Supermarket chain IGA is aiming to ward off pressure from its competitors by unveiling a fancy, new-look store – which includes an in-store barista, perfume counters, loads of fresh produce and ready-made, take-home meals.
If successful, the new-look store, located in Sydney’s bustling Martin Place, will become a prototype for other cities.
The swanky upgrade, by wholesale supplier and brand owner Metcash, will help relieve the struggling chain and combat growing pressure from supermarket giants Coles and Woolworths, and discount store Aldi.
A Metcash spokesperson told The New Daily that the new store was designed to appeal to the busy, young working professional and city dwellers – who took an ‘on-the-go’ and ‘shop as you need’ approach to shopping.
“Fresh is increasingly seen as an important drawcard for a store – people want to buy fresh produce and so IGA stores focus on this,” the spokesperson said.
Metcash chief executive Ian Morrice told News Corp that the new boutique supermarket in the heart of Sydney was “essentially an evolution of the industry model”.
“That’s the future for IGA, continuing to innovate and to differentiate itself away from the fairly standardised operations of the national chains, which by definition get all their efficiency out of everything being the same and homogenous,” Mr Morris said.
“We’ve got the ability to support a lot of complexity, because our distribution business is about supporting individual businesses who all have different formats.
“That’s what differentiates us from Aldi and also from the other national competitions.”
Sneak peek into the store
The new IGA store was unveiled under Metcash’s ‘Diamond Store Accelerator Program’ on Monday.
The wholesale distributor teamed up with Romeo Group to open it – named Romeo’s Food Hall – at Sydney’s Martin Place, inside the $165 million MLC Centre.
It resembled Woolworth’s upmarket chain Thomas Dux, with a fresh market feel and timber shelving and flooring throughout.
The floorspace was about double that of a standard IGA – with about 30 per cent of that taken up by fresh produce.
Customers can enjoy a coffee at the in-store cafe and sit at the dining area to eat their ready-made meals, or take home their sushi, lasagne or fish pie.
There is also a bakery section, cheese counter, fresh fish, delicatessen, groceries and a health and beauty department stocked with a massive range of make-up, lotions and high-end perfumes, all designed to appeal to the busy, young working professional.
A Metcash spokesperson said they were working on developing a private label range in 2016, and IGA currently stocked the Black & Gold ‘home-brand’ label.
“Our differentiator has always been that we are owned by independents and we can offer locals want they want in a store,” the spokesperson said.
IGA supermarkets are owned by independent retailers and also work with Metcash on tailor-making stores to suit the area in which they are located and to meet the needs of the local community.
In another response to the growing pressures, Metcash launched its “price match” program in September 2014, to meet the major competitors on the price of popular grocery items.
Romeo’s director, Joseph Romeo, told Fairfax Media, that there were no concerns that Metcash and IGA retailers could lose $300 million in sales when rival discount supermarket chain Aldi opens its doors in South Australia and Western Australia in February next year.
Puccini in the produce section at IGA Romeo’s Food Hall now open in the MLC Centre pic.twitter.com/iSxGlaBjCH
— Tess Bennett (@TessBennett) December 7, 2015
“There will always be a space for the independent – the independent has the ability to niche market to the consumer,” Mr Romeo said.
“This store (in the MLC Centre) is living proof that we have the ability to adapt and change as consumers’ needs evolve.”
In response, a Metcash spokesperson told The New Daily that last week, it was announced another 22 IGA stores would be rolled out in South Australia.
“We have nearly 1500 SupaIGA, IGA and IGA Xpress stores around Australia. They vary in size and range designed to cater for what locals in an area are shopping for – they are tailor made to suit the customer area.”
The spokesperson said IGA had a market share of roughly 15 to 17 per cent. It was believed that Aldi was behind that figure, while the two big chains – Coles and Woolworths – took up about 80 per cent of the market share combined.
Meanwhile, Aldi had also begun to expand a rollout of new-look stores, in a bid to capture middle-income earners who shopped at the big stores.
A handful of Aldi sites across the nation had already been transformed into posh-looking shopping spaces, giving customers better access to fresh fruit and vegetables, meat and dairy, and offering better product display, lighting, large silver freezers and check-outs.
Metcash posts $384m loss
In June, Metcash declared a $384.2 million full-year loss on massive write-downs, and announced the sale of its automotive division.
The company foreshadowed the loss when it recently announced $638.8 million worth of write-downs, reflecting a lower value of its assets in a highly competitive grocery market, the ABC reported.
The company said its underlying pre-tax earnings of $325.1 million were in line with estimates released in December 2014, however its earnings were well down on 2014, which stood at $390.3 million.
Excluding the one-off write-downs, Metcash said it would have posted a $169.2 million profit.
Most of the write-downs were in the company’s core food and grocery division, which the company had blamed on rising competitive pressures – as Coles and Woolworths battle for market share with each other, and newcomer Aldi and soon Lidl – which had led to falling supermarket prices and profit margins.
It hoped the IGA refurbishments would rectify this loss, but that wouldn’t be recorded until about 2017.