20/CENT Mood I don’t smell blood
The news came and created a tsunami of reactions: Delhaize intends to convert all of its 128 own-managed supermarkets into independent stores. It is clear that this decision is creating uncertainty and emotion among the Lion's staff. But does this mean that the King of the Jungle is dead? Is this a desperate act? Certainly not. Here is My 20/CENT.
A logical decision
On closer inspection, there are already 636 stores in the group that are operated by independents. The market share and results of these franchisees are growing, while the profitability of the directly operated stores is declining. So, there is a decision to be made for the future given the current environment. Franchising is the logical option.
First, consumers like franchisees. These independents are flexible, they have longer opening hours, sometimes even on Sunday. They make that little extra effort because they know it's "their" business. And this effort is also reflected in a customer satisfaction rate that is often higher than that of stores under company management.
It is also important to remember that the Belgian market is full of different formulas and the competition is tough. The new players that showed up in recent years are developing through franchising and use logistical structures where costs are lower. Yes, I'm referring to Ahold, Jumbo... these stores that are delivered directly from abroad because the labor is cheaper there and get a competitive advantage over Belgian retailers. Thanks to our different governments.
Anyway, just remember that converting an unprofitable formula into a more flexible and agile one is a logical move.
A surprise? NO!
Is it really a sudden change? Certainly not. It has been said for years that commerce is changing. Many specialists speak of rupture, of breaking codes, of demanding and fickle consumers jumping between the different channels. In short, we are seeing movement and we will continue to notice disruption. Makro has already fallen, and other chains are trembling. Again, this logical decision is not a spur of the moment decree. Anyone who is surprised is simply incredulous or refuses to see the changes in the sector.
The end? NO!
Even though Delhaize assures that point-of-sale employees will keep their jobs, there is still mention in the plans of a gradual reduction of positions within the central office. Uncertainty is therefore on the mind and this is understandable. But announcing the death of Delhaize is going too far.
First of all, change is entirely possible. Own-operated stores already have managers or department heads who do that extra bit for their category and their store. I can give you several examples of company operated supermarkets where the staff already has a customer-oriented and more entrepreneurial mindset. Take a look at the wine department in Genval, or the fruit and vegetable department in Grimbergen, to name but a few examples. The announced change simply marks a need to be more efficient in the structure of the group, but is a change totally possible for the stores currently under own management.
Secondly, I do not believe in the disappearance of the lion in Belgium and a scenario similar to that of GB which was swallowed by Carrefour in the past. The retail of the future must not only be efficient. It must also be able to play on different levels, such as sustainability, health and pleasure. Albert Heijn can demonstrate logistical efficiency, lower costs thanks to its presence only in franchising in Belgium. But Delhaize is a few steps ahead of its partner with a stronger positioning and plans and commitments on current (and future) food trends. Just think about the Lion's Footprint plan, think about the group’s quality image, think Nutriscore-related promotions... Albert Heijncan dance on his head, the dutch retailer is behind and lacks a clear positioning in Belgium while still not having set foot in Brussels or across the language border. Replacing the name Delhaize with Albert Heijn would therefore be a serious strategic mistake. It would simply be smarter for both partners to learn from each other. And it’s about time.
My 20/CENT in a nutshell
To be clear, I don't smell blood like other doomsday experts. Rather, I see a bold move in the chess game that the various retail companies in Belgium are playing. One move to position themselves, another to test, another move to make themselves more efficient and protect their future... So? Whose turn is it next?
DelhaizeAlbert HeijnAhold20cent Mood My 20/cent