Danish retailer Dansk Supermarked has admitted there is “still a lot to do” as part of its transformation plan to turn the business around and improve the performance of its hypermarkets.
Last year, the Danish grocer launched a strategy that included reinvesting in price, investing in new loyalty programmes, strengthening management functions and improving its hypermarket formats.
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Speaking at the World Retail Congress in Paris this week, CEO Per Bank told delegates the plan has not yet been fully implemented since its launch 18 months ago but that they are mid-way through it.
“You will soon see the first results of what we have achieved so far. It is still work in progress and there is still a lot we can do much much better than we do currently but we do think we’ve accomplished a lot in a short time.”
Dansk operates four formats across its operations, Fotex supermarkets, Bilka hypermarkets, Netto discount stores and Salling department stores. However, while the retailer has experienced growth in its discount operations, like many others across Europe, its hypermarkets are where Dansk is experiencing declines.
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“The market are we operating in is very similar to a lot of other markets in Europe and across the world. The compact hypers or hypers have been declining over the last two to three years and discount is in growth,” Bank said.
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By GlobalData“We have Netto [discount] which is one of the biggest discounters in Denmark … but we are only seeing growth in discount and so we have a dilemma operating as a multi-format company having both hypers and discounters.
“We are a leading retailer in our country but we have seen declines in two formats and if those declines continue then our profit will really be impacted … and it will affect our level of investment in stores and prices.”
In the group’s second quarter in August, Dansk said it had seen “clear progress” compared to the same period last year with sales up 3.7% to DKK14.1bn. However, the sales were boosted primarily by increased traffic to its Netto discount stores. The retailer did not break out figures per format.
Dansk says it has been important to “mobilise change” within the organisation in order to “balance” the portfolio, and so the transformation plan was developed.
“We defined a set of strategic goals. The first one was to be number one [in Denmark] by financial performance, growth, in terms of shopping experience, the customer experience, and in terms of price. Then we wanted to raise the ambitions for our international business outside of Denmark.”
Bank said the third goal is to grow profit and become a “really lean and agile” company, which meant “taking cost out and putting it in elsewhere where we need it more.”
A large part of this transformation plan, Bank suggested, was the “reinvention” of its hypermarket formats, which he said the group is currently mid-way through.
This will involve doubling the product range and revamping the look and feel of the stores. The first example of this will be ready in November, Bank said.
Aside from the hypermarket format, the CEO said the retailer will also look at boosting the growth of its Netto discount chain, through which he said there are “major opportunities” for “more aggressive growth” both at home and internationally.
“There are a lot of opportunities out there. There are not many retailers out there that have a discount format in more than four countries but we can do more.”
Bank said the company will also look at introducing a “mid-range” private label range to compliment its low and top tier lines, as well as growing its non-food online business and its click and collect service.
While the CEO is confident the changes will boost the retailer’s top and bottom lines, Bank conceded there is “still progress to be made”.
“In the medium-term, the strategy for us is about winning in the market. We have a way to go, we we realise where we needed most help was category management, concept and private label. And we need to listen much much more to the customer.
“In long-term it’s about the role of our business, doing even more … we want to expand further, first in our existing operations but if opportunities arise we want to go elsewhere as well.
He added: “Our results so far, we are gaining market share. Like-for like sales are up and our profit is up, but of course the first year is the easiest. However, it helps a lot with motivation that we are seeing growth on the bottom line. We still think we have a lot to improve but we think we are doing okay.”
