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An extra £500m investment in product and service innovation could put Waitrose ahead of the game

Published:  03 July, 2018

Store closures and profit warnings have become death knells for retailers on struggling high streets, and there was concern last week when Waitrose announced it is shutting five of its 353 stores.

A profit warning and plans to shut one supermarket and four convenience stores under the Little Waitrose banner were picked up widely by news outlets.

But less talked about was the retailer’s plans to invest a further £500 million over the next three years into product and service differentiation, including placing a greater emphasis on own brand labels, which currently account for over half of Waitrose’s products.

In order to “prioritise differentiation” the retailer said it plans to make adjustments to its overall estate, including closures.

A smart plan experts have suggested, and one which could help safeguard against – in the company’s own words – “generational change” in the retail sector.

“It would be more worrying if they said have no money to invest,” said Mike Callender, executive chairman at retail technology firm REPL Group. “The high street is littered with players who didn’t invest in online or differentiate their in store offer, and suddenly they have no income and nothing to invest. Sometimes it works and sometimes it doesn’t, but if you’re not investing then you’re not competing.”

Waitrose already has a strong history of investing in adding value to the in-store experience, with Sushi and wine bars as well as the offer of a free coffee with a purchase of the day’s paper succeeding in driving repeat footfall.

In a statement, the Waitrose group revealed it is now ramping up its investment strategy by continuing to invest at a rate of between £400m and £500m per year while taking “further steps worth £500m over three years” to strengthen the balance sheet.

This focus on product and service differentiation was underlined by Sir Charlie Mayfield, chairman of umbrella group the John Lewis Partnership, who said: “For us, the relentless pursuit of greater scale is not the right course. Our plans put differentiation, innovation and partner-led service at the heart of our offer.”

News that investment will go into differentiating rather than scaling up its offering is music to the ears of Callender, who believes the sector will polarise more and more as traditional bricks and mortar retailers look to set themselves apart from discounters on the one hand and online disrupters on the other.

He also highlighted Waitrose’s investment in building an agile supply chain, stocking both locally sourced spirits and wines alongside big brands, in order to compete with specialists in the area.

He said: “To stock Gordon’s as well as local craft gins in, you’ve got to have and a certain amount of forward thinking and investment in the supply chain. As time goes by, we’re going to see specialists coming to the fore. Retailers will either offer bottom dollar products, or find success by offering a service or specialism above online or mainstream channels. Those who invest now in making themselves stand out above the rest are going to reap the benefits, while others will be left behind.”