Woolworths Metro brings fresh differentiation to Australian convenience

Metro, Woolworths’ small store format, is a trailblazer for fresh foods in Australia’s convenience market.

Launched with its first store in Melbourne in August 2013, Metro now encompasses 20 stores on Australia’s Eastern seaboard in Queensland, New South Wales and Victoria.

Lachlan Drummond is business development manager for the format. He joined Woolworths 11 years ago and has notched up a nine-year career in stores before moving from Melbourne to Sydney to work in the support office for Woolworths’ smaller store formats. Drummond was also the assistant manager at the first Metro store.

Despite developing the format over the last five to six years, Drummond says the Metro business still comprises a dynamic team of support staff, which from the start has been keen to create its own, unique culture. Its focus to date, has been on bedding the format down in major cities such as Sydney and Melbourne, before moving out further afield.

“I’m really happy with the progress we’ve made,” Drummond states. “My predecessor moved on and I applied for his job, which has developed into the BDM role. I have been fortunate in having a great team around me to develop this new format and we are focusing on any areas where a big box format cannot fit. We are different to 7-Eleven and other convenience competitors, who are focused on chocolate bars and soft drinks.”

Fresh is Metro’s point of difference and is at the heart of the offer. “We are not dissimilar to Tesco Metro,” Drummond states. “Our focus is on fresh foods, fresh ready meals and hot soups and we have a strong coffee offer too, which is self serve or a barista model.”

Delivering that fresh promise from a smaller footprint has been a challenge for a business that successfully operates 1,000 big box supermarkets across Australia with seasoned logistics. Convenience stores, by their very nature, have restricted access, so the company has bought in expertise in small store logistics for the Metro operation but prudently too, Drummond states.

While the first eight to nine Metro stores were rolled out in quick succession a couple of years ago, the business then took a break in order to understand and analyse the concept and make the necessary tweaks and improvements, reports Drummond. “Now that’s embedded in our strategy and we are going out for more sites,” he says.

Fledgling market

While Metro brings something radically new and different to the Australian convenience party, Drummond concedes the market is as much as five to eight years behind the UK, for example. The business has just opened its first store beneath an apartment tower block, for instance, which is a commonplace location in other overseas markets. “We are very impressed by the sales we are getting out of that site,” reports Drummond. “It plays to the fact that customers are shopping little and often and are doing more top-up shops.”

Metro does cater for the top-up shop, with everyday essentials, but the emphasis is on really good, fresh produce and a protein range that’s heavily weighted to meal occasions, Drummond says.

In terms of direct competition, Coles is Woolworths’ closest rival. It does not operate small stores but has a forecourt-based model, which is more of a value proposition versus Metro, Drummond says. Further forecourt competition comes from the progressive retailer, Caltex, which is beginning to push fresh foods too.

On 24 December 2016, meanwhile, Woolworths agreed to sell its fuel convenience sites to BP and enter into a strategic partnership with the oil giant.

While the bid is currently facing scrutiny from the Australian Competition and Consumer Commission, it could see the roll out of a new Metro at BP convenience format.

“If they approve it, we won’t be doing anything until January next year,” says Drummond. “It’s all still pending but Australia would be the eighth country where BP has partnered with the best supermarket and it would be similar to its Marks & Spencer Simply Food partnership.”

Two distinct formats

There are two distinct Metro formats: a 250-750sq m city model, which targets office workers and commuters in highly transient locations; plus a larger 500sq m+ urban format, offering car parking for up to 50 vehicles.

According to Drummond, Metro is seeing “green shoots” for its city-based stores, which are beginning to win traction with shoppers. Typical is a new docklands location in Melbourne, where Metro complements a food court offer with its competitive, $9.00 meal deal of a sandwich, bag of crisps and drink.

“We are finding that people will come to us four days a week for that cheaper option but will treat themselves once a week and then buy into our top-up offer with take home meals,” Drummond reports.

The business deliberately capitalises on its Woolworths heritage too. “There are similarities between our range and full line supermarkets [including Woolworths own brands],” says Drummond. “We don’t want to be too dissimilar - we want to build that loyalty so that customers come to us in the week and the larger stores at the weekend for a bigger shop. We don’t want it to be a different proposition,” he asserts.

Foodvenience

Despite the newness of fresh foods in Australian convenience retail, the trend to foodservice and ‘foodvenience’ is already apparent with a surge in pre-packed meals, Drummond reports.

Metro is building on the trend in its larger stores, which feature more service departments including a fresh sushi kiosk or barista versus self serve coffee. All stores, meanwhile, have a bakery department and aim for a 50:50 split in fresh foods versus longlife [the current ratio is 40:60]. Drummond is convinced the tipping point will happen since Woolworths takes pride in its fresh credentials - its tag line is The Fresh Food People - and there is already a great deal of consumer trust in the offer. Plus, with just 20 Metro stores in three states and a further 10 smaller supermarkets, which have transferred to Metro stewardship for enhanced supervision, it’s been too early for full blown marketing campaigns.

Store design and technology

Metro has placed huge importance on the way its stores look, not least because of the surrounding competition.

“There are lots of awesome retail formats, particularly in food, in the inner city areas where we are located,” Drummond reports. He reveals Metro is already in its third design incarnation having developed from a look heavily influenced by supermarkets to one purpose built for smaller stores. “We’ve gone through each department to ensure the kit is the perfect fit for us,” says Drummond. The new look is deliberately stripped back. The ceiling grid is exposed for an industrial look, for instance, and stores feature polished, concrete floors. The lighting is directional to ensure the product remains hero - key when there is such a focus on fresh.

The technology is equally up-to-date. Woolworths is one of the largest users of self checkout in Australia. The latest Metro store, for example, features two cash self-service checkouts and 13, which are card-only plus a five-strong manned lane.

According to Drummond, there’s been a step change in the last 12 months following an analysis of shopper flow, which explored the best way for customers to exit the store and the customer count. “We’ve got that right first and then introduced the new way of thinking,” he says. The number of card-only self chioned is reported to be strong. “There’s a high percentage of card-only transactions and a high uptake in mobile payment as well,” says Drummond. “They take up less space and get customers through.”

Sustainability and future development

From a sustainability point of view, Metro adopts the same stretch targets as Woolworths, which are set for 2020. Key is a partnership with global food charities to ensure any waste goes to a good home rather than in the bin. Within convenience, upgrades in lighting and refrigeration have driven business efficiencies with doors introduced on chiller cabinets, with the exception of impulse drinks.

Metro’s focus for the next 12 months will be on increasing the fresh offer and optimizing the grocery range to make the space work better, says Drummond. Fresh logistics will be a further challenge, he adds. “Australia is so large that we need suppliers in each state and we are working on that.”

There’s also a push on securing more sites, as well as transferring supermarkets to Metro’s supervision and subsequent store upgrades.

It will keep the Metro BDM busy but not averse to eyeing the competition. Drummond attended CSE 2016 in Stockholm, London and Dublin. “It opened my eyes to what can be achieved in such a small space,” he says. “The standout, in terms of quality of food, was in Dublin.

“Networking with people - talking shop, building on ideas and hearing strategies in forecourt and convenience retailing - was also hugely beneficial,” he says.

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Fiona BriggsFiona Briggs Freelance retail business journalist

Fiona is an experienced journalist and editor, writing exclusive content for GCSF. She is founder of retailtimes.co.uk. She contributes regularly to NACS Magazine and writes articles on omnichannel shopper trends for Radial. Fiona is available for commissions at fionalbriggs@gmail.com

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