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Retailing in Emergent Markets: Strategic Foundations & Best Practices

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Retailing in Emergent Markets: Strategic Foundations & Best Practices Retailing In Emergent Markets: Strategic Foundations & Best Practices The Coca-Cola Retailing Research Council Latin America / January 2010 Contents Introduction 2 Executive Summary: Topline Observations 7 Setting the Context: Emergent Market Characteristics 9 Strategic Foundations Educate Customers and Employees 18 Implement Best Practices 23 Meet the Communications Challenge 29 Serve All Customers, All Incomes 33 Adapt to the Revolutionary Rhythm 38 Selected Best Practice Considerations 43 Company Profiles China: Bejing Hualian Group (BHG) 46 Poland: Biedronka 47 Turkey: BIM 48 Brazil: Magazine Luiza 49 Peru: Supermercados Peruanos 50 South Africa: Pick n Pay 51 Acknowledgments 52 Introduction A Global Perspective This report may change the way you think about Each of the markets studied for this report—Brazil, retailing in emergent markets. China, Peru, Poland, South Africa and Turkey—are changing at a different speed and in different ways. Based on rigorous research into leading retailers Each country sits along a continuum of cultural, in six emergent country markets in Asia, Eastern social and economic development. How these Europe, Latin America and South Africa, this report characteristics fit together makes each market a examines the dynamics and subtleties of each market singular place. and then “connects the dots” to form an original global perspective and yield useful insights. 2. There is no definitive emergent market retailing model. Yet all successful retailers share some This report is a companion to a definitive multi- combination of attitude and culture that enables media presentation. The research was conducted for them to grow in these challenging business the Coca-Cola Retailing Research Council of Latin environments and to draw customers from all America and took place from over the course of 2009. income levels. In most emergent markets, the Our work was informed by two assumptions: majority of the population shops both in the organized and fragmented trades, often during the 1. Useful knowledge of emergent markets requires same day. learning both what they share in common and also how they differ; and Note: For clarity we’ve used the following definitions: 2. There is no single “right” way to succeed • Customer: an individual who frequents a retailer commercially in an emergent market. But there • Shopper: a customer who has made a purchase at are certain attitudes, knowledge and capabilities some point in time that form the foundation of any successful engagement. • Consumer: someone who uses a product purchased at retail, but not necessarily the shopper Preliminary Comments who made the purchase 1. There is no one definition of an emergent market. Each of the six retailers studied is a home-grown While complicated econometrics can help define leader: Magazine Luiza (Brazil), Beijing Hualian Group what is meant by an emergent market, the (China), Supermercados Peruanos (Peru), Biedronka most succinct and useful description is this: An (Poland), Pick n Pay (South Africa), and BIM (Turkey). emergent market is a place where people who thought their daily existence could never improve Each has profoundly understood the defining now believe that the future will be better than the characteristics of its local market. Each faces a past. Emergent market retailers contribute to— similar challenge: attracting and retaining consumers and benefit from—this sense of hope. who historically have shopped in the small shops of the traditional trade and are generally unfamiliar with 2 Retailing In Emergent Markets /Introduction Figure 1: This study on emergent markets involved six retailers on four continents to provide a global perspective and depth. the expansive shopping venues of developed markets. 2. Operational flexibility: Emergent market retailers While each company is shaped by local particularities, are flexible in executing strategy. They know that they share a core strategy: Each retailer has a clear the unexpected is the expected. Some disruptions, retail proposition to its respective market, providing like a sudden loss of electricity, can be costly consumers with high-value products and services in time and money. Other disruptions, such as delivered at low cost. government programs to help the poor, can help drive additional sales. Strategy moves forward, but Some of the retailers have cultures that empower rarely in linear or predictable fashion. employees and emphasize a social responsibility connection with the communities they serve. Other 3. Long-term vision: Emergent market retailers retailers focus on more basic commercial formulas for understand that conducting business in an delivering a limited product assortment at the lowest emergent market is not about making a quick possible price. Regardless of approach, all of the profit. They take a long-term view, believing that retailers studied share the value/cost core strategy today’s investment in stores and infrastructure along with several underlying characteristics. will provide a substantial return over time as their markets grow. These retailers understand that 1. Strategic focus: Emergent market retailers are as markets are transformed by customers and highly focused in their direction and integration competition, they will accrue rewards for early and of planning. Characteristic of any successful sustained commitment. retailer, strategic focus is especially important in emergent markets. Because the retailers have the 4. Rapid growth: Emergent market retailers do not additional role of educating the consumer about exist in a steady state. Success requires staying shopping in organized retailing, strategic clarity ahead of swift change. In maturing markets, and consistency are paramount. retailers sometimes fret idly about discovering the next growth idea. Emergent market retailers do Retailing In Emergent Markets 3 not enjoy this luxury. Their challenge is daunting, • Suppliers: For a supplier, what could be better than but simple—to keep the engine revved at high reaching new groups of customers entering the speed. For them, to move quickly and fail is far less consumer society? This research examines how risky than to stand still and hope for real change to these potential customers think and act. emerge. • Investors: No longer at the mercy of wildly Who Should Read This Report fluctuating inflation and political instability, many emergent markets are drawing investor attention. Retailers and suppliers are the primary audiences This research provides an unusually deep probe of for this report and the presentation. But the one sector, retailing. opportunities available in emergent markets make the topic of interest to other constituencies. Those who • Governments and Non-Government Organizations: can benefit from this knowledge include: Government intervention, often in collaboration with NGOs, improves living standards and impacts • Emergent Market Retailers: Retailers already retailing directly. This research examines the serving these markets have historical advantage positive correlation between improvements in and profound insight. For them, this research retailing and society. provides a window into markets other than their own. How the Report was Created • International Retailers: Rapidly growing emergent We audited stores across a variety of markets to study markets are tempting to retailers in the mature a range of categories and formats. We interviewed markets of the developed world. But expansion shoppers and retailers, including executives and other across these borders is more than just another key officers, department heads, store managers, store opening. This research will help assess the frequent customers and occasional shoppers. Most complications and risks. retailers invited us to visit their corporate offices to conduct interviews, allowing us to compare their publicly stated strategies with what we found on the ground and across the marketplace. Figure 2: To enrich and broaden this study, a very wide set of retailer variables were Moreover, we were able to identify gathered in relation to ownership, site management, formats, and organization. idiosyncrasies of particular markets and Ownership Models Formats Reviewed distill the characteristics that are common examined Supermarket across all emergent markets. Full Family Ownership Small Market Private Equity We followed up by phone and email and Consumer Electronic / Home Horizontal Group complemented this extensive investigation Cash & Carry Family Controlled Public with desk research. The featured retailers Mall Management are profiled at the end of the report and Hypermart summarized here: Convenience Stores • Brazil: Magazine Luiza, a family-owed Site Management Organization Models chain of about 430 consumer electronics Full company owned Flat from Owner-Department stores that fosters an entrepreneurial spirit Standards Franchised Financial Franchise among its employees and proactively adopts Mixed Corporate/Franchise Operations - Marketing technology to boost efficiency. Mall Real Estate Model Financial Product Based Standards Reward • China: Beijing Hualian Group (BHG), a KPI Reward chain of more than 80 supermarkets and Retailers studied had a range of ownership and site management and site of ownership had a range studied Retailers market. to went they how impacted models that directly of the scope models further expanded and organization Formats solutions. market simple beyond this study department stores located throughout 4 Retailing In Emergent Markets
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