Discount Retail Chain Netto Nord’s representatives see new development opportunities for the retail chains that are able to adjust their offer according to demographic changes. Anders Hagh, CEO of Salling Group, and Brian Nyeng Olesen, CEO of Netto Polska, told about how the strategy of retailers will change in the face of the new market realities.
Demographics in Poland are changing retail
Demographic changes will have an increasing impact on the retail market. The shrinking population and the aging of the population mean greater pressure to sell, but Netto representatives argue that the new realities can also create opportunities for development. In their opinion, adapting the offer to the changing needs of consumers will be decisive.
Brian Nyeng Olesen, CEO of Netto Polska, admits that demography will be one of the biggest challenges for the industry in the coming years. At the same time, he points out that Polish consumers still spend a significant part of their income on food, which, in his opinion, leaves room for further development of the market.
“It is true that this is a huge challenge that will increase the pressure on sales volumes. However, you need to remember about the counterweight. Polish consumers spend a very large part of their earnings on food, about 25 percent. This number is much lower in a Danish household. I still see a great opportunity here,” wiadomoscihandlowe.pl told the portal.
As he adds, as the population ages, shopping preferences will also change. Some existing categories may be less important, while the demand for products corresponding to health-promoting trends will grow. “People will drink less alcohol, which is due to the health trend, but there are still plenty of categories that will grow. They simply need to be effectively identified and developed. Needs will change, and we must meet them effectively,” he added.
The CEO of Netto Polska also believes that the effects of demographic changes will be different for individual retailers. The biggest challenges may lie in networks with a strong presence in rural areas, which are rapidly depopulating, as well as the largest players with limited opportunities for further expansion. In the case of Netto, there is still a lot of room for store network development in Poland.
The price war is no longer a way to grow
Anders Hagh, CEO of Salling Group, emphasizes that the group observes similar phenomena in all six markets in which it operates. In his opinion, decreasing sales volumes require looking for new ways to increase the value of purchases, and not just fighting for customers with the lowest price.
“We operate in six countries and we see basically the same dynamics in every market, volumes are falling, societies are shrinking and aging. We don’t have a 100 percent market share anywhere, so we should focus on getting our customers to put more in their baskets.”
According to him, during the period of high inflation, most retailers adopted a similar strategy based on intensive promotions of basic products. The result was an increasingly strong price competition, which did not increase sales of the entire market. “We fell into a promotional trap. They all promote the same staples (pork shoulder, butter, cola, and coffee) at the same prices. In such a situation, it simply becomes a price game and takes value out of the market. The chains are not able to sell more butter, they only shift its sales between themselves,” explained Anders Hagh.
New product categories to drive sales
According to the CEO of Salling Group, the response to the changing market environment should be to develop new product categories instead of focusing solely on promotions. Among the areas with the greatest potential, he mentions health-promoting products, dietary supplements, protein foods and an offer inspired by the cuisines of the world.
“We need to be more innovative, develop new categories, such as vitamins, dietary supplements, health-promoting or protein products. We need to give customers a choice in the areas they’re looking for, instead of focusing solely on the price of butter,” Hagh said.
Store automation will not replace people
According to Anders Hagh, the food trade is changing more slowly than many other industries. As an example, he points to the development of e-grocery, which, despite earlier forecasts, still accounts for a small part of food sales. “The food trade is changing slowly. A great example is the development of the e-grocery channel, which still has a marginal share of food sales despite forecasts that everyone will shop online after the pandemic. Food shopping has its own specificity, customers want to choose and evaluate the product in the store on their own, they don’t like it when someone does it for them. Therefore, e-commerce will not replace brick-and-mortar stores for many years to come,” he explains.
At the same time, the president of the group believes that the progressive problems with the availability of employees will make automation play an increasingly important role. This applies, for m.in, to self-checkouts, which are in high demand from customers, as Hagh points out.
Despite the development of technology, however, the CEO of Salling Group does not expect that stores will be able to function completely without employees. Tests of autonomous outlets conducted by the company in Denmark have shown that customers still expect to be in contact with staff. “Our tests of autonomous stores without service in Denmark showed that customers want to interact with people. A store without people seems cold. Human touch, or the human element, will remain critical in the buying and selling situation,” explained Anders Hagh.
As he adds, the Danish project was created, based on Żabka’s experience with the Nano concept. It was assumed that the possibility of shopping without queues would be a sufficient incentive for customers, but practice has shown otherwise. “When launching unmanned stores in Denmark, we were inspired by what Żabka did in Poland by introducing the Nano concept. It seemed to us that we would offer customers the easiest and fastest way to shop, i.e. shopping without queues. However, the Danes said “no” to such a concept. It turns out that shopping is not a mechanical activity, but a social behavior,” Hagh said.
In his opinion, the development of humanoid robots will progress, but it will not replace store workers. Therefore, one of the most important challenges for retailers will be to build an attractive workplace and compete effectively for employees.