Page 40 - DMGT550_RETAIL_MANAGEMENT

Unit 3: Types of Retailer

3.2 Food Retailers Notes

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The latter half of the 20 Century, in both Europe and North America, has seen the emergence of
the supermarket as the dominant grocery retail form. The reasons why supermarkets have come
to dominate food retailing are not hard to find. The search for convenience in food shopping and
consumption, coupled to car ownership, led to the birth of the supermarket. As incomes rose
and shoppers sought both convenience and new tastes and stimulation, supermarkets were able
to expand the products offered. The invention of the bar code allowed a store to manage thousands
of items and their prices and led to ‘just-in-time’ store replenishment and the ability to carry tens
of thousands of individual items. Computer-operated depots and logistical systems integrated
store replenishment with consumer demand in a single electronic system. The superstore was
born.

On the Global Retail Stage, little has remained the same over the last decade. One of the few
similarities with today is that Wal-Mart was ranked the top retailer in the world then and it still
holds that distinction. Other than Wal-Mart’s dominance, there’s little about today’s environment
that looks like the mid-1990s. The global economy has changed, consumer demand has shifted,
and retailers’ operating systems today are infused with far more technology than was the case
six years ago.
Saturated home markets, fierce competition and restrictive legislation have relentlessly pushed
major food retailers into the globalization mode. Since the mid-1990s, numerous governments
have opened up their economies as well, to the free markets and foreign investment that has
been a plus for many a retailer. However, a more near-term concern, has been the global
economic slowdown that has resulted from dramatic cutback in corporate IT and other types of
capital spending. Consumers themselves have become much more price sensitive and
conservative in their buying, particularly in the more advanced economies.
From an operational point of view, active practitioners have voiced their opinion that retailer
concerns in 2003 have turned to deflation, lack of pricing power, global overcapacity, low
interest rates, economic stagnation, slump in world tourism and declining consumer confidence.
But, even before the global economic slowdown that forced retailers into monitoring costs
more effectively, technological advances were a way of life in retail organizations. Technology
has become the real enabler for retailers over the last six years. Supply chain innovations for
retailers were particularly strong in the second half of the 1990s and have continued into today.
With all the emphasis on technology and cost-cutting, a major thrust of retailers continues to be
demand-based: finding new markets through globalization efforts. Four years ago, more than
half (53 per cent) of the top 200 retailers operated in only one country. Today, only 44 per cent
remain single-country merchants. This globalization trend can only intensify in the years ahead.
The benefits of increased sales and greater economies of scale are too large to be ignored.
The global retail industry has traveled a long way from a small beginning to an industry where
the world wide retail sales alone is valued at $ 7 trillion. The top 200 retailers alone account for
30% of worldwide demand. Retail sales being generally driven by people’s ability (disposable
income) and willingness (consumer confidence) to buy, compliments the fact that the money
spent on household consumption worldwide increased 68% between 1980 and 2003. The leader
has indisputably been the USA where some two-thirds or $ 6.6 trillions out of the $ 10 trillions
American economy is consumer spending. About 40% of that ($ 3 trillions) is spending on
discretionary products and services. Retail turnover in the EU is approximately Euros 2000
billion and the sector average growth looks to be following an upward pattern. The Asian
economies (excluding Japan) are expected to grow at 6% consistently till 2005-06. Positive forces
at work in retail consumer markets today include high rates of personal expenditures, low
interest rates, low unemployment and very low inflation. Negative factors that hold retail sales
back involve weakening consumer confidence.

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