Tchibo’s non-food units built into 120 Somerfield stores’ grocery aisles are profiting both parties. Rod Addy examines the mix
When Somerfield announced the roll-out of its Tchibo concessions last October, there were a few raised eyebrows. Was a non-food offering from a German retailer really the right element to introduce to a supermarket chain that, bar concessions with Peacocks and Lloyds, was more grocery focused than most multiples?
The verdict seems to be a qualified yes.
The scale of the Tchibo roll-out certainly surpasses both of those tie-ups. Current figures put the number of Tchibo concessions in Somerfield stores at 120, with a target of 160 stores by the end of April. That compares with 16 Peacocks and six Lloyds offerings and Somerfield is also looking at trialling limited concessions in smaller stores, including independent franchise sites and forecourt outlets.
In most Somerfield outlets, the Tchibo deal consists of a free-standing unit that advertises the concession and draws shoppers in to a fixture built into a food aisle further back, measuring up to 4.8m x 1.2m. This houses virtually the same lines in every store, selected for the UK based on Tchibo’s research on sales trends.
It has looked like a winning formula since September 2003 when trials began in 12 stores. Somerfield says half of all products hitting stores have been bought within a week. Their success vindicates the faith Somerfield chairman John von Spreckelsen placed in the company, but there has been a learning curve, admits Mark Towler, head of third party relations at Somerfield. “Areas such as electrical, gadget, outdoor and gifting all perform very well. However, general clothing and coffee, due to their European influence, need further work.
“In clothing, other Europeans tend to be smaller than people in the UK, so Tchibo hasn’t tended to supply larger sizes.”
In terms of coffee, integral to every Somerfield/Tchibo concession, UK consumers tend to opt for the instant variety, whereas Europeans prefer filter coffee. Consequently, Tchibo has just launched a range of own label instant coffee into stores, alongside its cafetières and coffee-makers.
But perfecting the range has only been part of the struggle. The concession works by rotation, with new themed ranges fed through every week. Old ranges are bumped further down the fixture until they are either sold or returned a month after hitting stores. The churn rate makes the fixture look constantly fresh, but it makes merchandising more work than usual, says Towler: “Most supermarkets work to 12-14 week planograms. We have to change Tchibo displays on a weekly basis.”
The deal could have fallen at the first hurdle had there not been a close working relationship between the two companies. David Haimes, MD of Tchibo Great Britain, says: “Our business development managers visit stores regularly to ensure the relationship is managed. We have a team of 16 staff looking after Tchibo in Somerfield outlets and each store has its own Tchibo specialist, trained by us.”
Somerfield has also been careful to allow Tchibo flexibility with ranging, recognising they are the non-food experts.
The ability to give concession operators free reign as experts is one of the benefits of such a system, says Verdict analyst Gavin Rothwell. “If you’ve got a concession operator, you don’t have to invest in research and development and sourcing.”
Another advantage for Somerfield, says Towler, is that Tchibo’s products are sufficiently different from Somerfield’s non-food offering to generate incremental sales. And for Tchibo, the core advantage in the tie-up remains that it raises its brand’s profile in the UK, where it is still a relative newcomer, despite having 44 stores.
The partnership has proved so successful that Haimes says he would consider similar ventures with other companies. “Our priority is to continue our success with Somerfield, but in the longer term we would like to consider expanding with many partners.”
Somerfield, too, says it would consider further non-food concessions with other parties based on the Tchibo experience.
When Somerfield announced the roll-out of its Tchibo concessions last October, there were a few raised eyebrows. Was a non-food offering from a German retailer really the right element to introduce to a supermarket chain that, bar concessions with Peacocks and Lloyds, was more grocery focused than most multiples?
The verdict seems to be a qualified yes.
The scale of the Tchibo roll-out certainly surpasses both of those tie-ups. Current figures put the number of Tchibo concessions in Somerfield stores at 120, with a target of 160 stores by the end of April. That compares with 16 Peacocks and six Lloyds offerings and Somerfield is also looking at trialling limited concessions in smaller stores, including independent franchise sites and forecourt outlets.
In most Somerfield outlets, the Tchibo deal consists of a free-standing unit that advertises the concession and draws shoppers in to a fixture built into a food aisle further back, measuring up to 4.8m x 1.2m. This houses virtually the same lines in every store, selected for the UK based on Tchibo’s research on sales trends.
It has looked like a winning formula since September 2003 when trials began in 12 stores. Somerfield says half of all products hitting stores have been bought within a week. Their success vindicates the faith Somerfield chairman John von Spreckelsen placed in the company, but there has been a learning curve, admits Mark Towler, head of third party relations at Somerfield. “Areas such as electrical, gadget, outdoor and gifting all perform very well. However, general clothing and coffee, due to their European influence, need further work.
“In clothing, other Europeans tend to be smaller than people in the UK, so Tchibo hasn’t tended to supply larger sizes.”
In terms of coffee, integral to every Somerfield/Tchibo concession, UK consumers tend to opt for the instant variety, whereas Europeans prefer filter coffee. Consequently, Tchibo has just launched a range of own label instant coffee into stores, alongside its cafetières and coffee-makers.
But perfecting the range has only been part of the struggle. The concession works by rotation, with new themed ranges fed through every week. Old ranges are bumped further down the fixture until they are either sold or returned a month after hitting stores. The churn rate makes the fixture look constantly fresh, but it makes merchandising more work than usual, says Towler: “Most supermarkets work to 12-14 week planograms. We have to change Tchibo displays on a weekly basis.”
The deal could have fallen at the first hurdle had there not been a close working relationship between the two companies. David Haimes, MD of Tchibo Great Britain, says: “Our business development managers visit stores regularly to ensure the relationship is managed. We have a team of 16 staff looking after Tchibo in Somerfield outlets and each store has its own Tchibo specialist, trained by us.”
Somerfield has also been careful to allow Tchibo flexibility with ranging, recognising they are the non-food experts.
The ability to give concession operators free reign as experts is one of the benefits of such a system, says Verdict analyst Gavin Rothwell. “If you’ve got a concession operator, you don’t have to invest in research and development and sourcing.”
Another advantage for Somerfield, says Towler, is that Tchibo’s products are sufficiently different from Somerfield’s non-food offering to generate incremental sales. And for Tchibo, the core advantage in the tie-up remains that it raises its brand’s profile in the UK, where it is still a relative newcomer, despite having 44 stores.
The partnership has proved so successful that Haimes says he would consider similar ventures with other companies. “Our priority is to continue our success with Somerfield, but in the longer term we would like to consider expanding with many partners.”
Somerfield, too, says it would consider further non-food concessions with other parties based on the Tchibo experience.
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