Leading independent retailer Guy Warner has partnered with Morrisons to develop a new co-branded concept store that maximises the potential of the top up shop.
Warner’s new 6,000sq ft store opened in Upton-upon-Severn in the spring, branded as Warner’s Supermarkets – Together with Morrisons.
For Warner, a long-time Budgens retailer operating stores across the Cotswolds, it was the ability to deliver the right range and co-brand which clinched the deal with Morrisons.
“We’ve obviously traded stores of this size, in excess of 6,000sq ft, and I think the positive is that they are big enough to do a proper top up shop. The negative as an independent has been inherently, in more recent years, how you fill that shop with an appropriate range and at an appropriate price to maximise the potential of that top up shop,” he says.
“The opportunity with Morrisons was to do exactly that – you’d have a product range at a price that made you credible in that big convenience space and not just be a distress purchase location.”
The supermarket’s willingness to work with Warner’s and allow it to trade under its own brand was also key.
“For me, I very much wanted to build on the local name that we’ve built over the last decade as Warner’s and Morrisons were willing to co-brand,” Warner says; adding that “in conversations with others”, that never seemed remotely likely. “Morrisons were open to that, albeit within set criteria,” he adds.
And it’s been a shared journey, which Warner candidly admits he had not been anticipating.
“I approached Morrisons and it was a very collaborative journey really. I went in the front door with a preconceived idea that actually there wouldn’t be anything to do because I’d prejudged what the offer would be. As part of the overall due diligence we did however, the conversations and the collaborative approach of what we could do together really surprised me.” Warner says the working relationship with Morrisons and the supermarket’s refreshing approach, plus its willingness to learn and look at the opportunity adhered him even more. Morrisons’ vertical integration and the fact it owns so much of its own production capacity, particularly in fresh, has been another bonus, Warner says.
“That’s a positive to us and a positive to the consumer because it’s not only that British piece but equally, it’s a positive around price and synergies because they own so much of the production.”
Morrisons is supplying around 90% of the range to the new store with a mix of own brand, across all categories, and proprietary brands. In BWS, for instance, Morrisons’ own brand wines feature strongly but the store also stocks the “big hitters when it comes to off licence”, Warner says.
Brands have been listed where consumers really expect them, he says. Similarly for own label, own brand can be a nice to have in some categories but in a smaller format store, it’s not really necessary. The partnership, however, provides the choice including Morrisons’ tiered own brand offering.
Trading for five months, the new concept store has been well received and understood, Warner reports.
“Initially, if I’m really honest, consumers didn’t really know what was coming but, in the unpacking of it, they got it immediately. This is a Warner’s store and they can buy product at very competitive prices and there’s a lot of Morrisons’ own brand in here too,” he says.
While the store is located on a busy road and fulfils lots of different shopping missions, the key one for Warner is the trolley shop. “The one you look out for is trolleys going round and from day one there has been a decent number of those shopping for top up or a weekly shop, not just glorified convenience or impulse,” he says.
“The customer reaction has been good,” he continues. “The store looks good, that adds to it, and the pricing and positioning definitely works because we are very competitively priced at a retail level. Historically, we’ve not been as competitive as we are now, which in today’s market is key. The fact the store is getting used in a host of ways and for a raft of missions suggests Warner’s has got the offer in terms of the branding piece broadly right, Warner adds.
“We’ve not ended up in a scenario as a big convenience store that does a bit of top up if there is no alternative. The Holy Grail is for people come to you out of choice for that bigger basket.
“That’s why this partnership has been key – it’s given us more of ability to get into the supermarket space than we’ve ever had before.”
Upton-upon-Severn has pushed the envelope in both new tech and product ideas and the store looks set to reap the rewards of those investments.
“I’ve never built a store with so much investment in IT or with such renewable/green credentials before,” Warner says.
In-store meanwhile, Warner’s has developed its own drinks bar, featuring frozen slush, but taking equipment inspiration from the US rather than what was existing in the UK.
Warner reports his regular visits to the NACS Show are invaluable in this respect.
The education sessions alone are worth going for, he maintains. “Where in our industry can you get such a quality education session? You can’t.”
The themes that emerge from those sessions, coupled with the Expo and tech areas, paint a picture of where retail is going, he maintains. It’s an image he’s transposing on the new store.
“In the independent sector, IT has always been seen as an unnecessary expense rather than an investment that can make the operational model more efficient and customer experience slicker,” he opines.
So at Warner’s Supermarkets – Together with Morrisons, Warner has plumped for the best tech he could buy – be that NCR for self-scan or a new VME EPoS system that is integrated with Gander, the app that connects a retailer’s reduced food to a local audience of shoppers; as well as delivery companies and the store’s loyalty program and app providers.
“We’ve made five to six times the amount of usual investment but now I look at the tool kit we have: the app we have, the integration from the forecourt through to back office, through to customer, through to store, for both marketing and operational reasons and it’s the difference between a motor bike and pedal bike,” he says.
The increased investment in IT includes ESELs throughout the store. “I thought they looked nice but it was only a last minute decision to do it because I balked at the investment costs,” he says.
Investment in new tech like this does root itself in going to NACS over the last few years, seeing the signposting work and being able to prepare for the next iteration of retailing, Warner says.
In terms of renewables, the entire roof of the store is solar panelled, while the building has air source heat pumps and the heating and cooling is all heat exchange. “We’ve put a heavy investment into the mechanical set up of the business but there is so much operational saving attached to that, particularly now; and it’s so tax beneficial at the moment” Warner says.
The impacts of rising energy costs are truly horrific, he adds. While most of the media focus has been on the domestic market, there’s been too little talk about the impact to businesses; particularly heavy energy users like convenience stores and supermarkets with refrigeration that they have to have. The impact is of such a magnitude that it can’t fail to hit the bottom line. “You can’t make the type of cuts in other places in your business to fill the hole a size of the new world energy costs,” Warner says. And, if it’s a long term systemic increase, then the industry has problems, he adds.
In terms of changing consumer behaviour in response to the cost of living crisis, Warner reports there’s been a lot more interest and usage in the Gander app, which is new to store, than he would have thought. However, the migration to own brand has been happening for five to 10 years or longer and is not a new trend.
“People have wanted value for a lot longer, not just now – the market was already on the journey to that adjustment,” he says.
Where he believes consumers are making some of the greatest shifts is in how they heating their houses. “Increased sales of logs, coal and derivatives of coal that burn for longer, are definitely demonstrating people’s behaviour changes,” he says. ‘Extortionate energy costs have translated into the purchasing of everything from candles to domestic fuel,” he adds.
Next steps
After being in a build phase for the last 18 months and birthing a new concept brand with new IT and a new supply partner, Warner is keen to let the business settle down and prove the format at Upton-under-Severn in terms of profitably before considering any next steps.
“We want to make sure that what we have got can really sing,” he says.
“When you launch anything it’s usually 70% right but the next 30% is where the real return on investment sits,” he says. As such, Warner and his team will be getting to grips with the range, improving the offer and efficiency.
He also wants to get maximum value from the new tech and IT and not treat it like a washing machine.
“The tools that came with that tech that we could use are immense. We want to milk that investment and not only use the 40 degree, mixed cotton only program,” he smiles.
Christmas, a key event for convenience and supermarket retail, is on the near horizon. Warner doesn’t anticipate it will be a complete cutback Christmas in terms of food, however. “People may attack presents but they still like to eat and drink well on Christmas Day. Food and drink is intrinsically linked into what everyone thinks of as a holiday,” he says.
Warner will also be reflecting on the themes he recently saw at NACS and the direction in which the market is heading. “One relatively small stand that I passed, which to me was the most pertinent, was the Amazon no scan tech booth. That’s at NACS, with people like me wandering around. It’s one of those signposts you see. Amazon don’t want to run convenience stores but sell you the tech that runs c-stores. That’s the future here today potentially,” he says.
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