This professor is learning as much as the “students”
This year marks 25 years of IMS Retail University workshops. What better way to celebrate than to take Retail U on the road to Cyprus! A common theme we promote in Retail U is to “get out of town” to see and learn about retail formats in other countries. This week’s workshops in Cyprus are proving to be a fertile opportunity for the “professor” to learn new insights for the emerging markets of Central and Eastern Europe.
Retail beyond the big box stores of the west
The US market is dominated by the big box retailers. Not just Walmart, but the big format retailers of CE like Best Buy and the office superstores. Large retailers and hypermarkets also dominate Western Europe. Carrefour is the European Walmart, and Media Markt is the pan-European CE specialist. Regardless of the retailer brand name on the store, the large organized retailers of Europe are not all that different. They operate pretty much like the big format retailers in the US who have well established supply chains enabling cost reductions.
But, what about growth markets like Russia, and the emerging markets like Poland, Hungary and Czechoslovakia? How does retail operate there? What are the differences … and the similarities?
The retail “chains” of Eastern Europe are smaller, store size tends to be smaller, and most eastern European retailers must buy products through distributors. In many ways, the smaller format retailers of Central and Eastern Europe must be very innovative in order to compete with superior resources and lower prices of the big box mass merchants.
Get out of town and learn new retail perspectives
I can tell I’m in for some interesting workshop sessions by the questions being raised at pre-meetings. In many ways, the participant questions regarding retail in emerging markets retail are very cutting edge:
- How do we sell value … and not just lowest price?
- How can we get consumers engaged … online and in store?
- How can we position to sell solutions versus commodities?
- How do we make retail stores more exciting … an experience?
- How can we do all of this with very limited resources?
The participant questions are a great insight into the changing face of retail. The challenges of retail are just as real for the small shop in Cyprus as they are for Dixons in the UK. However, in order to compete with the growing presence of big box mass merchants, the small shop has to provide a competitive experience with less resources / staff.
Small shops vs. Big Box … who will survive?
Don’t count out the small format retailers just yet. In a previous blog post, we highlighted how many large big box retailers are rushing to build much smaller format stores that are more efficient to operate.
Advantages of small retail formats and stores:
- Smaller retail formats are more efficient to operate
- Smaller format stores tend to be more personal, engaging
- Smaller retailers have the potential to integrate services
- Smaller retailers often have the advantage of location
- Smaller retailers can leverage consumer relationships
The disadvantages of being small:
- Large retailers have volume buying clout
- Large retailers have efficient supply chains to leverage inventory
- Large scale can leverage more supplier marketing support
- Large chains have head quarter resources to execute
- Large retailers have systems to forecast & manage in-stocks
If you make a composite list, there are probably more similarities than differences between big box mass merchants and the smaller retailers. In order to survive in the “Retail Jungle” … only those that manage details of meeting consumer needs are the ones that survive.
Changing Face of Retail – Internet everyone’s competitor
The overwhelming key learning of this professor visiting Cyprus is how much the internet is impacting retail worldwide. Large format or small, retailers are under siege worldwide. Consider the following European retail stats regarding their share price:
Other than changing the retailer names and the share prices to US $, I’m not sure that the chart would be all that different in terms of % change in share price for US retailers. Even the mighty Walmart has struggled to grow both comp store sales and share price. Make no mistake, Amazon and Amazon clones are changing the face of retail worldwide.
Key Learnings from the Retail Jungle
Retail has always been a tough business. It is becoming even more brutal in terms of consumers electing to purchase online. It is possible for smaller retailers to compete with big boxes … they can win on location, personalization and services.
It is quite another thing for smaller retailers in emerging markets to compete with the e-tailers of the internet. When consumers shop the internet, they are not just shopping local competitors. Online consumers literally have access to the vast virtual assortments, and the best prices anywhere in the world.
The game is not over just yet. There are challenges of shipping and custom duties on international web purchases. But, as all the retailers quickly found out in Australia, the internet will NOT go away … and consumers will go online to shop and make purchases.
The Retail University workshops in Cyprus are yet to unfold this week, but here are my top 3 take aways for retail in Eastern Europe:
- Use the internet to become a multi-channel seller
- Embrace social media to engage consumers
- Results Count … measure everything
As always, part of the international experience is “cultural”. When I get finished “eating about it” … I’ll give you a full update on the retail sound bites from Retail University in Cyprus.
To receive more information and sound bites from IMS follow IMS Results Count on Twitter and Facebook.
Sources:
- World Image: Chris Roll; Freedigitalphotos.net
- Online Shopping Image: Nokhoog Buchachon; Freedigitalphotos.net
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