Hypermarkets creating a new shopping culture in China

I thought this article about shopping in China at The Retail Bulletin was a pretty amazing contrast to an earlier report in the WSJ about shopping in India. In India, if you'll recall, organized retail is still the exception rather than the rule, and except for a small population of elite Indians (well, small by percentages -- only about 14% -- but that's still 150 million people), most still do their daily shopping in disorganized mom and pop stores and stalls. In order to capitalize on this massive amount of people and their combined purchasing power, big retail chains have taken to creating organized retail stores that merely look disorganized, selling damaged merchandise alongside new goods, keeping stores hot and stuffy, and making aisles curved and cluttered instead of neat and orderly. In short, in order to cater to the existing shopping culture, retailers have changed the way their stores work.

Now go ahead and read the aforementioned Retail Bulletin article, and you'll see that in China retailers are trying precisely the opposite. China's middle class is growing at an astounding rate and are being influenced by outside forces and Western concepts like never before. Combined with traditional shopping patterns and expectations that are somewhat different from India's, China has been a breeding ground for new hypermarket activity, as, "on average, China's middle class consumers visit hypermarkets every 10 days, making for a frequent-shopping pattern that owners of hypermarkets can bank on for a predictable revenue stream." In fact, according to the article:

TNS Worldpanel (China), which continuously measures household consumption in 20 of China's provinces as well as Beijing, Tianjin, Shanghai and Chongqing, says latest data show that hypermarkets increased their share of the value of China's grocery sector in the country's 15 largest cities from 28.5% in 2005 to 29.8% in 2006. The share in these largely provincial capital cities and municipalities - known as tier 1 cities - has continued to increase this year, reaching 30.1% in the first half of 2007. TNS is predicting a share for hypermarkets of 35% by the end of the decade - compared to the level of just 19.7% seen in 2001.

Most hypermarket operators aren't native, but are instead imports from other countries (Wal-Mart/Trust-Mart (US), Carrefour (France), Tesco (UK), and RT-Mart (Taiwan)), further illustrating a difference between Chinese and Indian shopping preferences.

What's interesting is that both economies are growing rapidly, and both countries still have hundreds of millions of people who will grow wealthier over the next few decades, and will consequently have more expendable income to spend on food, soft/hard goods and luxury items. But where retailers -- even those native to the country -- have had to scale back their plans to Westernize their stores in India, in China the swelling middle class can't seem to get enough of Western-style organized retail activity. It's even more ironic considering that India's mode of government is democratic, and the nation has long appreciated the dynamic of free market economics, whereas China's sometimes stifling Communist government only recently began allowing the foreign investment and competitive business practices essential to making something like a hypermarket work in the first place.

I certainly haven't yet figured out what makes these two countries so different in terms of shopping cultures, but given the sizes of their markets and the speed at which they're both growing, there are probably a lot of smart minds working on the problem at this very moment.

Tags: marketing at retail, merchandising, store planning

In India, chaos equals retail sales

The Wall Street Journal published a really fascinating article about Pantaloon Retail (India) Ltd., India's largest retailer, and their discoveries that western retail innovations don't always translate neatly to other countries with different ideologies and histories. In fact, even simple, seemingly common-sense features like quiet stores, wide, straight aisles and fresh, clean produce (basically the hallmark of a good supermarket here in the US) take on decidedly different meanings in India. Says Kishore Biyani, president of the firm, "The shouting, the untidiness, the chaos is part of the design." The WSJ provides some further explanation:

[When] Mr. Biyani tried that in Western-style
supermarkets he opened in India six years ago, too many customers
walked down the wide aisles, past neatly stocked shelves and out the
door without buying.
Mr. Biyani says he soon figured out what he was doing
wrong. Shopping in such a sterile environment didn't appeal to the
lower middle-class shoppers he was targeting. They were more
comfortable in the tiny, cramped stores -- often filled with haggling
customers -- that typify Indian shopping. Most Indians buy their fresh
produce from vendors who keep vegetables under burlap sacks. Even the dirty, black-spotted onions serve a function. For the average
Indian, dusty and dirty produce means fresh from the farm, he says.

Yet while he has worked hard to de-westernize the customer-facing portion of his operation, Biyani has adopted many high-tech innovations to optimize things behind-the-scenes, using fancy ERP software and just-in-time inventorying to maximize profitability and ensure that his company runs as efficiently as possible.

Interestingly, Biyani notes that while the market-style approach of his grocery stores is designed to appeal to lower- and middle-income Indians (who make up the vast majority of the population), he has had success introducing Western-style stores (with clean floors, air conditioning, and well-merchandised goods) catering to more affluent Indians, so exposure to other cultures -- and probably the "brand image" that those cultures carry -- does seem to play some role in shoppers' expectations of how a store should look, feel and function.

Tags: retail advertising, merchandising, India

Getting the store ready for pre-shoppers

Just a few months ago I did a blog on pre-shopping, citing a study that suggested around 2/3 of shoppers do some research online before making a purchase in-store. While 66% is certainly nothing to sniff at, compared to the amazing 89% that this Yahoo! study estimates (brought to my attention by this article at Retail Design Diva), it seems like a drop in the bucket. From the study:

• 
  Consumers exposed to online advertising are more engaged:
  Consumers exposed to display and/or search advertising viewed an
  average of six more pages during the period in which they were
  researching compared to those not exposed to advertising.

• 
  Almost 90 percent of the incremental sales generated by online
  advertising take place in-store: Consumers exposed to online
  advertising spent an incremental six dollars in-store for every one
  dollar spent online.

• 
  Integrated search and display campaigns have maximum impact:
  Combined search and display ad campaigns resulted in deeper engagement
  for consumers exposed to those ads, leading to increased sales.
  

In my own blog article on pre-shoppers, I focused on the importance of using in-store displays to better tune the brick-and-mortar shopping experience for pre-shoppers. For example, POP displays and digital signs can encourage a purchase or improve the perception of suitability of a product/brand by using an information-driven approach to allow shoppers to tick off items on their mental checklist. Likewise, making signage that can communicate a message in less than the 3 seconds that P&G estimates is available for a "First Moment of Truth" is essential to entice shoppers who already know most of the brand's promises from their research.

It's pretty hard to simultaneously optimize in-store POP for shoppers who know nothing about a product and shoppers who have done some research, but 90% of incremental sales generated by online ads take place in store, so we know that shoppers are getting armed not only with information, but also brand and product preferences long before they reach the store. One thing's for sure: staying on message for those last few feet and last few seconds before a customer makes a selection in-store will become increasingly more important.

Tags: out-of-home advertising, retail advertising, merchandising

P&G looks to tiny tiendas for big growth

While Wal-Mart is P&G's single largest customer, as a percentage, they derive a much larger amount of revenue by selling into thousands of small, high-frequency stores frequently found throughout developing countries. While the stores may be tiny, collectively they add up to big business, as the WSJ recently illustrated. "Sales of P&G products in developing markets currently total $20 billion, up from $8 billion five years ago. In recent years, emerging markets have contributed about 40% of the company's "organic" sales growth, which excludes gains from acquisitions.... Last year P&G derived 26% of sales in these regions."

With that kind of growth it's no surprise that P&G is actively pursuing more business in these high-frequency stores. And while they've primarily competed on price and brand-power alone till recently, the company is now adding a new approach to the mix: providing merchandising advice. Since most of these stores are tiny -- many are run out of a small room on someone's home -- space is at a premium, and stores carry at most two or three brands for most product categories. This can be challenging for a company like P&G, who might make several different brands all by themselves, or might be trying to sell a full line card into a store that already carries as much product as their space allows.

To combat this, P&G is introducing new integrated displays that come fully stocked with a complete range of products, and they're working aggressively to "own" the space behind the cashier's counter. As the article notes, "P&G calls space nearest the cashier the 'hot zone,' and considers it the most valuable real estate in these small stores. Since more than 60% of customers already know what they're going to buy, P&G figures, little time is spent browsing. But P&G researchers found that shoppers tend to gaze at the cashier's area for a precious five seconds as they wait for the owner to hand them a product or get their change -- a prime opportunity to influence future purchases."

The company is also taking a page from Frito-Lay and having local distributors re-stock shelves, which cuts down on labor required by the store owner, but also ensures that the P&G products are shown in the best possible conditions. Likewise, they've ditched efforts to have their own sales force handle sales to each store (there are over 220,000 in Mexico alone), in favor of having local entrepreneurs handle that part of the business.

Tags: merchandising, POP displays, marketing at retail

Re-thinking retail design to address consumer self-service

A few weeks ago SelfServiceWorld published an article on the "new rules" of retail design. The crux of the argument: "New technologies make it possible, for the first time, to reach those individual customers with individual experiences. Digital signage, self-service — and, perhaps most importantly, the rise of multi-channel retailing — are demanding a new holistic view when it comes to the design of in-store experiences."

As I read through the rest of the article, which talks about retail media, shopper traffic monitoring and even shelving, I couldn't help but think: the rules are still the same. Ever since that first shop keep decided to put a sign outside his door advertising the arrival of fresh produce, biscuit mix or bolts of fabric, the rules have been largely the same. Make the store pleasing to the eye, ensure that shoppers feel comfortable, and (in the US at least), make sure that there's plenty of room to navigate. While there are arguments both for and against making products easy to find and convenient to purchase right away, these are more merchandising questions rather than design ones. Likewise, the addition of digital signage systems and other in-store media augment, not replace, current design considerations.

On the self-service front, there are basically two categories of devices that impact store design. The first are those machines that improve the store experience by making a hard process easier. I'd place self-checkout lanes, price lookup terminals and product information kiosks into this category because each provides shoppers a way to perform a standard in-store action more quickly and with less hassle than before. However, in all of these cases while store design might have to be modified slightly to make optimal use of the technology, they certainly don't require dramatic changes. The second category of self-service devices gives shoppers access to new services that they might not have had before. Loyalty program kiosks and product extension/virtual shopping terminals go here, because these kinds of activities are generally not available otherwise. These technologies have the potential to be quite disruptive when properly integrated into a store's business and design plan, and I could see the case for making significant changes to a store's layout if management thought it would drive business via these devices.

With everybody from Wal-Mart to Victoria's Secret constantly trying out new designs in an effort to improve the in-store experience, it's clear that there's no sure-fire method for winning over customers. Between changing tastes, new and diversified product/service offerings and the fickle nature of shoppers in general, the best we can do is try and keep up with consumer trends while making stores more enjoyable to navigate. While new retail media services can make the shopping experience better and even more fun, to those who have already been exposed to the fine art of store design, I think they're more likely to inspire ideas of evolution rather than revolution.

Tags: store design, retail media, merchandising

The Curious Shopper checks out Uniqlo

Though I first noticed articles about it back in November of last year, I still haven't found my way into the new Uniqlo store in NYC (granted I'm not exactly in the target demographic). But over at the Curious Shopper, Sara (who is), gives it a great going-over. She suggests that the retailer's difficulties moving out of its home market in Japan have been at least in part based on cultural differences:

Uniqlo has been challenged to translate its retail offering into other cultures. A first attempt at the UK market failed when big, splashy store openings were met with confusion. Now, Uniqlo is focused on bridging the culture gap, by understanding the mind of the fickle US consumer, while also maintaining a subtly Japanese aesthetic. They've set some lofty goals with that one.

When I visited the store, I had a slightly different observation. For me it was less of an American-Japanese gap they needed to bridge, and more of an Old Japan-New Japan gap that needed balancing. I saw spare Japanese discipline coupled with hip Japanese pop culture. The interplay between modern and traditional was fascinating, if not entirely cohesive. Most interestingly, the traditional was actually more in tune with the trends of American retail.

Sara also makes an excellent point about the use of repeating items/images as part of a merchandising strategy. Repetition is one of those basic Psych 101 principles that ties in to everything from short-term memory to pattern recognition, but we still see limited use of it in-store. While I could see a problem at a supermarket or big-box retailer, where trying to create repeating instances of 50,000 different brands might become a bit maddening, it seems like a natural fit for private label retail.

Tags: Uniqlo, repetition, merchandising, in-store marketing

Supervalu aims to surprise and delight shoppers

Fresh off of their recent acquisition of the Albertson's grocery chain, Supervalu CEO Jeff Noddle announced an ambitious plan to spend $1 billion in the coming years to remodel existing stores and build a few new ones under a new program called Premium Fresh & Healthy. The goal, according to Duncan Mac Naughton, EVP of Merchandising Marketing, "is all about surprising and delighting the customer," which will apparently include things like:

[expanding the stores'] produce, meat, seafood, bakery and deli departments. Stores remodeled or built under the new plan will also have an area for international foods, since 24 percent of Americans eat at least one ethnic meal a week, Mac Naughton said.

Supervalu is also pushing to focus on natural and organic products, which have become quite popular for mainstream grocers in the past few years after the rapid growth of specialty chains such as Whole Foods Market Inc.

While it certainly remains to be seen exactly how the chain expects to delight their shoppers, I'm hoping that they'll introduce some new innovations for making grocery shopping faster and more convenient (and you can always spot the good innovations because they spread through the whole industry like wildfire :)

Tags: digital signage, store experience, retail media, in-store media, merchandising, retail marketing, advertising, visual merchandising