It's not all about Coles and Woolies

05 Aug, 2014 05:16 AM
Comments
30
 
If you build your business around the majors it makes negotiating with them tough

MUCH has been written about the hard-nosed approach to doing business with Coles and Woolworths, the country's two largest grocery retailers. But they are not the only vehicles for businesses that want direct access to consumers.

NQR is one alternative that has built a name as a grocery clearance retailer. The company began in 1987, selling Four'N Twenty pies that were over- or underweight and had been rejected by the major retailers.

In recent years it has tweaked its offering. Once known as a 'seconds' retailer that offered at greatly reduced prices canned goods, for example, with a small ding in them, the business now sees itself as a sales avenue for suppliers whose goods have been rejected by the majors.

It buys stock the big grocers don't want at greatly discounted prices, savings it can pass on to shoppers.

Unlike the majors, NQR doesn't offer rebates, seek compensation for shrinkage or charge for promotions.

NQR chief executive Aaron Fitzgerald says the business offers a service to suppliers. It will take pallets that don't fit Coles or Woolworths specifications, or goods manufactured for promotional purposes that have not sold before the end of their campaigns. Consumers mostly would not be able to tell the difference between a product bought at his store and one bought through Coles or Woolworths, he says.

He won't reveal numbers, but says the business has recorded double digit growth in the past four years

Although NQR stocks all the big brands across all product categories, Fitzgerald is reluctant to name his customers (although they include Coca-Cola and Goodman Fielder) for fear that Coles and Woolworths will go back to the suppliers and ask for the discounts that NQR receives.

It's an approach that has captured the attention of suppliers and consumers, with NQR opening seven new stores over the past few years. It now has 23 stores in Victoria, with ambitions to spread into regional areas in NSW and South Australia. Last month it opened a new store in Sale, Victoria.

“We plan to open four stores a year for the next five years," Fitzgerald says. "We hope to move into Wagga and Wollongong, depending on space and rental negotiations."

He won't reveal numbers, but says the business has recorded double digit growth in the past four years.

“We'll have [sales] growth of 12 per cent this year, and 5 per cent revenue growth,” he says, adding that performance will be affected by a recent $1 million investment in IT.

The performance will eclipse the industry average, however. An IBISWorld report published in June shows average revenue growth over the past five years was 2.4 per cent; the sector was worth $87 billion in the 2013-14 financial year.

NQR customers include young families, students and pensioners. Top selling products differ from area to area, depending on the demographics. For instance, the Ashburton store in Victoria sells many meal-preparation supplies such as tinned tomatoes and tomato paste. The store in Fountain Gate, an area dominated by young families, sells lunch-box fillers such as yoghurts and muesli bars.

Fitzgerald is pessimistic about the future for smaller retailers if the main grocers continue to place pressure on margins. “Large companies will survive, but they will have to find margin elsewhere, which usually happens by cutting labour costs. Small businesses will also have to cut jobs, and if they can't do that, that's where they fail.”

He says consumers will suffer from a smaller range of products on offer.

“But there are lots of opportunities for smaller retailers to make niche brands the heroes in their range," he says. "This should provide independent grocers with a platform for growth. It's also important not to always blame the majors. It's a great volume opportunity. But it's also vital to find alternatives so that your business is sustainable. If you build your business around the majors it makes negotiating with them tough because you're only negotiating on the fear of being delisted.”

One NQR supplier is Marsh Dairy Products. Managing director Robert Marsh manufactures a cheese sold exclusively through NQR and sells about four tonnes of Marsh's Jedda a month. He says both his business and NQR make a return from the arrangement and he likes the straightforward nature of the relationship.

Marsh also sells through the major grocers and says the best way to do business with them is to meet their expectations. “It's a good business partnership and our approach is to overservice our customers so we maintain good relationships with them.”

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READER COMMENTS

genazzano
5/08/2014 6:47:44 AM

Coles and Woolies are all about choice - there band or no brand - take your pick!!!!!
Inverell
5/08/2014 7:04:15 AM

genazzano well said, especially Coles, they are the worst in our area at least. They are driving out the competition to their brands every day.
Bushie Bill
5/08/2014 7:35:39 AM

Colesworth's make a significant contribution to keeping our inflation rate under control. I do not expect the "ignorant and proud" banner-wavers to have the slightest understanding or appreciation of this fact. How could they when they are ignorant and proud?
wtf
5/08/2014 9:03:52 AM

how does mis-representing the true cost of food by sending growers broke help the economy bushie? if growers go broke and we end up importing our food, what's to say the new suppliers wont jack the prices up and send many people into poverty? take it from one of your proud agsocs, if we don't produce our own, it wont be long until our new food suppliers make it unaffordable for many in Aust. By the way, who says your rate of inflation is accurate anyway, from what I'm seeing its a bunch of lies, so the reserve can fiddle the books/rates and further plunge us into the credit bust.
farmed
5/08/2014 9:11:35 AM

bushie bill, give them a medal. they are sending the agricultural industry broke. imports of basic food are increasing. the average aussie can buy one less plasma screen tv to make up for paying a fair price for good quality food from its own country. i havent got time to wave a banner, im too busy feeding tools like you!
GFA
5/08/2014 9:58:22 AM

Isn't it amazing that we have every possible rule in place to ensure producers cannot unite to collectively bargain in marketing their produce. Yet we no rules in place to ensure that buyers like Woolies/Coles/Foreign Traders/Cargill et al cannot dominate sellers via their monopsony power. We also have regulations in place to ensure that Unions CAN monopolise and dominate artificially inflated labour rates and conditions. What a joke, that the likes of bushie bill, who supports labour market protectionism and Union thuggery, preaches to anyone on deregulation and free trade.
Bushie Bill
5/08/2014 3:37:31 PM

Wtf, the old saying that the bigger the lie, the easier it is to get away with it must be your guiding philosophy. Lie 1 is that farmers are going broke, lie 2 is that the Board of The Reserve Bank are liars - If any farmers are failing, it is not because of Colesworth; it is because of their mindset which claims fierce independence whilst holding out their begging bowls demanding Australian taxpayers and consumers fill them.
morrgo
6/08/2014 6:06:07 AM

@Bushie: The credit should go to Aldi. Coles management is on record blaming Aldi for messing with the cosy duopoly's comfy business model and profits.
Bushie Bill
7/08/2014 9:58:15 AM

Where can I find that "on record" assertion, morrge?
Bushie Bill
7/08/2014 10:00:43 AM

farmed, no one is stopping you from charging whatever you want for your products, are they? Get on with it and stop whinging.
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