STORES January 2004 Section 2

2004 Global Powers of Retailing

Audit.Tax .Consulting.Financial Advisory. integration

When you assemble a talented and integrated technology solutions crew, you quickly achieve success with your organization as well.

Retek® Enterprise Ready Point Solutions™. Talented components as you need them. Maximum implementation flexibility. Integration from front office to back office and every position in between.

At Retek, all of our solutions are engineered based on three key : value, innovation and simplicity. With the Retek Enterprise Ready Point Solutions, you can implement a single module or point solution, any combination of modules, or the entire Retek Enterprise — in the order that creates the greatest benefit to your business. You save time, money and win the game of . What you need, when you need it. It’s your call.

Visit our Web site today to learn more about the Retek Enterprise Ready Point Solutions and you could be pulling in more profits than you can handle.

www.retek.com/integration

Visit www.retek.com/retekworld04 for information on the leading global retail conference of the year.

HELPING THE RETAIL INDUSTRY CREATE, MANAGE AND FULFILL CONSUMER DEMAND™ Acknowledgments

Deloitte Touche Tohmatsu Retek Inc. Deloitte Touche Tohmatsu is an organization of member Retek Inc. is the leading provider of mission-critical soft- firms devoted to excellence in providing professional services ware and services to the retail industry. Retek solutions inte- and advice. We are focused on client service through a global grate collaborative software with patented predictive tech- strategy executed locally in nearly 150 countries. With access nologies, consulting services and the best practices of to the deep intellectual capital of 120,000 people worldwide, customers and partners to help retailers create, manage and our member firms (including their affiliates) deliver services in fulfill consumer demand. Leading global retailers including four professional areas: audit, tax, consulting and financial Tesco, , Gap Inc., Sainsbury’s, Eckerd Corp. and advisory services. Our member firms serve over one-half of the use Retek solutions. world’s largest companies, as well as large national enterprises, Contact Retek at 1.888.61.RETEK or at www.retek.com. public institutions, and successful, fast-growing global growth companies. Triversity Deloitte Touche Tohmatsu is a Swiss Verein (association) Triversity – the fastest growing international provider of cus- and, as such, neither Deloitte Touche Tohmatsu nor any of its tomer-centric retail solutions. Triversity’s solutions enable member firms has any liability for each other’s acts or omis- retailers to transform the Customer Experience throughout the sions. Each of the member firms is a separate and independent retail enterprise while dramatically improving operating effi- legal entity operating under the names “Deloitte,” “Deloitte & ciencies. Retailers worldwide have built their businesses Touche,” “Deloitte Touche Tohmatsu,” or other related around Triversity’s market-leading solutions for POS, Loss names. The services described herein are provided by the mem- Prevention, Retail CRM, Returns Management and Sales ber firms and not by the Deloitte Touche Tohmatsu Verein. For Audit. regulatory and other reasons certain member firms do not pro- STORES vide services in all four professional areas listed above. STORES is the magazine of the National Retail Federation, Diners Club the world’s largest retail trade association. It is the best-read Diners Club, established in 1950 as the first multi-purpose and best-rated magazine about retail technology, supply chain charge Card, is the preferred charge card among frequent busi- and logistics, loss prevention, credit and payment systems, and ness and leisure travelers. Issued in more than 200 countries store operations. NRF’s membership includes the leading spe- and 67 local currencies, Diners Club serves 8 million Card- cialty stores, , department stores, discount and members worldwide. Club Rewards from Diners Club was mass merchandise stores, drug stores, direct marketers, e-retail- voted the “Best Affinity Charge/Credit Card Program” in the ers, chain restaurants and home centers in the United States Americas for the sixth consecutive year by the readers of and 50 nations around the world. NRF represents more than InsideFlyer magazine in the prestigious 2002 Freddie Awards. 100 state, national and international trade organizations, Diners Club North America is a subsidiary of Citigroup, the which have members in most lines of retailing. NRF also leading global financial services organization. includes in its membership key suppliers of goods and services to the retail industry. JDA Software Group, Inc. JDA Software is the global leader in integrated retail demand chain solutions with more than 4,600 retail, manufacturing and wholesale clients worldwide. Capitalizing on its market position and financial strength, JDA invests significantly in advancing the JDA Portfolio merchandising, POS, analytic, and collaborative solutions that improve revenues, efficiency and customer focus.

WWW.STORES.ORG STORES / JANUARY 2004 3 Progresses Toward Corporate Vision with Active IT Investment JDA merchandise management software helps Aeon to reduce inventory by 4.1 bil- lion yen at the end of fiscal year 2003 as compared to the previous period

On its 30th anniversary in August 2001, leading ment of accounts reported for its General Merchandise Japanese retailer Aeon Co., Ltd. adopted its new name Store (GMS) operations and compared the end of fiscal and made the declaration, “We will continue to work year 2003 with the previous period. together toward a ‘future of limitless promise.’” As part of this announcement, Aeon also expressed the vision With a focus on developing its GMS operations, Aeon is of becoming one of top ten retail companies in the moving ahead with “Every Day Low Price (EDLP)” poli- world by 2010. cies, which it views as crucial for its long-term strategy. Both reduction of inventory realized by accurate inven- Aeon announced an IT tory management and reduction of receipt cost accom- strategy plan in plished by direct sourcing from vendors and product November 2001 that supply from abroad are essential factors for transform- would be key for ing Aeon into a retail company with a low cost structure. achieving its vision. Aeon’s IT plan called Aeon to Implement Portfolio Merchandising in for transitioning from Division its traditional operat- Aeon’s future plans call for allocating more than half of ing model to one that its IT investment to projects within its merchandising adopted the best prac- area and supply chain management. This includes tices of leading retail Aeon implementing ODBMS/Portfolio Merchandising companies in Europe at its supermarket business format and other retail divi- and the Americas by sions by the end of fiscal year 2004. Aeon has already the end of fiscal year 2004. Aeon’s IT initiative was signed a license agreement with JDA for this new designed to accelerate reforms in seven areas: mer- implementation that will expand its relationship with chandising, logistics, CRM, back office, human JDA beyond the GMS division. resources, group company management integration and IT infrastructure. Aeon now represents the best of retail companies in . Aeon leaders devoted thirty years of history Pursuing Best Practices at Each Segment into the principle, “Everything we do, we do for our Playing a key role in Aeon’s new IT infrastructure are customers,” as well as pursuing persistent reform. several JDA Portfolio® solutions, and in particular, Open The retailer views IT as the tool that will lead its DataBase Merchandising System™ (ODBMS™) (now reform and bring further progress to Aeon. This called Portfolio Merchandising™). Aeon started the JDA progress is pilot in 2001, and completed a massive rollout of the what will enterprise merchandise management software to all enable Aeon departments of Apparel in 2002. to achieve its goals of According to Vol.8 2003.JUL of Aeon Magazine, “What becoming are Aeon’s aims and how is it reinventing itself?” Aeon part of the “decreased its product inventory by ¥4.1 “global 10” billion since the previous period through — among merchandise management by the open the top ten database merchandising system (ODBMS).” retailers in This decrease also was noted in the settle- the world.

For more information, contact JDA at 800.479.7382, [email protected] or JDA.com. Get ready to enter a whole new playing field. JDA PortfolioEnabled™ will be launched this year. And the world will be divided between those who will flourish and those JDA who will not. Take the lead. Call 800-479-7382 or visit jda.com. ® Be enabled, seize success.

Up to The Challenge

eloitte personnel located in ates is to encourage fierce competi- countries of strategic interest to Deloitte Touche Tohmatsu, tion, which in turn can make prof- Dretailers made contributions to the knowledge leader in global itability all the more illusive. This this report. Their comments can be remained a key problem for several found in the Retail Industry Profiles retailing, is pleased to present industry players into 2003. section of this report. M+M Planet the seventh annual In a different reaction to the weak- Retail provided able assistance in com- Global Powers of Retailing, in ness in demand, numerous retailers piling the list of the top 200 retailers conjunction with STORES honed their negotiating skills with and their growth rates. Magazine. This report identifies brand producers who were asked to Judging by the results of the top 200 the 200 largest retailers around give even larger discounts and better retailers and the commentary from our credit and delivery terms. Given the Deloitte practitioners around the globe, the world and provides increased oversight from various it would seem that retailers love a good economic, demographic and government agencies, however, retail- challenge. In the midst of a difficult industry insights on the global ers were giving particular considera- economic and operating environment, marketplace. tion to their rebate management pro- many retailers fared relatively well in grams. 2002. Sales and profits generally To be sure, not all regions of the improved for these large retailers over the dismal 2001 results. world were experiencing softness in retail sales. In several This year’s list contains more profitable companies and a countries, demand remained buoyant and retailers there bene- stronger increase in sales than was the case last year. fited. In countries as diverse as Russia, Spain, Greece and It hasn’t been an easy time for most industry players. Australia, retail sales remained healthy in 2002. And in numer- Consider this set of recent retailing challenges noted by a ous developing countries or emerging markets, including much Deloitte practitioner in : of Eastern Europe and Asia, the demand for “modern” types Consumers are becoming more empowered and difficult to of retailing continued to grow, regardless of economic condi- retain. tions. It is in many of these countries – Russia, China, and The marketplace is reaching high levels of consolidation, India, for example – where key retailers today have the great- with powerful players shifting the competitive landscape. est opportunities for growth. Technologies are proliferating and becoming more powerful On the operational side, companies continued to invest in and more complex to manage. technologies that allowed them to better target consumers and The penetration of local and regional markets by Wal-Mart, to more effectively set prices. And inventory management Carrefour and Tesco creates more competition. improvements were extensive over the last year or more, even Or this comment from one of our Canadian retail experts on in the less developed countries. Customer loyalty cards contin- the difficult economic environment in which companies have ue to gain popularity as a major customer retention tool, had to operate: A tough year – SARS, West Nile Virus, Mad although it was noted that some retailers have not yet effective- Cow Disease, the great power outage (U.S. and Canada), trade ly integrated the information to enable better buying decisions. wars, real wars, forest fires, unusual weather, etc. Additionally, private label programs were frequently men- To that list of et cetera one could add terrorism, deflation, tioned as ways by which retailers are improving gross margins. high unemployment, low consumer confidence, accounting Large retailers, such as Wal-Mart, Home Depot and Tesco, irregularities, closer government oversight, rising oil prices, a have recently been involved in pilot tests of radio frequency drop in tourism, Latin American political crises and an Asian identification tag (RFID) solutions. Suppliers are installing nuclear standoff. To varying degrees, these issues have been low-cost antenna systems on the pallets and cases that will be impacting retailers over the last 24 months or more. shipped to retailers’ distribution centers. These RFID tags will Although the list of roadblocks might seem daunting, the allow companies to track items anywhere along the supply retail industry has actively responded with a long list of reme- route. The change to RFID tags is being called a revolution for dies to cure their weakened financial positions. The deteriora- the industry, one that will allow large savings due to enhanced tion in earnings that began in 2001 likely set things in motion. inventory management and reduced shrinkage. Privacy con- In an attempt to shore up profitability, various measures were cerns, however, are mounting from various consumer advocacy put in place beginning in 2002. groups. Consumers, it was said by one of our practitioners, have late- As in 2001, merger and acquisition activity was mostly quiet ly been in a constant search for price, “willing to change the in 2002, but it began picking up in 2003. In October 2003, shop, the retailer and the format” to get the price they want. A Canada’s Couche-Tard concluded an agreement with traditional response from retailers in this situation has been to ConocoPhillips to acquire convenience store operator, The implement aggressive price discount campaigns. And this time Circle K Corporation. Dutch retailer Ahold has been selling off was no exception. Yet the dilemma that discounting often cre- numerous operations and confirmed in late 2003 that it was in

WWW.STORES.ORG STORES / JANUARY 2004 G7 ADVERTORIAL EXPERT FORUM

Mark’s Work Wearhouse Improves Customer Service while Reducing Costs with Retek® Point-of-Sale™

BY PETER BASKIN

importantly, operating costs have been slashed. “Leveraging Retek Point-of-Sale running on Linux, we have reduced our POS operating expenses by 50%, and new store opening costs by 30% while improving customer service,” says Lynas. “Retek provided solid training and support to our in-house implementation team. This has been the most powerful IT project I have been associated with.” Retek POS is an application within Retek’s Integrated Store Operations (Retek ISO) solution. Retek ISO provides retailers with substantial flexibility, enabled by its Java- based architecture. Retek ISO’s flexibility includes operating system, database and hardware independence, enabling the retailer to select supporting technologies that best match its business. Retek ISO, powered by IBM SurePOS 500 POS terminals with Intel® processors, provides a scalable, cost effective and agile infrastructure. To maintain a low total cost of ownership, Mark’s Work Wearhouse deployed Retek POS on the Red Mark’s Work Wearhouse (Mark’s) is a leveraging a new technology in the store. Hat Linux 7.3 operating system. wholly owned subsidiary of Canadian Tire A new POS system powered by Java™ would Based on its previous experience with Corporation, operating 321 stores throughout reduce store technology costs while maintain- Java POS, Mark’s Work Wearhouse desired Canada. Mark’s specializes in ready-to-wear ing application uptime. a more active role in the implemen- apparel and business casual attire. Growing An initial pilot with a different Major Benefits tation. Retek provided brief very rapidly in the past eight years, it has Java-based POS system proved technical training on its Integrated • Reduced POS operating more than doubled its revenue and number of unsuccessful, failing to scale to Store Operations architectural costs by 50% stores. Saddled with a rigid legacy point-of- meet Mark’s Work Wearhouse’s platform and tool set. Mark’s sale (POS) system and high cost structure, POS transaction processing needs. • Reduced new store Work Wearhouse completed the Mark’s Work Wearhouse needed a scalable Undeterred by this early stumbling opening costs by 30% balance of the implementation POS solution capable of reducing costs and block, Lynas selected Retek’s Java • Intuitive POS application independently. improving customer service, while supporting based solution, Retek Point-of-Sale cut in store training by 50% “Retek POS demonstrates the the company’s accelerated expansion plans. (POS) in the spring of 2002. power of running open systems,” “Managing costs is very important for any Having experienced some • Reduced overall help said Lynas. “By taking advantage desk inquiries by 25% organization,” says Robin Lynas, Chief problems in its initial foray into of the application’s Linux deploy- Information Officer with Mark’s Work Java-based store solutions, Lynas ment option, Mark’s Work Wearhouse. “In retail IT however, it is critical. chose to proceed cautiously with the Wearhouse has been able to drastically cut Retail is a tough industry, and our margins Retek solution. “Our plan was to deploy costs while improving customer service and are under more pressure than other industry’s, it in approximately out to sixty some pilot our store experience. With more efficient store requiring us to be very diligent in evaluating stores prior to the holiday season, and moni- operations, our associates are better equipped how we spend our IT dollars. We need to tor the Retek POS performance during the to serve our customers.” reduce costs and deliver benefits to our stores intensive holiday season,” says Lynas. “The Retek® Point-of-Sale™ provides retailers wherever possible.” results were very strong, with no decrease in with a technologically advanced application Mark’s Work Wearhouse’s legacy POS performance with the larger holiday level that lets customers complete a purchase any- system was very stable, however it required transaction volumes. Encouraged by the where in the store. The application provides a significant cost structure to support it, pri- pilot performance, we decided to accelerate rapid execution and greater personalization marily through the use of AS/400 servers in the roll out after the holiday selling season.” while enabling reduced operating costs and every store to ensure maximum up-time, a By early summer of 2003, Mark’s Work greater flexibility. must in any retail POS environment. Lynas Wearhouse completed the rollout to its 320 Peter Baskin is Vice President Store Strategy saw an opportunity to improve store opera- plus stores, achieving outstanding results. at Retek Inc. For additional information, tions while lowering its cost structure by Help desk calls have gone down, and most call 1.888.61.RETEK or visit www.retek.com. 2004 Global Powers of Retailing talks to sell its majority stake in Argentine supermarket chain result, a significant amount of textiles, clothing, footwear and, Disco. Also in late 2003, Morrisons received the O.K. to buy more recently, household appliances are now being imported the U.K. chain, Safeway. from China. In some countries, low-priced Chinese imports Franchising was also frequently mentioned as means by have contributed to a deflationary environment. China is also which retailers were growing profits. Franchising and new a country that is drawing increased interest from retailers cooperative agreements were helping numerous compete because of its robust economy, expanding middle class and against the larger players. Licensing agreements were also gain- overall growth potential. Given that the Chinese per capita ing. Saks recently entered into a licensing agreement to open GDP is expected to rise sharply over the next decade, retailers’ Saks Fifth Avenue stores in the Middle East, and McDonald’s interest in the country will likely intensify. will begin licensing its brand on products in 2004. In summary, the retail industry seems to have successfully In terms of store concepts, the increased consumer demand maneuvered through the economic weakness and, having for value is bring several concepts to the forefront. The hard made some difficult decisions along the way, is better posi- discount, cash and carry concepts remain particularly popular tioned for growth now that an upturn seems evident. To para- in Europe and are spreading quickly to the less developed phrase the comment made by our U.K. practitioner: The retail regions. The dollar store, which is taking off in the U.S., has environment continues to be challenging, with intense competi- spread to Japan, where “one coin” (100 yen) stores have been tion and pressure on prices, but it still offers growth for those growing rapidly. And convenience stores continue to expand with the right offer. the concept from which they take their name, with many now staying open on a 24/7/365 basis. Our best wishes to all retailers for a prosperous 2004. Last, China was a major topic of interest throughout the industry. Most frequently, it was mentioned as a major supply Sincerely, source for retailers. Purchase agreements with Chinese manu- facturers have allowed numerous retailers to achieve signifi- Ed Carey Tara Weiner cant cost savings due to the country’s lower production costs. Global Consumer Business National Managing Partner It is a country where the quality and consistency of product Leader Deloitte Consumer Business had improved dramatically over the last decade or more. As a Deloitte Touche Tohmatsu Practice

Global 200 Highlights

The softness in the global till, for many of the large retail retail environment that began trillion. Thus, these 200 retailers have players, 2002 was not as diffi- captured 29 percent of the worldwide Scult as it could have been. Total in 2001 continued into 2002. market. The largest of the large have sales for the 200 retailers reached Retail sales in the U.S. continued to increase their market $2.23 trillion, which was an increase rose only 3.1 percent, the share. Sales for the top 10 retailers of 4 percent over 2001. This increase second-slowest growth in a reached $650 billion, which repre- was twice as strong as reported in last sents 29.2 percent of the sales from year’s report. Average sales for the 85 decade. Sales in Germany these top 200. Five years ago, the top U.S. companies on this top 200 list declined. And ongoing 10 share was only 23 percent. increased 6.7 percent from 2001. For deflation in Japan, coupled Rankings in the top 10 changed the 68 European retailers, sales with weak consumer demand, sharply from the prior list. Ahold improved 6.5 percent, on average. dropped four notches to seventh Additionally, many of these retailers kept sales on a downward place, and Kmart fell eight places, to became more adept at selling in a diffi- spiral. Sales there deteriorated 17th place. The two biggest gainers cult economy. Profitability improved. for the sixth consecutive year. were Tesco, which rose to eighth- Among those retailers that disclose net largest from 13th place last year, and income/loss figures, only 14 reported a which climbed three notches loss. In last year’s report, 27 had net losses. Nine of the current to become the ninth-largest retailer in the world. In 1997, crop of 14 were based in the U.S. Costco was ranked 18th largest. Another U.S. retailer that has According to M+M Planet Retail, global retail sales were $8 moved up sharply over the last five years is Lowe’s. In 1997 it

WWW.STORES.ORG STORES / JANUARY 2004 G9 Global 200 Highlights

Top 200 Retailers, Top 200 Retailers, by Country of Origin by Sales

United States United States 42.5% 50.6%

Other 7.0% Japan 13.0% Other Germany 3.3% Other Other 10.3% Europe Europe 12.5% U.K. 9.2% 9.5% Japan 9.3% 7.4% U.K. Canada Canada 8.4% 1.5% 3.5% France Germany 5.5% 6.5% was ranked 50th largest; currently it is ranked 20th largest. In a change from prior reports, publicly traded subsidiaries of This represents one of the strongest moves of any retailer in the larger retail entities are not shown separately. Thus, retailers such ranking. as Wal-Mart Mexico and A&P are not included on this year’s list Food retailing continues to dominate among these large because each has its sales included in the parent’s figure. retailers. Eight of the 10 largest retailers sold food, and 101 of This year’s list contains 21 new entrants into the top 200 list. the 200 operated food-related formats such as supermarkets In particular, 13 of the bottom 25 retailers are new to the rank- and convenience stores. The figure would go even higher if the ing. The dropping of subsidiaries from the list helped open up U.S. drug stores were included. These formats are increasingly several slots. stocking their shelves with convenience-related food items as a Each of the top 200 retailers had sales of $2.4 billion or way to grow sales. greater. Unfortunately, there were quite a large number of Specialty retailing, however, remains the single dominant retailers whose sales were just below that cutoff mark, and retail format. This year, 102 of the top 200 retailers operated therefore they did not make the list. There were, in fact, 18 specialty stores. The format represents a diverse group of retailers who had sales of between $2 billion and $2.39 billion, retailers that specialize in product groups such as home elec- which made them ineligible for the list. Over the years, the $2 tronics, office supplies, toys or apparel. billion to $2.5 billion sales range seems to be where a large number of retailers fall. The group of no- shows this year included several compa- Sector Composition of the Top 200 Retailers nies whose sales perennially are just above or below the cutoff, including Williams- Sonoma, Belk and Pep Boys (all from the Specialty 102 U.S.). Supermarket 81 A new feature added this year is a five- Department 54 year compound annual growth rate Hypermarket 42 (CAGR) for sales and earnings. The growth Convenience 40 rate is computed using local currency fig- Discount 37 ures, to prevent any distortions due to cur- Superstore 36 DIY 23 rency fluctuations over that period. Food Service 20 The 25 fastest growing retailers in terms Drug 20 of sales and income are shown in the table. Cash and Carry 20 The list is largely made up of retailers that Mail Order 19 either serve certain niches well, are value- Warehouse 10 oriented or are relatively new companies. Auto 8 , for example, grew its sales the 0 20406080100fastest of these retailers, with its stellar 93

G10 STORES / JANUARY 2004 WWW.STORES.ORG Global 200 Highlights Strongest Sales Increases Strongest Profit Gains DT Country of Name of Company 5 yr Retail DT Country of Name of Company 5 yr Net Rank Origin Sales Rank Origin Income CAGR% CAGR% (Local (Local Currency) Currency) 1 US Amazon.com 92.8% 1 Japan 156.8% 2 US The Pantry 42.3% 2 S. Korea Shinsegae 89.8% 3 Japan Yamada Denki 37.0% 3 US CVS 79.9% 4 S Africa Metcash 36.4% 4 US Costco 72.4% 5 S. Korea Lotte Shopping 35.3% 5 S. Korea Lotte Shopping 71.5% 6 Japan Fast Retailing 35.2% 6 Japan Fast Retailing 59.4% 7 S. Korea Shinsegae 31.9% 7 Japan Hankyu Department Stores 49.2% 8 US Bed Bath and Beyond 28.0% 8 US Michaels Stores, Inc. 36.1% 9 US Starbucks 27.5% 9 US Kohl's 35.5% 10 Spain Mercadona 27.3% 10 Japan Aeon (Jusco) 35.4% 11 Canada Empire/Sobeys 27.0% 11 UK Compass 35.1% 12 US Dell 25.9% 12 Japan Izumi 33.6% 13 Spain Inditex 25.1% 13 US Bed Bath and Beyond 32.8% 14 Brazil Pao de Acucar 24.9% 14 S. Africa Pick 'n Pay Stores 32.8% 15 US Kohl's 24.4% 15 US Lowe's 32.7% 16 US Advance Auto Parts 23.2% 16 S Africa Metcash 32.1% 17 UK The Big Food Group (Iceland) 22.3% 17 US Starbucks 31.4% 18 US Lowe's 21.2% 18 Spain Mercadona 30.5% 19 US Whole Foods Markets 20.7% 19 Japan Daimaru 30.2% 20 Sweden Hennes & Mauritz 20.2% 20 Spain Inditex 30.1% 21 US Best Buy 20.2% 21 France Pinault-Printemps-Redoute 29.6% 22 US 19.4% 22 Japan Yamada Denki 27.9% 23 US Home Depot 19.2% 23 Canada Loblaw 27.9% 24 S. Africa Pick 'n Pay Stores 19.0% 24 US Staples 27.8% 25 US Charming Shoppes 18.9% 25 Sweden Hennes & Mauritz 27.5% percent annual growth rate. The company opened its virtual inventory management into a science. doors for business as the “Earth’s biggest bookstore” in July The lists of fast growers are largely made up of specialty 1995; it has since expanded into a broad range of product lines. retailers. Food vendors, which make up the majority of the top The Pantry had the second-fastest sales growth rate on this 200 retailers, are a minority in this group of stellar performers. list. This convenience store operator has grown its store count Wal-Mart, for example, is ranked 51st in terms of five-year dramatically over the last several years, mostly through acqui- sales growth. Carrefour’s sales, however, were ranked 26th sition. Japan’s largest retailer of home electronics, Yamada fastest growing. The company’s 1999 megamerger with Denki, has enjoyed a 37 percent annual growth rate in sales Promodes has helped it become the second-largest retailer after since 1997. Wal-Mart. The two groups of the 25 fastest-growing sales and income Having a strong growth rate doesn’t necessarily equate with retailers are notable for the number of companies that are on being a global retail player. In fact, 17 of the 25 sales growth both lists. The two largest South Korean retailers, Lotte leaders operate in three or fewer countries. Shopping and Shinsegae, in fact, are in the top 10 for sales and The 1997 figures used to arrive at the growth rates were income growth. Other retailers that have enjoyed strong gains taken, where possible, from the 1998 Global Powers Report, in both sales and income include Kohl’s, Fast Retailing, Bed which contained the 1997 data. For retailers who were not on Bath and Beyond, Starbucks, Mercadona, Hennes and that list, the annual report was used. Mauritz, Inditex and two South African companies, Metcash and Pick ’n Pay. In particular, Mercadona has become the third-biggest retailer in Spain’s food sector by applying a busi- ness model very similar to Wal-Mart’s everyday low pricing. Diane M.Kutyla Apparel retailers Fast Retailing, H&M and Inditex have Deloitte Touche Tohmatsu catered to the youth markets with cheap but stylish apparel. Parsippany, N.J. All three have also made great strides at turning the art of [email protected]

WWW.STORES.ORG STORES / JANUARY 2004 G11 Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 1 US Wal-Mart Discount,Hypermarket, 244,524 229,617 8,039 Argentina,Brazil,Canada,China, 14.2% 17.9% Supermarket,Superstore, Germany,Japan,South Korea, Warehouse Mexico,Puerto Rico,UK,US 2 France Carrefour Cash & Carry, 65,011 65,011 1,314 Argentina,Belgium, Brazil,Chile, 18.7% 20.5% Convenience,Discount, China,Columbia,Czech Rep., Hypermarket,Specialty, Dominican Republic,Egypt, Supermarket France,Greece,Indonesia,, Japan, ,Mexico,Oman, ,Portugal,Qatar, Romania, Singapore,Slovakia,Spain,S.Korea, Switzerland,,, Tunisia,Turkey,UAE 3 US Home Depot DIY,Specialty 58,247 58,247 3,664 Canada,Mexico,Puerto Rico,US 19.2% 25.9% 4 US Convenience,Discount, 51,760 51,760 1,205 US 14.3% 23.9% Specialty,Supermarket, Warehouse 5 Germany Metro Cash & Carry, 48,738 48,349 475 Austria,Belgium,Bulgaria, China, 12.4% 9.6% Department,DIY, Croatia,Czech Rep.,Denmark, Hypermarket,Specialty, France,Germany,Greece,Hungary, Superstore Italy, Japan,Luxembourg, Morocco,Netherlands,Poland, Portugal,Romania,Russia,Slovakia, Spain,Switzerland,Turkey,UK, Vietnam 6 US Target Department,Discount, 43,917 42,722 1,654 US 9.0% 17.1% Superstore 7 Netherlands Ahold Cash & Carry, 59,292 40,755 (1,143) Argentina,Brazil,Chile,Costa Rica, 12.5% NM Convenience,Discount, Czech Rep.,Denmark,Ecuador, Drug,Hypermarket, El Salvador,Estonia,Guatemala, Specialty,Supermarket Honduras,Indonesia,Latvia, Lithuania,Malaysia,Netherlands, Nicaragua,Norway,Paraguay,Peru, Poland,Portugal,Slovakia,Spain, Sweden,Thailand,US 8 UK Tesco Convenience,Depart- 40,394 40,071 1,451 Czech Rep.,Hungary, 9.7% 13.4% ment, Hypermarket, Rep.of Ireland,Malaysia,Poland, Supermarket,Superstore S.Korea,Slovakia,Taiwan,Thailand, UK 9 US Costco Warehouse 37,993 37,993 700 Canada,Japan,S.Korea,Mexico, 9.8% 72.4% Puerto Rico,Taiwan,UK,US 10 US Sears Department,Mail Order, 41,366 35,698 1,376 Canada,Puerto Rico,US -2.9% 3.0% Specialty,e-commerce 11 US Albertsons Drug,Supermarket, 35,626 35,626 485 US 19.4% -1.3% Warehouse 12 Germany Einkauf Discount,Supermarket 33,837E 33,837E n/a Australia,Austria,Belgium, 15.2% n/a Denmark,France,Germany, Luxembourg,Netherlands,Rep.of Ireland,Spain,UK,US 13 US Safeway,Inc Supermarket 32,399 32,399 (828) Canada,Mexico,US 7.6% NM 14 US JCPenney Department,Drug, 32,347 32,347 405 Brazil,Puerto Rico,US 1.8% -6.5% Mail Order 15 France Intermarché Cash & Carry, 31,688 E 31,688 E n/a Belgium,France,Germany,Poland, 9.2% n/a Convenience,Discount, Portugal,Romania,Spain DIY,Food Service, Specialty,Supermarket, Superstore

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

G12 STORES / JANUARY 2004 WWW.STORES.ORG Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 16 Germany Rewe Cash & Carry,Discount, 35,405 31,404 n/a Austria,Bulgaria,Croatia, 7.4% n/a DIY,Drug,Hypermarket, Czech Rep.,France,Germany, Specialty,Supermarket, Hungary,Italy,Poland,Romania, Superstore Slovakia,Ukraine 17 US Kmart Discount,Superstore 30,762 30,762 (3,219) US -0.9% NM 18 US Walgreens Drug 28,681 28,681 1,019 US,Puerto Rico 16.5% 18.5% 19 Germany Edeka/AVA Cash & Carry,Discount, 27,166 E 26,514 E n/a Austria,Czech Rep.,Denmark, 17.2% n/a DIY,Supermarket, France,Germany,Poland Hypermarket,Superstore 20 US Lowe’s DIY 26,491 26,491 1,471 US 21.2% 32.7% 21 UK J Sainsbury Convenience,Hyper- 26,968 26,460 702 UK,US 3.5% -1.4% market,Supermarket, Superstore 22 Japan Ito-Yokado Convenience,Depart- 27,245 26,179 171 Australia,China,Denmark,Guam, 1.3% -21.5% ment,Food Service, Japan,Malaysia,Mexico,Norway, Specialty,Supermarket, Philippines,Puerto Rico,Singapore, Superstore S.Korea,Spain,Sweden,Taiwan, Thailand,Turkey,US 23 France Auchan Department,Hyper- 26,071 26,071 276 Angola,Argentina,China,France, 4.2% n/a market,Specialty, Hungary,Italy,Luxembourg, Supermarket Mexico,Morocco,Poland,Portugal, Russia,Spain,Taiwan,US 24 US CVS Drug 24,182 24,182 717 US 13.7% 79.9% 25 Germany Tengelmann Cash & Carry,Discount, 23,209 E 23,209 E n/a Austria,Canada,China,Czech Rep., -0.7% n/a DIY,Drug,Hypermarket, Germany,Hungary,Italy,Poland, Specialty,Supermarket, Portugal,Slovakia,Slovenia,Spain, Superstore Switzerland,US 26 Japan Aeon Convenience,DIY,Drug, 25,155 23,030 418 Canada,China,,Japan, 4.9% 35.4% Department,Discount, Malaysia,Thailand,UK,US Food Service,Specialty, Supermarket,Superstore 27 France E Leclerc Convenience,Hyper- 22,229 E 22,229 E n/a France,Italy,Poland,Portugal, 1.2% n/a market,Supermarket Slovenia,Spain 28 Germany & Schwarz Cash & Carry,Discount, 21,728 E 21,728 E n/a Austria,Belgium,Croatia,Czech 14.8% n/a Hypermarket, Superstore Republic,Finland,France,Germany, Greece,Rep.of Ireland,Italy, Netherlands,Poland,Portugal, Slovakia,Spain,UK 29 France Casino Cash & Carry, Con- 21,620 21,620 n/a Argentina,Bahrain,Belgium,Brazil, 14.5% 21.2% venience,Department, Colombia,Comoros,France, Discount,Food Service, Lebanon,Madagascar,Mauritius, Hypermarket,Specialty, Mexico,Netherlands,Poland, Supermarket,Warehouse Reunion,Taiwan,Thailand,Tunisia, Uruguay,US,Venezuela,Vietnam 30 US Best Buy Specialty 20,946 20,946 99 US 20.2% 1.0% 31 Belgium Cash & Carry,Con- 19,569 19,569 168 Belgium,Czech Rep.,Greece, 10.4% 7.8% venience,Drug,Specialty, Indonesia,Luxembourg,Romania, Supermarket Singapore,Slovakia,Thailand,US 32 UK Kingfisher DIY,Specialty 16,295 16,185 412 Belgium,Brazil,Canada,China, 11.0% -6.9% Czech Republic,France,Germany, Rep.Of Ireland,Italy,Luxembourg, Netherlands,Poland,Slovakia, Taiwan,Turkey,UK 33 US Convenience, 15,931 15,931 632 US 7.3% 12.2% Supermarket

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

WWW.STORES.ORG STORES / JANUARY 2004 G13 Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 34 US Rite Aid Drug 15,801 15,801 (112) US 6.8% NM 35 US Federated Department,Mail Order 15,435 15,435 818 US -0.3% 8.8% Department Stores 36 US McDonald’s Food Service 15,406 15,406 893 Global 6.2% -11.5% 37 Australia Woolworths Convenience,Depart- 15,389 15,225 356 Australia,New Zealand 9.1% 16.9% ment,Specialty, Supermarket 38 Japan Daiei Department,Discount, 17,910 14,941 1,103 China,Japan,US -7.7% 156.8% Specialty,Supermarket, Superstore 39 Germany KarstadtQuelle Department,Mail Order, 14,959 14,724 153 Austria,Belgium,Bosnia- -3.1% 5.5% Specialty,e-commerce Herzogovina,Croatia,Czech Rep., Denmark,Finland,France, Germany,Hungary,Italy,Japan, Netherlands,Poland,Portugal, Slovakia,Slovenia,Spain,Sweden, Switzerland,UK,US 40 US Gap Specialty 14,455 14,455 477 Canada,France,Germany,Japan, 17.3% -2.2% UK,US 41 Australia Coles Myer Department,Specialty, 13,560 13,560 187 Australia,New Zealand 4.5% -0.8% Supermarket 42 US May Department Department,Specialty 13,491 13,491 542 US 1.8% -6.9% Stores 43 US AutoNation Auto 19,479 13,463 E 382 US n/a n/a 44 UK Safeway Convenience,Hyper- 13,366 13,366 260 UK 4.4% -6.6% market,Supermarket, Superstore 45 Germany Otto Cash & Carry,Mail Order, 19,753 13,018 128 Austria,Belgium,China,Czech Rep., -2.6% -9.4% Specialty,e-commerce Denmark,France,Germany, Hungary,Italy,Japan,Korea, Netherlands,Norway,Poland, Portugal,Romania,Spain,Switzer- land,Taiwan,UK,US 46 US Winn-Dixie Supermarket 12,168 12,168 239 Bahamas,US -1.6% 3.2% 47 US Superstore 12,000 E 12,000 E n/a US 12.7% n/a 48 UK Marks and Spencer Department,Specialty, 12,497 11,986 743 Bahrain,Belgium,Bermuda,China, -0.6% -10.4% Supermarket Croatia,Cyprus,Czech Rep.,Finland, France,Germany,Greece, Hong Kong SAR,Hungary,India, Indonesia,Japan,Kuwait,Lebanon, Luxembourg,Malaysia,Malta, Netherlands,Philippines,Poland, Portugal,Qatar,Rep.of Ireland, Romania,Saudi Arabia,Singapore, Slovenia,South Korea,Spain,Tai- wan,Thailand,Turkey,UAE,UK,US 49 US TJX Cos. Department,Specialty 11,981 11,981 578 Canada,Rep.of Ireland,UK,US 10.1% 13.6% 50 France Pinault-Printemps- Department,Mail Order, 25,894 11,410 1,503 Belgium,Brazil,Denmark,Estonia, 12.0% 29.6% Redoute Specialty Finland,France,Germany,Luxem- bourg, Norway, Portugal, Spain, Sweden, Switzerland,Taiwan, UK,US

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

G14 STORES / JANUARY 2004 WWW.STORES.ORG Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 51 US Toys’R’Us Specialty 11,305 11,305 229 Australia,Austria,Bahrain,Canada, 0.5% -14.1% Denmark,Egypt,France,Germany, Hong Kong SAR,Indonesia,Israel, Japan,Kuwait,Malaysia,Mauritius, Netherlands,Norway,Portugal, Qatar,Saudi Arabia,Singapore, South Africa,Spain,Sweden,Swit- zerland,Taiwan,Turkey,UAE,UK,US 52 Spain El Corte Convenience,Depart- 12,701 10,910 520 Portugal,Spain 14.8% 24.7% ment,Hypermarket, Specialty,Supermarket 53 Canada Loblaw Convenience,Hyper- 14,709 10,900 464 Canada 9.2% 27.9% market,Supermarket, Superstore,Warehouse 54 Sweden IKEA Specialty 10,033 10,033 n/a Australia,Austria,Belgium,Canada, 15.0% n/a China,Czech Rep.,Denmark, Finland,France,Germany,Greece, Hong Kong SAR,Hungary,Iceland, Israel,Italy,Japan,Kuwait,Malaysia, Netherlands,Norway,Poland, Russia,Saudi Arabia,Singapore, Slovakia,Spain,Sweden,Switzer- land,Taiwan,UAE,UK,US 55 US Auto,Specialty 9,954 9,954 106 US 4.5% 0.4% 56 US SuperValu Discount,Hypermarket, 19,160 9,848 257 US 15.1% 2.2% Supermarket,Superstore 57 Switzerland Migros Convenience,Department, 13,022 9,844 115 France,Germany,Switzerland 2.4% -8.5% Genossenschaft Hypermarket,Specialty, Supermarket,Superstore 58 Japan Uny Convenience,Depart- 9,616 9,505 102 Hong Kong SAR,Japan 2.2% -0.5% ment,DIY,Drug,Specialty, Supermarket,Superstore 59 France Louis Delhaize Cash & Carry,Conven- 9,497 E 9,497 E n/a Belgium,Guyana,France,Hungary, 5.4% n/a ience,Discount,Hyper- Luxembourg,Romania market,Specialty, Supermarket 60 US H.E.Butt Supermarket 9,300 E 9,300 E n/a US,Mexico 7.7% n/a 61 UK Great Universal DIY,Mail Order,Specialty 11,056 9,141 388 Botswana,France, Germany, 18.6% -10.4% Stores Lesotho,Namibia,Netherlands, Rep.of Ireland,Japan,Spain, South Africa,Sweden,Swaziland, UK,US 62 US Kohl’s Department 9,120 9,120 643 US 24.4% 35.5% 63 Japan Seiyu Department,DIY, 9,289 8,811 (740) Hong Kong SAR,Japan,Singapore, -1.1% NM Specialty,Supermarket, Vietnam Superstore 64 UK Dixons Specialty 8,975 8,604 359 Czech Rep.,Denmark,Finland, 15.5% 6.7% France,Hungary,Iceland, Rep.of Ireland,Italy,Norway,Spain, Sweden,UK 65 Italy COOP Italia Discount,DIY,Hyper- 8,560 E 8,560 E n/a Croatia,Italy 7.2% n/a market,Supermarket 66 US Limited Brands Mail Order,Specialty 8,445 8,445 528 US -1.7% 19.5% 67 US Staples Mail Order,Specialty 11,596 8,200 E 446 Canada,Germany,Netherlands, 9.6% 27.8% Portugal,UK,US

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

WWW.STORES.ORG STORES / JANUARY 2004 G15 Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 68 Switzerland Coop Switzerland Convenience,Depart- 8,851 8,054 214 Switzerland 0.9% n/a ment,Drug,DIY,Food Service,Hypermarket, Mail Order,Specialty, Supermarket 69 US Dell E-commerce 35,404 8,000 E 2,122 Global 25.9% 17.6% 70 Japan Takashimaya Department,Specialty 9,652 7,949 32 Australia,France,Italy,Japan, -1.4% -13.8% Singapore,Taiwan,US 71 US Dillard’s Department,Mail Order 7,911 7,911 (398) US 3.6% NM 72 Sweden Coop Norden Convenience,Discount, 7,990 7,798 21 Denmark,Norway,Sweden n/a n/a Hypermarket,Specialty, Supermarket,Superstore 73 US Office Depot Specialty,Mail Order 11,357 7,450 E 311 Austria,Belgium,Canada,Costa 2.1% 14.2% Rica,France,Germany,Guatemala, Hungary,Rep.of Ireland,Israel,Italy, Japan,Luxembourg,Mexico, Netherlands,Poland,Portugal, Spain,Switzerland,Thailand,UK,US 74 Japan Mitsukoshi Department 7,680 7,309 51 China,France,Germany, -1.6% NM Hong Kong,Italy,Japan,Spain, Taiwan,UK,US 75 UK Somerfield Convenience,Discount, 7,273 7,273 62 UK 6.0% NM Supermarket 76 US Yum! Brands Food Service 7,757 6,891 583 Global -6.0% NM 77 US Army & Air Force Specialty 6,800 E 6,800 E 373 Global -1.2% 2.1% Exchange Services 78 Canada Empire/Sobeys Convenience,Discount, 6,772 6,772 116 Canada 27.0% 15.3% Drug,Supermarket, Superstore 79 UK Boots Drug,Specialty 8,242 6,686 468 Hong Kong SAR,Rep.of Ireland, -0.1% -4.8% Taiwan,Thailand,UK 80 UK The Big Food Group Cash & Carry,Supermarket 7,830 6,639 19 Rep.of Ireland,UK 22.3% -14.3% 81 S.Korea Lotte Shopping Convenience,Depart- 6,575 6,575 242 China,S.Korea 35.3% 71.5% ment,Food Service, Hypermarket,Supermarket 82 Japan Yamada Denki Specialty 6,517 6,517 46 Japan 37.0% 27.9% 83 UK Wm Morrison Supermarket,Superstore 6,514 6,514 276 UK 13.5% 13.9% 84 UK John Lewis Department,Hyper- 6,450 6,450 62 UK 4.2% -30.3% market,Supermarket 85 France Systeme U Supermarket,Superstore 6,338 E 6,338 E n/a France,Mauritius 10.2% n/a 86 US Avon Direct Selling 6,171 6,171 535 Global 4.0% 9.5% 87 US Dollar General Discount 6,100 6,100 265 US 18.4% 12.8% 88 UK Compass Food Service 15,620 6,092 672 Australia,Austria,Belgium,Brazil, 14.3% 35.1% Canada,France,Germany, Rep.of Ireland,Japan,Netherlands, Norway,Portugal,Spain,S.Africa, Sweden,Switzerland,UK,US 89 US Nordstrom Department,Mail Order, 5,975 5,975 90 US 4.3% -13.5% Specialty 90 US Saks,Inc. Department,Specialty 5,911 5,911 24 US 10.8% -17.6% 91 US United Auto Group Auto 7,435 5,907 E 62 Brazil,UK,US n/a n/a 92 US BJ’s Wholesale Club Warehouse 5,729 5,729 131 US 14.8% 19.4%

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

G16 STORES / JANUARY 2004 WWW.STORES.ORG Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 93 US Sonic Automotive Auto 7,071 5,488 E 107 US n/a n/a 94 Japan Daimaru Department,Supermarket 6,470 5,449 42 Japan -2.8% 30.2% 95 Sweden Hennes & Mauritz Specialty 5,428 5,428 632 Austria,Belgium,Denmark,Finland, 20.2% 27.5% France,Germany,Luxembourg, Netherlands,Norway,Spain, Sweden,Switzerland,UK,US 96 S Africa Metcash Cash & Carry,Conven- 5,430 5,403 E 76 Angola,Australia,Botswana,China, 36.4% 32.1% ience,Specialty, Israel,Kenya,Madagascar,Malawi, Supermarket Mozambique,New Zealand, South Africa,Uganda,Zambia, Zimbabwe 97 US AutoZone Specialty 5,326 5,326 428 Mexico,US 14.6% 17.0% 98 US Barnes & Noble Specialty 5,269 5,269 100 US 13.5% 13.5% 99 US Menard DIY 5,250 E 5,250 E n/a US 5.6% n/a 100 Finland S Group Convenience,Depart- 6,422 5,246 E 42 Estonia,Finland 2.6% n/a ment,Food Service, Hypermarket,Specialty, Supermarket 101 France Galeries Lafayette Department,Hyper- 5,172 5,172 79 France,Germany 6.4% -3.2% market,Mail Order 102 Germany Schlecker Drug,DIY,Hypermarket 5,108 E 5,108 E n/a Austria,France,Germany,Italy, 7.0% n/a Luxembourg,Netherlands,Spain 103 US CompUSA Mail Order,Specialty 5,100 E 5,100 E n/a US -0.7% n/a 104 Spain Mercadona Supermarket 5,087 5,087 86 Spain 27.3% 30.5% 105 S.Korea Shinsegae Department,Food 5,049 5,049 199 China,S.Korea 31.9% 89.8% Service,Hypermarket 106 US DeCA (Defense Commissary 4,963 E 4,963E n/a Azores,Belgium,Egypt,Germany, -0.3% n/a Commissary Agency) Guam,Iceland,Italy,Japan,S.Korea, Netherlands,Okinawa,Puerto Rico, Saudi Arabia,Spain,Turkey,UK,US 107 Austria SPAR Austria Group Convenience,Hyper- 4,956 E 4,956 E n/a Austria,Czech Rep.,Hungary,Italy, 11.2% n/a market,Specialty,Super- Slovenia market,Superstore 108 Finland Kesko Department,DIY, 6,116 4,911 64 Estonia,Finland,Latvia,Lithuania, 6.5% -5.1% Discount,Hypermarket, Sweden Supermarket,Food Service,Specialty 109 Japan Isetan Department,Specialty, 4,942 4,833 63 Austria,China,Hong Kong,Italy, 2.0% 24.6% Supermarket Japan,Malaysia,Singapore,Spain, Taiwan,Thailand,US 110 UK Cooperative Group Convenience,Depart- 11,421E 4,785E n/a UK 11.0% n/a ment,Hypermarket, Specialty,Supermarket, Superstore 111 Norway NorgesGruppen Convenience,Discount, 5,262 E 4,743E n/a Norway n/a n/a Supermarket 112 Belgium C&A Specialty 4,730 E 4,730 E n/a Austria,Belgium,Czech Rep., 9.2% n/a France,Germany,Hungary, Luxembourg,Netherlands,Poland, Portugal,Spain,Switzerland 113 Canada Hudson’s Bay Department,Specialty 4,720 4,669 71 Canada 2.5% NM Company 114 US Darden Restaurants Food Service 4,655 4,655 232 Canada,US 8.0% NM

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

WWW.STORES.ORG STORES / JANUARY 2004 G17 Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 115 US Radio Shack Specialty 4,577 4,577 263 Puerto Rico,US,Virgin Islands -3.2% 7.1% 116 Italy Conad Convenience,Hyper- 4,566 E 4,566 E n/a Italy 3.7% n/a market,Supermarket 117 US Officemax Mail Order,Specialty 4,776 4,532 74 Mexico,Puerto Rico,US,Virgin Islands 3.8% -3.9% 118 US Foot Locker Mail Order,Specialty 4,509 4,509 144 Australia,Austria,Belgium,Canada, -0.4% NM Denmark,France,Germany,Guam, Italy,Rep.of Ireland,Luxembourg, Netherlands,Puerto Rico, Spain, Sweden,UK,US,Virgin Islands 119 Netherlands VendexKBB Department,DIY, 4,533 4,496 194 Belgium,Denmark,France, 2.5% -17.2% Specialty Germany,Luxembourg, Netherlands 120 US Longs Drugs Drug 4,426 4,426 7 US 8.4% -34.5% 121 US Supermarket 5,100 E 4,400 E n/a US 12.4% n/a 122 US Alticor/Amway Direct Selling,e-commerce 4,500 E 4,400 E n/a Global 12.2% n/a 123 Japan Seibu Department Department 4,396 4,396 (2,020) Japan -3.0% NM 124 US Comcast / QVC TV Shopping 12,460 4,381 (274) Germany,Japan,UK,US -0.4% NM 125 Denmark Dansk Supermarked Department,Discount, 4,344 E 4,344 E n/a Denmark,Germany,Poland, 5.4% n/a Hypermarket,Specialty, Sweden,UK Superstore 126 Spain Eroski Convenience,Discount, 4,497 4,326 86 Spain 4.6% 26.0% Hypermarket,Specialty, Supermarket,Superstore 127 US V.T.Inc Auto 5,436 E 4,250 E n/a US n/a n/a 128 US Hy-Vee Supermarket 4,200 E 4,200 E n/a US 7.7% n/a 129 Japan Yodobashi Camera Specialty 4,169 4,169 52 Japan 16.4% n/a 130 US Family Dollar Discount 4,164 4,164 217 US 15.9% 23.7% 131 Japan Kojima Specialty 4,133 4,133 2 Japan 10.8% -31.6% 132 UK Woolworths (UK) Department,Specialty 4,128 4,128 52 UK n/a n/a 133 US Supermarket 3,938 3,938 13 US 1.3% NM 134 US Amazon.com E-commerce 3,933 3,933 (149) France,Germany,Japan, UK,US 92.8% NM 135 US Big Lots Discount 3,869 3,869 77 US -0.9% -2.2% 136 France DIY,Specialty 3,867 3,867 n/a Brazil,France,Italy,Poland, 12.3% n/a Portugal,Spain,China 137 US Asbury Automotive Auto 4,469 3,863 E 38 US n/a n/a 138 US Bed Bath and Beyond Specialty 3,665 3,665 302 US 28.0% 32.8% 139 Japan Marui Department 4,516 3,588 142 Japan -1.1% -1.7% 140 Spain Inditex Specialty 3,819 3,585 421 Andorra,Argentina,Austria, 25.1% 30.1% Bahrain,Belgium,Brazil,Canada, Chile,Czech Rep., Denmark, Dominican Rep, El Salvador,Finland, France,Germany,Greece,Iceland, Rep.Of Ireland,Israel,Italy, Japan, Jordan,Kuwait,Lebanon,Luxem- bourg,Mexico,Netherlands,Norway, Poland,Portugal,Puerto Rico,Qatar, Saudi Arabia,Singapore,Spain, Sweden,Switzerland,Turkey,UAE, UK,US,Uruguay,Venezuela

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

G18 STORES / JANUARY 2004 WWW.STORES.ORG Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 141 Germany Globus DIY,Hypermarket, 3,569 E 3,569 E n/a Czech Rep.,Germany 5.0% n/a Specialty 142 US Ross Stores Discount,Specialty 3,531 3,531 201 US 12.2% 11.4% 143 US Borders Specialty 3,513 3,513 112 Australia,New Zealand,Puerto Rico, 9.2% 7.0% Singapore,UK,US 144 US Group 1 Automotive Auto 4,011 3,448 E 67 US n/a n/a 145 Brazil Pao de Acucar Discount,Hypermarket, 3,413 3,413 88 Brazil 24.9% 11.4% Specialty,Supermarket 146 Hong Kong Dairy Farm Convenience,Discount, 3,354 3,354 343 China,Hong Kong SAR,India, -13.4% 21.6% International DIY,Drug,Food Service, Indonesia,S.Korea,Malaysia, Hypermarket,Specialty, Singapore,Taiwan Supermarket 147 UK Next Specialty 3,346 3,346 320 UK 13.4% 9.0% 148 Portugal Sonae/Modelo Cash & Carry,Conven- 3,346 3,346 95 Brazil,Portugal,Spain 8.2% 6.4% Continente ience,DIY,Hypermarket, Specialty,Supermarket, Superstore 149 Mexico Soriana Hypermarket,Warehouse 3,336 3,336 161 Mexico 13.6% 1.8% 150 Mexico Controladora Food Service,Hypermarket, 3,329 3,329 82 Mexico 12.3% 2.1% Comercial Mexicana Supermarket,Superstore, Warehouse 151 US Sherwin-Williams Specialty 5,185 3,302 399 Canada,Chile,Brazil,Mexico, 4.9% 8.9% Puerto Rico,US,Uruguay, Virgin Islands 152 US Advance Auto Parts Specialty 3,288 3,288 65 Puerto Rico,UK,Virgin Islands 23.2% 25.4% 153 Canada Metro Convenience,Drug, 3,274 3,274 92 Canada 7.1% 2.1% (Metro-Richelieu) Supermarket,Superstore 154 US Shopko Discount 3,253 3,253 (145) US 5.9% NM 155 Norway Reitan Convenience,Discount, 3,246 3,246 69 Denmark,Estonia,Latvia,Lithuania, Food Service,Specialty, Norway,Poland,Slovakia,Sweden 18.0% n/a Supermarket 156 Mexico Grupo Gigante Discount,Food Service, 3,207 3,207 36 Mexico,US 13.0% -9.2% Specialty,Supermarket, Superstore,Warehouse 157 US Raley’s Supermarket 3,200 E 3,200 E n/a US 5.9% n/a 158 France LVMH Department,Specialty, 12,006 3,156 526 Argentina,Australia,Austria, 8.3% -4.9% Supermarket Belgium,Brazil,Canada,Chile,China, Colombia,Czech Republic,Denmark, France,Germany,Greece,Guam, Hong Kong SAR, India,Indonesia, Rep.of Ireland,Israel,Italy,Japan, Korea,Kuwait,Luxembourg,Macao, Malaysia,Mexico,Monaco,Morocco, Netherlands,New Zealand, Philippines,Poland,Portugal, Puerto Rico,Russia,Saipan,Saudi Arabia,Singapore,Spain,Sweden, Switzerland,Taiwan,Thailand,Turkey, UAE,Uruguay,UK,US,Venezuela, Vietnam 159 US Wegman’s Supermarket 3,100 E 3,100 E n/a US 5.7% n/a 160 Japan Hankyu Department Department,Supermarket 3,243 3,082 70 Japan -1.2% 49.2% Stores

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

WWW.STORES.ORG STORES / JANUARY 2004 G19 Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 161 Japan Skylark Food Service 3,069 3,054 9 Japan,S.Korea,Taiwan,Thailand,US 6.7% NM 162 Japan Izumi Specialty,Superstore 3,122 3,043 46 Japan 7.8% 33.6% 163 Japan Matsuzakaya Department,Supermarket 3,130 3,007 40 France,Japan -5.3% NM 164 Canada Canadian Tire Convenience,Specialty 3,788 3,003 129 Canada 8.2% 6.3% 165 Japan Life Supermarket 3,067 2,990 16 Japan 5.0% 24.7% 166 Japan Maruetsu Supermarket 3,023 2,970 10 Japan 2.9% -3.9% 167 S.Africa Pick ‘n Pay Stores Convenience,Drug, 2,950 2,950 51 Australia,Botswana,Namibia, Hypermarket,Specialty, S.Africa,Swaziland,Zimbabwe 19.0% 32.8% Supermarket 168 Italy Esselunga Supermarket 2,948 E 2,948 E n/a Italy 10.1% n/a 169 Belgium Colruyt Cash & Carry,Convenience, 3,123 2,942 133 Belgium,France 9.4% 15.6% Discount,Specialty, Supermarket 170 Hong Kong Hutchison Whampoa/ Drug,Specialty, 9,647 2,938 E 1,832 Belgium,China,Czech Rep., 15.0% 3.1% SAR AS Watson Supermarket Hong Kong SAR,Hungary,Luxem- bourg,Macau,Malaysia,Nether- lands,Poland,Philippines,Singapore, Switzerland,Taiwan,Thailand,UK 171 Germany Bertelsmann Mail Order,E-commerce 17,321 2,922 878 Austria,Australia,Belgium,Canada, 6.9% 12.2% China,Denmark,Germany,Finland, France,Hungary,Italy,Japan, Netherlands,Poland,Portugal, Sweden,Switzerland,Spain, South Korea,UK,US 172 UK Mail Order,Specialty 2,900 E 2,900 E n/a Austria,Bahrain,Chile,Croatia, -2.4% n/a Cyprus,Denmark,France,Germany, Hong Kong SAR, Hungary,Iceland, Japan,Kuwait,Lebanon,Malta, Poland,Portugal,Qatar,Rep.of Ireland,Saudi Arabia,Singapore, Slovenia,Spain,Taiwan,Turkey, UAE,UK,US 173 US Payless ShoeSource Specialty 2,878 2,878 106 Canada,Guam,Puerto Rico, 2.3% -3.9% Saipan,US,Virgin Islands 174 US Neiman Marcus Mail Order,Specialty 2,948 2,877 100 US 5.4% 1.6% 175 US Michaels Stores,Inc. Specialty 2,856 2,856 140 Canada,US 14.4% 36.1% 176 Netherlands SHV Makro Cash & Carry 2,831 E 2,831 E n/a Argentina,Brazil,China,Colombia, 1.3% n/a Indonesia, Malaysia,Philippines, Taiwan,Thailand,Venezuela 177 S.Africa Shoprite Holdings Cash & Carry, 2,812 2,812 47 Botswana,Egypt,Lesotho, 11.4% 11.7% Convenience,Discount, Madagascar,Malawi, Mozambique, Food Service,Hyper- Namibia,Swaziland,South Africa, market,Specialty, Tanzania,Zambia,Zimbabwe Supermarket 178 Japan Tokyu Department Department 3,481 2,808 92 Japan -1.8% -5.9% Store 179 US Starbucks Food Service 3,289 2,793 215 Australia,Austria,Bahrain,Canada, 27.5% 31.4% China,Germany,Greece,Indonesia, Israel,Japan,Kuwait,Lebanon, Malaysia,Mexico,New Zealand, Oman,Philippines,Puerto Rico, Qatar,Saudi Arabia,Singapore, S.Korea,Spain,Switzerland, Taiwan,Thailand,UAE,UK,US

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

G20 STORES / JANUARY 2004 WWW.STORES.ORG Top 200 Global Retailers

DT Country of Name of Company Formats 2002 2002 2002 Group Countries of Operation 5 yr Retail 5 yr Net Rank Origin Group Retail Income/ Sales Income Sales* Sales (Loss) * CAGR% CAGR% (US$mil) (US$mil) (US$mil) (Local (Local Currency) Currency) 180 UK Littlewoods Department,Mail Order 2,752 E 2,752 E n/a UK -9.6% n/a 181 Japan Izumiya Specialty,Supermarket, 2,801 2,729 17 Japan -3.4% -10.8% Superstore 182 Japan Heiwado Specialty,Supermarket, 2,858 2,721 39 China,Japan 4.1% 23.8% Superstore 183 Japan Fast Retailing Specialty 2,753 2,713 223 China,Japan,UK 35.2% 59.4% 184 US Burlington Coat Specialty 2,697 2,697 65 US 8.7% 3.0% Factory 185 US PETsMART Specialty 2,695 2,695 89 Canada,US 8.5% NM 186 US Whole Foods Markets Supermarket 2,691 2,691 85 Canada,US 20.7% 26.2% 187 Japan Kintetsu Department Department,Supermarket 3,453 2,670 13 Japan 1.4% -64.8% 188 US Stater Bros. Supermarket 2,666 2,666 12 US 10.1% n/a 189 Canada Jean Coutu Drug 2,661 2,661 108 Canada,US 15.9% 21.1% 190 US Spiegel Mail Order,Specialty 2,650 E 2,650 E n/a Canada,US -1.3% n/a 191 Canada Shoppers Drug Mart Drug 2,561 2,561 133 Canada 0.0% 5.6% 192 US The Pantry Convenience 2,495 2,495 2 US 42.3% NM 193 Germany Dohle Cash & Carry, Department, 2,587 E 2,489 E n/a Germany 0.4% n/a Discount,DIY, Hypermarket,Specialty, Supermarket,Superstore 194 UK Department 2,472 2,472 160 Bahrain,Dubai,Hungary,Kuwait, 5.6% 6.3% Rep.of Ireland,UK 195 US Price Chopper Superstore 2,470 E 2,470 E n/a US 3.9% n/a 196 US Value City Department,Specialty 2,451 2,451 (4) US 17.9% NM 197 Australia Foodland Cash & Carry, 2,439 2,439 54 Australia,New Zealand 4.3% 9.4% Convenience,Department, Specialty,Supermarket 198 Japan Best Denki Specialty 2,890 2,417 (9) Hong Kong,Japan, Malaysia, 12.3% NM Singapore 199 US Charming Shoppes Specialty 2,412 2,412 (3) US 18.9% NM 200 Germany dm Drug 2,401 E 2,401 E n/a Austria,Croatia,Czech Rep., 16.9% n/a Germany,Hungary,Italy,Slovakia, Slovenia

Data prepared with assistance from M+M Planet Retail,UK. Five-year growth rates were computed from the 2002 and 1997 local currency figures contained in the appropriate Global Powers of Retailing worksheets or from annual reports.

* includes non-retail n/a = not available NM = not meaningful e = estimate CAGR = Compound Annual Growth Rate Name after forward slash is retail segment of parent company

WWW.STORES.ORG STORES / JANUARY 2004 G21 Top 200 Global Retailers Alphabetical List

NAME OF COMPANY RANK NAME OF COMPANY RANK NAME OF COMPANY RANK Advance Auto Parts 152 Foot Locker 118 Otto 45 Aeon 26 Galeries Lafayette 101 Pao de Acucar 145 Ahold 7 Gap 40 Pathmark 133 Albertsons 11 Giant Eagle 121 Payless ShoeSource 173 Aldi Einkauf 12 Globus 141 PETsMART 185 Alticor/Amway 122 Great Universal Stores 61 Pick ‘n Pay Stores 167 Amazon.com 134 Group 1 Automotive 144 Pinault-Printemps-Redoute 50 Arcadia Group 172 Grupo Gigante 156 Price Chopper 195 Army & Air Force Exchange Services 77 H.E. Butt 60 Publix 33 Asbury Automotive 137 Hankyu Department Stores 160 Radio Shack 115 Auchan 23 Heiwado 182 Raley’s 157 AutoNation 43 Hennes & Mauritz 95 Reitan 155 AutoZone 97 Home Depot 3 Rewe 16 Avon 86 Hudson’s Bay Company 113 Rite Aid 34 Barnes & Noble 98 Hutchison Whampoa/AS Watson 170 Ross Stores 142 Bed Bath and Beyond 138 Hy-Vee 128 S Group 100 Bertelsmann 171 IKEA 54 Safeway 44 Best Buy 30 Inditex 140 Safeway, Inc. 13 Best Denki 198 Intermarché 15 Saks, Inc. 90 Big Lots 135 Isetan 109 Schlecker 102 BJ’s Wholesale Club 92 Ito-Yokado 22 Sears 10 Boots 79 Izumi 162 Seibu Department 123 Borders 143 Izumiya 181 Seiyu 63 Burlington Coat Factory 184 J Sainsbury 21 Sherwin-Williams 151 C&A 112 JCPenney 14 Shinsegae 105 Canadian Tire 164 Jean Coutu 189 Shopko 154 Carrefour 2 John Lewis 84 Shoppers Drug Mart 191 Casino 29 KarstadtQuelle 39 Shoprite Holdings 177 Charming Shoppes 199 Kesko 108 SHV Makro 176 Circuit City 55 Kingfisher 32 Skylark 161 Coles Myer 41 Kintetsu Department 187 Somerfield 75 Colruyt 169 Kmart 17 Sonae/Modelo Continente 148 Comcast/QVC 124 Kohl’s 62 Sonic Automotive 93 Compass 88 Kojima 131 Soriana 149 CompUSA 103 Kroger 4 SPAR Austria Group 107 Conad 116 LeRoy Merlin 136 Spiegel 190 Controladora Comercial Mexicana 150 Lidl & Schwarz 28 Staples 67 COOP Italia 65 Life 165 Starbucks 179 Coop Norden 72 Limited Brands 66 Stater Bros. 188 Coop Switzerland 68 Littlewoods 180 SuperValu 56 Cooperative Group 110 Loblaw 53 Systeme U 85 Costco 9 Longs Drugs 120 Takashimaya 70 CVS 24 Lotte Shopping 81 Target 6 Daiei 38 Louis Delhaize 59 Tengelmann 25 Daimaru 94 Lowe’s 20 Tesco 8 Dairy Farm International 146 LVMH 158 The Big Food Group 80 Dansk Supermarked 125 Marks & Spencer 48 The Pantry 192 Darden Restaurants 114 Maruetsu 166 TJX Cos. 49 Debenhams 194 Marui 139 Tokyu Department Store 178 DeCA (Defense Commissary Agency) 106 Matsuzakaya 163 Toys ‘R’ Us 51 Delhaize Group 31 May Department Stores 42 United Auto Group 91 Dell 69 McDonald’s 36 Uny 58 Dillard’s 71 Meijer 47 V.T. Inc. 127 Dixons 64 Menard 99 Value City 196 dm 200 Mercadona 104 VendexKBB 119 Dohle 193 Metcash 96 Walgreens 18 Dollar General 87 Metro 5 Wal-Mart 1 E Leclerc 27 Metro (Metro-Richelieu) 153 Wegman’s 159 Edeka/AVA 19 Michaels Stores, Inc. 175 Whole Foods Markets 186 El Corte Ingles 52 Migros Genossenschaft 57 Winn-Dixie 46 Empire/Sobeys 78 Mitsukoshi 74 Wm. Morrison 83 Eroski 126 Neiman Marcus 174 Woolworths 37 Esselunga 168 Next 147 Woolworths (UK) 132 Family Dollar 130 Nordstrom 89 Yamada Denki 82 Fast Retailing 183 NorgesGruppen 111 Yodobashi Camera 129 Federated Department Stores 35 Office Depot 73 Yum! Brands 76 Foodland 197 Officemax 117

G22 STORES / JANUARY 2004 WWW.STORES.ORG Economic Overview by Continent/Major Country

By Ira Kalish, Today, Japan has had just one decade of almost no growth. Global Director of Economics, Deloitte Research It remains rich and its consumers remain capable of massive purchases. Yet, another decade of no growth will render Japan a second-tier nation. In the interim, Japan remains Japan attractive to the world’s retailers and their suppliers.

apan’s economy has barely grown since 1990. Indeed, between 1997 and 2002 there was only one year in which China JGDP grew faster than 1 percent. In 2003, growth likely exceeded that figure, but the outlook for 2004 and beyond hina is a beacon of strength in a world of economic remains uncertain. Despite massive government spending and troubles. At least its growth rate would lead to that interest rates dangerously close to zero, the economy remains Cconclusion. In the past decade, China’s economy has troubled. The principal reason is the poor health of Japan’s grown at an annual rate of 8 percent and the number of mid- banking system. The country’s banks hold a vast portfolio of dle class consumers has risen much faster. No other large non-performing loans, the result of propping up many of nation has experienced such rapid growth. On the other hand, Japan’s highly inefficient non-exporting companies. Unlike China is riddled with problems and risks. Like Japan, China during the Savings and Loan crisis in the U.S. a decade ago, has a serious banking problem. In this case, it is the result of the Japanese government has not forced the banks to resolve politically motivated lending by state-run banks. They have a the bad debts. Politicians have been fearful of the temporary large portfolio of non-performing loans, the result of prop- shock to the economy that such a move would entail. ping up state-owned companies that employ large numbers of Meanwhile, as banks have failed to lend to the worthy, and as workers. Failure to prop up these companies would result in the Central Bank has failed to increase the money supply, temporary unemployment for millions. Yet unlike Japan, Japan has become afflicted with deflation. This has only exac- China’s leaders appear to understand the magnitude of the erbated the banking problem as deflation increases the real problem and have begun to take actions aimed at resolving value of the borrowers’ liabilities. the failing banks. Where does Japan go from here? At this juncture, the out- Another issue for China is its currency. As of this writing, look is unclear. Despite declining prices, the Central Bank the Chinese renminbi is widely viewed as undervalued. China speaks of the dangers of inflation and fails to expand the continues to run a trade surplus, attract massive foreign money supply. Despite extreme inefficiency in many of Japan’s investment and the central bank continues to accumulate domestic industries, itself the result of regulation and protec- reserves at a gargantuan pace – all signs of a need for revalua- tion, the government hardly speaks about the necessity of rad- tion. Moreover, China is under considerable pressure from ical reform. And despite the continuing banking crisis, the abroad to revalue – lest it face protectionist action from the government continues to engage in stop-gap measures aimed likes of the U.S., EU and Japan. If China revalues, exports at keeping the banks afloat a little while longer. In the interim, would become more expensive and the trade surplus would Japanese companies with a strong business model are starved shrink, probably reducing protectionist pressures abroad. of credit, unless they are among a handful of global power- Reserve accumulation would diminish and money supply houses with access to the global credit markets. Yet Japan will expansion would decline. This would take pressure off of the need a coterie of strong medium-sized companies in order to bubbling property market. Finally, revaluation would increase resume meaningful long-term growth. Japanese consumers, consumer purchasing power in China, helping to develop the stung by depressed asset prices, are starting to spend their pre- domestic economy. cious savings – an indicator perhaps that there is little public Revaluation, however, would increase competition for confidence that things will turn around. domestic companies, leading to reduced profits and unem- If Japan fails to reform, it may face a prolonged period of ployment. This would put more pressure on the banking sys- stagnation. This is somewhat reminiscent of another relatively tem which is supporting many such domestic companies. affluent nation that stopped growing for a long period of China’s leaders are wont to allow more unemployment than time. Argentina during the 1930s had a per capita income necessary, especially at a time when they are trying to acceler- similar to many Western European nations. Yet after several ate privatization of the state sector. decades of almost no growth, the result of turning inward and The most important aspect of China’s economy is the fact adopting protectionist policies, Argentina was a relatively that China has joined the World Trade Organization (WTO). poor nation, far behind the great Western nations. This not only gives Chinese exports greater access to the rest

WWW.STORES.ORG STORES / JANUARY 2004 G23 Economic Overview by Continent/Major Country of the world, it requires China to reduce barriers to imports my stalled in 2001, Latin America slowed as well. For exam- and open many sectors of its economy to greater economic ple, Brazil’s growth dropped from 4.4 percent in 2000 to 1.4 freedom. The end result should be a more developed domestic percent in 2001, and Mexico’s growth dropped from 6.6 per- market, especially for consumers. For example, the reduction cent to -0.2 percent. Unfortunately, neither Brazil nor Mexico in tariffs on automobiles has already sparked an auto spend- has experienced a substantial turnaround since then. Latin ing boom. The effect will be to radically change the lifestyles America’s other big economy, Argentina, has turned around, of many middle income Chinese. It will stimulate the develop- but that is to be expected after a substantial economic con- ment of a modern consumer culture. traction. Although China faces risks, the most likely scenario for Going forward, both Mexico and Brazil face the prospect China in the short term is for continued rapid growth and a of a modest improvement in growth as the U.S. economy rapidly rising middle class. begins to accelerate. Moreover, with their currencies having depreciated in recent years, these countries’ exports are poised to accelerate. Both face increasing competition from Southeast Asia China. Mexico’s tariff-free access to the U.S. will become of less value as barriers to trade with China are reduced due to outheast Asia is beset by two serious problems. First, the China’s entry into the WTO. Still, many global retailers and region has been targeted by international terrorists bent suppliers are attempting to diversify their global sourcing so Son destroying Western influence in an area with a vast as not to be too dependent on China. Both Brazil and Muslim population. This has been especially problematic in Mexico will be attractive alternatives due to their proximity Indonesia and the Philippines. The potential for disruption to the North American market, their cheap currencies and also exists in Thailand, Malaysia and Singapore. How this their skilled manufacturing workers. In addition, the presi- will play out is anyone’s guess. dents of both Mexico and Brazil face difficulties in getting Second, the region has been buffeted by new competition their legislatures to adopt economic reforms. These include from a rising China. Until recently, Asia had an unspoken deregulation and privatization. In the case of Brazil, they division of labor, involving low-skill labor-intensive produc- include fiscal reforms aimed at reducing government borrow- tion in China and higher value-added processes taking place ing. in the rest of Asia. Now, China is home to a wide range of Latin America’s two other large economies, Argentina and export oriented manufacturing, running the gamut from labor Chile, are improving. In the case of Argentina, it is doing sur- intensive to very high tech. The result has been a shift in prisingly well after nearly collapsing. The country obtained a investment and sourcing away from Southeast Asia and favorable deal with the IMF that will enable repayment of toward China. This has created a new challenge for the gov- loans. Consumers have returned to the banking system and ernments of the region. the economy is starting to grow. Still, Argentina remains far Despite the competition from China, the rise of China has poorer than prior to the economic crisis. Moreover, the foun- created new opportunities for Southeast Asia. For the coun- dations for a sustainable recovery are not yet in place. In the tries in the region, China is now a very important export mar- case of Chile, on the other hand, prospects are very good. ket. Moreover, many products that are assembled in China for Although the country remains too dependent on copper export to the West involve the use of components made in exports, it is becoming relatively affluent. other Asian countries. Thus, Southeast Asian companies are Many of Latin America’s other countries are also poised to now part of a broad regional supply chain in which China benefit from an economic recovery in the U.S. Moreover, plays the dominant role. Some Chinese companies are even many have considerably lower costs of doing business, which investing in production capacity in Southeast Asia in order to makes them attractive sources for labor-intensive products better penetrate those markets. such as apparel. Still, these countries remain quite poor and In the medium term, Southeast Asia is awaiting a full recov- are not yet attractive to most global retailers. ery of the US economy. The region’s governments are also holding their currencies down in order to remain competitive with China. If China revalues, Southeast Asia’s currencies will likely rise as well. While this would hurt exports to the US, it would reduce inflationary pressures and allow for more Western Europe domestic-led growth. estern Europe is bifurcating. It is comprised mainly of France and Germany, two countries whose Latin America W economies are stagnant. On the periphery is “new Europe” which includes such dynamic economies as the he major economies of Latin America are highly Netherlands, Spain, Portugal and the U.K. – all of which are dependent on the health of the U.S. economy. experiencing faster growth and have more flexible economies. T Therefore, it is no surprise that, when the U.S. econo- For France and Germany, there are two principal problems.

G24 STORES / JANUARY 2004 WWW.STORES.ORG Economic Overview by Continent/Major Country

First, given their economic stagnation, they require lower rency has been appreciating in real terms due to rising oil interest rates. Yet the European Central Bank must consider prices and accelerated foreign investment. The effect has the economic situation in all of Europe when determining been an increase in the price of Russia’s non-oil exports. monetary policy. Given higher inflationary pressures else- This is bad news as the country’s economic success will where, they are reluctant to lower interest rates too much. depend on the ability to shift toward non-commodity The result is that, due to membership in the euro-zone, France exports. In addition, while Russia’s political situation has and Germany are stuck with a monetary policy that is too stabilized, it is not without uncertainty. The recent contro- tight for their circumstances. versy over the oil company Yukos bodes poorly for a hands- Second, France and Germany have highly regulated labor off government policy. Finally, Russia’s domestic social situ- markets. The result is unemployment, inflexibility of compa- ation is troublesome. The rate of alcoholism is staggering, nies and a failure to attract much job-creating investment. life expectancy is declining and the high and rising rate Prospects, therefore, are not particularly good absent mone- HIV/AIDS is becoming not only a public health problem but tary expansion and deregulation. Additionally, the rising value an economic problem as well. of the euro is creating further deflationary pressures and is hurting export growth by increasing export prices. More cur- rency flexibility in Asia (China and Japan) would take some USA of the pressure off of the euro. In the rest of Europe, the situation is somewhat better. he U.S. economy has begun to recover modestly, the Labor markets are mostly more flexible and economies are result of a massive fiscal stimulus combined with very growing nicely. The biggest problem, however, is that these T loose monetary policy. In addition, businesses are start- countries are highly dependent on the strength of Germany, ing to invest again in information technology after a period of the traditional engine of European growth. Absent a strong restraint following the bursting of the Internet bubble. German recovery, economic growth in the rest of Europe Therefore, short-term prospects look reasonably good. remains at risk. Medium-term prospects, however, are less certain. The U.S. economy is laden with imbalances left over from the 1990s that have not been resolved. Consumers, having borrowed Central/Eastern Europe vigorously in the 1990s when their assets were increasing in value, have seen their assets diminish and may now attempt to ive years ago, excitement about this region focused on rebuild their savings. The result could be a prolonged slow- Poland, Hungary and the Czech Republic. The largest down in consumer spending growth, especially if the robust F country in the region, Russia, was almost ignored by housing market slows. economic analysts who took a negative view of its corruption, Business investment, although recovering, has not come inefficiency and hopelessness. The economic crisis of 1998, close to the furious growth that characterized the late 1990s. involving default and devaluation, only served to reinforce That is because there remains considerable excess capacity to that view. transmit and transform information – a fact that could Yet today Russia is the hot country of Central and Eastern restrain investment for another two to three years. Europe. Its growth has been strong. Since the economic crisis Most worrisome, however, is the fact that the U.S. has a of 1998, the economy has grown at an annual rate of 6.3 large current account deficit with the rest of the world. This is percent. And this was in the context of a falling population, the difference between what the U.S. produces and consumes, which meant that per capita GDP grew even faster. In addi- and it now amounts to about 5 percent of GDP, or about tion, inflation has been falling and is nearing the critical sin- $500 billion per year. In order for the rest of the world to be gle-digit level. willing to lend this much to the U.S., foreign investors must To a large extent, strong growth has been the result of rela- believe they will obtain a decent return. Clearly, they don’t tively high oil prices, a reversal of which would harm believe this because private funds have begun to dry up. The Russian growth. However, the economy has benefited from result has been a substantial drop in the value of the dollar vs. accelerating foreign direct investment, a reflection of the the euro. In Asia, however, the dollar has been propped up by increasing regard with which foreign investors hold the central banks purchasing U.S. dollar assets. This will probably Russian regime. They believe that Russia has turned the cor- not last forever. Therefore, a further decline in the dollar is ner, having suppressed much corruption and accelerated the likely as is an increase in long-term interest rates. process of reform. Indeed Russia’s government debt has now While a decline in the dollar is helpful to export growth and achieved investment grade status, something that cannot be reducing the current account deficit, a rapid decline could be said for many leading Western corporations. This reflects inflationary and disruptive. An increase in long-term interest confidence in the probity of the country’s financial manage- rates could also stymie economic recovery. Therefore, eco- ment. nomic growth is likely to be restrained in the coming two The Russian economy is not without risk – not the least of years, and growth of consumer spending could be especially which is a drop in commodity prices. Also, the Russian cur- harmed.

WWW.STORES.ORG STORES / JANUARY 2004 G25 Retail Focus: The Emerging Markets of China and Russia

By Ira Kalish, stores in business. If in a market like Shanghai only 10 percent Global Director of Economics, Deloitte Research of the population can afford to buy at Giordano, this repre- sents a market of nearly two million people. The success of Giordano will demonstrate to other foreign retailers the poten- China tial of the Chinese market. hen U.S. retailer Wal-Mart requested permission to Finally, consider the strategy of Carrefour in China. Having open stores in Shanghai in the late 1990s, it was built many hypermarkets in big coastal cities, it is now starting W turned down and told to confine its investment to to open smaller stores in order to fill in the gaps. It intends to Southern China. When asked why, the official responsible for the open hundreds of Dia hard discount stores. In addition, it is decision replied “too much competition, it would be too unruly.” opening its flagship hypermarket concept in secondary markets That semi-socialistic attitude no longer dictates the develop- in the interior of the country. Other large retailers will follow a ment of modern retailing in China. Indeed, Wal-Mart is enter- similar strategy. ing Shanghai in direct competition with Carrefour. By joining the WTO, China has embraced the unruliness of and will, henceforth, experience vigorous competition – much Russia to the benefit of its consumers. The result will be a vast new ussia’s surprisingly robust economic turnaround has opportunity for global retailers and their suppliers to reach the attracted the attention of leading global retailers. Even millions of newly middle class Chinese. R before the economy turned the corner, these retailers Under the terms of China’s entry into the WTO, foreign were intrigued by Russia’s many positive attributes: hidden retailers will be able to open stores in multiple markets, source consumer wealth, few barriers to entry, inept local competition merchandise from foreign invested factories in China and offer and low import barriers. Still, global retailers shied away from cheaper imported merchandise following the reduction in tar- Russia due to the high level of risk and corruption. Debt iffs – all heretofore not possible. This comes at a time when default and devaluation in 1998 demonstrated just how high millions of Chinese have achieved middle class affluence. As a that risk was. result, these consumers can engage in discretionary purchasing. Today, that risk has been reduced dramatically. The economy They have decent sized homes. They have sufficient funds to is stable, corruption has been reduced and the political regime shop for more than just basic clothing and food. Finally, they has gained respect. The recent political strife over Yukos Chief are increasingly aware of brands and are eager to demonstrate Executive Mikhail B. Khodorkovsky is not expected to have a their sophistication. long-term impact on the country’s stability, although it is a The result is that retail investment into China has shifted. In cause for some concern. the past, it was focused on big box food retailing in large As a result of Russia’s strides, foreign retailers have started to coastal cities. Thus Shanghai is flush with hypermarkets, invest aggressively. Notably, the improved economy is not the although probably not yet saturated. Now, however, retail only factor attracting them. They have also been impressed by investment is becoming far more diverse, involving non-food the positive experience of early investors in Russia’s retail sector. formats, multiple food formats and investments in locations The principal success stories were Ramenka, a Turkish hyper- other than the large coastal cities. market operator, and IKEA, the Swedish furniture retailer. Consider the success in China of such home oriented retailers In the latter case, Ikea’s first store was so successful that its as Britain’s B&Q (Kingfisher) and Sweden’s IKEA. Both offer primary challenge was to get enough merchandise into the highly discretionary products primarily aimed at homeowners. store in order to satisfy consumer demand. There was no In China, home ownership has been increasing rapidly, the shortage of patronage or cash. Indeed Russia’s long-suffering result of government encouragement of bank lending for home consumers have accumulated a vast supply of hoarded cash, purchases. the result of having few opportunities to use that cash in a As ownership rises, and as average home size increases, con- socialist economy. With Ikea and other modern formats, sumers are more interested in spending on home improvement Russians have been more than eager to part with their cash. and furnishings. This will accelerate in the next several years Now IKEA is expanding in Russia. Not only is it opening new thereby creating new retail opportunities. stores, it is also developing sourcing relationships within Consider also the strong growth of Hong Kong apparel Russia, both to supply its Russian stores and to supply stores retailer Giordano. Until a few years ago, this low priced appar- throughout Europe. el specialty chain was considered too expensive for all but a Moreover, IKEA is involved in developing shopping centers, handful of Chinese. Today, although still expensive by local an important new venue for shopping in Russia. In 2002, five standards, it attracts sufficient consumer interest to keep 509 new large shopping centers opened in Moscow, among them

G26 STORES / JANUARY 2004 WWW.STORES.ORG 2004 Global Powers of Retailing the Mega Mall, an IKEA project that includes a 250,000 Despite the new enthusiasm for Russia, the country presents square foot Auchan hypermarket. After phase two is complet- some important risks for retailers. Among these are ruinous ed, this mall will encompass roughly 2 million square feet. competition from mafia-run street markets that offer very low IKEA has several other malls in the pipeline. prices for questionable goods, a poor supply chain, a lack of Recently, other European giants have begun to invest in decent local sourcing opportunities, arbitrary local government Russia. The most prominent are Germany’s Metro, a cash authorities, lack of adequate protection of property rights and and carry operation, and Auchan, the French hypermarket a consumer bias toward local brands. In addition, the staying chain. Metro expects to have 20 stores in Russia by the end power of the economic recovery has been questioned due to of 2005. There were six cash and carry stores operating by Russia’s heavy reliance on the export of commodities with mid-2003. The next 14 stores will include several Real volatile prices. hypermarkets as well as Media Markt electronics stores. By Still, it seems that the benefits now outweigh the risks in the the end of 2003, Auchan will have four hypermarkets in minds of investors. Russia’s vast hidden wealth, strong growth Russia. Other major global retailers known to be consider- and a lack of much formal competition make the country very ing Russia are Carrefour, Tesco and Wal-Mart. attractive.

POPULATION

Total 2001 Population Population % 2001 Population Economic (mil)* CAGR, 2001-2015F* Ages 15-64*

China 1272 Saudi Arabia 2.9% Hong Kong 72% India 1032 Philippines 1.6% South Korea 72% & Social United States 285 Egypt 1.5% Singapore 71% Indonesia 209 Israel 1.5% Thailand 70% Brazil 172 Malaysia 1.5% Czech Republic 70% Indicators Russia 145 Venezuela 1.5% Russia 70% Japan 127 Mexico 1.4% Hungary 69% Mexico 99 India 1.2% Poland 69% Germany 82 Brazil 1.1% Canada 69% Retailers who are Philippines 78 Indonesia 1.1% Spain 68% Turkey 66 Singapore 1.1% China 68% formulating global business Egypt 65 Turkey 1.1% Germany 68% Thailand 61 Argentina 1.0% Netherlands 68% strategies and location France 59 Chile 1.0% Austria 68% 59 Ireland 0.8% Switzerland 68% decisions often review Italy 58 United States 0.8% Portugal 68% South Korea 47 Australia 0.7% Italy 68% a broad array of measures South Africa 43 Canada 0.6% Australia 68% Spain 41 China 0.6% Greece 67% to determine optimum Poland 39 Hong Kong 0.6% Japan 67% Argentina 38 Thailand 0.6% Ireland 67% investment opportunities. Canada 31 Netherlands 0.4% Finland 67% Venezuela 25 Norway 0.4% Denmark 67% Malaysia 24 South Africa 0.4% Brazil 66% Saudi Arabia 21 South Korea 0.4% Belgium 66% omparisons of important economic and Australia 19 France 0.3% United States 66% social indicators are central to this Netherlands 16 Denmark 0.1% Turkey 66% C process. Levels of wealth, coupled with Chile 15 Finland 0.1% France 65% population density figures, economic growth Greece 11 Greece 0.1% United Kingdom 65% Belgium 10 Belgium 0.0% Indonesia 65% prospects and the stability of the political sys- Czech Republic 10 Poland 0.0% Chile 65% tems are some of the key measures that retail- Hungary 10 Spain 0.0% Norway 65% ers need to analyze when charting their global Portugal 10 Sweden 0.0% Sweden 65% expansion plans. This section presents data on Sweden 9 United Kingdom 0.0% South Africa 63% Austria 8 Austria -0.1% Argentina 63% several key indicators that retailers should Switzerland 7 Portugal -0.1% Israel 63% assess when deciding when and where to go Hong Kong 7 Switzerland -0.1% Malaysia 62% global. Israel 6 Czech Republic -0.2% India 62% Denmark 5 Germany -0.2% Venezuela 62% Finland 5 Italy -0.3% Mexico 61% Population Norway 5 Japan -0.4% Egypt 61% Twenty-five years ago, there were major con- Singapore 4 Russia -0.5% Philippines 59% cerns about the rapid growth in the world’s Ireland 4 Hungary -0.6% Saudi Arabia 56% population. Today, demographers are bemoan- * World Development Indicators, * World Development Indicators, * World Development Indicators, 2003, World Bank 2003, World Bank 2003, World Bank ing the spreading population declines through- CAGR= Compound Annual Growth Rate out numerous regions. By 2050, country-spe- F=Forecast

WWW.STORES.ORG STORES / JANUARY 2004 G27 Economic & Social Indicators cific declines are expected to have become so extensive that the added globally by 2050 will be born in the less developed earth’s population could be shrinking. countries. By mid-century, the population of the less developed Even though the world’s population is expected to climb to countries should total about 7.8 billion, while the more devel- nine billion people in 2050 from just over six billion today, birth oped countries should have about 1.2 billion inhabitants. In rates are already declining in numerous poor countries. In some 2050, the combined population of Eastern Europe, Western countries, the declines are particularly dramatic. The United Europe and North America should total about 900 million, Nations recently reported that within 50 years, four-fifths of the representing one-tenth of the global population. Currently, world’s women may be having two or fewer children. This is these countries have about a 13 percent share. below the replacement level for the overall population and leads China, currently the world’s most populated country, will to eventual decline. Already, 60 countries reportedly have fertili- continue to have slow population growth for the next 20 ty rates below replacement levels. Japan, for one, currently years. Gains are expected to flatten around 2030 or 2040. expects to have 14 percent fewer people by 2050. Given China’s current low birth rate, its population is expected The majority of the three billion people projected to be to be in decline by 2050. In contrast, India’s population is

GROSS DOMESTIC PRODUCT GDP 2002 Per Capita GDP GDP Avg. Annual Growth GDP Implicit Price Deflator US$ (Billions)* 2002 US$* 2003-2007F* Avg. Annual Growth, 1990-2001* United States $10,446 Norway $42,103 China 7.8% Brazil 168.2% Japan $4,146 Switzerland $36,531 India 6.9% Russia 139.6% Germany $1,992 United States $36,406 Argentina 4.6% Turkey 74.2% United Kingdom $1,564 Denmark $32,212 Indonesia 4.6% Venezuela 42.8% France $1,439 Japan $31,408 Malaysia 4.5% Poland 21.3% China $1,287 Ireland $31,382 Russia 4.5% Hungary 18.3% Italy $1,189 Sweden $26,917 Singapore 4.4% Mexico 18.2% Canada $728 Netherlands $26,065 Thailand 4.4% Indonesia 15.8% Spain $656 United Kingdom $26,010 Chile 4.2% Czech Republic 10.6% Mexico $621 Finland $25,293 Czech Republic 3.9% Israel 9.3% India $501 Austria $25,017 South Korea 3.9% South Africa 9.3% South Korea $476 Germany $24,301 Ireland 3.8% Greece 8.5% Brazil $452 France $24,018 Philippines 3.8% Philippines 8.2% Netherlands $420 Belgium $24,000 Poland 3.8% Egypt 7.8% Australia $398 Hong Kong $23,733 Egypt 3.7% India 7.6% Russia $347 Canada $23,168 Hungary 3.7% Chile 7.5% Switzerland $267 Singapore $20,921 Israel 3.6% China 6.2% Belgium $246 Italy $20,484 Greece 3.5% Portugal 5.1% Sweden $241 Australia $20,347 Hong Kong 3.4% South Korea 4.5% Austria $205 Spain $16,172 Australia 3.2% Argentina 4.3% Norway $191 Israel $15,625 Saudi Arabia 3.1% Spain 3.9% Poland $189 Greece $12,518 South Africa 3.1% Thailand 3.9% Saudi Arabia $187 Portugal $12,167 Mexico 3.0% Ireland 3.7% Turkey $183 South Korea $9,966 Brazil 2.9% Saudi Arabia 3.7% Denmark $173 Saudi Arabia $8,632 United States 2.9% Italy 3.6% Indonesia $173 Czech Republic $6,777 Canada 2.8% Malaysia 3.6% Hong Kong $162 Hungary $6,535 Finland 2.7% Hong Kong 3.3% Greece $133 Mexico $6,257 Spain 2.7% Norway 3.2% Finland $132 Poland $4,951 Norway 2.2% United Kingdom 2.8% Thailand $126 Chile $4,414 Sweden 2.2% Denmark 2.2% Ireland $123 Malaysia $3,869 Turkey 2.2% Netherlands 2.1% Portugal $122 Venezuela $3,767 United Kingdom 2.1% Sweden 2.0% South Africa $105 Argentina $2,699 Portugal 1.9% United States 2.0% Israel $103 Turkey $2,605 Austria 1.8% Belgium 1.9% Argentina $102 Brazil $2,570 Denmark 1.8% Finland 1.9% Malaysia $95 Russia $2,385 France 1.8% Austria 1.8% Venezuela $92 South Africa $2,321 Belgium 1.6% Germany 1.8% Singapore $87 Thailand $2,027 Italy 1.6% Australia 1.7% Egypt $83 Egypt $1,168 Germany 1.5% Canada 1.5% Philippines $78 China $1,002 Netherlands 1.4% France 1.5% Czech Republic $70 Philippines $922 Switzerland 1.2% Switzerland 1.2% Chile $66 Indonesia $807 Japan 0.6% Singapore 0.9% Hungary $66 India $501 Venezuela 0.6% Japan -0.1% *Global Outlook, August 2003, *Global Outlook, August 2003, *Global Outlook, August 2003, *World Development Indicators, Economist Intelligence Unit Economist Intelligence Unit Economist Intelligence Unit 2003, World Bank F=Forecast

G28 STORES / JANUARY 2004 WWW.STORES.ORG Economic & Social Indicators expected to continue to advance, albeit at slowing growth The last table in this section provides a snapshot on inflation, rates, throughout most of this century. As a result, India is or the lack thereof, in these countries. The average annual expected to have more inhabitants than will China by as early increase in the Implicit Price Deflator since 1990 has been as 2035. By 2050, India could have 1.6 billion inhabitants, benign, rising in the low single digits for most countries. Even while China’s population might only be 1.4 billion. the strong increases shown for Brazil and Russia are mostly As birth rates decline around the world, the elderly popula- behind those countries. Brazil’s bout of hyperinflation ended in tion will continue to represent a larger share of the total. The the mid-1990s and Russia’s large increases in consumer prices average age of the population today is 28; by 2050 it will be in the late 1990s have cooled to the 10 percent to 15 percent around 40. This aging has important implications for pensions range in the last year or so. and health services that governments will need to address over the coming years. Per Capita Retail Sales Per capita retail sales figures are helpful in understanding lev- Gross Domestic Product els of consumer demand since, unlike GDP, they do include Finally, a global economic recovery is taking shape. A year spending by businesses or governments. However, with per ago in this space, it was lamented how numerous economies capita retail sales shown in U.S. dollar terms, yearly move- around the world couldn’t catch a break. Real GDP growth in ments by country can be the result of exchange rate differences 2001 and 2002 was below long-term trends. And at the start rather than underlying demand. The dollar’s weakness in 2002 of 2003, things seemed to be going from bad to worse as a and 2003 is impacting the result of the SARS outbreak and the war in Iraq. rankings. PER CAPITA By the fall of 2003, however, a sense of optimism was As would be expected, the RETAIL SALES, 2002* becoming pervasive. And in equity markets around the world, largest retail markets are most- Japan $8,522 investors were taking notice, which helped to drive up 2003 ly in the developed countries. United States $8,347 stock prices in the U.S., U.K. and Japan, among other coun- Japan is the largest retail mar- Switzerland $7,227 tries. According to the Economist Intelligence Unit, worldwide ket, on a per capita basis, Norway $6,354 Ireland $5,371 GDP, adjusted for inflation, likely increased 3.3 percent in despite its weakened economy. United Kingdom $5,227 2003, with a stronger 4 percent gain expected in 2004. These Retail sales in Japan have been Denmark $5,187 gains follow the anemic 2.2 percent and 2.9 percent gains of deteriorating since 1997, due France $5,187 Belgium $4,769 2001 and 2002, respectively. in part to deflation, and as a Austria $4,378 The GDP growth rates shown here are useful in understand- result, several international Australia $4,354 ing the potential for growth and overall levels of demand. In retailers are struggling there. Netherlands $4,319 this regard, the U.S. economy remains the largest in the world. The sheer size of its consumer Sweden $4,247 Finland $4,179 As a result, its continuing recovery is crucial to global growth base, however, continues to Canada $3,696 because it imports a significant amount of goods from other make it an expansion target Singapore $3,695 countries. Most analysts predict stronger growth into 2004 for numerous companies. Spain $3,685 partly as a result of the monetary and fiscal stimulus packages Due to rising incomes and Greece $3,677 Germany $3,640 enacted over the last several years. Growth in Europe, howev- the opening up of the con- Italy $3,517 er, is expected to remain subdued into 2004. The Japanese out- sumer goods markets, China’s Hong Kong $3,462 look is perhaps the most difficult to judge. After numerous per capita retail sales figures Israel $3,417 Portugal $3,095 false starts over the last decade, various data suggest that the are expected to increase South Korea $2,650 Japanese economy could experience growth in 2004. A variety markedly over the longer Hungary $2,308 of sectors remain inefficient, however, which could continue to term. Current estimates sug- Mexico $1,998 hamper growth prospects. gest that per capita retail sales Poland $1,938 Czech Republic $1,795 China’s economy is improving. Rebounding from the SARS- could double before the Saudi Arabia $1,581 induced slowdown in the second quarter, the Chinese economy decade is over. India’s sales Chile $1,327 grew by 9.1 percent year-on-year in the third quarter. This was figures are also expected to Venezuela $1,133 Turkey $1,045 an improvement from 6.7 percent in the second quarter. The improve measurably as the Malaysia $1,025 economy was expected to top 8 percent growth in 2003, far country continues to benefit Russia $850 higher than the 7 percent official target. China remains the from rising incomes and Brazil $839 country where economic growth is expected to be the industry deregulation. India’s Argentina $827 South Africa $824 strongest. Coupled with its slow population growth, China’s retail sector remains highly Thailand $683 per capita GDP should rise sharply over the next several fragmented, with minimal Egypt $538 decades. Currently, despite its large economy, China is not a corporate ownership of retail Philippines $446 rich country. Its per capita GDP is less than half the size of space. Indonesia $393 China $367 Russia’s and one-fortieth that of the U.S. As incomes levels According to M+M Planet India $231 continue to rise in China, demand for consumer goods will Retail, global retail sales in *M+M Planet Retail continue to bubble up. 2002 were $8 trillion. The

WWW.STORES.ORG STORES / JANUARY 2004 G29 Economic & Social Indicators

2003-2007 regions with the highest sales capital, and favorable market opportunities have caused it to BUSINESS were North America, with a 30 notch up one place from last year’s rank, according to the EIU. ENVIRONMENT percent share, followed by All countries on the table down to Germany are rated as “very RANKING* Western Europe, with 23 per- good” places to do business by the EIU. Chile through Mexico cent, and the Far East (which are rated as “good” places. The remaining countries are rated Canada 1 includes China and Japan), either moderate or poor. Netherlands 2 Finland 3 where sales represented 22 per- United Kingdom 4 cent of the global total. The Far Quality of Life Indicators United States 5 East’s share was as high as 27 Quality of life indicators are important for gauging the well Switzerland 6 percent in 1995, however, being of a country’s population. With the exception of the Singapore 7 Hong Kong 8 Japan’s downward sales spiral unemployment rate, the World Bank data shown here have Denmark 9 has caused the share to deterio- changed little over the past decade. Improvements in poverty Ireland 10 rate. levels and literacy rates take time and dedicated investment Sweden 11 Australia 12 from government and private enterprise. France 13 Business The unemployment rates shown here are taken from official Belgium 14 Environment sources, but because governments do not measure unemploy- Germany 15 Rankings Chile 18 The Economist Intelligence Spain 19 QUALITY OF LIFE INDICATORS* Norway 20 Unit (EIU) has developed a set Austria 21 Unemployment Poverty: Adult Illiteracy Rate: Infant of global business rankings that Rate** <$1/day Male Female Mortality Rate Israel 22 measures the quality or attrac- (% of (% of pop. (% of pop. (per 1000 Portugal 23 pop.) 15+) 15+) births) Italy 24 tiveness of the business envi- Thailand 2.4% <2% 3% 6% 24 South Korea 25 ronment of countries. Their Mexico 2.7% 8% 7% 11% 24 Czech Republic 26 quantitative assessment of the Netherlands 2.8% - - - 5 Japan 27 Malaysia 3.0% <2% 8% 16% 8 Hungary 28 business environment – the China 3.1% <2% 7% 21% 31 Poland 29 opportunities for and hin- Switzerland 3.1% - - - 5 Thailand 30 drance to the conduct of busi- South Korea 3.3% <2% 1% 3% 5 Norway 3.9% - - - 4 Malaysia 31 ness – provide helpful insight Greece 32 Austria 4.3% - - - 5 Mexico 33 into the decision making Ireland 4.4% - - - 6 Philippines 35 process of global expansion. Singapore 4.4% - 4% 11% 3 South Africa 36 The ranking process involves Denmark 4.5% - - - 4 Brazil 37 Sweden 4.9% - - - 3 an analysis of various criteria, China 38 Hong Kong 5.0% - 3% 10% 3 India 39 including the political and Portugal 5.1% <2% 5% 10% 5 Saudi Arabia 41 economic environment, tax United Kingdom 5.1% - - - 6 Japan 5.4% - - - 3 Argentina 43 rates, labor markets, infra- Russia 46 Hungary 5.6% <2% 1% 1% 8 Turkey 47 structure and government pol- United States 5.8% - - - 7 Indonesia 48 icy toward competition. Indonesia 6.1% 7% 8% 17% 33 Egypt 51 Australia 6.3% - - - 6 According to the EIU, the Canada 6.8% - - - 5 Venezuela 58 only countries expected to Belgium 7.3% - - - 5 *Global Outlook, August 2003, Czech Republic 7.3% <2% - - 4 Economist Intelligence Unit experience an absolute decline through 2007 in the quality of Egypt 8.2% 3% 33% 55% 35 Israel 8.3% - 3% 7% 6 their business environment from the 1998-2002 period are Turkey 8.3% <2% 6% 23% 36 the U.S., the U.K., Hong Kong and Venezuela. For the U.S. Germany 8.6% - - - 4 and the U.K., an increased likelihood of war or terrorist France 8.8% - - - 4 Italy 9.0% - - - 4 attack and a slight deterioration in the macroeconomic out- Finland 9.1% - - - 4 look over the next five years, relative to the previous five Brazil 9.6% 10% 13% 13% 31 years, are the main reasons for the declines. Hong Kong’s Chile 9.9% - 4% 4% 10 Greece 10.0% - 1% 4% 5 deterioration has been ongoing for the last several years, but Philippines 10.1% 15% 5% 5% 29 it still ranks higher than most Asian economies. Venezuela’s Spain 11.3% - 1% 3% 4 decline results from a combination of political and econom- Russia 11.4% 6% - 1% 19 Argentina 12.8% n/a 3% 3% 16 ic uncertainty. Venezuela continues to be ranked as one of Venezuela 14.9% 15% 7% 8% 19 the most difficult places to do business out of the 60 coun- Poland 19.9% <2% - - 8 tries in the Economist Intelligence Unit’s rankings. South Africa 23.3% <2% 14% 15% 56 Canada is expected to be the best place in the world to India n/a 35% 31% 54% 67 Saudi Arabia n/a - 16% 32% 23 conduct business over the next five years. The country’s * World Development Indicators, 2003, World Bank; and OECD ** Latest year available advanced infrastructure, its openness to foreign trade and n/a = Not available

G30 STORES / JANUARY 2004 WWW.STORES.ORG Economic & Social Indicators ment in a consistent manner, figures are not always compara- spends roughly half an INTERNET USAGE* ble. Mexico’s figure, for example, is based on a narrow count hour at home surfing the Number of % of of unemployment. A wider measure is the partial unemploy- Net at each session, for a Online Users Population ment rate, which indicates the number of people in urban areas total of about 12 hours per (Millions) working fewer than 35 hours a week. This figure is typically month. Sweden 6.7 76 significantly higher. E-commerce, particularly Australia 12.8 67 The Millennium Development Goals were established by in the U.S., continues to Netherlands 10.4 65 United States 182.1 65 members of the U.N. in September 2000 to help improve expand. U.S. government Hong Kong 4.6 63 income levels, education, the status of women, health, the envi- statistics showed that the Denmark 3.4 62 ronment and global development cooperation. The first goal sector grew 27 percent in Norway 2.7 60 was to cut in half the proportion of people living in extreme the first six months of 2003 Switzerland 4.3 59 poverty between 1990 and 2015. There have been recent set- over the same period in United Kingdom 34.3 57 backs due, in part, to the global economy’s weakness, but 2002. E-commerce in Canada 16.8 53 progress is being made. The World Bank recently noted that, Europe is also catching on. Germany 44.1 53 South Korea 25.6 53 given current trends, global poverty rates will fall to 13 per- According to Forrester Finland 2.7 52 cent, or less than half the 1990 level. Research, about 40 percent Singapore 2.3 52 Countries are working toward bettering the lives of their of on-line European con- Austria 3.7 45 people through numerous means, both internally and external- sumers purchased on-line in Japan 56.0 44 ly generated. The removal of trade restrictions, technological 2003, up from 19 percent Portugal 4.4 44 improvements, declines in fertility rates, and medical and farm- in 2000. Belgium 3.8 37 ing advances are helping to reduce income inequalities, the Consumers continue to France 21.8 36 Spain 14.0 35 yardstick for measuring development progress. buy a wide array of prod- Ireland 1.3 34 While most regions of the country are realizing improve- ucts on-line. During the Italy 19.3 33 ments in their Millennium Goals, poverty and education goals 2002 holiday season in the Czech Republic 2.7 26 in Sub-Saharan Africa appear to be declining rather than U.S., the top items pur- Malaysia 5.7 25 improving. Civil disturbances, the spread of HIV/AIDS, gov- chased were books/music, Chile 3.1 20 ernment inaction, restrictive trade policies and difficult envi- apparel and travel. Of the Israel 1.9 17 ronmental conditions are impeding progress in numerous five major on-line product Poland 6.4 17 Greece 1.4 13 countries in this region. categories tracked by Hungary 1.2 12 Although governments are working to improve the quality of Jupiter Research, sales of Russia 18.0 12 life for many, difficulties abound. Current levels of population apparel and accessories Argentina 3.9 10 growth are said to be straining the earth’s resources. Some are were expected to grow the Brazil 14.3 8 predicting water and food shortages over the coming decades. fastest in 2003, outpacing South Africa 3.1 7 Further, the gap between rich and poor remains. The U.N. the growth in sales of per- Philippines 4.5 5 recently reported that by 2050, six billion people will be living sonal computers, books, Venezuela 1.3 5 China 68.0 5 in cities and, of those, 3.5 billion could be living in slums. software and movie or Turkey 2.5 4 Many fear that government’s failure to supply basic services concert tickets. Even the Mexico 3.5 3 such as education and water to the poor will continue to pro- once-dormant e-grocery Saudi Arabia 0.6 3 duce anti-social behavior unless these problems are addressed. business is regaining mo- Indonesia 4.4 2 mentum. The Food Mar- Thailand 1.2 2 Internet Usage keting Institute reported Egypt 0.6 1 India 7.0 1 Global growth in Internet usage continues to power ahead. that 26 percent of U.S. *NUA Ltd., from various sources. Not only are more consumers going on-line, they are going on- supermarkets offered on- line more often. In the U.S., estimates of Internet usage vary line shopping in at least some stores in late 2003, while anoth- between one-half and nearly two-thirds of the population. er 15 percent planned to launch on-line food shopping “soon.” Teens and young adults in the U.S. now spend more time on- Although Internet usage and on-line buying is increasing, it’s line than watch television according to Yahoo Inc. And Irish been a difficult recovery path for Internet companies from the people reportedly are now spending more time on-line than overly optimistic late-1990s. The dot-com shakeout reportedly they are talking on the phone. In China, the number of erased $3 trillion from investor portfolios in the U.S. alone. Internet users is said to have doubled to 68 million since 2001. Webmergers, a firm that has monitored the industry, estimates This gives China the second-largest Internet population in the that nearly 5,000 Internet companies were either acquired or world, behind only the U.S. shut down. Since the end of the first quarter of 2000, buyers The U.S. accounts for about 30 percent of the global Internet have spent $200 billion to acquire nearly 4,000 Internet prop- access universe, followed by Europe with 23 percent, erties, while another 1,000 companies have either shut down Asia/Pacific with 13 percent and Latin America with 2 percent. or declared bankruptcy. Webmergers estimates that roughly According to Nielsen/NetRatings, the average Internet user 2,000 of these companies were involved in e-commerce.

WWW.STORES.ORG STORES / JANUARY 2004 G31 Retail Industry Profiles

To help readers assess the potential opportunities in various markets, we asked our practitioners around the world to provide us with information on the latest retail developments in their countries. There comments are presented here.

ARGENTINA AUSTRALIA Coles Myer more than doubled technology spending, introducing a new merchandising system and new supply chain and point-of-sale systems to cut costs. Rebel Sport has implemented innovative on- line recruitment systems that recruit, screen and Top News Headlines Top News Headlines pre-train all applicants so that once hired, the Argentina suffered an economic crisis after Woolies Changes Fuel Strategy: Woolworths new staff member can start on the floor imme- the devaluation of the Argentine peso in has changed its home-brand fuel strategy and diately. January 2002. That was followed by high infla- unveiled a relationship with Caltex that mimics tion and unemployment rates. Those factors Coles Myer’s deal with Shell. Mergers and Acquisitions influenced the following headlines: Woolies Pharmacies A Step Closer: Australia’s Coles Myer purchased Theo’s Liquor business, Retailers are carrying on aggressive price dis- largest retailer is poised to move on to the next adding 50 liquor outlets to its business. count campaigns. Retailers are exerting increas- stage of a plan to operate a chain of full-service Italian eyewear group Luxottica announced a ing pressure on suppliers to help bring down pharmacies in conjunction with its supermar- A$550m takeover bid for the Australian optical costs. kets. retailer OPSM group. Strong increase in the sales of private label Banks Might Just Keep Card Fees High: Re- Woolworths and Coles both announced and less expensive brands. tailers fear banks will seek to undermine the petrol retail deals with Caltex and Shell, respec- Large increases in small neighborhood retail Reserve Bank of Australia’s credit card reform tively. Both retailers now offer 4 cent per liter stores, which are taking market share from big process by refusing to reduce merchant service discounts on the standard petrol price with pur- retailers. fees charged to provide card terminals. chases of more than A$30 at their respective Ahold Group to sell its Argentine subsidiary Coles Moves to Wrap Up Theo’s Liquor: Coles outlets. (Disco S.A.), as part of its strategy to leave the Myer is expected to wrap up the purchase of Latin American market. the privately held Theo’s Liquor chain. Growth Strategies Coles Myer Shakes Up Petrol Industry with The Oroton Group, a high-end fashion retailer The Retail Environment Shell Deal: Coles Myer joined forces with Shell that includes the Oroton, Morrissey, Marcs and Since the economic crisis, there has been a Australia to provide discount petrol, pitting it Polo Ralph Lauren brands, is set to open a series significant decrease in consumption, resulting against rival Woolworths’ highly successful Plus of new stores as part of a new youth denim in a 25 percent to 30 percent decrease in retail Petrol sites. retail concept. “Dr Denim” will target the 18- to sales. 35-year-old urban dweller who is generally left The main retailers have reduced their gross The Retail Environment to shop in stores that market to younger or margins and the levels of inventory. There was a Despite the mild economic slowdown in older generations. significant decrease in imports due to the Australia, the retail environment has been buoy- Country Road, a Melbourne-based fashion impact of devaluation of the Argentine currency. ant with Australian consumer confidence at a company, expects to place a stronger focus on Consumers have become much more price nine-year high. Year-to-date vehicle sales were retailing. The company will grow by 15 stores in sensitive. up 7 percent over 2002, retail sales were up 6.2 the next two years assisted through an exclu- percent and house prices were up 18 percent. sive deal struck with Myers Grace Bros. depart- Mergers and Acquisitions Low interest rates and a strong labor market ment stores to sell the Country Road brand. Ahold’s Argentine subsidiary is now in the have spurred spending. Freedom Furniture has launched an A$222m process of being sold. Consumers, however, have remained selective privatization bid in an effort to expand into the in discretionary spending and as a result some Asian and U.K.markets. Growth Strategies retail sectors have fared better than others. Small local supermarket chains, wholesalers Retail industry growth was lead by strong per- China Impact and discount stores that stress low prices are formances in the food and department store The major retailers in Australia have not being introduced to the retail market. sectors, which were partially driven by the rela- opened retail outlets or announced any plans to tively high (food) price inflation. Household open outlets in China to date. But the Chinese China Impact goods, recreational goods and travel retailers market has had a major impact on sourcing As a result of the devaluation that took place have been in decline. arrangements. General merchandise, consumer in Argentina, imports from China have been A slowing domestic economy is expected for electronics, clothing, footwear and textile prod- dramatically reduced, particularly in the house- FY 2004 and food no longer appears to be ucts have been affected by Chinese imports. hold appliance and textile sectors. growing faster than the rest of retail. The textile, clothing, and footwear industry (TCF) has been particularly hard hit. The Marcelo Garcia, Adriana Calvo Technological Investment reduction in tariffs and other trade barriers Deloitte Touche Tohmatsu Woolworths Limited has made technologi- has made trading with China more attractive Buenos Aires,Argentina cal improvements including StockSMART (dis- to retailers. Trade with China is expected to tribution center forecast based inventory increase as more favorable trade conditions replenishment), AutostockR (store forecast are created through the Australian Gov- based inventory replenishment) and Electronic ernment’s deadline of 2010 to achieve free Direct Store Delivery. trade in most TCF products.

G32 STORES / JANUARY 2004 WWW.STORES.ORG Retail Industry Profiles

As the quality and consistency of Chinese CANADA China Impact products improve, there is greater demand for Chinese imports are dominating the fashion Chinese products as they offer retailers signifi- markets. cant cost savings, currently 20 percent to 40 It is now cheaper to catch fish off New- percent. foundland and ship them frozen to China for processing than to do it in North America. Andrew Griffiths, Liz Welch Top News Headlines The impact of the third world is rapidly Shoppers Drug Market’s excellent results and Deloitte Touche Tohmatsu expanding from fashion, to electronics, to tech- successful public offerings enable company to Sydney,Australia nology outsourcing, to call centers, to all profes- compete against Wal-Mart. sional services – the extent of white collar jobs Disappointing results in Q1 & Q2 for most being transferred is totally underestimated – a department stores and fashion retailers. BELGIUM lot more than the loss of factory jobs in the Air Canada’s restructuring impacts the rest of 1970s and 1980s. the Travel and Hospitality industry. Tim Horton’s Donuts dominates in QSR;is now Brent Houlden larger and more profitable than everyone Deloitte Touche Tohmatsu including McDonald’s. Toronto,Canada Top News Headlines Trade promotions as a percent of EBITDA are Colruyt announced that it will enter the now up to 80 percent at certain Canadian gro- wholesale business. cery chains. Carrefour took over 20 Laurus stores. CHINA Carrefour launched new generic brand “No.1”. The Retail Environment Delhaize opened two stores in Germany. 2003 has been a tough year: SARS, West Nile Delhaize exported to Greece its proximity Virus, Mad Cow Disease, the great power out- store concept “City”. age, trade wars, real wars, forest fires, unusual weather, etc. Top News Headlines The Retail Environment SARS Cuts into Retail Sales: The outbreak of There is strong price competition in the Technological Investment SARS in China in the first half of 2003 hurt retail Belgium market. Cognos’ business intelligence tool has gar- sales severely. Surprisingly, the market recov- Delhaize’s expansion is going forward in prox- nered a lot of attention from Canadian retailers ered relatively quickly. The top 100 retailers imity and convenience stores. trying to extract useable data (e.g., SAQ, the achieved a growth in sales of 13.4 percent in Delhaize and Colruyt are gaining market liquor retailer). July 2003 over 2002. Sales for the six months share, while Carrefour is seeing its market share Wal-Mart is demanding its vendors introduce from July to December 2003 were estimated to declining. RFID over the next several years. have risen about 6.8 percent over the same Delhaize ended its promotions strategy and is SAP (retail) has gained momentum in the period of 2002. now applying an Every Day Fair Price strategy. enterprise resource planning (ERP) marketplace. Government Backs Consumer Business: The Hypermarkets are using promotions in non- It has been implemented at Indigo, followed by government has shown its support in develop- food to attract shoppers. Home Depot. ing the country’s retail businesses. A new policy Colruyt has reacted to price competition by has been put forward granting financial sup- asking shoppers to compare product quality. Mergers and Acquisitions port in the form of interest rate discounts for The retail scene in Canada has restructured the first time to retail businesses that are com- Technological Investment over the last few years. Many categories have petitive and have a promising future.This finan- Delhaize is employing an automatic ware- only one or two direct competitors. This con- cial support is mainly applied to improving house system. solidation of players has lead to a more prof- technology. SuperGB (Carrefour) has opened a store fully itable retail environment, with some strength- Ban on Foreign Investment May Be Lifted: The equipped with electronic labelling. ening of gross margins and less discounting. Commercial Bureau has proposed a new regula- Grocery, fashion and quick-service restaurants tion this year removing the minimum foreign Mergers and Acquisitions are still overstored and further consolidation investment requirement for consumer-related Colruyt took over some Laurus stores. is expected. enterprises seeking customs duty concessions. Delhaize took over three Match stores. In the past, only those consumer-related enter- Animal Planet (pet food stores) went out of Growth Strategies prises with a foreign investment of more than business. M&M meats has rapidly expanded to approxi- 25 percent could be granted customs duty ben- mately 350 franchised units and runs a prof- efits. Growth Strategies itable, well-managed business. Unique niche Competition Heats Up: There is fierce compe- Small retailers are not growing fast, and mar- without a direct competitor; outstanding supply tition in the retail market, especially in the distri- ket share is declining for most of them. chain logistics. bution of electrical appliances. Domestic retail- The top three retailers account for 70 percent Forzani, a national sporting goods chain, con- ers of electrical appliances are even expanding of the market. tinues to grow and prosper across Canada, their businesses outside China. Aldi and Lidl continue to grow through store introducing new formats and driving store pro- Foreign Giants Keep Coming: Foreign retail openings. ductivity through better merchandising. Forzani companies continue to explore the China mar- out-smarted and out-lived U.S. sporting goods ket. Wal-Mart has sped up its investment in Didier Boon competitors who tried to enter Canada several Beijing, Tianjin, Shanghai and some second tier Deloitte Touche Tohmatsu years ago. cities like Nanjing, Qingdao, Hangzhou, etc. By Diegem,Belgium Longos Grocery chain is able to compete the end of 2003, Wal-Mart is expected to have against the giant grocery chains like Loblaws. more than 40 stores in China. Strategy is driven by customer service and qual- ity produce. Though it’s not as large as a The Retail Environment Loblaws superstore, many consumers prefer the Retail businesses are starting to set up multi- unique produce and specialties (e.g. Ontario business enterprises, operating different kinds lamb) and the service. A true family business of formats, like supermarkets, department with excellent core values. stores and discount shops.

WWW.STORES.ORG STORES / JANUARY 2004 G33 Retail Industry Profiles

The number and scale of merger and acquisi- Jiangsu Suguo Supermarket: Jiangsu Suguo non-food goods in all retail segments. tion activity has increased. Supermarket introduced a new selling model, Government authorities are considering how “self-help discount,” in four of its branches. Rob den Otter, Carlos Brunat, Jan Petr to improve measures in monitoring and regu- Under this model, customers can enjoy a deep Deloitte Touche Tohmatsu lating retail business in China to facilitate the discounted price without buying a large Prague,Czech Republic needs of WTO. amount of goods. Suguo plans to expand this The advantages of standardization and chain- “self-help discount” model to more categories style management are becoming increasingly of goods and to achieve its target of prices that DENMARK apparent, and the market players that are are 10 percent lower than those of its major accommodating these methodologies are dom- competitors. Suguo ranks in the National Top 10 inating the market. Retailers in China, though in business only As competition is fierce, overall market prof- seven years. Suguo plans to invest in the next itability has decreased slightly, although gross three years to accelerate its new round of cross- Top News Headlines region expansion and to establish a large, easily margin and rate of spending have remained Consolidation through mergers and acquisi- accessible logistic distribution center in the stable. tions, both national and Scandinavian, contin- region. ued in 2003. Technological Investment The market share for discount food retailing Chengdu New Century Computer Mall is a China Impact over supermarkets continued its steep growth. large-scale marketplace and has chosen TP-LINK A number of foreign retail industry players In both food and nonfood, Denmark experi- 22M wireless solutions as the wireless online have entered the China market, with more than enced growth in retailing through franchising. model for doing business in its business hall. 20 multinational enterprises operating super- Little White Goat Supermarket has applied stores and chain stores. They include: Wal-Mart The Retail Environment wireless technology (Tsinghua Tongfang wire- (U.S.), Metro (Germany), Carrefour (France), Retail sales are status quo in real terms, but less network system) to enhance its manage- Auchan (France), Daiei (Japan), Auchan (France), unemployment is edging upward, which is neg- ment of fresh food by re-arranging its cashiers Aeon (Japan), B&O (U.K.), President (Taiwan) and atively influencing consumers’expectations. and computers and has also increased the use China Resources (Hong Kong). Real income among the employed is rising 3 of POS terminals and bar code scanners for stor- Others with plans to enter China include EK percent to 4 percent, and the 2004 tax cuts, age control. The new systems can also help the Chor (Thailand) and 7-11 (Japan). however small, will help spending. company in its stock replenishment efforts. Competition is tough and margins are under Shineway Group has installed new informa- Charles Lip, Ricky Tung, Meg Li pressure in both food and non-food. Expected tion technology in its logistics system and has Deloitte Touche Tohmatsu entrance of the German food retailer Lidl during brought its supply chain distribution systems Beijing,China 2004 is already further increasing the competi- up to international standards. tion in the food segment. Auto sales are low but are expected to edge Mergers and Acquisitions CZECH REPUBLIC up in 2004. Liaoning Dalian Store acquired 92 percent New formats for home mortgages are gaining equity interest in Beijing Tiankelong, a major popularity and are expected to help fuel con- supermarket chain with extensive operations in sumption. Beijing. Real retail growth is expected to reach 3 per- China Resources Supermarket, the third- Top News Headlines cent in 2004, up from 1.2 percent in 2003. largest supermarket in Hong Kong, announced The retail market is reaching its saturation its acquisition of 39.25 percent equity interest in point: big international players now compete Technological Investment Suguo Supermarket, a major supermarket oper- against one another instead of acquiring mar- The biggest investments have been in distrib- ator in Nanjing.This is a part of the expansion of ket share from local players. ution and logistics. China Resources business in Mainland China. Lidl has entered the country, expanding the Shanghai Lianhua Supermarket announced discount format against supermarkets and Mergers and Acquisitions its acquisition of Lianhua Huashang Group, hypermarkets. In food retailing, Dansk Supermarket and strengthening and solidifying its leadership in The focus of the retail industry has moved Swedish Ica Ahold have entered a joined ven- the retail industry. from geographical expansion to achieving cost ture to open Netto discount food stores in efficiencies and developing new services and Sweden. Growth Strategies formats within the present network. The Synoptik chain of opticians operating in Capital Market-United Co. Ltd. (Shoulian): Denmark, Sweden, Norway, Germany and Shoulian was established in 2002 through the The Retail Environment Poland was sold to Dutch-American Pearle merger of 10 local retailers. It is expected to Retail sales are increasing, but the growth has Vision. have 45 stores by 2005. It is also developing slowed, a sign the market is getting mature. shopping malls that incorporate a new business The same is true for the expansion of the Growth Strategies model of “mutual discount selling.” When cus- number of stores. Growth strategies involve expansion into tomers buy goods from them, they will get With slower growth comes more focus on neighboring countries, acquisitions or further vouchers for other merchandise sold through- increasing profitability. growth through franchising. out the whole mall. As a result, Shoulian’s new All growing retailers are expanding their num- model includes various kinds of retailing, not Mergers and Acquisitions ber of SKUs beyond traditional business lines. just supermarkets. There are no recent mergers or acquisitions, Significant “channel blurring” is occurring, as a Shanghai Hualian Supermarket: Hualian but the entrance of Lidl in the market is being result. supermarket, the first chain store going public, seen as having big consequences, as it is the Retailers are seeking to expand into retail boasts its “third-party logistics system” and first real no-frills discounter in the Czech market. environments that include entertainment facili- “auto-supply system” to accelerate its modern ties. supermarket management and advance its China Impact competitiveness. The system is a vital element The importing of Chinese goods and subse- China Impact for the company’s success. Hualian reportedly is quent sale both in small markets and in the China produces items for several Danish also developing new software to optimize its retail chains is leading to pricing pressures on chains and has done so for years. logistics information system.

G34 STORES / JANUARY 2004 WWW.STORES.ORG Retail Industry Profiles

There are no Danish retailers planning to required for its central buying office. ing rebates and price-offs last year, was aban- operate in China. Auchan has launched a sophisticated loyalty doned. Since then, couponing and customer program scheme. loyalty programs have seen a renaissance. Torben Liborius Carrefour has put in place a global uniform Saturday shopping hours were extended to Deloitte Touche Tohmatsu reporting system. 8:00 pm. Discussions are ongoing regarding Copenhagen,Denmark Sunday shopping hours. Mergers and Acquisitions Further Regulations: Introduction of the M&A activities have been limited or have not deposit system for cans and plastic bottles FRANCE yet surfaced. brought heavy protests from retail industry. Kingfisher has now fully integrated the French Consumers are confused. DIY chain. Online stores have moved forward to new Gucci was finally acquired by PPR group after areas,such as car sales and financial services. a long negotiation with LVMH, the other con- Top News Headlines tender. The Retail Environment Enron- and Ahold-type issues are causing Casino has taken a significant minority inter- In total, retail sales decreased slightly in 2002. retailers to focus on governance and internal est in and has active management responsibili- Sales have remained weak in 2003, however, control, with special care over rebate manage- ties within Laurus in Netherlands. small increases within the supermarket sector ment. As an example of vertical integration, Virgin took place in the first seven months of the year. New regulations are in place to limit or reduce stores in France are being acquired by the amount and nature of rebates that retailers Lagardère group, which also owns Hachette, the Technological Investment and suppliers are allowed to agree upon on top publications company. In May, Metro opened the “store of the future,” of the standard vendor’s tariffs. It is not yet clear a test concept. It has extensive retail technology that the new regulations will change the usual Growth Strategies in trial, such as radio frequency identification, practices. Bricot Depot (now part of Kingfisher) is grow- automatic checkout and replenishment, and Major food retailers are adopting loyalty pro- ing the DIY hard discount concept. intelligent displays on shopping carts. grams, following Leclerc. Vendors’ rebates with Marionnaud achieved fast growth through SAP retail solution seems to have taken the those programs are at least partly allocated to the acquisition of small independent perfumery lead: Karstadt implemented SAP retail, AVA loyal customers and allow retailers to reinforce shops to be re-branded, reformatted and adapt- potentially switched back to SAP retail from their price competitiveness. ed to a discount policy. Marionnaud leveraged Retek, Leckerland is going to implement SAP Casino and Cora have dismantled their joint its growing size to obtain optimized pricing retail, Rewe prefers an individual solution. buying group following the attempt by Casino terms from vendors. Customer loyalty cards face a boom as the to buy a significant share of Cora. Cora has reor- Paul is a fast growing medium- to high-end major customer retention tool. Coupon-clearing ganized its buying office and Casino has created bread/bakery retailer. It combined a traditional companies like NCH/Valassis and Catalina with Auchan a joint buying organization in bread image front office with a very effective Marketing are currently testing CRM software Switzerland. integrated bread production and supply chain programs for intelligent coupon distribution for PPR group is focusing on the retail segment back office. the German market. The new concept provides and luxury. The Gucci acquisition and sale of its individually designed gift coupons per cus- business-to-business operations (in process) China Impact tomer by analyzing the customer’s shopping Carrefour is opening stores in China at an illustrates that the strategy is being actively history. The gift coupons are distributed at the impressive pace. The company has decided to implemented. point of sale or via direct mail (Tesco has open all of its three store formats (hypermar- already implemented this concept). Customer The Retail Environment kets, supermarkets and hard discount). Most of cards and websites are combined as a commu- Slow growth or no growth is seen for most of the assortment is locally sourced. nication platform with customers. the classic retail players. Retailers have worked French retailers and in particular apparel hard on cost containment to maintain prof- retailers have sourced large portions of their Mergers and Acquisitions itability. Central city retailers have gained share merchandise from China for a long time. No sig- Spar Handel AG wants to sell, close or priva- over stores and malls outside the city. Retail nificant change here. tize its 389 consumer markets to bridge its liq- price regulations have reduced the price differ- uidity gap. ence between small and large food stores. Gilles Goldenberg, Antoine de Riedmatten Rossmann and KD are going to cooperate in There is strong growth in the hard discount Deloitte Touche Tohmatsu procurement, enterprise resource management retail segment and for the well-positioned non- Paris,France and logistics. food specialists like H&M and Zara. But tough Rewe, as the majority stockholder of Bon times lie ahead for Tati, an off-price and less Appétit, enriched its portfolio by two small area clearly positioned apparel retailer, which is fac- GERMANY formats, Primo and Vis à Vis.The future position- ing financial difficulties. ing strategy of Pick Pay, also part of the Bon There is no deflation in France or in most Appétit Group, needs to be specified. countries in Europe. The euro introduction has generated some inflationary effect, but that was Growth Strategies partly offset by private label product introduc- Top News Headlines Lidl & Schwarz KG: Lidl-Discount is the fastest tion and hard format growth. Germany continues to be a discount-driven growing discounter with a growth rate of 16 Global French food retailers having opera- retail environment. percent (January to May 2003). Aldi, the biggest tions in different regions of the world have been Discount retailers (Aldi, Lidl, Penny, Plus, etc.) competitor, realized 5.5 percent growth. The impacted by the Latin America crisis, but they are growing strongly, obtaining about a 40 per- average growth rate of all discounters was 4.7 have sufficient financial strength to keep their cent market share of the overall food market. percent. In France, Lidl is the market leader with- operation in the region and be well prepared Branded goods discounters had the highest in the discount segment with 900 outlets. Lidl’s for better times. growth rates. assortment is wider than Aldi’s (1,000 articles Private label brands increased significantly compared to 800) and it has a different focus Technological Investment within the traditional (non-discount) retail seg- (e.g., a wider assortment of drug store articles such as cosmetics). The most important differ- Cora has implemented a sophisticated mer- ment. entiator is the co-offering of branded goods. chandising master file software package Deregulation: The “Rabattgesetzt,” deregulat- Following its 2001 entry into Poland, Lidl is

WWW.STORES.ORG STORES / JANUARY 2004 G35 Retail Industry Profiles quickly expanding into the Czech Republic (14 Forum organized the Conference in April 2003 growth strategy has multiple levels, leading to markets), Hungary, Croatia, Slovenia and in Athens. Industry leaders discussed issues per- an impressive 22.3 percent sales growth. The Bulgaria. taining to the industry and shared best prac- stores are characterized by good taste and ele- Tchibo Holding AG: Invented a unique sales tices. gance as well as an impressive collection of strategy within the non-food segment. Under designer clothes, which continues to expand. In the slogan “every week a new world,” it com- The Retail Environment addition to franchising, the company has bined non-food articles like gardening and sold Supermarkets dominate the retail environ- opened up stores with different brand names in them at discount prices. Tchibo uses a multi- ment, accounting for 53 percent of retail sales, high profile Athens neighborhoods and is also channel distribution strategy – stores, customer followed by: car dealerships (15 percent), appar- looking into international expansion starting markets and mail order selling via internet or el (12 percent), electronics (10 percent), house- from Cyprus. stores. The non-food concept is rolled out to hold appliances (8 percent) and fast food (2 per- Austria, Switzerland, Poland, Great Britain, cent). China Impact Hungary and the Czech Republic. Retail sales have been growing steadily at an China’s entry into the World Trade 11 percent annual rate. Supermarkets increased Organization increased the level of trade China Impact profitability by rationalizing operating costs.The between the two countries, although Greece Currently, Metro is the only retailer with signif- industry has been creating new jobs at an still exports only a few products into China. A icant activity in China, opening 17 C&C Markets. annual rate of 30 percent. number of Greek enterprises are slowly making Forty more markets are planned. The overall feeling is cautious optimism. Price steps into that huge market but more so in pressures are still intense, with the Retail Price shipping and tourism than retail. Following the Gerald Hellmer Index showing 4.3 percent growth in the first Olympic Games in Athens in 2004, Greek com- Deloitte Touche Tohmatsu half of 2003, much faster than the 3.6 percent panies are expected to leverage the knowledge Munich,Germany annual inflation rate of 2002. The largest per- gained and business partnerships created with centage increase was in books and stationery Chinese companies, in light of the 2008 Olympic sales with 11.4 percent, supermarkets remained Games being scheduled for Beijing. GREECE at 8 percent, while apparel dropped 8.1 percent The influx of Chinese immigrants into Greece from the end of 2002. is creating a “Chinatown” phenomenon. This growing ethnic business center in the middle of Mergers and Acquisitions Athens is rapidly taking over the low-end retail In comparison to last year’s boom in retail sectors, particularly in apparel and house wares, Top News Headlines M&A activity and market consolidation, particu- and is expected to play a significant role captur- Prices Keep Climbing: Since the euro’s intro- larly in food and clothing, activity has recently ing the growing immigrant population con- duction, prices have been climbing. Consumer been quiet. Retailers are busy defending their sumer group. groups are urging the government to take mea- positions against consumer activists and gov- sures against the “unruly” and sometimes ernment agencies blaming them for price Chris Konstantinou, Dimitris Haramoglis “unjustified” price hikes. Large supermarket increases, as well as redirecting their growth Deloitte Touche Tohmatsu chains led by Carrefour announced in mid- strategies and creating new product offerings. Athens,Greece September a price freeze for the rest of 2003. Micromedia Britania S.A acquired three stores Veropoulos, a top-four supermarket chain, will operated by Club Electric S.A. in the Athens stop selling products on which vendors require metro area and one store in Halkida, in an effort HONG KONG SAR higher prices. Distributors for Procter & Gamble, to geographically diversify. Unilever, L’Oreal, Colgate, Henkell and others Ikona-Ihos S.A. took a 7 percent share in committed to freezing prices for this three- EXPERT A.E, member of EXPERT International, a month period. fast growing electronics retailer. Carrefour Expands: Already the largest retailer Sykaris A.E. signed a final agreement to Top News Headlines in Greece, the company has initiated the con- acquire 100 percent of Ikona-Ihos Southern The Outbreak of the Severe Acute Respiratory struction of a 500,000 square foot complex in a Greece S.A, a competing electronics retailer. Syndrome (“SARS”) Hits Hard: The disease kept southern suburb of Athens that will house a consumers in their homes, and retail sales fell an supermarket, a department store and several Growth Strategies average of 8.3 percent on a year-on-year basis. Specialty retailer Jumbo S.A. (toys, children’s other smaller retailers. Among the hardest hit segments were: jewelry, clothes and stationery) commands a 25 per- Shopping Complex Planned in Athens: The expensive gifts, apparel and footwear. Tourism cent market share, enjoys 27 percent sales opening of the largest shopping complex in fell almost 58 percent, a double blow to the growth and is highly profitable. Publicly traded Athens is scheduled for July 2004, in time for the retail industry and the Hong Kong economy. on the Athens Stock Exchange, the company Olympic Games. The complex is expected to Unemployment Rate Stays High: The unem- has used cross-border expansion and franchis- attract 120,000 visitors daily. The project will be ployment rate stayed at approximately 8 per- ing to grow. The company has opened three funded through a joint venture of three publicly cent. Unemployment rose in sectors such as stores in Cyprus and is planning to add six traded retailers and an individual investor with restaurants and hotels, retail, transport, real hypermarkets in Greece soon to its existing 14- a long presence in retail. The complex will estate, business services, recreational services store network. include Galerie Lafayette, other well-known and manufacturing. The unemployment rate Moda Bagno S.A, a publicly traded retailer, is retail chains, cafes and bars, and two theatres. further grew when the slow economy was fueling its growth through international expan- Authentic Athens 2004 Products Retailer unable to fully absorb recent graduates. sion and careful diversification of product lines. Named: Venue Retailing S.A. has been awarded Closer Economic Partnership Agreement Originally a tile and flooring retailer, it gradually the contract of Licensed Retailer of Authentic (“CEPA”): This free trade agreement will allow evolved into selling bathroom accessories, sani- Athens 2004 products. The company will oper- Hong Kong companies easier access to the tary ware, kitchen furniture and living room and ate 100 stores within Olympic Games venues, as expanding Mainland market, seen as the key to bedroom furniture. With showrooms in Greece, well as an Olympic Superstore around the main Hong Kong’s future. Turkey and Cyprus, the company is well posi- sporting facilities. Easier Access to Hong Kong for Mainland Tourists: tioned to maintain its double-digit growth The First International Retail Conference Held: The Hong Kong government has reduced barri- rates. The Hellenic Retail Business Association, with ers to certain Mainland tourists who wish to High-end apparel retailer Vardas S.A., a pub- EuroCommerce, the United States National travel to the territory. Certain Mainland tourists licly traded company, used the IPO funding to Retail Federation and the International Retail may now travel as individuals; previously this more than double the number of its stores. Its

G36 STORES / JANUARY 2004 WWW.STORES.ORG Retail Industry Profiles was not allowed. An increase of 20 percent to 30 aims to have 300 retail stores (through coopera- other markets. percent in Mainland tourists is projected for tive and franchised arrangements) by 2006. Independents Changing Their Approach: The 2004. Sa Sa International Holdings Ltd. is a leading continued growth of buying groups and sym- cosmetic retailing and beauty services group bol convenience groups is changing the way The Retail Environment with retail outlets in Hong Kong, China, independent operators play in the market. Continuing high unemployment, the poor Singapore, Malaysia, Taiwan and Thailand. It Still Just Talk: The constant rumors about in- economy, low confidence and the SARS out- plans to open 10 stores in Hong Kong, Malaysia ternational giants, particularly IKEA and Wal- break (Hong Kong’s real GDP fell during the and Singapore. It offers a wide selection of Mart, entering the country are still without real SARS crisis) have hampered the financial perfor- goods at competitive prices and online shop- substance. mance of the retail industry. Major retailers’ ping. financial results have been mixed. The Retail Environment The retail environment has recently turned China Impact Sales volume growth is very low, 1 percent to around. Since the demise of the SARS threat, the China presents a huge potential for growth; it 2 percent; certain categories such as motor and end of the Iraq War, the continuing strength of gives a boost to the Hong Kong tourism indus- apparel show negative growth. China’s economy, the increased numbers of try and is a producer of low cost goods. Price growth is down to 3 percent to 4 per- Mainland tourists, the positive effects of CEPA China represents a huge growth market for cent. This has fallen from 10+ percent in recent and indications of slight improvements in the companies looking for expansion. Its robust years and reflects a return to more “normal” global economy, the operating environment for economy, growing middle class and growth business conditions in Ireland. retailers has been more favorable. Consumers potential have attracted many retailers. With There is no deflation yet within the retail sec- are beginning to show more confidence in the CEPA, its close proximity, common language tor, but the first signs of intense price competi- economy and spending is projected to rise. and culture, China’s importance in Hong Kong tion are beginning to appear. Retail sales began improving in the summer will continue to grow. months of 2003. China plays an important part in supporting Technological Investment Hong Kong tourism. In 2002, Mainland tourists Superquinn is implementing SAP Retail, the Technological Investment made up 41 percent of the visitors to Hong first instance in Ireland. A major trend is the “Octopus smart card,” Kong. Future growth is reliant on greater num- All retailers are increasingly moving to central- enabling money for purchases to be deducted bers of Mainland holiday-makers, with the eas- ized distribution operations. from a pre-paid balance. First used on public ing of travel restrictions. transport and in 7-Eleven shops, the card is For years, retailers have looked over the bor- Mergers and Acquisitions available in many supermarkets and fast-food der for lower priced merchandise and other There has been very limited M&A activity in restaurants. cost-saving opportunities (e.g., storage of fin- Ireland over the last year. ished goods). The Musgrave group bought the Budgens Mergers and Acquisitions Companies such as Dairy Farm Group, Li & business in the U.K. Café de Coral Group, a restaurant group, Fung, and Hutchison Whampoa Ltd. have estab- acquired Oliver’s Super Sandwiches, a restau- lished their presence on the Mainland through Growth Strategies rant chain, from Jardine, Matheson & Co., Ltd. retail segments such as convenience stores, Musgrave: Business is being built around sym- The acquired sandwich retailer has 15 outlets in clothing and electronic outlets. These compa- bol/franchise operations and a large investment Hong Kong, six in Malaysia and nine in the nies have distinct advantages because of their in its supply chain to ensure low costs.The com- Philippines. The Café de Coral Group has plans size, strong cash flows and knowledge of the pany is converting independent retailers to part to open 20 more Oliver’s Super Sandwiches out- local retail market. of the chain. lets in Hong Kong. The majority of retail segments (i.e., clothing, Mace: Company is increasing investment in YGM Trading Ltd., a manufacturer, wholesaler electronic goods) have been affected by Northern Ireland, a common strategy for Irish and retailer of world-renowned apparel and Mainland imports. With the demise of manufac- retailers. accessories, acquired Chilli Investments Ltd., a turing in Hong Kong, Mainland imports are the DIY companies are opening stores at out-of- developer, producer and seller of pharmaceuti- norm, creating a deflationary effect on prices, town locations. cal and chemical products. because of lower costs in relation to imports from other countries. China Impact Growth Strategies Irish retailers, particularly apparel retailers, Veeko Group specializes in ladies fashion and Jimmy Toy, Maisy Chan, Canny Ma, Alan Tang have sourced large portions of their merchan- operates in various markets across South East Deloitte Touche Tohmatsu dise from South East Asia. The country may see Asia. Their latest results show double-digit Hong Kong SAR China becoming more and more of a supply growth.Veeko plans to expand by further pene- base.Traditionally the links between Ireland and trating and developing its presence in the China China have not been strong. market. IRELAND The group is popular because of its “value for Cormac Hughes money” merchandise, conveniently located Deloitte Touche Tohmatsu stores (the group has over 60 outlets in Hong Dublin,Ireland Kong) and its ability to stay in touch with fash- ion trends. Its inventory control system identi- Top News Headlines fies popular items so it can restock goods quick- Discount Chains from Continental Europe ITALY ly. Its designers travel to fashion shows and Thrive in Ireland: Retailers Aldi and Lidl have recognize future trends. grown their grocery market share to 5 percent Hang Fung Gold Technology Group is a and are impacting some traditional retail designer, manufacturer and distributor of - brands. ry and precious metals and sells to markets Government Looks at Retailing: To reduce Top News Headlines around the world. Hang Fung expects future inflation, the government is reviewing Irish Economic Crisis Hits Fashion:All Italian fashion growth from development of its distribution “Grocery Orders” and planning restrictions on brands (e.g., Prada, Versace) were impacted by channels, particularly in lucrative markets such store sizes.It is studying inflation and price com- the economic crisis and SARS in the Far East.The as China and the U.S. Its attraction is in innova- parisons across the Euro Zone. Ireland is per- result was a slowdown in revenues and, for tive designs and high quality standards. Hang ceived by the media to be more expensive than Prada, a delay in its IPO launch. Fung has already opened stores in China and

WWW.STORES.ORG STORES / JANUARY 2004 G37 Retail Industry Profiles

Coin Group Still Trying: The large textile and for larger retailers is to compete with the small branded products to improve gross margins. fashion retailer is trying to come out from a dif- city small shops through pricing. Larger compa- Among these are 7-Eleven and Matsumoto ficult financial situation alone, with only bank nies use their stronger bargaining power with Kiyoshi, the biggest drug store chain. support and a new CEO (former Ikea CEO). The the suppliers, especially in Southern Italy where company had considered selling the chain to a the market potential is still huge. Technological Investment private equity house. Resistances to change from goods producers Manufacturers, wholesalers and retailers are Foreign Apparel Retail Chains Entering the and local state institutions, as well as lack of sharing sales data to improve supply chain Italian Market: The most recent is the Swedish infrastructure (with severe consequences on management. group H&M, following the Spanish Zara (Inditex) logistical management), are the major risks to An electronic bidding system for private and Mango. The Italian apparel retail market is be managed. The growth of the associations brand medicine was introduced. Eleven Aeon still very much polarized, missing out on the among small shops (Cooperatives) will continue group drug store chains are using the system. opportunities in the low-end fashion segment. to be the Italian way of retailing. More companies are introducing integrated Resisting Outside Competition: Carrefour, The franchising system is giving the little inde- circuit tags using wireless technology to Auchan and Leclerc are going to reinforce their pendent shops a way to survive, a means of improve the productivity in store operations. presence in the market, especially with partner- entering into a bigger network. ships with Italian retailers. New openings are Mergers and Acquisitions still restrained by Italian laws. China Impact TESCO acquired C2 network. Looking to the South: International food retail China is playing an important role in terms of Wal-Mart acquired Seiyu. chains, among others, are paying attention to low-cost production. More and more retail Aeon acquired Sunday, a major DIY chain in Southern Italy, where large chains have little chains are manufacturing their entire collection northern Japan. presence. in China. Small temporary kiosk-like markets are com- Growth Strategies The Retail Environment peting with retailers at very low prices, although Modelled after the dollar store concept in the The retail sector is competing fiercely on retailers are learning to compete with them. U.S.,“one coin”(100 yen) stores have been grow- price. Especially in the food segment, great ing rapidly in Japan. CanDo reportedly is the attention has been given to price positioning, Massimiliano Bellunato, Riccardo Rosa, second largest one coin retailer in Japan. Many because of the economic slowdown. Ciro Di Carluccio products are sourced overseas to keep prices Consumers are in a constant search for price, Deloitte Touche Tohmatsu low. willing to change the shop, retailer and format. Rome,Italy Don Quijote, a discount store operator, has Retailers have to work on concepts such as recorded six years of record pre-tax profits. The “value for money”or “best price guaranteed.” retailer has been aggressively expanding its This situation has increased the pressure on JAPAN retail chain. Also, it recently began offering negotiations with brand producers. drugs and medicines for free at nighttime in emergency cases with staff contacting pharma- Technological Investment cists using videophones. Many retailers have launched loyalty card pro- jects in the past year, but they generally do not Top News Headlines China Impact integrate this information with POS informa- Foreign Retailers Enter Japan: Wal-Mart Imported goods from China are contributing tion. The integration of these two information acquired Seiyu, which was the sixth-biggest to Japan’s deflation. sources and the availability to extract the key general merchandise store in 2002. Carrefour Numerous retailers now source from China. trends in the purchasing behavior will lead to a opened stores in the Western part of Japan Aeon plans to set up a distribution and procure- better understanding of the customer. ( area). Metro opened its first shop in ment base in Guangdong Province by 2004.The Metro has launched a CRM project to leverage Chiba city (suburb of ).TESCO acquired C2 company’s purchases from China reportedly the information available and to customize the network, a medium-sized supermarket chain. jumped about 20 percent in 2002. China relationship with customers. Bankruptcy and Restructuring Affect Major accounts for about one-third of goods pur- Supply chain management is the other area Retailers: Daiei, the third-largest general mer- chased by Daiei Inc. companies have begun to utilize, to deal effi- chandiser in 2002, developed a reorganization ciently with the lack of infrastructure in Italy. plan. Mycal, the fourth-largest general merchan- Yoshio Matsushita,Yukiko Kano, dise store went bankrupt in 1997 and reorga- Masayuki Hiwatashi Mergers and Acquisitions nized in 2003 as a group company of Aeon. Deloitte Touche Tohmatsu GS, food retailer in the Carrefour Italy group, Changes in Laws Impact Retail Businesses:The Tokyo,Japan acquired the retail group Il Bosco. consumption tax is to be included in stores’ SSC (Carrefour Italy group) acquired Sumar posted prices starting April 2004. There will be (Hyparlo group). an increase in social insurance payments for KOREA Dixon Group has acquired Unieuro SpA (elec- part-time workers. tronic equipment retail). 24-hour Retail Store Operation Is Popular with Pinault Printemps Redoute acquired Consumers: Aeon group, the second-biggest Emmezeta. general merchandise group, several drug store Arca Merchant, a private equity house, sold chains and almost all convenience store chains Top News Headlines the optical chain Salmoiraghi Viganò. are now open for business around the clock. Economic growth rates were lower in 2003: The Pam Group has acquired Nuance Group, a Continuous Growth of Convenience Store Constrained consumption and growing eco- Swiss distributor. Chains: 7-Eleven now exceeds 10,000 stores in nomic uncertainty brought the rate down from Optical retailer Angiolucci has acquired the Japan. 2002’s level. Spanish optical retailer Navarro Optico Retailers are investing in larger stores and dis- Sunglass. The Retail Environment tribution centers to enhance or maintain the Limoni, the perfume retailer, has acquired the The retail environment in Japan is character- market share. Austrian retailer Richard Shops. ized by continuous deflation and a fusion of cat- Retailers rush into China: Among them are egories (supermarket and DIY, drug store and Emart, Shinsegae and CJHomeshopping. Growth Strategies DIY,etc.) Competition increases in discount stores: The small city shops struggle to resist the More retailers are manufacturing their own price guarantees, price cuts and promotions are competition from larger retailers. The strategy

G38 STORES / JANUARY 2004 WWW.STORES.ORG Retail Industry Profiles among the methods used. Debenhams, Britain’s favorite department There is strong growth in the direct selling Category killers,women/children’s wear retail- store, which sells more than 500 international segment. Sales reached $921 million in 2002, a ers, outlet malls and entertainment shopping brands, will open its first store in the region at 26 percent jump from 2001. Direct selling malls are making a niche for themselves. Berjaya Times Square. turnover is forecasted to grow 21 percent per The Malaysian government provided a major year through 2006, reaching $2 billion by then. The Retail Environment stimulus package in May to boost economic Most of the B2C e-businesses in Malaysia are The reduced consumption caused by the growth. run by direct selling companies. nuclear issue with the north and SARS has eased. The Retail Environment China Impact Rising prices and the upturn in the stock mar- Retailing is on the road to recovery after the Parkson is making headway in the retail indus- ket may drive the retail market toward recovery. very weak spring 2003. try in China. Since opening its first store in 1994, The 2003 growth rate of the retail market was Retail margin continues to experience down- it now owns and/or manages 36 Parkson expected to be 5.4 percent, lower than 2002’s ward pressure as key retailers are cutting prices department stores and is expected to open sev- 8.1 percent. to offer “best prices”to consumers. eral more stores. Food retailers are experiencing a minimal Technological Investment Technological Investment impact from Chinese imports because of the Emart introduced the global sourcing channel Parkson Grand implemented a just-in-time large Muslim population that requires “Halal” and opened its second discount store in Tenjin, inventory system. certified food. China. Tesco implemented Retek’s solutions for Retail prices in non-food segments such as HomePlus invested heavily in a distribution warehousing and enterprise-application inte- clothing, footwear, accessories and electrical center – the biggest one in Asia Pacific area. gration. appliances, face tremendous competition Jaya Jusco implemented HR Software resulting from Chinese manufacturers’ lower Mergers and Acquisitions Solution. costs and excess supply. HomePlus and Wal-Mart plan to acquire Haitai Stores Co., which has 40 stores in Korea. Mergers and Acquisitions Mak Weng Kieng, Low Lay Teng Emart and Wal-Mart are on the way to acquir- Dairy Farm group, which operates Giant Deloitte Touche Tohmatsu ing some of the New Core stores. supermarkets and hypermarkets, has acquired Kuala Lumpur,Malaysia 34 Tops supermarkets from Royal Ahold. Growth Strategies Home shopping and e-commerce have grown Growth Strategies MEXICO compared to other retail business. The basic Modern store-based retailing has flourished in strategy of those companies is to focus on the recent years because of the change in con- “lifestyle-oriented infomercial,” satisfying both sumers’ preferences. A younger generation of the rich and the middle class by differentiating consumers prefers modern trade for its hygienic lifestyle-oriented goods. and convenient atmosphere. Top News Headlines Besides providing all-under-one-roof conve- Comercial Mexicana will open new stores and nience, superstores are also a preferred destina- China Impact a distribution center in Mexico City. tion for weekend family outings. Many retailers are planning to launch their Zara, a department chain operating in Mexico Hypermarkets are setting up outlets in high own stores in China. Emart already opened its for the last 10 years,expanded from 97 stores to density housing areas, providing value-for- second discount store in Tenjin, China. 136 units in 2003. money products that appeal to all consumers. LG Homeshopping and Shinsegae are plan- Self-service stores reportedly are losing 4 bil- To meet the changes in Malaysians’ lifestyles ning to enter the Chinese retail market. lion pesos each year to petty theft. That repre- and shopping behaviors, Giant offers one-stop- CJHomeshopping contracted with SMG to sents 1.8 percent of sales and 40 percent of shopping, which is also an important source for launch a Homeshopping company in Shanghai, profits. family shopping and fun. To gain the competi- China. Gigante is opening its fourth store in the U.S. tive edge, Giant sources 95 percent of its prod- (Anaheim, CA), after resolving certain problems ucts locally. Inchan Moon, Seogkyeong Han with the local authorities who were against the Jaya Jusco Stores Bhd has been successful Deloitte Touche Tohmatsu entry of the Mexican chain. locating its outlets mainly in suburban residen- Seoul,Rep.of Korea Soriana will open 20 stores nationwide under tial areas, targeting the vast middle-income the Price Club concept to compete with Sam’s group that is less likely to be affected by an eco- Club and Costco. nomic downturn. The company is currently MALAYSIA Wal-Mart de México faces a lawsuit for alleged embarking on an expansion plan that involves monopolistic practices. An investigation has developing more superstores and converting been initiated by the Federal Antitrust some existing superstores to shopping centers. Commission. Tesco Stores (M) Sdn Bhd installed its First Wal-Mart de México announced its withdraw- Permanent Price Cut in March, permanently Top News Headlines al from the National Association of Self-Service reducing the prices on 800 product lines. Then Giant Retail Sdn Bhd of the Dairy Farm group and Department Stores (ANTAD) after refusing the company added 1,200 items to the list, acquired 34 Tops supermarkets from Royal to sign the code of ethics that would require it bringing the total to 2,000. The price-cut pro- Ahold. to refrain from using comparative pricing in its gram is a long-term strategy in line with the The SARS outbreak and the war in Iraq caused “low prices every day”strategy. retailer’s core value of “earning our customers’ retail sales to record the sharpest two-month lifetime loyalty.” drop in April and May of 2003.Sales tumbled 20 The Retail Environment ProJET is a petrol station moving toward percent and 30 percent, respectively, compared The retail sector suffered in 2002 as part of the retailing. It is Malaysia’s First Superstation. with a year ago. poor general performance of the Mexican econ- Besides selling fuel, it provides convenience Malaysia has opened the country’s largest omy, a delayed effect of the U.S. recession and stores (Destina) with great facilities, such as shopping mall, Berjaya Times Square, in Kuala its slow recovery. This generated low levels of ample parking lots and sitting areas. Destina is Lumpur. The 7.5 million square foot mall is exports, decreased manufacturing production three times the size of the normal petrol station expected to draw three million visitors and and job losses. Retail sales increased at an annu- convenience store, providing customers com- shoppers a month. al rate of 0.9 percent. fortable stopovers.

WWW.STORES.ORG STORES / JANUARY 2004 G39 Retail Industry Profiles

Continued macroeconomic stability is reflect- on credit). Coppel developed the system of companies, lost almost two-thirds of its stock ed in the 5.7 percent inflation rate. “revolving account credit sales,” which creates a market value after it revealed false accounting Profitability showed a slight drop compared balance and a single term for purchases of and suspected fraud at one of its U.S. units. with the prior year (12.8 percent to 12.0 percent clothes, making the system easier to under- Ahold’s chairman, Cees van der Hoeven, and his in ROE and from 6.0 percent to 5.8 percent in stand and administer. chief financial officer, Michiel Meurs, stepped ROA). Coppel channels 2 percent of sales to adver- down. At the same time, Ahold announced it Prices in the retail sector did not suffer defla- tising, and it runs promotions for 40 of the 52 was probing a separate possible fraud at its tion in 2002. weeks of the year. Argentinean unit Disco. Corporativo Fragua, S.A. de C.V., a pharmaceu- Vendex restructures: Retailer Vendex KBB, Technological Investment tical company, increased sales by 16.6 percent in which has some 11 percent of the Dutch non- Grupo Electra, S.A. de C.V. developed an inter- 2002, and by 5.6 percent in its same stores by food retail market with businesses ranging from nal point of sale computer system, which allows increasing its geographical presence. lingerie to do-it-yourself stores, will conduct a real-time centralized management of sales, Fragua grew more than any other national major restructuring at its department store costs, expenses, cash, services and inventories at drug store chain in 2002, increasing its number chain V&D, involving 1,800 staff cuts and 12 all stores. The company has established an elec- of branches from 235 to 270, and became the store closures. V&D suffers from mismanage- tronic data exchange with most suppliers to industry leader in sales nationwide. The Fragua ment of the supply chain and a lack of focus on simplify the replenishment. consumer benefits from the Super drug store profitability. Comerci, from 2000 through 2002, invested concept, a combination of drug store and con- Numico in strategic revamping: This troubled approximately $5.6 million in information sys- venience store, offering more than 10,000 prod- specialty food company is in the middle of a tems mainly designed to improve inventory ucts, including medication, foodstuffs, bever- strategic revamp. After a costly misadventure in handling, supply levels and control systems. ages and personal healthcare products. Roughly the vitamin and food supplement business, Innovations consist of open technology point- 70 percent of its establishments operate 24 Numico plans to focus on its core business of of-sale systems (which include barcode read- hours a day, 365 days a year. baby food and clinical nutrition. ers), a unit inventory control system, fiber optic The commercial division of Grupo Marti, S.A. Competition heats up: In late 2003, a price war communications networks and an electronic represents a department store specializing in broke out when the country’s two largest super- communication system to issue purchase footwear, physical conditioning equipment, market chains said they would cut prices on a orders to suppliers over the Internet. clothing and a variety of sports and entertain- wide range of items. Albert Heijn, owned by Gigante’s main investment was in maintaining ment articles. In 1998 it entered into the ware- Ahold, said it would cut prices by up to 30 per- an inventory control system to meet consumer house market, a niche with enormous potential cent on more than 1,000 products. Laurus also needs. This system allows the online identifica- and growth opportunities. These establish- said it would cut prices on 1,000 items.The price tion of stocks by number and value, which facili- ments are characterized by the physical austeri- cuts came a week after the Dutch government tates the response-to-market needs. ty of the store (racks, boxes, etc.) and large vol- said consumers were spending less on food and umes of goods at warehouse prices. household articles than they did a year ago, and Mergers and Acquisitions Marti customers benefit from accessible loca- three days after Ahold said its 2003 sales were Grupo Gigante and PriceSmart Inc. agreed to tions, attractive displays, a wide range of special- hurt by the weak global economy. invest up to $20 million each to form a new ized, high quality merchandise and more than company (50/50) that will open four PriceSmart 180,000 products (taking into account different The Retail Environment stores under the Club concept in Mexico. sizes, models and colors). In 2002, sales volume in Dutch retail trade was Almacenes Coppel bought the Tiendas down 0.4 percent from 2001. This is the first Calzado Canadá footwear chain, with 180 stores China Impact decrease in the annual sales volume since 1994. in Mexico and 15 in the US. No Mexican retailer has opened any stores in The drop was entirely in non-food, where the El Puerto de Liverpool is acquiring two China. turnover volume fell by 0.9 percent from 2001. department stores from Grupo Mazón in the The goods coming in from China have a major Consumers have indicated since January 2001 State of Sonora, Mexico. impact on the domestic retail industry. Most of that they felt less positive about major purchas- Farmacias Ahumada from Chile is purchasing the products are textiles, clothing, footwear and es, especially home furnishings. 51 percent of Farmacias Benavides. It assumes certain household appliances, some of which control and creates the largest pharmaceutical are contraband and sold in the underground Technological Investment group in Latin America. economy at prices much lower than their Food retailer C1000, after a successful trial Comercial Mexicana is purchasing the five domestic counterparts. period, will gradually install self-scanning check- AUCHAN stores operating in Mexico. In August 2003, Mexican Customs authorities outs. Gigante, Comercial Mexicana and Soriana began investigating the Spanish department have agreed on an alliance to make joint pur- store Zara, which has been operating in Mexico Mergers and Acquisitions chases and obtain volume discounts with their for 10 years, and Soriana, a Mexican self-service Food retailer Laurus has sold all of its Belgian suppliers. This will boost competitiveness store, for bringing goods made in China activities to the Colruyt group. because the three combined account for about through Spain. Vendex KBB has acquired the Belgian activi- 90 percent of the revenues of Wal-Mart de ties of the French DIY chain Leroy Merlin. México. Francisco Pérez Cisneros, Mario Aguirre, Optician chain Pearle has acquired a 50.2 per- Héctor Novoa cent interest in Danish optician chain Synoptik. Growth Strategies Deloitte Touche Tohmatsu The Zeeman Group (basic clothing and Coppel, S.A. de C.V. department store Mexico City,Mexico household textiles) has acquired about 100 out- increased year 2002 sales by 29.1 percent, lets operated by the German textiles chain through a strategy of geographic expansion. It Urban Textil-Handel-GmbH. began an aggressive expansion program in NETHERLANDS NBTY, Inc., a leading manufacturer and mar- 1990, when it had 25 stores, and by December keter of nutritional supplements, has acquired 2002 had increased to 172 stores. Recently it Health & Diet Group Ltd. and the FSC wholesale increased its presence in Northeast Mexico, and business from Royal Numico N.V. Health & Diet now has operations in the Central, Bajio and Group owned and operated 49 GNC stores in Southeast, with plans to expand to nationwide Top News Headlines the U.K.and seven GNC stores in Germany. coverage. Ahold value plummets: Supermarkets group Coppel’s strategy is based on its customer Ahold, once one of Netherlands’ most respected Growth Strategies financing mechanism (90 percent of sales are The Zeeman Group acquired about 100 out-

G40 STORES / JANUARY 2004 WWW.STORES.ORG Retail Industry Profiles lets operated by the German textiles chain opened by the company outside of Germany. chased ICN, the largest drug store chain in Urban Textil-Handel-GmbH. Zeeman also con- Two more leading DIY store operators, OBI and Russia. tinues to expand autonomously, opening some Leroy Merlin, also are opening their first stores Another major drug chain, 36.6 Stores, went 70 new stores each year. The acquisition of here. public with the first retail IPO in Russian history. Urban Textil-Handel-GmbH will enable the Two major international retailers have Templeton Strategic Emerging Markets Fund Zeeman Group to reach the target of 1,000 entered the Russian market: On a franchise purchased a non-controlling stake in a leading stores in Europe somewhat earlier than basis, Sephora has granted rights to the local food retailer, Perekrestok. By selling a stake, the planned. Despite the difficult economic circum- perfume chain L’Etoile, while Intersport has retailer intends to obtain financing for its stances in Europe, the Zeeman Group continues entered into a franchise agreement with the aggressive business expansion plans. to expand. In addition to its stores in Germany, Delta chain of sporting goods. the Netherlands and Curacao, Zeeman is active Growth Strategies in Belgium, France and Luxembourg. The The Retail Environment One of the success stories is the recent mar- emphasis of its European expansion is on The retail market in Russia has performed ket entry of , a U.K. retail chain for Belgium and France. beyond expectations. Retail sales grew by 10.6 children’s goods, which is developing a net- percent in 2002 and by 8.9 percent in the first work of medium-sized stores in Moscow. The Nancy Schifferling six months of 2003. Supermarkets, hypermar- company capitalized on the underdeveloped Deloitte Touche Tohmatsu kets and discounters, as well as other forms of market for children’s products that has been Amsterdam,Netherlands modern retailing, experienced the strongest split between open markets and run-down growth. Various specialty stores ranging from stores left from Soviet times. The company to homewares grew sig- gained high popularity among the middle RUSSIA nificantly as well. Most of the leading retail and upper classes through its fair prices, chains grew 30 percent to 50 percent year on friendly image, helpful staff and client rela- year, the result of rapid expansion in the num- tionship program. The main competitive ber of stores, development of new formats and advantage, however, is the merchandise entrance into new regional markets. assortment. Mothercare stores sell private Top News Headlines Companies have increased efforts to differen- label products in many categories, ranging Auchan enters market: Auchan opened three tiate themselves from the competition, particu- from clothes to toys. hypermarkets in one year. Two are stand-alone larly in consumer electronics and appliances, Starik Khottabych (name of a fictional char- outlets and one is at the Mega mall, which was which are highly concentrated and competitive. acter) retail chain entered the market in the developed by IKEA. The company has plans to Competitive pressures have affected food late 1990s and has quickly become the undis- operate 10 hypermarkets in the next 2 to 3 retailers less, as the market is still far from being puted leader in the area of home improve- years. Auchan’s entry exposed the high margins saturated. But many food retailers who had ment stores. The company’s success is based enjoyed previously by local retailers and provid- enjoyed high margins are experiencing pricing on its strong focus in certain categories, such ed the strongest competition to the local play- pressure from the hypermarkets and cash-and- as ceramic tiles, carpeting, bathroom acces- ers. carry operations. sories and flawless execution of merchandise Mega Mall opens: This Ikea-owned shopping In response, all major retailers have increased planning and selection. The company and entertainment complex opened in their pressure on suppliers, forcing them to give acquired prime properties in Moscow in the December 2002 and is considered to be the larger discounts, better credit and delivery beginning of its development and is now largest and one of the most modern malls in terms, and a shelf-space fee. replicating its successful concept in other Eastern Europe. The cost of the project was parts of Russia.The company also prepared for $200 million; its total area amounts to 1.6 mil- Technological Investment the massive market entry of three large Eleven leading retailers have combined efforts lion square feet.The complex expects to gener- European DIY operators. to create a joint efficient consumer response ate annual sales of $700 million for its tenants. Eldorado is a success story in the consumer (ECR) system that will connect them with 11 The key anchors are IKEA, Auchan, OBI (a DIY electronics retailing. The company originated leading manufacturers of fast-moving con- retailer) and Technosila (consumer electronics outside of Moscow. It built its network in the sumer goods. retailer), as well as a 10-screen movie theater large- and medium-sized cities in Russia, Piaterochka, the leading discount retailer in and many other major foreign and Russian before entering the Moscow market. The com- Russia, is completing a state-of-the-art distribu- retailers. pany pursued a low-price strategy, undercut- tion center and has selected i2 as its preferred Regional expansion is the plan: All major ting its high-margin rivals. The company’s new logistics management software. Russian retailers unveiled plans for regional market entry strategy is aggressive, placing its Kopeika, a large chain of discounters, is imple- expansion, and many opened their first stores flagship stores near its strongest competitors menting shelf-space management software, in various parts of the country. Some were suc- and then cutting the prices until the competi- likely the first installation of its kind in Russia. cessful in their regional development, having tor cannot match them. The company’s strate- rapidly gained market share and consumer loy- gy has been to open several medium-sized alty. Others have experienced major opposition Mergers and Acquisitions stores in a given city, rather than building one The most significant acquisition was the pur- from local competitors and administrative large supercenter. chase of the troubled retailer, Electronny Mir, by authorities. Nevertheless, retailers are expand- a leading consumer electronics retailer, ing their regional networks, lured by relatively China Impact Eldorado. Eldorado used the purchase as a Russian consumers have been receptive to low levels of competition and a virtually unmet springboard to gain instant access to the lucra- Chinese products. Merchant entrepreneurs consumer demand for modern type of retail- tive Moscow market that represents 30 percent brought the first Chinese products to Russia in ing. to 35 percent of the total Russian market. The the early 1990s. Since then the quality of mer- Rapid development by Metro: The company company’s sales volume in 2003 is forecasted to chandise has improved, with large importers now operates six Cash & Carry outlets and be around $1.4 billion. going to China for abundant supplies of low- announced plans to invest an additional $1 bil- Marta Holding Group, which operates a net- cost products of fair quality. This trend was par- lion into its retail network in the next four to five work of franchised Spar supermarkets, has ticularly true of the lower and middle segment years. It plans to develop its wholesale business recently purchased a chain of Stolitsa-Sever homewares market that came to be dominated and open up to 20 Real hypermarkets. supermarkets. The purchase almost doubled by Chinese imports. DIY comes to Russia: In 2003 the first Western- the number of its stores, thus giving it much Many non-food importers have developed style DIY store opened in Moscow. Marktkauf, a better penetration into the Moscow market. China sourcing projects, and some opened rep- DIY retail chain of AVA, was the first store Investment Fund Millhouse Capital has pur- resentative offices to control the quality and

WWW.STORES.ORG STORES / JANUARY 2004 G41 Retail Industry Profiles ensure supply reliability. As a result, there has Mart, Carrefour and Tesco creates more com- stores offer convenient, one-stop shopping to been a downward effect on wholesale and retail petition. meet all home, office and school needs. By intro- prices. ducing its online purchasing site, POPULAR now Technological Investment gives customers fast, secure shopping 24 hours Alexander Bragin, Andrey Kouzmin, The Infocomm Development Authority of a day.The company tries to channel in loyal cus- Egor Metelkin Singapore, together with the Singapore Article tomers from young ages. POPULAR has expand- Deloitte Touche Tohmatsu Number Council and SPRING Singapore, have ed to Malaysia and Hong Kong, is actively Moscow,Russia teamed up to build a new e-Supply Chain expanding the number of stores and has an Management Ecosystem for the Fast Moving active franchise program in place. Consumer Goods (FMCG) industry in Singapore. SINGAPORE The new system is based on EAN International’s China Impact e-Business Messaging Standards and will help Imports from China are exerting deflationary cut business costs and enhance efficiency. A pressure, particularly in the electronics, apparel National Electronic Product Catalogue will be and toys segments. developed and linked internationally. In the There are no signs of Singaporean retailers Top News Headlines short term, this project will eliminate inefficien- moving into China. However Dairy Farm Retailers in Singapore absorb GST hike: A cies along the supply chain and increase pro- International, a Singapore-listed retailer head- number of leading retailers in Singapore are ductivity through implementing e-business quartered in Hong Kong, has been opening absorbing the 1 percent increase in GST (goods standards. stores in Greater China. and services tax), which came into effect in Cold Storage launched the first self-check sys- January 2003, to keep up with the stiff competi- tem in Singapore. Richard Loretto tion. Dairy Farm also slashed prices on 100 pop- Mobile introduced the Speedpass system for Deloitte Touche Tohmatsu ular house brand items across all their retail fast and efficient payment, an addition to its loy- Singapore banners, effective for six months beginning alty points program. January 1, 2003. Singapore sets up retail academy to upgrade Mergers and Acquisitions SPAIN standards: Singapore’s retail industry is creating Robinson, Singapore’s oldest retailer, plans to its own training academy, the Retail Academy of sell its retail business, including its valuable Singapore (TRAS). The project is spearheaded Marks & Spencer franchise, and return cash to by the Singapore Retailer’s Association (SRA), shareholders. The company may not sell its the Association of Shopping Centers and Retail retail business to the highest bidder but to one Top News Headlines Promotion Center, and is supported by the committed to developing the 145-year-old Regulation challenged: Legal restrictions on Singapore government. brand. Robinson is looking for a buyer with a larger stores are being reconsidered, with some Profitable FairPrice seeks expansion: Boosted longer-term view on the business, including the players trying to influence the new regulations. by higher sales revenues, Singapore’s NTUC welfare of staff and management. Mercadona continues expansion: Applying a FairPrice is looking to employ more people and Dairy Farm: acquired five supermarkets in business model very similar to Wal-Mart’s every expand both in Singapore and the region. The Taiwan as well as Ikea Hong Kong and Taiwan; day low pricing, Mercadona has become the group’s sales increased by 4.2 percent from the commenced operations in South Korea through third-biggest retailer in the food sector. previous year. Although FairPrice closed three a 50-50 joint venture with CJ Corp. to operate Retailers make governance a priority: The stores in 2002, it opened three new stores with- health and beauty stores, and acquired the Kayo Enron and Ahold scandals have retailers focus- in the first half of 2003. chain of 22 supermarkets in Taiwan, increasing ing on reinforced internal controls and rebate its total outlets to 144. management. The Retail Environment Will Ahold Sell?: Rumors abound regarding Economic woes impact the retail industry in Growth Strategies the possibility that Ahold will sell its business in Singapore. The long chain of economic down- Homegrown supermarket NTUC FairPrice has Spain to reduce its debt and cancel the nega- turns, the GST hike from 3 percent to 4 percent, officially launched Cheers, a convenience store tive sales trend in Spain. the Iraq war, and the onset of the SARS outbreak whose growth strategy is pitched at the Increased cooperation between manufactur- have taken a toll. younger market, marking its aggressive push ers and retailers: The sharing of commercial, Despite its woes, Singapore’s retail industry into the 24-hour convenience store business. technical and financial data makes it possible to saw an increase in shopper traffic sales during With the convenience chain banking on the better coordinate production with consump- the Great Singapore Sale this year. large customer base of its sister store, FairPrice tion. The overwhelming need for cooperation Though it may take retailers some time to supermarket, it is hoping to capture more than between manufacturers and retailers will lead recover from losses that in some cases amount- 50 percent of the market. to the elimination of traditional impediments ed to 70 percent during the SARS outbreak, the BreadTalk’s growth strategy is to revolutionize and reluctance between both parties with one mood is generally positive. the buying of bread into an experience that clear objective: profitability. Improvements in Those companies that can afford to take customers could look forward to. Brightly lit and technology have made this process easier. advantage of technology and strategy to spacious interiors and the open layout of the enhance the customer experience will be able BreadTalk outlets let customers observe the The Retail Environment to reap disproportionate gains relative to their baking process.The strategy is to have signature Most big players have experienced reason- smaller competitors. Today’s marketplace chal- items that are distinctive, with bizarre shapes able growth, mainly because of the healthy lenges include: Consumers are becoming more and imaginative names. The presentation growth in Spain’s GDP compared to that of empowered and difficult to retain; The market- revolves around themes inspired by prevalent other European countries. This sales increase place is reaching high levels of consolidation, social and cultural trends. BreadTalk has its own has been bigger in supermarket chains because with powerful players shifting the competitive experienced research and development team they do not have legal constraints against new landscape; Rent is relatively more expensive in that regularly seeks to come up with new openings. Singapore because of the limited land space recipes that meet the ever-changing taste of Retailers have worked hard on cost reduction and high property prices; Technologies are the customers. to increase profitability. proliferating and becoming more powerful POPULAR in Singapore has become a house- There has been strong growth for the well- and more complex to manage, and the pene- hold name known for its wide offering of positioned non-food specialists like Zara, El tration of local and regional markets by Wal- Chinese and English books and value-for- Corte Inglés and Media Markt. money stationery products. POPULAR book-

G42 STORES / JANUARY 2004 WWW.STORES.ORG Retail Industry Profiles

There has been no deflation in Spain, or in growth than the older, traditional trade groups. Surveillance) system. most countries in Europe. The euro’s introduc- It is expected that the split between modern Tesco Lotus installed software that enables tion has generated some inflationary effect, and traditional sectors is approximately 53 per- individual units to create and print signage and which is partly offset by private-label product cent – 47 percent. The traditional trade market labels. The user interface is available to store increases and the growth in the hard discount share will continue to decrease because of the associates in both Thai and English. store format. Consumers feel prices of fresh rapid expansion of hypermarkets in the next Tesco Lotus is planning to introduce an online products have increased, and the government is few years. ordering service as part of its expanding retail analyzing different possibilities to control them. Discounters moving up country: With limited channels. The computer and Internet penetra- prime space in central and tough zon- tion rate in Thailand is comparatively low, and it Technological Investment ing regulations, discount store chains Tesco may take about five years before the market is Carrefour Spain has implemented a system to Lotus, Carrefour and Big C are gearing up to ready for extensive services. receive electronically the invoices from the sup- expand their network with a mix of big and pliers, avoiding manual recording in the small stores. Carrefour announced a plan to Mergers and Acquisitions accounting system. Almost 70 percent of its open its second provincial branch in Hat Yai to Tesco Lotus has expanded by acquiring local invoices are received electronically. compete with Tesco Lotus, Big C and Royal department stores and converting them into El Corte Inglés has built two totally automated Ahold’s Tops. Tesco Lotus is aggressively Tesco Lotus branches. warehouses (Madrid and Barcelona) to improve expanding by either building a new store or Hong Kong Land, a leading property group in its replenishment process. The supported soft- acquiring a local retailer and converting it to Hong Kong, has acquired a 30 percent stake in ware was developed internally. Tesco Lotus superstore. Additionally, Tesco Gaysorn,Thailand’s upmarket retailer. Inditex has developed a system to label its Lotus is expanding its smaller store formats, items in the stores with the information provid- Tesco Lotus Express and Tesco Value Store, Growth Strategies ed by the headquarters. because they are faster and easier to build and With increasing competition from foreign manage. hypermarket retailers, local supermarket and Mergers and Acquisitions Prospects bright for convenience stores: Al- convenience stores have employed a strategy of CVC acquired Grupo El Arbol, a former Laurus though hypermarket stores have become wide- focusing on other value-added products and subsidiary in Spain. spread in Thailand, the business potential for services. Convenience stores such as 7-Eleven Caprabo acquired Alcosto, a Madrid super- convenience stores remains lucrative, expecting offer new conveniences such as utilities bill pay- market chain. to reach 8,500 outlets by 2008.The number of 7- ing and catalog sales. Many local department Eleven outlets is expected to grow from 2,300 in stores have undergone major renovations and Growth Strategies 2003 to 3,000 in 2005. are focusing on high-growth merchandise such Mercadona, the fast-growing supermarket Regulations amended: Although the scope as IT and electronics, education and lifestyle chain, doubled its revenues in three years fol- is still unclear, amendments to regulations are products. lowing a successful every-day-low-pricing busi- being discussed that will curb the expansion Health and beauty stores such as Watson and ness model. of large discount chains by imposing zoning Boots will move to open outlets in smaller sizes Marionnaud is a French company with a sig- ordinances in provinces outside of Bangkok. this year and expand distribution channels. To nificant growth in Spain through the acquisition At the same time, the internal trade depart- attract new customers, the chain will open of small independent perfumery shops that are ment is in the process of setting fair trade Boots Corners at Robinson and some branches re-branded and given new openings. guidelines to restrict modern trade retailers of Central department stores. It will also intro- Marionnaud leverages its size to obtain opti- regarding heavy price reductions and the use duce more private label goods, both imported mum pricing terms from its vendors. Due to its of bargaining power on suppliers. The guide- and locally made. Similarly, Watson has expand- competitive prices, there is no other significant line will also prohibit retailers from producing ed its network by opening compact-size outlets player in the perfumery sector in Spain. private label brands using the know-how or on BTS skytrain. Media Markt is growing rapidly through new similar packaging to that of branded manu- Trying to keep their core customers loyal, openings in shopping centers. facturers. many hypermarkets are now offering their own The Thai government has set up Allied Retail credit cards. These hypermarkets also promote China Impact Trade Co. (ART) to help grocery stores and fami- their own private labels, targeting lower income No Spanish retailer has opened a store in ly-run stores compete with modern trade retail- group of customer. China. Usually the natural growing process ers. ART consolidates volume from small retail- With limited prime space and potential zon- takes Spanish stores to Latin-American coun- ers to achieve the same level of bargaining ing regulations, most retailers are now building tries because of the affinity of the language and power as modern trade. smaller size stores. customs. Another development is in “retail-tainment,” a Some of the international retailers (Carrefour, The Retail Environment combination of movie theatres and hypermar- Auchan), continue to source large portions of Official statistics showed significant growth in kets housed in one building. It’s designed as a their merchandise (appliance and other elec- modern trade retailing, with sales rising nearly single stop for both shopping and entertain- tronics products) from China. 46 percent, from 1999 to 2001. Annual sales ment. Both Big C and Tesco Lotus already have growth in 2003, however, was expected to have stores with movie theatres and bowling lanes. Juan José Roque,José Luis Aller,Victoria Larroy slowed. Deloitte Touche Tohmatsu Total retail sales in Thailand approached $24 China Impact Madrid,Spain billion in 2002. Growing domestic consumption Lotus Supercenter operates 17 branches in and heavy promotions from retailers were China, and the Charoen Pokphand (CP) Group responsible. aims to build another 30 new Lotus branches in THAILAND Total hypermarket (Tesco Lotus, Big C, Makro, the northern region. Carrefour) sales in 2002 were around $3.62 bil- With China’s booming economy and its grow- lion, an increase of 12 percent. Sales per hyper- ing middle class, CP is looking to have at least market were more than $24 million compared 100 Lotus hypermarkets located in the country with $4.8 million per supermarket and $286,000 by the end of 2006. Top News Headlines: per convenience store. Ekkapob Makeguljai Modern retailing is growing: Thailand is Deloitte Touche Tohmatsu among the many Asian countries in which the Technological Investment Bangkok,Thailand modern trade sector is registering stronger Big C has completed a chain-wide installation of an RF-EAS (Radio Frequency Electronic Article

WWW.STORES.ORG STORES / JANUARY 2004 G43 Retail Industry Profiles

UNITED KINGDOM Nectar has instituted a multiple-retailer loyal- UNITED STATES ty program with Sainsbury’s, Debenhams, and BP. Barclaycard has had successful growth in new card holders and is adding several new partners, including Vodafone. Top News Headlines Co-op stores are employing self-scanning Top News Headlines Morrison’s bid for Safeway allowed by com- technology. Kmart Emerges from Bankruptcy: Kmart petition authorities: Other leading supermar- Corp. emerged from Chapter 11 protection in ket groups, including Asda and Tesco, are pre- Mergers and Acquisitions May 2003. The third-largest discount retailer in vented from acquiring. Morrisons is expected to acquire Safeway, the U.S., 600 stores and 54,000 employees Private equity groups battle it out for Britain’s the U.K.’s fourth-largest supermarket chain. leaner, proceeded to hire new management, largest department store group: Pacific WHSmith exited from the U.S. with the sale introduce a trendy new Thalia line in its stores and Permira are involved in a $2 billion plus of its travel and hotel retail businesses. to capture Hispanic shoppers and report a battle to take Debenhams, the U.K.’s largest Baugur, an Icelandic retailer, acquired sharply narrowed loss in the second quarter of department store operator, private. Hamleys. 2003. Tesco takes 12p in every pound: Despite GUS, owner of Experian, Burberry and Argos, The SEC Investigates Retailers: The Securities missing out on the opportunity to participate acquired Homebase from private equity own- and Exchange Commission investigated vari- in the Safeway consolidation, Tesco continues ers, who themselves bought it from ous retailers’ accounting practices, looking into to go from strength to strength in sales, prof- Sainsbury’s in 2001. their account of vendor rebates and other ven- its, market share, non-food and on-line retail- The purchase of Debenhams by one of two dor considerations. ing. This year Tesco launched the Cherokee private equity groups is likely. The Wal-Mart Effect: A Gauge of the U.S. brand for its clothing offer in the U.K. With 27 Economy. Bloomberg News reported that Wal- percent of the grocery market, 12 percent of Growth Strategies Mart accounts for 9 cents of every U.S. retail all U.K. retail sales are at Tesco outlets. Tesco Many exciting fashion brands are led by dollar; its cash registers check out 19 million has also continued to expand its overseas French Connection, with its highly successful customers daily; it is the world’s biggest seller operations. FCUK brand and the continuing growth in the of toys, diamond jewelry, underwear and Kingfisher final demerger completed: King- higher luxury end with brands such as DVDs; its customers earn only about $1,000 fisher, the former U.K. retail conglomerate, Burberry and Pringle. less than the annual income of all U.S. house- completed its plan to break up into focused New Look continues to show strong growth holds; its sales affect more than 21,000 suppli- chains with the separation of its DIY and elec- and is now moving into menswear as well as ers, and it is the nation’s largest private trical businesses. Having disposed of seeking larger stores. employer, with 1.1 million U.S. employees. Woolworths, its general merchandise offer, and George Clothing, wholly owned by ASDA, has Store-Within-Store Concept Expands: In- , the chemist chain, in 2002, opened its first stand-alone store. George pro- creasingly, retailers are expanding their con- Kingfisher, trading as B&Q in the U.K. and vides good quality, low-priced clothing and cepts into other retailing venues as a means of Castorama in France, is now the world’s third- continues to take market share from the major increasing sales.Wal-Mart will be testing Krispy largest DIY chain. clothing retailers, particularly in children’s Kreme donut stores and H&R Block tax services Marks and Spencer to focus on furniture: As wear. inside its supercenters. RadioShack has been a plan to enter this highly fragmented sector, Mobile phone retailing continues to show- opening store-within-a-store formats in other Marks and Spencer poached Vittorio Radice, case many excellent retailers. A U.K., and more retail channels such as TrueValue Hardware. who has successfully turned around recently European (France, Germany), market Payless ShoeSource announces its first Payless Selfridges, to lead their push into the home leader is Carphone Warehouse. Brand neutral, ShoeSource Express store-within-store in HEB furnishings and furniture market. As existing it focuses on customer service, and it goes Grocery Stores. Toys “R” Us will be represented players such as MFI and Ikea are successful, from strength to strength and is expanding in Albertsons stores under a concept called Toy others such as Next are now planning to enter into telecom services itself. Box. Starbucks is opening full-service shops the sector. Showing that retailers can compete with the inside banks. Boots has brought in a new executive team scale supermarkets even in food and drink, Saks Fifth Avenue Ventures Abroad: Saks to try to counter the attack from the supermar- Majestic Wine, with its larger outlets, focuses Fifth Avenue, the upmarket department store, kets. In a change of strategy, Boots pulled the on value and knowledge of the product. It con- has said it would open a branch in Tokyo by plug on its new Wellbeing and Pure Beauty tinues to gain market share in this growing autumn 2005, marking the retailer’s first foray retail concepts. category. Range, product knowledge and loca- into the Asian market. The retailer also tion are the key basics delivering exceptional entered into a licensing agreement to open The Retail Environment success to date. four Saks Fifth Avenue stores in the United The retail environment in 2003 continued to Arab Emirates, Qatar, Kuwait and Bahrain in be challenging, with intense competition and China Impact 2004. pressure on prices, but still offering growth for Despite the historic U.K./Hong Kong links, those with the right offer. U.K. retailer expansion into China is relatively The Retail Environment In 2003, total sales are up 5 percent and com- limited. Significant switches of sourcing to Retail sales growth was subdued in 2002 parable store sales are up 2 percent. This com- China are taking place. But on the retail side, and early 2003. In 2002, total retail sales rose pares to 7 percent and 5 percent, respectively, only a handful of companies are currently in 3.1 percent. Since the spring of 2003, however, in 2002. the country. B&Q is well established; MFI has an sales growth has been firming. For the first With relatively low interest rates and relative- operation in Taiwan. nine months of 2003, sales were up 5.3 per- ly benign economic conditions, particularly Retailers continue to expand their sourcing cent from the same period in 2002. The sec- compared to those of the Euro Zone countries, of goods from China for the U.K. market across tors reporting the strongest year-over-year consumer spending continues to hold up, but all segments. Many have established buying growth rates in 2003 have been gasoline sta- real growth for retail is increasingly harder to offices in Hong Kong and look to expand their tions, non-store retailers (including electronic come by. sourcing from China. shopping), restaurants and home improve- ment stores. Technological Investment Richard Lloyd-Owen, Mike PreFontaine The lowest interest rates in 45 years created Safeway, Unilever,Tesco, Gillette and Woolworths Deloitte Touche Tohmatsu record levels of home refinancings in 2003 that are piloting radio frequency identification (RFID). ,U.K. put extra cash in consumers’ pockets. More

G44 STORES / JANUARY 2004 WWW.STORES.ORG Retail Industry Profiles than 68 percent of U.S. households own their chain in the U.S., completed a merger with Tuesday Morning Corp. was recently hailed own home, and many have refinanced over Gart Sports. The combined company has 389 as a “truly unique retailing concept” by one the last several years. Additionally, con- stores in 45 U.S. states. Wall Street analyst. It offers an event-based sumers’ cash positions were helped in the ConocoPhillips announced in October 2003 calendar for selling closeout, first-quality second half of 2003 by the federal govern- it is selling its convenience store chain Circle K merchandise such as branded upscale home ment’s child tax credit checks and withhold- Corp. to Canada’s Alimentation Couche-Tard furnishings, gifts and related items. Sales are ing tax cuts. Another contributor to the con- Inc. for about $821 million. The deal would expected to continue to grow 10 percent to sumer’s increased willingness to spend has mean the Canadian retailer will have more 15 percent per year over the next three to been the year-long runup of the stock mar- than 4,500 owned or franchised convenience five years. The retailer keeps costs down by ket. Last, the late-summer turnaround in the stores in the U.S. and Canada. selling from low-rent locations and using labor markets should help improve spending CompUSA, the consumer electronics chain seasonal help. It was been growing quickly, in 2004. owned by Mexican businessman Carlos Helu, from 286 at the end of 1996 to its current 556 is spending roughly $55 million in cash to units in 43 states. The off-price chain has Technological Investment acquire San Francisco-based Good Guys, implemented many initiatives since 2000 Wal-Mart has mandated that its top 100 which operates 71 stores in California, including the installation of new equipment suppliers provide RFID-tagged products to Nevada, Oregon and Washington. The move for unloading and opening boxes of new the company’s backrooms and distribution came after Helu’s takeover offer for Circuit inventory and stocking store shelves to boost centers by 2005. By the end of 2006, it expects City, in which he holds a 9.2 percent stake, its merchandise flow onto store shelves more all its suppliers to put RFID tags on pallets was rebuffed. rapidly. and cases. This mandate is expected to speed Sears, Roebuck and Co. sold its National Tire wider adoption of the technology and, as a & Battery (NTB) format to TBC Corp. for roughly China Impact result, reduce the cost of the tags themselves. $260 million. The move indicates Sears’ com- The U.S. trade deficit with China was running Wal-Mart’s requirements reportedly will cost mitment to focusing its efforts on its core at $120 billion in 2003. This represents the consumer goods manufacturers more than $2 department store business. NTB operates 226 widest gap between any two nations in histo- billion, collectively, or $13 million to $23 mil- stores in 20 states and has annual sales of ry. U.S. officials have asked Beijing to let the lion, individually. Retail analysts at Sanford C. more than $425 million. Yuan float freely. Politicians have vocalized Bernstein estimate that Wal-Mart could save their concerns over U.S. manufacturing job $8.35 billion annually, mostly in labor costs, Growth Strategies losses due to cheap imports and have accused by using RFID. Chico’s FAS has become one of the hottest China of keeping its currency artificially weak Called “a groundbreaking, technology-pow- tenants in malls by catering to the often-over- to bolster its exports. ered food-shopping revolution,” the shop- looked baby boom generation. It sells sophis- The types of goods being exported to the ping buddy is a cart-based wireless shopping ticated private label clothing and fashion U.S. from China are continually being upgrad- aide, being used at several Stop & Shop stores accessories. Chico’s has enjoyed six years of ed. Two decades ago, China’s exports were in Massachusetts. The technology walks and double-digit same-store sales and its operat- dominated by primary goods such as steel or talks the customer through the shopping ing margins are among the best in the indus- agricultural products. Today, China’s Haier experience. More specifically, it utilizes the try. With annual sales above $800 per square Group, for example, sells its refrigerators and retailer’s loyalty card data, linking the card foot, Chico’s total sales have quintupled, and air conditioners at such stores as Costco,Target and its personal shopper history to an 8-inch net income has increased 15-fold in the past and Wal-Mart. by 11-inch tablet that the shopper reads from five years. It recently agreed to buy the White U.S. retailers currently procure vast amounts a handle on her cart. The wireless browser House Inc., a women’s apparel chain that sells of goods from China, which has contributed to and ceiling-embedded sensors enable the only black and white clothing. Part of its mar- deflation in some retail sectors in the U.S. tablet to send and receive data that speeds keting success involves an active database of Numerous companies are setting up buying and simplifies the shopping experience. The more than 3.2 million customers, including offices there. Wal-Mart purchased approxi- system alerts the shopper to items that are on 716,000 Passport loyalty card customers. mately $12 billion worth of goods from China sale, items that are available at special prices Chico’s expansion plans have not been a total in 2002, making it the largest purchaser of specifically for the shopper and it can even success story. The company reportedly will Chinese goods. The U.S. retailer has 300 pur- place the shopper’s deli order for her and shutter its fledgling Pazo junior store concept chasing agents at its procurement center in alert her when its ready. in early 2004. Shenzhen. It has said it may double the level of Sarbanes-Oxley and Beyond. The Sarbanes- Williams-Sonoma, Inc. is a specialty retailer its purchases over the next five years. Home Oxley Act of 2002 is designed to improve of products for the home. Its sales of $2.36 Depot is setting up a procurement center in corporate governance practices and prevent billion in 2002 placed it just below this year’s Shanghai. fraudulent activity. It has been estimated Top 200 Global Retailers list. Sales rose 13 Few U.S. retailers have ventured into China. that the Fortune 1,000 can expect to collec- percent in 2002. The company’s two major Wal-Mart, however, has been selling in China tively spend $2.5 billion on Sarbanes-Oxley segments consists of retail store concepts: since the mid-1990s. It recently opened its compliance. As a result, retailers are spend- Williams-Sonoma, Pottery Barn, Pottery Barn 28th store there, a Sam’s Club in Beijing. ing heavily on business intelligence analytics Kids and Hold Everything; and its direct-to- to help improve business performance man- customer segment sells similar products Tara Weiner, Diane Kutyla agement. Beyond Sarbanes-Oxley compli- through direct-mail catalogs and e-com- Deloitte Touche Tohmatsu ance, retailers are beginning to focus on merce websites. One of Williams-Sonoma’s Philadelphia,PA and Parsippany,NJ measuring performance and connecting strengths is its ability to continually add new strategies to scorecards, while increasing retail concepts that help grow sales. For customer responsiveness. Retailers are example, the company has said that two spending on robust solutions that support new catalogs, West Elm and Pottery Barn huge datasets that large numbers of individ- Teen, are exceeding expectations. uals can access. Additionally, the company’s ongoing focus on customer service, operational execution Mergers and Acquisitions and cost containment have helped to The Bon-Ton Stores won a bidding war in recently deliver record quarterly earnings. Its September 2003 for The Elder-Beerman Stores use of customer relationship management Corp., a Midwestern department store chain. (CRM) solutions has also improved customer Sports Authority, the largest sporting goods profitability.

WWW.STORES.ORG STORES / JANUARY 2004 G45 Transforming the Customer Experience By David Thomas, President and CEO, Triversity Inc.

In recent years, retailers have imple- delivery to the actual transaction — identified within a store (through mented technology solutions that works together to help form the a loyalty card or giving the cashier help them become more competitive customer experience. his or her phone number), the by improving operational efficiencies. sales associate can provide helpful Now, however, the focus is expand- Customer-Centric information based on the customer’s ing into another area as well: Solutions for Retail purchasing patterns: “Ms. Jackson, improving the customer experience. your favorite clothing designer At Triversity, we are focused on After all, a customer’s experience introduced their fall line this week. enhancing the customer experience in the store strongly influences And by the way, your account has through technology that we call buying frequency, buying behavior, now reached premiere status, “Customer-Centric Solutions for word-of-mouth communication, entitling you to a discount on your Retail.” These solutions allow retail- and overall satisfaction. next purchase.” This type of cus- ers to deliver a consistently positive tomer-focused, personal encounter experience throughout the enterprise, goes a long way towards building regardless of whether the customer is loyalty and enhancing the customer shopping at his or her favorite store experience. location or one that’s hundreds of miles from home. Merchandise returns is another area that plays a large role in the customer Customer-Centric Solutions change experience. Retailers need the right the nature of how retailers sell to technology solutions in order to their customers. Today, when a create a fast, flexible and fraud-proof shopper walks into a store, product returns process for customers, even if availability is based on store invento- they don’t have a receipt. A ry. But what happens when your convenient returns process is a key store POS system can provide a component of customer satisfaction. gateway into your entire retail enter- For example, when a customer prise? Then, if a product is out of The scenarios I’ve described in this enters a store for a destination pur- stock at that store, a sales associate article represent just a few examples chase, the goal is to quickly find the can quickly search for the product of Triversity solutions that retailers product. If the customer can easily throughout the retail chain, identify around the world are using to create locate the product, determine the locations where the product is in superior customer experiences while availability, and understand the stock, and arrange for the product to optimizing their business. Triversity choices, the customer experience is be shipped to the store, held at has built its reputation based upon positive. However, if the product is another store for customer pickup, our leadership in enterprise and not in stock, the customer walks or delivered to the customer’s traditional POS, Loss Prevention, away with a negative impression, residence. CRM, and other Customer-Centric and the retailer loses the sale. That Solutions. And as the future presents doesn’t have to happen! Too often That’s the kind of service that creates opportunities for retailers to optimize the retailer may have the product a memorable customer experience, their largest single controllable elsewhere in the enterprise, but lacks and it is enabled by an enterprise expense — labor — through improv- the technology to determine the POS system with integrated order ing store workflow and business product’s availability and present a management. But this is only one processes, Triversity will be there as solution to the customer. aspect of creating a great customer well. experience; there are many more. Retailers make significant investments Triversity’s Customer-Centric in merchandise planning, promotions Successful CRM strategies, for Solutions give retailers every advan- and store aesthetics. These are example, can have a profound impact tage for greatly increasing sales by critical factors in creating the right on the customer experience, as transforming the customer experience. customer experience. But technology retailers identify their best customers Triversity solutions provide a flexi- also plays a key role, since every- and recognize their buying patterns. ble, scalable, and solid foundation thing in the selling process — from CRM is an enabler for one-to-one for the new era of customer-focused product identification, selection and personalized promotions. As an retailing. example, once a customer is DO YOU DISPLAY THE SIGN CUSTOMERS FROM AROUND THE WORLD PREFER?

As more and more retailers have discovered, the preferred currency of travelers from around the world is the Diners Club® Card. In fact, a significant source of all Diners Club U.S. retail sales come from international Cardmembers. Simply put, when you accept the Diners Club Card, you look forward to a busier business. And that spells profit in any language.

Call 800.432.1160 or visit dinersclubus.com.

©2004 Citicorp Diners Club Inc. Worldwide More Than 500 RETAILERS Run Their Business On TRIVERSITY SOLUTIONS.

Around the world, Triversity delivers store solutions that help retailers enhance the Customer Experience and boost the bottom line.

Our Customer-Centric Solutions for Retail are changing the way that retailers sell to their customers while helping stores improve their operating efficiencies. More than 500 retailers in over 30 countries run their business on Triversity solutions — one reason why Triversity is the fastest-growing international provider of Customer-Centric retail solutions.

Most retailers know Triversity for our best-of-breed J2EE and Windows®-based POS solutions. But that’s just the beginning. Our growing portfolio of integrated solutions includes market-leading Loss Prevention, Retail CRM, Returns Management, Sales Audit, Inventory and Order Management and more, all designed to help you deliver an exceptional Customer Experience throughout your retail enterprise. Customer-Centric Solutions for Retail www.triversity.com Triversity Customer-Centric Solutions for Retail: they’re the foundation for the 888.287.4629 x 295 new era of customer-focused retailing. Learn how we can put the power of Triversity solutions to work for you. Contact Triversity today.