Retail of Elections

I am back after a long break and holiday season is long gone and its election primary season. As the economy tip-toes on a thin line with recession looming large, the country (US in this case) is few steps away from electing its new president. But before that it is walking through a very interesting yard of primaries for nominating a presidential candidate with both the parties (GOP and Dems). I came across a very interesting article by David Brooks of the NY Times on a Retail consultants perspective of the Democratic nominee race (i.e. Hillary v/s Obama). Essentially the consultant (Dr. Retail) compares the candidates with 2 distinct grocery store profiles i.e. the Safeways of the world equated to Hillary and the Whole Foods of the world equated to Obama. One is commodity based and the other is aspirational based. Ofcourse its too simplistic but for all the retail enthusiasts out there just another view through their prism!!!!

Crumbling Wal?

For the last decade or so the retail landscape has been dominated by the Bentonville giant. Numbers from as recent as 2004 reflect the hold it has on retail market. But like changes in every field, the one in retail also came swooping and W*M has some challenges on its plate. I came across a very good article by Paula Rosenblum of Retail Systems Research on the challenges facing the giant. Some key observations cited by Ms. Rosenblum that I found interesting were pertaining to how retailers have responded to W*M's presence - "In a post Wal-Mart world, retailers could not differentiate on operational efficiencies, or selling commodities. Wal-Mart owned that space. Retailers like Target, who made hay by selling really cool stuff cheap (or somehow making commodities seem cool), Costco who made warehouse shopping chic, and Whole Foods, who gained its customers trust by being at the forefront of eco-friendly and healthy, started knocking the ball out of the park by NOT being like Wal-Mart". The article goes on to recommend how W*M can use IT to bring back its "mojo". One very interesting part of this recommendation was the use of RFID instore to track stock movements. However given some of the technological (hardware) problems related to RFID, I am not sure how practical that is. Only the future will tell if the Wal's crumbling or the Mojo's Risin.....

Glocalization

A very interesting report on the future of Retail in 2015 was published jointly by TNS Retail Forward and Retail practice of PriceWaterhouseCoopers. The report talks about 2 distinct groups of people emerging based on the age profiles - the Baby Boomers: 65 and above who will still go for the big box retailers and the The Millenials: 35 years of age who are more environmentally conscious, technologically savy and purchase based on lifestyle. Another interesting prediction is the growing diversity in the population where more than half of the population under 25 identifying themselves as non-whites. The study talks about how "The 'one-size-fits-all' approach of the 1980s is not going to work as the population becomes more diverse and tech savvy during the next decade.'' The report talks about trend as "The best way to define this trend is through the term 'glocalization:' retailers will need to serve customers across major geographic, cultural, legislative and regulatory boundaries, all while catering to local tastes, traditions, lifestyles and economies."

Climbing the Wal

As Walmart's same store sales growth has slowed down, some interesting insights have been done on the reasons behind it. I found one such insight on Reveries.com website based on an article in Wall Street Journal by Gary Williams. One thing that I found interesting was "The pricing gap between Wal-Mart and rivals has narrowed, and more customers are now choosing convenience over wading through a supercenter". I used to wonder if I was the only one who got lost and confused in a gigantic WalMart super center. There was just too much signage and the one in my neighbourhood was so crowded that it would be difficult to find an associate to help out. Which brings in another interesting point - on an average (as per a study which I need to dig up and link it here) a shopper spends 22 mins in a Wal Mart store but how much of that is spent searching and how much is spent doing aisle crossover (which is what the super centers are counting on to up their avg top line sale)? I wonder if this is a fundamental issue with the supercenter format itself? As life becomes faster (can it get any more faster???), if its time for more smaller lifestyle dedicated convinience based formats? Do I see a Tesco lurking somewhere!!!!!

Lessons from across the big pond

Tesco's entry into the US market is old news now. But I would like to refer to a very interesting article published by The Economist not so much from what Tesco is trying to do but the challenges it faces due to some fundamental differences in the way US Retail Operations are structured in comparison to Europe. Here is an excerpt which I found very interesting
"....In trying to compete with discount retailers such as Wal-Mart and Costco in a large country with good roads and cheap land that lends itself to big-box retailing, America's supermarkets have concentrated mainly on trying to take costs out of their supply chains. Labour is also cheaper in America. This has encouraged supermarkets to make two sorts of food: that which lasts long because it has been dried, canned, frozen or otherwise preserved, and that which is prepared from raw ingredients on site. "

However the preference for organic food and new age stores like The Whole Foods offering a range of pre-cooked food that has a shelf life of a few days, that might be changing.

On the other hand here is the contrast in the environment in which the European retailers compete

"...British supermarkets, in contrast, operate on a small, crowded island with restrictive planning laws. Whereas American stores are good at moving goods hundreds of miles and keeping them cheap, British retailers specialise in regular, frequent deliveries to heaving city-centre stores. Their supply chains are more sophisticated because they have to be. Stores can be so small that they have to switch from selling sandwiches at lunchtime to selling ready-made suppers in the afternoon.
Expensive labour and a shortage of space have encouraged British retailers to seek economies of scale from centralised food preparation. Rather than cooking on site, they make a wide range of meals that can last for a couple of days. These are not just staples such as macaroni cheese or lasagne. A typical London supermarket now stocks more than 50 different meals, including treats such as organic beef in wine, Keralan prawn curry and Asian noodles with vegetables. "

Bloody interesting ainhhh!!!!!!