OPERATIONS

Report finds retail in holding pattern, identifies major trends

BY Marianne Wilson

New York City — The retail sector continues to edge tentatively toward recovery, buoyed by a strong start to the holiday shopping season, but several obstacles stand in the way of sustained progress in 2012, according to Jones Lang LaSalle’s North America Year-end Retail Outlook.

“Everyone, including consumers, is in a continued wait-and-see mode, delaying major buying and investment decisions until they see how several dynamics play out, including the elections next year," said Greg Maloney, CEO and president, Jones Lang LaSalle Retail. "Until we have some market certainty in the U.S. and overseas plus sustained high levels of consumer confidence driven by higher paychecks, a stronger stock market and an improved housing market, a robust recovery will elude the retail sector."

One of the major trends impacting retail identified in the report is the growing prevalence of "web-influenced sales" whereby are consumers researching products online, reading reviews and searching for the best deals locally. The attractiveness of this practice lies in consumers’ desire for immediate gratification as well as the ability to save on shipping costs by buying locally in-store.

It’s estimated that web-influenced sales will generate almost $1.13 trillion in U.S. sales this year and, by 2015, will represent approximately 44% of total retail sales, or $1.55 trillion. Moreover, even though e-commerce sales are growing at a fast clip (10% annually), cross-channel commerce is growing even more rapidly, and is estimated to grow to five times the e-commerce market by 2015.

"To survive in the long-term, local retailers will have to ensure their products show up online, that the site reflects accurate availability, and that the online and in-store experiences are as seamless as possible," said Lew Kornberg, managing director, corporate retail solutions. "The rewards are direct — not only do shoppers come in for the researched product, they also stick around to buy other items once in-store."

Forrester Research reported that 45% of shoppers interviewed said they bought extra items once in a store, spending, on average, $154 on additional purchases.

Other major trends include:

  • Consumers’ increased reliance on their smartphones and tablets as an in-store shopping companion will motivate retailers to improve their mobile retail websites and capabilities and add mobile loyalty programs.
  • Amazon.com’s entrance into the designer fashion market with high-end fashion items, an online style guide and fashion recommendations based on previous choices will raise the stakes in this sector as the online retailer giant leverages its easy-to-shop, hassle-free reputation with fashion-forward consumers, eBay also launched its Fashion Outlet this year, offering savings up to 70%.
  • Consumers are splitting their grocery budget and time among several types of food retailers, from wholesale clubs to organic supermarkets to regular grocery stores. Mid-market chains, most squeezed by this trend, are responding by adopting one of two strategies — upgrading their shopping experience with increased organic selections or focusing on bargains.
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STORE SPACES

Supervalu steps up to the efficient buildings challenge

BY Staff Writer

Washington, D.C. — Supervalu announced that it has joined the U.S. Department of Energy’s Better Buildings Challenge, which aims to engage building operators nationwide in improving energy efficiency by 20% by 2020. The announcement was made by President Barack Obama and former President Bill Clinton during a leadership event attended by Craig Herkert, Supervalu CEO and president, this morning in Washington, D.C.

“Reducing our energy footprint and creating a more thoughtful and sustainable operation are important priorities, and we will continue to test innovative ways to build our stores with future generations in mind,” said Herkert. “These projects are good for the environment, improve our operating efficiency and create jobs — ultimately benefiting the communities we serve.”

Supervalu has invested $20 million in energy efficiency initiatives this year alone resulting in more than 1,300 projects across its enterprise.

In order to achieve its energy and carbon reduction goals, and support its commitment to the Better Buildings Challenge, Supervalu said it will continue to invest in innovative energy efficiency projects.

Supervalu said it has been working over the past five years to reduce total carbon emissions by 10% and landfill waste by 50% and is on track to reach those milestones by the end of 2012.

One of Supervalu’s projects is the nation’s first low-carbon, ammonia refrigeration system at an Albertsons store it is remodeling in Carpinteria, Calif.

Since 2008, Supervalu has completed 4,500 energy reduction projects.

“I am honored to attend today’s event and thrilled at our ongoing efforts around environmental stewardship,” said Herkert. “We appreciate the leadership shown by the Obama Administration and the Clinton Global Initiative and are committed to leading our industry through ongoing investments in projects that create energy efficient stores, offices and distribution centers.”

The Better Buildings Challenge is a leadership initiative launched in February by President Obama. It is spearheaded by former President Clinton and the President’s Council on Jobs and Competitiveness to support job creation by catalyzing private sector investment in commercial and industrial building energy upgrades to make America’s buildings 20% more efficient over the next decade, reducing energy costs for American businesses by nearly $40 billion.

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REAL ESTATE

Dollar General to target food deserts with its DG Market concept

BY Michael Johnsen

Goodlettsville, Tenn. — Dollar General on Monday told analysts the company plans to open 40 DG Market concepts in 2012 in both new and existing markets based on the success of the concept.

"The results of the DG Market remodels we have completed to date and the early success of our five DG Market stores in Las Vegas are very encouraging," Dollar General chairman and CEO Rick Dreiling told analysts Monday morning. "We introduced our updated general market banner in Nevada and these stores are performing well above our initial expectations. These are our first new Dollar General Markets since early 2007 and we’re excited about introducing the concept into new markets."

DG Market stores offer a wider variety of dry groceries and perishables, in addition to the general merchandise selections at a typical Dollar General store.

DG Markets have average annual sales of $4 million to $5 million, versus the $1.4 million across the regular formats, according to David Tehle, Dollar General CFO and executive VP. "The raw margin dollars and profit margin dollars that we get out of a DG Market is very impressive. Now, the mix is more consumable so the margin percent is somewhat lower but again the dollars, the raw dollars we get because of the volume is very impressive," he said. "We also think there’s an opportunity in smaller markets that are what we call food deserts to add tremendous volume where we can go into a town that really needs a DG Market and get a lot of volume and get a lot of market share. That’s really the way we’re playing the DG Market."

"We believe the DG Market concept is well positioned to serve food deserts in both rural and metro areas and reinforces DG’s heritage of serving the underserved," Dreiling added.

Companywide, Dollar General also is looking to further expand its cooler presence. Currently, new stores are opening with 14 to 16 coolers and the company will be installing four additional cooler doors in approximately 1,200 existing locations to better serve their "time conscious customer."

"Fresh and refrigerated foods helped us drive customer traffic and increase basket size by serving a greater share of our customers’ needs," Dreiling said.

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