SWL's Retail Radar - 20/03/24

Retail Radar, from SWL, provides you with a snapshot of the latest retail news from the UK and around the globe. These narratives highlight key events, emerging trends, and notable advancements, providing a deep dive into the dynamic retail landscape.

Declining food and dining expenses contribute to the decrease in UK inflation

February saw a notable dip in UK inflation, dropping to 3.4% from January’s 4%, edging closer to the Bank’s desired target of 2%. This decline signifies a deceleration in the pace of cost-of-living increases, marking the slowest rise since September 2021, when it stood at 3.1%.

Inflation, reflecting the rate of price escalation over time, has been on a downward trajectory since reaching its peak of 11.1% in October 2022, the highest in four decades. The Office for National Statistics (ONS) attributes the primary reason for this decline to a slowdown in food price inflation.

However, it’s crucial to note that prices aren’t plummeting; rather, they are ascending at a reduced rate compared to previous periods. While sectors like food, non-alcoholic beverages, restaurants, and cafes witnessed the most significant deceleration in price hikes, other areas such as alcohol and tobacco, as well as clothing and footwear, also experienced a slowdown, according to the latest ONS data.

Romania’s La Cocoș expands to Brașov and has plans to open five more stores

La Cocos , the Romanian hypermarket chain, makes its Brașov debut, marking its fourth nationwide location. Spanning 10,000 square meters within the Brintex-Brașov shopping complex, this new venture secured through Cushman & Wakefield Echinox promises to invigorate the retail landscape.

The revamped Brintex complex, home to over 200 stores, experiences a surge in foot traffic, currently boasting 5,000 daily visitors. La Cocoș’s arrival adds to the diversity of offerings and is poised to significantly enhance footfall.

With sights set on expansion, La Cocoș aims to establish five more stores across Romania by 2025. In a testament to its success, the retailer made history last year by becoming Romania’s first independent retailer to achieve RON 1 billion (€200 million) in sales, driven by its thriving hypermarkets in Ploiești and Bucharest.

The UK’s food-to-go market is projected to exceed its pre-pandemic value in the current year

The UK’s food-to-go market is on track to hit a staggering £23 billion in 2024, surpassing its pre-pandemic levels. Lumina Intelligence’s research forecasts a 3.5% year-on-year increase, indicating a remarkable “resurgence” in consumer demand following the challenges of 2023. This growth is expected to outstrip both the overall eating out market and inflation rates.

A key driver behind this expansion is the projected net space growth, with an estimated uptick of 0.7% to reach a total of 152,783 outlets. Diverse formats like travel hubs, drive-thrus, and kiosk-style services are catering to varied consumer preferences and lifestyles, fuelling this growth.

Despite facing obstacles such as rising living costs and shifts in consumer behaviour due to hybrid work arrangements and financial pressures, convenience store grab-and-go segments have experienced notable growth compared to pre-pandemic times. Strategic investment in product variety and value propositions has played a pivotal role in driving this resurgence.

Additionally, there is a notable trend towards healthier eating, with new product developments aligning with demands for enhanced health benefits and premium quality. Vegan, high-protein, and high-fibre products are witnessing increased demand, alongside innovations targeting gut health and immune system support, reflecting evolving consumer preferences in 2024.

Vodafone concludes its restructuring efforts with an €8 billion deal in Italy and announces a buyback plan

Vodafone seals an €8 billion ($8.7 billion) agreement to offload its Italian arm to Swisscom AG, marking the culmination of a lengthy divestment endeavour and heralding potential disruption in the fiercely contested Italian telecommunications arena.

Swisscom will merge Vodafone Italia with its Fastweb SpA subsidiary, with the transaction anticipated to conclude in the first quarter of 2025, as confirmed by both companies in a statement on Friday, corroborating an earlier Bloomberg report.

Under the leadership of CEO Margherita Della Valle , who formally took the reins last year, Vodafone has divested underperforming markets and streamlined its extensive empire, which once spanned from the US to Africa. European telecom carriers have grappled with stiff competition and stringent regulation in recent years, impacting returns and prompting increased deal activity.

In conjunction with the recent sale of Vodafone’s Spanish unit, the company anticipates receiving approximately €12 billion in cash and intends to allocate €4 billion toward stock buybacks. Additionally, Vodafone disclosed plans to halve its dividend to 4.5 cents per share starting in fiscal 2025.

Home Depot plans to launch four additional distribution centres in the upcoming year

The Home Depot , the leading home improvement retailer in the US, is gearing up to elevate its services for professional clientele by unveiling four new distribution hubs across North America in 2024.

Strategically positioned in Detroit, southern Los Angeles, San Antonio, and Toronto, these facilities are pivotal to Home Depot’s mission of accommodating both conventional in-store professional customers and those overseeing substantial projects.

Equipped to handle large and bulky items essential to builders and contractors, such as insulation, lumber, and roofing shingles, these centres aim to streamline procurement processes for professionals. With the option to order job lot quantities, professionals can conveniently secure bulk products with direct delivery to their job sites.

Scheduled for launch in the first half of 2024, these distribution centres signify Home Depot’s commitment to enhancing support for its professional customer base.

IKEA has announced a $327m investment in South Korea

IKEA , the renowned Swedish furniture giant, is poised to invest €300 million ($327 million) into South Korea by 2026, signalling a strategic move to fortify its foothold in the market. According to Bloomberg, Tolga Öncü , the retail head of IKEA’s operator Ingka Group , unveiled this ambitious plan during his recent visit to Goyang.

The centrepiece of this investment is the launch of IKEA’s iconic Blue Box store in Seoul, with further plans for numerous compact formats nationwide. Presently, IKEA operates four stores in South Korea, complemented by robust online shopping and delivery services, all aimed at enhancing consumer accessibility.

Öncü emphasised IKEA’s commitment to convenience, envisioning a scenario where customers can procure their desired products within a 15-minute walk, akin to accessing items at a nearby convenience store.

In tandem with its expansion efforts, IKEA is channelling resources into automating its shipping services, leveraging South Korea’s advanced last-mile delivery capabilities. This strategic manoeuvre is anticipated to pave the way for price reductions of 10% to 20% on select products, further solidifying IKEA’s position as a household name in South Korea.

Waitrose are to open their first new stores for a decade after JLP returned to profit

With John Lewis Partnership (JLP) back in the black, Waitrose & Partners has announced plans to open its first new stores in almost a decade. The supermarket has committed to investing up to £1 billion over the next four years to revamp its store network, propelled by increased sales and profitability.

In addition to modernising around 80 existing stores, Waitrose aims to introduce a new wave of outlets by the year’s end and beyond, with its property teams actively scouting suitable locations. This expansion strategy encompasses both traditional supermarkets and convenience stores, catering to the demands of its customer base.

James Bailey , Waitrose’s executive director, underscores the company’s confidence in identifying priority areas for expansion based on customer feedback. The plan includes introducing premium Waitrose stores as well as numerous little Waitrose outlets, reflecting the strong demand observed in catchment areas.

Bailey emphasises Waitrose’s commitment to enhancing the shopping experience through store modernisation efforts. These initiatives include optimising lighting, maximising the appeal of features like counters, and leveraging Waitrose’s distinctive brand attributes.

Furthermore, Waitrose aims to broaden its reach by expanding its network of third-party wholesale partners. As the supermarket charts its course for growth, it remains dedicated to meeting evolving consumer needs and delivering exceptional service across its expanding footprint.

Italian retailer Cisalfa to purchase German firm SportScheck in acquisition deal

Italian retail giant Cisalfa Sport has inked a deal to acquire Germany’s renowned omni-channel sports retailer, SportScheck , expanding its foothold in the German and DACH (Germany, Austria, and Switzerland) markets.

This move follows Cisalfa’s acquisition of Sport Voswinkel in November 2023, solidifying its presence in Germany and neighbouring regions.

SportScheck CEO Matthias Rucker expressed enthusiasm for the acquisition, citing the strategic alignment and growth prospects offered by Cisalfa Sport. Rucker highlighted the intense negotiations amid SportScheck’s recent insolvency proceedings, emphasising the positive outlook for the company’s future under Cisalfa’s management.

Established in 1946 by Otto Scheck, SportScheck boasts a network of over 30 stores across Germany, further bolstering Cisalfa’s expansive retail portfolio.

M&S engages in discussions to transform its banking division into an innovative ‘superapp’

Marks and Spencer is on the verge of striking a deal with one of the UK’s major high street banks to transform its banking division into a comprehensive financial services and loyalty ‘superapp’.

The retail powerhouse, in partnership with HSBC , the owner of M&S Bank 's UK arm, is nearing the final stages of negotiating a new long-term relationship agreement. This agreement is poised to pave the way for a significant overhaul of the banking business, as reported by Sky News .

With a customer base exceeding three million, M&S Bank currently offers a range of services including personal loans, travel insurance, store payment cards, and a buy now pay later credit product.

According to sources, discussions between M&S and HSBC have been focused on reaching a consensus before their existing contract expires in the coming weeks. An official announcement regarding aspects of the revamped partnership is expected to be made next month.

The overarching objective for M&S is to develop an all-encompassing ‘superapp’ that seamlessly integrates payments, financial services, and the retailer’s Sparks loyalty program.

While the potential scenario of M&S acquiring a stake in the venture remains uncertain, it remains under consideration as part of the evolving partnership dynamics.

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