Rewe Group is asking suppliers for financial support for its ailing Bipa drugstore division in Austria, Lebensmittel Zeitung reports. Following the acceleration of sales decline last year, the German retailer is on a complete realignment course for the banner. Turnover fell 4.4% in 2016 vs. the previous year. Bipa is expected to be back in positive sales growth by 2019.
The repositioning of Bipa includes a management reshuffle and a complete review of the assortment, pricing and distribution of the banner. Every week, 30 of the 612 Austrian stores are being redesigned. Meanwhile, Bipa will continue to drive expansion in Croatia.
The contrast couldn’t be starker. Just a couple of months ago, Bipa’s TV ads featured a world of nature, spirtuality, alternative hipster lifestyles, far away from the monotony of daily routines – only to clash heavily with reality just a short while later. The highlight of this return to the reality of retailing, not to say everyday dullness, was the Bipa Permanent Price Live Proof – an online ‘programme’ lasting 27 hours and 28 minutes in which a TV presenter read out the new everyday low prices of more than 15,000 products from Bipa’s assortment.
Countering huge sales declines with price cuts all over the range now seems the way to go. This is not hara-kiri, but simply an adjustment to the reality of retailing. Over the past few years, pricing in the Austrian drugstore sector has come under massive pressure from various directions. Competitor dm, now the market leader, has been growing relentlessly and is considered the greatest competence in Austrian drugstore retailing, while Bipa has a stronger perfumery focus. Productivity at dm is higher – according to LZ Retailytics data, it has improved within just one year, from 6,300 to 6,500 EUR gross sales per square metre, while Bipa’s fell from 4,800 to 4,500 EUR, in 2016 vs. 2015.
An everyday low price (EDLP) programme will eat into margin when implemented, but in the mid- to long term will lead to better acceptance and loyalty among shoppers and easier planning on the part of the retailer. dm is the best example of this. The pricing of drugstore items in Austria has also been challenged by the discounters, namely Aldi Süd’s Hofer, listing branded products – and other retailers have of course reacted to this. There has also been the expansion of another German drugstore player, Müller, which brings its lower German drugstore prices partly to stir up the Austrian market. Even worse for Bipa, its perfumery and beauty positioning has been challenged by the Müller Beauty Stores, since Müller's acquisition of a regional perfumery chain.
It is now important to reduce Bipa’s dependence on perfumery; as well as driving the average store size up from the current 277 square metres to get closer to the industry standard – dm’s international average is 481 square metres – and to generate higher footfall. To do so, reducing the dominance of the candy pink store design would be a first step to broaden the appeal. Even more important would be to shift the assortment towards health, including healthy and organic foods; which would drive more people, more often into the stores. With a stronger focus on food, Bipa could benefit from Rewe Group’s grocery buying power as a positive side effect – much more so than from its internationally insignificant drugstore competence.