February 9, 2016

Sir Stelios and his anything but easy food store

 Sir Stelios Haji-Ioannou (photo: easyGroup)
Sir Stelios Haji-Ioannou: A popular hero tries his hand at retailing
So the man who once claimed that food retailing was "easy-peasy" has done it at last. For a long time it looked as if the eloquent 48-year-old resident of Monaco had been daunted by the rigours and perplexities of council planning permissions and supplier contracts.

But Sir Stelios Haji-Ioannou has now opened a first low-budget easyFoodstore in gritty London suburb Park Royal, thus making good on his promise to undercut German discounters Aldi and Lidl in the UK. Like a latter-day Freddie Laker, the charismatic Greek-Cypriot billionaire is on a self-appointed mission to give the British people cheaper prices.

The story of a guy, whose favourite TV programme is said to be Only Fools and Horses, is well known. After creating the low-cost airline easyJet in 1995 and successfully taking it public five years later, Sir Stelios went on to found easyHotel, easyPizza, easyBus, easyGym etc. under the umbrella of his private investment vehicle easyGroup.

A serial entrepreneur will best appreciate the Derek 'Del Boy' Trotter philosophy of "some you win and some you lose". So is easyFoodstore just a good PR stunt, or is Sir Stelios serious? And, if he is, does he have a bat's chance in hell?

Facade of easyFoodstore in Park Royal/LonDon (photo: easyGroup)
Quiet before the storm: The first easyFoodstore in Park Royal had to close down temporarily on Thursday after it was besieged by Londoners hunting for a bargain
It was with great difficulty that Lebensmittel Zeitung resisted the temptation to publish at least one photo of long lines of customers queuing hundreds of yards down the road to get in on the first day, which eventually led to a temporary closure of the store last week.

But there are generally so many people eager for the freebies when most shops open for the first time that a mass influx of the greedy, desperate or simply curious gives virtually no indication as to whether a concept is going to be a sustained success or not. This is particularly the case when all items are on promotion for only 25 pence (33 eurocent).

The frantic customers were most certainly not coming for the ambience. With a surface area of approx. 800ft² (74m²) and only one check-out, small in the case of this pilot store chopped out of a former bus depot in north-west London is not beautiful. The best one could say of the former office premises is that they are functional. The only highlight among the utilitarian shelves, low artificial ceiling and strip lighting is a dash of orange paint.

With only 76 ambient lines, from ketchup to flour, no bread or deep-frozen food, no cleaning products, and zero fresh produce, few customers could have been there for the range.

It is also unlikely that the "Happy Shopper" and "Euro Shopper" own labels sourced from UK wholesaler Booker viz. European buying group AMS and Bestway "Best-in" lines stand for a treasure trove of organic superfood.

So what has easyFoodstore, which only opens its doors from 9 a.m. to 6 p.m., got going for it beyond sheer novelty? Former US-president Bill Clinton would doubtless answer: "It's the price, stupid." The corporate slogan duly underlines this: "No expensive brands. Just food honestly priced."

Inside the easyFoodstore in Park Royal/London (photo: easyGroup)
Spartan ambience: Maybe this lies in the cultural heritage of the Greek owner?
It is not known whether the UK's political and business élite are capable of feeling shame. But one wonders what thoughts may have come to them at this reminder of a vast underclass on their own doorstep who have no choice but to live on the very cheapest food. Maybe it gives them a sensation of power? One can only speculate.

It is perhaps incongruous or a sign of the times that a billionaire Greek, fascinated by food banks in his home country and in the UK, has been seized by a charitable urge to provide Britain's poor and doubtless soon vast numbers of migrants from the Levant with low-priced food.

"This is another way the easy brand can serve the less well-off. Given my experience in distributing food for free in Greece and Cyprus, this is a more commercial attempt to sell basic food for 25p per item to those less well-off in the Park Royal area," he says.

But, if one looks at other statements he has made recently, it is not clear whether Sir Stelios is acting as a businessman or as a philanthropist. These laudable, but sentimental illusions, however, are not impediments under which his competitors, numbering primarily the ruthless German discounters Aldi and Lidl, choose to labour.

More shelves at the first easyFoodstore in Park Royal/London (photo: easyGroup)
Keep it simple: Could the first Aldi have looked something like this in the 1960s?
The only real question for Lebensmittel Zeitung as a German trade publication is whether a concept such as easyFoodstore could torpedo Aldi and Lidl below the waterline as they increasingly transform themselves into supermarkets?

This trading-up strategy, which involves classier stores, broader assortments and more brands, has been going on since at least 2010. It is unlikely that the very poor now feel really comfortable in stores that also offer champagne, delicatessen food and increasingly fashionable clothing. Some experts warn that this increases Aldi's and Lidl's cost base and complexity while diluting their central price message.

Theoretically, this has made them vulnerable to any new player with a radical price proposition. But is easyFoodstore a real contender? Most trade commentators see the concept at best as a niche for poor urban areas that will inevitably face intense competition from the likes of Poundland or Home Bargains. It is also unlikely to derive much margin from other people's own label.

Meanwhile, Aldi and Lidl UK won't be having any sleepless nights. "Their sales are so high that they can easily compensate for more expensive shop designs. Their volumes are so huge that they can also offer better quality own label for cheaper prices," says Professor Thomas Roeb. The former Aldi manager and consultant also points to a number of failed attempts to undercut the discounters in the past. These include "Lemmi Lebensmittel" who opened 24 stores in the Ruhr area before filing for insolvency in 2014.

Cheap, cheaper – too cheap?

Even when the prices of easyFoodstore's introductory offer double to an average of around 50 pence (66 eurocent) as from the beginning of March, it is hard to see how the maths can add up.

Now that the UK multiples have foolishly let the discounters gain a threshold market share of 5 per cent (Aldi: 5.5 per cent; Lidl: 4.5 per cent) by not killing them off on prices immediately, the Germans can now also profit from local economies of scale. And, unlike the multiples, they will never allow themselves to be knowingly undersold by an easyFoodstore in any of their rapidly increasing number of catchment areas.

So, although easyFoodstore is certainly a nice idea, it looks increasingly as if Sir Stelios has gone bleary-eyed on this one and left his pocket calculator at home. For all his entrepreneurial and human qualities, Sir Stelios is not one of the Albrecht brothers (Aldi founders) or Dieter Schwarz (Lidl founder). As his beloved 'Del Boy' would put it: "You ain't got a prayer, mate."

Related articles in German: By Mathias Himberg in Lebensmittel Zeitung, no. 5, 05.01.2016 & Mike Dawson in Lebensmittel Zeitung, no. 35, 28.08.2015

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