Introduction to the Company: Waitrose & Partners
Waitrose & Partners, formerly known as Waitrose, is a British supermarket brand that sells groceries under the umbrella of the UK’s largest employee-retailer, the John Lewis Partnership. There are approximately 300 Waitrose supermarkets and convenience stores available around Great Britain, including London, southern England, East Anglia, Wales, Scotland, and the Midlands. It was founded in 1904 and acquired in 1937 by John Lewis Partnership (Eweje and Bathurst, 2017).
The grocery store chain aims to continue increasing its retail presence in the United Kingdom and beyond by entering into the convenience market and creating new stores of formats, and collaboration with other retailers. Due to the increased need of customers to find as many essential products at a store as possible, Waitrose is also planning to strengthen its non-food offering of clothing and houseware items in the Food & Home store (Coronavirus: latest retailer announcements, 2020).
Besides, by partnering with an online grocer Ocado, Waitrose can deliver groceries to homes around the country, which is essential during the COVID-19 pandemic. The company’s annual revenue for 2020 was $8.22 billion (£6.08 billion) (Dun&Bradstreet, 2020). The potential for Waitrose & Partners’ expansion is significant, and it is vital to evaluate the company’s strategy and positioning in the current market. This report aims to conduct a strategic management analysis of Waitrose & Partners, including the company’s market environment analysis, internal analysis, resource and capability analysis, and strategy formulation.
Market Environment Analysis
PESTLE
A PESTLE analysis is used as a broad activity associated with fact-finding. It is essential to help organisations establish their external factors that can impact the decision-making process. On their own, organisations cannot directly influence the changes in the elements, while the factors themselves cannot control an organisation’s profitability.
In terms of political factors, Waitrose & Partners experience the most significant pressure from varying trade policies as well as the uncertainty in the import and export operations. These limitations emerged reasonably recently due to the Brexit vote, which led to the overall decreased influence of the country in the global arena (Oliver et al., 2018).
The financial crisis, which is associated with the economic environment, adds to the challenges that Waitrose faces. With the help of the strong brand image, the company has been making attempts to stabilise its infrastructure to meet the recession on a long-term basis. To sustain itself in the unstable economic environment, the company had to implement flexible strategies associated with continuing to produce and selling foods of relatively superior quality compared to other grocery retailing companies in the United Kingdom.
The impact of social factors on Waitrose is moderate. The areas of development that are associated with the social component of the environment include the increased growth in private labelling, the focus of consumers on healthy food choices, the expectations of getting accurate and transparent product information, as well as the overall demand for safe products. Thus, customers are becoming more health-conscious, which requires the company to be attentive to such needs (Hanspal and Devasagayam, 2017).
The technological factors have a high impact on Waitrose as the use of online channels has accelerated, with more customers using the Internet to buy groceries (eMarketer Editors, 2020). In addition, the rise in sustainable technologies calls for the reconsideration of some of its operations to opt for renewable energy sources as well as selling products provided by reliable and ethical suppliers.
Legal factors have a moderate impact on Waitrose & Partners’ operations and are mainly concerned with regulatory actions and environmental regulations to which UK grocery stores are mandated to adhere. For example, in 2019, UK supermarkets signed a government pledge to help reduce wood waste by two times (UK Government, 2019).
Therefore, the environmental factor has a strong influence on the company due to the increase in attention to aspects of sustainable production and distribution. The UK Government initiative intended to reduce food waste is an example of the direction in which Waitrose & Partners will go in the nearest future.
Porter’s Five Forces Analysis
The Five Forces Analysis created by Michael Porter is intended to analyse an industry’s attractiveness and the potential profitability of companies operating in that industry. The competitive rivalry in the UK’s grocery store industry is intense. The market was worth £193.6 billion in 2019, and it has been growing since 2004 (Coppola, 2020).
Waitrose competes with Tesco, Sainsbury’s, ASDA, Aldi, Lidl, and Morrison’s in the grocery store market, and the companies’ rivalry in the market creates an environment of pressure. Every mistake that competitors make can cause a significant drawback in reputation and profitability.
The bargaining power of buyers in the industry is relatively weak because they do not have enough capability to drive prices down or demand more products or services at the current prices. Besides, the cost of switching from one competitor to another is not always small; for example, Lidl and Aldi always compete for customers because they have a similar product and price range.
This shows that customers can switch from one competitor to another because many of the industry products are undifferentiated and available everywhere. However, it is costly to switch from Aldi to Waitrose, which means that the company should be more aware of offering affordable products.
The bargaining power of suppliers in the UK supermarket industry is moderate because there are many of them both on the local and international level, which can cater to the needs of supermarkets. If a supermarket company is not satisfied with the products that its suppliers are offering, it can negotiate deals with the competitors of suppliers and make a switch if necessary. Even though suppliers’ bargaining power is moderate, the threat of new entrants is low.
It is currently challenging for new grocery store companies to enter the UK supermarket industry, which makes it more appealing for existing organisations. Going against Tesco, Sainsbury’s, or M&S as a newly-developed company will mostly result in failure because the organisations have worked in the industry for decades and developed a reputation that is hard to exceed. However, due to the increased need of customers to access online grocery store options, there is a potential for new entrants capturing the digital side of retail, although the existing market rivals have also been working on establishing and expanding their presence.
Internal Analysis
SWOT Analysis
The prolonged presence of the company in the market helps create a significant strength that other competitors do not have. Over time, Waitrose has been working with multiple partners around the UK to open supermarkets and food shops to capture larger audiences of potential customers. Over time, the partnership with Ocado has been instrumental in delivering food to the clients at home.
However, the leading partner has recently switched to the Marks&Spencer delivery service, which enabled Waitrose to use its market power and launch thousands of new and updated products for targeting online clients (Wood, 2020). Therefore, regardless of the environment, Waitrose has been useful in adapting to market needs and demands to appeal to its new and returning clientele.
As to the weaknesses of Waitrose, it is notable that the company is a retailer that targets higher-earning customers, which means that not all people can afford to go shopping there (Mullin, 2015). Even though it has got the reputation as the best supermarket in the UK several times, the consumer audience that returns to the supermarket is middle to a higher class, which creates an isolated consumer niche (Smithers, 2017).
The overall perception of the brand creates isolation in the target audience of customers, which further leads to the company losing on earnings because it does not have a range of affordable items for any ‘pocket.’
The foremost opportunity presented for Waitrose & Partners is concerned with the application of market penetration strategies intended to increase sales and secure an increased market share within the UK grocery store segment. It is possible to achieve the goal by offering customers with more value-for-money products as well as effective promotional programs that increase sales.
In addition, there is an opportunity for the organisation to increase the availability of non-food items by expanding a product range, thus subsequently increasing its revenue streams. Furthermore, the company should consider further global expansion with the help of franchising agreements and exporting.
The threats that Waitrose & Partners currently experience are predominantly associated with the severe competition in the market of UK supermarkets. The main rivals of the company are Tesco, Sainsbury’s, ASDA, Aldi, Lidl, and Morrison’s, most of which provide a more expanded price range to clients, while Aldi and Lidl regularly compete on price differentiation.
Besides, it is essential to note that the economic slowdown in the UK could be potentially harmful to Waitrose, which has a reputation as an upmarket brand. Inevitably, more customers will be attracted to discount retailers, even though their products may be of lower quality, in order to save money.
Resource and Capability Analysis
In order to comment on Waitrose’s resource and capability characteristics, a VRIO analysis will be implemented. It refers to the analytical technique intended to evaluate the company’s resources and the competitive advantage based on such resources. The value, rareness, imitability, and organisation components will be evaluated as applicable to Waitrose. When it comes to value, Waitrose aims to provide high-quality products and other items to its clients.
Such resources are considered valuable because of their premium status and the sourcing of them from a variety of channels dedicated to sustainability and luxury quality. However, the company has been working on cutting prices and increasing product differentiation, which enables the enhanced competitive advantage (Waitrose cuts the cost of hundreds of products to give affordable quality to customers, 2020).
As to the rarity component, Waitrose aims to offer unique products that are not available anywhere else. Due to the focus on the high-quality items that are more expensive, the company has created a market niche that is attractive to a specific group of customers. However, it is notable that a competitive advantage that is achieved from resources that are both valuable and rare is short-lived. Therefore, the imitation component is challenging for the organisation.
Waitrose has already been subjected to competitors’ threats of imitating high-quality products offered by the company and selling them in their stores. The privately-labelled range of items created specifically for Waitrose, for example, the Christmas range, was intended to limit the threat of imitations, however, the products are easily-imitable under the private labels created by other companies.
Finally, the organisation component is intended to capture the value and support it by processes, structure, and culture. At this time, Waitrose & Partners does not have a strong organisation to sustain its value and uniqueness because of the power of competitors. A more cohesive and reliable strategy is needed to ensure the reliability of the company’s advantage.
Strategy Formulation
Considering the disadvantages and the limitations of the previous strategy implemented by Waitrose & Partners, it is essential that the organisation works on a new approach to cater to a broader audience. The turnaround strategy that can benefit the organisation is three-fold: the digital strategy, the partnerships and channels strategy, and the sustainability strategy. The components of the comprehensive framework align with the current market trends and the demands to reorient some of the company operations to meet customer demands.
The digitalisation strategy is concerned with the overall improvement and strengthening of Waitrose & Partners’ online presence in terms of product selection and delivery. During the pandemic, it has become essential for customers to have more access to products and services online. While the company has already launched a series of virtual classes and consultations both across Waitrose and John Lewis, the company does not lead the market in this area.
Furthermore, it is imperative to grow the online delivery capacity across the UK while also offering slots for underserved populations through charitable programs (Wallop, 2020). In addition, there is a potential for collaborating with online delivery applications such as Deliveroo or Uber Eats to allow customers across the UK to order from Waitrose using their phones or tablets.
The partnerships and channels strategy need to advance to allow the company to align its processes to market needs. Specifically, the close partnership between Waitrose and John Lewis has the potential of leading to more expansion, such as the increased availability of products on one platform. For example, the Click & Collect scheme offered by John Lewis now includes Waitrose stores: customers order products on the John Lewis website and can pick them up at the nearest Waitrose supermarket, which encourages client engagement and retention (Calnan, 2020).
Furthermore, the company has already begun expanding product selection with the help of partnerships with Nespresso and Sweaty Betty (Stevens, 2020). Such collaborations are important for the strategic advantage of Waitrose because they allow improving the shopping experiences of customers that gain access to a broader selection of products that expand beyond groceries.
Besides, an increasingly important component of the enhanced partnership strategy is associated with the improvement of customers’ shopping experience. By adding more locations for Click & Collect as well as other services available from Waitrose’s partnerships, the company has the capacity of attracting more clients throughout the UK.
The third component, the environmental sustainability strategy, is essential for Waitrose to maintain a competitive advantage in the market of health-conscious consumers. For example, the company can launch marketing campaigns that promote eating with the seasons and offering deals on in-season produce. Such a program can set the company apart from competitors by underlining the principle of sustainability and the reduction of unnecessary food wastage, as related to the UK Government’s program (Waitrose, 2020).
Another example of a sustainability strategy is the promotion of British suppliers and brands. The company can introduce deals and lower prices on UK-sourced produce and other items as a means to support local manufacturers and the economy overall. The dedication to buying British is a sustainable choice because of the possibility to reduce food miles, which is the distance that products has to travel from its source of origination to the customers’ plates.
The combination of improving online presence, enhancing partnerships, and increasing sustainability efforts is expected to increase the positioning of the company within the grocery store market. Among the three tiers of the strategy, the digital-first component is the most urgent to implement. In light of the COVID-19 pandemic during which the population is suggested to avoid social places, more than 20% of the company’s sales are expected to take place online in the future (Rigby, 2020).
The changes in shopping trends have accelerated changes that have already been expected to take place in the coming years. As related to all John Lewis sales, 60% of them will be made online, which is up 40% from the previous years (Rigby, 2020). Therefore, the dedication of Waitrose to invest in making the shopping experience easier and convenient is essential for retaining customers. The company should work on developing advanced online personal services for applications and websites.
The reconsideration of the current online strategy may call for the company’s rebalancing of its brick-and-mortar shop estate. This is necessary for ensuring that Waitrose stores are located in the right places where customers need their shops to be. In addition, the strategy opens new opportunities to experiment with new store formats depending on the findings of location research.
Due to the increased demand for food delivery services, Waitrose will have to rebalance the overall availability of physical shops, opening and closing them based on demand. In general, the proposed strategy calls for a transformation in the way that Waitrose has been doing business to meet changing market needs and compete with rivals.
The increased reliance on technologies as the prominent trend requires the company to invest in detailed planning; however, the direction in which Waitrose will be heading is concerned with innovation and the improvement of customers’ shopping experience.
Conclusions and Recommendations
Over the years of operating in the grocery store market, Waitrose & Partners has positioned itself as a high-end retailer that focuses on the products of high quality that are affordable to only particular customer segments. At the same time, the market competition is high, with such retailers as Aldi and Lidl offering an extensive product selection at lower prices, which attracts more customers overall.
In such a climate characterized by a complicated financial state of the country, the political changes due to Brexit, as well as the increased social pressure associated with COVID, it is essential that Waitrose reconsiders its approach. The company can use its longstanding market reputation to its advantage and offer a more extensive selection of affordable products that more customers can purchase.
The key area of strategic transformation is concerned with meeting the demand for online services, home delivery in particular. By working with other brands under the John Lewis umbrella as well as collaborations with delivery service providers, Waitrose can expand its presence in terms of online shopping. However, it is also important to address the issue of the company orienting on a wealthier segment of clients. When working on improving its online services and presence, Waitrose can further differentiate the products and prices so that customers of all segments can shop online.
This is essential for competing against lower-cost rivals in the market and ensuring that when customers shop through Waitrose, the price range is not skewed to higher-priced items. Saving costs and offering good deals to clients is also possible through the dedication to environmental sustainability, such as the promotion of in-season produce and locally-manufactured items.
Considering the current market situation and the environmental factors that put a strain on Waitrose as a business, the strategy of doing the opposite of what everyone else is doing may not work long-term. Even though the company has been dedicated to blurring the line between the hospitality and grocery industries, now it is high time to improve the technology side of the value proposition to meet customers’ needs.
Reference List
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eMarketer Editors. (2020) More than half of Internet users have purchased groceries online. Web.
Eweje, G. and Bathurst, R. (2017) CSR, sustainability, and leadership. New York: Routledge.
Hanspal, S. and Devasagayam, R. (2017) ‘Impact of consumers’ self-image and demographics on preference for healthy labelled foods’, SAGE Open, 2017, pp. 1-18.
Mullin, G. (2015) ‘Are you rich? If you shop at Waitrose, drink champagne and can’t remember the last time you caught the bus then the answer is yes’, The Daily Mail. Web.
Oliver, T. et al. (2018) The impact of the UK’s withdrawal on EU integration. Web.
Rigby, C. (2020) John Lewis Partnership outlines a digital-first strategy for world where 20% of Waitrose sales and 60% of John Lewis’ are made online. Web.
Smithers, R. (2017) ‘Waitrose voted UK’s best supermarket’, The Guardian. Web.
Stevens, B. (2020) Sweaty Betty and Nespresso customers can now collect online orders from John Lewis. Web.
Waitrose cuts the cost of hundreds of products to give affordable quality to customers. (2020). Web.
Waitrose. (2020) Sustainable living. Web.
Wallop, H. (2020) ‘Christmas slots went in five hours: how online supermarket Ocado became a lockdown winner’, The Guardian. Web.
Wood, Z. (2020) ‘Waitrose to launch charm offensive as Ocado switches to M&S’, The Guardian. Web.