Sunday, 14 February 2010

Could Tesco be challenged by Alice?

Alice? Who the [heck] is Alice? More on Alice later, however as the song suggests, what seems established - living next door to her for 24 years - can change - as she leaves in a limo.

It's interesting how on a day to day basis things never seem to change and yet when you look back over a few decades you see huge changes in the way we live that just aren't apparent in the small increments of daily life or come as a sudden and unexpected shock.

This came home when I saw a news item about some footage that had recently been found and digitised that documented life for Cornish miners from 1920 and 1960. This was footage from the film unit of Holmans of Camborne - once the biggest employer in the area with over 3000 employees at it's height.

They had been around for over 100 years at that point and looking at the footage of thousands of people spilling onto the streets after a hard days work they probably never thought things would change so much. Yet now in Camborne, in place of one of the factories is that icon of retail, a Tesco store.

The only thing we can really be sure of is that nothing will stay the same.

Companies are started by entrepreneurial people who see an opportunity to challenge the status quo - they grow, become established, dominate the industry and eventually become the status quo. The challenge is that there will always be someone else who comes to it fresh, spots a new way of doing something and ultimate changes the face of the industry.

Grocery retail is one such industry which has seen big changes as they have changed from many smaller, independent retailers where the manufacturers had the balance of power to the current situation with a small number of very large retailers who now seem to hold all the power - and the customer relationships.

The manufacturers continue to look for ways to rebalance this situation - building relationships directly with consumers through a variety of means including on-pack loyalty schemes such as the latest offering from Tropicana with Juicy Rewards, but ultimately they don't have a direct purchase relationship with the consumer like the retailer has.

This is a situation that many can't see will change any time soon - and one which the retailers are increasingly maximising.

However, for someone from the early 1900's where brands were stocked behind the counter and the retailer picked and packed the goods for you, our modern day self service supermarkets would appear alien - yet they disrupted the status quo and become dominant.

In the same way, there is a new upstart on the block that could possibly challenge this hold the retailers have - they are called Alice.com.

Alice is a site which allows you to purchase FMCG goods online - nothing new there, many supermarkets offer online shopping - but which fundamentally changes the balance of power by providing a more direct relationship between manufacturer and consumer. They describe their approach saying:-

You order from Alice just like you would a retailer, but behind the scenes we work like a marketplace, allowing participating manufacturers to sell directly to you...This direct platform eliminates the retail middleman and saves lots of costs that can be passed directly on to you. And in addition to saving you money, the Alice marketplace allows participating brands to have a direct relationship with you—to reward you, personalize things for you, and work smarter for you.

What makes this service even more interesting is guaranteed free shipping on everything and the fact that it's accessible from your iPhone - so when you actually run out of something you can simply re-order it there and then - no lists. As they say on their website "Need toilet paper? There's an app for that."

The truth is no one really wants to spend their valuable spare time walking round a supermarket looking for toothpaste and toilet roll, but while we also have to purchase food for the week ahead it makes sense to do it together. However, if the increasing number of "delivered meals" services such as Dining made easy or established player Wiltshire Farm Foods start to gain ground whereby the consumer can simply order their menu for the week and have it delivered fully prepared - no waste and no hassle - then a service like Alice.com could fill the non-food gap.

I don't know if this kind of offering will ultimately break the grip of the large retailers, but it's also unclear if these retailers can continue to expand, increasing the lines they offer and the corresponding monopoly on consumers wallets.

What I am sure of though is that there will always be someone ready to challenge the status quo and even better where this provides more choice for the consumer.