More than groceries

Tea, eggs, washing powder, travel insurance, car hire – a trip to the local supermarket is about to take on a whole new dimension as Foodstuffs prepares to enter the financial services market.

Tuesday, January 14th 2003, 6:46AM

by Sue Allen

Tea, eggs, washing powder, travel insurance, car hire – a trip to the local supermarket is about to take on a whole new dimension as Foodstuffs prepares to enter the financial services market.

As well as the highly publicised banking service – a joint venture with Australian bank St George Bank - Foodstuffs supermarkets will also be offering other financial services, including insurance.

Foodstuffs chief operating officer of retail financial services James Munro, says moving into financial services was just the next step.

He says insurance products are another service they are well placed to offer.

"It’s all about creating a one-stop-shop. It’s about convenience, convenience, convenience."

Having lived in the UK, Munro has seen how successful in-house banking has been for the two major supermarket chains Tesco and Sainsbury’s.

By the end of last year, Tesco had issued 150,000 personal loans, issued 1.15 million credit cards and sold 700,000 insurance products.

After just six months offering car insurance through stores, Tesco had seized 5% market share. It holds 42% of the pet insurance market.

Munro says customers of Pak’n Save, New World, Four Square and Write Price can expect to see the first banking service launched before March.

That will increase to three products by the end of the year and full service within two-and-a-half to three years.

"Where it gets really interesting, is our ability to be innovative," he says.

He gives the example of Tesco’s shrink-wrapped travel insurance packs. Customers pick up a pack off the shelf, pay for it at the checkout and activate the insurance when they need it by ringing a freephone number and entering their personal pin details.

"We are going to be looking at innovating in all areas. We are going to do the whole lot."

This includes, he says, travel, health, home, car and, yes, pet insurance.

While Foodstuffs plans to be "price-competitive" with other players in the market, Munro says he does not envisage a price war.

"Consumers are quite savvy, and they realise about people coming into the market at one level and then eeking the margins up. We believe you should start where you plan to carry on. We will always be price-competitive, but we will not necessarily always be the cheapest on a particular product on a particular day."

He says Foodstuffs will be helped in its ability to be price-competitive because of its low overheads.

Another winning card for Foodstuffs will be its ability to cross-sell products and access consumers – every week around 3.2 and 3.5 million customers pass through their doors.

A recent survey undertaken by Sainsbury’s in the UK, showed that Tesco was doing particularly well because it was making good use of customer data to cross-sell.

Customers are also offered incentives to take up the stores' own brands in return for discounts elsewhere. For example, Tesco offers 1,500 loyalty card points which can be spent in its food and home stores if customers take up car insurance.

There are no clear details of what discounts and customers can expect from Foodstuffs, but Munro says it will happen.

"Loyalty bonuses are not a new concept, but it becomes worthwhile when it’s worth something to the consumer. If we extend into financial services, bear in mind our low overheads, our ability to cross-pollinate is huge."

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