Store Wars E-Book

Greg Thain

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 405

Veröffentlichungsjahr: 2012

Beschreibung

The sequel to the highly successful Store Wars: the battle for mindspace and shelfspace published in 1995. The new edition will retain all the strengths of the old book including a comprehensive and complex approach to the consumer & retail market and the interaction between FMCG retailers and manufacturers. The book will be thoroughly revised and updated and will consist of 4 main parts:

• A section on leading FMCG companies and brands (such as Coke, P&G, Unilever, Nestle, L'Oreal etc.), their marketing and branding strategies in the western markets (USA, Western Europe: UK, France, Germany and others).
• A section on leading retailers (Wal-Mart, Tesco, Carrefour etc.), their developments and expansion over the last 10 years.
• A section describing the interaction between retailers and manufacturers, including competition for end-consumers, trade marketing.
• A section covering the Emerging Markets—the retail landscape in the major developing economies, results of the expansion of major FMCG brands and western retail chains, challenges related to distribution and FMCG marketing in those countries.

The book will also discuss the impact of the Global Crisis on the consumer and retail markets as well as predictions and prospects for the future.

Leseprobe

Table of Contents

Cover

Title page

Copyright page

ACKNOWLEDGEMENTS

INTRODUCTION

Chapter 1 SHIFTING OF POWER IN THE VALUE CHAIN

The emergence of branding as a value chain weapon

The demise of the middleman

An early appearance by private label

The rise of the brand retailer

The triumph of branded manufacturers

Retailers battle for the scraps

The end of the golden age for discounters

The shift to selling orientation

Inefficiencies of the selling orientation

Manufacturers and selling strategies

The winners of the selling phase and the quest for market orientation

The information revolution

Chapter 2 DIFFERENCES BETWEEN MANUFACTURERS AND RETAILERS

Financial structure differences

Cost-structure differences

Pricing and price perception differences

Physical differences

Chapter 3 THE FRAGILITY OF A MARKETING ORIENTATION

Selling orientation and hustle strategies

Market orientation

An industry’s position on the selling–market orientation spectrum

Swinging back to hustle strategies

Chapter 4 RETAILERS AND THE MARKETING CONCEPT

Retailers and segmentation

Retail brand takeovers

Quality as a differential advantage

The retailers’ price imperative

Chapter 5 THE BATTLEFIELD FOR MINDSPACE AND SHELFSPACE

Mindspace and shelfspace

Controlling shelfspace

Reducing costs to fund mindspace/shelfspace

Creating mindspace

Forcing use via tactical marketing

Buying and renting mindspace

Losing mindspace

Size really does matter

Chapter 6 THE BATTLE FOR MINDSPACE

Brand management with retail characteristics

Retailers’ advantages for creating mindspace

Manufacturers’ mindspace advantages

Pressure on second-tier brands

Chapter 7 THE BATTLE FOR SHELFSPACE

The delisting spectre

The possible outcomes of an ‘out-of-stock’

What will happen?

The balance of power

Fighting for shelfspace

Chapter 8 CREATING A SUSTAINABLE RETAIL DIFFERENTIAL ADVANTAGE

What counts as a differential advantage?

Pricing tactics

Price guarantees

Price discrimination

Chapter 9 PRIVATE LABEL

Evolution of private label

Re-emergence of private label

Copycat private label

Today’s private labels

Private label brand portfolios

Risks for the retailer

Implications for manufacturers

To supply or not to supply?

Producing for private label

Chapter 10 TRADE MARKETING

From selling to trade marketing

The strategic triangle of trade marketing

Customer value

Total benefits

Total costs

Customer profitability

Category management

Retailers’ objectives

Manufacturers’ advantage: Specialisation

Category management and smaller manufacturers

Conflicts between trade marketing and consumer marketing

Managing actions

Organisational implications for manufacturers

Chapter 11 INTERNATIONALISATION AND EMERGING MARKETS

The widening international gap

The rise of the international retailer

To support or not support?

The emergence of emerging markets

The emerging market phenomenon

Strategies for manufacturers entering emerging markets

Retailers in emerging markets

The most successful emerging market retailer

Property acquisition in emerging markets

Chapter 12 E-RETAILING

Development of online sales

Features and benefits of shopping online

Learning from parallel categories and business models

Traditional retailers going online

Online-only grocers

E-retailing failures

Current trends: What are consumers looking for?

Implications for manufacturers

Chapter 13 THE NEW ORDER AND ITS CHALLENGES

The new focus of brand power

Manufacturer responses

Implications for retailers

In conclusion

Looking to the future

Appendix 1: TOP PRIVATE LABEL MANUFACTURERS

Appendix 2: BRIC MARKET SNAPSHOTS

Brazil

Russia

India

China

Index

STOREWARS IS THE WORLD’S LEADING BUSINESS MANAGEMENT SIMULATION PROGRAMME

Why is StoreWars Unique?

This edition first published 2012

© 2012 John Wiley & Sons

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Library of Congress Cataloging-in-Publication Data

Thain, Greg, 1954–

 Store wars : the Worldwide Battle for Mindspace and Shelfspace, Online and In-store / Greg Thain and John Bradley.

p. cm.

 Includes index.

 ISBN 978-1-118-37406-1 (cloth)

 1. Retail trade. 2. Marketing. 3. Consumer goods. I. Bradley, John, 1957– II. Title.

 HF5429.T37 2012

 381.'1–dc23

2012018039

A catalogue record for this book is available from the British Library.

ISBN 978-1-118-37406-1 (hbk) ISBN 978-1-118-37424-5 (ebk)

ISBN 978-1-118-37480-1 (ebk) ISBN 978-1-118-37481-8 (ebk)

* All brand names and product names used on the cover of or inside this book are trade names, trademarks or registered trademarks of their respective owners.

ACKNOWLEDGEMENTS

We would like to thank all the team that have assisted us over the last three years in the creation of this book.

Especial thanks go to Alexandra Skey, our researcher, who diligently uncovered much new information; Alex Utochkin, who made our initial charts; Ludmila Belokonova, the manager of the StoreWars Business Simulation; and the other members of our team, Ekaterina Voitenkova, Lavrenyuk Anastasia and Dariusz Kepczynski.

On the expert and academic side, we would like to thank Professor Niraj Dawar of the Richard Ivey School of Business for his valuable input and suggestions; Chen Junsong, professor of marketing CEIBS, China, who gave us extremely valuable help on the China and Asian markets; Nuno Bouça, our partner at Excel Formação in Brazil, who helped us with information from South America; Tim Munnion, our partner in Portugal; Stephen Kreeger, Managing Director of Metro, Almaty, Kazakhstan, who gave invaluable insights into Russia and CIS; and Fernando Zerboni, PhD and Dirección Comercial at IAE Business School, Universidad Austral; Mikołaj Budzyski, our partner at Inspiraction, Poland; Marika Taishoff, PhD and Director of the Monaco MBA at IUM, and Ben Aris in Moscow.

Thanks also to Planet Retail and AC Nielsen for their assistance with charts and data, and our editor Tim Bettsworth.

John would like to thank his wife Audrey and daughter Georgina for their unstinting support in all his endeavours. I would like to thank my wife Katya and children, Sarah, Nick, Poppy, James and Magnolia for their understanding.

Greg ThainApril 2012

INTRODUCTION

SINCE THE ORIGINAL edition of Store Wars was published in 1995, much has changed in the fast-moving consumer goods (FMCG) industry, both for manufacturers and retailers.

Many iconic brand companies, such as Gillette and Cadbury, have lost their independence, swallowed up by bigger players, who see size as crucial in dealing with another of the major changes: gigantic retailers. Wal-Mart’s 1995 sales of $93 billion more than quadrupled to a staggering $405 billion in 2010, with $100 billion coming from outside the United States. This leads to another massive change in the FMCG industry: the rise of emerging markets such as Russia, China, India and Brazil, which have been, and still are, a modern-day Klondike gold-rush for FMCG players, where fortunes can be made and lost. The rapid development of such markets is the prime reason behind global retail sales space more than trebling from 40 million m2 in 2001 to 130 million in 2011.1

Many of the tools used by both manufacturers and retailers in 1995 now have dramatically different levels of potency. Television advertising, the mainstay of the branded manufacturer, can now no longer be relied upon to drive retail listings; instead, marketing budgets have been moving to the Internet and social media. Private label, an almost insignificant factor in 1995, has ascended to undreamt-of heights and is the cornerstone of virtually every major retailer’s strategy, in some cases over 50% of their sales. Behind the tools, the information war has swung decisively in favour of the retailer as the combination of product scanning with loyalty cards has given the retailer almost perfect buying information at the level of individual shoppers.

The purpose of this second edition is to come to the aid of FMCG professionals, both manufacturers and retailers, to put into context and perspective the key events and changes which have taken place within their industry since the mid-1990s. This book will also be invaluable to academics and students who wish to better understand the shifting dynamics within the FMCG, retail and consumer-facing industries.

We shall see that much has changed at the operational level, and we will dig deeper to uncover and highlight the underlying strategic factors of these changes, while demonstrating how they should now be applied in the new reality of the twenty-first century. With over 100 examples and case studies from dozens of markets, we present the most comprehensive insight into the modern-day FMCG industry.

In Chapter 1, we take a strategic overview of the evolution of the FMCG industry and see how power has shifted not just in one direction from manufacturer to retailer but also in both ways at various times, driven by technological innovation, social change and, most crucially, innovation within the industry itself as each party seeks to increase its share of transaction profits. A crucial constant in the battle between manufacturers and retailers for a share of profits is the battle to win and hold consumer trust in an era when brand loyalties are more fragile than ever before.

In Chapter 2, we take a close look at the differences between manufacturers and retailers, and we learn how the friction characterising most of their dealings is not a result of similar organisations pursuing different, conflicting goals but of very different organisations pursu­ing the same goals by very different means. In particular, a lack of understanding of their contrasting financial structures is often the reason why they can respond acrimoniously to the same set of circumstances.

We focus on the manufacturing side and examine how and why manufacturers adopt the types of strategies they do, in Chapter 3. We look at the crucial role of segmentation, when properly applied, in moving companies from the deadly battlefield of price competition to the sunny uplands of profitable growth. However, such markets are very dynamic and we see how companies can easily be tempted by the siren-song of price competition to address failing top and bottom lines. But we also see how price competition can be a profitable and attractive strategy in the fast-moving emerging markets.

We then switch to look at retailer strategic positionings, in Chap­ter 4, to see that they are much more limited than manufacturers are. Retail chains need to occupy very broad swathes of the market, so tend to be much more closely grouped than manufacturer brands, which can profitably occupy many small differentiated niches. We then examine the emergence of the retailers’ ability to segment their store types by shopping need, meaning that one retail banner can cover anything from a 100 ft2 convenience outlet to a 100 000 SKU hypermarket, and see how this multi-format strategy is affecting the retailer–manufacturer interface.

In Chapter 5, we examine in detail the two retailer–manufacturer battlegrounds of shelfspace and mindspace. Previously, these two commodities were fought over between manufacturers, but now the battle rages between retailers and manufacturers. We see how the combination of retailer size, brand-building and robust private label strategies has tilted the playing field heavily in favour of the retailer. Manufacturers now have to be savvier in their approach to winning mindspace, including the retailers’ brands within their competitive sets.

In Chapter 6, we go on to dig deeper into the battle for mindspace and the relative advantages held by manufacturers and retailers. We explore different strategies in building mindspace and look at categories where one or the other player has a built-in head-start. We also highlight the increasing skills overlap between manufacturers and retailers, a consequence of brand-building becoming a core strategy for retailers in recent years.

We deep-dive into the fight for shelfspace in Chapter 7, where we expose the overused delisting threat as being largely hollow. We encourage a systematic approach based on the relative concepts of the cost of switching brands versus the cost of switching stores so that both parties better understand where they have leverage and where they don’t. We show how manufacturers must seek to in­­crease the consumers’ cost of switching brands through their brand-building activities and reduce their cost of switching stores through their distribution strategies. Similarly, retailers must strive to achieve the opposite.

In Chapter 8, we dissect the various means by which retailers can build a sustainable advantage in a category where dominance has been fleeting. The world’s two largest retailers were both founded in the 1960s, a situation unthinkable on the manufacturer side; they tend to be much older and more enduring. We explore the possibilities of fresh produce, multi-segmentation, loyalty cards and price as defendable strategies, we also show how each market has three price positionings, one of which every retailer must choose.

Chapter 9 concentrates on providing an in-depth understanding of the retailer’s single most important competitive weapon: private label. We explain the roles of the five different types of private label offering and how each has a specific role to play in positioning the retailer against its competitors and against manufacturer brands. We also explore the impact on manufacturers of the resurgence of private label as a retail strategy and their need to have a clear strategy on the matter and how its impact can be mitigated.

We then look, in Chapter 10, at the thorny issue of trade marketing for manufacturers, which for some has become their second-largest expenditure, as an interface between their business and the retailers. We explore how trade marketing and brand marketing inherently conflict as they serve different groups – consumers and retailers – who have different interests. Strategies for controlling the spiralling costs of trade marketing are explored, tied into the organisational challenges of accommodating it within a brand-focused organisation.

In Chapter 11, we step back to look at the internationalisation of the FMCG industry, especially with regard to emerging markets, with examples and illustrations from China, Russia, Brazil, India and further afield. We contrast the different rates of internationalisation of manufacturers and retailers, showing how this creates opportunities for the manufacturer. We show how internationalisation for the retailer can be a huge challenge, demanding a new set of skills and attitudes. As we focus on the emerging markets, we show how those markets are evolving at a much faster pace and along differing paths compared to the history of developed markets. We also note the emergence of strong manufacturers and retailers from those markets and the threat they pose to the established global players.

We switch, in Chapter 12, to the virtual marketplace of the Internet and examine the rapid rise of e-retailing and the emergence of e-grocery. We explore the reasons behind the phenomenal growth of e-commerce and look in detail at lessons from successful and unsuccessful e-retailing and e-grocery ventures to better understand the impact this channel will have on the FMCG category. We see how having the right business model is critical for retailers and how mobile presents enormous opportunities for retailers.

Finally, in Chapter 13, we pull together all the insights and predict what the future will be like for manufacturers, retailers and e-retailers. We see how consumers will be much more brand-neutral, in that they will be happy with the right branding from any party. This will force manufacturers to make much harder choices about their brand portfolios and force them to adopt genuine premium, value or industrial strategies, and we explore the organisational implications of each. Similarly, retailers will have to embrace e-retailing and fight off the challenge of the vertically integrated specialist, category-killer retailer, or suffer the consequences. Finally, we make a series of predictions of how we see the FMCG category evolving in the next 5 to 10 years.

The insights and lessons from this Store Wars book can be explored in a highly realistic setting in the StoreWars Business Simulation, which, since the mid-1990s, has been recognised as one of the world’s leading business simulations for executives, senior managers and directors of consumer-facing businesses. The simulation has been run in 43 countries in excess of 700 times and has been used by 60% of the world’s leading FMCG and retail businesses. Academically, the StoreWars simulation has been used by universities across five continents. Full details can be found at the website (www.STOREWARS.net). In addition, this website contains all the charts and tables in this book in full colour, and these will be updated annually to keep you abreast of the inevitable changes in the FMCG world.

Greg ThainJohn Bradley

Note

1. http://www.atkearney.com/index.php/Publications/retail-global-expansion-a-portfolio-of-opportunities2011-global-retail-development-index.html. Accessed 12 December 2011.

Chapter 1

SHIFTING OF POWER IN THE VALUE CHAIN

DURING THE LATTER half of the twentieth century, manufacturers had control of virtually all the marketing variables – such as price, promotions and presence on shelf – that resided within the retail environment. Brand-positioning strategies always included the consumer price point for the brand, which could then be counted on to appear in-store. A shortfall in distribution was seen as a tactical failure of the manufacturer’s sales department to negotiate properly with their customers, a failure that could be easily rectified. Manufacturers cared little in whose shops their brands were bought as distribution was near universal. However, shifts in the balance of power between manufacturers and retailers have made this era obsolete. In June 2009, Progressive Grocer reported:

Five years ago, manufacturers and retailers say they held equal shares of power in their partnerships, but today, manufacturers believe that retailers control almost two-thirds of the overall power and will extend their control to 71 percent five years from now, while retailers believe they currently control 60 percent of the overall power, and expect to control nearly two-thirds in five years’ time.1

Manufacturers’ sources of power from the past no longer work today. They used to be the sole provider of consumer knowledge, but they have been overtaken by retailers’ own information, analysed by experts. For example, 28.5 million shoppers use Tesco’s loyalty programmes. In 1994 Tesco’s hired dunnhumby to help them analyse their database, and within three months then Tesco Chairman Lord MacLaurin was moved to say, ‘What scares me about this is that you know more about my customers after three months than I know after 30 years.’