By / Phillip Russo
“I think these are all headlines in newspaper that you recognize. It’s about the crisis. It’s about banks in trouble. It’s about unemployment, big concerns from both retailers and supplier’s side. A lot of uncertainty and very weak consumer confidence.”
I thought to myself, “Oh dear, this is going to be a very depressing discussion about market conditions getting worse by the hour, commodity price increases, labor unrest, doom and gloom.”
ut it was nothing of the sort, our meeting with Mr. Bert Swartsenburg, CEO of AMS-Sourcing, at their World Headquarters at Schiphol Airport, was more like an accelerated MBA course in consumer insight and retail management.
Mr. Swartsenburg is one of the most optimistic business leaders I have ever met. He emphasized at one point in our meeting, “Is the glass half full or half empty, as we say in Dutch? If I look at this I see plenty of opportunities. You can be very sad about it, but as I said I’m always very optimistic, it offers a lot of opportunities at the same time. Let’s go for it.”
The context was the current stance of AMS-Sourcing through the lens of several conditions that impact on all retailers, suppliers and most importantly consumers. It would be impossible to overemphasize the importance this later group plays in Mr. Swartsenburg’s and AMS-Sourcing’s thought process.
Consumers have all the choices. >>
I have never been more impressed by a retail executives sharp understanding of exactly who is in the driver’s seat. “It is not AMS-Sourcing, not the A-brands, not the Retailers”. He exudes and embraces the fact that “the consumer has all the choice, is in total control of when, where and from whom they buy.”
One could argue that this driving attitude has quite a bit to do with AMS-Sourcing’s impressive growth over the last few years. That and Mr. Swartsenburg’s enthusiastic and positive guidance of his Sourcing Team.
While I would love to share all we discussed, I promised I wouldn’t. Instead, I’ve included some highlights of Mr. Swartsenburg’s observations about where our industry is, where it’s heading and what it will take to be successful in an ever-changing environment.
Topics Discussed >>
Scarcity of raw materials
European Retail Developments
Low consumer confidence
Changing consumer grocery expenses
European retail market
Changing sourcing strategies
Private label development
Private Label Trends Behaviour:
Trends in the supermarket
Selected observations from Mr. Swartsenburg on… >>
Increased awareness among consumers. Consumers in many countries expect our shareholders and our retailers to behave more responsibly.”
“I always say to suppliers, if you think this is a trend that will not last forever, it will be the new standard in a few years time. Eighty-three percent of the customers think it’s important that the company should have an environmental program. There’s more and more willingness and awareness that we should hand over the planet to the next generation and twenty two percent of the consumers are willing to pay more for, well in this case, eco-friendly products.“
“People also try to save money on everything they do… It also implies that they try to save money on grocery expenses and switch from A-brands to private label products and cheapest on display products. Of course, from our shareholders perspective we do regret that the world is in recession. From an A-list perspective, of course, we do see that there is a change from A-brand to private label and cheapest on display, and we are active in private label and cheapest on display.
That’s why also the participation of our shareholders in our project is growing more and more over the years.
When I presented the company profile to you last year, I told you I think it doubled almost in purchase value over the last four years, and that’s also because of these kinds of developments.”
“Europe is in crisis and although I am an optimist by nature, I think this will keep us busy and will be top of mind for a few more years. I don’t think we are there yet. I think there is a strong difference between countries like maybe the Netherlands, Scandinavia and Germany if you compare it to the South. That means that consumer confidence will be restored slowly. It will not change overnight. From a consumer perspective value and values are increasingly important. There’s a declining loyalty to your traditional retailer. Consumers are more and more active and empowered.”
…European retail markets
“There’s increased competition. The margins are under pressure, there’s no room for price increases. It’s very hard to transfer increased raw materials prices into consumer prices. That’s why negotiations between retailers and suppliers, but also between us as a buying alliance in between, are challenging at the moment. It means everyone is looking to source as efficiently as possible.
What you see that for the short term some retailers try to maintain a market share and try to maintain sales on their level by being very active in promotions. Well, my statement is that if your format by itself is not healthy enough and you are only able to attract customer by strong promotions, that’s, in the long run, not sustainable.
On the retail and private label side, concentration. There will be less future players, retailers, almost all retailers applying a multi-format approach. Private label we see it growing all over Europe. Retailers applying the three-tier approach in their private label architecture. Retailers try to differentiate themselves from the competition by being more innovative in their private label assortment”.
“Shifting dynamics, we see retailers moving into new geographical areas, but also developing new formats. Small convenience stores becoming more and more popular. E-commerce more and more important. Also something like Click & Collect, recently introduced and launched in the Netherlands, but already available in some other European countries.
Here just a few examples like in your magazine. Ahold, who entered the German market with a convenience format. Ahold has taken over Bol.com to build on its online business and accelerate growth. You can recognize here some other examples. Wal-Mart Express launched in the US.
We see it and the number of convenience stores all over Europe is growing very rapidly at this moment. In the UK Morrisons is speeding up it’s opening of convenience stores”.
“Sourcing over time has become much more fact based. We at least have 100 projects here, and they’re all scheduled and programmed. Today we have a pet food meeting going on where the shareholders flew in this morning. They spent the whole day together. They talk about last year’s tender. They talk about what went well, where can we improve. The room is full of pet food assortment so they can look at each other’s assortment. It always starts before the targets are set, before the negotiation strategy is defined.
“We’re continuously mapping and looking at the supplier landscape. We do value chain analysis, we analyze the products from what the British call from farm to fork, so from raw material to end product, and there’s some more product intelligence. This means sourcing has become a real profession today. It’s only been five, six years ago that we introduced the role of the sourcing intelligence department, the business analysts, when it comes to suppliers, meeting suppliers, talking to suppliers, mapping the supplier landscapes is so important.
…Consumer Behavior / Expectations
“The customer has high expectations on the one hand, as I said, regarding value, value for money, but on the other hand expect retailers to work on responsible sourcing, fair trade, animal welfare, sustainability, etc.
Retailers more and more act as a value providers to the customers. It’s not only as value provides value for money, they try to differentiate themselves more and more from the competition and they are more than ever before private label and margin focused. It’s all about innovation, convenience, quality and value for money.
Let the retailers not have the delusion that it’s up to them to tell the customers what to buy and what not. As you see from this presentation, customers are active and powerful and smart enough, and in the end it’s up to them to make a choice between private label and A-label.
This is an example of Albert Heijn that I put in the presentation. Albert Heijn, who passed away in 2012 and was the grandson of the founder, also named Albert Heijn, offered the statue Beppie on his retirement in 1990. It carries a text saying, “Never forget who we are working for.” That’s the customer in the end. The customer is more important than ever before.
We always say, “Well, Mr. Heijn in his first store knew all his customers on a personal basis. He knew exactly whether they had a cat or dog, or what happened in the family.” By analyzing and tracking all the data that retailers have, because customers use their loyalty cards, you are much better able to provide them targeted offers. It doesn’t make sense to put pet food on promotion if you know that your customer doesn’t have a cat or a dog.”
AMS-SOURCING KEY FA CTS >>
AMS was founded by the leading retailers of five European countries to create synergy in commodity buying. Since 1987 AMS has been initiating, managing, and coordinating joint buying activities for its members, European retailers. AMS creates economies of scale, pooling the expertise and volumes of 14 major European retailers. By sourcing commodities on a European/ Global scale, AMS delivers its members the best possible quality at the lowest price.
- Over 11,000 stores
- 100 million shoppers
- Covering 31 countries
- A combined retail sales value of approximately €130 billion
- Over 20 years of experience
11 European retailers and 3 Euro Shopper distributors >>
Ahold, Booker, Dansk SG, Delhaize, Hagar, El Corte Ingles, Elomas, Esselunga, ICA, JMR, Kesco, Migros, Morrisons, Systeme-U, Unlarme.
EURO SHOPPER™ products are now marketed by AMS and its authorized members in 11 countries across Europe, generating retail sales of more than €500 million for its members. Ahold is transferring Euroshopper into its new AH Basic as was done previously by ICA. Sourcing of these products in many cases has remained unchanged and is still managed by AMS.
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