Retail Disruptors - Promotion Optimization Institute · EFMI FOOD RETAIL’S HYPER COMPETITION IN...

Retail Disruptors The spectacular rise and

impact of the hard discounters

EFMI Business school

EFMI FOOD RETAIL’S

HYPER COMPETITION IN THE WORLD OF

GROCERY RETAIL

CONVENTIONAL GROCERY RETAILERS

FOODSERVICE CHANNEL

FOOD SPECIALTY

STORES

ONLINE CHANNEL

HARD DISCOUNT

LOW END (NON-FOOD) RETAIL

THE WALL?

“Retailing is the fine art

of separating consumers from their money”

MY VIEW ON RETAIL MARKETS


The “wish line”: This is what most people want


Organic

Local

Convenience

Fair trade

High quality & good taste

“Poor people need low prices, but

rich people love them”


The “wish to pay” line

THIS RESULTS IN A ‘BELL-CURVED’ MARKET

Marketsize

MOST HOUSEHOLDS INCOMES ARE LIMITED – AND NOT EVENLY DISTRIBUTED

PURCHASING POWER OF MOST HOUSEHOLDS IS MEDIOCRE AND STABALAZING

Development of GDP per capita in EU (purchasing power standard)

Average income standard household in the Netherlands

SO, MOST MARKETS IN FOOD RETAIL LOOK A BIT LIKE THIS

10-30% 50-75% 5-15%

Marketsize

THE MID-MARKET STILL HOLDS ‘THE BULK’ OF THE SALES

MID-MARKET

60-80% OF SALES

Marketsize

When markets mature the

‘Well curve’ becomes more dominant

THE WELL-CURVE: POLARIZING CUSTOMERS Grow

thpoten

8al

Averagemarketgrowthrate

POLARIZATION IS ALSO BASED ON CHANGING LABOR MARKET PERSPECTIVE


thpoten

8al


DISCOUNT DIGITAL


thpoten

8al


CHEAPER MOREADVANCED


thpoten

8al


EASYTOSHOPMORE

EXPERIENCE

“The rise and impact of the hard

discount business model”

THE SPECTACULAR RISE AND IMPACT OF HARD DISCOUNTERS

•  Hard discounters distinguish themselves compared to regular grocery retailers as follows –  Very limited assortment –  Strong focus on private labels –  Small and ‘Spartan-like’ stores –  Unbeatable price quality

•  In most countries traditional grocery retailers consistently lose sales and margin to hard discounters.

7.5% 8.5

% 9.1% 9.6

% 9.7

% 9.5

% 9.6

% 8.9

% 8.5

% 8.3

% 7.9

% 7.9

% 7.6

% 7.4

% 7.4

% 7.3

% 7.0

% 6.7

% 6.8

%

1.6% 1.9

% 2.8% 3.5

% 4.1%

3.8%

3.9%

4.0%

4.8%

5.4%

5.6% 6.7

% 7.5% 9.0

% 9.7%

10.0%

10

.3%

10.5%

10

.9%

0%

4%

8%

12%

16%

20%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

The impact of hard discounters


HUGE IMPACT IN NETHERLANDS

MARKET SHARE ALDI AND LIDL 2000-2018

Bron: Nielsen, 2018

OPERATION ANIK0

FUTURE OUTLOOK: HARD DISCOUNTERS WILL BE QUALITY DISCOUNTERS

1 Modern stores

2 Increased choice in vegetables & fruit

3 In-store oven, freshly baked bread

4 Fresh meat in standing shelves

5 Menu suggestions / recipies

6 More ready-to-eat assortment

7 More organic and fair trade

8 Energy saving refrigerators

ANIKO =ALDI NORD INSTORE KONZEPT

All Aldi-Nord stores in Europe will me remodelled

Total remodelling cost: EUR 5,2 billion (EUR 1 mln per store)

ANIKO is based on 8 pillars (see next)

OPERATION ANIKO: ALL ALDI NORD STORES WILL BE RENEWED

Bron: Inventarisatie EFMI Business School, december 2018

29

3

16

23

14 12

24

16

3

9 10

25

6

0

5

10

15

20

25

30

35 NUMBER OF STORES REMODELLED PER YEAR/MONTH

JAAR 2017

JAN 2018

FEB 2018

MRT 2018

APR 2018

MEI 2018

JUN 2018

JUL 2018

AUG 2018

SEP 2018

OKT 2018

NOV 2018

DEC 2018

ANIKO-RENEWAL IN NL PER JAN 2019

REMODELLED TO ANIKO

(NOT) YET REMODELLED TO ANIKO

193

299



DISRUPTIVE IMPACT IN THE UK



DISRUPTIVE IMPACT IN THE UK: 2015-2018

0

5

10

15

20

25

30

35Jan-15 Dec-18

IS THE US MARKET THE NEXT HARD DISCOUNT BATTLEGROUND?

The unique hard discount business model




THE IMPACT OF ROTATION

•  Harddiscounter:2.000items,Euro180.000perstoreper

week,averagepriceperitem1,80->rota%on50peritemperweek

•  Conven8onalretailer:20.000items,Euro240.000perstoreperweek,averagepriceperitem2,40->rota%on5peritemperweek

•  Withregardtofreshproducts,whatistheimpactofthedifferenceinrota8onfor:•  Freshnessandfoodwaste?•  Out-of-stock?•  In-storehandlingcosts?•  Workingcapital?•  Buyingoffice?

THE HARD DISCOUNTER BUSINESS MODEL

Lowcostdriver1:Efficientretailopera8on

•  LowHQcosts•  Efficientwarehouseand

transporta8on•  Efficientstoreopera8on•  Smartpackaging

Driversofcompe88vesustainableadvantages

Lowcostdriver2:Knowledgeableandefficient

procurement

•  Na8onalbrandasqualitybenchmark

•  Buyinglargevolumesatlowprices

•  Deepknowledgeofsupplychain

Lowcostdriver3:Efficientfinancialmanagement

•  Lowcapitalintensity•  Highsalesperm2•  Highrota8on->good

cashposi8on•  Solidopera8ngincome,

highROI



HUGE PRICE ADVANTAGE HARD DISCOUNTERS



AND QUALITY IS ALSO (VERY) GOOD






Mul8plier Largestorenetwork


procurement







highROI






Customervalueproposi8on

Mul8plier Largestorenetwork

Unbeatableprice-quality


procurement







highROI



VERY SOLID FINANCIAL PERFORMANCE OF HD’S

FINANCIAL PERFORMANCE BIEDRONKA

“How does hard discount growth impact conventional retailers?”



THE RETAIL SPACE MAP BEFORE HD ENTRANCE

IMPACT OF HD’ER ENTRENCE ON SHOPPER DECISION MAKING PROCESS

Consumerstendtobecomemorepricefocussedandlessfocussedonaddedvalue

IMPACT OF HD’ER ENTRENCE ON SHOPPER DECISION MAKING PROCESS

Consumerstendtobecomemorepricefocussedandlessfocussedonaddedvalue

Consumerstendtoevaluateconven8onalretailerslessonpriceandbeferonaddedvalue

HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT

Highaddedvalue

HighpriceLowprice

Lowaddedvalue


Highaddedvalue

HighpriceLowprice

Lowaddedvalue

Ini8alsweetspot


Highaddedvalue

HighpriceLowprice

Lowaddedvalue

Conven8onalretailerimage

Ini8alsweetspot


Highaddedvalue

HighpriceLowprice

Lowaddedvalue

HDimage


Ini8alsweetspot


Highaddedvalue

HighpriceLowprice

Lowaddedvalue

Newsweetspot

HDimage


Ini8alsweetspot


Highaddedvalue

HighpriceLowprice

Lowaddedvalue

NewCRimage

HDimageHD

image


Ini8alsweetspot

Newsweetspot


Highaddedvalue

HighpriceLowprice

Lowaddedvalue

HDimage

NewCRimage

HDimage


Ini8alsweetspot

Newsweetspot


Highaddedvalue

HighpriceLowprice

Lowaddedvalue

NewCRimage

HDimage


Ini8alsweetspot

Newsweetspot



HD HAVE CREATED THEIR OWN BLUE OCEAN

0

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15

20

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30

35Jan-15 Dec-18

DEVESTATING IMPACT OF HARD DISCOUNT GROWTH IN UK

HOW CAN CONVENTIONAL RETAILERS COUNTER HARD DISCOUNTERS?

STRATEGIC OPTIONS CONVENTIONAL RETAILERS

Is TESCO now adopting a downgrading strategy for its main chain?

STRATEGIC OPTIONS CONVENTIONAL RETAILERS?

STRATEGIC OPTIONS CONVENTIONAL RETAILERS

HOW RETAILERS CAN CAPTURE MORE VALUE FROM NATIONAL BRANDS? BR

ANDIM

PORT

ANCE

CATEGORYIMPORTANCE

CATEGORYIMPORTANCE

Retail Disruptors - Promotion Optimization Institute · EFMI FOOD RETAIL’S HYPER COMPETITION IN...

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