Igor marosa. non scale related competitivnes
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Igor marosa. non scale related competitivnes Presentation Transcript

  • 1. Non-scale related competitivnes Moscow, 4th of February 2011 Igor Maroša
  • 2. Regional retailing has a perspective in the next strategicperiod1. Food retail market consolidation levels depend heavily on size of population and GDP per capita2. Russian giants will slow down their growth, Russian market is becoming less interesting for global retailers3. Key to maintain market position and profitability is to find competitive edge in non-scale related areas4. Understanding the store, adapting assortment and pricing strategies are the key pillars to build local/regional competitive edge5. Stores need to be understood from the perspective of consumers and competitors6. Once understanding your stores, assortment can be adapted on store/cluster level7. Smart pricing can help you be competitive and maintain margin A.T. Kearney 43/01.2011/18733p 2
  • 3. Food retail market consolidation levels depend heavily on size of population and GDP per capita Food retail market consolidation:GDP/PPP per capita 60 Norway 55 United states of America 50 45 Switzerland 40 United arab emirates Canada Germany Belgium Sweden Netherlands 35 United kingdom Spain Japan DenmarkFinland 30 Greece France Slovenia Italy 25 Czech republic Poland Slovakia 20 Croatia Hungary Bulgaria Russia 15 Mexico China Turkey 10 Serbia Romania Brazil Ukraine 5 India 0 Market conc. 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Bubble size represents the size of the population Sources: Planet retail, A.T. Kearney, www.infoplease.com A.T. Kearney 43/01.2011/18733p 3
  • 4. Russian giants will slow down their growth, Russianmarket is becoming less interesting for global retailersRussian retailers YOY Russia ranking on GRDI(1):projected selling space growth:35% 31.7% Magnit X5 Dixy 2007 2008 2009 201030% 2 3 2 10 24.8%25% 22.7%20% 17.7% 16.2% 11.7% 15.3% Additional consolidation barriers:15% 13.3% 12.0% 11.0% 10.5% 9.5% 10.1% • Country size10% 9.2% 8.7% 8.4% 6.7% 7.4% 8.0% 6.2% • Dispersed urban areas, low logistics 5.2% synergies5% • Only 40% of modern trade formats0% 2010F 2011F 2012F 2013F 2014F 2015F 2016F Regional retailers have their window of opportunities open for the following strategic period(1) GRDI – Global retail development Index by A.T. KearneySource: VTB Capital, A.T. Kearney A.T. Kearney 43/01.2011/18733p 4
  • 5. Key to maintain market position and profitability is to findcompetitive edge in non-scale related areasNon-scale related focus areas of local and regional retailers: Category Formats and Retail Sourcing Logistics management Marketing ops/service • Create alliances • Manage • Manage • Adapt • Take the especially on complexity complexity in communication advantage of private label assortment strategy to understanding Opera- • Outsourcing vs. local/regional local/regional tional insourcing • Manage specifics labor marketefficiency decisions inventory • Use and • Service level vs. • Smart pricing • Understand • Adapt service promote local cost locations and levels to sources • Localized adapt local/regional Compe- extensively • Use logistics as assortment formats/types habbits titive additional accordingly edge • Take advantage potential service • Focused • Add services of understanding promotions • Stress with high value local local/regional added (home habbits/tastes characteristics delivery, pick&pay…) A.T. Kearney 43/01.2011/18733p 5
  • 6. Understanding the store, adapting assortment and pricingstrategies are the key pillars to build local/regionalcompetitive edge Introduce the price elasticity concept to the assortment 29,90 Pricing Introduce store/cluster based assortmnet structures Assortment Who are your competitors? Understanding of stores Who are your customers? A.T. Kearney 43/01.2011/18733p 6
  • 7. Stores need to be understood from the perspective ofconsumers and competitors Store service area Employed cluster model with constraints 2 Average household income Medium High Low Household composition Client store service area; With kids primary (black) and secondary (red) Mixed • Each store has a primary, secondary and sometimes even a tertiary service area defined Without kids High Low • Demographic data can be linked to service area • Competitors can be clasified by different dimension: 3 – Formats (discount vs. SM vs. HM 1 Model segment; every client store will land in one of the – Distance (primary vs secondary vs. terciary segments. A store cluster is formed by multiple model segments A.T. Kearney 43/01.2011/18733p 7
  • 8. Once understanding your stores, assortment can beadapted on store/cluster level Build the assortmnet ladder Distribute “Clean” right the assor SKU‟s to the -tment right stores A.T. Kearney 43/01.2011/18733p 8
  • 9. PAQ analysis reveals the item-level NSV and AGMperformance within a category in order to be able to make“cleaning” decisions Example: Canned Meat & FishPAQ Analyses by SBS3 & Top SBS6 Categories(12.2008 – 11.2009, M, %-NPV & %-AGM ) Total Canned Meat and Fish % of 257 (227) SKU„s AGM Questionable 77% Acceptable 49 (3) SKU„s 45% 19 (1) SKU„s Active Performing Non-active (..) 14% 5 SKU„s % of 20% 50% 80% NPV …-03-03-01 Tuna …-02-01-01 Meat Pate …-02-03-01 Fish Pate & Spreads % of % of % of 63(98) AGM Q 41(51) AGM Q AGM A Q 19 (9) 74% 78% A 80% A 14 (2) 4 9 (2) 57% 50% 38% 6 4 P 3 P P 14% 20% 2 18% 1 1 % of % of % of 30% 52% 81% NPV 21% 51% 80% NPV 30% 52% 81% NPVSource: client data-warehouse, A.T. Kearney A.T. Kearney 43/01.2011/18733p 9
  • 10. The assortment matrix helps to structure the categoryaccross various dimensions Normalized PriceA.T. Kearney Assortment Matrix Example: Deodorants(12.2008 – 11.2009, €, M) Price • Currently the deodorant assortment in5,42 market formats consists of 211 (active) 1 1 SKU„s -0,4%- -0,6%- - - [2 / 0,2%] [-] - - - X - # of SKU‘s • Within that range there are only four 14,41 % [..] - - Share in NPV Inactive ass. private label products 4 Y - # of Spar SKU‘s -1,4%- - - - • There is a significant amount of non- [1 / 0,0%] - - - active items (247) that were sold during 13,40 the 12 month under consideration – 82 30 6 4 overall those represent 12% of NPV -19,9%- -23,4%- -8,1%- -7,9%- [31 / 3,3%] [-] [-] [-] • The client generates most of it‘s 52 22 5 32,38 revenues with low-to-mid priced 71 (4) 9 2 1 products -14,8%- -7,0%- -2,6%- -1,9%- [198 / 7,9%] [1 / 0,7%] [-] [-] • According to client data Spar tends to 34 6 1 11,37 have a smaller assortment with NPV comparable/ slightly higher prices in the 250 16.549 32.847 49.145 65.443 deodorant categorySource: client data-warehouse, A.T. Kearney A.T. Kearney 43/01.2011/18733p 10
  • 11. The assortment scatter helps us to optimize thedistribution of SKU‟s on store levelDeodorant Scatter Plot Example: Deodorants(12/2008– 11/2009, MNE1)) # of stores sold480 # of months sold420 2 7 10 3 8 11 4 9 12360 AGM (%) [Ø-40,0%]300240180120 60 LN NPV 0Note: (1) Only active products consideredSource: client data warehouse, A.T. Kearney A.T. Kearney 43/01.2011/18733p 11
  • 12. Smart pricing combines competitivness, perception andelasticity to optimize volume sales, value sales and margin Competitvness – who am I competing against, what is the distance range Pricing in retail Perception – how do Elasticity – how my consumers perceive sensitive are my my price position consumers towards price in different categories A.T. Kearney 43/01.2011/18733p 12
  • 13. Price perception does not always coincide with actual pricecompetitivenessPrice competitiveness vs. Price perception Price competitiveness Index, Price perception, 2004–2009 2004 – 2009 Price gap to Retailer A (% of average price The cheapest retailer is… difference) (% of consumers) 2% 60% 0% 50% -2% 40% -4% 30% -6% 20% -8% 10%-10% 0% 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 Retailer A Retailer B Retailer C Retailer A Retailer B Retailer C Retailers are often neglecting other price perception elements: in-store positioning and promotion managementSource: A.T. Kearney example A.T. Kearney 43/01.2011/18733p 13
  • 14. Price elasticity reflects how consumers react to a changein price of a single itemPrice Elasticity and its Impact on Revenues Price Elasticity Elasticity Price elasticity (elasticity of demand) Price is the measure of responsiveness in As a price of an the product quantity demanded as a x article in the elastic result of change in price of the same range decreases, product. It is calculated as revenue increases. Sales Example: E = -13,4 % Change in quantity demanded Ed = x % Change in price Inelasticity Value Meaning E=0 Perfectly inelastic. Price As a price of an article −1 < E < 0 Relatively inelastic. in the inelastic range x decreases, revenue E = −1 Unit (or unitary) elastic. decreases. Example: −∞ < E < −1 Relatively elastic. E = -0,21 Sales E = −∞ Perfectly elastic. xSource: A.T. Kearney, client A.T. Kearney 43/01.2011/18733p 14
  • 15. Target price positioning is segmented according to itemelasticity: KVI = Competitor B+ 1 %, Inelastic = CompetitorB + 10% Quantity 3. Target price position sold • As retailer A has a larger market share and a worse cost structure, price-war should be avoided • Price competitiveness % gap to competition should be improved on items, where consumers Rank of items by volume perceive the difference -10 (KVIs) Target 0 • Inelastic items should 10 compensate for the margin Today loss prices should be KVI Destination cat. Seasonal/Apparel Inelastic increased Invest margin Neutral margin Gain margin KVI price Inelastic price ∆ price ∆ price Focus ∆ AGM € ∆ NPV € ∆ AGM % # KVI # Inel. position position KVI(1) inel.(1) 1% above 10% above Balance 0.15% 1.43% -0.47% -2.5% 5,261 +3% 13,632 retailer B Retailer B1) Average of all articles in the elasticity rangeSource: A.T. Kearney example A.T. Kearney 43/01.2011/18733p 15
  • 16. Regional retailers have a window of opportunity open, Invest into areas with low level of modern trade formats Operational excellence is a must Analyze and understand your consumer Localize assortment Promote regionality Keep price competitiveness with an eye on a margin Thank you! A.T. Kearney 43/01.2011/18733p 16