Retail Powerhouse

Good photos of different retailers and their pricing strategies @ the store level

http://retailnetgroup.com/Newsletters/Files/RNGStoreVisitsJan2009.pdf

Francis Romero stops by The Gamaexpress convenience store in the Chuao neighborhood of Caracas, Venezuela, twice a week because it’s … well, convenient. The store is near her home and ideal for such items as bread, canned goods, cheese and juices. Better yet, the 40-year-old actress can drop in to buy alcoholic beverages and snacks in the nick of time should visitors arrive unexpectedly.
Now seven stores strong since its inception six years ago, Gamaexpress is but one of dozens of convenience store chains spreading throughout Latin America. Simply put, the region’s growing disposable household income allows more people to pay a premium for convenience.
“Time has become a precious asset, and, when it is tight, consumers are more willing to pay a premium for a more efficient use of their time,” said Alejandra Puente, research project manager at the Retail Studies Center of the

Santiago-based Universidad de Chile. “These stores fulfill immediate needs and are not the principal source of groceries. But in Chile they account for 5 percent of supermarket sales.”
Many of Latin America’s convenience stores are in gas stations. “Our market’s sales are tied to the growth of the gross domestic product, and these years have been quite good,” said Miguel Angel Avendaño, general marketing manager for oil company Shell Caribbean and Central America, from his Guatemala City headquarters. “This market shows great growth potential in our region.”
Central America alone boasts 850 convenience stores at fuel stations, operating under such brands as On the Run, Select and Smart. There are 99 gas-station-based convenience stores in the Dominican Republic. Chile’s 622 convenience stores (not just gas-station-based) include the Pronto Copec chain (owned by Compañía de Petróleos de Chile), Shell’s Select chain and the Va y Ven chain (owned by the Organización Terpel fuel distribution company and relaunched this year following a $20 million revamp that includes Wi-Fi). Brazil, South America’s biggest country, had roughly 7,000 convenience stores at the end of last year, the bulk of them at gas stations.
“We are projecting 1,000 new convenience stores will open in the Brazilian market this year,” said Claudio Correa, a convenience store analyst at Rio de Janeiro–based Fecombustíveis, Brazil’s fuel station trade group. “Ours is relatively small because of the competition of bakeries and small supermarkets, but the increase in consumers’ income is making the market more attractive. Traffic bottlenecks in our cities have stimulated the convenience market as people look to shop closer to their homes and offices.”
This retail niche is particularly promising in Latin America, says Leonidas Oyaga, a Colombia-based retail analyst covering Latin America for The Partnering Group, a consulting firm based in Cincinnati. “If you want to compete with big retailers like Cencosud, you have to do it through small and efficiently run retail formats,” said Oyaga.
Traditional retailers are taking an increasing interest in the format, which in most countries has been controlled until now by fuel stations and the traditional neighborhood bodega or minimarket. Gamaexpress belongs to the Excelsior Gama supermarket chain. In Brazil supermarket giants Carrefour Brazil and Grupo Pão de Açúcar have entered the market. There are now 100 Carrefour Express stores in Brazil, with 38 more scheduled to open this year. Grupo Pão de Açúcar launched the Extra Perto convenience store chain last year to compete with neighborhood markets, Correa says. Brazil-based retail group Lojas Americanas owns the Americanas Express convenience store chain.
In Mexico, Latin America’s second-biggest country, the number of convenience stores has more than doubled during the past seven years, says a Nielsen Mexico study. There were about 7,000 stores in 1999 and roughly 13,000 in 2006. Such international players as 7-Eleven and Canada-based Couche-Tard’s Circle K Stores are in Mexico, but the lion’s share of the market belongs to Monterrey,

Mexico–based Oxxo, Latin America’s biggest convenience store chain. As of March Oxxo was operating about 5,600 stores in Mexico, with plans to roll out an additional 800 annually between now and 2012. It is set to enter Colombia next year.
“Our sales grew 13.3 percent during 2007, making us one of the main business segments of FEMSA,” said an Oxxo executive who requested anonymity. FEMSA is the largest beverage company in Mexico and Latin America. Its Mexican holdings include a majority stake in Coca-Cola FEMSA and ownership of FEMSA Cerveza, which in turn owns Mexico’s second-largest beer brewer, Cervecería Cuauhtémoc Moctezuma. “The growth of convenience stores throughout the country will continue, thanks to factors like changes in family roles, less time to go shopping and [the] types of products and services these stores offer,” the executive said.
Circle K has about 100 stores in Mexico currently, with an eye to opening about 30 more this year through franchisers. “There remains a tremendous amount of consolidation in our industry, and we are focusing our efforts in developing North America,” said John R. Patton, Circle K’s director of international franchise. “We will continue to concentrate more effort in Mexico.” (The company is also active in Asia.)
There is great potential for further convenience store growth in Latin America, says Guillermo D’Andrea, who teaches business administration at the Universidad Austral, in Buenos Aires, Argentina. “Latin America’s small retail operators, particularly neighborhood grocery stores, have weathered the retail evolution staged by the big retail chains since the 1990s,” D’Andrea said. But the time is ripe for chains to take over this niche, he says, and turn it into “a more professionalized format.”
Prospective investors must keep in mind, however, that what works elsewhere does not necessarily apply in Latin America’s convenience sector. In most Latin American countries, cards for prepaid cell phone minutes are a main seller, for example. Hot food, and not cold sandwiches, are a must at Chile’s convenience stores, while in Brazil, consumers look for the traditional cheese bread, coffee and sit-down accommodations. Prepared food and coffee comprise 15 percent of convenience store sales in Brazil, beverages and beer account for 30 percent, snacks and candies make up 20 percent, and cigarettes bring in 15 percent, according to Correa.
In Colombia where there are no major convenience store chains at present, neighborhood stores are popular for one key service: they deliver. “People call their neighborhood store and ask for immediate delivery of a missing product,” said Oyaga. “More convenience than this does not exist.”

Rising local interest rates and shockwaves from the global financial crisis likely mean that Brazilian supermarket sales will decline in 2009, according to a top official at Brazil’s Supermarkets Association, or Abras.

Supermarket sales have been growing at breakneck speed over the past year amid robust domestic growth and expanding credit availability. Abras forecasts sales will grow 8% in 2008.

“But we won’t manage to maintain that pace of growth in 2009,” said Sussumu Honda, Abras’ president, at a press conference in Sao Paulo on Tuesday.

He noted that Brazil’s banking system remained solid in the face of the crisis that hit U.S. banks but the country won’t be immune from the real economy fallout.

Meanwhile, the Brazilian Central Bank has been raising interest rates this year and this will start clipping demand in the future, said Honda.

The benchmark Selic interest rate currently stands at 13.75% after starting the year at 11.25%. According to a central bank market survey, the rate is expected to reach around 14.50% by the end of the year.

“Revenues are currently being driven by rising real incomes among Brazilians, which is going directly into consumption. This trend could turn with greater restrictions on credit,” he said.

In the first eight months of 2008, Brazilian supermarket sales were up 9.4% compared with the same period of 2007.

Brazil’s largest grocers are Companhia Brasiliera de Distribuicao (CBD), or CBD; France’s Carrefour SA (12017.FR); and U.S. retail titan Wal-Mart Stores Inc. (WMT). French retailer Casino Guichard Perrachon SA (12558.FR) owns a 35.3% stake in CBD.

Here is a list of the fastest growing grocery (supermarkets) in Latin America and around the world.

If you would like to see a photograph for any of these stores please visit our galleries.

In a presentation to investors and analysts yesterday, Supervalu chairman/CEO Jeff Noddle said, “We have delivered strong financial performance while transforming the company for the future. We are executing our plans to generate long term profitable growth which includes delivering improved sales, allocating capital to fund our business opportunities, and improving our overall financial condition.”

Noddle also said that the company’s stores that have been remodeled as part of the Premium Fresh & Healthy program are generating good results with healthy sales increases well above overall identical store sales growth. Noddle said, “We are pleased with our early remodel performance and plan to maintain our commitment to the important remodel program, increasing our major remodels in fiscal 2009 to 165 stores, up from fiscal 2008’s 125 store remodels.”

Source: morningnewsbeat.com

Rumor or reality?

Hannaford can’t afford them on their own, but Delhaize certainly could, specially if they bring Euros back to the US.

Competitive issues?  Yeah, there is some overlap, but they can divest some stores.

Kroger could do it as well. They are sitting on a lot of money and are not as leveraged anymore.

A big acquisition like this would definitely give investors some confidence in what is already setting up to be a shaky 2008.

Almost there!

Check out video here:

http://www.youtube.com/watch?v=3OBANZ2PXaE&e

Hannaford continues to focus on expanding its in-store pharmacies. Here’s a photo courtesy of Retailpowerhouse.com’s Retailers Photo Gallery

 Safeway’s average store size is approximately 46,000 square feet. The Company determines the size of a new store based on a number of considerations, including the needs of the community the store serves, the location and site plan, and the estimated return on capital invested. Safeway’s primary new store format, called the “Lifestyle” store, is typically 55,000 square feet but can vary depending on the factors stated above. Lifestyle stores showcase the Company’s commitment to quality with an expanded perishables offering. They feature an earth-toned décor package that is warm and inviting with special lighting to highlight products and departments, custom flooring and unique display features. The Company believes this warm ambience significantly enhances the shopping experience.

Safeway’s stores provide a full array of dry grocery items tailored to local preferences. Most stores offer a wide selection of food and general merchandise and feature a variety of specialty departments such as bakery, delicatessen, floral and pharmacy. In addition, many stores now offer Starbucks coffee shops and adjacent fuel centers.

Safeway continues to operate a number of smaller stores that also offer an extensive selection of food and general merchandise and that generally include one or more specialty departments. These stores remain an important part of the Company’s store network in smaller communities and certain other locations where larger stores may not be feasible because of space limitations and/or community needs or restrictions.

The operating environment for the food retailing industry continues to be characterized by intense price competition, aggressive supercenter expansion, increasing fragmentation of retail formats, entry of non-traditional competitors and market consolidation. Additionally, consumers are increasingly looking to restaurants to fulfill their food product needs. We have developed a strategic plan that we believe is a balanced approach that will enable Kroger to meet the wide-ranging needs and expectations of our customers. However, the nature and extent to which our competitors implement various pricing and promotional activities in response to increasing competition - including our execution of our strategic plan - and our response to these competitive actions, can adversely affect our profitability.

On June 2, 2006 (the “Acquisition Date”), we acquired the premier retail operations of Albertson’s, Inc. (“Albertsons”), adding approximately 1,125 stores to our retail footprint (the “Acquisition”). The Acquisition was a unique strategic opportunity to acquire those assets of Albertsons that we viewed as the most attractive and profitable. The acquired stores give us a strong market presence in many key urban markets with little overlap with our legacy business.

In connection with the Acquisition, we issued approximately 68.5 shares of common stock. We also assumed $6,123 of debt and issued $1,970 of new debt.

As of June 16, 2007, the Company has approximately 200,000 employees, 2,500 owned and licensed stores, 900 in-store pharmacies and 120 fuel centers. The Acquisition has significantly changed the mix of the Company’s segment revenues and operating results for the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007.

As described in Note 1 – The Company and Significant Accounting Policies, no operating results of the Acquired Operations are included in the accompanying Condensed Consolidated Statement of Earnings for the first quarter of fiscal 2007 ended June 17, 2006. See Note 1 – The Company and Significant Accounting Policies for the definition of Acquired Operations and Note 2 – Business Acquisition for disclosure of assets acquired and liabilities assumed in connection with the Acquisition. The Company’s consolidated balance sheet was significantly impacted by the Acquisition.

I’m creating a new glossary of retail consulting terms.

You can see what I have thus far by going here:

http://www.retailpowerhouse.com/a

And then just browse through the different letters.

Hope it’s helpful to all of you retail lovers out there!

You heard about it?  Kroger was supposedly looking for a LBO.  Yeah, right.

What’s next, Wal-Mart buying Target?

Ever been to an Aldi store? They are a limited assortment grocery store (only carry about 2,000 SKUs or so)

What is it about their business model that makes them so successful? I want to hear your comments. Once a few are build up, I’ll give you my POV.

For lack of time and inspiration, I will post a series of photos from store visits I’ve done in the past few months.

The lucky winner for this week is Hannaford Supermarket, of Portland Maine…

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To help us move our conversations past mere methodologies, here is a list from the Food Marketing Institute (FMI) that defines the different types of stores and different types of formats.

By Store Type

Grocery Store — Any retail store selling a line of dry grocery, canned goods or nonfood items plus some perishable items.
Supermarket—Any full-line self-service grocery store generating a sales volume of $2 million or more annually
Convenience Store— Any full-line, self-service grocery store offering limited line of high-convenience items. Open long hours and provides easy access. The majority sell gasoline with an annual sales of $2 million or more.
Independent — An operator of fewer than 11 retail stores.
Chain — An operator of 11 or more retail stores.

By Store Format

Conventional Supermarket - The original supermarket format offering a full line of groceries, meat, and produce with at least $2 million in annual sales. Conventional stores will realize 9% of their sales in GM/HBC. These stores typically carry approximately 15,000 items, offer a service deli and frequently a service bakery.
Superstore - A larger version of the conventional supermarket with at least 40,000 square feet in total selling area and 25,000 items. Superstores offer an expanded selection of non-foods (at least 10% GM/HBC).
Food/Drug Combo - A combination of superstore and drug store under a single roof, with common checkouts. GM/HBC represents at least one-third of the selling area and approximately 15% of store sales. These stores also have a pharmacy.

Technorati Tags: Retail, store formats, store types, store prototypes

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If you ever been to one then you must be thinking what I’m thinking: About time!

What is it about retail, particularly the grocery industry, that makes it so hard (apparently) to executre at a store level?

I’ve actually read several studies that suggest that having more people (i.e., better customer service) yields higher returns for retailers.

Think of Trader Joe’s. Think of Whole Foods. Think of HEB.

Then, why, do a lot of retailers lack the appropiate customer service and are so inefficient at store level execution?

Are they trapped in a vicious cycle?  How, if at all possible, can they get out?

There used to be a convenience store called ‘Store 24’ in the corner right in front of the apartment building where I currently live. For those of you who live in the East coast, you might have seen a few of them, but if you’re not familiar, just think of your typical mid-sized chain of convenience stores (c-stores).

They had a good operation, as far as I was concerned, and their store was just a good old regular c-store. One day though, they put up a sign saying they were going out of business and were closing their operations within the next few weeks. Fast forward a few weeks and Store 24 was gone. Few weeks went by, and much to my surprise, a new store settled in…

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After watching the 60 Minutes interview of Whole Foods CEO John Mackey, it got me into thinking of how much of a contrasting view there is between Mackey and, for the purposes of this example, Albertsons’ former CEO Larry Johnston.

Mackey made $430,000 last year (not counting any stock options) while Albertsons former CEO will pocket more than $100,000,000* in cash, stock, health and other benefits this year. This might be an unfair comparison, given that one takes into account one year’s salary and the other one takes compensation for the sale of the company… However, bear with me while I illustrate my point and get through my idea.

Technorati Tags: Whole Foods, Albertsons, CEO, compensation, retail

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I stumbled upon this site, grocerylists.org, which has a collection of over 1,000 scanned grocery lists that have been either randomly found or submitted to the site.

It’s interesting to see how the author took his initial idea and managed to create a big success out of it, to the point where the author is currently working on writing a book!

Here’s an example of one the lists:

And don’t forget: ‘Heart attack… Check’

Technorati Tags: grocery, Retail, Grocery, Supermarkets, Merchandising

Found a really interesting site of a photographer that takes 360 degree panoramic photographs, one of which was a photo of the Apple store in NYC. Enjoy!

http://www.panoramas.dk/newspanos/f20-apple-store.html

• Best: Target comps of 5.7%, beating analysts’ estimates of 4.8%, continued to outperform arch nemesis Wal-Mart
• Worst: Wal-Mart same-store sales of 2.3%, below analysts’ estimates of 2.9%. Who is to blame? Fuel prices, of course

• Best: JC Penney (11% comps), Federated (9.2%), Saks (1.1%) and TJ Maxx (4%)
• Worst: Gap (-6%, but to be honest, no surprises here), Pacific Sunwear (-2.6%) and Hot Topic (-3.5%)
• Last but not least, Sharper Image, with a -36% drop in same-store sales.

Good numbers across the board, particularly at the department stores who had been struggling for the past couple of months.

Wal-Mart continues to struggle to achieve Target’s pace, but new initiatives to target to the higher income consumer that shops the left side of the store (consumables) are under way, so we might see a shift in the months to come.

According to AdAge, NBC charged $100,000 for a 30-second commercial during the last show of Katie Couric on the Today show - That’s about twice as much as what their usual rates are.

I’ve seen several commercials on NBC for Hannaford Brothers (Delhaize America) as well as Shaw’s (Albertsons, uhm, I mean, SuperValu) and every so often for Wal-Mart as well.

Fifty grand is a lot of money to spend for a 30 second ad. Do you think they are more effective than running in-store promotions that actually pass on to consumers as ’savings’?

What about for suppliers? Do some retailers make you pay partially for these generic commercials (particularly if your product is shown)? Do you find them more effective than in-store promotions?

Welcome to RetailPowerhouse.com!

This is the first of what I hope to be many posts. In here you will find comments about the retail industry. A little vague? Probably!

You’ll find me rambling about the retail industry. I’ll comment, speculate, complain and generate ideas as they come. I encourage you to leave me feedback through comments as that’s the only interaction I’ll be getting with my readers for a while.

I hope you enjoy this space and that it keeps you entertained during those long hours at work!
- Retail Powerhouse