Supermarket to Sell More Expensive Apples
Tesco is looking to produce greater sales with a new Apple (Computer) Zone
department in 12 stores, according to The Sunday Times.
The U.K. grocery leader is adding the new departments following an earlier
test at a store in Milton Keynes, Buckinghamshire, England. The initial site
dedicated 120-foot area to the department. It was the first time, according
to The Scotsman, Tesco had ever dedicated a section of a store to a
single non-foods brand line.
When the initial test was announced, it surprised many who saw it as unusual that a discounter such as Tesco would carry a manufacturer’s line that holds to its retail sales price as tenaciously as Apple.
Tesco has made plain its intent to become as big on the nonfoods side of the business as it is in grocery. The chain recently remodeled home-entertainment departments within its stores to include interactive units that allow customers to test-drive products before buying.
Matt Leeser, a Tesco spokesperson, told The Sunday Times, "Tesco
is leading the way in this arena, offering a concept that allows customers to
interact with the latest technology."
Discussion Questions: Would Apple Zone-like departments
work in U.S. grocery stores? Do you see a current American supermarket chain
with the right image to pull off something similar to what Tesco is doing with
Apple Computer?
Tesco is obviously a force to be reckoned with. Adding the Apple Zone to its stores is consistent with Tesco’s goal of broadening its offering and consumer solutions. Will this same approach work for US grocers? Not unless they also decide (more than they have done to date) to become broader-purpose shopping experiences. Selling mustard and selling Apples requires different skill sets for the stores and employees. Most grocers are not in the position to pick up selling complex products. Although Wal-Mart, Costco and some others have trained consumers to think broadly when shopping, it has taken many years for them to develop that mindset. So, if grocers in the US want to fend off a Tesco invasion (beyond the convenience store concept already in the works), they need to take seriously the idea of becoming broad range consumer solution centers.
This is a great way to introduce technology to a consumer base where technology — be it self/automated checkout, mobile handset, RFID, etc.– will become an integral component to their shopping experience. Using a trusted brand like Apple that understands the customer and user experience is a wonderful dimension for Tesco and their customers.
It will be interesting to monitor how the Tesco customer engages this diversification in a grocery environment. The mindset of someone going to the grocery store is not aligned with suddenly stopping to engage (presumably in hopes of buying) with technology. Are Tesco and Apple simply flogging high margin products to the ‘available’ customers or is there a legitimate effort to bring value to the customer? My guess is that this is yet another attempt to capture the wallet of the ‘accidental’ shopper.
If the Tesco concept is meal solution convenience-driven, the stores will not work, except in selected locations. The trade area size, shopping frequency and market penetration is so different that there will be little value added from the Apple space. If they are relying on weekly product innovation or repair work, they will also be disappointed – although it does beat putting a Range Rover dealership in every store.
If Tesco wants to make a decent profit in nonfoods, Apple is a good partner if the margin situation is similar to the US. Apple products in the US have better margins than many competing brands. American supermarkets are better off sticking to the food business. Focus is the path to dominance in American retailing.
For Tesco, this concept provides convenience and one stop shopping to a large group of customers, especially younger shoppers who are more savvy with technology anyway.
Would an Apple Zone work in a US supermarket? Probably not in most, for you really need experienced and available sales associates to answer customer questions and speed them on their way to checkout. Having recently visited an Apple store in New York City, I was amazed at the diversity of offerings and the “fun” customers seemed to be having using the technology right in the store.
For the right kind of retailer, the combination has the potential to create an even more differentiated store. Who knows perhaps buying an iPod or accessory and a quick meal to go might work in the right format?