Tuesday, July 12, 2016

Why Bigger is no longer Better

Modern retail has long been guided by a powerful premise: the bigger, the better. Retailers, consumers and suppliers all benefited from economies of scale, but over the past 10 to 15 years, the retail store model has evolved. Supply chain process improvements have made it possible to achieve similar or even higher levels of profitability with smaller stores, paving the way for smaller retail chains to expand and take share from larger competitors in many markets. Further complicating retail’s evolution is the shifting global socio-economic landscape: Rising middle class, growing urbanization and coming-of-age Millennials are shaping consumer preferences.
“Perhaps the new retail mantra should be ‘Go small or go home,’ as the ‘Bigger is better’ paradigm has been challenged virtually everywhere,” said Steve Matthesen, president, Nielsen Retail Vertical. “Hyper-localization and specialization are fueling today’s retail growth. As lifestyle and consumption habits change, we’re seeing a structural shift in where consumers shop and what they buy, and some small formats are driving big growth. Mass-market strategies are also losing relevance as consumers look for unique experiences that meet their personal demands.”
So how can retailers stay ahead in the rapidly changing landscape? They can start by assessing how well they’re doing now. What do consumers think about the shopping experience, and how well do they think their needs are currently being met?
For many, grocery shopping is a chore. In fact, nearly half (46%) of respondents around the world say grocery shopping is something they try to spend as little time as possible doing. So what is it about the shopping experience that is particularly unpleasant? Less than half of global respondents (49%) believe their main grocery retailer always or mostly communicates with them in a relevant way. Just over half believe retailers always or mostly understand their grocery requirements (53%) and provide offers they like and value (52%). Globally, retailers are only doing slightly better on the product assortment front: 64% say their main grocery retailer always or mostly carries the items they want.
But sentiment isn’t the same everywhere. Retailers in North America—and, to a lesser degree, Asia-Pacific—seem to be doing a better job than their counterparts in Europe and Latin America. North American retailers particularly stand out when it comes to product assortment and providing valued offers. Roughly three-quarters of North American respondents (74%) say their main grocery retailer always or mostly carries the items they want, 10 percentage points above the global average (64%), and almost two-thirds (64%) say their main grocery retailer provides them with offers they like and value (compared with 52% globally).
Read more here

No comments: