future retail leaders - here is the most simple & effective tool for strategic positioning in retail

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Eysink Smeets Retail Business Innovators

Future retail leaders.Here is the most simple & effective tool for strategic positioning in retail.

http://www.eysinksmeets.comhttp://www.eysinksmeets.com



RijksuniversiteitGroningenOktober 19, 2015




I want to help you develop new thinking this afternoon.




To know what game you are going to play in the coming decade.




Give you a number of rules & tools for the next 4 decades of your career.




Open up your mind.




Help you understand those 1.000s of things that are happening.




I will tell you how a simple game can help you understand it all.




The NoCompromise Game.




I will tell you how to be a winner.




Just a a bit about my relevance.




Goedemiddag!




Ik benHansEysink Smeets.




I am a world-wide retail strategy consultant.




My specialty israpid changes to retail or business formats for the consumer goods sector.




Bosses of very large companies call our mini-consultancyto help them create a retail strategy.

Wij.




I have personally done projects in 39 countries on 5 continents.



Our client ask us to change their retail strategy




Their questions are always pretty simple:



Eysink Smeets Retail Business Consultants

Not enough consumers are dragging themselves to our stores.

Mr.Retailer




And when they leave, they are not excitedand have too little in their bags.

Mr.Retailer




What we want is that many consumersare running to our stores again.

Mr.Retailer




And that we see them leave with very full bags.

Mr.Retailer




We want this proces to be repeated and repeated...

Mr.Retailer




...and repeated and repeated...

Mr.Retailer




Our task is to help them from figure 1 to figure 2.

Figuur 1.

Figuur 2. Mr.Retailer

Mr.Retailer



A good retail strategy starts with the assortment.Mrs. Consumer must fall in love with our products.




Full of price-trust, she proceeds to part with her money. With a broad smile on her face.




Put a roof over that loving exchange of product & money,and youve understood the basics of retail & strategy.

Mr. Retailer



Figuur 1.

Figuur 2.

We do that for many retailers.And many brand manufacturers.



The main trend in all types of retail:the NoCompromise Revolution.




One thing is for sure: we are living in revolutionary times.




How to position yourself as player in the FMCG sector in these revolutionary times?




You will understand it too after this session.




Its no rocket science.



Its a game for the NoCompromise position.


A constant game, with simple rules.



First of all:the objective of the NoCompromise game.




Seduce her,the consumer.


Earn as many love-chips from her as possible.



Then:the players in the game.



The Producers and the Retailers.



The Producers of consumer goods or services.



The Retailers of consumer goods or services.



Who is the best seducer?



Winners?

Who gets the most love-chips?



Losers?

Who gets the most hate-chips?


There are many different players in the retail sector.

Importer

Agent

Distributor

Etc.

Producer

Retailer

Mrs. Consumer



This is how the NoCompromise positioning model works.



Lets open the box.


Put the players on the board.


And then Ill explain the rules of the game.

eysink smeetseysink smeets

Look at the axis that Mrs. Consumer defines.

High Price

Low Price

Low Value

High Value


First there is Price.

High Price

Low Price

Low Value

High Value


What she prefers is not difficult to understand.In most cases Mrs. Consumer prefers Low Prices.

High Price

Low Price

Low Value

High Value


Then there is Value.

High Price

Low Price

Low Value

High Value


What Mrs. Consumer prefers is pretty easy to understand too:she prefers High Value

High Price

Low Price

Low Value

High Value

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


Put together it looks like this.

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


In most corners there are one or more Compromises.Except one corner: the NoCompromise corner.

Love Value

Hate Price

Hate Value

Love Price

Hate Value

Hate Price

Love Value

Love Price



Old thinking.




How conventional thinking plays on the NoCompromise diagram.


ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


Michael Porter tells us that you have to make choices.

Michael Porter

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


Michael Porter tells us that you cannot survive in the Double Compromise corner.

Michael Porter

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


And high costs for high Valuewill kill you in the desirable NoCompromise corner.

Michael Porter

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


Michael forces you to be stuck on Compromise Alley.

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


And that is how compromised format positioning happens.Full-service supermarkets, soft-discounters, hard-discounters.

FuS

SoD

HaD



New thinking.




Things have changed in the past 15 years.


ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


We have experienced that old boundaries are fading away.

Hans Eysink Smeets

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


ValueCompromise players have moved to the right,while retaining low costs.

HaD

Hans Eysink Smeets

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


ValueCompromise players have moved to the right,while retaining low costs.

NoCo

Hans Eysink Smeets

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


Once NoCompromise players obtain sufficient share, the market dynamics change.


Start to understand the game?


Getting an idea of where the winners will be?



Some Dutch examples.



Or Lidls sister company Kaufland:no doubt a NoCompromise supermarket.


And Albert Heijn.

nocompromise-model



Yes. Albert Heijn.In Belgium

nocompromise-model

AHNederl

AHBelgie




Todays NoCompromise chains outperform the market on most KPIs.


ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value

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NoCompromise chains outperform the market on most KPIs.In primary, secundary, tertiary costumers.

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


NoCompromise chains outperform the market on the most important KPI: Share Of Wallet.



To grab that position you need first of all:structural changes in your thinking.


ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


PriceCompromise players natural relex to any threat: move upmarket, increase value, increase price.

FuS

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


With the effect that they move off the game field.

FuS

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


PriceCompromise players have great troubleto move towards the NoCompromise corner.

FuS

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


Moving south is hard for most companies.

Game-tip from NoCompromise:

You cannot make this jump without

fundamental company

innovation.

Game-tip from NoCompromise:

Your costs will be too high, your speed too low.

FuS



Gettingit sofar?



Than were making it slightly more complex.




The playing field is moving with time.




Lets look at lessons from the fashion sector.



The market will always movein the NoCompromise diretion.


DeSt


That means that the whole game-field moves to the right.


And below.


DeSt


Mrs. Consumer embraces the new NoCompromise.And has forgotten all about the past.



The same deadly disease is hitting other large surfaces.Like hypermarkets.



In developed countries like Germanythe hypermarket is at the end of its life-cycle.

12000 m2


But in Switzerland the same is happening.

12000 m2


12000 m2


In many countries hypermarkets are at the end of their life-cycle

12000 m2

HyM



The NoCompromise curve is determining products and assortment architecture too.



These were the good old FMCG brands.A-brands, B-brands and C-brands.

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


This is the old-fashioned way to look at assortments.


And how the private labels find their position.

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


The NoCompromise curve applies to the positioning of brands as well.

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


The Retailers private labels position themselvesalong the NoCompromise curve in well structured positions

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


The price-distance is always the samefrom country to country.

+0/40%

-60/70% -40/50%

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


Rationalization of the assortment architectureis a logical result.

ValueCompromise

NoCompromise

DoubleCompromise

PriceCompromise

High Price

Low Price

Low Value

High Value


This looks like the shapeof a modern rationalized assortment.



To fight off hard discounters,German full service retailers go a bit overboard in richness of assortment.


In the upmarket Zurheide we counted 91 SKUs of honey.


Which would look like this when we scribble it on the NoCompromises GameField.

LowValue

HighValue

LowPrice

HighPrice


Or 84 SKs of honey in a regular Edeka.


Looks a bit less confused, but still.

LowValue

HighValue

LowPrice

HighPrice


Or 24 SKUs honey at a Rewe City in Kln.


Starting to get a bit better.

LowValue

HighValue

LowPrice

HighPrice


In Aldi Sd we recently counted 4 SKUs of honey.


Much better.


In Aldi Sd we recently counted 4 SKUs of honey.

LowValue

HighValue

LowPrice

HighPrice


When you ask producers and retailersthey will tell you that less choice is less value.


But when you ask the consumer,she will tell you that a good pre-selection is fine by her.


Dont believe me: believe the consumer.Look what has happened in Germany.

eysinksmeets.com

43%

57%

Marketshare in money

65%

35%

Marketshare in units



The rationalization is not leading to a limited choice.On the contrary.



The choice of a multitude of brands looks impressive.But is very limited on close inspection.

54654

21 321

21321

21 321

21321

21 321


The retailer labels can offer much more choice.If only because they dont have the volume pressure.

54654

1 2 3 4 5

6 7 8 9 10

11 12 13 14 15

16 17 18 19 20

1 2 3 4 5

21 22 23 24 25

21 321

21321

21 321

21321

21 321



Just to show how that works, lets look at a hypermarket in Dubai.



The aluminum foil department.


Like good hard discounters do,we analyzed assortments ourselves.


Not only so many brands,each brand has many varieties

site map | search eysink smeetseysink smeetsHome

We counted 8 brands of aluminium foil.

1 2

34 5

6

7

8

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Not only that, many of the brandsoffered a pretty full range.


Aluminiumfoil brands Varieties >

1 2 3 4 5 6 7 Total SKUs

Falcon 1 1 1 1 1 1 1 7Diamond 1 1 1 1 1 1 1 7Sanita 1 1 1 1 1 0 0 5Wrap n Roll 1 1 1 1 1 0 0 5Scotch Brite 1 0 0 0 0 0 0 1Delmond 1 0 0 0 0 0 0 1Club 1 0 0 0 0 0 0 1Greens 1 0 0 0 0 0 0 1Own brand 0 0 0 0 0 0 0 0Total 28

We put that in a spreadsheetand saw that there were 28 skus, but only 7 varieties.



1 2 3 4 5 6 7 Total SKUs Costs per SKU30.000

Falcon 1 1 1 1 1 1 1 7 210.000Diamond 1 1 1 1 1 1 1 7 210.000Sanita 1 1 1 1 1 0 0 5 150.000Wrap n Roll 1 1 1 1 1 0 0 5 150.000Scotch Brite 1 0 0 0 0 0 0 1 30.000Delmond 1 0 0 0 0 0 0 1 30.000Club 1 0 0 0 0 0 0 1 30.000Greens 1 0 0 0 0 0 0 1 30.000Own brand 0 0 0 0 0 0 0 0 0Total 28 840.000

If you guestimate 30,000 euro per SKUit would cost Safeer supermarkets 840,000 euro.


If you understand this, you understand hard discount.

Aluminiumfoil


Falcon 1 1 1 1 1 1 1 7 210.000Diamond 1 1 1 1 1 1 1 7 210.000Sanita 1 1 1 1 1 0 0 5 150.000Wrap n Roll 1 1 1 1 1 0 0 5 150.000Scotch Brite 1 0 0 0 0 0 0 1 30.000Delmond 1 0 0 0 0 0 0 1 30.000Club 1 0 0 0 0 0 0 1 30.000Greens 1 0 0 0 0 0 0 1 30.000Own brand 0 0 0 0 0 0 0 0 0Total 28 840.000



Falcon 0 0 0 0 0 0 0 0 0Diamond 0 0 0 0 0 0 0 0 0Sanita 0 0 0 0 0 0 0 0 0Wrap n Roll 0 0 0 0 0 0 0 0 0Scotch Brite 0 0 0 0 0 0 0 0 0Delmond 0 0 0 0 0 0 0 0 0Club 0 0 0 0 0 0 0 0 0Greens 0 0 0 0 0 0 0 0 0Own brand 1 1 0 0 0 0 0 2 60.000Total 2 60.000Difference with todays situation 780.000

Calculated on total store

Number of alu-like categories 300Extra cost per category 780.000Total costs overhead 234.000.000



Than were making it even more complex.




The game field changes position much more rapidly today.




Iis called the Information Retail Revolution.



We need a new version of the NoCompromise Game.


New players force their way into the game.Fast and powerfull.


They are the children of the Information Revolution.


The grown-up Information Retailersare accelerating the NoCompromise changes.


Information Retailers are here!


They cause the Information Retail Revolution.



The IRR in reality.




Lets walk to my office, as I do when Im in town.



The more information there is in product and/or process,the more impact the Information Retail Revolution has.

InformationTangible

Product Process


For sectors like porn, music or banks,which all are pure information, the impact is huge.

InformationTangible

Product Process



The principles of retail dont change in the digital age.




Retail on digital media is not different from real stores.

Mr. Retailer




Also in digital not enough consumers may be dragging themselves to our stores.

Mr. Retailer




And when they leave, they are not excitedand have too little in their bags.

Mr. Retailer




Mr. Retailer

What we want is that many consumersare runing to our e-stores once again.




And that we see them leave with very full bags.

Mr. Retailer




A good retail strategy starts with the assortment.Mrs. Consumer must fall in love with our products.

Mr. Retailer




Mr. Retailer

Full of price-trust, she proceeds to part with her money. With a broad smile on her face.




Put a digital roof over that exchange of product & money,and once again youve got the basics of retail.

Mr. Retailer



New speed of change.




The Information Retailers make the game field move faster than ever.


site map | search eysink smeetseysink smeetsEysink Smeets Retail Business Innovators

The nice status quo before the Information Retailers.Sony, MGM and some others ruled the music market.

Old

eysinksmeets.com


New Information Retailers fought their way forward.They redefine Price as well as Value.

eysinksmeets.com

Old


What Value can beat instant satisfaction?What Price can beat free?

Old

eysinksmeets.com

IR


This can happen in a year or less.

Old

eysinksmeets.com

IR


This is the new reality for Mrs. Consumer.The old retailers are not in it.



The very essence of what you are selling is changing fundamentally.




Thats leading towards paradigm shifts.



Eysink Smeets NoCompromise GameField

When the movements of the GameField are incrementalSub-optimization is still a solution.

nocompromise-model

LPs I need an LP.

http://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.com



I need a LP.

The CD didnt change the business-model of music stores.It just led to some reshuffling on the same GameField.

nocompromise-model

CDs I need a CD.




I need a LP.

Downloads did change how people define their needs.

nocompromise-model

CDs

Down-loads

I need a CD.

I need a song.




I need a LP.

Streaming music is easily adopted by Mrs. Consumer but the companies have trouble changing.

nocompromise-model

CDs

Down-loads

I need a CD.

Stream

I need a song.

I need an atmosphere.

http://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.com



I need a LP.

The business model are changing fundamentally

nocompromise-model

CDs

Down-loads

I need a CD.

Stream

I need a song.


I need to be the best CD-store

I need to be the best

download site

I need to be the best music

streamer

http://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.comhttp://www.eysinksmeets.com



I need a LP.

Those jumps are real paradigm shifts.

nocompromise-model

CDs

Down-loads

I need a CD.

Stream

I need a song.


I need to be the best CD-store


download site

I need to be the best music

streamer




With books the paradigm shiftsare equally disturbing.

nocompromise-model

Books

eBooks

Netflix

I needreading.

I need to spend time.

I need a book.




With books the paradigm shiftsare equally disturbing.

nocompromise-model

Books

eBooks

Netflix

I needreading.

I need to spend time.

I need a book.


book-store


eBook site


time-filler




With tangible products the paradigm shiftsare equally disturbing.

nocompromise-model

Dealer

Car share

Skype

I needtransportation.

I need contact.

I need a car.




With tangible products the paradigm shiftsare equally disturbing, although the nee.

nocompromise-model

Store

3D Print Shop

Home 3D

print

I need acup.

I need acup.

I need a cup.




Or the way the accommodation game has changed.

nocompromise-model

Hotel

Home share

I needa room.

I need ...

I need a hotel.




Hitting FMCG too.



But the great new Information retailers are going into food too.


Amazon is offering fresh categoriesin Los Angeles and Seatle and soon in San Francisco.


Including all fresh categories;vergetables, fruit, bakery, meat and seafood.


With tantalizing pictures


Until you get to the ordering pages


They apply all the new IRR-techniquesto FMCG.



You need to be athletic and agile for the IRR.



A? B?



Make them think outside the box.



You can make that crucial challenge to get out of the box.



Help your new colleagues by taking a blank sheet of paperand scribble the NoCompromise GameField.

LowValue

HighValue

LowPrice

HighPrice




Ask them to plot everybody on the GameField.

LowValue

HighValue

LowPrice

HighPrice

Us

A

BC




Tell them that they have to forget about Porters Compromise Diagonal.

LowValue

HighValue

LowPrice

HighPrice

Us

A

BC




And explain to them that you need to position on the NoCompromise Curve.

LowValue

HighValue

LowPrice

HighPrice

Us

A

BC




Tell them that the GameField always moves.

LowValue

HighValue

LowPrice

HighPrice

Us

A

BCLow

ValueHigh

Value

Low

HighPrice

Us

A

B

C




Remember and use the NoCompromise gameand think of me in the next 40 years of your careers.

LowValue

HighValue

LowPrice

HighPrice

Us

A

BCLow

ValueHigh

Value

Low

HighPrice

Us

A

B

C




Any questions?

LowValue

HighValue

LowPrice

HighPrice

Us

A

BCLow

ValueHigh

Value

Low

HighPrice

Us

A

B

C

[email protected] www.eysinksmeets.com



www.eysinksmeets.comwww.eysinksmeets.com / eysink smeets business consultants bv / 2006 / singel 26 / 1015 AA amsterdam / the netherlands / phone +31 20 6265573




eysink smeetsworld wide retail strategy experts

www.eysinksmeets.com / eysink smeets business consultants bv / 2006 / singel 26 / 1015 AA amsterdam / the netherlands / phone +31 20 6265573