Retail Sector Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Retailing involves all the activities used to sell goods and services directly to final consumers for personal nonbusiness use; global retailing represents retailing activities that cross national boundaries.

Over the past several centuries, entrepreneurial merchants have ventured abroad to exchange merchandise and open retail operations. International trading and retail store operations were the two primary economic engines of the colonial firms. For example, over 150 years ago, Dutch-based apparel and accessories chain C&A began expanding throughout Europe; it now has a network of 1,200 outlets, with new expansions planned in Bulgaria in 2009. Deichmann, a German retail shoe chain, began operations in 1913, and now has over 2,200 stores and 32,000 staff in 16 European countries; they sold 122 million pairs of shoes in 2007. Woolworth, founded in 1878 in the United States as a five-and-dime store, began expanding to Europe, Mexico, and South Africa in the mid-20th century, and now no longer exists within the borders of the United States, yet survives in the United Kingdom (UK), Germany, Austria, Mexico, and South Africa.

The Largest Global Retailers

Three (Wal-Mart, The Home Depot, and Target) of the 25 largest businesses in the United States are retailers. Outside the United States, big retailers include Carrefour in France, Tesco in the UK, Metro in Germany, and Daiei in Japan.

Of the top 250 retailers, 104 (41.6 percent) have no international experience at all. The most international retailer is France’s Carrefour, which has stores in just 29 countries, compared to multinationals in other industries that might operate in 100 or more countries. Overall, the 10 largest retailers in the world (with country of origin and corresponding sales in U.S. dollars) are Wal-Mart (United States: $348.7 billion), Carrefour (France: $97.86 billion), The Home Depot (United States: $90.84 billion), Tesco (UK: $78.98 billion), Metro (Germany: $75.25 billion), Kroger (United States: $66.11 billion), Target (United States: $59.49 billion), Costco (United States: $60.15 billion), Sears (United States: $53.01 billion), and Schwartz Unternehmens Truehand KG (Germany: $52.42 billion).The top four retailers in each market are as follows: Wal-Mart, The Home Depot, Kroger, and Target (North America); Carrefour, Tesco, Metro, and Schwartz (Europe); Seven and I Holdings, AEON, Woolworths, and Coles Group (Asia/Pacific); CBD Grupo Pao de Acucar, Cencosud, Soriana, and Casas Bahia (Latin America); and Pick ’n Pay, Shoprite Holdings, Massmart, and Metcash Africa (Africa/Middle East).

The predominant retail formats of the top 250 retailers are supermarkets (93), other specialty stores (88), hypermarket/supercenter/superstore (73), convenience store (73), department store (53), apparel/ footwear specialty store (49), and discount store (46). Nearly 11 percent (10.6 percent) of these retailers operate in 10 or more countries.

Global Retailing Trends

According to the 2008 Global Powers of Retailing presented by Deloitte, Touche Tohmatsu in conjunction with Stores magazine, the total retail sales for the top 250 retailers rose to $3.25 trillion in 2006, up 8 percent from $3.01 trillion the previous year. Most of the growth was attributable to the rapid growth of consumer incomes in the emerging markets economies, where millions moved from poverty to the middle class.

Of the top 250 retailers, 36 experienced decline in sales in 2006, compared to 49 in 2005. The net profit margin for the group was up by 3.6 percent, slightly more than the 3.5 percent in 2005 and significantly better than the 2.7 percent in 2004. Only seven firms reported a net loss in 2006 compared to 15 the year before.

Based on the 2008 Retail Development Index developed by A. T. Kearney Analysis, Euro Money, and the World Bank, the top emerging markets based on four major factors—country risk, market attractiveness, market saturation and time pressure, and the most attractive markets for the next decade—are in Vietnam, India, Russia, China, Egypt, Morocco, Saudi Arabia, Chile, Brazil, Turkey, Mexico, Algeria, Malaysia, Peru, Indonesia, Bulgaria, Ukraine, Tunisia, Colombia, and the United Arab Emirates.

Some of the major trends among the top retailers are an increased emphasis on social responsibility. Because of the growth in mass media throughout the world, more consumers are focused on product safety issues. Moreover, with rapid globalization and reduced trade barriers, more food retailers are becoming more concerned about the safety of their supply chains.

Other trends include the shift away from the United States and toward Asia and other emerging markets. Retailers in the United States and in Europe are likely to face competition in the domestic market and hence seek opportunities abroad. As more countries grow and become affluent like the nations in the European Union, Japan, and the United States, consumer spending on services retailing continues to grow by leaps and bounds. Hence, more and more retailers are selling services related to their core merchandise. For example, Best Buy has Geek Squad, which offers after-market servicing for complicated home electronic products, while Tesco, the UK food retailer, offers many online and financial services.

There is also a trend toward multichannel integration as online retailing continues to take market share away from brick-and-mortar stores. The best retailers are integrating the two formats and enriching the customer experience for distinct customer segments across multiple channels to build brand identity, engaging consumers in dialogue, and obtaining feedback from them. As retailers become more powerful, they continue to develop long-term relationships with them, and develop as world-class marketing entities.

Failures In Global Retailing

Despite the successes of the major global retailers, some have encountered failures as well. After a decade-long effort to win German consumers, WalMart decided to quit in late 2006. It sold its 85 stores to local retailer Metro AG, costing the retailer $1 billion. Earlier, it had to retreat from the South Korean market as well. It now operates in 13 countries around the world, compared to Carrefour, its largest competitor, which operates in 29 countries.

Analysts believed that the company was losing over $250 million a year on turnover sales of about $2.5 billion annually, despite several attempts to turn around the business. The German consumer could not get used to some of Wal-Mart’s signature features like employees required to smile and heartily greet the customer, baggers at the checkout, or stores outside the town center. The firm was also frustrated with German shopping regulations, the feared Laden-schulssgesetz, which regulates store openings and restrictions on discounting. Other reasons included the fact that many of the stores were not in the best of areas.

Discount retailing as practiced by major firms such as Aldi and Lidl were firmly entrenched by the time Wal-Mart arrived and it had nothing new to add. In the United States, Wal-Mart is the undisputed price leader; Aldi owns that position in Germany. Wal-Mart’s conservative management style, which worked in the United States, and involved hiring and firing at will and having everyone toe the company line, did not work in Germany.

Wal-Mart’s annual turnover of $285 billion gives it a distinct scale advantage on globally sourced products such as Chinese-made toys and clothing. Yet, the purchasing clout did not extend to regional brands of bratwurst and beer. Wal-Mart’s German selection was dominated by European brands from Fischer bicycles to Vernel fabric softener. The company also did not have superior distribution efficiencies because of a lack of strong enduring relationships with local suppliers. Wal-Mart is now concentrating on expanding in China, India, and Central America. It has been acquiring stores in Brazil and entered a partnership with a retail chain in Central America. After a long struggle, it also boosted its investment in Japan when it gained a major share of Seiyu Ltd.

Bibliography:

Nicholas Alexander and Marcelo de Lira e Silva, “Emerging Markets and the Internationalization of Retailing: The Brazilian Experience,” International Journal of Retail & Distribution Management (v.30, 2002);
Mark Carr et al., “The New Era of Global Retailing,” Journal of Business Strategy (v.19, 1998);
Mahmoud Ezzamel and Hugh Willmott, “Rethinking Strategy: Contemporary Perspectives and Debates,” European Management Review (v.1, 2004);
Mahmoud Ezzamel and Hugh Willmott, “Strategy as Discourse in a Global Retailer: A Supplement to Rationalist and Interpretive Accounts,” Organization Studies (v.29, 2008);
Stephane J. G. Girod and Alan M. Rugman, “Regional Business Networks and the Multinational Retail Sector,” Long Range Planning (v.38/4, 2005);
Nirmalya Kumar, “The Global Retail Challenge,” Business Strategy Review (v.16, 2005);
“Leaders: Trouble at Till; Global Retailing,” The Economist (v.381, 2006);
Edwin J. Nijssen and Susan P. Douglas, “Consumer World-Mindedness, Social-Mindedness and Store Image,” Journal of International Marketing (v.16, 2008);
“Overcoming the Hurdles in Global Retailing,” International Journal of Retail & Distribution Management (v.25, 1997);
Stephanie Rosenbloom, “To Save on Gas, Stay Home and Click,” New York Times (July 19, 2008).

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