Albert Heijn makes life simpler for consumers

How we shop is undergoing rapid change but Albert Heijn, the largest retailer in the Netherlands and a successful challenger in Belgium, believes its core retail proposition and ability to change will position it for a healthy future.

Retail is one of the fastest changing markets: consumer tastes evolve almost overnight; supply chains become ever more complex; a bewildering range of new products are launched every year; and – perhaps most importantly of all – technology changes how we shop. Retail sales have been transformed by the advent of the internet, the smartphone, in-store scanning technology and a plethora of new payment methods such as Apple and Android pay.

“Change is in our DNA: we’ve been through many different stages in the 130 years since Mister Albert Heijn first opened a store in the north of Holland,” says Hendrik Jan Roel, CFO of the chain, which operates supermarkets, convenience stores and online channels and is part of Ahold Delhaize, a top 10 global retailer. Certainly, few customers of a decade ago would recognise today’s in-store concepts such as sushi bars and self-scanning. “However, our mentality has always been ‘both feet on the ground‘. What that means to us is that we are straight thinking and straight talking. These ideas shape the company’s culture.”

To this end, Albert Heijn has an egalitarian approach to retail. “Our mission has always been to offer all the ingredients for betting living – not just for a select group of customers but for all,” says Roel. “That mission is deeply rooted within the company and has enabled us to remain popular. Superficially, trying to serve everyone sounds like a risk but we believe we are able to deliver local, sustainable products and offer good value, because we work closely with our suppliers, have a very strong brand, and because we can attract and retain the best talent available in the market.”

 

The outlook for online

Online grocery shopping is expanding dramatically around the world and Albert Heijn, which in line with position in the physical marketplace is number one for online market share in the Netherlands, is no exception to this trend. “Online is definitely our fastest-growing segment, says Roel. “Ultimately, industry experts anticipate that the online food market could represent 5% to 10% of the total market.” According to research by Euromonitor, the growth in online shopping is driven by Dutch consumers’ increasing price-consciousness and busier lives, which leave them with less time to visit physical stores to compare products and prices.

Online shopping has necessitated new business strategies and structures. In September, Albert Heijn opened its fourth home shop centre, which are logistic centres specifically serving online customers and have no in-store retail function: the new centre gives Albert Heijn the capacity to make 40,000 deliveries a week. In areas not served by home shop centres, online orders are picked in-store and Albert Heijn is also experimenting with other online formats, giving customers the option to pick-up orders from stores or get rapid delivery of items ordered online.

Despite these changes, Roel is adamant that the shift to online business hasn’t required any fundamental change in mindset at the company. “We have always sought to be efficient and to provide the most relevant offer to our customers,” he says. “Online shopping has simply reinforced this need for back office efficiency and front office relevance.” Roel believes that the distinction between online and offline shopping has become less relevant: “We look at an inline market: not online or offline. Consumers want access anytime, anywhere, anyplace. Inline shopping gives us a closer connection, and more loyalty, with the consumer.”

Similarly, increasing online sales won’t necessarily result in store closures. “We always seek to have a relevant and healthy portfolio of activities. And we review white spots where we don’t have a store and look for opportunities,” says Roel. Indeed, Albert Heijn added 80 outlets to its already dense network of supermarkets from 2011 to 2016. “In the long term future, there may be fewer stores, especially in rural locations, but supermarkets, in our view, also have local relevance. We connect neighbourhoods and people, and also generate traffic for other stores. We take that role very seriously, and technology will enable us to have a far more differentiated regional store portfolio.”

 

Improving the customer experience

While online and offline shopping may be part of the same continuum, Albert Heijn wants to optimise consumers’ shopping experience by emphasising the advantages of each format. “In our physical shops we want to make shopping more pleasant and personal, with an emphasis on fresh produce for example,” says Roel. “For online buyers, the goal is to use digital technology to improve convenience. For example, by predicting your shopping list, delivering personalised offers or offering subscriptions for certain products that are frequently ordered.”

Roel is cautious about some of the business opportunities created by the most valuable commodity in the modern retail environment – data. “Our view is that the use of data must be relevant to the consumer,” he says. “It can deliver transparency and provide them with useful information about products and their implications for allergies for example. We recognise there is value in data but we do not see it as a commodity to be sold to third parties.”

Technology can play an important role in addressing one of consumers’ most common complaints about supermarkets – queueing. “We are currently piloting self-scan only stores, especially in busier locations,” notes Roel. “And we’re also seeking to make the payment process flawless for the consumer, by integrating self-scanning and self-payment – the customer could simply pay on the way out by tapping their phone.” Albert Heijn is also experimenting with augmented reality, which can be used to provide additional information about ingredients, for example. New technology will also have supply chain benefits by improving efficiency and transparency.

 

Making life simpler for consumers

While Albert Heijn is well placed for the future, with a high share of online and 35.2% of the overall grocery market in the Netherlands in 2016, Roel says that retail in general is under pressure. “All retailers need to be part of the digital journey but it can be challenging,” he explains. “Banks have a big role to play in encouraging retailers to become more digital and innovative.”