Market potential lures Safeway

 

"IRELAND is a fast growing economy, it has a fast growing population and that population is weighted towards young families. Those three factors are why we are here," Safeway chief executive Mr Colin Smith said about the group's plans to expand aggressively into the Irish retail market.

Safeway's plans for Ireland do not just involve grocery retailing, with the superstores planned for the north and Republic also likely to include petrol stations, dry cleaning services and creches. "In the UK, we are the leaders in providing in store creches and we plan to offer the same services in Ireland," said Mr Smith.

He added that Safeway - which will have operational and management responsibility for the joint venture with Fitzwilton - also plans to offer its loyalty card when it begins operations in Ireland. This loyalty card, which offers £1 refunds for every £100 spent at Safeway stores, has been an enormous success in the UK where Safeway has 6.5 million cardholders.

Loyalty cards are seen in the industry as one of the main ways of ensuring that customers do not move from retailer to retailer. Supermarket shoppers in Ireland are notoriously fickle and the introduction of loyalty cards - as Dunnes Stores has done this week with its Value Club card - is seen as one of the ways of ensuring that shoppers do not shop around but stay loyal.

Asked what will differentiate Safeway from its competitors on the Irish market, Mr Smith said the group's emphasis on catering for the family would be one of its main selling points. "We are focused on families, especially young families. We are the leader in the UK for creches in stores and offering products aimed specifically at children such as fruit and vegetable products in `kids size' packs as well as special baby discount schemes for young smothers."

But while the focus would be on families with young children, Mr Smith emphasised that Safeway customers would not lose out on price.

"We aim to be absolutely competitive on price. We don't start price wars but we offer added value through the loyalty card, `offers of the week' and our `best buy' schemes," he stated.

Mr Smith identified technology as one Safeway's advantages in its assault on the Irish market and laid that its technology was far more advanced than that of any other retailer in Ireland. Safeway plans to introduce self scanning in all of its Irish stores - so far this is only available at selected Superquinn stores.

Industry sources said that Safeway's plans for Ireland represent the biggest challenge yet for the Irish retailing industry and that the pressure would be on the two domestic players, Dunnes Stores and Superquinn, to respond before Safeway's first stores are up and running from late 1998 onwards.

Tesco has spent £630 million on acquiring the Quinnsworth Stewarts and Crazy Prices outlets and would be keen to boost its market share before Safeway became a major competitor. Likewise, Dunnes Stores would be moving aggressively to safeguard its position and the introduction of a loyalty card - modelled closely on the Safeway card indicates that Dunnes would fight to retain and increase its market share.

The buying power of Tesco and Safeway, as well as the advanced retailing technology of both the British companies, would however put intense pressure on Dunnes which is still at a relatively early stage in introducing scanning technology and Superquinn, whose focus on quality and the upper end of the market would be challenged by Tesco and Safeway.

With Sainsbury already in Northern Ireland and regularly tipped to move south, industry sources believe that changes in ownership in Dunnes and/or Superquinn in the years ahead may be the logical outcome, with the Irish retail industry becoming even more dominated by the British retailing giants.

With sales of over £7 billion sterling and 420 stores, Safeway is the third biggest grocery retailer in the UK after Tesco and Sainsbury and, with operating profits last year of £462 million, claims to have the highest operating margin of any major multiple in the UK.