OPINIONRetailers

Discount the Hard Way, from Russian Retailer Mere

A ramshackle U.K. debut could preview a U.S. expansion
Photograph courtesy Steve Dresser/Grocery Insight

Given that we all place such a huge emphasis on the retail environment and all that goes with it in this Instagram/social media heavy world we are in, it was strange to visit Mere, the Russian discount store opening its first store in the United Kingdom last week, and see precisely the opposite.

As in, it was bare bones. Eastern European, scraped back, basic retailing of discount at its very purest. This store will win precisely zero awards for the look or feel of the outlet and it’s unlikely to be visited by very many people unless they’re retail aficionados or indeed, aiming to shop there.

Mere has been advertising hard on social media for colleagues, but only paying them £9 per hour, for long shifts and responsibility in running the store. Both Aldi and Lidl chose to pay more than the market average given the higher workloads versus larger retailers (Aldi for example, pays at least £9.55, and more in London, and give their managers use of a car. Mere is choosing not to follow this idea, seemingly).

Mere has captured the headlines for its seemingly rapid expansion into Europe, with stores in the Netherlands and Belgium alongside the U.S., with adverts highlighting its interest in securing store locations in Georgia and Alabama to facilitate growth.

Who is Mere?

Originating in Russia, owner Svetofor (Russian for traffic light) incepted Mere as a trademark in 2017 and currently has about 1,800 stores in and around Russia, Romania, Lithuania, Poland, and more recently, Germany – very much the “Eastern Bloc” of Europe.

The relatively rapid expansion has seen Mere open in the U.K. (one store, soon to be two) and with further stores planned in western Europe. Its model of direct supplier deliveries and being 20-30% cheaper than competitors is one that captures attention.

What does it mean for the current players in the space?

Both Aldi and Lidl have revolutionized the discount space in the U.K. (and beyond) with their low-price, high-quality offering with ever-improved store environments and improved product ranges.

So, for Mere to advertise it’ll be 20-30% cheaper than the German discounters, themselves 7-10% cheaper than Asda (formerly Walmart-owned) is really something.

However, there is a trade-off here; Mere stores, as you’ll see, are so far removed from the “premium” discount experience that we have become accustomed to in the U.K., Australia and indeed, in the refitted and newly opened stores in the U.S.

Whereas Aldi and Lidl have both boosted their in-store environment and ambience by installing more rustic displays and softer lighting, alongside more traditional supermarket features such as self-checkout and, in Lidl’s case, an expanded in-store bakery offering.

Property and Location Strategy

The Aldi and Lidl property strategy is to aim to open near larger retailers to feed off the footfall, before opening in locations where they’ll perform well (affluent areas, where space is more expensive and highly prized).

Mere appears to be going the opposite way and deliberately targeting areas that are not quite “food deserts” (not a concept we are particularly familiar with in the U.K.) but equally, undesirable store locations for a variety of reasons.

The location in Preston has been a Kwik Save (a long defunct discount retailer) before converting to an independently owned Nisa (a convenience-based buying group), but this store closed some time ago and the building has remained empty ever since.

The store is off the beaten track with several larger competitors all between 1-2 miles away.

It’s not hard to see why there wasn’t huge competition for the site, the rent is likely to be rock-bottom which helps the cost line.

Mere has literally not wasted a dime on the marketing of the store. There is nothing that indicates it’s a Mere store, except for the temporary looking sign outside. The parking lot features zero messages and the posters next to the store are left over from the former occupants.

Inside, it’s much the same. No messages, no signage except for printer-size paper prices taped on the pallets. The only Mere “identifier” is where it’s painted the perimeter of the store in yellow, its corporate color.

Product range

Given it’s Mere’s first store, one is always braced with cynicism. It’s so hard to adjudicate, with any opening, how a business will scale. There were very few brands around the store and any featured were ones that shoppers would expect to see in other similar bargain stores, (PG Tips brand Tea, General Mills’ Shreddies cereals, and Fairy brand liquid soap) with stock likely sourced from the “grey market.”

Every product was on pallets with a single yellow sheet of paper displaying the product, price, and Mere logo. The assortment was a real variety of products from hand sanitizer to dried pasta with energy drinks in between.

Chilled items were inside a “walk-in” refrigerated room of which about half was curtained off. This contained basics such as cheese and yogurt, alongside some products I had genuinely never heard of.

Frozen foods were located in three smaller freezers that you may find in a Dollar General; again, one of these units wasn’t in use.

Non-food and general merchandise special buys were also notable. The store featured a ton of toilet paper and paper towels (as is the norm for discount stores) alongside a huge range of nonfood products which ranged from coloring books to a “Top Trumps” card game (merchandised in a shopping cart near the checkout).

It also remains the only place I have been where a 24-pack of toilet paper rolls is more expensive than a messenger-style luggage bag (just 25p between the two).

What's Ahead for Mere?

There is no doubt that this model will work in its targeted areas, and the focus on cost will also mean Mere will be able to stay the pace and cope with lower sales, given the stores’ demographic and location planning strategy.

But they will need scale though to make the model work. Aldi has said it would require 700 stores in the U.K. to get to scale, where the flywheel model would really work and bring buying prices down as they were able to buy in such quantities. Mere will likely require fewer stores, but still need a fair number (comfortably in the hundreds) to achieve scale and improve its buying position. Sourcing of stock will be sporadic, but it certainly could become an outlet for suppliers and retailers wanting to shift unwanted quantities.

For customers, Mere certainly solves a problem for the lower demographics. The store experience, while extremely basic, will result in lower prices, so Mere will be a realistic solution for some customers.

The competition in the U.K. is fierce, so it won’t be easy, but there’s a place for Mere, somewhere in the towns and cities up and down the country. As for being 20-30% cheaper than Aldi and Lidl, possibly so. But the range overlaps are hard to find, so it’s hard to properly adjudicate this.

For the U.S., they are one to watch in less affluent demographics, and I would expect Mere to open in food deserts. They have shown that they’re happy to open in abandoned or closed locations while running the store on a very lean basis.

But discount retailing has moved on. Mere is not a discounter as we know them; they’re hard discounters.

Steve Dresser is director of Grocery Insight, an advisory, insight and intelligence service for food retailers based in Harrogate, U.K. He can be reached via email or on Twitter.

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