Essential Retail – NRF 2018

On a recent trip to New York for the NRF Big Show, I was asked my thoughts on the value of additional services in retail for Essential Retail.
Portuguese retail group and Continente parent company Sonae says success in retail comes through developing additional services – some tech led, and some that simply take the business into new verticals.

Sonae Group’s head of marketing Tiago Simoes gave an insight into how a commitment to developing additional services and continually seeking new business avenues has helped establish the company as a leading player in Portugal and beyond.

In a presentation at NRF 2018, Simoes detailed the diversity of Sonae’s various brands, which include the supermarket Continente, pharmacy chain Well’s, and stationery retailer Note, which have helped the group become a $5 billion+ company through operating diverse business models.

Simoes explained how over the years Continente has expanded from pure retail to also run its own telco arm, investment management services, and shopping mall management company, among other offerings.

Digital services it has launched for customers include a Whatsapp customer communication platform, digital queue management system, and in-store street view via mobile phone.

At Well’s, customers can choose from a health-plan and other medical services, alongside a range of medical products for sale. Note has grown as a business by introducing copy centres and in-store hubs run by the national post office.

As Essential Retail reported back in 2016, Sonae was one of the retailers that recognised an opportunity to leverage the popularity of augmented reality game, Pokemon Go. In another example of its services-oriented culture, it developed a mobile app in reaction to the growing trend in just three days, to keep customers entertained and encourage game players into store.

Sonae’s model is representative of a growing trend within the wider retail industry, to bolt on services to the traditional mission of selling products. The move by Sweden-based furniture retailer Ikea, last year, to acquire Task Rabbit is a prime example of this pattern.

Task Rabbit is a San Francisco-based startup that will supply people to assemble flatpack furniture for Ikea customers in their homes. It’s an online network of handymen and women based all around the world.

Karl McKeever from retail consultancy Visual Thinking says Ikea has been “cute” with its acquisition, which the retailer has indicated might be the start of other digitally-focused takeovers.

“It’s realised that a barrier to its growth is the fact people are nervous and unconfident assembling flatpacks,” he explains, adding that it also acts as an upselling tactic.

“It makes the point that there is money in services – not necessarily in product.”