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Current Trends in European Retailing John Wheeler, Director, RMDP Tony Savage, Director, RMDP RMDP Consulting C.2001.

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Presentation on theme: "Current Trends in European Retailing John Wheeler, Director, RMDP Tony Savage, Director, RMDP RMDP Consulting C.2001."— Presentation transcript:

1 Current Trends in European Retailing John Wheeler, Director, RMDP Tony Savage, Director, RMDP RMDP Consulting C.2001

2 Agenda l Some pan-European trends l Department Stores - the dinosaurs mutate! l Discounters and off price l Brands and globalisation l Competition for locations l Direct Channels - clicks & bricks winning l What next?

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

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

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

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

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

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

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

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

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

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

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

14 Retailing in Europe some critical management concerns November 2001 Sextant Management Services Ltd

15 Agenda l Brands l l Walmart l Issues l Interesting Sectors

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

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

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

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

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

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

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

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

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

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

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

27 The E-tail Top 10 l Amazon l Marks & Spencer l Tesco l l Argos l Comet l (Littlewoods) l l W H Smith l

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

45 Information Technology in Retail Sextant Management Services Ltd. the operational necessities e-tail or retail!

46 SKU Management l The ability to manage stock at the level at which the customer purchases è the Stock Keeping Unit l E.g.: a pair of shoes u style, size, colour, width l a dress u style, colour size l a can of beans u description, size

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

48 The Retail Cycle l Retail, and most consumer goods wholesale businesses work to a very similar basic process model: CONSOLIDATE PLAN BUY RECEIVE DISTRIBUTE SELL REPLENISH PROMOTE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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