Monday 5 August 2013

EasyGroup hopes to take on Aldi et al with budget supermarket plan

EasyJet founder Sir Stelios Haji-Ioannou plans to challenge low-cost food retailers by undercutting low prices offered by budget supermarkets Aldi and Lidl, concentrating on affordable, basic 'no-brand-name' packet and tinned foods at bargain prices.

Recent retail figures suggest the UK grocery market is becoming increasingly polarised with the strongest sales gains coming at the top and bottom ends – with the likes of Waitrose doing well on one side and Aldi and Lidl on the other.

Starting with a store in their Croydon building and using a new web site, "coming soon", the company hopes to make a viable return on capital employed.

Several plus-points stand out:
  • This solus ‘white’ offering will have a unique focus compared with other retailers
  • Stelios may have identified a genuine niche in a market that will remain flat-line to low-end consumers, for many years
  • Aiming at ‘an acceptable return on capital’ and buying redundant high street outlets at low cost means the company will have very simple KPIs, with a focus on an ROCE of 10 -12%, in the current climate
  • Little shortage of suppliers willing to supply
  • Generic branding means goods can be multi-sourced to optimise leverage on cost prices
  • The formula is infinitely scalable at low cost, to optimise low-price demand…

The 'downside'?
Stelios is not a shopkeeper, but once-upon-a-time he did not know much about running airlines, either…   

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