To get a taste of what Kwik Save could look like in three years, you need to pay a visit to Sale. It's there, on the high street of this south Manchester suburb, that the discount chain's new management team has decided to open the first of 10 concept stores that they hope will provide a blueprint for the future shape of the business.
Sale is like no other store in the Kwik Save estate. But that's deliberate, says managing director Graham Maguire.
"We wanted to put in an offer that attracts new customers," he explains. "We have very loyal customers. But there are more customers that reject Kwik Save because it is not modern and does not meet their needs in terms of service and value.
"Value is not just about price. Price has never been a problem for Kwik Save. Value is about all the other things such as cleanliness, range, service and availability."
And it's on these sorts of crucial issues that Maguire and his team have been focusing for the past 12 months as they attempt to turn around what is still Britain's biggest discount chain.
Ranges and promotions have been completely re-engineered while prices have been sharpened at the expense of margin so that Kwik Save does again meet customer expectations that it provides the biggest brands at the lowest prices. Availability problems are also being tackled, while the chain's marketing has been made more aggressive and its impact maximised. Stores are benefiting from a makeover programme of £80,000 refits as well as new IT infrastructure and EPoS that goes some way towards making up for a lack of investment in recent years. Behind the scenes, more effort is being spent on training staff, improving their conditions of employment and generally raising morale among the 20,000 people employed by Kwik Save. This, in turn, is feeding through into stores in better customer service.
A lot has been achieved and the latest trading figures from Kwik Save are encouraging. First half like-for-like sales were up 3.5% in the six months to November 10 and up 6.2% in the 300 or so stores to have undergone a makeover. The picture is mixed, with Q1 like-for-likes ahead 4% and Q2 ahead 2.3%. But at least they are moving in the right direction. "We have stopped the slide and lifted our nose," says Maguire.
Nevertheless, he warns much remains to be done: "Our team has been here for less than a year. You don't achieve miracles in that time. We have built on the platform that was already there and have adapted it and changed it."
But he adds: "You must remember that Kwik Save was holed below the water line."
It's true that Kwik Save was in trouble even before the merger with Somerfield in 1998. And thereafter its decline became near terminal as the new owners first tried to rebrand and reformat stores under the Somerfield fascia while generally ignoring Kwik Save, and then tried to sell off the business to anybody who would have it.
Unfortunately, nobody wanted it. And that only added to the gloom surrounding the business.
The arrival of self-confessed Kwik Save fan John von Spreckelsen as chairman of Somerfield and Alan Smith as chief executive last year marked the start of a new chapter in the story of the 36-year-old discount business. Soon after they were appointed, the two men told the City that Kwik Save would be retained even though investors, analysts and the media had written off the business.
At the first Kwik Save managers' conference in North Wales in October of this year, von Spreckelsen revealed that he had made it a condition for accepting the job that Somerfield retained its troublesome discount arm. And he had another surprise for the 1,000 managers gathered in Hafan Y Mor holiday camp. "In 1996 I tried a reverse takeover of Kwik Save," von Spreckelsen told them.
Back then, von Spreckelsen and his team concluded that Kwik Save needed to sharpen its prices and ranging, strengthen relationships with the retail partners who ran the produce and meat concessions in its stores, and invest in the store base. "The conclusions we made in 1996 are still valid today. And it's not too late. They are being implemented," von Spreckelsen said. "For the first time in six years Kwik Save has returned to sustainable growth and the growth is now at quite respectable levels. I would expect it to accelerate rather than stay steady. I am convinced this company can be returned to a very proud and solid business."
Other Kwik Save executives speaking at the two-day conference were equally confident. And if longserving managers had attended the conference thinking "here we go again" as many of them must have done there was little sign of that kind of thinking by the end. If anything, it appeared that morale among the Kwik Save troops was riding high.
"Our stores are better and our staff happier. And it shows," Maguire said at the conference. "More important, customers can see a difference and because of this we are in a growth phase."
But he added: "We need to get on with addressing the way Kwik Save deals with customers. Recreating the past is not an option. We have to create and deliver a different offer. We have to move quality and do so with pace because we need to catch up and pass the opposition because our competitors are going to continue trying to capture our customers. Our challenge is to change the way that Britain thinks about Kwik Save."
Fast forward two months. Maguire is seated with his colleagues in the training room above the Sale concept store. It's been open for just two hours, and the head office team is giving retail colleagues and store staff some first impressions of the way the concept has been executed. As the discussions inevitably focus on the retail detail of whether a particular element works or doesn't, Maguire reminds everyone of the bigger picture. Kwik Save, he says, needs to make a major step change in the way it does business, and Sale is a major move towards achieving that ambition.
"I don't want anyone to think this is the [finished article] because it's not," he says after the meeting. "This is the skeleton of the concept; it's a platform on which this and other stores can take the concept forward."
In other words, Sale is one vision of how the Kwik Save of 2004 could look. Maguire explains that the Kwik Save stores of today will be improved gradually over the next three years through a series of iterations that will turn it into a chain of quality supermarkets offering real value for customers. At the same time, the concept stores will allow it to take more dramatic leaps forward and then roll back the learnings into the rest of the estate.
However, he stresses that as a company in recovery mode it cannot afford to throw huge sums of money at the concept stores. "We have set a pretty tight design concept that we can replicate in our current store model. We will not get to the stage where we say we cannot afford to synthesise what is in these stores into the rest of our stores. This is affordable; it's not expensive."
Even though it's cheap by retail standards, the concept is still radically different.
One of the things that hits anybody walking into the Sale store for the first time is the focus placed on the fresh foods provided by concessionaires Perkins Produce and Pete Dewick's (the latter providing meat and Cuisine de France bake-off bread as well as running the butcher and deli counters). This area at the front takes up about one third of the space in the 7,400 sq ft store and provides plenty of theatre, having been designed to look and feel like a continental market with strong displays of product, awnings over key features and bright colours (including a terracota coloured ceiling).
The store is bright and welcoming throughout not just in the market area. Windows at the front are not masked with stickers and clutter but left clear so people can see in and natural light can get through too. A customer service desk by the front entrance is another pleasant surprise, as is the upbeat Kwik Save FM instore radio and the way product is actually merchandised in the body of the store.
Kwik Save's core biggest brands, lowest prices' message is communicated, but in a much more subtle way. And everything combines to create the feeling this is a quality high street supermarket still with a strong price message, but as far removed from the pile it high and sell it cheap' mentality as you can get.
But therein lies the rub. Surely all this fancy stuff will put off traditional Kwik Save customers?
That's not the way Maguire sees it. He believes that so long as the chain builds on its price heritage and is effective in marketing that position it can bring traditional customers with it. At the same time, he argues, if it can raise standards and expectations, Kwik Save can attract a whole new generation to its stores.
"We are about creating customer value," he insists again. "We are a brand-building team."
It's a bold plan. But Maguire and his team are right to develop a strategy that is about more than simply repairing the damage of the past. The ability of the multiples to attract price-conscious shoppers means there is no going back for Kwik Save. The chain has to recreate a point of difference to avoid being caught in no man's land squeezed by the big multiples on one side and the hard discounters on the other. And if price-conscious shoppers of every demographic profile are comfortable with the idea of finding attractive deals in, say, a modern Asda or Tesco, why not in an equally modern Kwik Save?
The discounter argues that it has other things going for it too. For starters, the big brands, low prices message tends to appeal to shoppers in its target group. In addition, Kwik Save stores are ideally located for consumers who don't own cars and who tend to shop on a regular basis to help them meet tight budgets. And, of course, despite all the upheavals of recent years, consumers still know what Kwik Save stands for and this high level of brand recognition will be reinforced next year when the chain hopes to make a return to TV advertising.
That Kwik Save is turning a corner is not in doubt. Neither is the fact that building on these early signs of recovery to regain market share will be really tough. The latest Retailer Share Track data from Taylor Nelson Sofres for the 12 months to November 11, for instance, shows Kwik Save's share of the grocery market is down from 2.8% to 2.4% year-on-year. But, having started to tackle the things that were driving customers into the arms of its rivals, Kwik Save's management team is confident it can now start generating real growth in the business. More than that, Kwik Save clearly knows where it is heading. And, for the first time in many years, it isn't heading for the scrapheap. n
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