Jumbo dealing with dynamics in the retail market
Family-run supermarket chain Jumbo managed to grow despite adverse market conditions during and after the financial crisis by means of bold acquisitions such as Super de Boer, C1000 and, more recently, LaPlace. A radical customer-oriented philosophy and space for entrepreneurship provide the basis for this success. In an in-depth interview Ton van Veen, CFO of Jumbo, the food retail challenger which is now the number two on the Dutch market, said: “Our entrepreneurial DNA gives us the edge, especially with the transition of our market.”
Online competition is putting a great deal of pressure on the European retail market. Survival is by no means certain for non-food retailers, with many sports goods, fashion and shoe retailers already having folded. Ton van Veen believes that food retailers also need to innovate in order to survive. “The world around us is changing rapidly. We are all writing history together.” Online sales are starting to take off in the food sector. Van Veen cited the UK market, which according to the Syndy report 'The state of online grocery retail in Europe' leads the European market in terms of online food and drink sales. These are expected to grow to 6 per cent of the UK market this year. Online grocery sales are also growing rapidly in the Netherlands, which is why Jumbo is investing heavily in online shopping as well as in optimising its stores.
Following the demanding takeovers of the (then larger) retail chains Super de Boer and C1000, in 2009 and 2012 respectively, you might expect Jumbo to adopt a cautious approach. But that would be unwise, maintains Van Veen. Nobody can afford to stand still during the transition of the food market. The CFO believes that Jumbo even holds the right cards to come out on top. “In a changing market it’s all about adapting to new customer demands. If there’s one thing that Jumbo does really well it’s listening to customers. Everyone says they do, but hardly anyone actually does. We do.”
“It is a formula that looks impossible, but we have proved that it can be done.”
This is borne out by the facts. Jumbo has repeatedly been voted best Dutch supermarket chain (GfK survey). This is partly thanks to a noteworthy customer vision called 7 Zekerheden (‘seven certainties’). The most striking certainty is that the fourth person standing in a supermarket queue will get their groceries for free. All in all Jumbo’s vision boils down to striving to provide the widest range, the best service and the lowest prices. Van Veen: “It is a formula that looks impossible, but we have proved that it can be done.” Partly as a result of this striking formula Jumbo has always been slightly underestimated and for a long time retained the appeal of a challenger. “Being underestimated in this way has given us a tremendous drive to prove ourselves. It has also presented us with opportunities to take steps that no one was expecting – like buying Super de Boer and C1000.”
Another important reason why Jumbo is ready for the food market transition is its enterprising spirit, according to Van Veen. “Our mentality is: whatever the customer is doing, we have to follow. Our entrepreneurial spirit makes us agile: we are able to switch quickly in response to developments.” He points to a motto on the wall at head office: ‘Doing business together and winning’. It was this entrepreneurial drive that brought Van Veen to the company 12.5 years ago, exchanging the corporate world of first KPN and then dairy firm Campina for Jumbo – at that time smaller but highly ambitious. “The Van Eerd family surrounds itself with professionals who are allowed the space to be critical and to take responsibility. As CFO I really am a co-pilot, a veritable second-in-command.” This became apparent to him during the refinancing operation shortly after he joined. “I was given a free rein to manage that completely independently.” And when he expressed concerns about a potential acquisition of Konmar and Edah in 2006, it did not go ahead. “I was the only one who thought we were not yet ready for it at that time.”
"Our mentality is: whatever the customer is doing, we have to follow."
Banks that value entrepreneurship Another important condition for survival in a changing market is being open towards your environment, says Van Veen. Jumbo is an outward-looking company that not only looks to its own sector for information but also for example to banks, which it views as an ally in major strategic decisions. “It is incredibly important that a bank goes along with genuine entrepreneurship. Despite their troubles the banks helped us to get funding from the market in 2009 and 2012. Without that support we could never have got to where we are now.”
He says that ING played a crucial role in this, for example acting as lead bank in the takeover of Super de Boer in 2009 during the crisis. “ING is a real sparring partner and an accessible bank. They don’t just look at making money; they value entrepreneurship. Banks need to switch just as rapidly as businesses. And ING does just that.” The real value of banking advice is determined by the service surrounding the product, says Van Veen. “Just like for us it’s about more than that bottle of Coke or carton of milk, for banks it’s about more than just the balance sheet.”
Investing in online shopping
Has it not been difficult to maintain that entrepreneurial spirit following the radical acquisitions? Van Veen acknowledges that after six years of acquisition and integration the time has now come to ‘optimise’. The company aims to enhance its effectiveness by carefully cutting staff and reviewing processes, allowing it to focus fully on investing in the provision of innovative services. The supermarket chain has launched an online channel, opened more than 250 Pick Up Points and recently launched a home delivery service. “Home deliveries are starting off in Utrecht, Arnhem and Eindhoven, with large sections of the country following in the course of the year.”
"It is incredibly important that a bank goes along with genuine entrepreneurship."
In addition the retail chain is investing heavily in ‘Food experience’, explains Van Veen. “Just look at our Foodmarkets in Breda, Amsterdam and Veghel, which combine several different worlds: make it, take it, or eat it. “It is a strategy that requires a great deal of development, particularly in terms of our range.” The acquisition of the La Place restaurants and formula – the successful restaurant chain formerly owned by bankrupt department store group V&D – is consistent with this strategy. “In financial terms that was a relatively small takeover, but one that creates a wealth of possibilities. La Place has a lot of hidden value. And Jumbo can learn a lot from La Place and vice versa.”
How does Van Veen see Jumbo’s future? “Channels will blur. Food retail, foodservice and catering will all intermesh. More and more it’s all about ‘share of stomach’. People eat in different places and order from different channels at different times. Which is why we are switching to omnichannel as we want to be present throughout the circle surrounding the customer.”
New business models
Food retailers are undergoing a transition from traditional trading firms to service providers, says Van Veen. Driven by the shift towards online trading Jumbo is developing new business models. However, making money online will not be easy, says Van Veen. “Clients traditionally do the logistics themselves, they pick their own groceries. When they stop doing that, we’ll have to find an alternative way to compensate for that.” Which is why Jumbo is investing in a system that analyses and creates value from customer transaction data. Jumbo is also investing heavily in optimising its website and app in a communication platform with the aim of using this to do business with customers personally. “The trick for us is to keep listening very carefully to customers, digitally as well as personally. We are already looking into the situation where a customer takes a picture of some rotten strawberries and gets a refund to an electronic wallet. This digital personal contact is completely consistent with our vision that you must always listen to the customer.”
Nurturing culture With so many new changes in prospect, Jumbo needs more than ever before to nurture its customer-focused vision and its culture of ‘doing business together’, says Van Veen. It can do so by hiring people with the right DNA. “People who leave this company tend not to do so because they have missed a target. Someone who works for the collective good and in doing so fails to achieve a personal KPI will not immediately be made to pay for it. A person set on achieving their own KPIs at the expense of a colleague is far more likely to be given their marching orders.”