“how to find and develop competitive advantages” · such as the new customer-centric waitrose...

Copyright (c) John L. Stanton 2006

“How to find and develop

competitive advantages”

By

Dr. John L. Stanton

Department of Food Marketing

Saint Joseph’s University

Philadelphia, PA

[email protected]

www.johnlstanton.com

After being in the food industry for the

past 40 years I believe there have been

more significant changes in the past 5

than the previous 35

Consumers have changed and retail has

changed.

My own example

• When I came to Brazil the first time in

1963, on my birthday I could call my

mother on the telephone for 5 minutes

• Today I talk to my friends in Brazil anytime

on Facetime


4

Rapid changes to demographics, consumer lifestyles and technology are piling increasing pressure on retailers…

1. New threats for the retail industry

Busy lifestyles

Greater access to

technology

Changing demography

Two working parents

Increasingly hectic work/home schedules

Smartphone/tablet Penetration rising

Internet access anytime, anywhere

Increasing single person households

More commuting

Ageing population

Shift towardsurban dwelling

Tech-savvy generations

Better informed

Who would have thought 5 years ago

that the largest hotel chain would be

Airbnb

or the largest retailer

Alibaba

Or the largest taxi/limo company

Uber

Single family Households in

Brazil?

• However the average family size is

dropping fast

– In 1991 it was 4.1 In 2002 it was 3.7

– In 2011 10% of all Brazilian households are

single person


Millennials are different

10

…Meaning a wealth of questions must be answered and decisions made as how best to tackle those issues arising from the new retail environment.

1. New threats for the retail industry

Am I safe from

Amazon?

Is big-box dead?

Does online need offline?

How transparent do I need to be?

How much customer data

can I use ? Which channel do I prioritise?

Where will the great

competitive pressure come

from?

The really big global stores

And

The on-line world

And

The deep discounters


These competitors will be tough

but each has their weaknesses

• The trick to beat the competition is to do

what they can not do.

• Take advantage of their weaknesses

• So let’s exam these two segments.



But no one is invincible! You must

just find its “Achilles Heel.”

Remember the quote from the Wall

Street Journal in the 1940’s:

“Every supermarket in America will

be an A&P by 1950.” Today in the

U.S., A&P is in a very sad situation.

In the next slide we will see

estimates of global food sales

growth

• The international chains will target the

countries that offer the best opportunity!


Expect the Global Giants to come

fastest then the past

• They will bring all the last technology



Wal-Mart wants the

world!

"We're all working together; that's the secret.

And we'll lower the cost of living for everyone,

not just in America, but we'll give the world an

opportunity to see what it's like to save and have a

better lifestyle, a better life for all. We're proud of

what we've accomplished; we've just begun."

Sam Walton

(1918-1992)

You can’t ignore the technology

• Maybe not today but you have to be ready!!

Tesco begun piloting so-called Endless Aisles in its toy departments and for its F+F private label clothing range.

Giant touchscreens allow customers to order directly from the tesco.com online shop instore.

Customers can reserve orders by requesting a printed click & collect ticket or by app-equipped smartphone using a QR code displayed on the screen.

Some products can be rotated onscreen for a 360-degree view and all come with detailed information and descriptions.

Tesco will expand the trials to more ranges and is currently considering a new, integrated kiosk and digital signage strategy for its stores.

Case study: For UK-based multinational Tesco, Endless Aisles are seemingly the agents of change.

2. Technology can be a remedy

© T

esco

“I am convinced that these Endless Aisles,

in one way or another, will be part of the

fabric of our stores in the future. “

Mike McNamaraCIO, Tesco

Responding to the online threat, especially from

Amazon, Tesco is investing USD750 million to

comprehensively “embrace digital”.

Q. Thinking about when you've been shopping over the last six months, did you do any of the following? BASE: 15,201

19%of shoppers have used a stationary instore kiosk

http://www.planetretail.net/NewsAndInsight/Article/81061

Two thirds of its customers shop via multi-channel and these spend 3.5 times more than regular shoppers.

Exploiting differentiation: convenience, assortment curation, best-in-class customer service, ease of returns.

Trialling new store formats, such as the new customer-centric Waitrose Swindonbranch (read more here).

Fulfilment options via Waitrose outlets; tie-up with delivery firm CollectPlus.

Matching competitor pricing.

Case study: John Lewis is a prime example of leveraging omni-channel capabilities to deliver on customer demand.


“Amazon is our biggest

competition. [The systems and

technology] they are firing at

us would make even the most

cavalier person modest.”

ANDY

STREETMD, John Lewis

John Lewis has invested heavily in ‘bricks and

clicks’ (instore/e-commerce) and in 2013

enjoyed online sales grow of 41%.

Q. Thinking about when you've been shopping over the last six months, did you do any of the following? BASE: 15,201

22%have used an interactive display to search more product ideas and suggestions



UK department store group John Lewis went

live with a wall in the window of the Brighton

branch of its food retail chain Waitrose in

November 2011 .

Entertainment retailer HMV and 20th Century

Fox launched QR code shopping walls at bus

shelters in major UK cities in November 2011.

Online grocery retailer Ocado launched a virtual

shopping wall at the One New Change shopping

centre in London in August 2011.

French grocer Casino undertook a first trial of its

digital shopping wall in Lyon in October 2012.


Case study: Tesco’s test of a virtual shopping wall spawned numerous similar versions across Europe and beyond.

Tesco South Korea caused a stir in 2011 with a

QR code wall – enabling shoppers to add items

to online baskets by scanning the code. Orders

were then delivered that evening. Test locations

included a subway in Seoul (above). Tesco ran a

similar trial at Gatwick Airport in 2012 (below).

Offers scanning function, shopping lists, weekly circular, product information, recipes, store finder.

App links into Ahold’s POS software and loyalty card programme.

Provides personalised offers based on past purchases, last barcode scan and the shoppers’ instore location.

Ahold scores every item purchased to achieve a ranking of products by their relevance to an individual customer.

Future plans: building a mobile super-app with increased amount of functionalities, including online ordering options.

Ahold is currently working with indoor geolocation specialist inside.

Case study: Ahold is among the pioneers of mobile commerce, providing comprehensive customer services via smartphones.


The importance of

personalisation from a

customer viewpoint can be

demonstrated by the take-

up of the Scan It!

technology. The app was

first launched without

personalised offers. When

these were later added, the

adoption rate by shoppers

doubled.

The retailer took its ‘Scan It!’ scheme, first launched at its US Stop &

Shop chain, from Motorola handhelds to the iPhone in spring 2011.

© A

ho

ld

42%of shoppers’ choice of retailer is influenced by personalised promotions and deals received on their phone.


Smartphones mean the retailer can initiate a one-to-one communication with the shopper, delivering personalised messages and tailored offers along the path-to-purchase.

They enable retailers to identify high-spending customers the moment they enter a store, as well as avenues by which they can entice that shopper to visit their outlet.

What’s more, compared to other technologies and marketing methods, this approach is rather inexpensive.


However, the game is now changing dramatically. And this change is being powered by advancements in, and enthusiasm for, the smartphone.

By offering indoor navigation as well, retailers can kill two birds with one stone.

Provide shoppers with convenient tools (online product reviews, digital shopping lists etc.).

Collect valuable shopper insights at the same time.

The rise of smartphone technology offers hitherto-unimagined means of generating detailed insights into instore shopping behaviours and buying patterns.

The current situation in Brazil



Winning

• In developing any strategy to compete you

focus your strength against its weakness.

• We must frankly and honestly assess its

strengths and weaknesses.

What can be done to stay

competitive

• Why The Supermarket’s Past Is Holding

It Back!!



You can’t beat them on PRICE

• So stop giving away your margin to

compete on a basis you won’t win.

• Even if you get your prices lower,

customers won’t believe it.

– Wal-Mart spends too much money telling

people it is cheaper.

• Move to the next area of competition!


Look at How Carrefour creates

perception of low price

“If you find cheaper in another store,

call us we will cut our prices within 24

hours” Red Line launched in April 2006

N1 The lowest price

Quality for the best price

The best prices of the city

MVI picture – Spain - 2006

Carrefour France

Carrefour Spain

Carrefour France


“Stores that compete with the

giant mega-retailers strictly on

price will be hurt. As a niche

marketer we emphasize the total

shopping experience.”

Tom Copps of Copps Corp.


But Pricing can’t be ignored!

• Pricing must be part of a strategy and not

something done on a category or

“acceptable GM” basis.

• Certain key items must be priced right.

• There are marginal shoppers who for a

“little more” will trade off for other benefits

but won’t be taken advantage of.


Fragmenting the Marketplace

• The future of retail is a non-standardized

marketplace

• Not likely an undifferentiated mass market

is going to be as productive

– Mass products, mass distribution, mass

identities

• It is a truism that you can’t be all things to

all people

– It is increasingly true that being one thing to all

customers is not always good strategy


Corporate, Brand and Product

Ubiquity

– The Past: the same thing available everywhere

• Economies of scale drove standardized marketing and

assortment

– The Future: more niche marketing, more

segmentation, more differentiation

– We need to learn how to have profitable

offerings that make our company ubiquitous but

not always at the product or even the brand

level

Something for everyone – but not the same something and not in the same place


Both of these stores are very

targeted!

• Wegman’s • Whole Foods


This won’t be easy!!!

• Low price has been the paradigm of food

retailers since the 1950s.

– Habits are hard to break

• The largest part of the market is “price

conscious” and it will require you to focus

on another benefit.


Who can you focus on??

• Singles– More prepared

– More smaller sized especially produce and meats

• Moms with kids– Convenient “reserved parking” in front of store

– Wider baby food section than “category management” might suggest

– Help with bulky items like diapers

• See my book 325 Ways to Make Customers Feel like Your Supermarket is Their Supermarket


Size

• Giants size means that it loses some control

especially in the area of customer service.

• With a million employees you can’t have

the best of the best.

• News reports show employees disgruntled

and it shows in store.


• If employees don’t understand the mission and vision

of the business, chances are the customers won’t

either.

• It is employees who have to execute, so the mission

and vision become reality.

Remember,

Your People are Assets, too!


“It’s our knowledge that can help the

customer. So, the first pump we have to

prime is our own people.”

Remember,

Your People are Assets, too!

Danny Wegman


You can out perform the giants on

Customer Service

• The bigger it gets the more difficult it will

be to train and supervise the employees.

• The strength is efficiency so it must have

minimums on labor to maintain edge.


• Make service departments a keystone of the stores.

Make sure everyone in a service department

knows their products and knows how to SELL.

• (in an ad hoc study I did for years I discovered

about half of the people working in the seafood

department didn’t eat seafood and admitted it)

– Teach suggestive selling

– Have people wear costumes that look like they

know what they are talking about.


One Store Puts Everything Needed to

“Dress up a Potato” in the Produce

Section

They Have a Portable Cooler With Butter,

Sour Cream, Chives, Bacon Bits, Etc.

Available Next to the Potatoes.


Here’s an example on a Fajita in one spot!

By the way they sold 40 cases of cheese in the week!


How About Bacon, Lettuce and

Tomato Merchandised Together!

It Is Done Only When the Local Tomatoes Are in.

http://www.mayo.com/

http://www.mayo.com/


Size and the Shopping Experience

• For many shopping at Wal-Mart is like

going to work. It is a chore that needs to be

done.

• But shopping can be an experience and

some retailers have created this sense.

– Publix in FL is an example

– It tries to make shopping more like a trip to the

mall than a trip to Wal-Mart.


Volume

• By building its economic model on volume

the large format stores must reduce the

choice offered.

• There is a significant segment who do not

want the “average product” but want a

product for them.

The value stores have limited

assortment

• You can get a product for a lower price at

the



Key advantage:

Efficiency

• The drive to low price and efficiency has

left the hypermarket’s service departments

vulnerable.

• All meat is sent in shelf ready and no one

knows about the meats, produce and

seafood.


Key advantage:

Product assortment

• Have a wide assortment to appeal to those who

want “more.”

• Requires a change in paradigm.

– You cannot use the usual model of profitability of

products and traditional category management.

– Look at Hy-Vee that offers 14 varieties of deli turkey,

or Harry’s Market that has 6 colors of peppers (even

though roast turkey and green peppers outsell the

others)


Hy-Vee in Iowa offers 14

different varieties of sliced turkey

luncheon meat

• Oven roasted

• smoked

• fat free honey

Mesquite

• New England maple

• Fat free brown sugar

• Lemon dill

• Honey pepper

• Smokey mountain

pepper

• Rio Grande hot pepper

• Honey

• Kentucky Gold

• Garlic Pepper

• Fat Free Cajun

• Tomato Basil


Another supermarket carried a

complete line of Mushrooms

• It had morels, shitake,

oyster, porcini, miatake,

cloud ear, enoki, crimini,

girolles, mosisseron,

French bolet, chanterelles,

black trumpet, Yellowfoot,

Hedgehogs porn porns and

portabellas.


• The new focus must be on profitability of

customers not products.

• The focus must not be on gross margin of a

product but the absolute profit from each

customer.

• Never forget you make money from

customers not products!


• Understand how you must position yourself to serve

your target customers.

• As it relates to your business, what does it mean to

“differentiate?”

• Realize “differentiation” does not mean pleasing

everyone.

Don’t try to be

Everything to Everybody!

The implications of the global shift are clear: consumers are looking to spend, but retailers

have fewer opportunities to interact with them. Consumers are planning, demanding and

above all, connected. Retailers need to capture consumers when they are in the store!!



Can we do a better job of

merchandising the stores we have?

• Where do you find the nuts?

The candy section?

• Should it be in the dessert

section?

• The wine section?

• The greeting card section?

• Should we put products

targeted to Hispanics in with

Goya?

• In the fruit section?


The Indulging Center• Other examples are the

candles, bubble baths and where legal, wines. Chocolates or other sweets are a natural in this location.

• Candles! 54% of consumers buy candles and it is a $2.3 billion business with 95% going to women.


The Kids’ Center

• Many stores from

Supermarkets to non-

food stores such as

IKEA have Kids’

centers.

• In some cases they are

with toys and games to

buy as in this picture,

but in others it is

entertainment.


In the Floral Sections and Florists

• Flowers are usually

associated with gifts

and entertaining.

• So is nice candy.

While many times the

florist carries the

“expensive

chocolates” there is

room for all kinds of

candy.


A Party Section


• Execution is everything!

• Good execution is the result of good hiring,

training and feedback

• Good execution drives value

• Proper execution leads to consistency

“You Seldom Get a

Second Chance to Make a

Good First Impression”


We often get too much planning

and not enough execution!

When competing against good competition everything must be

right.

Avoid the avoidable

Be quick and Agile

• A key weakness of the giants is that it has

layers and layers of administration to make

the smallest changes

• Act quickly



Set the highest standards for

execution

• Make people responsible.

– If employees can’t get it right keep searching

for someone who will…don’t accept

compromise!


Remember: It doesn’t matter

how big or how strong a

competitive chain is, it only

matters how big and strong the

one close to you is!!!

It may be hard to beat Wal-Mart in Bentonville

but you may be able to beat them in the store in

Washington Township NJ.


A study comparing the effect of

Wal-Mart Supercenters moving

into a town in the mid-West

showed how things changed.

Stay in the game as long as

possible


Initial Fallout

• Some companies had almost no unique

selling proposition or differential

advantage and only competed on price.

• They had the highest decline in sales

when Wal-Mart entered their market.

• They quickly went out of business.


Initial Fallout

• Some of the better positioned stores

lost customers, but not all the

customers of the closed stores went to

Wal-Mart.

• Total sales in some of the remaining

stores increased!


If you stay in the game, you get to

share the customers of the stores that

go out of business with the

remainder of those that stay in.

It is a lot like the poker games you see on TV. As each contestant goes out of the

game the remaining players get to share the total number of chips on the table.


The way to best compete against

a Giant is

Never go head to head!!!


Principles that help

“Take Back the Market:”

• Understand as much about the competition as

possible (Rule 5 Know the competition)

• Remember, your people are assets, too!

• Don’t try to be “everything to everybody.”

• You seldom get a second chance to make a good

impression.

• Stay in the game


These changes will force a

“Paradigm shift”

• Most of what we do is determined by manufacturers and what manufacturers will give us.

• We still see profits in products and not customers.

• A market driven chain will have the buyers working for the store managers and not the other way around.

• Those closest to the customer will be determining what should be in the store and not the other way around.


To compete with the Giants the same

old thing won’t work!

• We must all put aside what we did and

focus on what needs to be done.

• People who say it can’t be done must get

out of the way of the people who are doing

it.

Remember

• There are no longer food stores that everybody likes a little, only stores that somebody like a lot!!



Darwin Has Often Been Misquoted As

Saying

‘Only the Strongest Survive.’

However, what he really said

was “In the struggle for

survival, the fittest win out at

the expense of their rivals

because they succeed in

adapting themselves best to

their environment.”

Charles Darwin (1809 - 1882)

The Origin of Species 1859

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