The Co-operative

Co-op preps ‘series of new digital services and business’ as it moves from 'rescue to rebuild'


By Natalie Mortimer, N/A

April 7, 2016 | 5 min read

The Co-Operative Group will use the learnings from its e-commerce Co-operative Electricals business to shape wider services and marketing investments as it continues to steady itself following a radical overhaul of its brand.

The once beleaguered business, which is one year in to a three-year long turnaround plan, wants digital to play a bigger role in that effort, particularly now that it has moved “from rescue in to rebuild” mode. That shift, it believes, is shown in the “stable” group revenues at £9.3bn in the quarter, which despite being down from £9.4bnlast year, are underpinned by like-for-like growth in its food, convenience and funerals business.

Speaking on a conference call earlier this morning (7 April), chief executive Richard Pennycook, who also announced has slashed his pay packet by 60 per cent to £750,000, said that the digital team, led by Mike Bracken, will look to Co-op Electricals’ business model to build its ecommerce capabilities.

“At the moment our online business, which is small, is electrical and that is a business we are keen to continue to grow,” he said. “It’s got high customer service scores and we have recruited a new team to bring Co-op into the 21st century in terms of digital. That is something we are working on in terms of strategy. At the moment we can’t comment on where we will go with digital activities but it’s great that we sit with a small but good business to build on.”

In a report, also published today, the Co-op detailed plans to launch “a series of digital services and businesses” to help better service to its existing members and build brand affinity and awareness. “In the years ahead, we may even explore entirely new Co-op digital businesses,” the report added.

Moving forward, the Co-op will focus much of its marketing and advertising strategy on a relaunch of its membership offering in a bid to entice more shoppers to sign up to the scheme, which provides offers from across the Group’s businesses including food, legal services, online electrical, insurance and funeral care.

In answer to a question posed by The Drum, Pennycook revealed that Co-op’s broader marketing activities will be ”more of the same” but with investment behind pushing the business’ points of differentiation as it continues to compete with the big four.

“In terms of our membership proposition it won’t surprise you that there will be activity and we will be talking more about what being a member means… and talking more about the Co-op brand and the ethical stories behind the brand so there will be weight behind that.”

Pricing and an emphasis on convenience has played a key part in Co-op’s turnaround plan to date and the retailer has invested £125m in lowering prices, which in turn has positively impacted the amount shoppers are putting in their baskets. For example it has cut prices by over 15 per cent on fruit and veg, a move that saw volumes grow by almost 20 per cent.

Food like-for-like sales grew by 1.6 per cent in 2015, with like-for-like volumes up 5 per cent.

Via a plan called ‘True North’, the Co-op is aiming to become ‘the UK’s number one convenience retailer’, a strategy that seems to be showing signs of progress after it was named by Kantar as the most frequently visited major retailer in the country. Like-for-like sales in its convenience stores rose 3.8 per cent against 2.5 per cent for the rest of the market.

But despite slashing prices, the Co-op is keen not to get stuck in a battle with the discounters, with Pennycook stressing the business is not “in a race to the bottom”.

“We are not here to compete against the discounters. What customers were telling us was that price was the biggest barrier to shopping and we want to get to a fairer price and a fairer place, which is a combination of lowering prices, and a great focus on value for money of which price is an important ingredient. What we must avoid is lowering price and lowering quality and we do not want to do that.”

Overall underlying profit before tax was up 8 per cent to £81m, while group revenue lay flat at £9.3bn.

The Co-operative

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