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SPAR International Managing Director, Tobias Wasmuht responds to topics and questions regarding the impact of COVID-19 on the SPAR organisation around the world.

SPAR International Managing Director, Tobias Wasmuht
Q1 - How did SPAR’s international distribution network benefit the supply chain as consumer trends shifted overnight during COVID, and moving forward, what considerations will you make regarding supply sources given the learnings from COVID-19?

Leveraging our global network, which sees SPAR operating in 48 countries across four continents, SPAR International was able to promptly and effectively prepare our markets for the impact of COVID-19. For example, we were able to track and share learnings from SPAR China for the benefit of other SPAR countries as early as February. This support included the rapid dissemination of resources, advice and execution guidelines on hygiene practices instore and consumer messaging around social distancing, as well as recognition of the incredible efforts of all who were delivering a vital service to consumers.

Data from a panel of several SPAR country operations was consistently used to help forecast the waves of demand and shifts in buying behaviour post-lockdown. By reviewing this in-depth market data, other markets could be advised about anticipated customer demands in real time, as well as the supply chain changes required in anticipation of future demand.

Across Europe, SPAR country teams reported challenges in procuring some essential grocery items. In the early days of the lockdown, customer panic buying led to short-term stock outs in some cases. In markets as diverse as the United Kingdom and Hungary, volume purchases were restricted; in others, the replenishment process meant stock outs were short-term. In response, SPAR International adopted a marketplace approach of utilising our global sourcing networks to purchase from both own-brand and A-brand suppliers. Sourcing support was provided to SPAR countries, identifying alternative local suppliers where necessary in response to procurement issues due to the high-volume demands.

Post COVID-19, those alternative products – in some cases tertiary brands not previously available internationally – continue to be sold. Specific examples of hard to source products included pasta, rice and hand sanitizer, all of which were procured through new suppliers using local expertise. The ability to rapidly exchange information about product specifications, consumer responses to different brands and assortment updates, proved hugely beneficial to SPAR countries at a time when resources were stretched across the industry.

Q2 - Over the past 3 months, SPAR has ventured into online retail in 12 new markets, bringing the total number of markets in which you offer online retail to 25. How has COVID-19 fast-tracked investments into online capabilities, and what do you see as the long-term effects of rapid upscaling within this channel?

SPAR has been providing online grocery retail for over 20 years and by the end of 2019, SPAR had a significant online presence in over a quarter of the 48 countries in which we operate worldwide, with a significant number of others at a well-advanced stage in their online plans. The COVID-19 outbreak acted as an accelerator to our online developments and, for many SPAR country operations, acted as a catalyst to launch solutions quickly and to scale-up fast in response to customer needs. In this wave of new online launches, we applied an approach of transferring what had been successfully trialled and tested in a number of SPAR markets to roll out at pace. This approach meant that innovative ideas developed and adopted by SPAR country operations spanned a variety of solutions, including home delivery, click-and-collect, and drive-in pick-up solutions from forecourts, WhatsApp orders, home delivery via shop-for-a-friend apps, as well as the creation of essential grocery boxes and care hampers for home delivery to those most in need.

The importance of online grocery remains strong as shoppers have discovered this additional channel of shopping to complement their existing preferences. In many markets, we have seen local neighbourhood proximity stores thrive and outpace the market as communities choose to stay and shop locally. A combination of online retail and a strong local store network, whereby the proximity of stores allows for shortened delivery time provides a further growth opportunity.

Internationally, in China and India, operating online in conjunction with utilising our large-scale hypermarkets as ordering hubs has proven extremely successful. This approach has been mirrored in new online stores opened during the COVID-19 crisis in markets such as Nigeria and Saudi Arabia.

Longer term, we have the opportunity to build on the solid online foundation, using the unique position of being an online grocery retailer in over 25 markets to continuously evolve this channel through sharing insights and developments within the group.

Q3 - When, if ever, do you foresee promotional activity resuming to the levels it was pre-COVID?

SPAR has taken a market-by-market approach to promotion activity. The dynamic in each market is very different and based on the extent of the lockdown, a bespoke approach was required.

In Austria for example, SPAR has continued with promotion activities throughout the period. This continuation of promotion activities was combined with measures taken by SPAR in Austria to protect our customers and employees very early on during the COVID-19 outbreak, contributing positively to customer trust and confidence. Specifically, SPAR decided to distribute face masks free of charge to all shoppers in response to legislation introduced by the Austrian government on April 1st. SPAR Austria reached a record-breaking market share of 35.6% in April 2020, outperforming its domestic competitors, according to market researcher Nielsen. Reviewing the first six months of the year, SPAR has held an overall market share of 34%, making it the market leader in Austria’s food retailing during this period.

SPAR China was experiencing the impacts of COVID-19 as early as January. Operating large hypermarkets which attract over 5,000 people each day, SPAR China was always conscious of the need to avoid gatherings of customers instore, maintaining social distancing as per legislation. In response, SPAR China took a responsible approach – holding back on promotion activity, despite the very busy trading period of Spring Festival.

SPAR country operations have also ramped up digitally communicated promotions during COVID-19, reflecting the strong trend in digital technology promoting sales, reflected in the sharp rise in online sales and the integration of apps. In Hungary, for example, SPAR’s online sales platform experienced a dramatic increase in demand, necessitating the expansion of delivery slots and the purchase of more delivery vehicles.

In the longer term, value is going to be at the forefront for consumers with economic recession already being felt; with consumers being more price conscious and postponing purchasing decisions. SPAR reacted quickly in many markets, by putting together a price-freeze on SPAR Own Brand and introducing an “Everyday Low Price” (EDLP) campaign. There has been an increase in the sourcing of value tertiary brands as well as co-operating and working with established A-brand supplier partners. Going forward, suppliers will increasingly be required to review the product portfolio, working in collaboration with retailers to identify innovative and attractive consumer promotions which will ensure those suppliers are desirable collaborative partners. More focus will be required to develop a sustainable EDLP value proposition particularly on known value items (KVIs).

Q4 - What trends have you been observing in terms of certain formats and store types doing better than others?

Given globally changing social distancing norms and ongoing economic concerns, we are seeing the growing importance of community and proximity retail stores. With over 7,000 SPAR stores in the proximity channel in Europe, SPAR is a recognised leader in proximity retailing where our stores are closely integrated with the communities they serve.

While the proximity channel has experienced strong growth in recent years, the COVID-19 crisis has acted as an accelerator to this trend. Since 2015, SPAR globally has recorded a sustained compound annual growth rate of over 5%. In addition, our larger format EUROSPAR and INTERSPAR stores have also performed well in residential locations, providing ease of accessibility to shoppers, proving that the success of proximity retail is defined more by location than the actual size of the store.

Larger format stores, particularly in shopping centres, experienced reduced footfall but were able to partially offset this through larger average baskets or by using these larger stores for replenishment and online ordering. City centre stores, which rely on high levels of traffic, were impacted, with many repurposing their stores to offer food-to-heat solutions for at home consumption, which has proved popular.

As various national lockdowns have eased, consumers have continued to shop locally, creating new shopping habits and thus we see this as a more sustained growth driver for the brand. The critical role our stores have played during the crisis has built up positive trust and loyalty which, in turn, has a positive impact on sales growth, ensuring we are well placed for the future.

Q5 - What behaviours and attributes from your supplier community were most beneficial during the pandemic? As we move into the “new normal” what supplier behaviours or competencies will retailers be looking for in their most valued supplier partners?

The reality of the  COVID-19 outbreak has seen the best laid category plans uprooted and replaced with traditional trading, where speed and agility have outweighed perfection and detailed planning. Suppliers able to respond to this need benefited by ensuring product availability remained as high as possible, despite transportation issues which impacted even the most agile suppliers.

Supplier agility and innovation will be equally necessary in the future. For instance, suppliers who adopted a flexible approach to sourcing packaging at short notice were able to reduce out-of-stocks. This agility is a positive development which should be built on by the industry for the future, allowing us to be more responsive to customer needs. Maintaining this responsiveness will be key.

With consumers focusing on value for money and the continued emphasis on remote working in many countries, the assortment rationalisation which took place during COVID-19 is likely to be retained and further reviewed. SPAR will continue to work with A-brand partners to review assortments, looking for opportunities to bring additional value through the inclusion of specific value brands. The growth in penetration of own brand will create opportunities for own brand suppliers yet will require flexibility on their part in new product development and range extensions.

The COVID-19 pandemic tested everyone in the industry and will continue to do so. The positive contribution from all suppliers at this extraordinary time shows that we can, as an industry, be proud of our achievements and can be counted on for the contribution which we bring to the lives of millions around the globe. We recognise that the trust earned by our valued customers and the gratitude they showed to retailers continuing to meet their needs, was possible because of the support given by all suppliers. In recognition of this SPAR took the step of integrating into our consumer communications our thanks to suppliers for the role they played during the crisis.

Looking to the future, transparency in product origin, transport routes and production facilities will increasingly be demanded of suppliers as the new economy takes shape with consumers seeking reassurance in an uncertain environment. When this is paired with the growth in e-grocery, the use of data technology to provide transparency from source to shelf will be more applicable than ever before. We recognise that stronger collaboration between retailers and suppliers will be required to meet these demands.

Q6 - The pandemic brought about improved levels of collaboration, flexibility and information sharing between manufactures and retailers in many cases. How do you anticipate that retailer – supplier relationships will progress post-Covid?

The COVID-19 outbreak has not only kept us apart but has also brought us closer together. The same can be said for our industry through the crisis. The last number of months has been an unprecedented time for retailers and suppliers to come together in the spirit of collaboration. We at SPAR are grateful for the support that we have received from our many supplier partners in keeping the supply chain open and meeting the needs of the communities we serve internationally throughout the worst of the crisis.

As an industry, we do face challenges with retail channels devastated by the impact of COVID-19, the headwinds of economic recession and insecurity in food sourcing. Historically, we have been an industry driven by quarterly growth pressure. What recent experience has taught us, however, is that we increasingly need to take the longer-term view.

The challenge going forward will be to offset decline in specific channels, such as food service, and realise sufficient growth in channels that are best placed to deal with this consumer shift. To facilitate growth, we will seek ways to collaborate ever more closely with our suppliers throughout the supply chain. A key emphasis will be to take supply chain collaboration to the next level, with long term goals of taking costs and waste out of our mutual supply chain and reinvest those savings into retail growth. Closer integration of demand and forecast planning will be vital in dealing with the expected aftershock of irregular purchasing behaviour.

Since the foundation of SPAR in 1932, collaboration has been in our DNA – as evidenced by our founding statement ‘Door Eendrachtig Samenwerken Profiteren Allen Regelmatig’ which translates to ‘Through United Cooperation All Will Benefit’. The spirit of that business philosophy is as appropriate today as it was nearly 90 years ago, representing SPAR’s core ethos of uniting together the global scale and resources of the SPAR network so that all, including our supplier partners, shall benefit.

We believe that what we have achieved as a global retail brand reflects how we work with purpose together with like-minded supplier partners and will continue to do so in what will be a very demanding economic and trading future.