Retail Disruptors The spectacular rise and
impact of the hard discounters
EFMI Business school
EFMI FOOD RETAIL’S
HYPER COMPETITION IN THE WORLD OF
GROCERY RETAIL
CONVENTIONAL GROCERY RETAILERS
FOODSERVICE CHANNEL
FOOD SPECIALTY
STORES
ONLINE CHANNEL
HARD DISCOUNT
LOW END (NON-FOOD) RETAIL
THE WALL?
“Retailing is the fine art
of separating consumers from their money”
MY VIEW ON RETAIL MARKETS
MY VIEW ON RETAIL MARKETS
The “wish line”: This is what most people want
MY VIEW ON RETAIL MARKETS
Organic
Local
Convenience
Fair trade
High quality & good taste
“Poor people need low prices, but
rich people love them”
MY VIEW ON RETAIL MARKETS
The “wish to pay” line
THIS RESULTS IN A ‘BELL-CURVED’ MARKET
Marketsize
MOST HOUSEHOLDS INCOMES ARE LIMITED – AND NOT EVENLY DISTRIBUTED
PURCHASING POWER OF MOST HOUSEHOLDS IS MEDIOCRE AND STABALAZING
Development of GDP per capita in EU (purchasing power standard)
Average income standard household in the Netherlands
SO, MOST MARKETS IN FOOD RETAIL LOOK A BIT LIKE THIS
10-30% 50-75% 5-15%
Marketsize
THE MID-MARKET STILL HOLDS ‘THE BULK’ OF THE SALES
MID-MARKET
60-80% OF SALES
Marketsize
When markets mature the
‘Well curve’ becomes more dominant
THE WELL-CURVE: POLARIZING CUSTOMERS Grow
thpoten
8al
Averagemarketgrowthrate
POLARIZATION IS ALSO BASED ON CHANGING LABOR MARKET PERSPECTIVE
THE WELL-CURVE: POLARIZING CUSTOMERS Grow
thpoten
8al
Averagemarketgrowthrate
DISCOUNT DIGITAL
THE WELL-CURVE: POLARIZING CUSTOMERS Grow
thpoten
8al
Averagemarketgrowthrate
CHEAPER MOREADVANCED
THE WELL-CURVE: POLARIZING CUSTOMERS Grow
thpoten
8al
Averagemarketgrowthrate
EASYTOSHOPMORE
EXPERIENCE
“The rise and impact of the hard
discount business model”
THE SPECTACULAR RISE AND IMPACT OF HARD DISCOUNTERS
• Hard discounters distinguish themselves compared to regular grocery retailers as follows – Very limited assortment – Strong focus on private labels – Small and ‘Spartan-like’ stores – Unbeatable price quality
• In most countries traditional grocery retailers consistently lose sales and margin to hard discounters.
7.5% 8.5
% 9.1% 9.6
% 9.7
% 9.5
% 9.6
% 8.9
% 8.5
% 8.3
% 7.9
% 7.9
% 7.6
% 7.4
% 7.4
% 7.3
% 7.0
% 6.7
% 6.8
%
1.6% 1.9
% 2.8% 3.5
% 4.1%
3.8%
3.9%
4.0%
4.8%
5.4%
5.6% 6.7
% 7.5% 9.0
% 9.7%
10.0%
10
.3%
10.5%
10
.9%
0%
4%
8%
12%
16%
20%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
The impact of hard discounters
EFMI Business school
HUGE IMPACT IN NETHERLANDS
MARKET SHARE ALDI AND LIDL 2000-2018
Bron: Nielsen, 2018
OPERATION ANIK0
FUTURE OUTLOOK: HARD DISCOUNTERS WILL BE QUALITY DISCOUNTERS
1 Modern stores
2 Increased choice in vegetables & fruit
3 In-store oven, freshly baked bread
4 Fresh meat in standing shelves
5 Menu suggestions / recipies
6 More ready-to-eat assortment
7 More organic and fair trade
8 Energy saving refrigerators
ANIKO =ALDI NORD INSTORE KONZEPT
All Aldi-Nord stores in Europe will me remodelled
Total remodelling cost: EUR 5,2 billion (EUR 1 mln per store)
ANIKO is based on 8 pillars (see next)
OPERATION ANIKO: ALL ALDI NORD STORES WILL BE RENEWED
Bron: Inventarisatie EFMI Business School, december 2018
29
3
16
23
14 12
24
16
3
9 10
25
6
0
5
10
15
20
25
30
35 NUMBER OF STORES REMODELLED PER YEAR/MONTH
JAAR 2017
JAN 2018
FEB 2018
MRT 2018
APR 2018
MEI 2018
JUN 2018
JUL 2018
AUG 2018
SEP 2018
OKT 2018
NOV 2018
DEC 2018
ANIKO-RENEWAL IN NL PER JAN 2019
REMODELLED TO ANIKO
(NOT) YET REMODELLED TO ANIKO
193
299
The impact of hard discounters
EFMI Business school
DISRUPTIVE IMPACT IN THE UK
The impact of hard discounters
EFMI Business school
DISRUPTIVE IMPACT IN THE UK: 2015-2018
0
5
10
15
20
25
30
35Jan-15 Dec-18
IS THE US MARKET THE NEXT HARD DISCOUNT BATTLEGROUND?
The unique hard discount business model
EFMI Business school
The impact of hard discounters
EFMI Business school
THE IMPACT OF ROTATION
• Harddiscounter:2.000items,Euro180.000perstoreper
week,averagepriceperitem1,80->rota%on50peritemperweek
• Conven8onalretailer:20.000items,Euro240.000perstoreperweek,averagepriceperitem2,40->rota%on5peritemperweek
• Withregardtofreshproducts,whatistheimpactofthedifferenceinrota8onfor:• Freshnessandfoodwaste?• Out-of-stock?• In-storehandlingcosts?• Workingcapital?• Buyingoffice?
THE HARD DISCOUNTER BUSINESS MODEL
Lowcostdriver1:Efficientretailopera8on
• LowHQcosts• Efficientwarehouseand
transporta8on• Efficientstoreopera8on• Smartpackaging
Driversofcompe88vesustainableadvantages
Lowcostdriver2:Knowledgeableandefficient
procurement
• Na8onalbrandasqualitybenchmark
• Buyinglargevolumesatlowprices
• Deepknowledgeofsupplychain
Lowcostdriver3:Efficientfinancialmanagement
• Lowcapitalintensity• Highsalesperm2• Highrota8on->good
cashposi8on• Solidopera8ngincome,
highROI
The impact of hard discounters
EFMI Business school
HUGE PRICE ADVANTAGE HARD DISCOUNTERS
The impact of hard discounters
EFMI Business school
AND QUALITY IS ALSO (VERY) GOOD
THE HARD DISCOUNTER BUSINESS MODEL
Lowcostdriver1:Efficientretailopera8on
• LowHQcosts• Efficientwarehouseand
transporta8on• Efficientstoreopera8on• Smartpackaging
Driversofcompe88vesustainableadvantages
Mul8plier Largestorenetwork
Lowcostdriver2:Knowledgeableandefficient
procurement
• Na8onalbrandasqualitybenchmark
• Buyinglargevolumesatlowprices
• Deepknowledgeofsupplychain
Lowcostdriver3:Efficientfinancialmanagement
• Lowcapitalintensity• Highsalesperm2• Highrota8on->good
cashposi8on• Solidopera8ngincome,
highROI
THE HARD DISCOUNTER BUSINESS MODEL
Lowcostdriver1:Efficientretailopera8on
• LowHQcosts• Efficientwarehouseand
transporta8on• Efficientstoreopera8on• Smartpackaging
Driversofcompe88vesustainableadvantages
Customervalueproposi8on
Mul8plier Largestorenetwork
Unbeatableprice-quality
Lowcostdriver2:Knowledgeableandefficient
procurement
• Na8onalbrandasqualitybenchmark
• Buyinglargevolumesatlowprices
• Deepknowledgeofsupplychain
Lowcostdriver3:Efficientfinancialmanagement
• Lowcapitalintensity• Highsalesperm2• Highrota8on->good
cashposi8on• Solidopera8ngincome,
highROI
The impact of hard discounters
EFMI Business school
THE HARD DISCOUNTER BUSINESS MODEL
The impact of hard discounters
EFMI Business school
VERY SOLID FINANCIAL PERFORMANCE OF HD’S
FINANCIAL PERFORMANCE BIEDRONKA
“How does hard discount growth impact conventional retailers?”
The impact of hard discounters
EFMI Business school
THE RETAIL SPACE MAP BEFORE HD ENTRANCE
IMPACT OF HD’ER ENTRENCE ON SHOPPER DECISION MAKING PROCESS
Consumerstendtobecomemorepricefocussedandlessfocussedonaddedvalue
IMPACT OF HD’ER ENTRENCE ON SHOPPER DECISION MAKING PROCESS
Consumerstendtobecomemorepricefocussedandlessfocussedonaddedvalue
Consumerstendtoevaluateconven8onalretailerslessonpriceandbeferonaddedvalue
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
Ini8alsweetspot
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
Conven8onalretailerimage
Ini8alsweetspot
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
HDimage
Conven8onalretailerimage
Ini8alsweetspot
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
Newsweetspot
HDimage
Conven8onalretailerimage
Ini8alsweetspot
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
NewCRimage
HDimageHD
image
Conven8onalretailerimage
Ini8alsweetspot
Newsweetspot
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
HDimage
NewCRimage
HDimage
Conven8onalretailerimage
Ini8alsweetspot
Newsweetspot
HARD DISCOUNTERS CAUSE A ‘CONTRAST’ EFFECT
Highaddedvalue
HighpriceLowprice
Lowaddedvalue
NewCRimage
HDimage
Conven8onalretailerimage
Ini8alsweetspot
Newsweetspot
The impact of hard discounters
EFMI Business school
HD HAVE CREATED THEIR OWN BLUE OCEAN
0
5
10
15
20
25
30
35Jan-15 Dec-18
DEVESTATING IMPACT OF HARD DISCOUNT GROWTH IN UK
HOW CAN CONVENTIONAL RETAILERS COUNTER HARD DISCOUNTERS?
STRATEGIC OPTIONS CONVENTIONAL RETAILERS
STRATEGIC OPTIONS CONVENTIONAL RETAILERS
Is TESCO now adopting a downgrading strategy for its main chain?
STRATEGIC OPTIONS CONVENTIONAL RETAILERS?
STRATEGIC OPTIONS CONVENTIONAL RETAILERS
HOW RETAILERS CAN CAPTURE MORE VALUE FROM NATIONAL BRANDS? BR
ANDIM
PORT
ANCE
CATEGORYIMPORTANCE
CATEGORYIMPORTANCE