Home sweet home: for retailers too
A recent study by Roland Berger Strategy Consultants and EFMI
Business School, into the developments and perspectives in the United
Kingdom, France, Belgium, Germany and the Netherlands, suggests four
strategies for growth. The first two are mainly focused on the
optimisation of existing business models that have already proven
their worth, while the other two strategies point more towards
development and innovation.
Whether a retailer operates internationally or not, a precondition
for a structurally sound business is a strong position in the home
market. That is why researchers of Roland Berger and EFMI suggest a
decent maintenance of operations in the home market as the first
strategy.
This means shop formats need to be
thoroughly reviewed and, if necessary, reorganised. Saying goodbye to
outdated formats, such as the hypermarkets that have become far too
large, will require a radical choice. Other options are giving more
attention to private labels, as they add margin, creative marketing
as it offers distinction from others and a better knowledge of the
wishes and preferences of individual customers.
A lot depends on organic growth
Alexander Belderok, partner at Roland Berger in Amsterdam and head of
the Consumer Goods & Retail team, acknowledges that mainly large
retailers will be able to work with this first growth strategy:
“Retailers need sufficient market share and volume to be able to
implement a private label strategy that
enables them to offer more distinction and improve their margins.”
As large retail take-overs are often no longer a possibility, because
competition authorities will generally put a stop to them, a lot
depends on the possibilities to grow organically. “There are a lot
of markets where there are no other parties to take over that can
contribute to improving profits per square meter of floor surface”,
states Belderok.
Arduous international expansion
A second option is expansion across the borders, with tried and tested
retail concepts. Pioneers such as Carrefour, Ahold and Aldi made this
strategy very popular in the 1980’s and the 1990’s, but it is
still a viable option for growth anno 2012.
Meanwhile lessons have been learned from
retail concepts crossing borders, says
Belderok: “Many retailers have had trouble organising their
international expansion. Benefits coming with a larger scale appear
difficult to maintain: for example, it is not easy to have one
purchasing organisation for the entire company. It is extremely
difficult on a European scale, let alone on a global scale.”
According to Belderok, international expansion is a lot like
beginning all anew: “When you start in a new market, your own
retail knowledge is your only benefit”, he says. “Apart from
that, you have learn to work with local parties and you have to be
able to adjust your format to the local wishes. That is not easy:
Aldi is not as successful in the Netherlands as it is in Germany.
This is why Albert Heijn is staying close to its Dutch stores during
its international rollout: to benefit as much as possible from the
existing format and scale.”
Internet and innovation important for growth
The third growth strategy revolves around a retailer’s ability to convince consumers to show a new buying behaviour. This is not a new
strategy: the introduction of self-service after the Second World War
and the success of Aldi, which exported the internationally unknown
phenomenon of hard discounts in the 1970’s, are earlier examples.
A new wave of this strategy has been developed in France, where
Auchan and Leclerc are very successful at creating a market for
online supermarkets. Auchan even wants to export this concept to
China, while Tesco has been performing tests with their ‘click &
collect’ service for some time in the United Kingdom and closer to
home, Albert Heijn has been opening its first pick-up points as
well.
E-commerce and m-tail offer numerous possibilities for this third
growth strategy, but also for implementing the fourth strategy: creating innovative retail concepts. Successful recent examples are the
virtual supermarket which Tesco’s South-Korean daughter Home Plus
first showed on a subway station in Seoul and Belgian Delhaize that
brought the concept to Europe.
Who will win: bricks or clicks?
The third and fourth growth strategies have innovation as a common
denominator. The question remains who is in the best position for
growth: newcomers such as pure online players, or the existing
physical retailers if they are creative and good enough to reinvent
themselves and to start up a multi-channel operation?
“That battle has not yet been decided”, says Belderok. “Albert
Heijn is better placed to develop pick-up points than a purely online
retailer, because AH has experience with bricks. They know physical
retail as no other and they know how to acquire necessary permits and
locations.”
“Who has the best position in that area in between offline and
online, remains to be seen. Personally I believe that multi-channel
retailing has the best chances: consumers want to be able to choose
between home delivery, pick-up points and going to the shop
themselves to buy their familiar products”, he concludes.
The complete rapport can be downloaded for free at the website of
Roland Berger.
(YVL)
