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slow down and online grocery retail grows in popularity, Australia’s grocery retailers will find it increasingly hard to drive growth from physical stores. Major retailers are responding by rolling out new store formats that will make existing space work harder and create a point of difference from their competitors’ stores. With nationwide store networks and stores serving lots of different locations, retailers are also looking at how to use space, range, marketing and merchandising to drive stronger local appeal. • Woolworths completed 68 store renewals and 80 store upgrades in Australia in its last financial year. It will look to use international foods, localised store ranging, a greater focus on seasonal events (eg, Christmas, Easter, Ramadan, Diwali and Lunar New Year), plus better fresh food and convenience ranges, to appeal more to local demographics and increasingly meet shopper demand. • Coles is rolling out four different store formats, which flex ranges to demographics and will have up to 40 per cent variation in range between them. • Metcash continues to roll out its Diamond Store Accelerator (DSA) program as part of its Mfuture strategy. In total, around 450 stores have received the DSA treatment. On average these stores have seen a sales uplift of 15 per cent. Private label innovation Private label innovation and penetration in Australia are on the increase. For years, own-brand penetration sat around the low 20 per cent mark. However, retailers are giving private label products more shelf space, improving the quality and introducing new ranges to appeal to shoppers’ changing needs for convenient, fresh and healthy food. In 2019, own-brand sales at Coles grew 5.9 per cent and sales reached $9bn. The retailer used its own brand to lower the cost of living and provide an expanded and better value choice for shoppers. Woolworths’ own brands also delivered solid growth, with double-digit growth in macro and free from lines last year. • Coles launched more than 1,200 new private label products last year, focusing on health foods, prepared and ready-to-cook meals, personal care and meat alternatives. New brands included Wellness Road health products, Nature’s Kitchen vegan range and ‘I’m Free From’. Coles has also formed a wholesale partnership with UK supermarket chain Sainsbury’s. From early this year, Sainsbury’s will supply own brand products to Coles, which will be rebranded under the Coles brand. In time, Sainsbury’s will look to source Australian products through Coles. • Woolworths is looking to invest in its private label ranges and marketing to meet growing demand for both healthy living and convenience ranges. Over Christmas 2019 it introduced new free-from and vegan festive ranges to tap into this growing trend. • Metcash continues to roll out its Community Co private label range, with a further 70 products added in the first half of this financial year, taking the range to around 250 products. Convenience gaining credibility The convenience channel is an untapped opportunity in Australia. The landscape is dominated by forecourt stores, with limited credible standalone options available. IGD has been monitoring the evolution of the convenience channel for several years. Finally, it appears that retailers are taking the plunge and looking to develop propositions that meet the changing demands of busier lifestyles and changing shopping habits, across multiple locations. In the second half of 2019, we saw new formats being rolled out and expect to see more evolution throughout 2020. • David Jones and BP opened their first convenience store on a petrol forecourt in Bayside, Melbourne, last November and planned to open 10 more by this month (April). The retailer also launched its first standalone convenience store in the Melbourne suburb of South Yarra in October 2019. • At the end of Q1 2020, Woolworths had 45 stores trading under its Metro banner. It has also launched a 50sqm MetroGo store with 640 SKUs on Elizabeth Street near Sydney’s Central Station, which is tailored for busy professionals and passing trade. • As part of Woolworths’ wholesale agreement with Caltex, the retailer has opened its first new petrol forecourt store in North Ryde, Sydney. The store is the first of 250 that the retailer plans to roll out across Australia, with improved food-to-go and food-for-later solutions. • Coles opened its second Coles Local, an urban supermarket format, in the Melbourne suburb of St Kilda. It has been pitched as its ‘most innovative’ supermarket yet, with extensive shopper research having been conducted to tailor the offer to the local area. What do these trends mean for suppliers? Online grocery is growing rapidly, while new partnerships will increase automation and capacity. Suppliers should make sure their products and supply chains are ready for this evolution. Retailers are also flexing stores to the demands of the catchments they serve. You should understand whether there are gaps in your portfolio and whether you can develop new strategies to assist them. Convenience, health and fresh are hot topics. Retailers are looking to develop ranges that tap into these consumer trends. Private label will increasingly fill this space if brands don’t take the initiative in their categories. Finally, convenience stores will grow in importance over the coming years. Price, ranging and merchandising strategies need to be tailored to these stores and their shoppers. INDUSTRY INSIGHT About Nick Miles Nick joined IGD’s Retail team in September 2011 and specialises in Asian and Australian grocery retailing. His core responsibilities include shaping the strategy for IGD’s growing research program in Asia Pacific, plus managing the analyst teams in IGD’s UK and Singapore offices. He regularly delivers research for IGD’s Retail Analysis subscription website, customised presentations for clients, plus industry platform presentations. Stay informed by signing up to IGD’s weekly newsletter at igd.com/newsletters. APR, 2020 RETAIL WORLD 23