News

Retailers Use Big Data to Inform Expansion into New Markets

BY CSA STAFF

By Karen Lowe, [email protected]

India may be one of the most promising retail markets in the world. The economy is expected to grow anywhere from 6% this year to 8% over the next five years, based on recent projections. And as an added incentive, the Indian government passed a suite of reforms last year that will make it easier for foreign-owned and businesses to open shop there, removing some barriers to entry.

Among the companies that have set their sights on India: Wal-Mart announced plans to open its first stores there over the next couple of years; and Ikea recently received approval to enter the market. Luxury brands are also coming fast and furious. Prada, Alexander McQueen and Dolce & Gabbana are all reportedly looking for local real estate in India.

Yet another reason why the billion-person market is so appealing: Mobile phone penetration is high. Ultimately, it’s easy to imagine that many Indian shoppers will bypass computers, opting instead to do their shopping on their mobile devices. (Given the potential size of the market, it’s not surprising that Amazon is lobbying to have the Indian government relax laws so that foreign businesses can sell directly to consumers online.)

For retailers, there is tremendous opportunity, but entering a foreign market is much easier said than done. The retail experience — including everything from advertising to merchandising — must cater to the local customer base. Understanding their needs is not a trivial task. Ikea, for example, sends thousands of researchers to people’s homes near their stores to see how people live and the types of products they might use. In developing nations where Ikea prices are not considered low, the store markets itself as an “international lifestyle” chain. In developed nations, it’s marketed as a low-price, mass market retailer.

Adapting and localizing brand strategies is critical to retailers’ success. “Big Data” analytics can help them avoid embarrassing or expensive mistakes in established markets as well as ease retailers’ transition into a new market. Most major department stores and chains already harvest a variety of data and apply analytics to determine where to locate and how to stock stores, what advertising and promotions are appropriate, how to display goods and so on.

Big Data analytics could do even more in markets where consumers are diverse. Sending researchers into consumers’ homes is a labor-intensive and expensive undertaking. Analytics could prove a cost-effective alternative. Retailers could look, for example, at demographic data to help determine the types of products to carry. They can look at live tweets or comments made on social media to immediately identify market trends and individual preferences; they can use location-based data generated by mobile phones to gain a better understanding of local geography; and, after stores are up and running, retailers can use live, streaming sales data coupled with historical data to predict how trends will evolve.

Undoubtedly, there are risks involved with global expansion, but for retailers who take the time to understand the needs and preferences of local markets the investment could pay off for decades to come. Succeeding in a new market isn’t just a matter of making a splashy, expensive introduction; it’s about making informed strategic decisions — and data analytics can help retailers make that happen.

Karen Lowe, IBM general manager, Global Retail Industry. She can be reached at [email protected].


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News

Sales gains in Q2 for Ace Hardware

BY CSA STAFF

Ace Hardware Corp. experienced sales gains in nearly every department, leading to second-quarter revenue of $1.74 billion, a 9.7% increase from $1.07 billion. Net income increased to $42.3 million, compared to net income of $14.9 million in the same quarter last year.

CEO John Venhuizen said the co-op is plaese with the results so far in 2013. "Sales increased in virtually every department with significant growth at both wholesale and retail from our Discovery Edge, Level 3 merchandising re-sets and branding inititatives," he said.

The second-quarter also included a charge of $6.2 million related to the closing costs of the co-op’s Retail Support Center in Toledo, Ohio.

Across the Ace network, same store retail sales were up 5.3% for the quarter, with momentum gaining in June (up 6.1%) and July (up 9.8%).

The company’s income statement includes a line for retail revenues — $77.7 million for the three months ended June 29. This line tracks the company’s December 2012 acquisition of Westlake Ace Hardware, which operates 86 stores in the Midwest. Same-store sales at these Ace-owned stores were down 3.4%, contributed to a cold spring that limited lawn and garden sales.

On the wholesale side, total wholesale revenues were $1.10 billion, an increase of 2.4%.

The Ace co-op added 34 new domestic stores and cancelled 19 in the second quarter. The total domestic store tally stands at 4,121 as of June 29.

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OPERATIONS

Target partners with Metro unit for Quebec in-store pharmacies

BY Dan Berthiaume

Mississauga, Ontario — Target Corp. is partnering with Metro Inc. subsidiary McMahon Distributeur pharmaceutique Inc. regarding the operation of in-store pharmacies at Target locations across Quebec. The partnership under McMahon’s Brunet banner will provide pharmacies in the majority of Quebec store locations.

"We’re pleased with the positive response we’ve received from guests at the 62 in-store pharmacies that are currently in operation throughout Canada , and look forward to delivering superior, patient-focused healthcare to our guests in Quebec," said Tony Fisher , president, Target Canada. "Brunet’s reputation as a leader in promoting patient health and well-being, combined with its specialized product offering, makes Brunet the ideal strategic partner to help us deliver outstanding patient care in Quebec."

Under the agreement, McMahon, which is the franchisor of the Ed Brunet banner, will enter into agreements with pharmacist-owners who will own and operate pharmacies within Target stores across Quebec. McMahon will provide supply chain and inventory services as well as all the operational support to the Brunet franchised pharmacist-owners. The in-store pharmacies will carry Target-owned brands and provide guests with access to prescription, pharmacy and health consultation services.

"The agreement with Target provides an excellent growth opportunity for Metro’s pharmaceutical division, particularly for the Brunet banner, as it enables us to significantly increase our presence, our purchasing power and our sales potential in Quebec,” said Eric R. LaFleche, president and CEO of Metro Inc. “In all, 18 new pharmacies, including 12 in the Greater Montreal area, will be set up by the summer of 2014, bringing the total of Brunet to 168.”

As previously announced, Target plans to open 124 stores across Canada throughout 2013 and will open its first 25 stores in Quebec this fall.

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