Strategic retail management text and international cases joachim zentes

Part I Formats and Players in Retailing Part II Strategic Marketing in Retailing Part III Marketing Mix in Retailing Part IV Buying, Logistics and Performance Measurement Part I Formats and Players in Retailing Part II Strategic Marketing in Retailing Part III Marketing Mix in Retailing Part IV Buying, Logistics and Performance Measurement Part I Formats and Players in Retailing Part II Strategic Marketing in Retailing Part III Marketing Mix in Retailing Part IV Buying, Logistics and Performance Measurement

Joachim Zentes | Dirk Morschett | Hanna Schramm-Klein

Strategic Retail Management

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1st edition February 2007

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Joachim Zentes (J.Zentes@mx.uni-saarland.de) is Professor of Marketing and Management at the

Saarland University, Saarbrücken, Germany He is Director of the Institute for Commerce & national Marketing (H.I.MA.) and Director of the Europa-Institut at Saarland University He holds achair in Business Adminstration, with a focus on Foreign Trade and International Management.Joachim Zentes is also a member of various boards of directors and advisory boards in Germany andabroad

Inter-Dirk Morschett (D Morschett@mx.uni-saarland.de) is Assistant Professor of Marketing and

Manage-ment at the Institute for Commerce & International Marketing (H.I.MA.), Saarland University, brücken

Saar-Hanna Schramm-Klein (H.Schramm@mx.uni-saarland.de) is Assistant Professor of Marketing and

Management at the Institute for Commerce & International Marketing (H.I.MA.), Saarland sity, Saarbrücken

Univer-Retailingȱ isȱ becomingȱ consistentlyȱ moreȱ importantȱ inȱ economicȱ terms.ȱ Thisȱbecomesȱ evidentȱ whenȱ lookingȱ atȱ theȱ developmentȱ ofȱ manyȱ individualȱcountries,ȱ inȱ Europe,ȱAmericaȱ andȱAsia.ȱ Inȱ highlyȱ developedȱ countries,ȱ reȬtailingȱ isȱ assumingȱ moreȱ andȱ moreȱ ofȱ aȱ leadershipȱ roleȱ inȱ theȱ distributionȱchannel.ȱ Theȱ expansionȱ strategies,ȱ retailȱ brandingȱ strategies,ȱ innovativeȱsolutionsȱ forȱ supplyȱ chainȱ managementȱ etc.,ȱ allȱ reflectȱ thisȱ trend.ȱ Inȱ transȬformationȱ countries,ȱ suchȱ asȱ inȱ Centralȱ andȱ Easternȱ Europe,ȱ asȱ wellȱ asȱ inȱemergingȱcountries,ȱsuchȱasȱChinaȱandȱIndia,ȱfundamentalȱchangesȱinȱretailȬingȱstructuresȱbecomeȱapparentȱandȱmayȱleadȱtoȱcomparableȱdevelopments.ȱInȱ viewȱ ofȱ internationalisation,ȱ aȱ furtherȱ profoundȱ changeȱ canȱ beȱ noticed.ȱRetailingȱcompaniesȱthatȱwereȱformerlyȱcharacterisedȱbyȱaȱlocalȱorȱnationalȱorientationȱareȱincreasinglyȱdevelopingȱintoȱglobalȱplayersȱ withȱworldwideȱoperations.ȱ

Book Concept and Overview

Theȱ presentȱ bookȱ isȱ devotedȱ toȱ theȱ dynamicȱ developmentȱ ofȱ retailing.ȱ Theȱvariousȱ strategyȱ conceptsȱ adoptedȱ byȱ retailingȱ companiesȱ andȱ theirȱ impleȬmentationȱ inȱ practiceȱ areȱ atȱ theȱ coreȱ ofȱ theȱ book.ȱ Thisȱ isȱ notȱ aȱ traditionalȱtextbookȱ orȱ collectionȱ ofȱ caseȱ studies,ȱ butȱ isȱ intendedȱ toȱ demonstrateȱ theȱcomplexȱ andȱ manifoldȱ questionsȱ ofȱ retailȱ managementȱ inȱ theȱ formȱ ofȱ 15ȱlessonsȱthatȱprovideȱaȱthematicȱoverviewȱofȱkeyȱissuesȱandȱtoȱillustrateȱthemȱwithȱ theȱ helpȱ ofȱ comprehensiveȱ caseȱ studies.ȱ Internationallyȱ knownȱ retailȱcompaniesȱ areȱ usedȱ asȱ examplesȱ toȱ facilitateȱ anȱ understandingȱ ofȱ whatȱ isȱinvolvedȱinȱstrategicȱretailȱmanagementȱandȱtoȱpresentȱsomeȱbestȱpractices.ȱȱTheȱ bookȱ isȱ dividedȱ intoȱ fourȱ mainȱ parts.ȱ Partȱ Iȱ introducesȱ “Formatsȱ andȱPlayersȱinȱRetailing”ȱandȱcomprisesȱChaptersȱ1ȱtoȱ3.ȱInȱPartȱII,ȱgrowth,ȱinterȬnationalisationȱ andȱ positioningȱ strategies,ȱ asȱ fundamentalȱ aspectsȱ ofȱ “StraȬtegicȱMarketingȱinȱRetailing”ȱareȱdealtȱwithȱ(Chapterȱ4ȱtoȱChapterȱ6).ȱPartȱIIIȱfocusesȱ onȱ theȱ “Marketingȱ Mixȱ inȱ Retailing”.ȱ Storeȱ location,ȱ merchandiseȱandȱ categoryȱ management,ȱ pricing,ȱ instoreȱ marketingȱ andȱ customerȱ relaȬtionshipȱ managementȱ areȱ discussedȱ inȱ Chaptersȱ 7ȱ toȱ 11.ȱ Theȱ finalȱ Partȱ IVȱ

“Buying,ȱ Logisticsȱ andȱ Performanceȱ Measurement”ȱ dealsȱ withȱ retailȱ purȬchasingȱ strategiesȱ andȱ concepts,ȱ modernȱ conceptsȱ ofȱ physicalȱ distributionȱandȱITȬbasedȱsupplyȱchainȱmanagement,ȱasȱwellȱasȱmethodsȱofȱperformanceȱandȱfinancialȱcontrollingȱ(Chaptersȱ12ȱtoȱ15).ȱ

Teaching and Learning

Theȱbookȱisȱtargetedȱprimarilyȱatȱstudentsȱinȱtheirȱthirdȱandȱfourthȱacademicȱyearȱ(undergraduateȱandȱgraduateȱlevel)ȱinȱtheȱfieldȱofȱBusinessȱAdministraȬtion/Marketing/Managementȱ atȱ differentȱ institutions,ȱ suchȱ asȱ universities,ȱacademiesȱ andȱ businessȱ schools.ȱ Inȱ addition,ȱ practitionersȱ inȱ theȱ consumerȱgoodsȱindustryȱandȱinȱretailingȱcompanies,ȱwhoȱwishȱtoȱobtainȱcompactȱandȱpracticeȬorientedȱ informationȱ onȱ currentȱ retailȱ concepts,ȱ willȱ alsoȱ benefitȱfromȱreadingȱthisȱbook.ȱ

Furthermore,ȱtheȱbookȱcanȱbeȱusedȱinȱeducationȱasȱaȱbasisȱforȱworkingȱwithȱcaseȱstudies.ȱForȱthisȱpurpose,ȱtheȱcaseȱstudiesȱareȱintegratedȱintoȱtheȱlessonsȱinȱsuchȱaȱwayȱthatȱtheyȱprovideȱadditionalȱcontentȱandȱaȱspecificȱapplicationȱofȱtheȱindividualȱlessons.ȱThatȱis,ȱtheyȱformȱpartȱofȱtheȱmainȱtopic,ȱbutȱalsoȱleadȱ toȱ suggestedȱ discussionȱ subjectsȱ andȱ questionsȱ inȱ orderȱ toȱ deepenȱ theȱunderstandingȱ ofȱ theȱ topic.ȱ Instructorsȱ areȱ providedȱ withȱ additionalȱ reȬsources.ȱForȱeachȱcaseȱstudy,ȱaȱsuggestedȱsolutionȱcanȱbeȱrequestedȱfromȱtheȱH.I.MA.ȱ (Instituteȱ forȱ Commerceȱ &ȱ Internationalȱ Marketing,ȱ Saarlandȱ UniȬversity,ȱGermany,ȱeȬmail:ȱhima@mx.uniȬsaarland.de).ȱ

Acknowledgements

Aȱ caseȱ studyȱ approachȱ cannotȱ beȱ developedȱ effectivelyȱ withoutȱ theȱ activeȱsupportȱ andȱ cooperationȱ ofȱ theȱ selectedȱ retailingȱ companies.ȱ Thus,ȱ weȱ firstȱofȱ allȱ thankȱ theȱ companiesȱ andȱ theirȱ representativesȱ whoȱ haveȱ willinglyȱsupportedȱusȱinȱtheȱdevelopmentȱofȱtheȱcaseȱstudies.ȱ

Atȱ Gablerȱ Verlag,ȱ Barbaraȱ Roscherȱ supervisedȱ ourȱ bookȱ conceptȱ fromȱ theȱbeginningȱandȱweȱareȱindebtedȱtoȱherȱforȱherȱsupport.ȱ

Atȱ theȱ H.I.MA.,ȱ whereȱ theȱ threeȱ authorsȱ teachȱ andȱ researchȱ retailȱ manageȬment,ȱ weȱ wouldȱ particularlyȱ likeȱ toȱ thankȱ Julianeȱ Krebsȱ forȱ preparingȱ aȱnumberȱofȱcaseȱstudiesȱinȱcooperationȱwithȱtheȱretailȱcompanies,ȱasȱwellȱasȱforȱtheȱlayoutȱ designȱandȱfinalȱediting.ȱCaseȱstudiesȱwereȱalsoȱpreparedȱbyȱMarkusȱLehnert,ȱSandraȱPocsayȱandȱLambertȱScheer.ȱȱ

Finally,ȱ thanksȱ goȱ toȱ Brianȱ Blochȱ andȱ Heikeȱ Frenschȱ forȱ supportȱ withȱ theȱ

translationȱ ofȱ partsȱ ofȱ theȱ manuscriptȱ andȱ theȱ proofreading.ȱ Heikeȱ Frenschȱhasȱ typedȱ severalȱ versionsȱ ofȱ theȱ scriptȱ withȱ greatȱ accuracyȱ andȱ commitȬment.ȱ

Saarbrücken,ȱJanuaryȱ2007ȱ

ȱ

JOACHIMȱZENTESȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱDIRKȱMORSCHETTȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱHANNAȱSCHRAMMȬKLEIN

Prefaceȱ VȱIntroductionȱ ȱ1ȱ

Part I Formats and Players in Retailing

Chapterȱ1ȱ RetailȱFormatsȱ–ȱFood 9ȱ

CaseȱStudy:ȱCarrefour 20ȱChapterȱ2ȱ RetailȱFormatsȱ–ȱNonȬFood 31ȱ

CaseȱStudy:ȱMediaȱMarktȱandȱSaturnȱ 42ȱChapterȱ3ȱ NewȱCompetitorsȱ–ȱVerticalȱStrategies……….53ȱ

CaseȱStudy:ȱCoopȱ(Switzerland) 174ȱȱ

ȱ

Brief Contents

Chapterȱ9ȱ Pricing 187ȱ

CaseȱStudy:ȱWalȬMart 198ȱChapterȱ10ȱ InstoreȱMarketing 209ȱ

CaseȱStudy:ȱGaleriesȱLafayette 220ȱChapterȱ11ȱ CustomerȱRelationshipȱManagement 231ȱ

CaseȱStudy:ȱTesco 243ȱ

Part IV Buying, Logistics and Performance Measurement

Chapterȱ12ȱ Buyingȱ–ȱStrategyȱandȱConcepts 255ȱ

CaseȱStudy:ȱKingfisher 266ȱChapterȱ13ȱ Logisticsȱ–ȱPhysicalȱDistribution 277ȱ

CaseȱStudy:ȱSainsbury’s 286ȱChapterȱ14ȱ Logisticsȱ–ȱSupplyȱChainȱManagementȱandȱȱ

ȱ InformationȱManagement 297ȱ

CaseȱStudy:ȱBenetton 308ȱChapterȱ15ȱ ControllingȱandȱFinancialȱManagement 317ȱ

CaseȱStudy:ȱMetro 325ȱȱ

Referencesȱ 337ȱIndexȱ 363ȱȱ

Retailingȱisȱoneȱofȱtheȱworld’sȱlargestȱindustries.ȱItȱisȱinȱaȱpermanentȱstateȱofȱ

change,ȱandȱtheȱpaceȱofȱthisȱchangeȱhasȱbeenȱacceleratingȱoverȱtheȱlastȱdecȬ

ade.ȱFromȱtheȱmarketingȱperspective,ȱretailersȱare,ȱbyȱdefinition,ȱcloserȱtoȱtheȱ

consumerȱ thanȱ manufacturingȱ companiesȱ (Reynoldsȱ 2004b,ȱ p.ȱ 3).ȱ Retailersȱ

representȱ theȱ culminationȱ ofȱ theȱ marketingȱ processȱ andȱ theȱ contactȱ pointȱ

wasȱ onceȱ aȱ simpleȱ wayȱ ofȱ doingȱ businessȱ isȱ transformingȱ intoȱ aȱ highlyȱ soȬ

phisticatedȱ formȱ ofȱ managementȱ andȱ marketing.ȱ Retailȱ marketingȱ consisȬ

tentlyȱ featuresȱ moreȱ efficient,ȱ moreȱ meaningfulȱ andȱ moreȱ profitableȱ marȬ

ketingȱpracticesȱ(Mulhernȱ1997,ȱp.ȱ103).ȱ

Retailingȱinvolvesȱthoseȱcompaniesȱthatȱareȱengagedȱprimarilyȱinȱtheȱactivityȱ

ofȱ purchasingȱ productsȱ fromȱ otherȱ organisationsȱ withȱ theȱ intentȱ toȱ resellȱ

thoseȱ goodsȱ toȱ theȱ finalȱ customer,ȱ generallyȱ withoutȱ transformation,ȱ andȱ

ever,ȱ theȱ processȱ alsoȱ encompassesȱ theȱ selectionȱ ofȱ productsȱ forȱ aȱ retailȱ asȬ

sortment,ȱ theȱ provisionȱ ofȱ salesȱ advice,ȱ afterȬsalesȬserviceȱ andȱ manyȱ otherȱ

takenȱ overȱ marketȱ shareȱ fromȱ independentlyȱ ownedȱ smallȱ shops.ȱ Theseȱ

retailȱ chainsȱ firstȱ developedȱ intoȱ regionalȱ groupsȱ andȱ thenȱ intoȱ nationallyȱ

Definitionȱ ofȱRetailingȱ

Emergenceȱofȱȱ LargeȬScaleȱȱ RetailȱChainsȱ

Mart,ȱachievesȱaȱturnoverȱofȱ312ȱbillionȱUSDȱwhichȱexceedsȱtheȱgrossȱdomesȬ

ticȱproductȱofȱmanyȱsmallerȱcountriesȱandȱemploysȱ1.8ȱmillionȱpeople.ȱCarreȬ four,ȱtheȱlargestȱEuropeanȱretailerȱandȱtheȱno.ȱ2ȱinȱtheȱworld,ȱoperatesȱmoreȱthanȱ12,000ȱstoresȱworldwide.ȱ

Atȱ theȱ sameȱ time,ȱ manyȱ retailersȱ haveȱ developedȱ intoȱ internationalȱ multiȬchannelȱretailers,ȱthatȱis,ȱtheyȱoperateȱinȱmanyȱcountriesȱandȱofferȱdifferentȱ

retailȱformatsȱforȱtheirȱcustomers.ȱForȱexample,ȱtheȱFrenchȱCarrefourȱisȱnowȱaȱ

multiȬformatȱ groupȱ thatȱ usesȱ hypermarkets,ȱ supermarkets,ȱ convenienceȱstores,ȱhardȱdiscountersȱandȱotherȱformatsȱtoȱsellȱitsȱassortmentȱtoȱcustomersȱinȱ overȱ 30ȱ countries.ȱ Moreȱ thanȱ halfȱ ofȱ itsȱ turnoverȱ isȱ earnedȱ outsideȱ theȱ

homeȱ market.ȱ Theȱ Germanȱ Metroȱ Groupȱ employsȱ foodȱ superstoresȱ (Real),ȱ foodȱ supermarketsȱ (extra),ȱ consumerȱ electronicsȱ categoryȱ killersȱ (Mediaȱ Marktȱ andȱ Saturn ),ȱ cashȱ &ȱ carryȱ wholesaleȱ storesȱ (Metroȱ C&C),ȱ andȱ otherȱ

formatsȱ andȱ earnsȱ moreȱ thanȱ 50ȱ %ȱ ofȱ itsȱ turnoverȱ inȱ 29ȱ marketsȱ outsideȱ

ers,ȱ evenȱ forȱ globalȱ brandȱ manufacturersȱ suchȱ asȱ Procterȱ &ȱ Gamble,ȱ Sonyȱ orȱ Nestlé.ȱThus,ȱmanufacturersȱ nowȱdependȱonȱaȱfewȱlargeȱretailersȱforȱaȱsubȬstantialȱshareȱofȱtheirȱturnover.ȱHandȱinȱhandȱwithȱtheȱincreasingȱsize,ȱretailȱmarketingȱ budgets,ȱ ITȱ budgets,ȱ andȱ budgetsȱ forȱ topȱ managers,ȱ haveȱ beenȱincreasing.ȱ Notȱ onlyȱ theȱ growingȱ sizeȱ andȱ concentration,ȱ butȱ alsoȱ theȱ inȬcreasedȱsophisticationȱofȱretailȱmanagement,ȱcombinedȱwithȱtheȱbetterȱavailȬabilityȱofȱcustomerȱdata,ȱcontributedȱtoȱtheȱpowerȱshift.ȱRetailingȱisȱcurrentlyȱoneȱofȱtheȱleadingȱindustriesȱinȱtheȱapplicationȱofȱnewȱtechnologies.ȱRetailerȱ

PoSȱdataȱhasȱbecameȱmoreȱvaluableȱasȱITȱsystemsȱhaveȱfacilitatedȱtheȱcollecȬtionȱ ofȱ dataȱ atȱtheȱ checkout.ȱ Furthermore,ȱ asȱ retailersȱ haveȱ grownȱ fromȱ reȬgionalȱ toȱ nationalȱ chains,ȱ theyȱ haveȱ beenȱ ableȱ toȱ accumulateȱ knowledgeȱaboutȱ consumerȱ trends,ȱ theȱ developmentȱ ofȱ productȱ sales,ȱ etc.,ȱ thatȱ hasȱenhancedȱ theirȱ relevanceȱ asȱ gatekeepersȱ forȱ productsȱ onȱ theirȱ routeȱ toȱ theȱcustomer.ȱCustomerȬspecificȱdataȱthatȱisȱnowȱincreasinglyȱbeingȱgatheredȱviaȱ

toȱ beȱ allȱ important,ȱ theȱ lastȱ fewȱ yearsȱ haveȱ witnessedȱ theȱ powerȱ ofȱ retailȱ

brandsȱchallengingȱ theȱ positionȱ ofȱ suppliersȱ (Gilbertȱ 2003,ȱ p.ȱ1).ȱ Retailersȱ

haveȱstartedȱtoȱembraceȱtheȱconceptȱofȱstrategicȱmarketing,ȱtheyȱuseȱstrategicȱ

planningȱ andȱ positionȱ themselvesȱ relativeȱ toȱ theirȱ competitors.ȱ Thus,ȱ theȱ

enormousȱ buyingȱ volumeȱ ofȱ retailersȱ isȱ onlyȱ oneȱ sourceȱ ofȱ itsȱ powerȱ base,ȱ

certainlyȱtheȱmostȱimportant,ȱbutȱotherȱdevelopmentsȱaddȱtoȱtheirȱpower.ȱ

Retailersȱareȱintermediariesȱinȱtheȱdistributionȱchannel.ȱHowever,ȱwhileȱretailȬ

ingȱ hasȱ longȱ beenȱ consideredȱ aȱ somewhatȱ passiveȱ linkȱ inȱ theȱ valueȱ chainȱ

betweenȱ manufacturerȱ andȱ consumer,ȱ retailersȱ nowȱ useȱ theirȱ positionȱ toȱ

becomeȱtheȱdominantȱplayerȱinȱtheȱdistributionȱchannel.ȱTheyȱdevelopȱtheirȱownȱ

marketingȱ conceptsȱ andȱ assumeȱ marketingȱ leadershipȱ inȱ theȱ verticalȱ relationȬ

shipȱ withȱ manufacturers.ȱ Retailersȱ haveȱ alsoȱ developedȱ theirȱ ownȱ logisticsȱ

concepts.ȱ Accordingly,ȱ whileȱ itȱ wasȱ theȱ manufacturersȱ whoȱ traditionallyȱ

fulfilledȱ largeȱ partsȱ ofȱ theȱ logisticsȱ function,ȱ retailersȱ todayȱ alsoȱ striveȱ toȬ

wardsȱlogisticsȱleadershipȱinȱtheȱdistributionȱchannel.ȱ

Withȱthisȱbook,ȱourȱobjectiveȱisȱtoȱcoverȱtheȱmostȱimportantȱaspectsȱofȱretailȱ

managementȱwithȱaȱcomprehensive,ȱyetȱbrief,ȱandȱinnovativeȱapproach.ȱWeȱ

discussȱ 15ȱ differentȱ topicsȱ inȱ retailȱ managementȱ byȱ firstȱ givingȱ aȱ thematicȱ

overviewȱ ofȱ theȱ topicȱ whichȱ coversȱ theȱ keyȱ issuesȱ andȱ explainsȱ theȱ mostȱ

importantȱ conceptsȱ andȱ thenȱ illustratingȱ themȱ withȱ theȱ helpȱ ofȱ extendedȱ

caseȱ studies.ȱ Forȱ theȱ caseȱ studies,ȱ internationallyȱ knownȱ companiesȱ wereȱ

chosenȱ thatȱ canȱ beȱ consideredȱ bestȱ practiceȱ casesȱ inȱ theȱ respectiveȱ strategyȱ

fields.ȱ

InȱPartȱI,ȱformatsȱandȱplayersȱinȱretailingȱareȱdiscussed.ȱAȱretailȱformatȱrepreȬ

sentsȱ aȱ specificȱ configurationȱ ofȱ theȱ retailȱ marketingȱ mixȱ (e.g.ȱ storeȱ size,ȱ

typicalȱ location,ȱ merchandise,ȱ priceȱ andȱ serviceȱ offered)ȱ andȱ itȱ oftenȱ formsȱ

theȱcoreȱofȱtheȱretailȱstrategy.ȱDifferentȱformatsȱareȱdescribedȱandȱthereȱisȱaȱ

discussionȱ ofȱ thoseȱ thatȱ areȱ currentlyȱ gainingȱ marketȱ shareȱ andȱ thoseȱ forȬ

matsȱ thatȱ areȱ onȱ theȱ decline.ȱ Forȱ example,ȱ categoryȱ killersȱ suchȱ asȱ IKEA,ȱ

butȱ Internetȱ shoppingȱ isȱ offeredȱ moreȱ andȱ moreȱ oftenȱ asȱ partȱ ofȱ aȱ multiȬ

channelȱ approachȱ (Chaptersȱ 1ȱ andȱ 2).ȱAtȱ theȱ sameȱ time,ȱ notȱ onlyȱ newȱ forȬ

mats,ȱ butȱ alsoȱ newȱ playersȱ areȱ competingȱ withȱ existingȱ retailers.ȱ Theȱ mostȱ

importantȱtrendȱexplainedȱinȱthisȱbookȱisȱtheȱemergenceȱofȱmanufacturersȱasȱ

competitors.ȱToȱanȱincreasingȱextent,ȱmanufacturersȱoperateȱinȱverticalȱmarȬ

ketingȱ systems,ȱ tryingȱ toȱ controlȱ theȱ distributionȱ ofȱ theirȱ productsȱ toȱ theȱ

consumer,ȱ eitherȱ throughȱ contractualȱ orȱ evenȱ byȱ meansȱ ofȱ equityȬbasedȱ

verticalȱstrategiesȱ(Chapterȱ3).ȱȱ

Marketingȱandȱ LogisticsȱLeaderȬ shipȱ

Formatsȱandȱ Playersȱinȱ Retailingȱ

Inȱ Partȱ II,ȱ theȱ mostȱ importantȱ aspectsȱ ofȱ strategicȱ retailȱ marketingȱ areȱ disȬcussed.ȱVeryȱdynamicȱgrowthȱisȱoneȱofȱtheȱmostȱimportantȱdevelopmentsȱinȱretailingȱ overȱ theȱ pastȱ decades,ȱ andȱ formsȱ theȱ foundationȱ forȱ manyȱ otherȱsubsequentȱ changes.ȱ Thisȱ growthȱ isȱ beingȱ achievedȱ throughȱ variousȱ differȬ

entȱgrowthȱstrategies,ȱsuchȱasȱoutletȱmultiplication,ȱacquisitions,ȱandȱfranchisȬ

ingȱ (Chapterȱ 4).ȱ Inȱ addition,ȱ sinceȱ manyȱ industrialȱ countriesȱ areȱ characterȬisedȱ byȱ stagnatingȱ retailȱ markets,ȱ thisȱ growthȱ isȱ moreȱ andȱ moreȱ oftenȱ

achievedȱ byȱ enteringȱ foreignȱ markets.ȱ Theȱ processȱ ofȱ internationalisationȱ

posesȱ aȱ complexȱ task,ȱ sinceȱ theȱ localȱ environmentsȱ inȱ hostȱ countriesȱ oftenȱdifferȱ considerablyȱ fromȱ theȱ homeȱ marketȱ (Chapterȱ 5).ȱ Growth,ȱ whetherȱnationallyȱ orȱ internationally,ȱ canȱ onlyȱ beȱ achievedȱ withȱ aȱ sustainableȱ comȬpetitiveȱ advantageȱ andȱ retailersȱ areȱ nowȱ increasinglyȱ tryingȱ toȱ developȱ aȱ

clearȱpositioningȱforȱtheirȱcompaniesȱrelativeȱtoȱthatȱofȱtheirȱcompetitors.ȱOneȱ importantȱ componentȱ ofȱ thisȱ marketingȱ strategyȱ isȱ toȱ createȱ aȱ strongȱ retailȱ brand,ȱ withȱ clearȱ andȱ distinctȱ associationsȱ inȱ theȱ consumers’ȱ mindȱ whichȱsupportȱtheȱdevelopmentȱofȱcustomerȱloyaltyȱtoȱtheȱcompanyȱ(Chapterȱ6).ȱWithinȱtheȱframeworkȱofȱstrategicȱretailȱmarketing,ȱretailersȱhaveȱmoreȱ opȬ

tionsȱavailableȱinȱtheirȱmarketingȱmixȱthanȱmanufacturers,ȱbecauseȱtheyȱareȱinȱ

directȱ contactȱ withȱ theȱ finalȱ consumers,ȱ whoȱ visitȱ theirȱ storesȱ andȱ interactȱdirectlyȱ withȱ them.ȱ Partȱ IIIȱ ofȱ theȱ bookȱ examinesȱ theȱ marketingȱ mixȱ andȱtakesȱanȱinȬdepthȱlookȱatȱaȱnumberȱofȱretailȱmarketingȱmixȱinstruments.ȱTheȱ

locationȱofȱtheȱstoreȱisȱconsideredȱaȱdominantȱdeterminantȱofȱretailingȱsuccess,ȱbecauseȱinȱstoreȬbasedȱretailing,ȱgoodȱlocationsȱareȱkeyȱelementsȱforȱattractȬingȱ customersȱ toȱ theȱ outlets.ȱAlso,ȱ becauseȱ ofȱ itsȱ intrinsicallyȱ fixedȱ nature,ȱlocationȱ cannotȱ beȱ changedȱ inȱ theȱ shortȬtermȱ (Chapterȱ 7).ȱ Withinȱ theȱ store,ȱ

theȱ retailerȱ offersȱ aȱ merchandiseȱ assortmentȱ toȱ itsȱ customersȱ andȱ oneȱ ofȱ theȱ

primaryȱ functionsȱ ofȱ theȱ retailerȱ isȱ toȱ selectȱ theȱ appropriateȱ breadthȱ andȱdepthȱofȱtheȱassortmentȱandȱtheȱspecificȱproducts,ȱe.g.ȱmanufacturerȱbrandsȱorȱstoreȱbrands,ȱandȱtoȱtailorȱtheȱofferȱtoȱtheȱtargetȱcustomers.ȱAȱnewȱconceptȱ

isȱcategoryȱmanagementȱthatȱaimsȱatȱimplementingȱaȱmoreȱstrategicȱandȱholisȬ

ticȱapproachȱtoȱmerchandisingȱ(Chapterȱ8).ȱCloselyȱrelatedȱtoȱtheȱassortmentȱ

itselfȱ isȱ theȱ pricingȱ policy.ȱ Sinceȱ consumersȱ spendȱ aȱ largeȱ shareȱ ofȱ theirȱ inȬ

comeȱ inȱ retailing,ȱ pricingȱ isȱ consideredȱ highlyȱ relevantȱ forȱ retailȱ patronageȱdecisionsȱ and,ȱ withinȱ pricingȱ processes,ȱ retailersȱ haveȱ manyȱ strategicȱ andȱtacticalȱoptionsȱavailableȱtoȱinfluenceȱpurchasingȱbehaviourȱ(Chapterȱ9).ȱAsȱalreadyȱ mentioned,ȱ theȱ customerȱ isȱ alsoȱ influencedȱ byȱ theȱ storeȱ environȬment.ȱ Manyȱ buyingȱ decisionsȱ areȱ madeȱ atȱ theȱ pointȬofȬsale,ȱ soȱ thatȱ profesȬ

sionalȱinstoreȱmarketingȱcanȱincreaseȱsalesȱveryȱsubstantially.ȱStoreȱlayoutȱandȱ

storeȱ designȱ canȱ supportȱ theȱ customerȱ orientationȱ inȱ theȱ storeȱ andȱ createȱ aȱ

positiveȱ storeȱ atmosphereȱ (Chapterȱ 10).ȱ Customerȱ relationshipȱ managementȱ

(CRM)ȱisȱaȱrelativelyȱnewȱelementȱinȱtheȱretailȱmarketingȱmix.ȱAȱkeyȱobjecȬtiveȱ ofȱ CRMȱ isȱ toȱ establishȱ enduringȱ relationshipsȱ withȱ customersȱ andȱ loyȬaltyȱ programmesȱ areȱ manifestationsȱ ofȱ CRMȱ inȱ retailing.ȱ However,ȱ behindȱ

StrategicȱMarketȬ

ingȱinȱRetailingȱ

MarketingȱMixȱȱ

inȱRetailingȱ

theȱ merchandiseȱ theyȱ offerȱ toȱ theirȱ customers,ȱ andȱ theyȱ useȱ various,ȱ veryȱ

heterogeneousȱ supplyȱ sources,ȱ rangingȱ fromȱ globalȱ manufacturersȱ ofȱ

brandedȱgoodsȱtoȱexternalȱbuyingȱorganisationsȱinȱforeignȱmarketsȱandȱstoreȱ

brandȱ manufacturers.ȱ Relationshipsȱ withȱ suppliersȱ andȱ newȱ conceptsȱ suchȱ

asȱefficientȱconsumerȱresponseȱhaveȱemerged,ȱbutȱtheȱbuyingȱconceptsȱemployedȱ

mustȱ beȱ closelyȱ adaptedȱ toȱ theȱ specificȱ supplyȱ situationȱ (Chapterȱ 12).ȱ Theȱ

productsȱ mustȱ beȱ transportedȱ alongȱ theȱ supplyȱ chainȱ –ȱ fromȱ theȱ factoryȱ toȱ

theȱ storeȱ shelf.ȱ Moreȱ andȱ moreȱ frequently,ȱ physicalȱ logisticsȱ isȱ consideredȱ aȱ

ishmentȱ haveȱ beenȱ developed,ȱ andȱ theseȱ areȱ basedȱ onȱ newȱ enablingȱ techȬ

nologiesȱ (Chapterȱ 14).ȱ Finally,ȱ theȱ intensiveȱ competitionȱ inȱ retailing,ȱ comȬ

binedȱ withȱ theȱ priceȱ pressureȱ toȱ whichȱ mostȱ retailersȱ areȱ exposed,ȱ makeȱ itȱ

necessaryȱbothȱtoȱperformȱwellȱandȱconstantlyȱimproveȱtheȱeffectivenessȱandȱ

efficiencyȱ ofȱ allȱ appliedȱ strategiesȱ andȱ processes.ȱ Adequateȱ controllingȱ isȱ

thusȱ necessaryȱ andȱ retailersȱ haveȱ developedȱ sophisticatedȱ systemsȱ forȱ

evaluatingȱ theȱ profitabilityȱ ofȱ theirȱ storeȱ network,ȱ supplyȱ chainȱ efficiencyȱ

Formats and Players in Retailing

Part I

PartȱIȱ

FormatsȱandȱPlayersȱ

inȱRetailingȱ

Chapter 1

Retail Formats – Food

Retailers have various ways of meeting customer needs through organising and

de-signing their retail outlets The objective of this Chapter is to describe the different

types of food-oriented retail institutions which represent different types of retailer

strategies in selling their goods and services

Types of Retail Institutions

52.1 : Retail sale in non-specialized stores

52.11 : Retail sale in non-specialized stores with food,

beverages or tobacco predominating

52.12 : Other retail sale in non-specialized stores

52.2 : Retail sale of food, beverages and tobacco in

specialized stores

52.21 : Retail sale of fruit and vegetables

52.22 : Retail sale of meat and meat products

52.23 : Retail sale of fish, crustaceans and molluscs

52.24 : Retail sale of bread, cakes, flour confectionery and sugar

confectionery

52.25 : Retail sale of alcoholic and other beverages

52.26 : Retail sale of tobacco products

52.27 : Other retail sale of food, beverages and tobacco in

specialized stores

52.3 : Retail sale of pharmaceutical and medical goods,

cosmetic and toilet articles

52.31 : Dispensing chemists

52.32 : Retail sale of medical and orthopaedic goods

52.33 : Retail sale of cosmetic and toilet articles

52.4 : Other retail sale of new goods in specialized stores

52.41 : Retail sale of textiles 52.42 : Retail sale of clothing 52.43 : Retail sale of footwear and leather goods 52.44 : Retail sale of furniture, lighting equipment and household articles n.e.c.

52.45 : Retail sale of electrical household appliances and radio and television goods

52.46 : Retail sale of hardware, paints and glass 52.47 : Retail sale of books, newspapers and stationery 52.48 : Other retail sale in specialized stores

52.5 : Retail sale of second-hand goods in stores

52.50 : Retail sale of second-hand goods in stores

52.6 : Retail sale not in stores

52.61 : Retail sale via mail order houses 52.62 : Retail sale via stalls and markets 52.63 : Other non-store retail sale

52.7 : Repair of personal and household goods

Section G : Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods

52 : Retail trade, except of motor vehicles and motorcycles; repair of personal and household goods

ȱSource:ȱ EuropeanȱUnion.ȱ

Severalȱsystemsȱofȱretailȱclassificationȱhaveȱbeenȱdevelopedȱbyȱgovernmentalȱ

institutionsȱ inȱ orderȱ toȱ collectȱ andȱ analyseȱ businessȱ dataȱ moreȱ effectively.ȱ

Oneȱ ofȱ theȱ firstȱ classificationȱ systemsȱ isȱ theȱ Standardȱ Industrialȱ Classificationȱ

(SIC)ȱ code,ȱ aȱ classificationȱ systemȱ thatȱ wasȱ developedȱ forȱ theȱ USȱ Censusȱ

Figureȱ1.1ȱ

Classificationȱ Schemesȱ

1 Retail Formats - Food

Bureauȱinȱ 1930ȱ andȱ usesȱ specialȱ codesȱ (specialȱ setsȱ ofȱ numbers)ȱ toȱ identifyȱtypesȱ ofȱ retailersȱ (Ogden/Ogdenȱ 2005,ȱ pp.ȱ88Ȭ89).ȱ Itȱ servedȱ asȱ theȱ basisȱ forȱfurtherȱ developmentȱ ofȱ classificationȱ systemsȱ thatȱ areȱ alsoȱ appliedȱ onȱ anȱ

internationalȱbasisȱsuchȱasȱtheȱInternationalȱStandardȱIndustrialȱClassificationȱofȱ allȱEconomicȱActivitiesȱ( ISIC)ȱofȱtheȱUnitedȱNations,ȱtheȱNAICSȱ(NorthȱAmeriȬ canȱIndustrialȱClassificationȱSystem )ȱorȱtheȱNACEȱ(Nomenclatureȱstatistiqueȱdesȱ ActivitésȱéconomiquesȱdansȱlaȱCommunautéȱEuropéenne)ȱofȱtheȱEuropeanȱUnionȱ(seeȱFigureȱ1.1).ȱ

However,ȱtheseȱclassificationȱschemesȱareȱusedȱforȱdataȱcollectionȱandȱstatisȬticalȱ analysisȱ toȱ provideȱ insightȱ intoȱ theȱ developmentȱ ofȱ theȱ variousȱ retailȱinstitutionsȱ atȱ aȱ nationalȱ orȱ internationalȱ level.ȱ Forȱ retailȱ managers,ȱ onȱ theȱotherȱhand,ȱtheȱmoreȱstrategicȱaspectsȱofȱtheȱdifferentȱtypesȱofȱretailȱinstituȬ

tionsȱ areȱ ofȱ primaryȱ importance.ȱ Therefore,ȱ forȱ strategyȱ developmentȱ andȱ

competitiveȱ analysis,ȱ theȱ classificationȱ ofȱ retailȱ institutionsȱ inȱ termsȱ ofȱ theȱcharacteristicsȱ ofȱ theȱ strategiesȱ thatȱ retailersȱ employȱ inȱ sellingȱ goodsȱ andȱ

services,ȱisȱimportant.ȱSuchȱtypesȱofȱretailȱinstitutionsȱareȱreferredȱtoȱasȱretailȱ formats.ȱAȱretailȱformatȱrepresentsȱaȱspecificȱconfigurationȱofȱtheȱretailȱmarȬketingȱ mixȱ (e.g.ȱ natureȱ ofȱ merchandiseȱ andȱ serviceȱ offered,ȱ pricingȱ policy,ȱadvertisingȱandȱpromotionȱprogramme,ȱapproachȱtoȱstoreȱdesignȱandȱvisualȱmerchandising,ȱ typicalȱ location,ȱ etc.)ȱ whichȱ isȱ maintainedȱconsistentlyȱ overȱtimeȱ(Fox/Sethuramanȱ2006,ȱp.ȱ193).ȱȱ

Theories of Retail Evolution

Aȱnumberȱofȱtheoriesȱexplainȱtheȱpresentȱstructureȱofȱtheȱretailȱindustryȱandȱ

predictȱtheȱfutureȱdevelopmentȱofȱcurrentȱandȱnewȱretailȱformats.ȱTheȱwheelȱ ofȱretailingȱ andȱtheȱretailȱlifeȱcycleȱareȱtwoȱparticularlyȱimportantȱtheories.ȱ

The Wheel of Retailing

Theȱ wheelȱ ofȱ retailingȱ (McNairȱ 1931)ȱ isȱ aȱ wellȬestablishedȱ frameworkȱ forȱ exȬ

plainingȱ developmentsȱ inȱ retailȱ institutions.ȱ Theȱ theoryȱ suggestsȱ thatȱ retailȱinstitutionsȱgoȱthroughȱcyclesȱ(seeȱFigureȱ1.2).ȱTheȱrationaleȱisȱthat,ȱasȱlowȬendȱ retailersȱ upgradeȱ theirȱ strategiesȱ toȱ increaseȱ salesȱ andȱ profitȱ margins,ȱnewȱformsȱofȱlowȬpriceȱ(discount)ȱretailersȱtakeȱtheirȱplaceȱinȱtheȱmarket.ȱ

Theȱ wheelȱ ofȱ retailingȱ consistsȱ ofȱ threeȱ stagesȱ (McNair/Mayȱ 1978;ȱ BerȬ

„ Theȱsecondȱphaseȱisȱcalledȱ“tradingȱup”.ȱRetailersȱwishingȱtoȱexpandȱtheirȱ

businessȱandȱattractȱmoreȱcustomers,ȱenhanceȱtheȱquantityȱandȱqualityȱofȱ

merchandiseȱ handled,ȱ provideȱ moreȱ services,ȱ andȱ openȱ outletsȱ inȱ moreȱ

convenientȱ locations.ȱ Thisȱ leadsȱ toȱ anȱ increaseȱ inȱ operatingȱ costsȱ andȱ

pricesȱ andȱ thusȱ offersȱ opportunitiesȱ forȱ newȱ competitorsȱ toȱ enterȱ theȱ

Trading-Up Phase

Vulnerability Phase

Š higher-rent locations

Š fashion-orientation

Š higher prices

Š extended product offerings

Traditional Retailer

ȱSource:ȱ AdaptedȱfromȱBrownȱ1988.ȱ

The Retail Life Cycle

Theȱ conceptȱ ofȱ theȱ retailȱ lifeȱ cycleȱ refersȱ toȱ theȱ successionȱ ofȱ identifiableȱ

1 Retail Formats - Food

„ TheȱgrowthȱphaseȱisȱcharacterisedȱbyȱrapidȱgrowthȱofȱbothȱsalesȱandȱprofȬ

its.ȱExistingȱcompaniesȱexpandȱtheirȱmarketsȱandȱnewȱcompetitorsȱwithȱtheȱ sameȱ retailȱ formatȱ enterȱ theȱ market.ȱ Towardsȱ theȱ endȱ ofȱ thisȱ stage,ȱgrowthȱaccelerationȱbeginsȱtoȱdeclineȱandȱcostȱpressureȱmayȱemerge.ȱ

„ Theȱ nextȱ stageȱ isȱ characterisedȱ byȱ maturityȱ ofȱ theȱ retailȱ formatȱ whichȱ isȱ

broughtȱ onȱ byȱ marketȱ saturation,ȱ inȱ turnȱ causedȱ byȱ aȱ highȱ numberȱ ofȱfirmsȱ inȱ thisȱ retailȱ formatȱ andȱ competitionȱ fromȱ newȱ formats.ȱ Salesȱgrowthȱdeclinesȱandȱprofitȱmarginsȱmayȱhaveȱtoȱbeȱreducedȱinȱorderȱtoȱstimulateȱ purchases.ȱ Onceȱ maturityȱ isȱ reached,ȱ theȱ mainȱ goalȱ isȱ toȱ preȬventȱtheȱbusinessȱfromȱdecliningȱandȱtoȱsustainȱprofitȱasȱlongȱasȱpossible.ȱ

„ Inȱ theȱ finalȱ stageȱ (decline),ȱ salesȱ volumeȱ declinesȱ andȱ pricesȱ andȱ profitȬ abilityȱdiminish.ȱCompaniesȱcanȱtryȱtoȱavoidȱdecline,ȱforȱexample,ȱbyȱreȬ positioningȱtheȱretailȱformat,ȱbutȱmanyȱcompaniesȱabandonȱtheȱformatȱalȬtogetherȱandȱstartȱintroducingȱnewȱformatsȱtoȱkeepȱtheirȱcustomersȱorȱatȬtractȱnewȱones.ȱ

Figureȱ1.3ȱillustratesȱtheȱcharacteristicsȱofȱtheseȱfiveȱstagesȱandȱindicatesȱtheȱstagesȱinȱwhichȱpresentȱretailȱformatsȱoperate.ȱ

TheȱRetailȱLifeȱCycleȱ

Competition Positioning Profitability Sales

low to break even high/declining

high yield negative to break even

dropping high, levelling off

rapid acceleration low/growing

Decline Maturity

Growth Introduction

Development

niche broad market

special needs concept innovation

intensive/

consolidated extensive/

saturation limited

none Competition

Positioning Profitability Sales

low to break even high/declining

high yield negative to break even

dropping high, levelling off

rapid acceleration low/growing

Decline Maturity

Growth Introduction

Development

niche broad market

special needs concept innovation

intensive/

consolidated extensive/

saturation limited

Internet Shops

Food Discounters

Superstores/

Hypermarkets

Traditional Supermarkets Department Stores

Specialty Stores Category

Killers

Mobile Commerce

Shopping Centre

Traditional Catalogue Retailing

ȱSource:ȱ AdaptedȱfromȱBerman/Evansȱ2007,ȱp.ȱ132;ȱZentes/SchrammȬKlein/ȱ

Neidhartȱ2005,ȱp.ȱ34.ȱ

Figureȱ1.3ȱ

1977)ȱisȱimportant.ȱItȱisȱdefinedȱasȱaȱdiminutionȱinȱtheȱappealȱandȱabilityȱofȱaȱ

retailingȱ companyȱ toȱ attractȱ customersȱ overȱ time,ȱ dueȱ toȱ changesȱ inȱ theȱ

company’sȱ internalȱ andȱ externalȱ conditions.ȱAsȱ aȱ selectionȱ processȱ inȱ aȱ dyȬ

namicȱ environment,ȱ newȱ retailingȱ formatsȱ whichȱ meetȱ newȱ customerȱ needs,ȱ

merchandiseȱ outsideȱ theirȱ traditionalȱ lines,ȱ i.e.ȱ nonȬfoodȱ items,ȱ andȱ offerȱ

otherȱ kindsȱ ofȱ services.ȱ Theseȱ developmentsȱ indicateȱ thatȱ itȱ isȱ difficultȱ toȱ

clearlyȱ allocateȱ retailȱ institutionsȱ preciselyȱ toȱ eitherȱ foodȱ orȱ nonȬfoodȱ forȬ

mats.ȱ Inȱ thisȱ sectionȱ ofȱ theȱ book,ȱ conventionalȱ supermarkets,ȱ superstores,ȱ

combinationȱ stores,ȱ hypermarketsȱ andȱ supercentres,ȱ convenienceȱ stores,ȱ

foodȱ discounters,ȱ warehouseȱ clubsȱ andȱ severalȱ nonȬstoreȱ formatsȱ areȱ preȬ

sented.ȱ Tableȱ1.1ȱ providesȱ anȱ overviewȱ ofȱ theȱ characteristicsȱ ofȱ theȱ mostȱ

ersȱ thatȱ utiliseȱsupermarketsȱ inȱ Europeȱ are,ȱ forȱ example,ȱ Sainsbury’s,ȱ Edeka,ȱ

Rewe ,ȱ Ahold’sȱ supermarketȱ “ah”ȱ orȱ Intermarchéȱ asȱ wellȱ asȱ Krogerȱ andȱ AlbertȬ

Supermarketȱ StrategyȱMixȱ

1 Retail Formats - Food

Companiesȱ likeȱ Edeka,ȱ forȱ example,ȱ tryȱ toȱ repositionȱ theirȱ supermarketsȱ andȱ

thusȱtoȱimproveȱtheirȱcompetitiveȱpositionȱemphasisingȱfreshnessȱandȱhighȱqualityȱinȱtheȱassortment,ȱintroducingȱmediumȬȱtoȱhigherȬlevelȱstoreȱbrandsȱ

andȱimprovingȱstoreȱatmosphereȱandȱthusȱprovidingȱaȱbetterȱinstoreȱshoppingȱ experience.ȱȱ

SelectedȱCharacteristicsȱofȱStoreȬBasedȱRetailȱFormatsȱinȱFoodȱRetailingȱ

80-90 %

90 % 60-70 %

60-80 % 75-90 %

Percentage Food

heavy use of newspapers, flyers, coupons

community shopping centre

or isolated sites average competitive

full selection of supermarket and drugstore items, and general merchandise;

extensive width, and depth

40,000-150,000 5,000-30,000 Hypermarket

heavy use of newspapers, flyers, coupons

community shopping centre

or isolated sites average competitive

full assortment of supermarket items, plus health and beauty aids and general merchandise

30,000-40,000 1,000-5,000 Superstore

very low average to

above average/high

average/

competitive Prices

low average

average/good Atmosphere

and Services

neighbourhood, traffic-oriented neighbourhood,

city or highly frequented sites

city or neighbourhood Location

heavy use of newspapers and flyers little to moderate

use of newspapers, flyers, coupons Promotion

medium width and low depth, heavy use of store brands (up to 90 %)

medium width and low depth of assortment, average quality

extensive width and depth of assortment;

average quality;

manufacturer and store brands

Merchandise

700-1,500 1,000-3,000

20,000-30,000 SKUs

500-1,500 200-400

400-1,000 Size (m²)

Hard Discounter Convenience

Store Conventional

Supermarket

80-90 %

90 % 60-70 %

60-80 % 75-90 %

Percentage Food

heavy use of newspapers, flyers, coupons

community shopping centre

or isolated sites average competitive

full selection of supermarket and drugstore items, and general merchandise;

extensive width, and depth

40,000-150,000 5,000-30,000 Hypermarket

heavy use of newspapers, flyers, coupons

community shopping centre

or isolated sites average competitive

full assortment of supermarket items, plus health and beauty aids and general merchandise

30,000-40,000 1,000-5,000 Superstore

very low average to

above average/high

average/

competitive Prices

low average

average/good Atmosphere

and Services

neighbourhood, traffic-oriented neighbourhood,

city or highly frequented sites

city or neighbourhood Location

heavy use of newspapers and flyers little to moderate

use of newspapers, flyers, coupons Promotion

medium width and low depth, heavy use of store brands (up to 90 %)

medium width and low depth of assortment, average quality

extensive width and depth of assortment;

average quality;

manufacturer and store brands

Merchandise

700-1,500 1,000-3,000

20,000-30,000 SKUs

500-1,500 200-400

400-1,000 Size (m²)

Hard Discounter Convenience

Store Conventional

Supermarket

ȱSource:ȱ AdaptedȱfromȱBerman/Evansȱ2007,ȱp.ȱ137;ȱLevy/Weitzȱ2007,ȱp.ȱ40.ȱ

Superstores

FoodȬbasedȱ superstoresȱ areȱ largerȱ andȱ moreȱ diversifiedȱ thanȱ conventionalȱ

supermarkets.ȱ Theirȱ sizeȱ variesȱ betweenȱ 1,000ȱm²ȱ orȱ 1,500ȱm²ȱ andȱ 5,000ȱm²ȱwithȱ expandedȱ serviceȱ deli,ȱ bakery,ȱ seafoodȱ andȱ nonȬfoodȱ sectionsȱ (BerȬ

Thisȱ combinationȱ ofȱ foodȱ andȱ nonȬfoodȱ itemsȱ inȱ superstoresȱ andȱ combinaȬ

tionȱ storesȱ yieldsȱ operatingȱ efficienciesȱ andȱ costȱ savings.ȱ Theȱ mainȱ reasonȱ

–ȱ lowȱ –ȱ priceȱ (seeȱ Chapterȱ9).ȱ Superstoresȱ andȱ combinationȱ storesȱ canȱ beȱ

locatedȱ inȱ cityȱ orȱ neighbourhoodȱ locations,ȱ butȱ alsoȱ onȱ isolatedȱ sitesȱ orȱ inȱ

Whereasȱ theȱ trendȱ towardsȱ suchȱ largeȱ retailȱ formatsȱ hasȱ developedȱ moreȱ orȱ

lessȱ similarlyȱ inȱ theȱ internationalȱ context,ȱ specificȱ typesȱ ofȱ formatsȱ haveȱ

nonethelessȱ beenȱ developedȱ inȱ theȱ variousȱ differentȱ countries.ȱ Ofȱ these,ȱ

hypermarkets,ȱ whichȱ originatedȱ inȱ France,ȱ areȱ theȱ largest.ȱ Theirȱ sizeȱ rangesȱ

fromȱ 9,000ȱm²ȱ toȱ 30,000ȱm²ȱ (e.g.ȱ Carrefourȱ andȱ Auchan).ȱ Theȱ Germanȱ “SBȬ

Warenhäuser ”ȱ (e.g.ȱ Metro’sȱ formatȱ real,ȱ orȱ Kaufland)ȱ tendȱ toȱ beȱ smallerȱ withȱ

sizesȱfromȱ5,000ȱm².ȱWhereasȱtheseȱEuropeanȱformatsȱhaveȱaȱlargerȱshareȱofȱ

foodȱitemsȱrangingȱfromȱ60ȱ%ȱtoȱ70ȱ%,ȱinȱtheȱUSA,ȱtheȱ“supercenters”ȱformatȱ

(e.g.ȱ WalȬMart,ȱ Kmart,ȱ Target)ȱ rangingȱ fromȱ 14,000ȱm²ȱ toȱ 21,000ȱm²ȱ carriesȱ aȱ

broaderȱ assortmentȱ ofȱ generalȱ merchandise.ȱ Thus,ȱ theȱ shareȱ ofȱ nonȬfoodȱ

itemsȱ isȱ higher,ȱ rangingȱ betweenȱ 60ȱ%ȱ andȱ 70ȱ%ȱ (Levy/Weitzȱ 2007,ȱ

pp.ȱ43Ȭ44).ȱȱ

Theseȱlargeȱretailȱformatsȱusuallyȱfollowȱanȱaggressive,ȱpromotionȬorientedȱ

lowȬpriceȱ strategy.ȱ Theȱ storesȱ areȱ generallyȱ locatedȱ atȱ isolatedȱ sitesȱ orȱ inteȬ

gratedȱ inȱ orȱ closeȱ toȱ shoppingȱ centres.ȱ Theȱ architectureȱ isȱ usuallyȱ costȬ

orientedȱ withȱ aȱ veryȱ simpleȱ storeȱ designȱ andȱ aȱ functionalȬorientedȱ storeȱ atȬ

mosphere.ȱAsȱtheseȱlargeȱretailȱformatsȱofferȱaȱbroadȱassortmentȱofȱfoodȱandȱ

generalȱ merchandiseȱ andȱ thusȱ provideȱ oneȬstopȬshoppingȱ opportunities,ȱ cusȬ

tomersȱ usuallyȱ shopȱ biggerȱ shoppingȱ baskets.ȱ Theseȱ storeȱ formatsȱ haveȱ aȱ

greaterȱ marketȱ areaȱ thanȱ theȱ smallerȱ storeȱ formatsȱ (e.g.ȱ supermarkets),ȱ i.e.ȱ

customersȱ areȱ willingȱ toȱ driveȱ longerȱ distancesȱ toȱ visitȱ theseȱ typesȱ ofȱ retailȱ

outlets.ȱTheseȱstoresȱthereforeȱofferȱsubstantialȱparkingȱfacilities.ȱBecauseȱofȱ

theirȱ lowȱ operatingȱ costsȱ andȱ theȱ combinationȱ ofȱ foodȱ withȱ higherȱ marginȱ

nonȬfoodȱ merchandiseȱ whichȱ allowȱ forȱ anȱ oftenȱ aggressiveȱ pricingȱ strategyȱ

“BigȱBoxȱ Retailing” ȱ

ȱ Internationalȱ Differencesȱ

“BigȱBox”ȱ StrategyȱMixȱ

1 Retail Formats - Food

andȱshoppingȱconvenienceȱ(e.g.ȱinȱtermsȱofȱtheȱbroadȱandȱdeepȱassortment),ȱduringȱtheȱpastȱfewȱdecades,ȱlargeȱretailȱformatsȱhaveȱgainedȱmarketȱshareȱmainlyȱatȱtheȱexpenseȱofȱconventionalȱsupermarkets.ȱ

Convenience Stores

Convenienceȱstoresȱ(“cȬstores”)ȱareȱusuallyȱsituatedȱinȱlocationsȱthatȱareȱeasyȱtoȱ access,ȱ suchȱ asȱ inȱ heavilyȬfrequentedȱ areasȱ orȱ inȱ urbanȱ neighbourhoodȱlocations.ȱTheyȱopenȱlongȱhoursȱ(upȱtoȱ24ȱhours,ȱdependingȱonȱlocalȱorȱnaȬtionalȱ legislation).ȱ Theȱ storesȱ areȱ smallȱ andȱ facilitiesȱ areȱ limited,ȱ withȱ anȱaverageȱ atmosphereȱ andȱ averageȱ serviceȱ level.ȱ Convenienceȱ storesȱ canȱ beȱ

operatedȱ asȱstandȬaloneȱ unitsȱ (e.g.ȱ TescoȱExpress,ȱ SevenȬEleven,ȱ Auchan,ȱ Coopȱ Pronto ),ȱ butȱ areȱ oftenȱ associatedȱ withȱ petrolȱ stationsȱ (e.g.ȱShellȱ Shops,ȱBPȱ orȱ AralȱStores,ȱEssoȱShops).ȱ

TheȱveryȱlimitedȱassortmentȱofȱtheseȱstoresȱisȱfoodȬoriented.ȱAȱhighȱproportionȱ

ofȱsalesȱconsistȱofȱimpulseȱpurchases,ȱwithȱmostȱinȱareasȱsuchȱasȱsnackȱfoods,ȱsoftȱdrinks,ȱbeerȱandȱwine,ȱtobaccoȱproductsȱorȱnewspapersȱandȱmagazines.ȱTheȱ averageȱ transactionȱ inȱ convenienceȱ storesȱ isȱ smallȱ andȱ theȱ pricesȱ areȱusuallyȱaboveȱaverage.ȱȱ

Convenienceȱstoresȱfocusȱonȱeaseȱofȱshopping.ȱTheyȱofferȱfastȱshopping,ȱthusȱ

enablingȱcustomersȱtoȱpurchaseȱquickly,ȱpickingȱmerchandiseȱinȱaȱshortȱtimeȱ

withoutȱ havingȱ toȱ searchȱ throughȱ aȱ largeȱ storeȱ orȱ waitȱ inȱ longȱ checkȬoutȱlines.ȱ Theyȱ alsoȱ offerȱ “mentalȱ convenience”,ȱ asȱ theȱ assortmentȱ isȱ limited,ȱwhichȱ enablesȱ customersȱ toȱ makeȱ theirȱ choiceȱ fastȱ (Berry/Seiders/Grewalȱ2002).ȱȱ

Hard Discounters

Foodȱ hardȱ discountersȱ usuallyȱ followȱ aȱ veryȱ aggressiveȱ everyȬdayȬlowȬpriceȱ strategyȱwithȱ pricesȱ upȱ toȱ 20ȱ%ȱ toȱ 30ȱ%ȱ belowȱ thoseȱ ofȱ conventionalȱ superȬmarkets.ȱTheyȱofferȱaȱsmallȱselectionȱofȱitemsȱandȱthereforeȱareȱalsoȱreferredȱ

toȱ asȱ “limitedȬlineȱ stores”ȱ orȱ “limitedȬassortmentȱ stores”ȱ (e.g.ȱ Ogden/Ogdenȱ

2005,ȱp.ȱ106).ȱTheȱbasicȱassortmentȱconsistsȱofȱfoodȱitemsȱwithȱaȱhighȱrateȱofȱturnoverȱandȱfewȱsizesȱandȱbrandsȱareȱofferedȱperȱproductȱcategory.ȱPromiȬnentȱexamplesȱofȱinternationallyȱsuccessfulȱhardȱdiscountersȱareȱtheȱGermanȱ

rangeȱ ofȱ manufacturerȱ brandsȱ andȱ relyȱ heavilyȱ onȱ lowȬpriceȱ storeȱ brands.ȱ

Thus,ȱpricesȱareȱlessȱcomparableȱbetweenȱdifferentȱretailers.ȱ

FoodȬbasedȱ hardȱ discountersȱ oftenȱ complementȱ theirȱ assortmentȱ byȱ aȱ

weeklyȱorȱsemiȬweeklyȱchangingȱselectionȱofȱnonȬfoodȱitemsȱwhichȱareȱsoldȱatȱ

veryȱ lowȱ pricesȱ andȱ heavilyȱ promotedȱ byȱ newspaperȱ advertisingȱ orȱ theȱ

distributionȱ ofȱ flyersȱ toȱ households.ȱ Theseȱ itemsȱ comeȱ fromȱ aȱ varietyȱ ofȱ

productȱcategoriesȱ(rangingȱfromȱpersonalȱcomputersȱandȱfurnitureȱtoȱhomeȱ

accessories)ȱ andȱ oftenȱ doȱ notȱ haveȱ anyȱ associationȱ withȱ theȱ regularȱ merȬ

chandiseȱ carriedȱ byȱ theȱ retailer.ȱ Suchȱ itemsȱ areȱ offeredȱ inȱ orderȱ toȱ increaseȱ

storeȱ traffic,ȱ andȱ theseȱ nonȬfoodȱ itemsȱ that,ȱ inȱ someȱ cases,ȱareȱ producedȱ exȬ

clusivelyȱforȱthisȱpurpose,ȱusuallyȱhaveȱaȱhigherȱmarginȱthanȱfoodȱitems.ȱ

Hardȱ discountersȱ areȱ usuallyȱ locatedȱ inȱ easilyȱ accessibleȱ trafficȬorientedȱ andȱ

costȬorientedȱ locationsȱwithȱ aȱ focusȱ onȱ lowȱ occupancyȱ costs,ȱ e.g.ȱ neighbourȬ

hoodȱlocationsȱorȱperipheryȱsitesȱwithȱadequateȱparkingȱfacilities.ȱBecauseȱofȱ

theirȱ aggressiveȱ pricingȱ strategy,ȱ theȱ convenienceȱ dimensionsȱ (e.g.ȱ “mentalȱ

convenience”ȱbecauseȱofȱtheȱlimitedȱassortmentȱandȱquickȱshoppingȱdueȱtoȱ

theȱ smallȱ storeȱ size)ȱ andȱ locationȱ strategy,ȱ hardȱ discountersȱ haveȱ grownȱ

consistentlyȱ overȱ theȱ pastȱ decades.ȱ Theyȱ oftenȱ playȱ anȱ importantȱ roleȱ inȱ

proximityȱretailing.ȱ

Warehouse Clubs

Warehouseȱ clubsȱ areȱ aȱ foodȱ retailȱ formatȱ whichȱ isȱ specificȱ toȱ theȱ USAȱ andȱ

notȱ prevalentȱ worldwide.ȱ Warehouseȱ clubsȱ sellȱ theirȱ productsȱ bothȱ toȱ endȱ

usersȱandȱtoȱsmallȱtoȱmediumȬsizedȱcompanies.ȱBusinessȱmembersȱtypicallyȱ

representȱlessȱthanȱ30ȱ%ȱofȱtheȱcustomerȱbase,ȱbutȱaccountȱforȱapproximatelyȱ

70ȱ%ȱ ofȱ salesȱ (Weitz/Whitfieldȱ 2006,ȱ p.ȱ66).ȱ Membershipȱ isȱ requiredȱ andȱ cusȬ

tomersȱ areȱ chargedȱ anȱ annualȱ fee.ȱ Theȱ largestȱ warehouseȱ clubsȱ inȱ theȱ USAȱ

areȱCostcoȱandȱSAM’SȱCLUBȱ(WalȬMart).ȱȱ

ThisȱtypeȱofȱstoreȱisȱcharacterisedȱbyȱlowȱpricesȱforȱaȱlimitedȱassortmentȱcomȬ

prisingȱ halfȱ foodȱ andȱ halfȱ generalȱ merchandise.ȱ Theȱ storesȱ areȱ veryȱ largeȱ

(9,000ȱm²ȱ orȱ larger)ȱ andȱ areȱ locatedȱ inȱ secondaryȱ sites,ȱ i.e.ȱ inȱ lowȬrentȱ disȬ

tricts.ȱStoreȱarchitectureȱandȱdesignȱareȱveryȱsimpleȱandȱcostȬoriented,ȱcharȬ

acterisedȱbyȱaȱsimpleȱinterior,ȱconcreteȱfloors,ȱandȱwideȱaislesȱ(Ogden/Ogdenȱ

2005,ȱp.ȱ104).ȱ

Itemsȱ areȱ usuallyȱ presentedȱ onȱ pallets.ȱ Inȱ thisȱ typeȱ ofȱ store,ȱ fastȱ moving,ȱ

highȬturnoverȱ merchandiseȱ isȱ offered,ȱ thus,ȱ minimisingȱ holdingȱ costs.ȱ

Warehouseȱ clubsȱ concentrateȱ onȱ specialȱ purchasesȱ fromȱ popularȱ brands.ȱ

Productsȱ areȱ oftenȱ soldȱ thatȱ areȱ availableȱ onȱ specialȱ promotionȱ fromȱ theȱ

manufacturersȱ(e.g.ȱoverruns,ȱreturns,ȱetc.)ȱ(Berman/Evansȱ2007,ȱp.ȱ141).ȱ

NonȬFoodȱ Promotionsȱ

ȱ ȱ ȱ ȱ Membershipȱ

1 Retail Formats - Food

Theȱ conceptȱ ofȱ warehouseȱ clubsȱ resemblesȱ cashȱ &ȱ carryȱ wholesalersȱ (e.g.ȱ Metro)ȱthatȱalsoȱrequireȱmembership.ȱEvenȱthoughȱmembershipȱisȱrestrictedȱtoȱ companiesȱ andȱ theseȱ outletsȱ focusȱ onȱ businessȬtoȬbusinessȱ trade,ȱ endȱusersȱalsoȱfrequentlyȱpurchaseȱatȱtheseȱstores.ȱ

Non-Store Formats in Food Retailing

Theȱdominantȱshareȱofȱfoodȱretailingȱisȱgeneratedȱbyȱstoreȱformats.ȱNonetheȬ

less,ȱthereȱareȱseveralȱnonȬstoreȱformatsȱatȱwhichȱgroceriesȱandȱrelatedȱprodȬ uctsȱcanȱbeȱpurchasedȱbyȱconsumers.ȱForȱexample,ȱremoteȱorderingȱchannels,ȱ

suchȱ asȱ traditionalȱ cataloguesȱ orȱ Internetȱ shopsȱ canȱ beȱ usedȱ toȱ distributeȱmerchandise.ȱ Whileȱ theseȱ formatsȱ areȱ generallyȱ gainingȱ importance,ȱ theȱshareȱ ofȱ groceriesȱ offeredȱ throughȱ mailȬorderȱ channelsȱ remainsȱ ratherȱ limȬitedȱ(seeȱChapterȱ2).ȱ

Forȱfreshȱmerchandise,ȱe.g.ȱfarmȱproduce,ȱbakeryȱproducts,ȱmeatȱorȱfish,ȱtheȱ

useȱofȱmarketȱstandsȱorȱtruckȱandȱvanȱsalesȱisȱaȱtraditionalȱmodeȱofȱdistributionȱ

that,ȱforȱexample,ȱsmallȱproducersȱuseȱtoȱreachȱtheirȱcustomersȱasȱaȱspecificȱformȱ ofȱ directȱ selling.ȱ Becauseȱ ofȱ theȱ closeȱ andȱ personalȱ contactȱ withȱ theirȱcustomers,ȱ theseȱ vendorsȱ oftenȱ haveȱ highȱ retentionȱ ratesȱ amongȱ theirȱ cusȬtomerȱ base,ȱ butȱ theȱ costsȱ associatedȱ withȱ directȱ sellingȱ areȱ veryȱ highȱ andȱtherefore,ȱsoȱareȱtheȱprices.ȱ

Vendingȱ machineȱ retailingȱconstitutesȱ yetȱ anotherȱ alternative.ȱ Merchandiseȱsuchȱ asȱ snacksȱ andȱ softȱ drinksȱ areȱ storedȱ inȱ aȱ machineȱ andȱ dispensedȱ toȱcustomersȱ whenȱ theyȱ depositȱ cashȱ orȱ useȱ aȱ creditȱ card.ȱ Vendingȱ machinesȱareȱusuallyȱplacedȱatȱconvenientȱlocationsȱwithȱhighȱtrafficȱ(Levy/Weitzȱ2007,ȱpp.ȱ56Ȭ57).ȱDevelopmentsȱinȱtheȱfieldȱofȱvendingȱmachinesȱareȱquiteȱinnovaȬtive.ȱForȱexample,ȱnewȱtypesȱofȱkioskȱvendingȱmachinesȱprovideȱcustomersȱwithȱ productȱ displaysȱ andȱ informationȱ onȱ theȱ merchandiseȱ orȱ electronicȱsystemsȱ trackȱ inventoryȱ andȱ cash,ȱ thusȱ reducingȱ outȬofȬstocksȱ orȱ malfuncȬtions.ȱ

Conclusion and Outlook

Theȱ foodȱ retailingȱ landscapeȱ hasȱ changedȱ dramaticallyȱ overȱ theȱ pastȱ fewȱ

decades.ȱ Competitionȱ hasȱ increasedȱ becauseȱ of,ȱ variousȱ factorsȱ including,ȱ

mergersȱ &ȱ acquisitionsȱ andȱ theȱ internationalisationȱ ofȱ retailȱ companiesȱ(Fox/Sethuramanȱ2006;ȱDawsonȱ2006).ȱInȱadditionȱtheȱmainȱretailȱformatsȱinȱ

thisȱsectorȱhaveȱalsoȱchangedȱasȱaȱresultȱofȱtheseȱdevelopments,ȱtechnologicalȱ progressȱandȱ responsesȱ toȱ changesȱ inȱ customerȱ behaviourȱ (Weitz/Whitfieldȱ2006).ȱ

4,4 3,6 3,4 3,4 3,4 3,4 3,3

26,8 43,2 41,9 31,2 29,0 51,2

40,0

36,6 30,4 32,3

13,8 8,0 9,7 14,4 22,6 9,6 53,6

26,8 43,2 41,9 31,2 29,0 51,2

40,0

36,6 30,4 32,3 37,6 21,0 28,8 4,0

18,7 16,0 13,7 16,0 17,7 7,2

1,6

3,2 0,8

4,1 2,4 2,4 0,8 9,7

Hypermarkets Specialty Stores Superstores Conventional Supermarkets

Electronic Retailing Convenience Stores

Food Hard Discounters

very important important neither…nor of less importance not important at all

“Please rate the importance of the following food retail formats in the year 2010.”

Results of a top management survey, n = 134. ȱSource:ȱ AdaptedȱfromȱZentes/SchrammȬKlein/Neidhartȱ2005,ȱp.ȱ42.ȱ

Evenȱ thoughȱ newȱ nonȬstoreȱ retailȱ channelsȱ haveȱ beenȱ developed,ȱ because,ȱ

ienceȱ storesȱareȱ alsoȱ becomingȱ progressivelyȱ moreȱ important.ȱ Theȱ futureȱ

trendsȱ withȱ respectȱ toȱ theȱ relevanceȱ ofȱ theȱ differentȱ retailȱ formatsȱ inȱ foodȱ

retailingȱareȱillustratedȱinȱFigureȱ1.4.ȱȱ

Inȱorderȱtoȱremainȱcompetitiveȱinȱtheȱmatureȱbusinessȱofȱfoodȱretailing,ȱmoreȱ

andȱmoreȱretailersȱcarryȱmerchandiseȱoutsideȱtheirȱtraditionalȱbusiness.ȱThisȱ

phenomenonȱ isȱ referredȱ toȱ asȱ “categoryȱ migration”ȱ (Zentes/SchrammȬ

Klein/Neidhartȱ 2005,ȱ pp.ȱ52Ȭ55)ȱ orȱ asȱ theȱ “blurring”ȱ ofȱ retailȱ formatsȱ

1 Retail Formats - Food

MORSCHETT,ȱ D.;ȱ SWOBODA,ȱ B.;ȱ FOSCHT,ȱ T.ȱ (2005):ȱ Perceptionȱ ofȱ StoreȱAttributesȱ andȱ Overallȱ Attitudeȱ towardsȱ Groceryȱ Retailers:ȱ Theȱ Roleȱ ofȱShoppingȱMotives,ȱin:ȱInternationalȱReviewȱofȱRetail,ȱDistributionȱandȱConȬsumerȱResearch,ȱVol.ȱ15,ȱNo.ȱ4,ȱpp.ȱ423Ȭ447.ȱ

Case Study: Carrefour1

Profile, History, and Status Quo

Theȱ originsȱ ofȱ Carrefourȱ dateȱ backȱ toȱ 1959ȱ whenȱ theȱ companyȱ wasȱ estabȬ

lishedȱ inȱ Franceȱ byȱ theȱ Fournierȱ andȱ Defforeyȱ families.ȱ Theȱ shopsȱ wereȱ allȱ

locatedȱ onȱ thoroughfares;ȱ henceȱ theȱ nameȱ “Carrefour”.ȱ Inȱ otherȱ words,ȱ theȱ

nameȱsignifiesȱthatȱitȱisȱconvenientȱtoȱshopȱthereȱ(Lhermieȱ2001).ȱ

Carrefourȱopenedȱ itsȱ firstȱ supermarketȱ inȱAnnecy,ȱ HauteȬSavoie,ȱ andȱ atȱ theȱ

sameȱ time,ȱ theȱ LLCȱ Promodis,ȱ theȱ forerunnerȱ ofȱ Promodès,ȱ wasȱ created.ȱ Theȱ

companyȱ wasȱ formedȱ throughȱ aȱ mergerȱ ofȱ twoȱ wholesalerȱ familiesȱ fromȱNormandy,ȱmanagedȱbyȱPaulȬAugusteȱHalleyȱandȱLeonorȱDuvalȬLemonnier.ȱ

Inȱ 1962,ȱ Promodèsȱ openedȱ itsȱ firstȱ supermarketȱ inȱ MantesȬlaȬVilleȱ (Yvelines)ȱ andȱ inȱ 1963,ȱ Carrefourȱ inventedȱ aȱ newȱ storeȱ concept:ȱ theȱ hypermarket.ȱ Theȱ firstȱ Carrefourȱ hypermarketȱ openedȱ inȱ SainteȬGenevièveȬdesȬBois,ȱ withȱ aȱ

salesȱareaȱofȱ2,500ȱm2,ȱtwelveȱcheckȬoutsȱandȱ400ȱparkingȱspaces.ȱFournierȱ Badinȱ andȱ DefforeyȱattendedȱBernardoȱ Trujillo’sȱseminarsȱ inȱ DayȬtonȱ(Ohio)ȱatȱtheȱendȱofȱtheȱ1950s,ȱandȱwereȱmuchȱinfluencedȱbyȱwhatȱtheyȱ

heard.ȱJustȱaȱfewȱyearsȱlater,ȱtheȱPromodèsȱsupermarketsȱadoptedȱtheȱChamȬ pionȱ retailȱ brandȱ name.ȱ Carrefourȱ openedȱ itsȱ firstȱ hypermarketȱ outsideȱ

France,ȱinȱBelgium,ȱandȱtheȱfirstȱoutsideȱEurope,ȱinȱBrazilȱ(Sternquistȱ1998).ȱ

Inȱ1972,ȱPromodèsȱhypermarketsȱadoptedȱtheȱContinentȱretailȱbrandȱandȱconȬ

ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

1 ȱȱ Sourcesȱusedȱforȱthisȱcaseȱstudyȱincludeȱtheȱwebȱsitesȱhttp://www.carrefour.frȱandȱ http://www.carrefour.com,ȱ andȱ variousȱ annualȱ andȱ interimȱ reports,ȱ investorȬ relationsȱpresentationsȱasȱwellȱasȱexplicitlyȱcitedȱsources.ȱ

Openingsȱofȱtheȱ

FirstȱStoresȱ

RetailȱBrandsȱ

venienceȱ storesȱ operatedȱ underȱ theȱ Shopiȱ brand.ȱ Inȱ theȱ 1970s,ȱ Carrefourȱ inȬ

troducedȱ“produitsȱlibres”ȱ(genericsȱasȱanȱearlyȱtypeȱofȱstoreȱbrand),ȱwhichȱ

areȱ unbrandedȱ productsȱ butȱ “justȱ asȱ goodȱ andȱ cheaper”ȱ andȱ startedȱ theȱ

developmentȱ ofȱ hardȱ discounting.ȱ Theȱ companyȱ createdȱ theȱ Edȱ chainȱ inȱ

00 0.08 00

N/A 0

Internet Shops

000 1.51 166

00 8.63 00

5,502 0

Discount Stores

000 0.59 N/A

0 100.00 15,597

% of Sales (2005) Store Format

000 0.10 N/A

00 0.08 00

N/A 0

Internet Shops

000 1.51 166

00 8.63 00

5,502 0

Discount Stores

000 0.59 N/A

0 100.00 15,597

% of Sales (2005) Store Format

ȱSource:ȱȱ PlanetȱRetailȱ2006b.ȱȱ

expansionȱ moreȱ thanȱ 40ȱ yearsȱ ago,ȱ fromȱ whichȱ itȱ hasȱ gainedȱ considerableȱ

experience.ȱ Withȱ theȱ strengthȱ ofȱ thisȱ expertise,ȱ Carrefourȱ pursuesȱ aȱ growthȱ

strategyȱthatȱisȱbasedȱincreasinglyȱonȱitsȱinternationalȱbusinessȱ(McGoldrickȱ

1995).ȱ Thus,ȱ overȱ theȱ lastȱ fewȱ years,ȱ aboutȱ 80ȱ%ȱ ofȱ theȱ newȱ pointsȬofȬsaleȱ

Tableȱ1.2ȱ

Internationalȱ GrowthȱStrategyȱ

1 Retail Formats - Food

wereȱcreatedȱoutsideȱFrance.ȱGrowthȱhasȱbeenȱachievedȱwithȱanȱincreaseȱofȱsalesȱoutsideȱFranceȱofȱ8.3ȱ%ȱatȱconstantȱexchangeȱrates.ȱ

Complementarity of Store Formats

TheȱmultiȬformatȱapproachȱisȱanȱessentialȱmeansȱofȱsecuringȱmarketȱshareȱinȱ

theȱ variousȱ countries.ȱ Carrefourȱ triesȱ toȱ respondȱ toȱ theȱ specificȱ needsȱ andȱ

shoppingȱ habitsȱ ofȱ localȱ customers.ȱ Theȱ multiȬformatȱ approachȱ contributesȱ

toȱtheȱrapidȱexpansionȱofȱtheȱgroupȱ(Shiue/Horng/Yehȱ2006).ȱItȱenablesȱCarȬ refourȱtoȱtransferȱretailȱbrands,ȱwhileȱrespectingȱtheȱdevelopmentȱofȱtheȱtradȬingȱstructureȱofȱaȱtown,ȱregionȱorȱ–ȱevenȱmoreȱcommonȱ–ȱanȱentireȱcountry.ȱThisȱwasȱtheȱcaseȱinȱ2004ȱinȱGreece,ȱatȱIoannina,ȱforȱexample.ȱInȱ2004,ȱaȱsuȬpermarketȱwasȱopenedȱsouthȱofȱthisȱtownȱofȱ90,000ȱinhabitants,ȱandȱaȱhyperȬ

marketȱtoȱtheȱnorthȱwasȱenlargedȱunderȱtheȱCarrefourȱretailȱbrand.ȱTheȱresultȱ

–ȱwithȱtwoȱstores,ȱtotalȱsalesȱinȱtheȱIoanninaȱregionȱalmostȱtripled.ȱTheȱdeȬvelopmentȱpotentialȱofȱthisȱapproachȱisȱconsiderableȱandȱthreeȱotherȱoperaȬtionsȱofȱthisȱtypeȱareȱplannedȱinȱtheȱcountryȱoverȱtheȱnextȱfewȱyears.ȱ

The Formats

Hypermarkets

Carrefourȱhypermarketsȱofferȱaȱlargeȱchoiceȱunderȱoneȱroofȱ–ȱbetweenȱ40,000ȱ

andȱ 60,000ȱ itemsȱ –ȱ ofȱ foodȱ (60Ȭ70ȱ%)ȱ andȱ nonȬfoodȱ (30Ȭ40ȱ%)ȱ products,ȱ

mostlyȱ atȱ lowȱ pricesȱ (Levy/Weitzȱ 2007).ȱ Beingȱ partȱ ofȱ aȱ shoppingȱ mallȱ orȱ

retailȱpark,ȱhypermarketsȱattractȱgoodȱtraffic.ȱInȱtheȱlastȱfewȱyears,ȱCarrefourȱ

decidedȱtoȱcapitaliseȱonȱtheȱattractionȱofȱitsȱhypermarketsȱby:ȱ

„ strengtheningȱitsȱpositionȱandȱpriceȱimageȱ

„ adjustingȱtheȱbusinessȱmodelȱtoȱmeetȱcustomerȱexpectationsȱ

„ makingȱ shoppingȱ easierȱ soȱ thatȱ itȱ canȱ beȱ aȱ pleasure:ȱ simplificationȱ ofȱ

messages,ȱ introductionȱ ofȱ shorterȱ pathsȱ aroundȱ theȱ store,ȱ adaptationȱ ofȱ

ample,ȱ theȱ massȱ consumerȱ productȱ panelȱ ofȱ Novemberȱ 2004ȱ rankedȱ 125ȱ

Frenchȱ Carrefourȱ hypermarketsȱ amongstȱ theȱ 179ȱ priceȱ leadersȱ inȱ theirȱ cusȬ

Electronicȱ TaggingȱSystemȱ

“Departments”ȱ

1 Retail Formats - Food

installedȱ atȱ theȱ entriesȱ toȱ theseȱ areasȱ inȱ orderȱ toȱ improveȱ theȱ visibilityȱ andȱofferȱcustomersȱaȱmoreȱpersonalisedȱandȱfriendlyȱreception.ȱAnotherȱexamȬpleȱ ofȱ developmentȱ canȱ beȱ seenȱ inȱ theȱ textilesȱ area:ȱ modernisationȱ ofȱ theȱ

relevantȱ areasȱ andȱ aȱ restructuringȱ ofȱ theȱ collections,ȱ theȱ Texȱ storeȱ brandȱ inȱ

particular.ȱHouseholdȱequipmentȱ(crockery,ȱfurniture,ȱdecorativeȱitems,ȱetc.)ȱandȱ generalȱ equipmentȱ (binȱ bags,ȱ bulbs,ȱ batteries,ȱ inkȱ cartridges,ȱ etc.)ȱ alsoȱrepresentȱsolidȱproductȱlines.ȱ

Toȱpersuadeȱcustomersȱtoȱvisitȱtheȱhypermarketsȱmoreȱoften,ȱitȱisȱnecessaryȱthatȱ theyȱ differentiateȱ themselvesȱ fromȱ theirȱcompetitors,ȱ notȱ onlyȱ inȱ price,ȱqualityȱandȱadaptationȱtoȱlocalȱcontext,ȱbutȱalsoȱinȱtheirȱproductȱmix.ȱToȱbeȱvisibleȱ andȱ useful,ȱ thisȱ differentiationȱ requiresȱ aȱ richerȱ andȱ moreȱ clearlyȱvisibleȱproductȱmix.ȱ

Theȱhypermarketsȱtryȱtoȱofferȱtheȱbestȱpriceȱonȱtheȱ20ȱ%ȱofȱmassȱconsumpȬtionȱproductsȱthatȱaccountȱforȱ80ȱ%ȱofȱsales.ȱFurthermore,ȱtheyȱgiveȱaccessȱtoȱanȱ additionalȱ productȱ mix.ȱ Thisȱ richnessȱ wasȱ recentlyȱ enhancedȱ withȱ aȱ reȬbalancingȱofȱfoodȱagainstȱnonȬfoodȱwhichȱwillȱcontinueȱonȱanȱongoingȱbasis.ȱTheȱhypermarketsȱareȱpayingȱparticularȱattentionȱtoȱfreshȱproduce,ȱaȱmajorȱfactorȱinȱdifferentiationȱandȱcustomerȱloyalty.ȱToȱkeepȱtheȱteamsȱaheadȱofȱtheȱgameȱ andȱ maintainȱ theirȱ professionalism,ȱ aȱ majorȱ trainingȱ programmeȱ isȱdueȱtoȱbeȱrolledȱoutȱinȱtheȱ nearȱfuture.ȱThisȱwillȱaffectȱallȱemployees,ȱfromȱmembersȱofȱtheȱexecutiveȱcommitteesȱtoȱsalesȱdepartmentȱmanagers.ȱInȱtheȱnonȬfoodȱarea,ȱtheȱproductȱmixȱisȱadjustedȱaccordingȱtoȱseveralȱcriteȬriaȱincludingȱtheȱcustomerȱrequirementsȱandȱmacroȬeconomicȱconditionsȱinȱtheȱ variousȱ countries,ȱ asȱ wellȱ asȱ localȱ competitionȱ fromȱ specialistȱ retailers.ȱTheȱhypermarketsȱadaptȱtheȱaggressivenessȱofȱtheirȱpricingȱtoȱtheȱrealityȱofȱ

localȱ specialistȱ competition.ȱ Thus,ȱ inȱ France,ȱ Carrefourȱ offersȱ aȱ greaterȱ perȬ

manentȱrangeȱofȱtextileȱproductsȱthanȱseasonalȱones.ȱTheȱSpanishȱmodel,ȱonȱtheȱotherȱhand,ȱoffersȱaȱmoreȱseasonalȱtextileȱrange.ȱ

InȱFrance,ȱCarrefourȱhasȱchosenȱtoȱemphasiseȱcertainȱnonȬfoodȱproductȱcateȬ

gories:ȱ Forȱ example,ȱ culturalȱmediaȱ isȱ goingȱ throughȱ majorȱ changesȱ withȱ aȱ

structurallyȱ regressiveȱ compactȱ discȱ market.ȱ Carrefourȱ hasȱ anticipatedȱ thisȱ

fallȱ andȱ reducedȱ theȱ spaceȱ inȱ itsȱ hypermarketsȱ givenȱ toȱ CDsȱ butȱ increasedȱtheȱspaceȱallocatedȱtoȱbooks.ȱTechnologyȱsalesȱthatȱwereȱdividedȱintoȱtelephȬony,ȱcomputers,ȱaudioȱandȱphotographyȱsectionsȱhaveȱnowȱbeenȱintegratedȱ

intoȱ theȱ “Techno”ȱ concept.ȱ Thisȱ greatlyȱ simplifiesȱ theȱ accessȱ toȱ technology,ȱ

andȱ theȱ resultȱ isȱ clearerȱ andȱ moreȱ preciseȱ advice.ȱ Textilesȱ combineȱ theȱ

strengthȱ ofȱ theȱ permanentȱ Texȱ collectionȱ withȱ theȱ progressiveȱ implementaȬ

tionȱofȱtheȱSpanishȱcollections.ȱAfterȱanȱappropriateȱadjustmentȱofȱtheȱpriceȱposition,ȱattentionȱmustȱalsoȱbeȱfocusedȱonȱtheȱpriceȱimageȱinȱorderȱtoȱgainȱmarketȱshare.ȱTheȱmodernisationȱofȱ theȱ storesȱ isȱ supportedȱ byȱ anȱ expansionȱ ofȱ theȱ freshȱ produceȱ range.ȱ

petition,ȱ Carrefourȱ remainsȱ oneȱ ofȱ theȱ leadersȱ inȱ termsȱ ofȱ priceȱ image.ȱ Inȱ aȱ

veryȱ competitiveȱ environment,ȱ theȱ Spanishȱ hypermarketsȱ haveȱ beenȱ enȬ

cessȱ ofȱ largeȬscale,ȱ innovativeȱ operations,ȱ asȱ exemplifiedȱ byȱ theȱ “Codicoȱ

Magico”ȱ interactiveȱ gameȱ whichȱ isȱ broadcastȱ onȱ television.ȱ Theȱ groupȱ and,ȱ

moreȱ particularly,ȱ itsȱ hypermarketsȱ areȱ thusȱ wellȬplacedȱ toȱ continueȱ theirȱ

whereȱ Carrefourȱ hasȱ theȱ bestȱ priceȱ imageȱ inȱ theȱ market.ȱ Inȱ Argentina,ȱ theȱ

hypermarketsȱ holdȱ secondȱ position.ȱ Inȱ 2004,ȱ aȱ franchisedȱ hypermarketȱ ofȱ

7,700ȱm2ȱ wasȱ takenȱ onȱ andȱ elevenȱ existingȱ storesȱ wereȱ enlarged,ȱ makingȱ aȱ

1 Retail Formats - Food

Supermarkets

Withȱitsȱadaptabilityȱandȱintegrationȱintoȱtheȱdailyȱlifeȱofȱtheȱcustomers,ȱtheȱsupermarketȱ formatȱ isȱ aȱ successȱ inȱ allȱ thoseȱ countriesȱ inȱ whichȱ itȱ isȱ estabȬlished.ȱTheȱformatȱoffersȱseveralȱadvantages:ȱconvenientȱservicesȱandȱaȱqualȬityȱ andȱ freshnessȱ ofȱ productsȱ whichȱ enableȱ itȱ toȱ establishȱstrongȱ linksȱ withȱitsȱ customers.ȱ Operatingȱ underȱ variousȱ retailȱ brands,ȱ bothȱ inȱ Franceȱ andȱ

internationallyȱ (Champion,ȱ Norte,ȱ GS,ȱ GBȱ andȱ Globi),ȱ theȱ supermarketsȱ playȱ

oneȱ mainȱ roleȱ inȱ allȱ theȱ geographicalȱ areasȱ inȱ whichȱ theȱ groupȱ hasȱ aȱ presȬence:ȱ complementingȱ theȱ hypermarketȱ format.ȱ Theȱ adaptabilityȱ ofȱ theȱ

group’sȱ supermarketsȱ isȱ wellȱ illustratedȱ byȱ theȱ Championȱ supermarketȱ inȱ

Paris.ȱItsȱorganisationȱrespondsȱtoȱtheȱrequirementsȱofȱtheȱParisianȱcustomer,ȱwhoȱhasȱlittleȱinterestȱinȱpromotions,ȱconstantlyȱseeksȱlowȱprices,ȱisȱasȱmuchȱattractedȱ byȱ theȱ manufacturerȱ asȱ byȱ theȱ storeȱ brandsȱ andȱ isȱ alwaysȱ inȱ aȱhurry.ȱAȱ“fastȱlane”ȱhasȱbeenȱsetȱupȱwithȱsuitableȱopeningȱhoursȱ(theȱsuperȬmarketȱ isȱ openȱ untilȱ 22:00),ȱ theȱ produceȱ isȱ selfȬserviceȱ toȱ avoidȱ waitingȱ atȱpeakȱhoursȱandȱcertainȱcheckȬoutsȱareȱreservedȱforȱbasketsȱandȱsmall,ȱtwoȬbasketȱtrolleys.ȱ

Generally,ȱtheȱsupermarketsȱadaptȱtoȱtheȱlocalȱcontextȱbyȱtakingȱaccountȱofȱcustomerȱtypes,ȱtheirȱconsumptionȱhabits,ȱtheȱnatureȱofȱtheȱcompetition,ȱetc.ȱTheirȱmodelȱgivesȱtheȱbenefitȱofȱflexibilityȱandȱleadsȱtoȱthreeȱdifferentȱtypesȱofȱstore:ȱ

„ inȬtownȱstores,ȱwhichȱofferȱessentiallyȱfoodȱproductsȱ

„ townȬfringeȱ stores,ȱ whichȱ oftenȱ haveȱ aȱ roleȱ thatȱ complementsȱ orȱ evenȱcompetesȱwithȱtheȱhypermarketsȱ(withinȱtheȱgroup)ȱ

„ ruralȱstores,ȱcharacterisedȱbyȱaȱgreaterȱdevelopmentȱofȱtheȱofferȱofȱnonȬfoodȱproductsȱ(textiles,ȱgeneral,ȱetc.).ȱ

Theȱ veryȱ constructionȱ ofȱ theȱ storesȱ incorporatesȱ thisȱ flexibility.ȱ Highlyȱ moȬdular,ȱ theirȱ architectureȱ facilitatesȱ rapidȱ modification.ȱ Theȱ group’sȱ superȬmarketsȱareȱalsoȱcharacterisedȱbyȱtheȱpresentationȱofȱaȱwideȱrangeȱofȱprodȬucts.ȱ Overȱ theȱ lastȱ fewȱ years,ȱ theȱ growthȱ ofȱ theȱ supermarketsȱ hasȱ beenȱbackedȱ byȱ franchisingȱ whichȱ favoursȱ rapidȱ expansionȱ andȱ offersȱ goodȱ deȬvelopmentȱ opportunities.ȱ Franchisingȱ meetsȱ theȱ increasinglyȱ evidentȱ reȬquirementsȱofȱtheȱindependentsȱandȱsmallȱchainsȱ(Bronsonȱetȱal.ȱ1999).ȱTheseȱ

haveȱ aȱ greatȱ dealȱ toȱ gainȱ fromȱ theȱ supportȱ ofȱ aȱ groupȱ likeȱ Carrefour.ȱ Thisȱ

givesȱ themȱ theȱ benefitȱ notȱ onlyȱ ofȱ powerfulȱ centralȱ purchasing,ȱ strongȱ andȱeffectiveȱ communicationȱ andȱ highȬperformanceȱ logistics,ȱ butȱ alsoȱ ofȱ theȱgroup’sȱ commercialȱ knowȬhow.ȱ Withȱ aȱ presenceȱ inȱ France,ȱ Belgium,ȱ ItalyȱandȱNorway,ȱfranchisingȱnowȱrepresentsȱaȱsignificantȱgrowthȱvectorȱforȱtheȱformat.ȱ

toȱ strengtheningȱ theirȱ linksȱ withȱ theȱ formatȱ andȱ itsȱ brands.ȱ Thisȱ liesȱ atȱ theȱ

heartȱ ofȱ severalȱ projectsȱ nowȱ beingȱ devisedȱ orȱ rolledȱ out,ȱ whichȱ aimȱ atȱ aȱ

greaterȱdifferentiationȱofȱtheȱCarrefourȱgroupȱsupermarketsȱfromȱotherȱretailȬ

ers.ȱ Thisȱ detailedȱ programmeȱ coversȱ theȱ launchȱ ofȱ nicheȱ brandsȱ andȱ newȱ

itemsȱ(bio,ȱbabyȱandȱcosmeticȱproducts,ȱetc.),ȱandȱtheȱmoreȱeffectiveȱexploiȬ

tationȱofȱexistingȱproductȱranges,ȱespeciallyȱtheȱQualityȱLines,ȱspecialȱrecipesȱ

andȱ freshȱ produce.ȱ Thisȱ strategyȱ isȱ implementedȱ throughȱ customerȱ loyaltyȱ

programmes,ȱ whichȱ facilitateȱ communicationȱ andȱ directȱ marketingȱ actions.ȱ

Eachȱ supermarketȱ regularlyȱ measuresȱ customerȱ satisfactionȱ throughȱ checkȬ

outȱ surveysȱ andȱ analysesȱ changesȱ inȱ consumptionȱ attitudesȱ andȱ expectaȬ

andȱ continuedȱ inȱ theȱ followingȱ yearsȱ toȱ incorporateȱ internationalȱ productsȱ

thatȱ wereȱ developedȱ atȱ theȱ groupȱ levelȱ (Produitsȱ Carrefourȱ Internationauxȱ

(PCI)),ȱ inȱ theirȱ productȱ range.ȱ Atȱ theȱ endȱ ofȱ 2004,ȱ Diaȱ storesȱ wereȱ alreadyȱ

offeringȱ theirȱ customersȱ overȱ 200ȱ PCIȱ items.ȱ Thisȱ notȱ onlyȱ helpsȱ theȱ hardȱ

discountȱ storesȱ toȱ establishȱ theirȱ particularlyȱ aggressiveȱ positionȱ inȱ theirȱ

markets,ȱbutȱalsoȱcontributesȱtoȱmaintainingȱtheȱhighȱlevelȱofȱqualityȱofferedȱ

toȱtheirȱcustomers.ȱTheȱcompanyȱitselfȱconsidersȱtheȱhardȱdiscountȱconceptȱ

asȱ aȱ veryȱ flexibleȱ model.ȱ Theȱ smallȱ floorȱ areaȱ makesȱ hardȱ discountȱ storesȱ

ȱ StoreȱBrandsȱ ȱ

ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ CustomerȱLoyȬ altyȱProgrammesȱ

ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ Internationalȱ StoreȱBrandȱ Conceptȱ

1 Retail Formats - Food

easierȱtoȱexpandȱworldwideȱthanȱotherȱformats.ȱMoreȱthanȱhalfȱofȱtheȱsalesȱcomeȱfromȱstoreȱbrands.ȱTheȱkeyȱreasonsȱforȱsuccessȱareȱspeedȱofȱadaptation,ȱflexibilityȱ andȱ decentralisation.ȱ Theȱ storesȱ areȱ regularlyȱ reȬfittedȱ andȱenlargements,ȱchangesȱofȱlocation,ȱmodernisationȱorȱreorganisationȱareȱveryȱfrequentlyȱcarriedȱout.ȱThus,ȱtheȱbusinessȱmodelȱchangesȱwithȱitsȱmarket.ȱTheȱ hardȱ discountȱ storeȱ adaptsȱ toȱ itsȱ environmentȱ andȱ canȱ beȱ dividedȱ intoȱthreeȱtypes:ȱ

„ Theȱ townȬcentreȱ Diaȱ withȱ aȱ salesȱ areaȱ ofȱ lessȱ thanȱ 300ȱ m2.ȱ Thisȱ formatȱoffersȱ aȱ rangeȱ ofȱ foodȱ productsȱ atȱ minimumȱ price.ȱ Theseȱ rentedȱ storesȱareȱextremelyȱflexibleȱandȱfirmlyȱanchoredȱinȱtheȱurbanȱenvironment.ȱ

„ Theȱ townȬfringeȱ Dia,ȱ withȱ aȱ salesȱ floorȱ areaȱ ofȱ aboutȱ 600ȱ m2ȱ andȱ aȱ carȱpark.ȱLargerȱthanȱtheȱpreviousȱtype,ȱitsȱproductȱrangeȱisȱgreaterȱinȱmostȱofȱ theȱ cases.ȱ Itȱ offersȱ productsȱ inȱ wholesaleȱ packagingȱ andȱ hasȱ aȱ freshȱproduceȱsection.ȱ

40ȱ%ȱandȱ80ȱ%.ȱTheȱstrengthȱofȱDiaȱisȱalsoȱbasedȱonȱcontinuingȱcommunicaȬ

tionȱ aboutȱ qualityȱ andȱ foodȱ safety.ȱ Theȱ accentȱ isȱ onȱ theȱ strengtheningȱ ofȱqualityȱ controlsȱ andȱ increasingȱ frequencyȱ ofȱ supplierȱ auditsȱ carriedȱ outȱ byȱindependentȱlaboratories.ȱSpecialȱattentionȱisȱpaidȱtoȱtheȱperformanceȱofȱtheȱonlineȱtraceabilityȱsystem.ȱTheȱloyaltyȱcardsȱareȱdeployedȱinȱallȱthoseȱcounȬtriesȱinȱwhichȱtheȱretailȱbrandȱhasȱaȱpresenceȱandȱisȱsufficientlyȱsuccessful.ȱ

Convenience and Other Business

Theȱrealȱstrengthȱofȱtheȱconvenienceȱretailȱbrandsȱisȱthatȱtheyȱmeetȱtheȱdailyȱneedsȱofȱcustomersȱwithȱaȱpracticalȱproductȱmixȱandȱspeedyȱshoppingȱinȱaȱ

friendlyȱ atmosphereȱ (Swoboda/Schwarzȱ 2006).ȱ Theȱ Carrefourȱ groupȱ impleȬ

mentsȱ storeȱ concepts,ȱ qualityȱ productȱ mixesȱ andȱ innovativeȱ servicesȱ whichȱcorrespondȱtoȱcustomerȱlivingȱhabits.ȱAȱlargeȱpartȱofȱtheȱconvenienceȱstoresȱisȱ managedȱ inȱ theȱ formȱ ofȱ franchiseȱ stores.ȱ Thus,ȱ itȱ alsoȱ benefitsȱ fromȱ theȱusualȱ commitmentȱ ofȱ franchiseesȱ toȱ increasingȱ theȱ profitsȱ ofȱ theirȱ stores.ȱ

Carrefourȱintendsȱtheseȱstoresȱtoȱbecomeȱaȱpartȱofȱtheȱdailyȱlifeȱofȱcustomers.ȱFriendlyȱandȱaccessible,ȱtheȱconvenienceȱstoresȱtryȱtoȱofferȱmanyȱservicesȱtoȱ

TypesȱofȱHardȱ

DiscountȱStoresȱ

theirȱ customersȱ (Liebmann/Zentesȱ 2001).ȱ Inȱ additionȱ toȱ theȱ qualityȱ ofȱ theȱ

welcomeȱ andȱ products,ȱ customersȱ appreciateȱ theȱ adaptationȱ toȱ theirȱ shopȬ

pingȱhabitsȱandȱdailyȱlives.ȱInȱaȱcontinuallyȱchangingȱworld,ȱmarkedȱbyȱanȱ

increaseȱinȱsingleȱhouseholdsȱinȱsearchȱofȱfastȱandȱpracticalȱservices,ȱthereȱisȱ

aȱ“revival”ȱofȱinterestȱinȱconvenienceȱstores,ȱespeciallyȱinȱhighlyȱdevelopedȱ

regions.ȱ Establishedȱ inȱ fourȱ Europeanȱ countries,ȱ Carrefour’sȱ convenienceȱ

storesȱ benefitȱ fromȱ thisȱ trend.ȱ Inȱ orderȱ toȱ makeȱ themȱ evenȱ moreȱ attractive,ȱ

theyȱ extendȱ theȱ veryȱ conceptȱ ofȱ convenience,ȱ fromȱ theirȱ geographicalȱ locaȬ

tionȱ toȱ theirȱ friendlinessȱ andȱadvice.ȱTheȱ group’sȱ strategyȱinȱ thisȱ areaȱ comȬ

„ theȱ qualityȱ ofȱ theȱ productȱ rangeȱ andȱ continuityȱ ofȱ availability:ȱ allȱ thisȱ

reliesȱ onȱ theȱ integrationȱ ofȱ logisticsȱ andȱ masteryȱ ofȱ purchasing,ȱ whichȱ

customerȱ requirements,ȱ almostȱ allȱ theȱ storesȱ areȱ managedȱ byȱ franchisees.ȱ

Eachȱ month,ȱ theȱ franchiseesȱ presentȱ theirȱ resultsȱ toȱ theȱ groupȱ forȱ detailed,ȱ

realȬtimeȱ monitoringȱ ofȱ theȱ business.ȱ Therefore,ȱ variousȱ controlȱ toolsȱ haveȱ

beenȱ established,ȱ includingȱ aȱ regionalȱ barometerȱ andȱ anȱ assessmentȱ ofȱ theȱ

franchiseesȱ withȱ regardȱ toȱ Carrefourȱ services.ȱ Theȱ convenienceȱ storeȱ adȬ

dressesȱ variousȱ typesȱ ofȱ customers.ȱ Carrefourȱ knowsȱ theseȱ customerȱ typesȱ

andȱcanȱshareȱthisȱknowledgeȱwithȱmanufacturers.ȱȱ

Inȱ convenienceȱ stores,ȱcustomerȱ loyaltyȱ dependsȱ onȱ friendliness,ȱ theȱ develȬ

opmentȱ ofȱ servicesȱ andȱ enlargementȱ ofȱ theȱ rangeȱ ofȱ freshȱ produce.ȱ Theirȱ

ȱ ȱ ȱ ȱ ȱ ȱ CȬStoreȱȱ Franchiseȱ Conceptȱ

Productȱandȱ ServiceȱRangeȱ

1 Retail Formats - Food

locationȱ inȱ theȱ heartȱ ofȱ theȱ districtsȱ orȱ villagesȱ whereȱ theirȱ customersȱ liveȱmakesȱ convenienceȱ storesȱ visible,ȱ andȱ theyȱ canȱ makeȱ themselvesȱ moreȱ atȬtractiveȱbyȱdevelopingȱtheirȱcommunication.ȱThisȱattractivenessȱisȱincreasedȱ

byȱ theȱ offerȱ ofȱ aȱ widerȱ rangeȱ ofȱ additionalȱ services.ȱ Thus,ȱ theȱ Marchéȱ Plusȱ

storesȱ offerȱ homeȱ delivery,ȱ dryȬcleaning,ȱ photoȱ development,ȱ theȱ saleȱ ofȱstampsȱ andȱ telephoneȱ cards,ȱ photocopying,ȱ aȱ faxȱ service,ȱ automaticȱ ticketȱ

machines,ȱetc.ȱLocatedȱmainlyȱinȱtheȱmountains,ȱSherpa’sȱrangeȱofȱservicesȱisȱ

particularlyȱ wellȱ adaptedȱ toȱ itsȱ customers,ȱ especiallyȱ theȱ seasonalȱ trade:ȱreturnȱ ofȱ unusedȱ products,ȱ hireȱ ofȱ racletteȱ andȱ fondueȱ appliances,ȱ etc.ȱ Inȱaddition,ȱtheȱallocationȱofȱappropriateȱdisplayȱshelvesȱandȱtheȱqualityȱofȱtheȱproductȱrangeȱandȱsupplyȱnowȱrepresentȱaȱmajorȱinvestmentȱinȱstoreȱmodȬernisationȱandȱtheȱdevelopmentȱofȱnewȱconcepts.ȱ

Theȱ cashȱ &ȱ carryȱ businessȱ continuesȱ toȱ developȱ asȱ well.ȱ Toȱ serveȱ restauraȬ

teursȱandȱfoodȱtradeȱprofessionals,ȱCarrefourȱisȱdevelopingȱtheȱcashȱ&ȱcarryȱ businessȱinȱFranceȱ(Promocash),ȱinȱSpainȱ(Puntocash)ȱandȱinȱItalyȱ(DocksȱMarȬ ket ).ȱ Theȱ eȬcommerceȱ webȱ siteȱ Ooshopȱcontinuesȱ toȱ satisfyȱmanyȱ customers,ȱ

offeringȱhomeȱdeliveriesȱofȱproductsȱatȱtheȱsameȱpricesȱasȱtheȱhypermarkets.ȱTheȱconceptȱisȱavailableȱinȱFranceȱandȱSpain.ȱ

Questions

1.ȱ Isȱ itȱ possibleȱforȱ Carrefourȱ toȱ extendȱ theȱ successȱ ofȱ itsȱ multiȬformatȱ conȬ

ceptȱworldwide?ȱDiscussȱcriticallyȱandȱgiveȱexamples.ȱ

2.ȱ Sinceȱ 2004,ȱ Carrefourȱ hasȱ beenȱ inȱ aȱ relaunchingȱ process,ȱ becauseȱ ofȱ aȱ

growingȱ competitionȱ bothȱ onȱ aȱ worldȬwideȱ levelȱ andȱ inȱ manyȱ specificȱcountryȱ markets.ȱ Conductȱ aȱ SWOTȱ analysisȱ forȱ theȱ groupȱ andȱ discussȱcriticallyȱtheȱmultiȬformatȱapproachȱinȱthisȱcontext.ȱ

3.ȱ Inȱ someȱ countryȱ markets,ȱ Carrefourȱ isȱ pushingȱ itsȱ expansionȱ throughȱ

convenienceȱ stores.ȱ Discussȱ theȱ generalȱ characteristicsȱ ofȱ convenienceȱstores,ȱ analyseȱ theȱ developmentȱ ofȱ convenienceȱ storesȱ ofȱ otherȱ retailȱcompaniesȱandȱexplainȱtheȱadvantagesȱofȱaddingȱaȱconvenienceȱstoreȱreȬtailȱformatȱtoȱtheȱexistingȱportfolio.ȱ

Hints

1.ȱ SeeȱannualȱreportsȱasȱwellȱasȱtheȱcurrentȱpressȱforȱanȱanalysisȱofȱdivestȬmentsȱ andȱ problemsȱ encounteredȱ inȱ theȱ internationalisationȱ processȱ ofȱ

Carrefour.ȱ2.ȱ See,ȱforȱexample,ȱKotler/Bliemelȱ2001ȱforȱaȱSWOTȱanalysis.ȱ3.ȱ Consider,ȱamongȱothers,ȱtheȱvariousȱtheoriesȱofȱretailȱevolution.ȱ

Cashȱ&ȱCarryȱ

ȱ

ȱ

InternetȱShopȱ

Chapter 2

Retail Formats – Non-Food

In this Chapter, the main characteristics and empirical relevance of a variety of store

and non-store retail formats applied in non-food retailing are discussed Many retailers

sell to their consumers through multiple retail formats This phenomenon, which is

referred to as multi-channel retailing, is also discussed in this Chapter

Diversity of Retail Formats in Non-Food Retailing

eralȱ timesȱ perȱ week,ȱ nonȬfoodȱ itemsȱ usuallyȱ areȱ purchasedȱ infrequently.ȱ

Someȱ categoriesȱ suchȱ asȱ cosmeticsȱ orȱ householdȱ articlesȱ areȱ boughtȱ moreȱ

frequentlyȱ thanȱ others,ȱ forȱ instance,ȱ TVȬsetsȱ orȱ computersȱ thatȱ usuallyȱ areȱ

purchasedȱonlyȱeveryȱfewȱyears.ȱ

Whileȱ inȱ nonȬfoodȱ retailing,ȱ substantialȱ salesȱ areȱ generatedȱ byȱ traditionalȱ

storeȬbasedȱ retailȱ formats,ȱ nonȬstoreȱ formatsȱ suchȱ asȱ catalogueȱ retailingȱ orȱ

Retailȱ Innovationsȱ

2 Retail Formats – Non-Food

extensiveȱ andȱ specialtyȱ storesȱ thusȱ provideȱ aȱ betterȱ selectionȱ inȱ termsȱ ofȱ aȱ

higherȱ choiceȱ varietyȱ thanȱ competitorsȱ fromȱ otherȱ retailȱ formatsȱ suchȱ asȱdepartmentȱ storesȱ (Ogden/Ogdenȱ 2005,ȱ p.ȱ99).ȱ Specialtyȱ storesȱ additionallyȱ

offerȱ aȱ highȱ levelȱ ofȱ servicesȱ andȱ knowledgeableȱ salesȱ personnel.ȱ Typically,ȱ

theȱstoresȱareȱlocatedȱinȱcityȱlocationsȱorȱinȱshoppingȱcentres,ȱareȱsmallȱandȱ

theȱinstoreȱatmosphereȱisȱveryȱpronouncedȱsoȱasȱtoȱcreateȱaȱpleasantȱshoppingȱ experience.ȱ LimitedȬlineȱ specialtyȱ storesȱ areȱ aȱ specificȱ typeȱ ofȱ specialtyȱ storeȱ

thatȱcarryȱonlyȱaȱveryȱnarrowȱassortment,ȱbutȱofferȱpronouncedȱdepthȱinȱthisȱlimitedȱsector.ȱOften,ȱtheseȱstoresȱofferȱ(very)ȱhighȱqualityȱmerchandiseȱandȱ

aȱ highȬlevelȱ ofȱ customerȱ serviceȱ andȱ instoreȱ design,ȱ whileȱ pricesȱ areȱ aboveȱaverage.ȱ

Thisȱstoreȱformat,ȱtraditionallyȱchosenȱbyȱretailersȱthatȱsellȱmerchandiseȱsuchȱ

asȱ clothesȱ (e.g.ȱ Gapȱ orȱ Benetton),ȱ footwearȱ (e.g.ȱ Footlocker),ȱ cosmeticsȱ (e.g.ȱ Douglas,ȱTheȱBodyȱShopȱ orȱSephora),ȱbooksȱ(e.g.ȱBarnesȱ&ȱNobles,ȱWHȱSmithȱorȱ Thalia )ȱorȱjewelleryȱ(e.g.ȱChrist).ȱInȱmanyȱcases,ȱhowever,ȱspecialtyȱstoresȱareȱ runȱbyȱindependentȱlocalȱretailers.ȱȱ

Theȱmainȱelementȱofȱspecialtyȱstores’ȱstrategyȱisȱthatȱtheyȱfocusȱonȱaȱspecificȱmarketȱ segment.ȱ Whileȱ thisȱ offersȱ manyȱ opportunitiesȱ inȱ termsȱ ofȱ tailoringȱ

theirȱ storesȱ toȱ theirȱ targetȱ groups,ȱ theȱ strategyȱ makesȱ themȱ vulnerableȱ toȱ

changesȱinȱconsumerȱtastesȱandȱpreferences.ȱTheyȱalsoȱsufferȱfromȱtheȱhighȱ

costsȱ thatȱ resultȱ fromȱ theȱ qualityȬorientedȱ strategyȱ inȱ termsȱ ofȱ storeȱ environȬ

ment,ȱ merchandiseȱ andȱ serviceȱ offeredȱ toȱ theȱ consumersȱ (Levy/Weitzȱ 2007,ȱpp.ȱ48Ȭ49).ȱThisȱoftenȱresultsȱinȱhigherȱthanȱaverageȱprices.ȱ

Whileȱ specialtyȱ storesȱ haveȱ beenȱ theȱ traditionalȱ formatȱ forȱ nonȬfoodȱ shopȬping,ȱ inȱ recentȱ years,ȱ theyȱ haveȱ beenȱ oneȱ ofȱ theȱ weakest,ȱ slowestȬgrowingȱareasȱ inȱ retailingȱ andȱ haveȱ lostȱ marketȱ shareȱ toȱ otherȱ storeȬbasedȱ orȱ nonȬstoreȱformats.ȱȱ

Drugstores

Drugstoresȱ areȱ specificȱ typesȱ ofȱ specialtyȱ storesȱ thatȱ focusȱ onȱ beautyȱ andȱ

healthȱ andȱ personalȱ groomingȱ merchandiseȱ (Levy/Weitzȱ 2007,ȱ p.ȱ49).ȱ Inȱaddition,ȱtheseȱstoresȱoftenȱsellȱcategoriesȱsuchȱasȱfoodȱitems,ȱmagazinesȱorȱnewspapers,ȱ stationery,ȱ toysȱ orȱ gifts.ȱ Dependingȱ onȱ governmentalȱ healthȱ

careȱ policies,ȱ inȱ someȱ cases,ȱ pharmaciesȱ areȱ associatedȱ withȱ drugstoresȱ andȱ sellȱ prescriptionȱ pharmaceuticalsȱ inȱ additionȱ toȱ ethicalȱ orȱ overȬtheȬcounterȱ

siveȱ onȱ priceȱ andȱ applyȱ pricingȱ strategiesȱ suchȱ asȱ everyȬdayȬlowȬpriceȱ

(EDLP)ȱ strategiesȱ orȱ promotionȱ pricing.ȱ Importantȱ playersȱ includeȱ Boots,ȱ

Walgreens ,ȱSchleckerȱorȱdmȬdrogerieȱmarkt.ȱ

Drugstoresȱareȱoftenȱlocatedȱinȱcityȱorȱshoppingȱcentres,ȱbutȱareȱnowȱfoundȱ

moreȱ andȱ moreȱ atȱ locationsȱ suchȱ asȱ neighbourhoodȱ locationsȱ orȱ isolatedȱ

sites.ȱ Thus,ȱ theyȱ playȱ anȱ importantȱ roleȱ inȱ proximityȱ retailingȱ andȱ usuallyȱ –ȱ

becauseȱ ofȱ theirȱ locationalȱ strategyȱ andȱ ratherȱ smallȱ storeȱ sizeȱ withȱ speedyȱ

diseȱ forȱ otherȱ retailersȱ (Levy/Weitzȱ 2007,ȱ p.ȱ50),ȱ mainlyȱ forȱ specialtyȱ stores.ȱ

Theȱ serviceȱ levelȱ offeredȱ byȱ categoryȱ killersȱ isȱ usuallyȱ keptȱ atȱ aȱ lowȱ level.ȱ

gainedȱ marketȱ shareȱ mainlyȱ atȱ theȱ expenseȱ ofȱ specialtyȱ stores,ȱ becauseȱ ofȱ

advantagesȱ inȱ termsȱ ofȱ priceȱ andȱ productȱ range.ȱ Categoryȱ killersȱ areȱ nowȱ

establishedȱ inȱ manyȱ nonȬfoodȱ categoriesȱ suchȱ asȱ consumerȱ electronicsȱ (e.g.ȱ

Curry’s ,ȱDarty,ȱMediaȱMarktȱorȱBestȱBuy),ȱDIYȱ(e.g.ȱLeroyȱMerlin,ȱB&QȱorȱHomeȱ

Depot ),ȱ sportsȱ (e.g.ȱ Decathlon),ȱ furnitureȱ (e.g.ȱ IKEAȱ orȱ Conforama),ȱ officeȱ

productsȱ(e.g.ȱStaplesȱorȱOfficeȱDepot),ȱpetsȱ(e.g.ȱPetsMart,ȱMilleȱAmisȱorȱFressȬ

Shoppingȱ Convenienceȱ

CategoryȱKillerȱ StrategyȱMixȱ

2 Retail Formats – Non-Food

napf/MaxiȱZoo )ȱorȱtoysȱandȱbabyȱproductsȱ(e.g.ȱToysȱ‘R’ȱUsȱorȱBabiesȱ‘R’ȱUs),ȱ

andȱtheȱformatȱisȱstillȱexpandingȱintoȱnewȱcategories.ȱ

Department Stores

Departmentȱ storesȱ areȱ largeȱ retailȱ unitsȱ thatȱ carryȱ aȱ broadȱ varietyȱ ofȱ merȬ

chandiseȱ andȱofferȱ aȱ deepȱ assortmentȱ “underȱ oneȱ roof”.ȱ Theȱ termȱ “departȬmentȱ store”ȱ resultsȱ fromȱ theȱ structuringȱ intoȱ separateȱ departmentsȱ forȱ disȬplayingȱ merchandiseȱ inȱ aȱ mannerȱ thatȱ resemblesȱ aȱ collectionȱ ofȱ specialtyȱstores.ȱEachȱdepartmentȱnotȱonlyȱhasȱaȱspecificȱsellingȱspaceȱallocatedȱtoȱit,ȱbutȱ alsoȱ usuallyȱ hasȱ itsȱ ownȱ pointȬofȬsalesȱ terminalsȱ andȱ salespersonsȱ toȱassistȱ theȱ customersȱ (Levy/Weitzȱ 2007,ȱ p.ȱ46).ȱ Theȱ merchandiseȱ soldȱ byȱ deȬpartmentȱ storesȱ traditionallyȱ comprisesȱ aȱ wideȱ rangeȱ ofȱ categoriesȱ suchȱ asȱclothes,ȱ accessories,ȱ appliances,ȱ homeȱ furnishing,ȱjewellery,ȱ cosmetics,ȱ toys,ȱfurniture,ȱ sportingȱ goodsȱ orȱ consumerȱ electronics.ȱ Recently,ȱ however,ȱ mostȱdepartmentȱstoresȱhaveȱbeenȱreducingȱproductȱvarietyȱandȱfocusȱmoreȱandȱmoreȱonȱsoftȱgoodsȱ(e.g.ȱclothesȱandȱfootwear).ȱ

Theȱmainȱlocationsȱofȱdepartmentȱstoresȱareȱcityȱcentres,ȱorȱtheyȱoftenȱserveȱ asȱ anchorȱ storesȱ inȱ shoppingȱ centres.ȱ Departmentȱ storesȱ aȱ pleasantȱ atmosȬ

phereȱ whichȱ createsȱ anȱ enjoyableȱ shoppingȱ experience.ȱ Instoreȱ designȱ andȱvisualȱmerchandisingȱareȱthusȱveryȱimportant.ȱAlso,ȱtheȱservicesȱofferedȱbyȱdepartmentȱstoresȱareȱdiversifiedȱandȱmayȱinclude,ȱforȱexample,ȱaȱtailoringȱserviceȱforȱclothesȱorȱhomeȱdeliveries.ȱ

Inȱ termsȱ ofȱ theȱ merchandiseȱ carriedȱ andȱ theȱ servicesȱ offered,ȱ departmentȱstoresȱcanȱbeȱcategorisedȱintoȱthreeȱtiersȱ(Weitz/Whitfieldȱ2006,ȱp.ȱ67):ȱ

„ upscale,ȱ highȬfashionȱ storesȱ withȱ exclusiveȱ designerȱ merchandiseȱ andȱ

excellentȱcustomerȱ service;ȱ theseȱ areȱ oftenȱ theȱ flagshipȱ storesȱ ofȱ departȬ

mentȱ storeȱ chainsȱ (e.g.ȱ Harrods,ȱ Selfridges,ȱ Jelmoli,ȱ Saksȱ Fifthȱ Avenue,ȱ KaDeWe,ȱGaleriesȱLafayetteȱParisȱHaussmann)ȱ

„ modestlyȱ priced,ȱ midȬlevelȱ merchandiseȱ withȱ lessȱ customerȱ serviceȱ (e.g.ȱ Macy’s ,ȱHoopers,ȱDebenhams,ȱJohnȱLewis)ȱ

„ storesȱwithȱlowerȱlevelȱmerchandiseȱandȱpricesȱ(e.g.ȱSears,ȱJCPenny).ȱ Mostȱ departmentȱ storeȱ chainsȱ suchȱ asȱ Galeriesȱ Lafayette,ȱ Karstadt,ȱ Elȱ Corteȱ Inglés,ȱ Houseȱ ofȱ Fraserȱ orȱ Saksȱ operateȱ departmentȱ storesȱ inȱ severalȱ ofȱ theseȱ

tiers.ȱ

Inȱrecentȱyears,ȱtheȱoverallȱsalesȱandȱmarketȱshareȱofȱtraditionalȱdepartmentȱstoresȱ haveȱ declinedȱ andȱ –ȱ internationallyȱ –ȱ theyȱ faceȱ substantialȱ competiȬtionȱfromȱotherȱretailȱformatsȱsuchȱasȱcategoryȱkillersȱandȱdiscountȱstoresȱorȱnonȬstoreȱformatsȱ(e.g.ȱInternetȱretailers).ȱTheȱdifficultiesȱmainlyȱresultȱfromȱ