Background
Migrolino, a wholly owned subsidiary of Migros, the Swiss retail giant, was started in January 2009 as a result of the demerge of the Joint Venture between Swiss Federal Railways and Valora and Migros.. Mr. Markus Laenzlinger has been the CEO since the start. As of April 2020, Migrolino counts some 325 stores and has a turnover of close to CHF 1 bn.
Structure and Reporting
Mr. Laenzlinger was formally reporting to Mr. Beat Zahnd, who was heading up the largest country-wide cooperative Migros Aare and is leading now the division of commerce of the Migros Federation with 5 companies and a turnover of 7.3 bn. The store structure of Migros was embedded in ten regions, covering various parts of Switzerland, quite similar to the cantonal structure of this nation itself. The 28 product producing entities were part of another nation-wide Migros division, however.
Some outsiders might perhaps feel that the structure of the Migros group might be too complex. Mr. Laenzlinger did not feel so. While the Migros organization indeed might be seen as rather political and rather complicated, Mr. Laenzlinger does not believe that this might hamper him or Migrolino, neither when it comes to the ability to be innovative nor when it comes to growth.
Effects from the corona virus on Migrolino
Most of Migrolino’s gasoline-station-located stores are doing very well, with the exception of a few stores in the canton of Ticino, close to the Italian boarder.
Stores located in railway stations are doing rather badly (minus 80% to 90% in sales).
Reduction of fuel volume at the fuel stations of around 48%.
Total reduction of frequency overall by 7%
80% increase of the basket value at fuel stations
The sourcing/supply of goods/logistics function is doing fine.
Therefore, all in all, Migrolino is likely to reach the same results as it did in 2019.
Germany
Laenzlinger was not given approval when it came to expansion into the German market. He had observed that prices in Germany, in general, tended to be even higher than in Switzerland! The Frankfurt Rhein-Main area might have been a good starting target, to be served by a relatively small local logistics center, sourcing around 50 – 60 outlets. The Migros-Zurich organization (from the Zurich region) was already active in Rhein Main Aera. Eventual expansion into the rest of the German market would then be region by region, following the Frankfurt model.
Growth Initiatives
Migrolino works with McKinsey on developing a new store concept, very simple, with a high share of fresh products and with no Migros products in order to start a second expansion and to be more attractive for landlords (too many stores with the same brand). Migrolino had also run the “pick me” experiment, which involved semi-automated sourcing for each customer. This did not seem to work as intended, above all because of the need to tailor this function specifically to every individual location. But the trail will continue for another year and two more outlets.
Flexibility
Mr. Laenzlinger was in general able to open new stores across Switzerland, but with consensus from the regional organizations. A rare exception was a lack of such consensus regarding a potential new store in Baden, which was only 100 meters from a Migros outlet, however. Mr. Laenzlinger noticed that the sister organization, Denner (with much larger turnover) in general was allowed to decide independently on its new store locations, without any such consultations with the regional organizations.
Mr. Laenzlinger is a member of the international board of directors of the US Based NACS organization. Over 400,000 stores worldwide are part of this organisation, which is a source of many new and innovative concepts.
Competition
Pronto, (owned by COOP) is the major competitor, and Migrolino and Pronto tend in fact to copy each other to a considerable extent. Migrolino has recently surpassed Pronto in terms of locations and sales, and started 10 years later. Migrolino has a potential advantage over Pronto in that it can lean on the Migros Group’s wholly owned products, produced by the Migros Group itself – i.e. a “private brand” advantage. The Migros Group owned 28 different manufacturing entities. Migrolino is, however, free to buy from these or not, depending on competitive price and quality, but often tends to do so as these products are well recognized in the market.
Valora had recently won the contract for around 220 stores located in SBB railway stations but had to pay the double rent than the period before. In this bid, igrolino lost 10 stores.
In general, Valora was following an ultrafresh concept under the brand “avec” and a rather standardized so-called “box concept”, which did not give the customer much choice (i.e. similar price/product choices etc., could be found in every store).
Key Critical Success Factors
To stimulate a high frequency of purchases was seen by Mr. Laenzlinger, as absolutely critical, based on adopting the so-called “wheel of retailing”:
Relevant products
Price, and also to give the customer several choices of product/price combinations
Store layout
Mr. Laenzlinger was very much involved in these decisions. He visited the competition and generally talked extensively with customers.
Sourcing
All products during the lockdown were available. Migrolino has three supply chains. One for frozen food, one for Food/near and non Food ,and one over the night logistic. Today’s logistics functions are completely automated, from Migrolino’s central facility in Suhr and Neuendorf. This decision was made in 2014 in order to increase the overall margin for the company. The over the night logistic is still manual.
Fresh Products
This has become a central part of Migrolino’s competitive advantage. There are unique sourcing issues, which are handled as follows:
Each store puts in its orders for fresh products in the afternoon (by 15:00).
Fresh food is then prepared at night, initially in a wholly owned kitchen section in Migrolino’s Suhr facility, but later on through various sub-suppliers.
The fresh food is sent out early in the morning, via light trucks, each serving 14 stores, and left in boxes outside each store to be ready for its opening hours in the morning.
Migrol
Migrol is the gasoline-filling station chain owned by Migros Federation and is a sister company of migrolino. They traditionally saw themselves as supplier of fuel. However, later they saw themselves as supplier of energy (electric, hydrogen others), which will again depend on how to move more people to these Migrol stations (Migrolino can play a role here, by being located in Migrol facilities!).
Migrol’s CEO is now joining Migrolino’s board, and, further, Mr. Laenzlinger is also joining Migrol’s board.
The future of automobiles; Mr. Laenzlinger’s view
Mr. Laenzlinger believes that hydrogen-driven cars will take over (these are de facto electric cars). Trucks would be too heavy to be run using electric, anyway. He sees this happening over a ten-year time horizon. So, filling stations (now for petrol and diesel) will still be there in the future (for hydrogen), and parking will thus typically still be good!
Cash; Mr. Laenzlinger’s view
There will always be a societal demand for cash – without cash the government sector might be potentially too strong! The “Octopus” card functions almost as cash!
Cards; Mr. Laenzlinger’s view
The Migrol and Socar cards relate to gasoline purchases only. Cumulus (Migros’ card), is now effective in all Migrolino stores. A clearer strategy for the Cumulus card might be needed, with this card becoming associated with all purchasing activities within the Migros Group in the future.
The younger generation; Mr. Laenzlinger’s view
In general, there tends to be a lot of throwing away, say, of plastic bottles, packaging etc., often by the youth. Perhaps relevant education might help ameliorate some of this. The fresh products of Migrolino are also typically wrapped in bio-degradable packaging, again ameliorating some of the throw-away problems.
General
The Migrolino store concept is, above all, built on convenience, initially by co-locating relatively small Migrolino stores together with gas stations, so that customers might make their necessary purchases while they were filling their cars. This has since evolved into Migrolino stores located also elsewhere. Parking is however always key! Carefully stocked Migrolino stores are also key, to be able to cover most of the average persons’ basic needs. Things need to be simple, convenient, and fast!
What can we learn from the Migrolino story? Three lessons seem to stand out in particular:
To serve the customer better seems to be a question of coming up with more convenience. Migrolino seems to have hit a “nail” here:
Save time
Parking
Good quality at reasonable price
Innovations often tend to work out better when one is able to build on an already existing infrastructure. Existing gas stations were perfect such structural support for Migrolino.
New waves of change did not seem to necessarily impact Migrolino’s business model. For instance, there would always be a need for energy-filling stations for cars, now hydrogen, rather than petrol or diesel. Migrolino would be well-positioned!
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