Inside Netto Leeds: How the discounter aims to win in the UK

IGD’s Priya Chandarana explores Netto’s differentiated discount offer following a trip to Leeds to see the first store.

Dansk Supermarked CEO Per Bank outside the new Netto store

Dansk Supermarked CEP Per Bank outside the new Netto store

Focus on fresh at front of store

After recently visiting Netto in its domestic Danish market, it is clear that the discounter has brought its Danish merchandising principles to the UK, locating fresh produce at the beginning of the shopper journey. While creating a spacious front of store that differentiates it from other discounters, the layout gives shoppers a clear view of the rest of the store with its low fixtures and clear signage. In produce, Netto communicates value through its ‘Fresh Five’ offer, where it cuts prices on five fruit and vegetable lines every week.

Danish delights in bakery and beyond

Following the produce department is the in-store bakery: a hero category for Netto which allows it to highlight its Danish roots with pastries such as Copenhagener and Danish Crown, both priced keenly at 39p. With prices ranging from 15p-90p and innovative products like banana donuts for as little as 25p, Netto is clearly setting itself apart in this category and hopes to inspire customers with its Scandinavian twist. Other products from Denmark include Tom’s chocolate turtles, herring in curry sauce and blue cheese as well as brands such as Anthon Berg and LEGO: the world’s largest toy maker.

Fresh meat, 100% British ‘Fresh meat. 100% British’

Chilled meat is another fresh category that Netto believes will attract shoppers with its value prices and sourcing credentials. There is clear communication above its low fridges that all chilled meat is 100% British, understanding the importance provenance plays to UK shoppers in the category. Located in front of ambient food lines, the fridges are well-positioned for customers to pick up items quickly for a food-for-tonight mission.

Maximising appeal with tiered ranging

Netto aims to have universal appeal by stocking private label brands to suit various budgets. Easy is Netto’s UK-only entry level range consisting of c.50 lines, while premium range Premieur consists of c.150 lines and is available in Netto’s other four markets – Denmark, Germany Poland and Sweden. Following its international private label strategy, Netto has multiple mid-tier ranges with a few being created especially for the UK market such as Nayan, an Indian range, and Snaxters crisps.

Creating excitement with Spot Deals

Netto UK has listed c.2,200 SKUs (stock keeping units) in keeping with discounter principles of maintaining tight ranges. However, alongside these fixed lines, Dansk has brought its popular ‘Spot Lines’ offer over to the UK, renamed as ‘Spot Deals’. 60 predominantly branded food and non-food SKUs are brought in on a weekly basis and are sold on a ‘when it’s gone, it’s gone’ basis. For the store’s opening week, Spot Deals include branded Christmas confectionary, and on the non-food side, Russell Hobbs kitchen appliances priced between £20-£30. With these deals, Netto aims to create excitement and attract customers with its low prices on branded products.

Adding a fresh twist to UK food discount

Netto’s UK store is reminiscent of stores seen in Denmark as the discounter has stayed close to its roots. The store is refreshingly bright, light and airy which adds to its appeal and makes for a pleasant shopping environment. Wide aisles allow customers to shop comfortably with trollies, while a self-scanning price check machine highlights commitment to speedy customer service.

First store located next to Sainsbury’s

The sites of Netto’s new stores have been chosen carefully with the first store opening next to a Sainsbury’s supermarket in a retail park in Moor Allerton, close to Leeds city centre. A second store in Manchester’s Heaton Park, due to open on Wednesday 12 November, is co-located with a Sainsbury’s store, showing how the discounter is trialling different site options. Another three stores are due to open this month in Doncaster, Sheffield and Ormskirk, with two being located in retail parks alongside stores including Poundland and Argos.

No plans to move south at this stage

Netto will open five stores this month and ten by next summer, all in the north of England. With stores opening in different types of locations, Dansk and Sainsbury’s will have a clearer idea of Netto’s direction once the trial has been completed, with the senior Netto team revealing there are no plans to expand to the south as yet. Should the trial be successful we can expect that Netto stores will open all over the UK and potentially bring a Scandinavian twist to the convenience channel with Danish sister format, døgn Netto: a hybrid discount-convenience format, where 60% of lines are price matched to Netto.

Our view

This is an impressive start from Netto. Prices are keen, while products are appealing and merchandise is attractively displayed. A key challenge lies in building the brand but this week’s high profile opening will certainly have raised broader interest levels. Clearly, however, this is just one store and much will depend on the format’s ability to work in a variety of locations, competing alongside many different competitor sets. The format has very broad appeal in Denmark: we expect Netto UK to aspire to something similar, and this first store is a good move in that direction.

Hear Netto UK’s Commercial Director Nick Townend speak at the upcoming 2015 Sainsbury’s Trade Briefing: