Beware the middle ground.

winners and losers

I walked around most of the UK grocery majors stores the other day. I haven't done this for a while - all together in one day. The stark differences in layout, style and presentation shocked me having been able to compare and contrast in a matter of hours. It got me thinking....

I fondly remember in the family household at Christmas-time past, there were a number of alcoholic staples vying for space in the Yuletide family drinks trolley (there was no actual trolley ....we were not that posh!). Alongside the box of dates and jar of cherries jostling for position were old favorites like Harveys Bristol Cream, Stones Ginger wine, Warninks Advocaat and QC Cream Sherry. In the case of the latter I always remember the "Quality Counts" moniker. And it got me thinking....

There's a saying that is handed down through the generations...."if you are going to do something ... do it well", Business is often about finding something that your potential customers want, and you do well. Ideally something that no one else can. In management speak we might call it differentiation by brilliance ..... or doing something that few others can copy or compete with.

The polar opposite is differentiation by price - doing only the very basics at an incredibly very low cost (or as exponents of this art might prefer.. for exceptional value).

High Quality / brilliance

Invariably accompanied by high(er) price and often scarcity of supply and resilient products.

This is where the "do it well" saying comes in... It's something worth holding onto if you are not in the mood to compromise with your service or product offer….. think High-quality (maybe luxury) products. Patek Philippe and other high-end watch makers: Cost is never a barrier that compromises quality. They may layer functionality (the high-end watch industry quaintly call these "complications") but never quality. Similarly: Porsche 911: Never cheap. Functionality is layered but driving quality is never compromised. On a more day to day / accessible level we might include Apple or even McKinsey or a magic-circle law firm in this category: you pay (handsomely) for the perceived high quality that you get.

Exceptional Value

Characterised by high volume and layering of price add-ons

At the other extreme of the market sit the low cost players. Ryanair, Southwest and Wizz in air travel. Lidl and Aldi, for example, in grocery retail. Offers that are unashamedly (and proudly) low cost / great value. With a model where non-essentials are removed from the core offer and efficiency and economy are central to the business. Producing only necessary functionality to achieve lowest cost and price. They never compromise on lowest cost for their core product and resist the temptation to add quality / service - safe in the knowledge that low cost is for many compelling. And why not?

Both extremes of the spectrum are attractive: be amoungst the selective elite or fight aggressively in low cost / high volume sectors.

Availability or Convenience

There is a third differentiation sitting in the middle ....which is availability. You are simply available or convenient - when no one else is. Local businesses with available products and faster response times fit into this space.

Back to the UK grocery sector........

At the exceptional value end Aldi and Lidl are thriving with well executed stores even with an occasional subtle flourish of excess ( in store bakeries / extended wine offers) whilst doing the basics well. We might add Iceland and B&M etc into this (albeit less subtle) end of this sector. Volume businesses that are all working hard to thrive at this end of the market.

Great quality - is the high ground where M&S and Waitrose traditionally camp. Quality products and more pleasant environments. Add Ocado's on-line service into this mix as well. Performance is mixed but longevity in this niche appears assured.

Co-op sits securely in its long term traditional convenience role supplying great availability locally to shoppers.

But what of the middle ground where players are neither the best or the cheapest? .... there are some big fish here..

Tesco hedges its position with an aspiration to mix low cost (tertiary brands, value ranges), availability & convenience (Express, One Stop and Premier via Bookers).

Sainsbury alternatively mixes perceived higher quality and availability & convenience (Local).

There is one player that is struggling to find its place in this hybrid landscape - Asda. No longer the cheapest and playing catch up by being late to the convenience game. And with store environments that on inspection are often less than good.

The lesson that might be drawn from this brief journey through market positioning and the grocery sector?....

Be the best, the cheapest, or be the most available/accessible - or blend a hybrid of these. Dont be caught out by being none of them - beware the middle ground it's usually never a great place to be.