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Case Studies

by: Alissa Foreman

Case Studies MKTG 488

Alissa Foreman
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About this Document

Is Walmart Good or Bad, The Dollar General, Are Supermarket's the Next Big Thing?, Why Target Failed in Canada
Retail Strategy
Dr. Christopher Newman
Class Notes
RetailStrategy, retail




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This 8 page Class Notes was uploaded by Alissa Foreman on Wednesday September 21, 2016. The Class Notes belongs to MKTG 488 at University of Mississippi taught by Dr. Christopher Newman in Fall 2016. Since its upload, it has received 6 views. For similar materials see Retail Strategy in Marketing at University of Mississippi.

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Date Created: 09/21/16
Stop the Bullying, Wal­Mart­mart.html Anti – Walmart Stance: When it comes to price, it’s hard to beat Wal­Mart (WMT). But the "everyday low prices" come  at a high cost to its employees. A recent report from consumer group Los Angeles Alliance for a  New Economy found that Wal­Mart employees earn 20% less than the average U.S. retail  worker, and some $10,000 less than what the average two­person family requires to meet its  basic needs. Also, the company has fewer than half of its employees enrolled in its health insurance plan,  compared with 67% for the average large employer. As a result, taxpayers end up subsidizing the company’s workers. "In California alone, taxpayers pay $32 million annually in medical care for  Wal­Mart employees," the report finds. No wonder the world’s largest retailer has become the target of activist groups around the  country, and a punching bag for Presidential candidates Senator Barack Obama (D­Ill.) and  former Senator John Edwards. Its status as a political and social target is costing Wal­Mart millions. To clean up its image, it  launched a multimillion­dollar advertising campaign in January, telling viewers about the  positive characteristics of the company and its workers. It has also hired the powerful public­ relations firm Edelman and several political consultants to help polish its image. One of the consultants, Leslie Dach, a former media adviser to President Bill Clinton, was hired  for $3 million in stock, as well as options on 168,805 shares that vest over the next five years. At the same time, the political attacks on Wal­Mart seem to have unleashed paranoia within the  company, which has beefed up its security operations, hiring former senior FBI and CIA officials to watch workers and those who maintain contact with the company. All this usurps funds that  could go to workers’ salaries or benefits instead. These new developments have come at a time when "everyday low prices" isn’t the growth  model that Wal­Mart necessarily wants to pursue long term. In recent years, many of its  competitors have grown just as efficient in upping profits, and there’s nothing unusual about low  prices anymore. No wonder that in the past year Wal­Mart has tried luring upscale customers  with a hip fashion line called Metro 7 and has upped the organic food offerings in its stores. Wal­Mart says it wants to offer more choices to customers at affordable prices. However, its  motivation to sell more organic food and fashionable apparel is the desire for the higher margins  these goods bring. Since it’s already charging customers more, isn’t it about time that Wal­Mart  stopped squeezing its employees? Pro – Walmart Stance: Although it has become the popular symbol of capitalism’s ills, Wal­Mart (WMT) has a business model that works quite well. Its fanatical focus on eradicating costs aids the largest number of  people—the world’s shoppers—while allowing a simple redress for others, who can take their  business or labor elsewhere. Moreover, it is supremely haughty to suggest Wal­Mart’s customers could all just pony up a little extra cash so the lives of others could suddenly improve. Many people cannot afford an extra  few bucks here or there, especially when it comes to buying staples. Last fall, quoted a spokesman for, a group harshly  critical of the company, who said the retailer "has the responsibility to improve the lives of its  workers." Actually, in the U.S., most would likely agree that we as individuals are tasked with  improving our own lives, if their current state displeases us. Make no mistake, the company’s business model mandates adherence to a lean cost structure.  Wal­Mart has been known to hector manufacturers and distributors in hopes of paying less, and,  undeniably, doesn’t always sell the highest­premium product in a particular merchandising  category. But is that such a bad thing? If Wal­Mart drives out costs, it forces suppliers to also narrow costs. Isn’t battling cost bloat one of the hallmarks of running a successful business? Who is to say that  Wal­Mart isn’t improving the management of those companies with which it does business? Also, it is true, no Wal­Mart clerk has ever gotten wealthy from his or her salary. Does anyone  expect to do so? Still, company defenders have an extensive litany of persuasive stats: Wal­ Mart’s average wage amounts to nearly $10 per hour, its workers pay roughly $1 per day for  medical insurance, and the company employs more than 1.3 million Americans. And the retailer has just begun boosting hourly compensation through bonuses—last month it  gave $530 million to nearly 80% of its 1.04 million hourly workers. Finally, let’s take a look from a different perspective: In a society geared toward hyper­ consumption and greed, perhaps the real issue isn’t Wal­Mart’s business plan. Maybe it’s us IN CLASS DISCUSSION  Cons o Low Pay, No benefits  Unequal distribution of pay the low are low, corporate level extremely  high o Traffic (pro and con) o Decrease in property value o Pressure on suppliers   “Dictatorship” over suppliers  makes partnerships difficult and profit margins low o Driving small businesses out of an area  Pros o Creates Jobs o Easily accessible products  o Low prices  o Convenience of being everywhere and having many services o Creates demand for suppliers o Brings other businesses   Walmart has certain criteria to even come to a city  Businesses thrive around Walmart Why Target Failed in Canada­canada­fail/ In his biggest move since taking the reins in August, Target CEO Brian Cornell pulled the plug on the  discount retailer’s ill­fated, poorly executed foray into Canada, its first attempt at international expansion. Target opened 124 stores in one fell swoop two years ago, but empty shelves, dreary locations and unexciting  merchandise failed to entice shoppers in Canada, a country of 36 million people with a way of life similar to  Americans’ but with habits different enough to make it a potential minefield for U.S. retailers. For Target it was a costly mistake: it is taking a $5.4 billion write­down on the Canada business and had a  total net loss in the Great White North of some $2 billion. And clearly, enough was enough for Cornell, who is busy with a much more important task: re­igniting American shoppers’ desire to shop at Target. Under the most optimistic scenario, Target Canada would have made a profit in 2021 at the earliest,  unacceptable to Cornell as the company prepares to expand its small­format stores in the United States, a  capital­intensive effort. “Our Target Canada business had reached the point where, without additional funding, it could not continue to meet its liabilities. Simply put, we were losing money every day,” Cornell said in a blog post. Here is closer look at why Target Canada failed. Location, Location, Location: In 2011, Target bought the store leases of the now defunct Canadian discount chain, Zellers, for $1.8 billion  from HBC, a move hailed at the time as brilliant, as it gave Target an immediate cross­country footprint and  spared it the expense of building out its own stores. (Target now has 133 stores in Canada, versus nearly 1,800 in the U.S.) But the reality is that most Zellers stores were dumpy, poorly configured for Target’s big­box layout, and were in areas not frequented by the middle class customers Target covets. And inheriting many awful locations  from a dying low­end retailer was at the heart of the damage to Target’s cheap­chic allure in Canada. “They diminished people’s image of what Target was. They should have done fewer stores, but better stores,”  Doug Stephens, president of Retail Prophet Consultants in Toronto, told Fortune. Empty Shelves: Opening 124 stores within such a short period of time led to havoc with inventory planning, causing a big  problem with stock outs early on, disappointing shoppers expecting to see the same abundance they would see  cross­border shopping in the United States. With bare shelves, Canadian shoppers couldn’t even shop if they  wanted to. In May, Target named a long­time U.S. executive with operational experience to address but the  retailer’s performance during the key holiday season in Canada, but it wasn’t good enough to convince  Cornell that Target should stay the course. “While we made some recent progress, the changes were not enough to inspire the guest to shop Target,”  Cornell said. Target’s popularity hinges on being a treasure trove for trendy but affordable fashion and higher­quality  merchandise, but its Canadian assortment was seen by many customers as not especially more compelling than Wal­Mart’s.   Focused on quantity over quality   Working on revamping US stores while opening Canadian stores   Inventory was not enough to cover shelves  o Dissuaded consumers from shopping  Too many stores opening all at once   Locations weren’t targeted to the market Target wants  Are Smaller Supermarkets the Next Big Thing?­format­supermarket/shift­smaller­formats­finally­ underway#ixzz3tvtRAmOR Last week I spent a couple of days in the Boston and Portland, Maine, areas. The reason for my visit was to take in recently opened, smaller­format concept stores. Smaller grocery stores have been on the agenda for retailers  in the USA for a number of years; but do these latest developments, from two of the major retailers in the  market, indicate that the long­awaited shift is starting to happen? Bfresh winning at the intersection of retail and foodservice Ahold's bfresh offers high­quality foods to go. First, some details on the stores. In the Allston district of Boston, Ahold has opened the first of its ‘bfresh’  smaller­format stores. Part grocery store, part food takeaway, at 10,000 square feet this is one of the best  examples of format blurring in action. The retailer’s partnership with La Place from the Netherlands has  enabled it to present the market with a unique, high­quality food­to­go offer which sets it apart from a number  of urban­focused competitors. Hannaford focused on offering a convenient solution Hannaford has opened a smaller store near Portland, Maine. Just outside Portland, Delhaize’s Hannaford has developed a 20,000­square­foot smaller supermarket.  In a  more rural location, this store leads with a fresh food offer, with a layout that has been built around offering  convenient meal solutions. Merchandising wine next to produce and deli is a relatively unique idea, but one  which works really well in this format. Can things be different this time? So two great additions to the U.S. grocery sector — but we have been here before, at the dawn of the small­ format revolution. Walmart Marketside and Tesco’s Fresh & Easy were two concepts developed by industry  leaders that were destined to reshape retail but failed to realize their full potential. But things could be different  this time. Shopping little and often is on the rise If we look at trends from elsewhere, particularly Europe, shoppers are showing a greater propensity for these  types of format than before. Multichannel shopping is on the rise and while we are not seeing the end of the big, weekly family shop, shopping patterns are changing: more regular, top­up shops are becoming part of the  repertoire.  Part of the reason for this change is that shoppers are also investing more time and effort into health and  wellness, including a switch to more fresh food. Smaller­format stores are well positioned to capitalize on this,  providing they can deliver and execute on an offer which meets shopper expectations in terms of variety,  freshness, quality, and pricing. Convenient pickup points for online orders One of the biggest drivers of the growth of smaller formats could be online grocery shopping (another key  growth channel). In Europe, many retailers are using their convenience store formats as pickup locations for  online orders. This enables shoppers to top up with last­minute items, while allowing the retailers to deliver  their large­format range in a much smaller footprint. Not only is this convenient for shoppers, but it also helps  to support the economics of small­format retailing for the retailers. Growing number of smaller­format options It’s also important to remember that smaller­format stores are already doing really well here in the U.S.. Trader  Joe’s, along with Aldi through its core hard discount format, continue to see great success in the U.S. market  and are building a larger network of stores. Shoppers like the ease of shopping at these formats and the great  pricing. This has not gone unnoticed, with both Whole Foods Market and Lidl making their own plans for the  smaller­format segment. Soon others could be tempted to dust off the small­format playbook and shoppers may  have many more convenient options for their grocery needs. CASE STUDY DISCUSSION  Pros o Small; more convenient  o Relaxed environment o Easily carry products consumer in that area want o Offer better service  Cons o Relatively lower profits  o Not appealing to everyone/ not “one stop shop” o Less variety/ assortment


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