Talk with Irish retail legend Feargal Quinn
His famous book 'Crowning the Customer' has gone a long way to popularising them. This delightful read is surely one of the best books ever written on retailing.
In its heyday during the 1980's and early 1990's, Superquinn was a Mecca for retailers world-wide. Quinn even forced suppliers to negotiate with him on the shop floor and got shop staff speeding around on roller-skates.
When he ran his own show, Feargal Quinn only ever gave interviews in his stores. "This is where I belong; this is where I should be – with my customers."
The boomerang principle
This was frustrating for the journalist because, if a customer had the slightest question, he would answer it in detail. If there was a mere hint of a queue at the till, he would stop everything and start bagging customer shopping.
If he detected the smallest piece of paper or fluff on the floor, it was always stuffed into his pocket with a frown. Could one imagine a CEO doing this at Tesco, Carrefour or Metro?
Quinn was surely right. After all, he was only living what he has termed the "boomerang principle", whereby the most important thing in retailing is to get the customer to come back again. Other retailers please take note.
Looking back over the years, it is hard not to miss the older men in the trade. Whether Feargal Quinn, Sir John Irish at Spar UK, Jean-Claude Jaunait at Système U or Willy Leibbrand in Germany, they were real characters with immense charm. True, they had their faults, but these were hugely outweighed by their good points.
Today, they have largely been replaced by pinstriped Harvard and McKinsey boys with carefully designed Apple laptops and Florentine-leather brief cases – none of whom seem to be less than six feet four inches tall.
Bring back the old boys
Doubtless, the new breed is more knowledgeable about such arcane things as discounted cash-flow or share price valuations. However, their species often seems interchangeable, and they are certainly not a patch on the retailers of old when it comes to the nitty-gritty of serving the customer.
With retrospective wisdom, Quinn's death-knell was probably sounded when Tesco entered Ireland. The big guns soon began to tell, and Quinn's higher-price, service-oriented model couldn't survive, though it was very good fun while it lasted.
Perhaps, also, Quinn, like most natural retail entrepreneurs, could stamp his character on a maximum of, say, 20 local branches; but after this bigger multiples soon become a systems and numbers game – and one he could never win as a local SME.
Be this as it may, it was fun to catch up with him and stroll down the emerald aisles, especially as it is very doubtful whether we shall see his like again.
"Always something different"
Senator Quinn, in the last few years the Feargal Quinn of old has become rather quiet. Are you suffering from creative burn-out?
Our 'boomerang principle', i.e., to get the customers to come back again is still our overriding one. But even before I sold Superquinn, its strong expansion throughout the 1990's meant that inevitably my role had changed.
As an advisor to the company, I now see my main role as inculcating core values throughout the company, namely: "Respect" for our colleagues, "Service" to our customers, a "Value" proposition, which does not only include price, and "Passionate" about food, although we do offer some non-food.
Furthermore, I want this company to offer "always something different" because shopping can be boring. One of the challenges as we outgrow our role as a regional multiple and become a national player is the challenge of innovation. This in turn raises another question: how do you manage to innovate from below rather than from the top?
It’s all very well formulating goals, but how can one inculcate something emotional as "passion"?
Let me tell you a little anecdote to illustrate what I mean: I was once visiting Fred Meijer, whose private business employs around 140,000 staff at Michigan-based Meijer. Once, I asked him a question about his centralised distribution. He answered: "Feargal, quite frankly I don’t know the answer to that. Sometimes, when you get to our size, all I can do is set the tone."
But this was the same man who refused ever to take a car parking space from a customer, even at his own company, who always ranged in stray shopping carts, never passed a piece of litter without picking it up, never passed one of his employees without thanking them for their work, or failed to greet a customer and ask them if they were content.
And you could see the effect of this behaviour in his organisation, whereas his competitors, despite being highly technically proficient, lacked that inspiration. It seems to me that as a company gets bigger, sometimes bosses fail to encourage passion down below.
That’s all very well for CEOs, but how does one get shop floor staff, who are generally not well-educated or highly paid, to identify with such values?
The very first step is at the recruitment level because if you recruit the wrong people then you are less likely to achieve the goal of identification. Immediately at the initial training level, it’s those first three months that are essential. It’s less about teaching people how to cut meat, bake bread or take money at the till, it’s very much more about teaching people our core values.
Superquinn is a local hero in an increasingly consolidated and global retail trade. Aldi and Lidl entered the Republic of Ireland in 1999 and 2000, respectively, and have since gained a combined share of more than 5 per cent on an increasingly price-conscious market. How much longer-term potential do they have?
I think those two discounters have found a gap in the market, and I consider their expansion plans realizable.
Have they hurt Superquinn?
Yes, to an extent because we didn’t develop the right counter-strategy. Where they’ve opened in competition with us, they’ve taken a chunk of the market away. We thought that we had taken the right steps to protect ourselves, but they weren’t well thought through.
For example, we joined the AMS buying group, to which, of course, Edeka is attached. AMS have an own label called "Euroshopper" which is a price fighter range designed to combat the discounters. We believed that by tagging onto this with a couple of hundred products we should be able to compete on prices.
What went wrong?
I once met a customer in Clonmel who said to me: "You’re very expensive! I can’t afford to shop here anymore. Look, for instance, at your orange juice. Aldi and Lidl only charge 79 cents for their orange juice and you are 1 euro!"
Now this is, of course, quite a gap so I pointed out to her that our Euroshopper brand was only 77 cents to which she replied: "No", that’s your cheap brand!"
In fact, she was comparing Lidl’s and Aldi’s price with our top brand. Also, although our “Euroshopper” mayonnaise was 1 cent cheaper than theirs, she compared the price of their own labels to that of the Hellmann’ brand we were offering.
When I pointed our Euroshopper price out, she replied: "That’s your cheap brand, but it’s their best brand!" In other words, she perceived the own labels of Lidl and Aldi as top brands. This was very disconcerting because we had assumed that we had the correct product and pricing policy.
After all, our "Euroshopper" mayonnaise is probably made by the same people in Germany who make the mayonnaise for Lidl and Aldi, but as far as this customer was concerned, she wanted to compare their own label lines with the Hellmann's brand. We weren’t smart enough to discover this phenomenon quickly enough, so we lost market share.
Would you be prepared to quantify Superquinn’s losses?
If you take, for instance, our store in Clonmel, where we run a fine store and full service, we had about 45 per cent of the town’s business. Now that there are two Lidls and one Aldi in the town, they’ve taken more than 10 per cent from us.
What other measures is Superquinn taking to combat the rise of German hard discounters in Ireland?
We have also begun to increase our non-food offer. For instance, we have introduced flowers, newspapers and magazines into our stores.
Other non-food lines are being increasingly offered at the caps of our gondolas etc., where we have the space, but sometimes produce simply gets in the way and disturbs customer traffic flow so this is one area which I am currently reviewing critically.
At the end of the day, however, didn’t the entry of Aldi and Lidl into Ireland mean the end of Superquinn’s profits longer term?
No, because price is only one element in the overall value equation. If we were to take a company like Wegmans in New York State as a good example, consumers don’t go there because it is the cheapest place to shop. They go because they enjoy the shopping experience and because Wegman’s are not that much out of line with Wal-Mart’s prices.
If we can manage to find a way to say: "Shop with us because you’re going to enjoy the experience and we’ve got knowledgeable and caring people who are serving you and who are passionate about food and we are not too far out of line on price," then we are still in with a chance.
So much for the German discounters, but since Tesco entered Ireland in 1997, through the purchase of market leader Quinnsworth, haven’t they just copied your customer service ideas?
Of course they have, but that’s legitimate in retailing, after all everyone copies from everybody else. Some of our own ideas were copied from Lucky Stores in California.
Do you not fear Tesco’s advantage of being able to tap the international capital markets at will in order to finance its expansion?
To be quite frank with you, I fear their buying power more.
With what countermeasures has Superquinn tried to counteract their colossal advantage in buying power?
We also thought we had protected ourselves from the upper segment of the market through AMS because the organisation has a different partner in different countries. Now the partner in the UK was Safeway, which meant that we could tag on to their buying power and purchase such pan-European brands as Coca-Cola or Nescafé at reasonable terms.
The trouble is, of course, that Safeway were taken over by Morrisons who have not yet focussed their attention on buying partnerships. This was an unexpected development.
So Superquinn is now being attacked from both above and below?
The real problem in the last five years is that our competitors have become so much bigger than we are. We may have a local advantage in the sense of being closer to our customer or of being more flexible and of knowing our customers and market place better, but the buying power of the big guns is almost insuperable.
The only argument which we can make to our suppliers is that if they lose the likes of us they will end up with a customer base dominated by mega-retailers who will dictate terms to them.
It’s certainly not easy to compete against the likes of Aldi and Lidl on the lower side and Tesco on the upper when you are only operating 19 stores. We’ve done all the obvious things such as forming a combined buying organisation with a group of Irish wholesalers.
But even though this has doubled our purchasing power, we have nowhere near the buying strength of such international heavyweights as Aldi, Lidl or Tesco. Therefore, we continue to look to tag onto someone bigger than us in order to get the benefits.
Why doesn’t Superquinn link up with a German or French retailer?
When we look around Europe for retail success stories of our size, we don’t find that many. Through AMS we have good relations with Edeka, but AMS would only give us perhaps a pan-European deal with Coca-Cola or Nescafé. More realistically, we should probably need some big British retailer to tag onto for buying power.
If we were to buy solely through a German retailer, we should have a different language on the packaging and maybe a different product as well.
To what extent has your thinking advanced since writing about the boomerang principle in "Crowning the Customer"?
The focus of our attention was and is listening to the customer, but this leads us to neglect to listen to the non-customer and why he or she decided not to shop with us. We found, for instance, a number of professional married women with children who work in Superquinn and who only buy around 25 per cent of their food at Superquinn because they are so busy.
The rest of the share of stomach they buy elsewhere, whether that be the Chinese takeaway, the pizza delivery, the little Spar shop at the petrol station on the way home, or at McDonald’s etc. So we found that we hadn’t identified the so-called "CTT" customer, in other words the customer who can’t COOK, has no TIME to cook and is too TIRED to cook.
How did you action this insight?
When we found that we hadn’t catered for this new breed of consumer, we developed, in conjunction with the regional English multiple Waitrose a broad range of around 140 chilled, readymade convenience foods.
But doesn’t having the "Waitrose" own brand on your shelves confuse Superquinn’s customers and dilute its own label image?
Waitrose is a regional greater-London retailer who is not present in Ireland so the majority of our customers probably believe Waitrose is a supplier brand.
Why does Superquinn intend to diversify its store base to include small convenience stores?
There is certainly a time-stressed customer segment prepared to pay more for a good convenience service, which is why we are experimenting in this direction. In the past we opened four such outlets with Texaco, but we’ve since discontinued the joint-venture.
The problem was that there were too many people taking money out of the equation: Texaco, the franchisee and Superquinn, so the newer ones are fully owned and aren’t attached to a petrol station.
But haven’t Tesco also blocked this avenue of advance by introducing their own Tesco Express convenience stores? Surely they will take away Superquinn’s margins by also competing on price in the convenience sector?
Tesco charge only slightly more at their Tesco Express convenience stores than at their larger stores. Indeed, we’d find it difficult in terms of economics to charge the same price in a small store which opens at 7 a.m. in the morning through to 11 p.m. at night, 7-days-a-week, especially as the average sales ticket of the typical "top-up" shopper is less.
Why not come back next year, and I’ll tell you whether we’ve succeeded?!