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Current Trends in European Retailing

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Amazon: 1.7 million UK visits in September. Marks & Spencer. best 'Traditional' Retailer ... UK Retailers margin model under threat! could be reduced by circa 50 ... – PowerPoint PPT presentation

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Title: Current Trends in European Retailing


1
  • Current Trends in European Retailing

John Wheeler, Director, RMDP Tony Savage,
Director, RMDP
RMDP Consulting C.2001
2
  • Agenda
  • Some pan-European trends
  • Department Stores - the dinosaurs mutate!
  • Discounters and off price
  • Brands and globalisation
  • Competition for locations
  • Direct Channels - clicks bricks winning
  • What next?

3
Some pan-European trends
  • Small Space vs. Large Space polarisation
  • city centre and mall volumes enabling "mega
    stores" in many sectors
  • music/dvd/minidisc
  • fashion (e.g. Bennetton)
  • Return of the "General Store"
  • wider range of products and services
  • longer opening hours
  • Large Space retailers and customers still prefer
    Out of Town
  • The Mobile Phone effect

4
  • The Mobile Phone effect
  • eroding "traditional retail" revenues
  • Many stores/brands
  • Fashion status
  • Age no barrier!

5
  • Mobile Phones Coffee Bars
  • where else could you be seen with your new phone?

6
  • Department Stores - the dinosaurs mutate!
  • Department Stores - the dinosaurs mutate!
  • strong loyal and now added BRANDS
  • Selfridges showing the way
  • international
  • aspirational
  • Young, and not so young!

7
  • Discounters and off price
  • Discounters and off price
  • in fashion terms -"the new black"
  • everyone wants them!
  • permanently changing the margin model
  • "Walmartization" of European retailing!

8
Brands and globalisation
  • Multi millions being invested
  • available everywhere
  • Massive advertising
  • desirable values
  • mass(ive) markets
  • Where do local (national) brands go?

9
  • Competition for locations
  • Out of Town locations are getting scarce across
    Europe
  • administrative - planning
  • social - car usage - "green" issues
  • cultural - local populations/local stores
  • Re-development of City centres
  • -brown fields
  • two places of
  • worship...

10
  • A full circle- back to the centre?
  • Competition drives
  • retailers back to
  • the City Centre

11
  • Direct Channels - clicks bricks winning
  • Traditional Retailers make E-tail work!
  • Critical success factors are no different in the
    E-conomy
  • right product, right place, right time
  • Customer Service
  • Brand Perception
  • Intelligent use of the Search engines reaches the
    global www market
  • Fulfilment not gee-whiz is the need!

12
  • Direct Channels - some winners and losers
  • boo.com -a really whizzy failure
  • technically clever
  • did not excite the consumer
  • or deliver the product
  • or establish a brand identity
  • Early Learning Centre - a brick based success
  • built on the Retail brand values
  • established fulfilment process before the www
  • delivered reliably
  • now equal to their largest store

13
  • What next?
  • The E-tailers continue to get better
  • sensible not over hyped
  • repeat purchases increasing
  • further erosion of "brick" based turnover
  • Retail Entertainment - "the Retail Theatre"
  • merchandise and people mix
  • "stage school " as a part of Associate Training?
  • Gross Margin pressures increase
  • Nett margins revived through intelligent supply
    chains

14
  • Retailing in Europe
  • some critical management concerns

November 2001 Sextant Management Services Ltd
15
  • Agenda
  • Brands
  • dot.com
  • Walmart
  • Issues
  • Interesting Sectors

16
  • What do customers look for-
  • store or brand?
  • Everybody shops where they feel comfortable
  • but comfort varies from customer to customer
  • I may feel fine in Littlewoods, but overwhelmed
    in Harrods
  • I believe that Waitrose is higher quality than
    Somerfield
  • Volvo make safe cars
  • I trust Marks Spencer

17
  • Brands
  • Global, consistent
  • Sony
  • BMW
  • Kodak
  • Bennetton
  • Compaq
  • Disney
  • McDonalds

18
  • Brands attract the Customers
  • Brands still growing in importance
  • Value
  • Cachet
  • Ownership aspiration
  • Lifestyle
  • Timeliness
  • Pride
  • Passion

19
  • Attracting the Customer
  • The power of the Brand
  • is a store good enough to compete with global
    brands
  • or is it just a shopfront!
  • A strong brand can go Direct
  • Sony
  • BMW
  • British Airways
  • Ralph Lauren

20
  • In the Year 2001..a dot.com e-tail business
  • is most likely to have a "bricks" presence
  • has new low cost, high availability channels to
    their Customers.
  • provides personalised offerings to their
    profitable customers.
  • operates a quality service branded proposition.
  • is increasingly trusted by their customers
  • or has become a dot.gone!

21
  • Where will e-tail businesses come from?
  • new channels to existing markets
  • more customer oriented services
  • innovative "Super Niche" retailers
  • customers growing in confidence

22
  • Sources of e-tail businesses
  • new channels to existing markets
  • Internet - Barclaysquare "Mk n"
  • has their time past?
  • Strong brands attract customers directly
  • some trade ("guild") groups are effective
  • the jewellers.net
  • Specific - driven from a Brand
  • Tesco Direct
  • Dell
  • Marks Spencer

23
  • Sources of e-tail businesses
  • Sector driven
  • Amazon
  • mature e-tail!
  • sold it's first book in 1995
  • now 1.2 billion
  • Entertainment Express
  • Kingfisher get serious
  • and undercuts its own stores
  • Intranet - Smartzone
  • cable
  • digital television

24
  • Channels to e-tailing - some potential winners
  • digital TV adds to broad appeal
  • secure, multiple channels
  • current TV standards to go by, say, 2005
  • compulsive reason to buy new set!
  • Digital, cable and satellite universal franchise

25
  • E-tail myth or reality?
  • May 2001 40 of UK homes have Internet
    connections
  • August 2001 39
  • no of net users still growing
  • 900,000 September 2001- November 1st
  • More over 50s shop online than under 24s
  • 33 of Internet users visit online stores more
    than once per week
  • 40 of shoppers access the www from the office!

26
  • The E-tail Winners
  • Amazon 1.7 million UK visits in September
  • Marks Spencer
  • best "Traditional" Retailer
  • reliable, secure
  • on line stock availability of in store products
  • ease of use

27
  • The E-tail Top 10
  • Amazon
  • Marks Spencer
  • Tesco
  • ebay.co.uk
  • Argos
  • Comet
  • jungle.com (Littlewoods)
  • qxl.com
  • W H Smith
  • colonize.com

28
  • How some of today's businesses will respond ..
  • more customer oriented services
  • encouraging BRAND loyalty
  • unique personalised offers
  • cellular technology based
  • loyalty points
  • air miles
  • tradable points/vouchers
  • electronic purse
  • conventional voice and E Mail

29
  • Physical retailing moves into new areas..
  • Innovation
  • "super niche" retailers gain ground
  • Seattle Coffee
  • definitive range books
  • The Link

30
  • Walmart - why worry? -1
  • Revenues 2 billion per week
  • Proven operator
  • occupying the "wrong" sector
  • always avoid lowest cost
  • Harvard
  • Henley
  • Ashridge etc.etc
  • Has broken out of its middle US image
  • still some US site potential
  • product range extension - groceries
  • Acquisition hungry

31
  • Walmart - why worry? -2
  • Economic power
  • monthly revenues over 9.5 billion
  • c.f. largest European retailers
  • LfL growth exceeds sector
  • Supply Chain ability
  • provides 10X more processing capability than its
    nearest competitors (anywhere)
  • shares store based sku sales data with suppliers
  • and trains them on how they may use it!

32
  • Walmart - why worry? -3
  • Creates unprecedented value based competition
  • driven by global buying
  • volume driven
  • lower gross margins accepted
  • Public/government sentiment has moved to support
    lowest cost

33
  • Walmart - why worry? - 4
  • We had said
  • " UK Retailers margin model under threat!
  • could be reduced by circa 50
  • potential for many casualties!
  • not just supermarkets......"
  • We do not like being smug, but
  • margins are falling
  • the middle market is being squeezed
  • there are many casualties
  • and more to come!

34
  • Issue Maintain Customer volumes
  • In the face of
  • overt price based competition
  • aggressive promotional activity
  • new channels

35
  • Issue Price based competition
  • How to protect the Nett achieved margin?
  • lower buying prices
  • seek (retrospective) discounts
  • reduce the cost of holding inventory
  • smaller commitments
  • more replenishment
  • faster stockturn
  • lower markdown
  • reduce wastage
  • lower operating costs

36
  • Issue Everybody getting smarter!
  • Smarter competition
  • new entrants have no legacy problems
  • global buying and negotiating
  • alliances driving customer loyalty
  • Smarter consumers
  • know the value of loyalty
  • increasingly discerning
  • more knowledge
  • less time

37
  • Issue Promotional Activity
  • Maximise the potential from promotions
  • needs active collaboration with suppliers
  • precise and timely execution
  • accurate measurement
  • Advertising and communication effectiveness
  • measurement

38
  • More drivers of change....
  • Targeted communication technologies
  • digital TV set top box
  • www
  • Satellite and telco Hybrids
  • Social Pressures
  • Travel
  • Parking

39
  • Issue New Channels
  • How to become a player - when I understand their
    potential?
  • what must we do differently?
  • How to integrate their operation within my core
    business?
  • I do not need to break the bits which work well
  • we have lots of customers in our stores
  • How to avoid this becoming another late, over
    budget IT project?!
  • I cannot wait for IT to learn the new skills

40
  • Loyal and profitable customers are retained
    because of
  • a clear and unified focus on the customer
  • supported by
  • efficient and integrated processes
  • superior knowledge
  • consistent execution

41
  • Some interesting Sectors -1
  • Mobile Phone retailers
  • high quality web sites
  • call centre operations
  • integration with service suppliers is critical
    requirement
  • Music/Video Programme material
  • early direct channel
  • mainly established High Street retailers
  • already under threat from new entrants
  • Books - if they haven't already noticed!

42
  • Some interesting Sectors -2
  • Travel and Ticketing
  • the perfect direct product?
  • needs integration with suppliers
  • digital TV could cause take-off!
  • Toys
  • Learning element translates well to e-commerce
  • Brands already established
  • take on Toys'RUS

43
  • Some interesting Sectors -3
  • Leisure Sports Brands
  • strong consumer loyalty
  • desire for information
  • opportunity for direct channels
  • Motoring Service Organisations
  • Call centre based
  • integration required to many systems/sources
  • provided a focus for consumer services businesses

44
  • Summary Retailing today
  • Increasing competition
  • new entrants
  • established retailers suppliers extending
    reach
  • global information creates consumer knowledge
  • Pressure on costs
  • product
  • operations
  • store
  • people

45
  • Information Technology in Retail

the operational necessities e-tail or retail!
Sextant Management Services Ltd.
46
  • SKU Management
  • The ability to manage stock at the level at which
    the customer purchases
  • the Stock Keeping Unit
  • E.g. a pair of shoes
  • style, size, colour, width
  • a dress
  • style, colour size
  • a can of beans
  • description, size

47
  • Measuring and monitoring the SKU
  • Throughout the whole process
  • Plan
  • Order
  • Supply Chain
  • Warehouse
  • Distribution
  • Sales

48
  • The Retail Cycle
  • Retail, and most consumer goods wholesale
    businesses work to a very similar basic process
    model

PLAN
BUY
RECEIVE
SELL
DISTRIBUTE
49
  • Electronic Point of Sale
  • EPoS Terminals
  • online, real time
  • Up to 60,000 SKUs per outlet
  • Promotion Control
  • 3 for the price of 2
  • lowest price free
  • linked purchases, etc
  • Plastic Card Authorisation
  • and verification
  • Robust and reliable

50
  • Accurate Data Capture
  • EAN 13 digit barcode
  • world wide standard
  • the world's most successful standard
  • basis for b2b e commerce
  • Robust
  • Reliable
  • Universal
  • Retail Wholesale
  • Hypermarket to Corner shop

51
  • The Must Haves....merchandise
  • Basic functionality
  • epos provides sku data capture
  • and price look up
  • store polling of sales
  • price file changes and refresh
  • inventory file updates
  • replenishment requirements
  • inwards merchandise movement
  • inter branch transfers

52
  • The Must Haves....customer
  • Basic functionality
  • unique customer record
  • Card based - loyalty or payment
  • Mail or telephone order
  • payment verification/authorisation
  • fulfillment process

53
  • Local (Store Based Processing)
  • EPoS
  • Price File Management
  • SKU Sales
  • Personnel Planning
  • Payroll Data Capture
  • Merchandise Ticket Production
  • Delivery Information

54
  • Central Based Processing
  • Sales Consolidation Financial Reporting
  • Stock Replenishment
  • Merchandise Purchase Ordering
  • Payroll Processing
  • www
  • Management Executive Information
  • Data Warehousing

55
  • Issue IT skills resourcing
  • "My IT function is already stretched, and they
    will not have the skills"
  • "I need to keep our revenue costs flat (at
    worst), can we afford this?"

56
  • Issue Best of breed vs Integration
  • "Retail ERP" has existed in merchandise system
    terms for some years
  • Retail Express (now owned by NSB)
  • Island Pacific (now owned by SVI)
  • JDA
  • However, they did not include Finance systems
  • typically CODA was a popular choice

57
  • Issue Best of breed vs Integration
  • SAP developed a retail version
  • initially relatively poor in retail depth
  • now on a par with NSB/JDA
  • expensive to implement when allied to business
    process review
  • long projects (BQ, Homebase)
  • new template based systems from specialist retail
    implementors reducing cost and time

58
  • More drivers of change....
  • Targeted communication technologies
  • digital TV set top box
  • www
  • Satellite and telco Hybrids
  • Social Pressures
  • Travel
  • Parking

59
  • Markdown -
  • The difference between Stock valuation at Retail
    prices, and how much the item was actually sold
    for.
  • a budgeted and planned item
  • the largest single cost after personnel
  • can have a make or break affect on results!

60
  • Issue Promotional Activity
  • Maximise the potential from promotions
  • needs active collaboration with suppliers
  • precise and timely execution
  • accurate measurement
  • Advertising and communication effectiveness
  • measurement

61
  • Some real positives!
  • www. is a liberating experience
  • in gaining information
  • in application development
  • new tools enable VERY rapid deployment of
    collaborative and www applications
  • outside of the traditional IS functions
  • in how systems are upgraded and maintained
  • 24hr/remote/informed

62
  • EDI to E-commerce
  • EDI (Electronic Data Interchange) is well
    established
  • between consenting retailers and suppliers
  • complex messages
  • batch operation
  • tends to be inflexible - it works so leave it
    alone
  • EDI has not been taken up by the SMEs
  • too complex and technical
  • requires intricate interfaces to "operational"
    systems

63
  • COLLABORATIVE APPLICATION USERS
  • What are Collaborative Applications?
  • These applications are being used by major
    players to
  • reduce total inventory in the supply chain
  • optimise promotional sell through
  • They will also be used by SME retailers,
    suppliers and channels
  • as they are easier to implement than traditional
    IS
  • with easy access and usability

64
  • Who are COLLABORATIVE APPLICATION USERS
  • J Sainsbury is a hub
  • circa 200 in the JS "community" on promotional
    collaboration
  • and up to 500 in "Order" collaboration
  • Some of these community users are themselves
    becoming hubs
  • Nestle
  • KJS
  • Each of these will subscribe to the need to
    integrate into their Core Operational systems.
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