Global Trends in Retail Innovation
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Global Trends in Retail Innovation Christine Cross March, 2010 Disclaimer ¾ The information in this presentation is provided as a courtesy by Christine Cross Ltd (CXL) and conclusions are the results of the exercise of CXL’s best professional judgement. ¾ CXL does not give any representation or warranty express or implied concerning the accuracy, completeness or fitness for a particular purpose of the information contained herein and accepts or assumes no liability or duty of care to any persons accessing this information. ¾ Any use made by a third party of the information contained in this presentation, or any reliance placed upon it, is the responsibility of such third party who shall assume full responsibility for the use of the information and understands that CXL is not responsible or liable for any claim, loss or damage arising from the use of the information. 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Copyright in the presentation is owned and retained by CXL to the extent permitted by law and this presentation and the information contained herein should not be copied or disclosed to any other person without the express authorisation of CXL. 1 www.christinecross.com When the going gets tough Introduction GDP Growth The worst recession of world economy since WW 5% II (-2.9%) will be followed by a very fragile 4% and slow recovery in 2010 3% 2% Expected USA GDP growth 1% 4.4%1.8%2.0% 2.9% 4.1%3.6% 4.2% 4.0% 2.1% 1.5% of around -2.9% in 2009 0% before a small recovery in 00 01 02 03 04 05 06 07 08 09 10 2010 (+1.1%) -1% -2% -2.9% Expected EMU GDP -3% World growth to stay under USA USA GDP growth both in 2009 -4% Eurozone (-4.8%) and 2010 (-0.1%) -5% -6% Sources: IHS Global Insight, Euler Hermes Calculation and Forecasts published end of March 2009 in the EH Economic outlook 2009 #2 (GDP 2007 weighting at current exchange rates) 2 www.christinecross.com What is needed today? Introduction …for survival DEBT / CASHFLOW COST CONTROL STOCKTURN …your “bank” budget 3 www.christinecross.com What is needed today? Introduction …for growth INNOVATION CUSTOMER METRICS PROFITABLE SALES …your “target” budget 4 www.christinecross.com What is needed today? Introduction …for out performance $ $ € $ € $ € € $ INVEST IN PEOPLE $ SWEAT THE ASSETS REMEMBER, MULTIPLES MATTER …your “stretch” budget 5 www.christinecross.com Key characteristics of growth retailers Introduction What characterises the winners in the last 18 months? ¾Contemporary formats ¾Format flex by geography ¾Supply chain infrastructure investment ¾Continuous reduction in CODB ¾IT simplicity in operations ¾Verticalisation in processes / operations …and the ability to INNOVATE at low cost 6 www.christinecross.com Innovation will depend heavily on market status Introduction independent FRAGMENTATION format economic proliferation growth legislation cash & carry small box saturation CONSOLIDATION chain stores 7 www.christinecross.com …and on format specific trends Introduction ¾Drugstores 1980s larger store formats 1990s extended range, including convenience food 2000s giving space back to customers 2010 format flex by neighbourhood / authoritative offers ¾Hypermarkets 1980s invention 20,000 sq m 50 : 50 2000s downsizing 2005s shop within shop Still contrasting approaches, e.g., Carrefour Auteuil v Auchan Velizy v Mulhouse ¾Supermarkets 1980s ranging by store size 1990s ranging by customer sociodemographic 2000 customer insight driven ranging ¾Cash & Carry Morphing with hypermarkets Non-trade model, e.g., Costco, Sams Club Trade model, e.g., Metro Added value service model, e.g., Booker ¾Electrical 1990s Big box, price, volume sales 2000s Theatre & service to differentiate from .com 8 www.christinecross.com Innovation is key to all Introduction QuickTime™ and a Follow the decompressor customer = follow the money are needed to see this picture. 9 www.christinecross.com Agenda 1 Retail formats 2 Products 3 Other interesting “stuff” 10 www.christinecross.com Retail Formats 1 11 www.christinecross.com Shoppers Drug Mart - Canada 1 ¾ No 8 in the global drugstore rankings, but dominant in its Canadian home market with some 1,300 stores of c800 sq m, and 6.5% market share. ¾ Has deliberately segmented its store offers by market and customer requirements - differentiating between health (including a format for medical centres), beauty & everyday convenience food products. ¾ Well-developed “Shoppers’ Optimum Loyalty Card” programme with over 9m customers enrolled. 12 www.christinecross.com Shoppers Drug Mart - Orleans, Canada 1 ¾ Murale is their perfumerie / beauty store concept ¾ Five currently, the concept is still on test 13 www.christinecross.com Shoppers Drug Mart - Toronto, Canada 1 ¾ All stores are in process of being refitted to represent: Either health and / or everyday needs and / or beauty 14 www.christinecross.com Alliance Boots - UK 1 ¾ A home-grown, vertically integrated UK business with domestic manufacturing. Boots is “on steroids” since its move into PE hands in 2006. ¾ No 6 in the global rankings, with 3,400 stores of c300 sq m Boots has become a chameleon well able to morph from one format to another based on local needs, bur focused firmly around health and beauty. ¾ The Boots loyalty card helps gather customer data, identify market gaps and track opportunities. ¾ Boots has been innovative in both format & product in the last three years & is not shy of its name. 15 www.christinecross.com Alliance Boots - Seahouses, UK 1 ¾ Under PE (KKR) ownership, stores designed to serve segmented local needs from this… 16 www.christinecross.com Alliance Boots - Colchester, UK 1 ¾ …To drive through pharmacy format 17 www.christinecross.com Alliance Boots - London, UK 1 ¾ …To a full service store with: - one floor focused on beauty -one on health - one on everyday needs 18 www.christinecross.com AS Watson - Hong Kong 1 ¾ AS Watson runs concessions in its stores for brands but, also, for other retailers 19 www.christinecross.com AS Watson - Wuhan, China 1 ¾ From the traditional SE Asia drugstore, where they dominate the market 20 www.christinecross.com AS Watson - Krakow, Poland; Brighton, UK; Frankfurt, Germany 1 ¾ …To bespoke businesses acquired through M&A that trade very differently in each market. 21 www.christinecross.com Walgreens 1 ¾ The No 1 drugstore retailer globally, not renowned for innovative store design, but what might happen with their purchase of Duane Reade - who, themselves, have just produced a Shoppers Drug Mart look alike in New York City. ¾ Might they look like Shoppers Drug Mart in the future? …but, what has been happening in other sectors? 22 www.christinecross.com Tengelmann – Neuried, Germany 1 ¾Supermarkets ranging from 400 sq m to 1,500 sq m. ¾93% food / 7% non-food. Non-food offering may be further reduced. ¾Strong emphasis on fresh and convenience. ¾Impressive meat/cheese counters and wine department. ¾Innovative elements are largely limited to the retailer’s latest generation of stores. ¾Self-serve units 23 www.christinecross.com Tengelmann – Neuried, Germany 1 24 www.christinecross.com Délitraiteur (Louis Delhaize) – Belgium 1 ¾Stores with sales area of 150 for ‘city’ concept and 250 sq m for others ¾Targets consumers with high disposable incomes and busy lives ¾Plans to rollout concept to France and perhaps UK 25 www.christinecross.com Délitraiteur (Louis Delhaize) – Belgium 1 ¾Store fittings made out of wood to accentuate premium positioning ¾Carries between 800 and 1,200 fresh lines, 1,500 to 2,000 ambient and 400 frozen ¾Organised by menu course, for example there is an area designated for desserts and for starters 26 www.christinecross.com Délitraiteur (Louis Delhaize) – Belgium 1 ¾Sells fresh, premium products including regional specialities, ready meals, prepared vegetables, salads and bakery goods ¾Some food lines change depending on the time of the day with bakery items sold in the morning and prepared meals from midday until 10pm. ¾Premium private labels called “Daily Delices” 27 www.christinecross.com Délitraiteur (Louis Delhaize) – Belgium 1 ¾Cooked food is sold in a Deli Takeaway section ¾Facilities for customers to eat on site ¾Sandwich bar caters for business meetings 28 www.christinecross.com Delhaize City (Delhaize) – Belgium 1 ¾City centre stores with sales area of approx 500 sq m selling c7,000 products ¾Concept focusing on self- service and convenience ¾Targets middle-class customers ¾A key banner for expansion within Belgium 29 www.christinecross.com Delhaize City (Delhaize) – Belgium 1 ¾Merchandising strategy focuses on deep range of fresh products, plus impulse ambient buys ¾Spacious layout ¾High incidence of cross- merchandising ¾100% self-service – fresh food prepared on site 30 www.christinecross.com Carrefour City (Carrefour) – Spain 1 ¾ Convenience store concept launched at the end of 2007 ¾ City centre stores for towns with limited space for new store openings ¾ Sales area