Cornering the Market
The recent announcement that retail giant Walmart plans to open more than 100 of the brand’s Neighborhood Market stores in 2013, and as many as 500 Neighborhood Market locations over the next few years, has industry analysts and observers talking. They have my attention, as well.
The announcement makes it clear that Walmart’s support for smaller-format concepts—and particularly the Neighborhood Market brand — is growing. Neighborhood Markets have actually been around for some time: the first one opened its doors in 1998. For a brand as large, dynamic and growth-oriented as Walmart, the fact that there are “only” around 200 stores 15 years later represents downright glacial growth. The new plan, for 500 by 2016, represents a big step forward — a sign that Walmart sees this segment of their business as one that’s time has come.
While this might seem to reinforce the ongoing retail shift toward “right-sizing,” I believe there are other factors behind the decision for Walmart. The chain most likely sees this as an opportunity to increase its market share in the grocery/supermarket sector. The typical Neighborhood Market location has a 42,000-square-foot layout and includes a pharmacy alongside traditional grocery offerings (but without the bells and whistles and large volume of prepared foods found at larger and more upscale grocers). Like all Walmart concepts, Neighborhood Market is all about value and convenience.
Anecdotally, Walmart seems to be positioning their Neighborhood Market stores roughly in between existing traditional Walmart locations. Considering the fact that there are still a significant number of those larger stores that are not true supercenters and lack the full grocery component, this makes sense if the brand is looking to capture additional grocery and convenience store business. Another reason to think that this is a proactive, market-oriented move is that Walmart shows no real signs of stopping its growth across all formats: the iconic value-oriented retail giant still plans to open 125 supercenter locations this year.
This begs the question: Why now? There are two primary issues in play. First, Walmart is looking for another growth vehicle, and has been experimenting with a range of smaller format concepts in recent years. With food sales in existing supercenters doing quite well, that may have inspired a more aggressive attempt to capture more supermarket market share. Secondly, from the standpoint of space, affordability and availability, this also seems like an opportune time for a mid-sized retail format to make a push. With the recently announced OfficeMax and Office Depot merger (as well as the uncertain futures of Best Buy and other national retailers), there are bound to be plenty of opportunities for stores of this size to acquire quality space at an affordable price point.
This approach also reflects the recognition that not everybody is a superstore shopper. Walmart may be calculating that the appeal and convenience of a smaller and less intimidating retail environment may bring in supermarket shoppers who were not previously Walmart regulars. At the moment, the Neighborhood Market rollout seems to be focused largely on major metropolitan areas and less on the suburban and more rural markets where larger formats have made inroads in recent years. In the next few years, there are more than three-dozen Neighborhood Market stores scheduled to open their doors in metro Atlanta alone! It may have taken a few years, but Walmart is finally betting big on going small.
Do you see the expansion plan as the right step for Walmart? Will it make a real difference for landlords by filling in empty storefronts? Comment below to join the conversation, or email me directly at [email protected].
Click here for past columns by Jeff Green.
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Supervalu finalizes leadership team
MINNEAPOLIS — Supervalu announced that Janel Haugarth who will remain with the company as EVP and president of independent business and supply chain services. The announcement comes as Sam Duncan, Supervalu president and chief executive officer, continues finalizing his leadership team following the sale of five retail banners to AB Acquisition LLC, a transaction that was completed on March 21.
Haugarth, who has spent more than 35 years in a variety of leadership positions with Supervalu, agreed to continue as EVP and president of independent business and supply chain services. Haugarth will oversee the company’s wholesale and distribution business which is expected to account for nearly 50% of Supervalu’s annual revenues after the transaction closes. Supervalu’s Independent Business division is the primary grocery supplier to nearly 2,000 of the country’s most successful independent grocery retailers across 43 states. She also will lead supply chain services for the company which consists of 19 distribution centers across the country.
“It was a priority for me to keep Janel with the organization going forward,” said Duncan. “She is highly respected by our independent retailers and her experience and leadership ensures stability as we continue to help these important stakeholders grow and prosper.”
Supervalu also announced new executive appointments.
Randy Burdick has been named EVP, chief information officer for the company, effective March 25. In this role, Burdick is responsible for Supervalu’s information technology infrastructure and personnel, as well as the shared service/contact center organization. He joins Supervalu after spending the past eight years as chief information officer at OfficeMax.
Burdick has more than 28 years in a variety of technology leadership positions, including experience as group information officer for Hewlett-Packard and chief information officer at Advanced Micro Devices (AMD). He began his career as an automation engineer at Harris Semiconductor. Burdick replaces Kathy Persian, senior vice president and chief information officer, who will leave the company. Persian has served in her current role since Sept. 2012 and previously held the positions of group vice president, corporate planning, analysis and business process, finance, and group vice president of retail and merchandising systems, IT, with the company. She will stay with Supervalu through April 5 to help ensure a smooth and efficient transition.
Michele Murphy has been named EVP, human resources and corporate communications for the company, effective March 25. In this role, Murphy oversees all of SUPERVALU’s human resources functions, labor relations and corporate communications. She has spent the last seven years as Supervalu’s SVP corporate human resources and labor relations.
Murphy has more than 30 years of experience in a variety of positions dealing with employment law, human resources and labor relations. She has served in roles with international law firm Morgan Lewis, grocery store operator American Stores and roles of increasing responsibility at Albertsons and Supervalu. Murphy replaces Dave Pylipow, executive vice president, human resources and corporate communications, who will leave the company at the end of April. Pylipow has served in his current role since 2006, and previously held the position of vice president, human resources at Save-a-Lot. He will stay with Supervalu for several weeks to help complete the transition of responsibilities.
With the transaction completed, J. Andrew (Andy) Herring, EVP real estate, market development and legal, will depart the company. Herring joined Supervalu in February 1998 as VP corporate development and external relations and was promoted to senior vice president in 1999. He has held numerous positions during his career at the company, including management of its in-store pharmacy business from 2002 to 2006. Herring has served in his current role since 2010, during which time he was responsible for real estate, mergers and acquisitions and legal.
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Key Takeaways from RILA’s ‘Logistics 2013’ Conference
By Kris Bjorson, [email protected]
If you’re a retailer feeling the economic heat, you’re in good company. A whopping 70% of the retailers at the RILA (Retail Industry Leaders Association) Retail Supply Chain Conference — Logistics 2013 event said that the “current economy and political situation” was either hurting or having a slightly negative impact on their business. And along with the slow-growth economy, the omni-channel commitment is creating more pressure to deliver online orders faster.
But here’s the good news: Retail and logistics leaders are rising to the occasion. At the conference, ideas abounded, as leaders shared innovative new ways to meet today’s retail logistics challenges through strategies related to international logistics and sourcing, transportation, omni-channel distribution, and inventory management.
Here are a few of the key ideas/themes retail leaders discussed at the conference:
Multichannel retailing supports a seamless customer experience: The evolution has begun from true multichannel retailing towards the “omni-channel.” This seamless approach to the consumer experience harnesses all available shopping channels, such as mobile devices, computers, bricks-and-mortar establishments, TVs, catalogs, and beyond.
Today’s consumers are increasingly expecting access through their own channel of choice, all day every day. With this, consumers are dictating the future of retail. They want 24/7 access to goods online, as well as the option to pick up or return those goods to a store. Several panelists made the point that only by harnessing all of these channels — e-commerce and mobile device-friendly shopping as well as in-person bricks-and-mortar access — will today’s retail businesses succeed tomorrow.
"It’s only the retailers and brands that focus on the best consumer experience that will thrive, which means not blurring but erasing the lines between channels," said John Ehmann, SVP GSI Commerce, in a Multichannel panel. Whether by outsourcing e-commerce fulfillment operations to third parties or tackling it in-house, retailers have options when it comes to improving seamlessness in the customer experience.
More retailers are betting on free, fast shipping: According to the conference survey, seven of 10 retailers are still working on defining their multichannel strategy. For Laura Sen, CEO of BJ’s Wholesale Club, that strategy needs to meet at least one consumer demand: free shipping.
"Free shipping is just the ‘table stakes’ for retailers,” Sen explained.
To maintain an efficient, reliable shipping and tracking system, retailers also need more technology investment in sophisticated information systems. Compounding those up-front retailer costs are same-day and next-day delivery options, which are becoming more common amongst big-box and e-commerce companies — creating even more competition for traditional retailers that must meet the same service benchmarks.
Determining where the retail store meets the dock door: Developing new inventory management strategy was another common thread in this year’s conference. It covered the importance of optimizing a common pool of inventory for the best in-store and online shopping experience, making each portal uniquely inviting to the customer. From rethinking the number of dock doors and amount of backroom inventory and/or shipping space, to ensuring adequate room for customers to pick up orders. The big question facing retailers: Where does the store meet the dock door?
Should retailers outsource individual order e-fulfillment operations to other companies? Should they build a dedicated e-commerce facility to fulfill such orders? Or, should they have a multichannel distribution center that fulfills both individual and store orders? If they do, they would do well to choose their location wisely, as JLL’s Big Box Outlook report shows that the location of ‘big box” facilities can make or break a retailer or an e-commerce company’s abilities to deliver their service commitments.
Vertical integration for reduced costs, improved service: Many retailers are aiming to hit dual goals of cost reduction and service improvement by vertical integration, from manufacturer, to logistics service provider, to retail store. Choosing the right collaboration partners is more important than ever, as same and next-day delivery of online purchases is driving even greater demand for multichannel-capable distribution centers that can handle the demand efficiently and effectively.
Given that facilities in a retailer’s supply chain do not act in isolation, it is important to achieve full integration between planning and execution systems. Also a key topic was the need to optimize inventory flow from warehouse to retail shelf. This goal becomes a much more manageable task with a strong partnership in place between retailers and manufacturers that can effectively execute the process, while creating efficiencies and reducing cost to improve on-shelf availability.
Several panelists shared insights into predicting future trends, on topics ranging from the economy and political landscape to energy supply. Two sessions explored the use of natural gas in transport, casting it in a positive light as the would-be fuel of the future. Derek Leathers, CEO, Werner said that transitioning fleets to natural gas has become a matter of when versus if.
Kris Bjorson, international director and head of retail/e-commerce distribution, Jones Lang LaSalle, a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. He can be contacted at [email protected].