Can these stores save IGA?

YOU’VE never seen an IGA store like this before. The supermarket chain is turning swanky in a bid to save itself.

IN-HOUSE baristas, a gourmet “cheese master”, even a perfume counter. This is the future for IGA, and it’s pretty swanky — but is it enough to save the supermarket?

Metcash has unveiled the new-look IGA store at the MLC Centre in Sydney’s CBD as the struggling supermarket wholesaler seeks to combat growing pressure from Aldi by catering to the rise of “buy as you need” grocery shoppers.

The new store — the final element of the MLC Centre’s $165 million overhaul — will place fresh food at the heart of its offering, giving about 30 per cent of its floor space to fresh produce, or roughly twice the size of a standard IGA.

Taking a leaf from Coles cafes, the new format also features a dining area where shoppers can eat their ready-made meals, and a fully stocked health and beauty section that even sells Hugo Boss, Calvin Klein and DKNY.

It’s over and above the so-called “diamond standard” refit being rolled out across IGA’s 1455 stores, launched in a bid to bring underperforming stores up to speed. Metcash says 52 stores were refurbished in the last financial year and another 100 will be complete by June 2016.

Metcash, which has seen its share price plummet by nearly 70 per cent from its high of $5.19 in 2007, is holding up the premium format as an example of the flexibility and personalisation available with the IGA model.

“This store I believe will go straight into the diamond standard performance, which is measured by sales per square metre and various other metrics,” Metcash chief executive Ian Morrice told news.com.au. “Essentially this is an evolution of the industry model — it’s a highly convenient supermarket serving office workers, commuters as well as residents of central Sydney.”

According to internal research conducted by Metcash, Australian shoppers are visiting more frequently as the “buy as you need” takes the place of the weekly shop. The new store, located next to Martin Place railway station, is designed to capture that trend of “on the go” and “mission shopping”.

Store owner Joseph Romeo.

The new store focuses on fresh produce.

Mr Morrice said the new format demonstrated the way forward for the retailer. “We’ve got the ability to support a lot of complexity, because our distribution business is about supporting individual businesses who all have different formats,” he said. “That’s what differentiates us from Aldi and also from the other national competitions.

“That’s the future for IGA, continuing to innovate and to differentiate itself away from the fairly standardised operations of the national chains, which by definition get all their efficiency out of everything being the same and homogenous.”

IGA has found itself under siege from all sides over the past decade, being leapfrogged by the rapidly expanding Aldi for third-placed supermarket by market share while being caught in the crossfire of the damaging price war between Coles and Woolworths.

Mr Morrice said Metcash, which launched its “price match” program in September last year to meet the major supermarkets on the price of popular grocery items, was focusing on “value, not just price”.

“I think we bring the buying scale that at least allows IGA stores under price match to be competitive, and we’ve also developed private label products to enable independents to be competitive with Aldi and the other chain stores,” he said.

“[But] it’s not about copying them, because we don’t want it to ever be as big a part of what we do [as for them], but it’s important for value to our shoppers.”

It also carries an extensive range of health and beauty products.

And an in-house cafe.

Magnolia Solutions retail strategist Nancy Georges said the new store format was a “smart move”.

“Metcash has definitely decided, and made the right decision, that they’re not going to get into the price war,” she said.

“They know that this is their point of difference — personalised, local shopping. The Metcash product is recognising customers want service, variety and quality, not the whole supermarket price war monster.”

Store owner Joseph Romeo from the Romeo’s Group, which owns more than 30 IGAs in NSW and South Australia, said it was more than a up-market supermarket experience like Thomas Dux.

“We’re more than that. Yes, it’s a fruit market experience, but at the same time you can get your basic staple grocery items, health and beauty, it’s about giving the consumer the full offer when they shop in our store,” he said.

Mr Romeo said there were another three on the drawing board, as well as Adelaide, where the entry of Aldi into the local market was expected to put further pressure on the independents.

“In South Australia we’ve been preparing for Aldi for a number of years,” he said. “The independents in South Australia are very strong. We’ve been competing with Aldi here in NSW and continue to grow. I believe the other two chains will probably be the ones more affected than the independents.”

Mr Morrice said Metcash had a philosophy of “plan for the worst and hope for the best”. “We’ve planned sensibly and conservatively but in all honestly we do believe that the retailers in South Australia [and WA] are as good a group as anywhere in the country and they will defend their position,” he said.

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