New Concepts of Retailng PDF

Global Retailing: New Concepts in
Retailing The Thin Line Between

Success and Failure
July 2009
Retailing New Concepts
Euromonitor International >
Overview
Premiumisation: Exploiting the Niche
Discounting: Value in Volume
Virtual and Multi-channel Retail: Bricks to Clicks and Back Again
Technology in Retail: Pressing the Right Buttons

Segmentation: Shopping for the Right Consumers
New Concepts in Action
Retail Faces the Credit Crunch Challenge
New Retail Concepts: What Next?
2
Overview
Introduction
Euromonitor International's report on new concepts in retailing reviews notable launches that have taken place
around the world.
The report provides analysis of new formats in markets by channel, date, country of origin, unique selling
points and prospects.
In order to assess the potential impact on retailing the concepts are grouped by primary trend:
Premiumisation
Discounting
Multi-channel and virtual retailing
Technology-driven innovation
Segmentation
In addition, the report looks at some examples of how new concepts have been implemented and some of the
ways in which retailers are reacting to the challenge of the credit crunch
Overview
Definitions
All values expressed in this report are in US$ terms, using a fixed 2008 exchange rate.
All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical
data are expressed in current terms; inflationary effects are taken into account.
Retailing coverage:
Store-based retailers
Grocery
Non-store retailers
Vending
Hypermarkets
Homeshopping
Supermarkets
Internet retailing
Discounters
Direct sales
Small grocery retailers

Food/drink/tobacco specialists
Other grocery
Non-grocery
Mixed retailers
Health and beauty specialist retailers
Clothing and footwear specialist retailers
Home and garden specialist retailers
Electronics and appliance specialist retailers
Leisure and personal goods specialist retailers
Other non-grocery retailers
Terms and abbreviations:

Tweenager: a child who has not yet reached
his/her teenage years but has started to exhibit
teenage-style behaviour, generally between 812 years old but the lower limit is not precisely
fixed. In terms of retail behaviour, tweenagers
show more independence in their buying
decisions than younger children.
RFID: Radio Frequency Identification, enables
the storage of substantial amounts of data on
electronic tags.
4
Overview
Key Findings
Premiumisation: Exploiting the niche
Opportunities remain at the upper end of
the market: grocery retailers adopting
premium formats can tap into a trend for
higher spending on household necessities
at the expense of discretionary purchases
Discounting: Value in volume

At the lower end of the market, discount
retail is expanding into new channels, such
as internet retail, as sales volume becomes
key. Other retailers are adding a discount
element to their normal store format
Virtual and multi-channel

retail: From bricks to clicks
Internet retailers are looking to
exploit synergies with other
channels, while established
retail formats now see the
benefit of moving some of
their business online.
Meanwhile, social networking
is taking retailer-consumer
relationships to a new level
Segmentation: Shopping for the right consumers
In the current economic climate, a retail concept
which restricts its consumer base is a risky strategy.
Segmentation concepts are becoming less common,
unless they can target a substantial consumer base,
such as the growing pensioner demographic
Technology in retail:
Pressing the right buttons
From the potential offered by
mobile phones to high-tech
service enhancement
concepts, retailers stand to
benefit by harnessing
technology but the line
between attractive gadget
and useless gimmick
remains easy to cross
Today's retail climate has little

room for error: all the more
reason for retailers to be
imaginative and proactive in
developing new retail concepts
5
Overview
Top Five Trends in New Retail Concepts

Premiumisation: These formats focus on high quality products and an upscale retail environment, and are
able to charge higher prices as a result. However, maintaining a suitable store ambience and
developing/sourcing appropriate products raises operational costs.
Discounting: Discounters are geared towards value pricing and high-volume sales, often in a "no-frills" store
setting, and may be marketed by comparing prices with the mainstream. Popular even before the global
recession, now the drive for low prices has accelerated the discount trend and seen it enter new channels,
such as online retail.
Virtual and multi-channel retail: Although many retailers initially viewed the internet with suspicion, they are
increasingly appreciating the contribution that online sales can make to the bottom line, and looking at new
ways to integrate e-tail into the business model. Online communication has become so accepted by retailers
that many are now looking to social networking websites to help enhance their relationships with consumers:
to drive sales, increase brand loyalty or for research purposes.
Technology: Technology has a wide range of applications within the retail environment, whether improving
product supply, enhancing customer service or reaching the areas that retail otherwise struggles to access.
Segmentation: Identifying a customer base and then designing a store format expressly to cater to it.
Targeting specific consumers rather than all consumers and, at the same time, making sure the consumer
base is big enough to support the retail store is a complicated balancing act. Internet retail has added another
layer to the segmentation concept, by allowing niche concepts to attract consumers from a much wider area.
Premiumisation
Virtual and
multi-channel retail
Discounting
Technology
Segmentation
6
Overview

7
Getting What You Pay for: Premiumisation Concepts
Premiumisation concepts have enabled retailers to compete against

more value orientated competitors by offering high quality rather
than low prices, and have also been used to enhance the value of a
retail brand within the wider market
Markets hit by the global recession are seeing a sharp downturn in
discretionary non-grocery spending, but premium grocery retail is
better placed, able to take advantage of the rise in spending on
cooking from scratch and entertaining at home, and to tap into
continuing consumer demand for environmentally-friendly or
ethically-sourced products
Retailers in emerging markets have begun using premium formats
to harvest rising disposable incomes, but concepts must be
accurately targeted so as to attract the topmost earners the ability
of lower income tiers to support premium stores is limited, and
success outside first tier cities will initially be minimal.
As markets mature, non-grocery and mainstream premium formats
become more common but remain highly vulnerable during an
economic downturn
8
Premiumisation Potential Still Centred in Developed Markets

The markets with the highest premiumisation potential combine a large population with high, and growing,
household income levels for the top 20% of households. The percentage of total income controlled by the top
households is also a significant marker: the lower it is, the further the market for premium retail will extend into
the rest of the population.
Because of these factors, even negative growth markets, such as the UK, are still fertile areas for premium
retail, whereas progress in China must still overcome the obstacles of low income levels and income disparity.
Deciles 9 & 10: combined income

CAGR 2008-2013 (%)
Niche or single-store premium concepts have demonstrated the ability to thrive in all markets, emerging or
developed, but chains are difficult to establish, and are almost exclusive to grocery retail in developed
markets.
Premiumisation Potential: Purchasing Power of the Top 20% of Households (Deciles 9 and 10)
15
Figures in brackets represent

average income of 9-10th decile
households in 2008 (US$)
10
5
0
-5
-10
30
35
40
45
50
55
60
65
70
% age of national annual disposable income controlled by decile 9 and 10 households
USA (222,672)
Australia (159,325)
United Kingdom (142,890)
Japan (131,522)
France (128,324)
Germany (122,397)
Saudi Arabia (71,371)
Brazil (57,791)
Russia (41,093)
China (16,394)
India (7,587)
Bubble size represents total income of deciles 9 and 10 in 2008 (US$)
Finding the Premium Consumer: Cold Storage Solaris

Concept name: Cold Storage Solaris
Company: GCH Retail (M) Sdn Bhd
Market: Malaysia
Channel: Supermarkets
Launched: April 2008
USP:
Cold Storage is an established chain in Malaysia, but the Solaris store is designed around the needs of a
niche consumer base: wealthy Korean and Japanese expatriates and affluent locals, a community centred
around the Kuala Lumpur suburb of Mont Kiara, where the store is located.
The stores offer Japanese, Korean, Taiwanese and other imported products, as well as a walk-in wine chiller,
fresh juice corner and a section that sells biodegradable cleaning products.
Comment:
At less than US$1,000 per capita in 2008, the average annual retail spend of Malaysian consumers remains
low. The Solaris format allows Cold Storage to tap into a much more affluent consumer base, and by supplying
hard-to-find products it can operate higher price points than normal outlets.
The large population of expatriates in Mont Kiara, as well as neighbouring suburbs ,such as Kenny Hills and
Taman Duta, should ensure that the outlet has a large enough consumer base to thrive.
The potential for further stores is obviously limited on a national basis, but in the long term, operating a
premium format should make it easier for Cold Storage to gauge when the demand for higher end products is
strong enough to consider adding them to the product mix in other stores.
10
Premium Retail as Brand Enhancement: Wadi Food Stores

Concept name: Wadi Food Stores
Company: Wadi Holdings
Market: Egypt
Channel: Food/drink/tobacco specialist
Launched: 2006
Progress: 4 stores open, 2 more planned
USP:
Wadi Holdings is a well-known Egyptian producer of premium olive oils and other ingredients; the stores are
entirely dedicated to products under its brands (Wadi Food, Wadi Gourmet and Wadi Organic). Wadi brands
are widely available in Egypt through both retail and wholesale channels, but the stores feature exclusive
products and offer a more luxurious shopping experience that is rare within the Egyptian retail market.
Comment:
The top 10% of households accounted for over 30% of Egypt's total income in 2008. Wadi Food Stores are
designed to appeal to this small but more affluent segment of the consumer base of upper income and
expatriate households, and in a market with limited premium outlets offering gourmet food products, Wadi
Food Stores faces only limited competition.
Wadi Food has a strong brand name that it has been building for several years, and its brands are perceived
as high quality products. The presence of premium stores also enhances the equity of the brand within
mainstream retail.
Organic food consumption is on the rise in Egypt, but at a slow pace, due to high unit prices and the limited
number of players. Other organic food suppliers continue to monitor the success of the concept. If its success
grows, more gourmet food shops could open, increasing competition.
11
From Niche to Mass: Developed Market Premiumisation

Finding a niche:
Recipease (UK)
Mass-market premium:
Ftex Food (Denmark)
Launched in south London in February 2009, by

celebrity chef Jamie Oliver; more planned nationwide.
Launched March 2009 by Dansk Supermarked A/S; 2

stores open, up to 50 planned.
Format: Gourmet food store providing cookery

lessons and meal assembly, alongside food and
cookery products.
Format: Supermarket offering a range of premium

goods at higher price points alongside mainstream
staples from the main Ftex chain.
USP:
USP:
Focus on experiential retail: customers can put

together dishes in-store, be taught how to cook the
meal from scratch by professional chefs, or pick up
ready meals to finish at home.
Aims to help customers re-learn "forgotten" food
skills and become excited about cooking again:
location of first store in affluent middle-class area
suggests the concept is aiming at a niche rather
than the mass market.
Prospects
Located in an affluent area, taps into consumer
willingness to spend more on eating at home instead
of spending money in restaurants.
However, the concept is high-maintenance and a
national rollout will be challenging and expensive.
Mix of normal and premium prices is suited to a wide

consumer base, enabling customers to treat
themselves and control costs at the same time.
Prospects
Non-grocery sales in Dansk Supermarked's Ftex
and Billa chains have been falling: Ftex Food
increases access to the upper end of the more
resilient groceries market without repositioning the
Ftex brand overall.
The economic downturn has created a challenging
environment for a new, upmarket chain. Dansk
Supermarked is taking an aggressive approach to
the economic downturn: "The successful launch of
Ftex food shows that we do not intend to go on the
defensive" CEO Erling Jensen, April 2009.
12
When Premiumisation Doesn't Work: Expo Design Center, US

Concept name: Expo Design Center
Company: Home Depot Inc
Market: US
Channel: Furniture and furnishings stores
Launched: 1991
Progress: Closure of all 34 Expo outlets was announced at the beginning of 2009
USP:
A "one-stop-shop" for upmarket home-remodelling projects, offering a custom installation service, fixtures,
appliances and homewares.
Comment:
Expo's store count rose to a high of 50, with plans for up to 200 units in the US and Canada by 2005, but
essentially remained an experimental concept. The US housing boom should have been the ideal
environment for it to thrive, but it never took off, and once US property sales began going into freefall, Home
Depot decided to focus on its core big-box, more value-orientated DIY format.
The range of services offered and the products stocked by Expo stores required significant investment, but
high prices and operational issues with stores and post-sale services meant the stores remained more
popular as sources of design inspiration than sales destinations.
14 other Home Depot concept stores were also axed. With Expo, these businesses lost US$50 million in
2008 on turnover of US$950 million. Losses for 2009 were forecast to rise to US$80 million.
Key point: The collapse of the US housing market meant the end for the Expo Design
Centers, but the concept had never provided the service and sales standards to attract
high-end clients and did not offer good enough value for more mid-market customers
13
Prospects for Premium Retail Concepts

Opportunities
Added value retailers can benefit from higher price
points if the products are perceived to offer additional
benefits, such as superior quality, ethical sourcing or
environmentally friendly attributes.
These higher price points can help niche concepts
come to life, enriching the retail landscape.
During the credit crunch, consumers are now
spending more on cooking and entertaining at home
rather than going out, making grocery sales at the
higher end of the market surprisingly resilient.
Industry commentators, including outgoing Wal-Mart
head Lee Scott, believe that after the global recession
consumers will look for better quality,
longer-lasting products, which could create
opportunities for mainstream premium non-grocery
retail concepts or store-in-store areas.
Both retailers and manufacturers can use a premium
format to raise brand equity, extend a brand or adopt
an upmarket positioning alongside their usual offer,
(as with Ftex Food), allowing them to widen their
consumer base and benefit from higher price points.
Challenges
Low consumer confidence and tighter disposable
incomes impact spending on premium products, and
can give mid-market retailers an advantage. UK
premium grocery chain Waitrose has responded with
a mid-priced "value" line, but this move may cost over
UK25 million in lost revenues.
Non-grocery premium retail has been particularly
hard hit by the credit crunch, as consumers decide
against discretionary purchases. This market will
continue to be under pressure after the recession
ends, as consumers deal with the debt hangover.
Premium retailers risk damaging their brands by
moving price points downwards, and once the
economy improves the threat of development of
premium private label by the major supermarkets will
reappear.
Responding to the higher expectations that
consumers have of premium retail formats raises
capex and operating costs, making premium retail
less able to withstand sales downturns.
Raised costs and a smaller consumer base makes it
difficult to operate premium concepts on a large scale.
14
Overview

15
Price Extremes: Discounting on the Rise
Discounter formats are seen mainly in mature or semi-mature retail

markets, where mainstream retail has moved upscale and left a
vacuum at the lower end of the market
The current recession has led to consumers trading down and
increasingly demanding low prices, accelerating the development of
discount concepts
Discounter chains, including Aldi and Lidl, have become stronger in
markets such as the UK, US and Ireland, as a result of the global
recession, affecting the mid-market by forcing mainstream grocery
retailers to compete more strongly on price
Discount concepts trade off lower margins against higher volume
sales. Cost control is key, no-frills store formats are standard, and
development is now moving online
In emerging markets, lower prices marketwide, lower incomes and
logistical and legal obstacles to implementing operational efficiencies
can make success with a discount model more difficult to achieve
16
Low-price Potential: Poorest Doesn't Mean Poor

Even the less affluent section of society still represents a significant market, particularly in developed markets,
with the poorest 20% of households representing up to 10% of national disposable income.
This creates potential for discount retail formats. For example, discounters generated 39% of all grocery sales
in Norway in 2008, and 23% in Austria.
The discounter grocery format is still establishing itself on a global scale. Discounters have largely focused on
markets where they are able to obtain synergies with existing operations, hence the strong presence of the
German discount chains in Eastern Europe.
Recessions in a number of markets are encouraging retailers to develop a low-price option in order to retain
customers as they trade down.
Discounter concepts are now developing beyond the traditional low-price grocery, fixed price and outlet store
formats to encompass internet retailing, shop-in-shops and other retail elements.
50
10
40
30
20
10
Average annual disposable income
%age of total income
US$ 000
Deciles 1 & 2 (the Bottom 20% of Households by Income):

Average Income and Proportion of National Income 2008
Proportion of national annual disposable income
17
Branded Fashion Outlets Move Discounts Online: Ted's Shed

Concept name: Ted's Shed
Company: Collaboration between MandMDirect.com Ltd and Ted Baker Plc
Market: UK
Channel: Internet retailing
USP:
Accessed via the MandMDirect homepage, the Ted's Shed site offers last season or
end-of-line Ted Baker branded clothing at discounts of up to 65%.
Comment
Ted Baker is a clothing brand that also operates its own retail outlets and concessions,
positioned at the upper end of the high street price scale; MandMDirect is a catalogue retailer
that has moved strongly into internet retailing, with a lower end positioning. This collaboration
makes Ted Baker accessible to a new consumer base.
Ted Baker operates its own transactional website, which has no permanent sale area. Ted's Shed allows the
brand to discount clothes without cheapening the image of its main store-based and online activities.
The UK clothing and footwear market is forecast to fall to 36 billion in 2009, from a peak of 38 billion in
2007. Retailers have been discounting heavily in the face of falling consumer spend. Tighter inventory control
will slow this trend within the mainstream, but discount offshoots will help retain cost-conscious consumers.
Discount fashion e-tail is increasing very rapidly in the UK across the whole price spectrum, from designer
fashion e-tailer Net Porter's new discount offshoot, Theoutnet.com, to Asos Red in the mid-market and
getthelabel.com from JD Sports Fashion. Low price fashion chains, such as New Look, are also ramping up
their online offer, with further competition coming from general retailers, such as the Debenhams Outlet pages.
18
Retail Brand + Discount Brand: Store-in-store Concepts

Tesco Discounter range
$1-$2-$3 Fun (Toys 'R' Us)
Launched September 2008 in UK stores
Launched April 2009 in US stores
Format: Value products under different brands, with a

distinctive red and yellow badgeing
Format: Store-in-store offering a range of around 100

products for US$1, US$2 or US$3 in a dedicated aisle
USP:
USP:
Different from Tesco's normal private label strategy,

the Discounter range is packaged under a variety of
brands without the Tesco logo, in order to remove
any stigma associated with buying "value brands".
Prospects
Developed in response to the meteoric rise of the
discount chains Aldi and Lidl in the UK, as the credit
crunch began.
Tesco was criticised for diluting its brand image with
the range, and for forgetting that its main UK rivals
are not Aldi or Lidl, but mainstream competitors such
as Sainsbury, Morrisons and Asda.
However, the move allowed the company to regain
the PR initiative, and was declared a success in
Tesco's recent annual results presentation, despite
loss of margin.
Extension of the Discounter range into Tesco's
Polish stores appears to have been highly
successful.
Toys 'R' Us already sold toys from US$2.50, but $1$2-$3 Fun caters to the current vogue for bargain
hunting.
Simple, low-tech toys may also benefit from a
nostalgia trend, as parents look back to better times.
Prospects
Toy sales are forecast to grow in the US by 2% in
2009. As parents turn to small-ticket treats, $1-$2-$3
Fun could help Toy's 'R' Us win consumers from lowprice rivals, such as Wal-Mart and Target.
A 100 SKU range is unlikely to prompt a special visit
to the Toys 'R' Us big box, standalone stores, but
Toys 'R' Us has also developed another store-instore, 'R' Market, selling a range of branded child
and baby-related FMCG products.
These developments help to make Toys 'R' Us
stores a more rounded shopping experience,
strengthening the brand.
19
Prospects for Discount Retail Concepts

Opportunities
Demand for value cost-conscious consumers are
focusing strongly on price, making this the ideal
climate for discount retailers to expand their share of
the market.
The recession is causing many consumers to rethink
their buying habits completely. Discount retailers
have the opportunity to respond by entering new
geographical areas or product categories.
Retail rents have fallen, and many discount retailers
are being actively sought by landlords as footfall
drivers, putting discounters in a very strong position
when it comes to property negotiations.
Store-in-store concepts or online "sister sites" are
enabling mainstream retailers to introduce a
discount element to their normal stores.
In emerging markets, economic turmoil may help
foreign retail entrants fast-track their way into
consumers' hearts by offering low prices.
Discount retailers prepared to invest in a big enough
retail base can compete with local retailers on price
and beat them in terms of profit through operational
efficiencies.
Challenges
The economic crisis has led mainstream retailers to
focus much more strongly on price, intensifying
competition for discounters.
The attraction of a "no-frills" discounter store is likely
to fade fast if value/price is matched by mainstream
retailers.
Many mainstream retailers are choosing to take a
short-term hit in order to compete against
discounters on price. Once the economy improves
the mainstream can move back upmarket, but this
will be a more difficult proposition for discounters.
With their USP based so strongly on price, customer
loyalty for discounters is limited and any move
upmarket goes against the brand image.
Now is an ideal time to expand, but the success of a
discounter store-based chain is reliant on economies
of scale. Discounter retailers must choose new
markets carefully and be prepared to invest
significantly in order to build a cost-effective
network.
20
Overview

21
Store-based and Non-store Channels Begin to Converge

Whilst there are some geographical variations, non-store sales are increasingly important to global retailing,
and will account for nearly 7% of sales by 2010.
Non-store's strong growth over recent years has been driven by the spread of internet retailing. In the most
mature internet retailing markets, online sales are now so key that almost all store-based retailers have
evolved a web-based strategy in parallel with bricks-and-mortar operations.
Specialist e-tailers, which initially dominated internet retailing, are coming under pressure from store-based
retailers, as they harness the benefits of multi-channel retail, such as collect-in-store options.
Other forms of non-store retailing are also adjusting their business model to include internet retail. The
synergies with homeshopping are obvious, but direct sellers such as Avon also now have transactional sites,
despite the potential clashes with their existing business model.
Non-store Sales as a Percentage of Total Retail 2003/2008/2013
World
N America
W Europe
Latin America
Non-store
Asia Pacific
Australasia
E Europe
2013
2008
2003
2013
2008
2003
2013
2008
2003
2013
2008
2003
2013
2008
2003
2013
2008
2003
2013
2008
2003
2013
2008
2003
100%
80%
60%
40%
20%
0%
MEA
Store-based retailing
Key Point: Internet retail requires availability of both internet technology and distance
payment methods: because of this, developed regions lead the way in terms of sales, but
the progress in Latin America demonstrates the potential within emerging markets.
22
Opportunities Created by a Multi-channel Retail Approach

With the development of internet retail as a catalyst, the boundaries
between store-based and non-store retail are becoming blurred, and
retailers from both sides are crossing over in search of new consumers
Non-store formats, such as catalogue and TV selling once looked
threatened by the internet: in fact, they have gained a new lease of life.
Initially slow to pick up on the potential of online sales, store-based
retailers in both developed and developing markets are now actively
looking for multi-channel synergies.
The potential of m-commerce and the interplay between online
retailers and store-based networks has yet to be fully explored.
As store-based retailers improve their online
offer and exploit the benefits of a store network
Store
to the full, internet specialists will benefit by
based
retail
developing a physical presence. Some are already
opening their own boutiques, others, such as Dell,
have begun selling products through stores.
The logical continuation of this trend will be for unconnected retailers to
form alliances in order to benefit from a cross-channel boost, as seen
in the collaboration between an internet retailer and a convenience
store chain in Japan.
Retailers are now facing another leap into the unknown: social
networking. Whether virtual worlds and sites such as Facebook and
Twitter are any good at driving sales remains to be seen, but in this
age of economising the prospect of promoting a brand at little or no
cost is highly tempting, as is the consumer insight that these sites offer.
Homeshopping
Internet
retail / mcommerce
Store
based
retail
Direct
selling
23
Interplay Between Channels Becoming More Fluid
DHC
Homeshopping sales are
migrating to the internet,
but some of the channel's
strategies are influencing
other retailers.
These include
theoutnet.com, a UK
discount designer fashion
website and part of Net
Porter.
Strategies such as "flash
sales" and Going, Going
Gone mirror TV shopping
channels such as bid tv.
theoutnet.com
Sometimes only a store will

do: DHC is a major homedelivery skin care company
in Japan, but has begun
opening stores in China.
This has allowed DHC to
increase its profile and
penetration in a market
where it is not yet established.
Other non-store specialists
which have successfully
entered store-based retail
include US T-shirt specialist
Threadless and computer
manufacturer Dell.
Mygofer is a new format

currently being tested by
Sears, the US department
store chain.
The format relies on
internet sales, allowing
customers to order online
and collect items in store or
via a drive-thru.
The department store
format has been struggling,
and this approach allows
Sears to access a larger
consumer base.
Sears/mygofer
24
Multichannel Progress: RakutenBooks@FamilyMart

Concept name: RakutenBooks@FamilyMart
Company: Collaboration between Rakuten Inc and Family Mart Co Ltd
Market: Japan
Channel: Internet retailing/convenience stores
Launched: May 2007
Progress: Now available at around 7,000 FamilyMart outlets across Japan
USP:
Collaboration between online retailer and convenience store chain. Products such as books, CDs, DVDs and
PC software purchased through Rakuten's website can be delivered to the customer's selected FamilyMart
convenience store for collection.
Comment:
RakutenBooks@FamilyMart makes receiving internet-ordered goods easier for working consumers, and
payment can be made at pick-up, reassuring consumers unhappy with entering credit card details online.
There is also anecdotal evidence that FamilyMart's books and magazine sales have increased since they
started the service, as the customers that come to collect items are already book fans.
Collect-in-store options are common, but this collaboration between two otherwise unconnected retailers is
unusual. It has been a success and Rakuten now has similar agreements with the Circle K Sunkus and
Ministop convenience store chains, while Amazon Japan has a similar arrangement with Lawson Inc.
With internet sales accounting for only just over 2% of total retail in 2008, Japan lags behind the US, but its
convenience store channel (7% of total retail sales in 2008) is very well developed. An alliance such as this
helps to accelerate the development of internet retailing in Japan, as well as enhance a convenience store
chain's offer within a saturated market.
25
Virtual Retail: Social Networking and Virtual Worlds

Social
Networking
Virtual
Worlds
Pros:
Pros:
Designed for mass consumer use, social

networking pages are quicker and easier to
set up than virtual stores.
Offers "real world" access to consumers,
eg Twitter updates to mobile phones.
Pages need to be monitored, but not
constantly manned, to engage consumers.
Two-way dialogue doubles as a customer
research tool.
Social networking sites are designed to
spread word-of-mouth, ideal for marketing.
Easy and free for consumers to sign up to.
Space to show off the concept; visitors

are likely to focus on the retail concept.
Enables retailers to target specific
consumer bases, eg teen orientated
worlds.
Cons:
Sites need regular updates to remain fresh.
Retailer pages can be easily lost amidst the
vast number of other pages on offer.
Unanswered customer complaints or
negative feedback can damage a brand.
Cons:
Marketing value outside the virtual world
is limited.
Creating a virtual world site is more
complex and expensive than setting up a
social networking page: investment can
be lost if the world's popularity fades.
Unmanned spaces lack impact,
virtual worlds can be high maintenance.
Difficulty in converting virtual interest into
real sales.
Key Point: their relevance to the real, everyday
world of consumers is what sets social networking
sites above virtual worlds in marketing terms
26
The Early Days of Virtual Retail: Second Life and Beyond

Concept name: Second Life
Company: Linden Research Inc
Market: Worldwide
Channel: "Virtually" any channel
Launched: May 2003, but did not gain prominence until late 2005
Progress: Second Life continues, but retailers have largely lost interest
USP:
Second Life's American Apparel store
Second Life is a virtual world which "residents" visit in the form of avatars. A wide variety of products and
services are on sales, paid for in Linden Dollars, which can be exchanged for real currency at approx L$250 to
US$1. From late 2005, Second Life began generating significant media coverage, at which point retailers,
including Circuit City and Sears, began opening virtual stores on the site.
Comment:
Second Life has boasted 9 million users worldwide, and benefited from a massive amount of hype in 20062008. Because avatars can take any form, visiting the site can be a very aspirational activity. For retailers, the
site represented access to a consumer base, rather than a money-making opportunity.
Second Life continues, but companies such as American Apparel, Best Buy and Dell have closed their Second
Life shops, finding that residents did not transfer their allegiance to real-world companies.
Despite fears of waning popularity, Linden Labs claimed a record US$120 million worth of transactions in Q1
2009. It is possible that retailers may be tempted to return to Second Life by such figures, but the current
vogue has turned to social networking sites, such as Twitter, Flickr and Facebook, which have arguably a
more direct connection to real stores and real purchases.
The Second Life experiment made retailers more open to the concept of virtual worlds. For last year's back-toschool season, Sears set up a store in Zwinky and Kohls sold products in Stardoll.
27
Short and Tweet: Retailers on Twitter

Twitter: a real-time short messaging service that works across a number of
platforms. Users sign up to receive messages, or "tweets", from friends and
organisations. Despite data from Nielsen Online that up to 40% of Twitter
US's new members may be quitting the site after a month, Twitter still
reaches a significant audience: 13.9 million visitors in March 2009.
Twitter's problems include
difficulty searching for specific
retailer pages, the constraints of
the 140 character tweet limit and
brand hijacking (for example,
twitter.com/sephora links to a site
called valentineperfume.com,
apparently unconnected to the
LVMH banner).
Fresh and Easy is using

Twitter to gain ground in the US
market, advertising sales
promotions and store openings,
answering questions and
gaining consumer insight.
Collapsed UK store brands Woolworths and Zavvi are

using Twitter to maintain brand awareness as they
transform into online-only retailers.
Zavvi is using the site to advertise products and

services on the "new Zavvi", answer questions and gain
consumer insight.
"team_woolies" tweets are informal and chatty, aiming
to maintain the surge of popularity that Woolworths
belatedly experienced before its closure, in preparation
for the relaunch of the brand online.
28
Prospects for Multi-channel Retail Development

Opportunities
An online sales element can help retailers reduce
operational costs, while stores or catalogues help
make online retailers more attractive. The economic
downturn and growing competition online make both
these elements increasingly important.
Order delivery and returned goods are two
significant obstacles to internet retailing. Offering
these via a store network can give an internet retailer
a significant advantage.
As internet and store-based retail become
increasingly intermingled, more collaborative formats
may appear, such as internet "showrooms", where
consumers can collect, return and view products.
The potential for shopping malls to act as delivery
points for deliveries or returns has also not been
explored. This could be a potential footfall driver,
particularly as most visitors will arrive via car.
Dell recently announced that it generated US$3
million in sales by Tweeting promotion deals: expect
a surge of retailers aiming to follow Dell's example.
The internet can drive sales and add value by
providing use information, such as "how-to" videos.
Challenges
Brands can be devalued by the introduction of a
transactional website if orders are then delayed or
wrong.
Collaborations where store-based retailers have
partnered with e-tail specialists to develop their
brand online have been complicated and often
acrimonious. Store chains have little choice but to
put up with the risk and cost of developing a
transactional website from their own resources
though Gap, due to launch online in the UK via
Asos.com, will hope to buck the trend.
Multi-channel retail is best done simultaneously:
store chains attempting to go to an online-only
model appear to struggle. Home Retail will be
hoping an online-only Woolworths does better than
DSGi's Dixons.
Popularity can kill interactivity: Second Life lost its
underground cachet once it gained widespread
media coverage, and if Twitter or Facebook become
crowded with retailers pushing promotional deals or
the corporate message, users will move on.
29
Overview

30
Instant Retail Boost Impulse Media Purchases

The media products category relies strongly on impulse sales, putting retailers able to offer instant purchase
options at an advantage.
Because products tend to be small and easily sent by post, they are highly suitable for internet retailing.
Powerful e-tailers, such as Amazon, have become highly price-competitive and frequently offer free delivery,
subject to a minimum order value, making delivery time their only disadvantage to store-based retail.
Developed markets dominate media product sales, with some still achieving strong growth rates, driven by
online sales. Music downloads and eBooks will increasingly threaten store-based sales.
The three more-advanced BRIC nations, China, Brazil and Russia, complete 2008's top 10 India lags
significantly behind despite strong growth, owing to the lower base of its market. Growing internet penetration
and availability of financial cards for online payments will result in long-term growth for emerging markets.
US$ bn (fixed 2008 exchange

rates; value at current prices)
Combined Value Sales of Booksellers and Stationers, Media Products Internet

Retailing and Audio-visual Stores: Top 10 Global Markets 2003-2013
45
40
35
30
25
20
15
10
5
0
USA
Japan
UK
Germany
France
Italy
Spain
China
Brazil
Russia
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
31
Retailing On-the-go: Amazon's TextBuyIt

Concept name: TextBuyIt
Company: Amazon.com
Market: US
Channel: Internet retailing/m-commerce
USP:
Text messaging service to enabling users to search for and purchase products from the amazon.com site.
Designed to make comparison shopping quick and easy; amazon.com account holders text a search term, bar
code or ISBN number to 262966 ("amazon" on a mobile phone keypad). Prices for two matching items are
returned, and can be purchased by replying to the text message and punching in a single-digit number next to
the desired item. Amazon will then call the person to confirm the order.
Comment:
TextBuyIt offers Amazon the opportunity to compete even more strongly with store-based retail by matching
the instant gratification of the purchase, though delivery is still a delay.
Offering real-time price comparisons which customers can access as they shop could gain Amazon some
sales; however, sales could also be lost if the price differential is not significant. Consumers who might
otherwise wait to check an Amazon price online may decide to buy in-store for a similar price.
TextBuyIt is still operating in the US alongside other m-commerce options such as Mobile 1-Click. However, it
remains absent from international sites such as amazon.co.uk and amazon.de, which only offer Mobile 1-Click.
M-commerce, already strong in Japan owing to closer integration of mobile phone, email and bank accounts, is
slowing gaining ground internationally, so providing more m-commerce options is a good strategy for Amazon.
The increasing sophistication of mobile phones is making them more suitable for use in retailing, but as
viewing web pages via mobile phones gets easier, TextBuyIt's 2-result search may prove too limited.
32
In Tune with the Times? Apple Download Kiosks

Concept name: Apple Download Kiosks
Company: Apple Inc
Market: US
Channel: Vending
Launched: Patent filed by Apple in 2007 but not revealed until 2009, possibly
indicating that commercial development of the machines is nearing completion
Image courtesy of Apple
USP:
Kiosks designed to transmit digital media, such as music and films, wirelessly to Apple media players, such
as iPods, iPhones and MacBooks
Comment:
Euromonitor International estimates that by 2013, nearly half a billion travellers will be departing from
airports across the world. Download kiosks would help Apple tap into this massive consumer group and also
make the brand more visible in these high traffic areas and support Apple brand loyalty.
Other potential locations include any environment where consumers are likely to be looking for distractions:
hotels, train stations, shopping malls, college campuses, aeroplanes, ferries, even prisons.
The kiosks will be able work in places where internet connectivity is slow or non-existent and media cannot
be downloaded from normal online sources. It could increase iPod ownership/usage among people without
easy access to a computer to download music.
The kiosks offer Apple a number of key advantages: wireless downloads minimise the likelihood of
machines breaking or being vandalised; there is flexibility in terms of payment options (using iTunes accounts,
cards, contactless payments or cash) and also the potential for combining with iPod vending machines.
Competition from other music download providers, already being felt by iTunes, is a threat. Amazon,
for example, would benefit from similar synergies in terms of brand presence and cross sales.
33
Store-based Retail Fights Back: The Espresso Book Machine

Concept name: The Espresso Book Machine
Company: On Demand Books LLC
Market: US
Channel: Vending/booksellers and stationers
Launched: 2006
Progress: Now over a dozen machines worldwide (US, Canada, Australia, Egypt, UK)
USP:
A book publishing machine which rapidly prints single copies on demand, identical to the published version,
billed as an "ATM for books".
Comment:
Listed as one of Time Magazine's Best Inventions Of The Year in 2007, the EBM makes rare, out-of-print and
foreign language books available on demand, and at speed: Tolstoy's War And Peace prints in just 9 minutes.
Most EBMs are located in libraries, archives or colleges. In October 2008, Australia's Angus & Robertson
bookseller pioneered its use in a retail store, and in April 2009, the Charing Cross branch of Blackwells in
London became the first European bookshop to install an EBM.
EBMs allow booksellers to keep fewer items in stock, particularly titles for which demand is low, and could also
enable a degree of customisation, large print, for example.
They allow customers to buy any book (almost) instantly at in-store prices, and offer book stores an advantage
over the internet retailers that have begun to dominate the book sales market. There is also potential for books
to be ordered and paid for over the internet and collected in store, or delivered by post. Blackwells is planning
an online catalogue for the machine.
However, not all titles are available yet (400,000 listed by Blackwells, with a million planned by summer 2009),
and EBM represent a significant investment for retailers: machines cost upwards of US$50,000.
34
Non-grocery retail selling space has

been rising steadily, with a CAGR of
2% between 2003-2008,
representing an extra 27 sq m per
1,000 people over the past five
years.
This indicates an increasingly
competitive retail environment
where businesses will need to
differentiate their stores, services or
products, in order to attract
consumers.
Year on year growth (%)
Service Enhancement: A Retail Survival Strategy

6
5
4
3
2
1
0
-1
Sales Space Growth Per 1,000 People Worldwide

2003-2008
2003-04
2004-05
2005-06
2006-07
2007-08
Retailers are increasingly being hit by the global recession, as well as the
longer term increase in competition.
Retailers of discretionary products and, especially, big ticket items are
particularly threatened.
Service enhancement continues to be strong within health and beauty retailers
and electronics and appliance retailers, from specialist advice and technological
innovations to product customisation.
Retailers which are able to survive the challenges of the current retail
environment can look forward to a future in the short to mid term at least
with fewer competitors.
35
Technologically Enhanced Customer Service

Praktinfo, Hungary
Smart Cart, South Korea
Launched in September 2007, in a Praktiker Kft store

in Vecss (near Budapest airport)
Format: Virtual shopping basket, also supplying
product data
Praktiker's Vecss branch is a state-of-the-art DIY
outlet: features include electronic price tags, interior
design programs and information on plasma screens
or via the internet.
Pratkinfo offers registered customers a handheld
reader which acts as a virtual shopping basket,
providing product information and location, and the
total value of selected products.
Customers buy items by putting them into the virtual
basket rather than carrying them around the store.
Easier shopping has great potential, and male
consumers, in particular, are attracted by
technological novelties.
Launched in South Korea in January 2008 by

Shinsegae Co Ltd in the E-Mart grocery chain
Format: RFID-enabled shopping cart, equipped with
barcode reader and touch screen
Products are scanned as they go into the cart and all
related information, including product origin, price
and location in store are displayed on the screen. At
the end of the visit, the barcode reader is simply
passed to a cashier for payment.
Popular with consumers Smart Carts are to be rolled
out to more outlets but cost of the carts is a factor.
Talking Trolleys, Poland

Piloted in Tesco Plc's Krakow branch in June 2007
Format: Shopping carts with integrated audio system,
activated by infrared sensors
Carts play advertisements for particular products as
the customer passes the shelf.
The concept was only tested for a limited period of
time and has been discontinued.
The concept proved too complicated and somewhat
annoying/distracting for customers, subjecting them
to more advertising without adding convenience.
36
Technology Doesn't Work on Its Own: TecAsia

Brand name: TecAsia
Company: FTEC Resources Bhd
Market: Malaysia
Channel: Electronics and appliance specialist retailers
Launched: February 2008
USP:
A large-scale IT concept store covering around 2,500 sq m, with highly experiential and service-led approach
Comment:
The store has four "Experience Zones" Digital Home, Gamers Zone, Digital Office and Kids Corner -- where
consumers can get hands-on experience of products before they buy. For example, customers can play
games in a cybercafe setting at the Gamers Zone before they make their final purchase decision.
A dedicated Dell counter inside the premises is Dell Inc's first store-based retail outlet in Malaysia.
Apart from offering a variety of IT products, including PCs and accessories, this outlet also offers in-depth
customer service, with trained technical staff in-store to assist shoppers.
Other facilities include a Gloria Jean's coffeehouse and a bookstore, making TecAsia a more rounded retail
destination.
Sales through electronic and appliance retailers in Malaysia have been growing steadily, reaching US$1.7
billion in 2008. Government efforts to raise computer literacy among Malaysians, with extra income tax
allowances for the purchase of computers, printers and bundled software, are expected to drive growth of this
retail format.
FTEC Resources has revealed plans to expand this concept, aiming for at least one store per state in
Malaysia, but spend per capita remains low and only the larger cities are likely to be able to support the stores.
37
Prospects for Technology-driven Innovation

Opportunities
Technological advances are increasingly offering
retailers the opportunity to make their products more
accessible and convenient for consumers to buy,
increasing the likelihood of impulse purchasing.
Technology also has the potential to help retailers
make cost savings, and not only in terms of staffing
levels. For example, the EBM allows booksellers to
hold fewer books in stock while widening the range
of titles available in-store.
Using technology to enhance customer service
makes a vast range of product and usage
information available to consumers at the point-ofsale.
Using customer service assistants and incorporating
other retail and leisure elements helps consumers to
enjoy and feel comfortable with technology,
particularly in emerging markets.
Challenges
Technology-led service concepts can lack the
human touch, and the ability to respond to nonstandard queries is limited. Even a format targeting
a tech-friendly consumer base such as TecAsia lays
heavy emphasis on person-to-person interaction.
Many consumers have a dislike of gadgetry
pushing their use too strongly can create a negative
impression of a retail environment.
The absence of a human salesperson can
potentially lose sales. Technological innovations
geared toward driving sales may lack finesse.
Interacting with customers via machines rather than
employees may make it harder to anticipate what
consumers want from their stores, which could
reduce the success of future developments.
In-store technology requires investment:
unsuccessful introductions can be an expensive
waste of money.
38
Overview

39
Consumer Segmentation, Personalisation, Gratification

Segmentation is not a new
concept: fashion retailers have
been separating menswear and
womenswear for decades
Segmentation allows retailers to
differentiate themselves within a
saturated retail landscape and
specifically target their consumer base
Concepts must target a strong
consumer base, otherwise the
format will fail or remain niche
Overly narrow segmentation concepts
risk excluding too many consumers
Segmentation concepts are highly
vulnerable to spending downturns within
their target consumer base; many will be
threatened by the global recession
40
Lessons to Learn: Segmentation Failures

Narrow consumer base: havinababy.com
Economic Vulnerability: Just Married Center
Launched by Big & Small Co in

the Philippines, December 2006
Format: website selling maternity
clothes and accessories
Progress: website is now closed
The Theory:
Targeted a high-spending consumer group, already
familiar with the Havin' A Baby stores
Offered online payments for extra convenience
The Practice:
Even though Havin' A Baby stores are popular, the
base of online shoppers in the Philippine market was
still too low
Underdevelopment of financial systems to support
online transactions was an additional disadvantage
Weak marketing strategy meant target market's
awareness of the site was not high enough
Impact on market:
Companies are re-thinking their online marketing
strategies, introducing more convenient payment
systems like Paypal and Xoom.com and promoting
websites more actively
Due to launch in spring 2009

in Biatorbgy, Hungary
(developer: ImmogrinvestKft)
Format: shopping mall for
wedding-related stores
Progress: construction delayed until spring 2010
The Theory:
Aimed at engaged couples, relatives and friends
Population of 2 million within a 15 minute journey,
plus excellent road transport links
Range of facilities planned: a bank, a playground for
children and party rooms, as well as shops and
restaurants
The Practice:
Planning issues have delayed construction
Concerns remain over whether the centre will be
able to attract enough of its target consumers
Hungary has been severely hit by the credit crunch,
casting further doubt on the project, though a weak
forint could attract Euro-zone spenders
Some experts also question why foreign examples
of such a format are non-existent
41
Widening the Net for Niche Consumers: Kidfresh Inc

Concept name: Kidfresh
Company: Kidfresh Inc
Market: US
Channel: Convenience stores
Launched: January 2007
Progress: Manhattan flagship still in operation, no additional stores
USP:
Health and wellness convenience store for children, which offers healthy ready meals
made in conjunction with a paediatric nutritionist, cooking classes, story times and other services
Comment:
Kidfresh targets a high spending consumer base of upmarket Manhattanite parents, and taps into current
concerns over child health and obesity.
It remains a niche concept, difficult to expand into mainstream or internationally, but has begun expanding as a
brand instead: now available in 70 Wholefood Market outlets across the US. Prices for pre-packed lunches
range from US$3.99 to US$5.99.
Development as a food brand rather than as a retail banner offers the strongest potential for international
expansion, though flagship outlets may help to raise the profile of the brand.
Partnerships with health food retailers offer a more cost-effective and practical way to increase presence
overseas than opening stores catering to a single market niche, though premium chains such as Whole Foods
Market and Canada's Planet Organic are beginning to show signs of strain in the current economic
environment.
However, spending on children, particularly if related to health and wellness, is expected to remain relatively
resilient
42
Segmentation: Catering to Elderly Consumers

Over 65s as a Percentage of Total
Population 1978-2018
Globally, the proportion of over 65s is increasing:

nearly 10% of the world's population by 2018
In some national markets the pace is more rapid
As well as formats designed specifically for the
elderly, mainstream formats can benefit from
incorporating pensioner-friendly features
Wal-Mart's UK subsidiary Asda is trialling the
sale of mobility aids, including wheelchairs,
walking sticks and medical products/equipment
SeniorStore SL, Spain
Originally launched in 1994 as
La Tienda del Abuelo,
offering consumer goods for
the elderly
Relaunched as SeniorStore
in 2007, widening its remit to
offer services such as
adapting homes to cater for reduced mobility, as
well as specially designed furniture
The expansion of the seniors population in Spain
has now slowed, but they remain a significant
proportion of the Spanish consumer base
%age of total population
Not all consumer segments are niche markets

35
30
Japan
Spain
Global Average
25
20
15
10
5
0
1978 1983 1988 1993 1998 2003 2008 2013 2018
Anshin Support Store, Japan

Launched in 2008, as an
extension of Ito Yokado's
Anshin Support Shop range of
nursing goods
An 800 sq m store located within an Ito Yokado outlet,
offering food, clothing, mobility aids, therapy and
exercise facilities
Japan's elderly population is expected to grow strongly
The format targets three customer bases: those who
need care, carers and those wanting to remain fit
It also increases weekday traffic to the Ito Yokado store
43
Segmentation: Wal-Mart Develops Its Ethnic Retail Strategy

Concept name: Store of the Community
Company: Wal-Mart Stores Inc
Market: US
Channel: Hypermarkets and mass merchandisers
Launched: 2006
Progress: The project has become more ambitious and is driving the evolution of entirely new retail banners
USP:
A project aimed at tailoring store formats more closely to the needs of the local community
Comment:
Since the launch of Store of the Community, Wal-Mart has customised stores in various ways to reflect the
local community, for example by adding hitching posts for tethering horse-drawn buggies to a store located in
the heart of Amish country.
In 2008, the programme moved up a gear by remodelling its store in Dearborn, Michigan, entirely around the
needs of the half million-strong local community of Arab-Americans, the largest concentration of Arabs outside
the Middle East.
The Hispanic community now accounts for nearly a sixth of the US population, and Wal-Mart has begun
targeting this market very actively. Rather than simply widening its product mix to include more Hispanic
foods, Wal-Mart is developing two new store banners.
Wal-Mart's Supermercados are currently being trialled in Phoenix and Houston, while Houston is also set to
be the site of the first Hispanic version of the Sam's Club chain, to be called Mas Club.
Key point: The low-key start to this project suggests that it was as much to do with
improving Wal-Mart's image within local communities as driving sales, but now
Wal-Mart now seems to be looking on ethnic retail as a sales growth driver .
44
When Segmentation Goes Too Far: Club Libby Lu (CLL), US

Concept name: Club Libby Lu
Company: Club Libby Lu Inc, a subsidiary of Saks Inc since 2003
Market: US
Channel: Other leisure and personal stores
Launched: 2000
Progress: Closure of all 98 stores finalised in January 2009
USP:
Experiential retail concept providing themed makeovers for tweenage girls (aged 6-12). The stores offered
children (singly and in groups) the chance to "unlock their inner princess" by dressing up, having makeovers
and Libby Du hairstyles, singing and visiting the Pooch Parlour for a (stuffed) canine accessory
Comment:
The chain was criticised for its emphasis on looks and shopping, and accused of sexualising children. Midriffbaring crop tops were phased out in mid-2007, but there was more bad publicity at end-2007 when it emerged
that the winner of a Club Libby Lu contest had lied when she said that her father had recently died in Iraq.
Defenders pointed out that the make-up was light, dances were not "sexy", that it was normal for girls to enjoy
dressing up and makeovers, and that a Club Libby Lu makeover could help improve a child's self-image.
Many higher income parents of tweenagers were alienated by the concept, and its popularity with younger
children may also have dented its appeal at the older end of the target age bracket.
No buyer: with sales of just US$52 million in 2008 (US$0.5 million per store), the chain was not profitable.
Also, 2009 marked a low point in the US tweenager demographic, though numbers are now expected to
increase.
Key point: Although Club Libby Lu brand products were sold through the stores
and online, it had potential to be developed as a standalone brand: with wider
distribution it might have thrived despite the limited target demographic.
45
Prospects for Segmentation Concepts

Opportunities
Challenges
Product range benefits: segmentation concepts gain

an advantage over general retailers by stocking
hard-to-find products.
Restricting the consumer base is a gamble for any

retail concept, particularly in the current economic
climate.
Consumers are also willing to pay more for specialist

products and specialist advice which caters to their
needs more precisely.
Any lucrative consumer base will be targeted by

other retailers, either specialists or general retailers
adjusting their product mix in response to local
demand.
Developing a segmentation concept, such as WalMart's Hispanic stores, can refresh a brand and
make it attractive to a new range of consumers.
Despite a few concepts geared towards them, large
consumer bases such as the elderly have yet to be
well-targeted by retailers, and continue to hold
potential.
Segmentation concepts lack flexibility: any downturn

in the fortunes, or numbers, of the target base will
have a major impact.
Once the economic climate improves, segmentation

concepts are likely to become more diversified,
responding to pent-up retail demand.
Internet retailing offers the opportunity for
segmentation concepts to access a consumer base
beyond their immediate area, increasing the chance
of success.
46
Overview

47
Cross Border, Cross Category Format Development: Tesco

Tesco Plc has been the fastest
growing of the top three global
retailers over the past four years,
so it is no surprise to find the
company continually exploring
new retail concepts in its home
market and abroad
MALAYSIA: wholesale/retail hybrid
After the acquisition of Makro's
Malaysian cash and carry network in
2007, Tesco developed a version of its
Extra format that caters to business as
well as retail customers, including bulk
pack sizes, additional product ranges
and business development advisers
UK: Private label innovation
UK: The ultimate store layout
Tesco took private label to the next

step by creating the Discounter range
of value products designed to look like
ordinary brands. It is also widening its
net of Tesco brand services with
financial, mobile phone and
technological support products
The results of a 2-year research

project into the perfect store layout,
undertaken by Unilever and involving
computer simulations and virtual
shoppers, have been implemented in
1,500 Tesco Express convenience
stores since the beginning of 2009
"Nothing can be sacred

within business. Hold your
nerve, follow your
customers, spot trends,
observe them."
Sir Terry Leahy, CEO of Tesco Plc,
June 2009
SLOVAKIA: Wooden Tesco

Outlet built in 2008, entirely from
natural materials, eg wood, wool and
straw. Solar panels, motion detecting
lighting and other "green" devices
included in the CEE's first sustainably
built supermarket. Noticeably reduced
running costs are an additional benefit
US: compact supermarkets
HUNGARY: strip mall
CZECH REP.: Department store
When Tesco launched into the US

with Fresh & Easy in 2007, its
compact supermarket format had its
doubters. However, the chain is still
expanding and rivals such as WalMart, Safeway and Supervalu have
now launched similar formats
Tesco has combined its hypermarket

and petrol station concepts with an
open-air strip mall featuring non-Tesco
stores, opened in 2008 at the popular
resort of Balatonboglr. A wider retail
offer helps boost footfall within the
Tesco hypermarket
Tesco has moved away from its

grocery store roots with the launch of
My Liberec. The store stocks groceries
on one floor and clothing on another.
Positioned at the upper end of the
market, Tesco branding and private
label products are present but minimal
48
Not So Easy for Fresh & Easy: Progress of a Tesco Innovation

Feb 06: Tesco
unveils plans to
move into the
US market with
small-format
grocery stores
Jan 08: In a trading

update, Tesco cites
"encouraging" interest
in Fresh & Easy but
does not issue sales
figures
Nov 07: First Fresh

& Easy opens quietly
in Hemet, CA,
days before the
"official" launch on
Nov 8
Apr 06: a
massive
research
programme
gets underway
Jan 08: Wal-Mart

announces that it will
open its own chain of
small-format grocery
stores, called
Marketside
Jan 08: US labour

union opens antiTesco website,
Fresh & Queasy
Nov 07: 93% of

customers "fairly
or very satisfied"
with Fresh &
Easy; 13 stores
open by end of
first month
Mar 08: Tesco

announces a 3 month
break from new store
openings to "kick the
tyres".
61 stores so far.
Sept 08: Jewel-Osco

launches Urban
Fresh, a small-format
supermarket, in
Chicago, IL
May 08: Safeway

Inc launches its
own small-format
supermarket,
The Market, in Long
Beach, CA.
Jan 08: Fresh &

Easy criticised by
industry pundits
who say the chain
is missing sales
targets and may
never make money.
Tesco responds:
"we are seeing
growing sales,
growing customer
numbers"
Jun 08: Tesco's

US operations
chief Tim Mason
says Fresh &
Easy is "thriving"
Jul 08: 62nd

store opens,
ending 3
month hiatus
Nov 08: 100th Fresh & Easy

store opens, but Tesco
decides to slow expansion of
F&E because of the credit
crunch
May 09: 120th Fresh
& Easy store opens
Oct 08: Wal-Mart
Competitor
launches
storecount:
Marketside with 4
Marketside 4
stores in Phoenix,
Urban Fresh 1
AZ
The Market 1 (a 2nd
is planned
Apr 09: Tesco reveals a loss of 142

million in its US operations for the
2008-9 financial year.
Tesco remains "fully committed" to
Fresh & Easy
Key Point: A number of US

competitors have launched their
own compact supermarket formats,
but only Fresh & Easy is expanding
aggressively. Tesco needs critical
mass for the Fresh & Easy
infrastructure to pay its way,
but rivals are clearly not yet
convinced of the format's potential.
49
Single-channel Development: Forecourt Retailing

Forecourt retailing has been going through a phase of rapid development: on the
one hand, grocery chains offering discounted fuel and a sharp increase in
convenience retail formats have put the channel under pressure; on the other, the
influx of well-known grocery chain banners has raised consumer expectations of
the channel
Forecourt retailers must continue to anticipate and drive consumer demand by
providing the right mix of products and services for their target consumers
Limited location options and lack of space remain an issue
Petro-Canada Neighbours (Canada), pictured
The Petro-Canada Neighbours format, launched in 2007, aims to be a retail destination rather than a fuel stop
Stores feature innovative design: a stone-clad entrance tower to attract attention from the road, an in-store layout that directs
customer traffic through the food section with staff dressed as chefs, touch-screen ordering terminals and self-service coffee, an
outdoor patio for diners, and a drive-through window
In addition, the company attempts to emphasis a distinct Canadian identity for its stores
The combination of advanced customer service features, attractive layout and an expanded range of products and services has
helped Petro-Canada boost its retail sales; 18 Neighbours format stores are in operation, with more stores to be converted
KLO Co (Ukraine)
Johnson Family Market (US)
Attractions include 9 different types of gasoline, a restaurant and Launched in North Carolina in
a Podorozhnik mini-market, and customers are also encouraged July 2008
Forecourt retail concept
to visit the Thai Massage parlour while their car is in the wash
combining convenience with
Has limited appeal in the most developed areas of the country
natural/organic foods. To
such as Kiev and Donetsk in the East: while the one stop
bring in customers, fuel is sold
shopping concept will appeal to a wide range of consumers, the
at wholesale prices and fullThai Massage parlour is more niche
service is offered free of charge
50
Overview

51
New Retail Concepts: Lessons from Other Recessions

In previous economic downturns,
total retailing has not been as
badly hit as product specific
industries. Growth in grocery
channels offsets a fall in sales
through non-grocery ones.
For many companies, downturns

offer an opportunity to expand as
retail rents fall and properties
become available. Retailers that
expand during the downturn appear
to benefit once it has passed.
Spending patterns return to

"normal" quickly, although
recovery does depend on how
long the downturn lasts for.
Investigations into previous
downturns have demonstrated
that although some channels will
emerge stronger than others,
spending patterns overall are
unlikely to change significantly.
Within grocery retailing, consumer

shopping patterns change, with price
becoming increasingly important.
The longer the downturn lasts,

the worse it is for retailers.
Despite signs of economic
recovery in many markets, some
economists are now predicting a
"double dip" downturn. In these
environments, the retailing
market has historically been hit
more quickly and harder in the
second dip than the first.
Shopping patterns that emerge during

economic downturns have invariably became
embedded for consumers in the grocery
channel, but this is not the case in nongrocery.
In relation to small non-food items (CDs,
books), grocers have emerged as competition
for non-grocery, but overall, specialists have
been able to bounce back to pre-crisis trends.
Thanks to the ongoing development

of private label ranges over the past
decade, major grocery retailers in
key markets such as the US and UK
have a greater ability to enforce
lower pricing, even at the premium
end of the market, than ever before.
Previous economic downturns have not acted

as a hindrance to emerging retail channels
within a specific country. Internet retailing, for
example, will continue to do well in countries
where it is still relatively new, but sales are
beginning to slow in Western markets, where
e-commerce is more mature.
The channels most vulnerable in a

downturn are those that sell "big
ticket" items. Electronics and
appliance specialists, the furniture
and furnishings channel and
department stores are affected most
by an economic downturn,
particularly when the housing
market is affected.
Key Point: Previous economic

downturns across the world have
shown that fundamental shifts in
consumer habits can result, even after
spending levels return to normal.
Aggressive retailers which take the
opportunity to expand and to develop
attractive new retail formats can gain
long-term benefit.
52
Spreading the Pain of Payments: Return of the Layaway

The credit crunch has left many consumers struggling to repay debts and keep up with hire purchase
agreements. Retailers offering rent-to-buy and credit options are expected to do well in the current economic
climate, but their exposure to payment defaulters is increasing.
In answer to this, retailers are developing or re-introducing payment options that do not involve consumers
going into debt, including layaway programs and payment sharing.
Consumer Debt Profiles: Outstanding Consumer Loans as
a Percentage of Annual Disposable Income 2008
Lower debt
Moderate debt
Higher debt
Not covered
Key Point: Most of the world's major developed markets have a

high level of consumer debt; there is also a strong correlation
between the proportion of electronic card payments and debt levels
53
Payment Spreading, Payment Sharing: Sears Holdings
In 2007-08 the channel contracted by 2%, but for the

first time since 2004, Sears Holdings' performance
was in line with the overall channel
In response to the economic downturn, Sears has
introduced some more flexible payment options
Sears Layaway
Relaunched by Sears in Nov 2008 after a 20 year absence
Format: Credit alternative where customers pay for goods
before collecting, over a 90 day period
USP:
Allows consumers to spread payments for goods without
getting into debt or incurring interest
Prospects
The Sears scheme was introduced after the success of
the Kmart layaway programme, which had never been
discontinued but has only been actively marketed since
October 2008
Clearly there is a demand for this service currently, but
this will lessen once the US economy recovers
US Department Stores / Sears Holdings

Year-on-year Growth 2004-2008
5
% growth
Even before the credit crunch began to affect the US

market, the department stores channel was
struggling to achieve growth, under pressure from
specialist retailers, mass merchandisers, outlet stores
and internet retailing
0
-5
-10
2004-5
2005-6
Sears Holdings Corp
2006-7
2007-8
Total US Department Stores Channel
Sears Givetogether
Launched in May 2009 at Sears.com
Format: Online facility where payment for gifts can be
divided between a group of people
USP:
Allows more expensive gifts to be bought
Prospects
Taps into current demand for easier payments
May help boost sales of big-ticket items, a category
that has been hard hit by the current recession
Launched in time for Mothers' Day in the US,
strong potential to market for birthday/wedding gifts
Sears loses fewer gift sales to other retailers
54
Overview

55
New Retail Concepts: Future Scenarios

Crisis for some retailers means opportunity for others: successful
businesses will stay ahead of the curve so what's in store for stores?
Powerful retail chains are
While some retail concepts
pressuring branded manufacturers
have been successfully
as never before. As the retailerAs store-based retailers
transferred from developed
supplier relationship gets more
move towards multi-channel
to emerging markets,
unsatisfactory, manufacturers are
operations, internet
retailers moving into new
beginning to look at more direct
specialists need to make
business environments need
routes to market where they have
their offer more accessible.
to be flexible in their format
a greater degree of control.
Watch for more partnerships
development.
Several struggling retailers have
between non-store
Today's emerging markets
been bought by suppliers.
specialists and store chains
are not the same as
Danone, Nivea and P&G have all
and in the future, perhaps,
yesterday's: differences,
set up dedicated brand flagship
dedicated internet service
such as the high penetration
outlets and suppliers of the
centres on the high street.
levels of mobile phones, hold
bankrupt Principles chain have
the potential to spawn new
launched their own website this
ways of retailing.
is a trend that will escalate.
56
Formats and Segmentation Most Durable Trends

Trends
Key Issues
Premiumisation
Premium grocery formats are already demonstrating that it is possible

to survive, and even grow, during a recession. When the global
economy improves, premiumisation will be an obvious retail strategy,
and will once more be suitable to non-grocery and emerging markets.
Discounting
Multi-channel
Technology
Segmentation
Impact
2008
Impact
2013
The longer the recession continues, the more the thrill of thrift will fade.
As the recession eases, consumers will be eager to return to normal
life and "normal" retail, and no-frills discounters could be left behind.
The price gap between discounters and mainstream retail could be
slow to return to pre-recession levels.
Retailers are becoming increasingly open to the synergies offered by
multi-channel approaches. As progress in internet retail, m-commerce,
cashless payment and delivery systems continues worldwide, the
impact of multi-channel retail can only grow.
Technology still has massive potential to improve operational
processes and help retailers to understand their consumers, but as
consumers become more used to gadgets, a human touch may come
to be valued more highly than an impersonal technological interface.
The current challenging retail climate is difficult for all segmentation
concepts, unless they are targeting a major demographic. By 2013, the
retail landscape is likely to begin getting crowded again, and
segmentation will be one way for retailers to differentiate their offer.
57
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Global Retailing: New Concepts in

Retailing The Thin Line Between

Retailing New Concepts

Euromonitor International >

Technology in Retail: Pressing the Right Buttons

Retailing New Concepts

Euromonitor International >

Retailing New Concepts

Euromonitor International >

Small grocery retailers

Terms and abbreviations:

Retailing New Concepts

Euromonitor International >

Discounting: Value in volume

Virtual and multi-channel

Today's retail climate has little

Retailing New Concepts

Euromonitor International >

Top Five Trends in New Retail Concepts

Retailing New Concepts

Euromonitor International >

Technology in Retail: Pressing the Right Buttons

Premiumisation: Exploiting the Niche

Retailing New Concepts

Euromonitor International >

Getting What You Pay for: Premiumisation Concepts

Premiumisation concepts have enabled retailers to compete against

Retailing New Concepts

Premiumisation: Exploiting the Niche

Euromonitor International >

Premiumisation Potential Still Centred in Developed Markets

Deciles 9 & 10: combined income

Figures in brackets represent

% age of national annual disposable income controlled by decile 9 and 10 households

Bubble size represents total income of deciles 9 and 10 in 2008 (US$)

Premiumisation: Exploiting the Niche

Retailing New Concepts

Euromonitor International >

Finding the Premium Consumer: Cold Storage Solaris

Premiumisation: Exploiting the Niche

Retailing New Concepts

Euromonitor International >

Premium Retail as Brand Enhancement: Wadi Food Stores

Retailing New Concepts

Premiumisation: Exploiting the Niche

Euromonitor International >

From Niche to Mass: Developed Market Premiumisation

Launched in south London in February 2009, by

Launched March 2009 by Dansk Supermarked A/S; 2

Format: Gourmet food store providing cookery

Format: Supermarket offering a range of premium

Focus on experiential retail: customers can put

Mix of normal and premium prices is suited to a wide

Premiumisation: Exploiting the Niche

Retailing New Concepts

Euromonitor International >

When Premiumisation Doesn't Work: Expo Design Center, US

Premiumisation: Exploiting the Niche

Retailing New Concepts

Euromonitor International >

Prospects for Premium Retail Concepts

Retailing New Concepts

Euromonitor International >