GLOBAL OPERATION WITH MORE CHOICE

IGD's Global Retailing Conference last month heard how globalisation of retailer power is proceeding apace but bringing with it the creation of new market niches and much greater diversity for the industry and the customer. Sarah Dowding reports Global operation with more choice IGD's European Grocery Retailing 2000 reports points out: "No UK supplier can afford to ignore the European retail market. Wal-Mart's arrival and the Carrefour/Promodès merger have changed the rules forever. The structure of the market is evolving rapidly and UK companies must be fast on their feet to keep pace." But as globalisation gains pace, scale is not always a guarantee of success. The winning strategy is the efficient use of scale. In a global market it will bring greater economies in areas such as distribution, management and technology. Retailing on a global scale is far easier to achieve with non food products: "Even the few well developed international food retailers have yet to harvest global sourcing benefits in food," Dave McCarthy of Salomon Smith Barney told the Global Retailing conference. Many food manufacturers are not yet able to manufacture on a global scale and those that do, do so on a country by country or continent basis, ie the UK sources Coke in Europe not from the United States. However, it is in the interest of retailers and suppliers to operate globally. Although economies of scale will drive prices down, the gains will be made through volume growth and maintaining market share. Many companies will still be attracted by the greater overall profit despite a drop in margins. However, the onset of globalisation will lead to more price transparencies. True global players are only just emerging. For many UK retailers, European consolidation will probably come before global scale, but the Competition Commission will keep consolidation under control. A prevalent theme at the conference was that food retailing would become a global sector with a maximum of six players in a super league' ­ at least half of them from Europe. Carrefour, Ahold, and Tesco, together with Wal-Mart, will likely compete at the global level. Yet Joanne Denney, chief executive of IGD, pointed out: "The superstore format has been the triumphant retail format for many years, but the market is signalling a new mix of formats. "Companies will need to refocus their strategies on these new market segments and decide which customer needs they will serve and how to do so most successfully." IGD predicts that in 10 years' time there could be five market segments: l Destination stores ­ today's superstores with leisure, entertainment and doctor's surgeries included. Global players will have an advantage here, as economies of scale will be vital. l Meal Solution Centres ­ located near stations, offices and densely populated areas where people can pick up a quick, quality meal. l Discounters ­ to serve the needs of the most price conscious consumers, with limited choice. l Neighbourhood Retailers ­ serving the demand for impulse/emergency items. Service, location and good management will be more important than price. l Remote/internet shopping with alliances between retailers and distribution or courier companies. People sometimes worry that globalisation is crushing diversity and squeezing out the little people. Far from crushing diversity, globalisation, alongside the growth of choice, is actually creating enormous new opportunities. {{LEADING EDGE }}