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Guest Column, by Bob Vereen

(Content Guy's Note: MNB user and longtime retail writer Bob Vereen was kind enough to send us the following missive from Germany, where he attended a trade show that offered some insight into consumer motivation.)

What kind of business climate awaits the world’s retailers in the next few years?

“Consumers in virtually every country in the world are schizophrenic today,” according to Ira Kalish, global director of consumer research for Deloitte Research, who is headquartered in Los Angeles.

Speaking at a meeting of The Home Improvement Industry Presidents Council, held during this year’s International Hardware Fair/Practical World exhibition in Cologne, Germany, Kalish said consumers are both price-conscious and quality conscious, and these conflicting desires pose real problems for retailers.

He says that’s one reason accounting for the rise of dollar stores in the United States, where everything sells for that low price, while high-end department and jewelry stores are also thriving. He describes the consumer as experiencing “a fragmented type of shopping” by tailoring their shopping to the types of products under consideration.

In too many countries, he explained, there is excess retail capacity—too many stores chasing too few purchases. It is going to result in continued consolidation as stronger survivors gobble up weaker retailers.

He also foresees increased globalization, and cited European firms like Carrefour, Metro and Tesco and the U. S. giant Wal-Mart. In the home center industry, European chains are far more globally oriented than are the two largest chains in the world, Home Depot and Lowes. Depot only operates in Mexico, Canada and Puerto Rico. Lowes is only operating in the U. S.

B & Q of the UK and OBI of Germany have expanded as far as Asia with stores in China. B & Q also is in Taiwan. Other west European countries are jumping into east European countries aggressively because their competitors in those countries are small, inefficient, outdated and high priced independents .

He also sees these global and domestic giants exerting increasing pressure on their suppliers and focusing on more use of private brands to distinguish themselves from other global competitors.

Opportunities for home center retailing, worldwide, remain strong in the long run, he predicted, because of rising home ownership, though traditional merchants will face increasing competition from mass merchants seeking to expand their home improvement market share.

To grow, traditional retailers need to focus more of their advertising and merchandising on appealing to women. Lowes is doing this successfully and forcing Home Depot to do so, too, he noted.

What will it take to be a successful retailer in the future? Kalish outlined the following strategic actions:

•Differentiate oneself
•Provide a compelling shopping experience
• Be a retail innovator
•Reinvent value for the customer
•Offer speed & convenience for the shopper
•Improve supply chain efficiency
•Seek new customers
•Build your store as a brand
•Be flexible

He did forecast specific problems facing European retailers:

•An aging population
•A slowing birth rate, meaning fewer customers in the future

He sees new technologies as one answer to improving efficiency, with self checkouts, already in use, as one method of affordably putting more employees on the floor to help consumers, RFID to improve inventory stockturns and reduce shoplifting and lost products, and, in the future, such things as electronic price labels and “smart shelves.”—all of which will improve retail productivity.

For vendors supplying the industry, he says there are positive signs because of the tremendous future growth of consumer demand in China, India and Russia.
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