Tesco’s reciprocal wholesale deal with Spanish retailer El Corte Inglés is far from a new phenomenon, but it makes plenty of sense.
Retailers wholesaling their own brands to other retailers is nothing new. In essence, it’s the logic that has underpinned the department store model for donkey’s years.
The technique is becoming an increasingly popular way of crossing borders too – a way of gaining volume, exposing new shoppers to one’s brand and serving ex-pat shoppers with the brands and products that they sorely miss.
And all of this is achieved without the pesky need to open shops, which, as we know, can be fraught with risk, humiliation and not inconsiderable expense if it all goes wrong.
All in all, the wholesale/export model is a low-cost, low-risk way of globalising a retail brand.
A master of this strategy is Iceland. I can remember, as a much younger chap, being able to get my hands on Iceland goodies in a variety of Spanish resorts through a number of different retailers.
Waitrose has also generated a fairly chunky export business that is genuinely global. The upmarket grocer’s brands are now available in a tremendously esoteric list of countries through manifold retailer partnerships.
When I was shopping a few years ago in the now deceased Cypriot retailer Orphanides, I was able to buy both Waitrose and Iceland brands in one place – great for Orphanides as a point of differentiation, great for local British shoppers and a decent bit of business for the brand owners.
Recent revelations that Tesco and El Corte Inglés are embarking on a mutual brand exchange partnership makes a whole heap of sense.
Following on from Tesco’s export activities in Asia and the Middle East, the addition of a Spanish partner is a no-brainer given the level of UK tourism.
Carrefour Spain has done a fairly credible job of stocking UK brands in select Spanish locations and the deal enables El Corte Inglés to offer a similar proposition.
For Tesco, the addition of El Corte Inglés items into the mix creates greater authority in the realm of world foods and further enhances differentiation too. Tesco is arguably streets ahead of its competitors in terms of selling international foods.
While this is great for ‘ethnic’ shoppers, it is also really popular among local folk too. My favourite section in my local store is world foods, as I love flavours and products from Asia, Africa and the Caribbean. It will now be a genuine boon that I can pick up some El Corte Inglés sardines as well.
I can’t help but enjoy the much improved variety of international foods in M&S. It becomes a genuine unique selling point and a reason to cross the road.
In an era of homogenisation and retailers looking for non-price competitive avenues, partnering with overseas retailers is a nice move.
I know a number of shoppers that favour Ocado due to the presence of premium foods from Carrefour, for example.
The first UK chain to ink a deal with Winn-Dixie and start selling grits, gravy and mac and cheese will have my custom for life.
- Bryan Roberts is global insights director at TCC Global
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