CHAPTER 2 THE COMPETITIVE ENVIRONMENT

1. CHAPTER 2 THE COMPETITIVE ENVIRONMENT CONSUMPTION AND SHOPPING PATTERNS Expenditure Trends The Changing Consumer Shopping Patterns TYPES OF RETAILING ORGANIZATION Multiples v. Independents Co-operative Societies Franchising Symbol Groups MAJOR RETAIL FORMATS Retail Outlet Density Small Store Formats Large Store Formats Department and Variety Stores Discount Stores Shopping Centres Variations upon the Mall Home Shopping

4. Growth Forecasts for Selected Items

5. The Changing Consumer: Age Band Projections • Forget disparaging terms like ‘wrinklies’ and ‘empty nesters’, which imply lonely, feeble souls. This new breed will be fitter and healthier than ever before. They will travel abroad and will enjoy experimenting with food.

6. Even within many traditional units, there is now the ‘cellular household’, in which the ownership of duplicate televisions, audio equipment and other durables allows different members of the household to pursue their own lifestyles as and when they chose.

7. Social Value Trends Map

8. Postmodernism and Popular Culture • ‘There is no fashion only fashions’ • ‘There are no rules, only choices’ • ‘Anything goes’ • ‘Do your own thing’

9. Postmodernism and Social Groups • Modern society was conceived as an ensemble of social groups: socio-professional categories, social classes, and so on. Postmodern society, in contrast, resembles a network of societal micro-groups in which people share strong emotional links, a common subculture, a vision of life. • (They) develop their own complexes of meanings and symbols, and form more or less stable tribes that are invisible to the categories of modern sociology. • Cova (1996)

12. Multiple’s Growth Cycle

16. Co-operative Societies: Special Principles • Voluntary and open membership: anyone can join, regardless of race, religion or political affiliation. • Democratic control: the ultimate control of societies lies with the members: one member one vote. • Share capital should receive only a limited rate of interest. • Surplus (profits) should be distributed to members in proportion to their purchases: the members dividend (or ‘divi’).

17. A multi-faced giant, which has had to learn to balance Co-operative principles with hard-headed commercialism (SuperMarketing, 1996).

18. Types of Franchise • The manufacturer-dealer franchise. Within this arrangement, the manufacturer is the franchisor and the franchisee sells direct to the public, e.g., of cars and petrol. • The manufacture-wholesaler franchise. The most notable examples are Coca-Cola and Pepsi-Cola, who franchise the independent bottlers/canners. • The wholesaler-retailer franchise. Symbol groups such as Spar, could be described as this type of franchise. • The business format franchise. The franchisor grants permission for the franchisee to sell the former’s products or services.

21. Some Symbol Groups

22. Advantages of Voluntary Group Membership • Loans and financial support to develop or to extend/refurbish units. • Group buying power normally leads to better prices than an independent could obtain. • Benefits are gained through own-brand products and the group image. • Turnover is increased through lower prices, group marketing expertise, promotions, etc. • Selling costs as a percentage of turnover are therefore reduced. • Labour productivity is improved through higher turnover and better administrative systems. • Space productivity improves through advice on space allocations, merchandising and display. • Profitability and return on capital is improved.

23. MAJOR RETAIL FORMATS

26. Problems of Small, Independent Retailers • Inadequacies in the trading environment • Economic and social change • Competition from multiple retailers • Locational difficulties • Inadequacies in the retail form • Operating costs • Investment capital availability • Supply problems • Inadequacies in management • Expertise and techniques • Entrepreneur’s age

27. Opportunities for Well Managed Smaller Stores • The inconvenience of most large stores for top-up shopping. • Government restrictions on large store developments in many countries.

28. Convenience Store: One Definition • A convenience store is defined as a small grocer, confectioner, tobacconist and newsagent (CTN), off-licence or petrol forecourt shop, with between 500 and 3,000 square feet of selling space; • trading for 7 days a week, including public holidays; • open continuously from 8am to 11pm or for 24 hours a day; • located within or close to a local community, for whom it offers a friendly and nearby source for regular daily purchases, top-up and emergency items, and a range of services, such as photo-processing, dry cleaning, video rental and games hire.

30. Meal Solution Centres: • Located in the high street and near offices, railway stations and road junctions. The focus will be on quality, freshness and convenience, a cross between McDonalds and Fortnum & Mason. With a mix of ready-to-eat and easy to prepare meals, they will eliminate the need to plan ahead (IGD, 2000). • Cater for more informal eating practices: • Snacking, snatching, cheating-in, special-in, dining down and dining-up (IGD, 2001).

31. Large Store Formats Small supermarkets: self service grocery stores of between 3,000 and 12,000 square feet, which sell food, beverages and other goods. Large supermarkets: those between 12,000 and 25,000 square feet. Superstores: outlets specialising in grocery sales (although not exclusively selling food) with a floorspace of between 25,000 and 50,000 square feet, usually on one level with car parking provision. Hypermarkets: with over 50,000 square feet, usually located in edge-of-town and out-of-town locations, with extensive car parks.

33. Tesco ‘Extra’ Stores Selling everything from cucumbers to hi-fi equipment. Tesco has already put into play 23 of these 60,000 sq.ft.-plus destination-shop hypermarkets, endowing them with a width of assortment that qualifies them as mini-department stores.

36. Problems for Department Stores • Price competition: almost every part of the department store range has faced waves of price competition from lower cost operators. • Assortment competition: only the largest can now compete on the depth of assortment of large unit specialists. • Fashion competition: some have found it difficult to compete with the fashionable brand images created by more nimble, specialist competitors. • Experiential competition: many other stores and centres now offer comparable or better leisure experiences. • Location problems: city centre locations have proved problematic in terms of accessibility, car parking, higher costs of property and maintenance. • Management: some have suffered from a traditional emphasis upon ‘form’ rather than ‘intellectual substance’.

37. Discount Stores • A retailer that offers a tightly controlled range, at low prices, from premises which are basic by design. The company culture emphasises rigorous cost control and the principal marketing tool is price. • an emphasis on cost control • low prices • strict range management • a no frills approach to store design and hpresentation • low levels of customer service

39. Extreme Value Traders (One Euro/Dollar) These companies’ customers are in the lower income groups in permanent recession and, therefore, are not as affected by economic downturn or upturn as other customers. Clothing Discount Stores In quality terms, discounters described their clothing as being no higher in quality than “good” and, in value terms, representing good-to-excellent value for money.

40. Shopping Districts Traditional concentrations of shops within town or city centres Shopping Centres A group of retail and other commercial establishments that is planned, developed, owned and managed as a single property.

41. Waves of Out-Of-Town Centre Development Wave One: the superstores selling primarily food, with modest non-food ranges. Wave Two: similarly large stores selling bulky good, such as DIY, carpets, furniture, larger electrical items and garden centres. Wave Three: clothing and other comparison goods sold in regional shopping centres, a full-scale alternative to traditional town centres.

43. Problems for Malls in the USA • Over-saturation of shopping space, with around 35,000 shopping centres in the USA. • Too many of the malls look alike, with similar stores and merchandise. • Time-pressed consumers find the long walks around malls inconvenient. • As the novel becomes the familiar, fewer consumers report enjoying the mall experience. • Some of the department and variety stores that anchor many malls have declined. • The malls tend to be expensive retailing environments and this is perceived to be reflected in prevailing prices. • Other formats, such as ‘power centres’, are offering more focused shopping opportunities.

44. Power Centres in the USA • More than 250,000 sq.ft of GLA (gross leasable area), some have more than one million sq.ft. • At least one super-anchor store with at least 100,000 sq.ft. • At least four smaller anchors of 20,000-25,000 sq.ft. each. • Only a few smaller shops of less than 10,000sq.ft. • Generally an open-air centre. • A total trading area similar to a regional shopping centre. • A unified shopping centre management.

45. Factory Outlet Centres/Malls • A vehicle for suppliers to dispose of merchandise that cannot be sold through conventional retail channels – whether it be surplus stock, last season’s ranges, slow-selling products, end-of-line items, returned goods, seconds, discontinued lines, or cancelled orders.

49. Multichannel Retailing • If retailers hope to design and position their various channel options as an integrated, value-rich package, understanding fundamental differences in the experience delivered by multichannel retail environments is essential.