Waitrose plays the premium card

Related tags Retailing Tesco Asda

Waitrose is not the cheapest food retailer in the UK, nor does it
offer the largest range of services. But it does claim to have the
best quality and service levels in the industry - a focus on the
premium end of the market which continues to pay dividends for the
employee-owned group, writes Chris Jones.

Waitrose last week reported sales growth of 12 per cent in 2003 to £2.7 billion, with like-for-like sales growth of around 5 per cent, one of the highest in the food retail sector (in comparison, Tesco's like-for-like growth is around 6-7 per cent, while Sainsbury's is nearer 1 per cent), figures which clearly show that the company premium proposition continues to work well in a UK market where price is becoming an ever-important factor.

"Good food costs what it costs,"​ Waitrose spokesman Christian Cull told FoodandDrinkEurope.com​. "People understand what we are about, and that comes from our clear strategy of being second to none on product quality. As long as we maintain that product quality, price becomes less of an issue."

But quality is not just about products, it is also about service levels, and this is where Waitrose's unique ownership structure comes into its own. Like its parent company, the John Lewis Partnership, Waitrose is owned not be shareholders or investors but by its employees, who share the profits at the end of the year.

"Waitrose shoppers know that they will get a better quality of service from our staff - or partners as we call them - because they understand that they essentially own the business,"​ said Cull.

"It is all about the perception of price. Yes, we don't compete on price the same way as our rivals do, and we are not the cheapest retailer around. But we are certainly cheaper than Safeway, and than Sainsbury, and our customer base is the most loyal in the UK."​All of which helps Waitrose more than hold its own in a sector increasingly dominated by four major groups with huge buying power and extensive store portfolios. Waitrose has just 144 stores in the UK, almost all of which are around 25,000 square feet and in High Street locations - a business plan which is the virtual opposite of that used by most of its rivals.

"We are proud to be High Street retailers, we want to be part of the community that we serve, not destroy like out-of-town retail developments are so often accused of doing,"​ said Cull. "Certainly, being on the High Street means that we get a relatively high level of 'top-up' shoppers compared to other retailers, but there are also a large number of people who do all their shopping with us. The average spend per basket is now £18.50, but we have shoppers who can spend up to £250 a time."

Cull said that the focus on food was key to the success of Waitrose's High Street store - "If people want to buy a TV, they don't go to their supermarket to do so because they know that they won't get the same quality of service as they would from a specialist"​ - but stressed that Waitrose had nonetheless benefited from non-food sales at the new Food & Home stores.

While other supermarket groups such as Asda and Tesco have moved into non-food by adding ranges to their traditional stores, Waitrose has taken advantage of its links with the John Lewis department store group to build new stores combing the two different store formats. But unlike Marks and Spencer, whose food courts sit side-by side with the clothing and home departments, Waitrose's food offer is completely separate.

"There are a lot of synergies between John Lewis and Waitrose,"​ said Cull. "There is a significant level of cross over between our customer bases and that is what the Food & Home stores are designed to tap. But we still want to cater for the large number of consumers who just want to do their food shopping, or are just looking for a new sofa or stereo system, so the two stores are kept completely separate. In Canary Wharf, 45,000 of the 70,000 square feet is Waitrose."

These Food & Home stores might be much bigger than the average Waitrose, but they still aim to fill the same community need. "One thing we found was that there was no where in Canary Wharf which sold stationary, so we added that to our range there. This store also has a high proportion of what we call 'boys toys' - upmarket electrical goods - to cater for the local community. The Cheltenham store, meanwhile, is the biggest toy retailer in the town."

The success of this format is likely to see it extended to other locations in the future, but on the whole Waitrose's expansion plans are relatively unambitious. "We have 144 stores at the moment and have a five-year plan to increase this to around 180,"​ said Cull. "Our stores go as far north as Newark [north Nottinghamshire], and while we have nothing against going farther north, we see no need to do so unless there is a logical reason for doing so.

"Our strength is in the depth of what we offer, not our geographical coverage, and though we watch the other players in the market like hawks, we don't necessarily feel the need to follow them in everything they do, not least expanding for the sake of it."

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