Retail Chinn-wag: new store format analysis from Verdict

Simon Chinn: retail analysis

In a regular new column, Verdict retail analyst Simon Chinn, assesses the latest grocery store formats and concepts around the globe

Germany’s REWE is trialing a new market-style concept in Cologne in response to rising demand for organic and local produce.

Towards the end of 2009 REWE opened TEMMA, an organic deli-supermarket combining a premium supermarket concept with a café and food service proposition in Cologne. With the new format REWE is responding to the growing consumer trend towards organic and local produce. However, the format’s high prices, niche target market and local sourcing strategy will make it costly and difficult to rollout on a greater scale.

The store’s offer consists of a range of fresh and organic produce including meats, cheese and baked goods, many of which have been sourced locally. Product categories are arranged in the form of a market and sold from deli-style counters. The aim of the concept is to provide an alternative to the discount-driven and fast-paced nature of the mundane weekly grocery shop. With a strong emphasis on customer service and a sit down deli-café area, TEMMA encourages customers to spend more time in store and promotes a more relaxed shopping environment. The retailer aims to develop a local relationship with customers through good service levels and a local offer, and thereby become a true destination store. TEMMA takes its name from the colloquial German term Tante Emma meaning mom-and-pop stores, a format REWE has aimed to recreate with its neighbourhood and local store feel.

Early reports suggest that REWE’s management is pleased with TEMMA’s performance so far. However, it is still too early to tell whether the concept will be extended beyond Cologne. REWE will assess the store’s overall performance and whether it should be rolled out further by next summer.

While the format does respond to a number of growing consumer trends in Germany, such as increasing demand for convenience and local, organic, fresh produce; the roll out potential of the format is quite limited. The concept is targeted at wealthy gourmet consumers, a growing but niche customer base. The store’s higher prices mean it will not work in every location, especially in regions where the low cost discount format is dominant. Should the concept be rolled out further TEMMA is likely to open in city centre locations tapping into demand for fresh and local produce from busy urban dwellers, commuters and food connoisseurs.

With TEMMA, REWE has identified a gap in the grocery sector for an organic deli-supermarket with a strong community spirit. While the concept is unlikely to work on a grand scale, it should enjoy success in regional capitals and large cities such as Munich, Hamburg and Düsseldorf and Vienna, for example. Selective expansion to these more affluent cities will give the retailer access to a large wealthy customer base that is increasingly looking for fresh, organic and local produce in urban environments and will feel at home in upmarket surroundings.