MONTREAL — The premise that shopper-level insights can generate actionable and profitable programs got a big boost last week when Metro here announced the formation of Dunnhumby Canada, a joint venture with the United Kingdom-based marketing organization.
“Dunnhumby has expertise and sophisticated software, and we have the local experience, so together we can improve our offer and improve our business,” Eric R. La Fleche, the retailer's chairman, president and chief executive officer, said during a conference call with analysts to discuss financial results for the year and fourth quarter, which ended Sept. 26.
Dunnhumby already has similar exclusive joint-venture deals with two other supermarket operators — Tesco in the U.K. since 1995 and Kroger Co. in the U.S. since 2003 — and with leading retailers and manufacturers in various other distribution channels.
Jim Hertel, managing partner with Willard Bishop, Barrington, Ill., told SN the formation of Dunnhumby Canada follows logically after the success Kroger has reportedly derived from its joint venture.
“When Kroger stepped off the plank with Dunnhumby several years ago, it was not nearly as easy a decision as it would be today,” he said, citing estimates that the partnership has generated $200 million or more in fees for access to information and services.
“And further, because Kroger makes the store-level data available to various manufacturers, it has thousands of additional business analysts utilizing that information to develop merchandising and marketing programs for its business and identifying what works and what doesn't.”
According to La Fleche, Metro's goal in working with Dunnhumby is to improve consumer loyalty by developing and implementing more customer-centric strategies and providing the company with opportunities “to be even more relevant to customers, to be more targeted in our efforts and to be more efficient in our marketing.”
Some pilot programs with Dunnhumby have been in place for almost a year, he noted, “and we anticipate seeing benefits in fiscal 2010. It's a long-term project and a long-term investment, and it's not going to change everything overnight, but it's already starting to happen and hopefully it will gain even more traction in future years.”
La Fleche did not reveal specific details about the project.
“[The partnership] is really all about analyzing your customer base, segmenting it properly and determining who your best customers are and what they buy to help you make much better decisions and to be more effective and more relevant to your customers, with better merchandising and better marketing,” he explained. “It's a wheel that, once it gets going, really drives momentum and loyalty.”
Irene Nattel, an analyst with RBC Capital Markets, Montreal, said Metro already has a way of collecting customer-level data in Ontario through its loyalty-card program there, but it does not have a loyalty program in Quebec, “so in the near term, Metro is likely to utilize its [existing] customer data in Ontario while developing an alternative, likely electronically based loyalty program for the Quebec market that will enable the company to begin collecting data [there].”
She said early benefits of the joint venture are likely to accrue late in 2010, “but this is a long-term venture for Metro, the benefits of which will accrue gradually over the next several years.”
In response to a question during the conference call, La Fleche said he had “nothing to announce” about a possible loyalty program in Quebec, “but we will be looking at ways to capture that data.”
Metro operates 221 conventional Metro stores in Quebec and 160 Metro locations in Ontario.
La Fleche said the partnership between Metro and Dunnhumby is a 50-50 joint venture that will provide services to Metro and offer some services to the vendor community.
For the fourth quarter, which ended Sept. 26, Metro said net income was up 16.4% to $80.4 million (U.S.), while sales rose 2.3% to $2.4 billion. Same-store sales grew 2%.
For the full year, net income increased 21.3% to $337.5 million, while sales rose 4.4% to $10.7 billion.
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