INTERVIEW with Joanne Denney-Finch, chief executive of IGD

The Institute of Grocery Distribution (IGD)

Which are the hot issues in retail? Tell us something about challenges that this industry, which is retail and manufacturers and producers, have to face while going forward.

I think that we have had lots of things that have come together all at once. So what we are seeing around the world now is certainly economic and political uncertainty, and consumers who have lost confidence -which is actually shaping the way in which they shop and the way they behave.

We're also facing some really big challenges looking out to the future, such as sustainability and limited resources. So for example, fuel prices continue to rise and so does demand: This year the amount of fuel that we actually need to produce, is the equivalent of another four Saudi Arabia's worth of production, in order to meet demand in another few year's time. So it is a big, big challenge in terms of fuel - which is making people rethink how they actually do things.

There's a huge shortage, even in Europe, in terms of water. And if we look in London, we already have the first desalination plant. So there are going to be parts of the country in different markets which suffer from, what we describe as 'water stress'.

A lot of retailers in Croatia look for the most innovative ideas. What do you see that’s cutting edge in Europe that we could learn?

If we look across Europe, and in the developed world, you've got some very mature marketplaces. We've seen lots of consolidation, and we will see more of this, this is inevitable. I think more people recognise right now that wherever you sit in Europe, you have the challenge of trying to manage the results of the quarter so your performance today goes almost against the economic cycle.

There is a real need to invest in the future and in developments and innovation, and what we're seeing right now is the dual trend, where manufacturers and retailers have to do the 'day job'. These are the ordinary things, the basics they have to do and be very, very disciplined now, because every single percentage point of growth counts. So that is the routine. And then on the other hand, everybody needs to be going against the economic cycle, where at the moment most people say it is too risky to invest. But if you don't invest, the penalty could be even greater.

There are several brave and great companies out there at the moment who say we must do, in respect to what we have done in history: invest in the future. And, given all of that, it actually means that there are huge opportunities, for the very best in the food industry. You do have to push the boundaries and you have to change the status quo. So when we look at the world right know, not just in Europe, what we actually see is a hive of activity in terms of innovation.

Online retailing in all its shapes and forms – trends? Will online shopping continue to grow, and what that means when we are talking about physical stores?

Online shopping is still only a very small part of the marketplace, even in the UK or America. In the UK it is worth £4.8bn. So, it is only a few percent of the overall market which is worth £150.8bn, but it cannot be ignored, because it is an indicator of what may come next.

And especially in the UK and in France, everybody is very focused in developing their online proposition not just for non-food but for food. In the UK it is Sainsbury's, Tesco and Asda. In France, you've got companies like Carrefour, Auchan and Casino also developing online models. One thing that has been a challenge for people is that their volumes have been small and therefore it can be difficult to make it profitable.

But, Auchan, Casino, Carrefour and more recently Tesco in the UK, have been pioneering a new approach. This is often described as 'click and collect' where you order online and pick the shopping up on your way home.

And if you want to take that on the whole different level, in London, just a couple of weeks ago, Ocado - who are a pure online retailer- have developed a shopping 'wall' in London of their products. People can click on a product on this wall and build their shopping list, then book a delivery time to have the goods delivered.

Tesco in South Korea did the same thing, in the subway they have a big wall displaying 500 of their key products and each has a QR code, (a barcode for smart phones). People use their smart phones to swipe it and again can connect and order products and arrange collection when they get off the train. So, although it is not popular in many markets, it is an indicator of what may come - that you can tap into shoppers anytime, anywhere, without the need of a shop.

What do you think, will Mobile, and Social Networks change retail industry?

It could just be a virtual wall or back lids, with a picture which people can just swipe on the QR codes in order to do their actual shop. I think with smart phone technology, shoppers around the world want to be more engaged, and want to know more about where a product comes from, where it was produced, nutrional information, whether the product is on promotion - so it's a two way dialogue. And clearly all those things you cannot put on the product itself because the labels are already congested with the information.

So what we're seeing again around the world is smartphone technology being used as a way to engage shoppers. And engaging with shoppers is an area that we're seeing huge interest from the retailers and manufacturers, for example how to best use Facebook. We have seen that with Konzum today who have experimenting with social media.

Some manufacturers and retailers are using the digital arena to generate ideas and test new concepts with shoppers, resulting in what I would describe as real consumer-led innovation.

When you think of what grocery stores will be like 5 or 10 years down the road, how will they be different from those we shop in today? The next generation of stores?

Online is proving to be especially popular for the repeat purchase of dry grocery brands that shoppers buy on a regular basis. These are products which the shopper knows and trusts and will potentially enable retailers to free up more space in-store to more profitable lines.

Creativity from retailers?

Yes absolutely. But through real engagement of the shoppers and that is because it is a tough market, so you need to find other things. But we also have the technology.

So, one thing that we are very clear about is that shoppers say it's just not going to be online, they are taking a multi channel approach. So, for example on my way to work I might go to the convenience store, on my way home I may order something online, on the weekend I might go to the town in the hypermarket, but I will buy what I want, wherever I want to suit my mood and to suit my needs. And the challenge for manufacturers is that they have to manage lots of different channels well because that is how the shoppers will shop. But it is definitely going to be multi channel.

Who are the top retailers in Europe?

I will be very careful here. I don't want to single out anybody in particular. Because I think it is different in each market. In the UK, Tesco is the big international player. And I think they have done really well in some of the markets they moved to. They are highly innovative and their brand is so strong that you have actually seen the stretching of the brand built on trust. So I think that is very interesting. In the UK some of the retailers that are top end of the market, like Marks and Spencer, and Waitrose.  

For more price conscious shoppers, there is Aldi and Lidl, who are catering for the needs of the other shoppers. If you look beyond that, in France, Auchan, Carrefour are all experimenting. Here in Croatia we have also seen some excellent innovation from market leader Konzum.

I think it is difficult to pull out any one particular company because each of them is doing some really good things and there isn't one retailer for me that particularly stands out in the crowd. Each is innovating in different ways, going at different paces and developing best practices in different areas. And here I definitely wouldn't choose because all of them are members of the IGD.  

Marija Kosor, Progressive Croatia