REMA 1000 uses smart technology to keep prices low, increase sales and reduce cost to serve

In this interview Robin Nygaard, Head of Supply Chain for REMA 1000, shares how the retailer is tackling fierce competition and customer demand for low-prices by reducing costs in the value chain by deploying new technology.

Interview by Symphony RetailAI’s Paul Hoffman. Robyn Nygaard presented at Xcelerate Retail Forum 2017 on the journey REMA 1000 is taking to optimize retail store operations to meet customer demand for low-prices against a backdrop of high employee salaries and fierce competition.

The retail market in Norway is quite unique, with intense competition compared to other countries. What does this mean for how REMA 1000 operates?Robin Nygaard

It’s very true, the Norwegian market is quite unique in that it is divided among three players that make up 100% of the market. So, this obviously means that competition is fierce and it’s all about the fight over market share. REMA 1000 has one chain only, but our two competitors have multiple chains and brands under their umbrella. The biggest competitor is NorgesGruppen, holding the greatest percentage of the market share, and the rest is divided between REMA 1000 and our other competitor, Coop Norge, which is marginally larger than us. While we may be the smallest player, we differentiate on having the lowest prices, which means we must have the lowest costs.

Having the lowest costs while at the same time being the smallest player is where it gets interesting. That’s basically the mandate and the background for everything we do. How can we have the lowest costs while being at a disadvantage because of the economies of scale our larger competitors have? We know that at least one of them, NorgesGruppen, because of their size has advantages in their buying and negotiations with suppliers, the biggest cost in the grocery. We make up for this disadvantage and get a cost advantage by being smarter and more efficient. That’s our main focus.

Going back ten years, there were around six players in the market but now we have just three. So, you can see that’s it’s a very tough market in which to remain competitive.

How do you envision the future of grocery retail? What are a few of the changes that you anticipate in the next few years, perhaps by 2020?

For Norway and in REMA 1000, we like to keep it simple. For us, we’re not overly focused on all the cool and fancy gadgets and widgets that we can bring to the customer. We’re not talking much yet about omnichannel, because the Norwegian shopper is quite traditional. We have low online grocery sales market share compared to our neighboring countries – and even though it’s growing, we expect this growth to be slow. We’re more traditional than our neighboring countries, or at least, say, the UK or the US. That means that I can likely predict how the Norwegian market will develop by looking outside our country at trends. This plays to our advantage in terms of knowing what’s coming. I think we need to focus first on providing the lowest prices and lowest cost and utilizing the technologies that enable this. That will always be our main area of focus.

At the same time, we have a saying in REMA 1000 – and it’s one of the most important values we have – “The customer is our CEO.” That means that, on all decision points, we consider what the customer wants. Part of this is that we recognize that the future customer will have grown up with a smartphone from the age of ten, so that means that we must be available in the channels where the customers are. We can’t ignore this. Furthermore, we’re seeing a move away from traditional market segments to a more personalized approach – we have to give every single customer what they want to buy, not what we want to sell.

Also, automation in the value chain will be crucial to having the lowest costs. When sales vary by more than 50% on different products according to the weather, we need to incorporate this information into how we plan and execute our supply chain operations. Looking further ahead, when it comes to the store, I think it’s self-service shopping with a mobile device — being able to go to the store and get your groceries, and leave the store without having to deal with anyone — will be key. And behind all of this, I think both artificial intelligence and big data will play a major part in the upcoming years. How do we catch data necessary to do large-scale, one-to-one marketing? How do you have 2 million different marketing campaigns at once?

So very personalized marketing?

Definitely, everything will be personalized in the future. We’re moving there very fast. For instance, myself, I eat quite healthy on weekdays. Say, I have chicken and broccoli on a Wednesday, that’s quite predictable. But, then I want to have a bag of Doritos on a Friday, or a Ben & Jerry’s ice cream on a Saturday. Being able to offer deals to our customers on a one-to-one basis, based on the transaction data we get from them, will be key to keeping our customers with us instead of one of our competitors.

One-third of our customers are loyal ambassadors, and one third are cheating on us, and the final third are just visiting every now and then. A big part of our focus will be on moving this last group over to be regular customers.

Why did you agree to speak at Xcelerate?

We’re working very closely with Symphony GOLD, the Retail Solutions Division of Symphony RetailAI, on many of our projects, and we’re working very well together, so it was a “no-brainer” to participate and share. I think it’s helpful to share our experiences, which have been very good, with Symphony RetailAI’s customers and prospects. Also, it’s a good platform to meet and talk with other retailers and professionals from other countries and share experiences, best practices etc.

For those who didn’t make it to Xcelerate, what are a few key themes of your presentation?

The presentation covered how REMA 1000 is working hard to move up the ladder and grow market share. Going from the smallest to becoming the second largest, to becoming the largest, which is our long-term ambition. For us to do that, our full effort needs to be focused on two things: increasing our revenues and reducing costs. Both of those are interrelated, but how we use technology is crucial in our achieving that because of the disadvantages of being a smaller player.

However, being a smaller player also enables us to be agile, that’s our advantage. Being agile is a good thing when we talk about using technology because it means that it’s easier for us to adapt and change than for our larger competitors. We’re reducing cost in the value chain by using new technology and increasing revenues by thinking more one-to-one with all our customers. Since every store has a unique set of customers, it makes sense to have unique stores in terms of both assortment and spacing. That was the main focus of my presentation at the Xcelerate Retail Forum.

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