MVI Insights Breakthrough - A Look At The New Retail Landscape
With the economic situation as the backdrop, changes in the retail landscape have taken place from top to bottom: from the macro, market, and continental levels down to specific initiatives of retailers amd thus suppliers. Here MVI focuses on core themes - driven by broader, more permanent, dynamics - that underpin these changes.Science
In everything from pricing to assortment to format design, global retailers are applying more systematicdiscipline and rigor to understand their shoppers. To participate in strategic conversations, suppliers muct continue to bring more specific and comprehensive fact-based insights to their retail partners. Pricing is becoming a much more significant issue, as retailers work to achieve price competitiveness or price leadership. Pricing strategy is particularly critical for suppliers. Without science to get a stronger economic assortment, retailers will put intense pressure on suppliers for funding to support a more aggressive pricing strategy.
At the store and on the shelf, retailers continue to focus on enhancing shopper choice. This enhancement can come from not only format prototypes but also experimentation within a retailer’s existing box. MVI profiles Wal-Mart’s Project Impact, illustrating a key retailer trend that is enhancing choice by reducing SKUs. Retailers (and suppliers) are increasingly finding that shoppers often react to SKU reductions with the feeling that the selection has in fact been enhanced. As this continues to gain steam, the challenge for suppliers in keeping SKUs in
distribution will become more intense, as retailers both add their own private label items and seek to reduce the total number of items available.
The economic flip-side of enhanced shopability is simplicity, along with the operational efficiencies and cost savings associated with this efficiency. Retailers are continuing to find ways to drive complexity out of their operations. This means either they run a more simple business, putting pressure on suppliers to meet the need for fewer bigger opportunities, or they outsource complexity back to the suppliers.
Retailers are getting more pressure from their shareholders to generate stronger operating cash flow. This may come from shareholders in general or, as in Carrefour’s case, a specific shareholder group concerned about maximizing asset utilization. Retailers pushing to optimize returns in a challenging economy are engaged in two primary behavior types:
- Profit certainty and an increased focus on margin rate to lock in profit targets
- Asset avoidance and an intense focus on managing inventory levels down
The US drugstore industry, for example, is going through a significant structural shift, as it becomes a more integral part of the US health care industry. Suppliers must understand how this transition is driving the strategy and viability of the key players in the US market.
In challenging times, insights become more critical to suppliers looking to maintain and grow their
partnerships with retailers. Among the content featured in this publication is a selection of analyses
that our clients have been able to access and use to their advantage. MVI is always prepared to bring suppliers the vital insight, fact, or idea they need to help expand and grow their relationship with key retailers around the world.
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