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What A Leading Manufacturer Should Know About Retail Jbretcha
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Let’s talk about Retail(your partner in conquering the Consumer)
Joaquim BretchaManaging Director Iberia
Netquest
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Top 25 Europa. Ranking Forbes 2009
The Retail has built large fortunes
$ Bn Rk $ Bn
1 Ingvar Kamprad IKEA 22,2 1 312 Karl Albrecht ALDI SÜD 21,5 3 273 Theo Albrecht ALDI NORD 18,8 6 234 Amancio Ortega INDITEX 18,3 11 20,25 Bernard Arnault LVMH 16,5 4 25,56 Stefan Perrson H&M 14,5 15 17,77 Liliane Bettencourt L'OREAL 13,4 7 22,98 Michael Otto ECE 13,2 14 18,29 Gerald Cavendish
GrosvenorReal Estate 11
10 Susanne Klatten BMW 10
20082009
Fuente: Forbes
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THE “SUPPLY CHAIN”
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Manufacturer’s Concentration: x 4 in 20 years
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Retailer’s Concentration: x 11 in 20 years
x32
x 4
x 12
x 20
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0,5
0,6
0,6
0,7
0,7
0,9
0,9
0,9
0,9
1,2
1,2
1,5
1,8
2,2
3,5
4,1
4,3
4,4
11,6
12,1
20,2Año 2007 Año 2008
CoviranBon PreuDinosol GrupoLa SirenaCondisAlimerkaEl ArbolGadisaEl Corte InglésAhorramásHipercorSabecoConsum CoopCapraboHiper EroskiLidlAlcampoSuper G.EroskiDia (*)Hiper CarrefourMercadona
0,6
0,6
0,7
0,7
0,7
0,8
0,9
1,1
1,0
1,3
1,2
1,5
1,5
2,7
3,7
4,3
4,0
10,8
11,7
19,6
3,4
(*) Dia en 2008 incluye Plus
The Food Retail Concentration. Top 10 accounts for 66% of the total market
Fuente: TNS Worldpanel
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The Role of “Retail”
Retail is the key toaccess the consumer
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THE SPANISH RETAIL SECTOR
Store Outlets Universe
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THE SPANISH RETAIL SECTOR
Channel’s Share of Market
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� Manufacturer’s Power
� Marketing to the end-consumer
� Focus on “Sell-in” Manufacturer
THE POWER SHIFT
Yesterday
� New Retail Formats
� Speculative purchasing: Hard negotiations
� “Amateur” sector
� Aggressive Hi-Lo promotions Retailer
�Natural Growth and diversity of consumption spending
Consumer
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THE POWER SHIFT
Today (some “hours” ago)
Retailer
� Concentration and International Expansion
� Focus on innovation and technological differentiation
� Consumer and Shopper Marketing
� From “sell-in” to “sell-out”
� Retail Concentration. Big competition
� Focus on “Efficient management” and “cost savings”
� Marketing seeks differentiation and Loyalty Building
� More demanding to Manufacturers (price / service) Manufacturer
�The “big spender”
�Huge amount of products and point-of-sales options
�Convenience: the key factor Consumer
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THE POWER SHIFT
Tomorrow belongs to the Consumer
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Physical Barriers are falling downThe Role of “Retail”
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Conceptual barriers are falling down (too)The Role of “Retail”
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Net Margin:1% - 4% while a manufacturer would never be satisfied with less than a 10%
It is a high volume & low marginbusiness
The high rotation is responsible for the“value”
The whisky effect: the great discovery of Gerard Mulliez
The Role of “Retail”
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Some figures for an average Supermarket chain(200 stores):
The moment of truth: shopper face –to - face• 400 categories• + 8.000 sku’s• Constant evolution of prices and products• Different Price levels according to catch-up areas• + 1.200 providers• 200 stores• 8.000 employees managed in autonomous cells• Logistics: from long distance to “the last mile”• Warehouses managing +25.000 sku’s• Food Safety laws
The Role of “Retail”
It is a very “demanding” business
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THE
4 MARKETINGP’s
in
Retailing
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ProductThe Shop.
“The Shopping Experience”
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The Value Offer is the CommercialOffer by itself: the “neverending”sum of multiple elements
TIENDA
SURTIDO
RELACIÓN CLIENTE
-80
-40
0
40
80Modernidad
Compras agradables
Diseño tienda
Rapidez
Localización prod.
Confianza del establec.
Surtido
Continuidad surtido
Roturas stock
Prod. nuevos
Calidad prod. frescosCalidad-precio marca propiaPrecio
Ofertas
Folletos
Publicidad
Amabilidad
Disponibilidad
Profesionalidad
Información al cliente
Servicios
Preocupación social
CARREFOUR'04
CARREFOUR'03
MERCADONA'04
MERCADONA'03
DIA'04
DIA'03
Product
STORE
ASSORTMENTPRICE
CUSTOMER RELATIONSHIP
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* La cuota de mercado pesa el 60%, el numero de tickets pesa el 40%** El margen % pesa el 30%, las ventas/ m2 y las ventas pesan el 25% cada uno, la rotación pesa el 20%.
Nota: Punto caliente presente solo en 43 tiendas
0
50
100
150
200
50 100 150 160
COMIDA PREPARADA
Punto caliente
CONGELADOS
PERFUMERIA
CHARCUTERIA
PESCADERIA
DROGUERIAFRUTAS YVERDURAS
CARNICERIA
SALADO
DULCELIQUIDOS CREMERIA
€80,000,000Ventas
Shopper’sRole*
Supermarket’s Role**
Trafico
Oportunista Base
Liderazgo
Media 100
Media 100PF
PGC
Leche
It’s a “location, location, location” business….that needs to work the Differentiation axis
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Price The market is the Owner. Theretailer is just a “follower”
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“Promotion”Advertising
Events at Store level
Retailers seek to differentiate. They invest in communication
• At the point of sale: Spending Builder
• External communication : Traffic Builder
They want to be the "master" of their actionsand, increasingly, seek originality in promotionalcampaigns and its communication
We will see new approaches to businesscustomers through technology and greatersophistication of marketing departments
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“Promotion” Winning shopper’s loyalty
Loyalty Card:
Customized promotions
Customized communication
Couponing
Fresh product Quality
Home delivery service
web2.0
Store commitments
Inherent coherence
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Place The Business Lung
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Increasing clients
Getting more from the current clients
In a “volumetrical business”,
growth is the key issue.
Companies can grow by:
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In a “volumetrical business”,
growth is the key issue.Companies can grow by:
Increasing clients
• Store Openings
• Traffic Attraction
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Increasing clients
Getting more from the current clients
Store Openings
Traffic Attraction
Loyalty
+ Spending per shopping Trip
In a “volumetrical business”,
growth is the key issue.
Companies can grow by:
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•Increasing the Parking space
•Increasing the baskets and carts size
•Volume promotions
• Shelves headers
• Fresh Products counters (service)
• Check-out merchandise
• Personalized Discount coupons
• Special Fresh Food Day
• Special discounts
How do Retailers increment the Average Basket Trip?
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WHAT IS THE RETAILER’SOBJECTIVE?
TO ACHIEVE THE EXPECTED
PROFITABILITY
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The Retail Goal: To reach the expected profitability
¿Which are the means?
EFFECTIVENESS EFFICIENCY
2 BASIC FLOWS:
PRODUCT & INFORMATION
ASSETS
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RETAIL MAIN FUNCTIONS
PURCHASES
MARKETING
SALES
OPERATIONS
IT
HR
FINANCE/ CONTROLLER
• Product negotiation: cost price control
• Global and local Agreements with suppliers
• Quality Control
• Client : strategy / shopper link: CRM/ Advertising
• Operational: Category – product management: assortment, pricing, merchandising, promotions, ECR
• Point of Sale Management, Client Service, Team Management
• Stock Management and Efficient Shelves Replenishment
• Stocks Management: Orders / replenishment / transport/ storage
TECHNICAL
• Client Solutions
• Internal Management
• Recruiting / Training/ Motivation / Management / Control
• Finance Statement
• Cost, margin and investments Control
• Openings, Construction, maintenance and security
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PURCHASES AND MARKETING FUNCTIONS
THE MANUFACTURER’S &
RETAILER’S LINK
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Why call itCOLLABORATION if they mean NEGOTIATION?
1 Pressure on the incomestatement
2. The Retailer calls for mostof the “Consumers’ Booty “
3. We are expiriencing a real Price War
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1,42
16
9,1
4,9
16
25
42
78
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Manufacturers Retailer
Cost of good sold
Fixed expenses
Variable expenses
Taxes
Net Profit
2,6
Source: Journal of retailing and consumer services15 (2008) 224-236, table 6, Marakon and INSEADclient expertise
Stylised cost structurefor retailers andmanufacturers
1. Pressure on the income statement
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2. The Retailer calls for most of the “Consumers’ Booty "
Operational margins, 2006
3,4%
4,3%
4,6%
4,7%
6,4%
6,9%
8,8%
11,6%
12,7%
15,1%
21,8%
24,6%
Kroger
Auchan France
Carrefour France
Casino France
Tesco UK
Walmart US
Target
Nestlé
Unilever
Danone
L'Oréal
Pernod
Source : NATIXIS, A. Casas & C. Raux - Marges distribution-industrie sur 10 ans - Septembre 2007
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3. A real Price War
MAS MADERA. ES LA
GUERRA!!
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ANOTHER 18th JULY. THIS TIME, 2007.
BEARN & STERN “TRASH FUNDS” FALL
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THE PERFECT STORM SETTLED IN SPAIN
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… AND YOU SUDDENLY DISCOVER THAT WE ARE NOT WHAT WE THOUGHT TO BE RICH
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2 BIG WARS IN ONE START
2.The “Brands’ War”:Manufacturers against Retailers
1. Price War between Retailers: The Open War
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'Esta crisis es la tercera guerra
mundial pero sin balas'
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“Inventiveness” by importing
“best practices(?)”
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Common goal: to offer a shopping cart cheaperFocus on the axle unit price + basket composition (PL)
+ Price- Price
+ Brands
- Brands
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* Datos obtenidos en base a 8.000 hogaresFuente: Worldpanel% Parte de Mercado Valor Total España Marca Distribuidor.
Total Alimentación + Bebidas (sin Frescos) + Droguería + Perfumería Familiar
The amazing growth of the Private Label
7,710,2
12,613,9
18,6
22,424,4
26,5 27,5 28,329,5 29,9
32,5
1991 1993 1995 1998 2000 2001 2002 * 2003 2004 2005 2006 2007 2008
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Creates
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While the Brands live their own war due to thefall of Consumption
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Could we think the Time for Consumer has arrived?
THE POWER SHIFT
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WITH THIS SCENARIO,
WHAT CAN BE THE ROLE OF THE“BUYER” IN RETAILING?
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EFFECTIVENESS CATEGORY MANAGEMENT
Sales
EFFICIENCY NEGOTIATION
Product Margin
The Retailer’s Goal: To reach the expectedprofitability
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CIFRA DE VENTAS 100
COSTE DE LAS VENTAS 75
MARGEN BRUTO 25Aportaciones Fuera Factura
MARGEN GLOBAL 28Pérdida DesconocidaPérdida Conocida
MARGEN COMERCIAL 25,5Costes logísticosDepreciación de stocks
MARGEN DE MERCANCÍAS 19,5Gastos de personalGastos de PublicidadAlquileresEnergíaGastos informáticosSeguridadOtros
CASH FLOW BRUTO 3,75Gastos FinancierosAmortizaciones
RESULTADO ECONÓMICO NETO 1,5
CUENTA DE RESULTADOS RETAILER
Simulation
profitability getting harder to get…
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CIFRA DE VENTAS 100
COSTE DE LAS VENTAS 75
MARGEN BRUTO 25Aportaciones Fuera Factura
MARGEN GLOBAL 28Pérdida DesconocidaPérdida Conocida
MARGEN COMERCIAL 25,5Costes logísticosDepreciación de stocks
MARGEN DE MERCANCÍAS 19,5Gastos de personalGastos de PublicidadAlquileresEnergíaGastos informáticosSeguridadOtros
CASH FLOW BRUTO 3,75Gastos FinancierosAmortizaciones
RESULTADO ECONÓMICO NETO 1,5
CUENTA DE RESULTADOS RETAILER
Simulation
EFFECTIVENESS
THE GREAT OPPORTUNITY FOR MANUFACTURERS &
RETAILERS:COLLABORATION
…becomes essential to maintain sales …
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CIFRA DE VENTAS 100
COSTE DE LAS VENTAS 75
MARGEN BRUTO 25Aportaciones Fuera Factura
MARGEN GLOBAL 28Pérdida DesconocidaPérdida Conocida
MARGEN COMERCIAL 25,5Costes logísticosDepreciación de stocks
MARGEN DE MERCANCÍAS 19,5Gastos de personalGastos de PublicidadAlquileresEnergíaGastos informáticosSeguridadOtros
CASH FLOW BRUTO 3,75Gastos FinancierosAmortizaciones
RESULTADO ECONÓMICO NETO 1,5
CUENTA DE RESULTADOS RETAILER
Simulación
EFFICIENCY
…and minimize costs
THE GREAT OPPORTUNITY FOR MANUFACTURERS &
RETAILERS:OPERATIONS
COLLABORATION
NEGOTIATION
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The price is a critical variable in productmanagement and marketing strategy
The manager pursues 2 goals:
1. Section Profitability
2. Positioning Objectives in prices compared tocompetition
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1. Section profitability
Simulation
SECCIÓN PERFUMERÍA 2010
CIFRA DE VENTAS 36.350.000
PROGRESIÓN % 3,50
MARGEN S/ PRODUCTO 21,05
OTROS INGRESOS 5,12
MARGEN GLOBAL 26,17
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2. “Competitiveness objective”
The Retailer can work a single rate but it is usual to work differentrates depending on the area of influence and the target
98 100 102 104
T.1 BASE T.2 T.3 T.4
MARCA NACIONAL - MERCADONA + + +
MARCA PROPIA - MERCADONA MERCADONA + + +
PRIMER PRECIO DIA LIDLLIDL +
+ +
COMPETIDOR ALCAMPO MERCADONA EROSKI CENTER CAPRABO
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The comparison with respect to competition is constant
2. “Competitiveness objective”
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211
536
697
1.547
1.657
2.232
5.573
0 1.000 2.000 3.000 4.000 5.000 6.000
Lidl
Schlecker
Maxi Día
Mercadona
Eroski Center
Caprabo
Alcampo
Tomas de precio en junio por competidor(Total surtido)
Total: 12.453 tomas de precios
The screenings are intensive and sustained
2. “Competitiveness objective”
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13
2. “Competitiveness objective”Price positioning
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• To the Customer
• Toward Teams
The benefits due to an EDLP Strategy are evident
But they can be much more if we use technology to ouradvantage and manage the variable with "intelligence"
Constant Price changes may have manyimplications
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While the storm obliges everybody to firmlyreact, there is no doubt that we all should be
preparing for the “dawn”
The“Shopper Marketing”
new Era
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� Reality Bites: Healthy food
� Local knowledge
� Sustainability
� Fair enough
� Seniors
� Discount and Value
� Online shopping
� Own label vs brand
� A time for change
� At your convenience (“eat out at home”)
We are facing a new consumer that isshaping new patterns
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� Fit to compete
� A sustainable future
� Backing the winners
� Reformating for success
� Seizing the opportunity
And Retailers must face the newchallenges globally…
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� Differentiation
� Innovation
� Adapt to new emerging Categories
� Health
� Conveniencie
� Pleasure
� Price
� “Smart” balance on National Brands and Private Labels
� The Shopper Comprehension
� Building new communication links with their shopper
� Manufacturers partnership
…and their Marketing strategy locally
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� Link up the Chain
� Know your customers
� Know your end consumer
What role it should play a leading Manufacturer?