nigel Robson teamed up with James Taylor in 1993 to take over the Spar franchise for the islands, its independent stores did not match up to convenience stores by modern standards, says Hopley. Just under a decade later, the Spar stores in Jersey deliver some of the best returns among the membership, with a roaring trade from food to go, wall to wall chillers and a thriving customer base of wealthy office workers in nearby banks and financial centres buying sandwiches, beer and chilled convenience foods. CIWG runs eight company-owned stores and subfranchises the Spar name to Channel Islands News, which is moving from CTN to full convenience. It also supplies about 150 independent retailers on the island, offering merchandising and promotional support. A move into Guernsey is scheduled for next year with discussions underway for a distribution facility on the island, says Robson, who is unfazed by the arrival of the new Checkers and Grand Marché stores: "We're in a different market. The retail scene here is polarising between hypermarkets and convenience and those in the no-man's land in between will lose out. Our business is growing and we are becoming a force to be reckoned with." So what does the future hold? If this year has been one of expansion, the coming years will be ones of retrenchment to defend market share. Safeway is overhauling both stores to the Woking format; Le Riche is rebuilding its site at St Brelade and the co-op is refurbishing its estate and building new formats. The only certainty is that store standards in these pustules on England's backside will continue to improve as market leaders fight to keep their slice of the action. n {{COVER FEATURE }}