Even when Waitrose is asking you for money, it asks you nicely, say the chain’s suppliers. It’s a cliché, but Waitrose is a nice company to do business with.
To a certain extent, it can afford to be, concedes boss Steven Esom, who is currently on a round of interviews trying to convince people that Waitrose can cut it north of Watford Gap following the acquisition of a tranche of Safeway stores outside its southern heartland.
“We have 3% of the grocery market,” he says. “When you are buying the amount of milk that we do, for example, you do know exactly where it’s coming from. When you are a £33bn business [like Tesco], it’s not quite so easy.”
Moreover, with a customer base comprising predominantly ABC1s and a clear USP as a quality food retailer, Waitrose is not under the same sort of pressure as Tesco and Asda to get the best price at all costs, he says.
“We don’t have to devote acres of floor space to low margin soft drinks and crisps - that’s not why people shop with us.” Unlike another one of its larger rivals, he adds with a smile, Waitrose knows exactly where it fits into the market.
“We appeal to people that have an appreciation of good food. That’s not necessarily about social class, although I know there are swathes of people for whom price has to be an overwhelming imperative.
“We appeal to customers with older children, where they have time to cook, and to young professionals.
“We also do well in towns surrounded by villages and areas where people have an understanding of farming because we are very close to British farmers.”
The chain’s star is certainly in the ascendant at the moment. Business at the chain is booming, with like-for-like sales topping 5%, an extremely positive media profile and a passport to the north of England finally secured after picking up 19 stores from Morrisons earlier this year.
Moreover, with the debate about spiralling obesity and concerns about the power wielded by the major supermarket chains gathering pace, Waitrose’s partnership structure, focus on quality food and commitment to small suppliers are earning it brownie points all round.
Sites are increasingly hard to come by, admits Esom, but Waitrose aims for at least 220-230 stores in the next five to eight years, and is likely to double in size over the next decade. The new stores take it up to 163.
Debating whether Waitrose will succeed in the north is missing the point, he says. “The north versus south debate is an irrelevance. There are people all over the country that love food and would appreciate what we are trying to do.”
Indeed, as a CACI analysis of the stores that Waitrose has just snapped up reveals, those furthest north such as Harrogate, Willerby and Otley have a closer fit to the typical demographic profile of the Waitrose shopper than stores acquired in the south, such as those in Dartford and Worthing (The Grocer, April 3, p4).
Scotland is also fertile ground, although there are plenty of sites within Waitrose’s current trading area that are higher on the priority list at the moment, says Esom. “It’s more about logistics than anything else. There are places in Edinburgh and Glasgow where we would love to trade, but there’s no commercial sense in sending a truck way up to Scotland for one store when we can infill with new stores in the areas where we already have an infrastructure.”
As for the size of stores that Waitrose can trade successfully from, Esom is extremely clear about what works and what doesn’t. “We are food specialists. Serveover counters are what we do best. The economics of our model probably wouldn’t work in stores smaller than 8,000 sq ft.”
Likewise, stores larger than 35,000 sq ft are probably too large for Waitrose, and the partnership would look at whether a Food & Home format, with a 50:50 food/non-food offer, was more appropriate if a very large store came up for grabs, says Esom.
Food retailers trying to trade from stores in the 40-45,000 sq ft bracket are in no-man’s land, he claims. “It’s too small for a credible non-food offer, but too big for food. If you are going to do non-food, you have to do it properly, and devote the space to it - as Tesco and Asda have done in their Extra and Supercentre formats, or do a 50:50 food/ non-food offer as we have in the Food & Home format. It’s so hard to get a return if you don’t get it right.”
As the market continues to consolidate and to polarise, with food-led general merchandisers at one end of the spectrum and quality food specialists at the other, Waitrose is well placed to grow its market share, says Esom. “Some people used to say we were hiding our light under a bushel. Probably more like down a mine. Not any more. People increasingly want to know what you stand for,” he explains.
“People express their hopes and desires and values in different ways, and increasingly through where they shop. Our time has come really. We were profit sharing before share options were even heard of. We work with our people, our staff and our suppliers in a different way,” he adds.
“If people ask me whether Waitrose is a value retailer,” Esom concludes, “I say Waitrose is a retailer with values.”
Waitrose is no stranger to major conversion programmes, having converted 11 Somerfield stores in 2000 in as many weeks. However, its latest acquisition - 18 Safeway stores and one Morrisons store, is in a league of its own, boosting selling space by 20% and bringing with it 3,500 new staff.
The pace of the conversion programme - dubbed Project Toronto - will be ferocious, says director of selling and marketing Mark Price. “We’re aiming for one a week, taking us up to December.” Until then, pretty much everything else is on hold, including the ongoing store refurbishment programme.
The first Safeway conversion, in Sandbach, Cheshire, has 30% more lines than the store it replaced, says Price. “This puts pressure on the supply chain, but if you can keep availability up, you get a real margin benefit.”
Chilled capacity has doubled, serveover counters have been brought in, and more space has been devoted to fresh fruit and veg and wines.
However, the biggest challenge will be to integrate 3,500 new employees, says Price. This will also put pressure on the rest of the business as staff are seconded out of Waitrose stores and head office to help manage the transition.
When it comes to availability, retailers could all learn a lesson or two from Sir Ken Morrison, says Esom.
“People are constantly overcomplicating retailing. There is no substitute for good store discipline.”
Waitrose’s on-shelf availability is “at least a couple of points higher” than its rivals, he claims. “We’re not below 97% on-shelf.”
Although Waitrose has reaped the benefits of new information and ordering systems, technology is only a facilitator, insists Esom. “The secret to good availability is establishing a routine and sticking to it. For example, at 4pm, making everyone stop what they are doing and cover the shop, checking for gaps so that we are OK for evening trade.”
Waitrose has also slashed lead times on fresh over the last year, which has made a huge difference in terms of stockholding, accuracy and wastage, he adds.