Keeping food retailing fresh: 4 learnings for UK supermarkets from China

By Hannah Rapley, Associate at Prophet

With the retail industry shifting beneath their feet, the UK’s four largest grocers have some bold moves to make in order to maintain relevance with consumers. The results of this year’s Prophet Brand Relevance Index (BRI), which speaks directly to consumers to understand which brands they find indispensable to their lives, sees the downward trend for Tesco, Sainsbury’s, Asda and Waitrose continue. With drifting enthusiasm for British born-and-bred brands, some profound changes need to happen as the stalwarts of old are not even running fast enough to stand still. Those keeping abreast of the retail scene in the East will realise that there, no such issues are being faced. For some years, Alibaba – the Chinese e-commerce titan – has been honing its revolutionary, wave-making concepts and today its futuristic ‘new retail’ model is controlling the Asian tide. Now Hema, Alibaba’s ever-expanding supermarket network, is epitomising its pioneering digitisation strategy in creative and innovative ways. Wildly customer-centric, there’s much for British retailers to learn from the master of ‘online-to-offline’, or O2O retailing, and its whole new experience and business model.

A new kind of superstore

Hema stores think holistically about the consumer journey and consistently anticipate the consumer’s ever-growing needs. Technology is their beating heart: AI tracks consumer trends, robots replenish stock and customers control their entire shopping experience from smartphones. This operational seamlessness is impressive considering Hema’s flexible model of exciting and personalised experiences compared to the once-mundane chore of shopping. You can fish for your own food, watch it get sautéed before you, learn about the intricacies of your produce and have it delivered to your doorstep within 60 minutes. Hema’s multi-functionality and ‘always-on’ customisation have fuelled its success. When we look to the results for Prophet’s Brand Relevance ranking in Asia specifically, we see Hema sitting high in the top 50. Not only is it the leader in its category and the most relevant grocery provider in Asia but it also surpasses its counterparts in the U.S. and the UK too.

The likes of Tesco, Sainsbury’s, Asda and Waitrose simply can’t compare. Whilst the relevance of these players averages at 56%, – Hema is streets ahead with a score of 82%.

There’s no doubt it’s a commoditised industry and customer loyalty is increasingly fickle but for UK supermarkets, the threat materialises in different ways. Similarly to Amazon’s $13.7 billion acquisition of Whole Foods, the risk of a ‘new retail’ outsider acquiring a big UK player is a palpable threat. Conversely, all it takes is a revolutionary incumbent to adopt this model at scale. If the mega mergers between Sainsbury’s and Asda, or Tesco and Booker, do as little as raise a finger in the direction of ‘new retail’, the remaining players in the supermarket sphere are directly endangered. As for now, the aftershocks of ‘new retail’ from the East are felt. If UK supermarkets delay in taking action, they risk being engulfed by the futuristic, more customer-centric retailer.

What can UK supermarkets do?

Quick-wins, in this remit, will not deliver long-term success. Rather, grocery retail in the UK must adopt this philosophy of non-tradition and internalise disruption. Whilst price wars pose a cyclical struggle and consume their focus, these supermarkets lose sight of growing consumer needs that nobody previously thought to satisfy. Why wouldn’t you be tempted by a multi-experiential, all-in-one hub that tailors shopping to your individual preferences? British supermarkets must evolve the experiences they offer. Here’s how:

  1. Break the boundaries

The first step in this journey is to defeat the boundaries between the online and offline. This means digitising in-store shopping so that it becomes an online experience too with customisation at every interface and touchpoint. For example, technology must infiltrate the store in every way possible whether that be through smart screen store navigation, AI that designs meals just for you or the ability to pack a virtual basket. Enhanced technology permits greater customisation in retail and without it, the barriers remain firmly in place.

  1. Cater to a holistic purchase journey

Supermarkets need to create a greater need for their services and in order to do that they must enter the headspace of the consumers and provide timely offers and personalised solutions that go beyond the expected. Recipe push notifications via an app when on the train home, using a smart fridge camera to flag that all the ingredients are there to cook up a tasty beef bourguignon or even a friendly reminder that the milk is about to expire. UK supermarkets satisfy our needs when they come to fruition, but what about the before and after? A more holistic purchase journey is required. This will elevate and integrate the supermarket’s function within our lives; bringing relevance.

  1. Challenge the touchpoints

At each touchpoint of the retail experience there is undoubtedly a degree of friction. From queues at the checkout to seeing they’re out of your favourite ginger biscuits then having to spend a good 15 minutes trying to order them online. Whilst supermarkets do their best to enhance these touchpoints with more straightforward interfaces, they ought to be rigorously challenged.

Supermarkets must go beyond the efforts of minimising ‘time wasted’ by brainstorming how to revolutionise experiences. Not only has Amazon conceived the first grab-and-go, cashier-free store, but they are now developing doorbell technology that allows them to home deliver, even when we’re not there. Here, friction has been neatly overcome.

  1. Generate excitement

You don’t usually associate supermarkets with theatre but – as seen with Hema – a greater integration of digital is beckoning next level novelty. It’s interesting to see that the excitement is sourced from the food itself with new product ranges, on-the-go food education or pay-as-you-dine experiences. UK supermarkets must do the same, especially with the high street decreasing in popularity. As they roam around the store, customers should be inspired by food provenance or recipe ideas appearing on interactive screens. They should be able to sample foods, like at a French market, or curiously watch Chefs create and customise the meals. The banal shopping trip must be a creative and worldly experience, one that UK supermarkets can incarnate in their own way.

Ultimately, the supermarkets of today must be bold in finding new ways to be relevant with an audience that has already moved on. They can flaunt their heritage and stay true to their core brand strategy but must develop a style of shopping that resonates with the consumer. It’s the customer experience that requires a relevance revolution; it’s time for the British retailers to defrost and embrace the East’s winning approach to ‘new retail’.