What s Leading Edge With Today s Leading Mass Volume Retailers

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American Logistics Affiliation Trade Roundtable. What's Driving Edge With Today's Driving Mass Volume Retailers?. Walk 8, 2005 Dallas, TX. www.hoytnet.com.

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American Logistics Association Exchange Roundtable What's Leading Edge With Today's Leading Mass Volume Retailers? Walk 8, 2005 Dallas, TX www.hoytnet.com 8912 East Pinnacle Peak Road • Scottsdale, AZ 85255 Phone (480) 513-0547 • Fax (480) 513-0548 • E-Mail: chrishoyt@hoytnet.com • nancyswift@hoytnet.com

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Based on latest research, the main 3 retailers customers rank as actually "imperative" to their every day lives are Wal-Mart, Target and Costco: Meyers Research: "Retailers Consumers Could Not Live Without" (Aug, 2004) Source: Meyers Research, Aug, 2004

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Not circumstantially, Wal-Mart, Target and Costco are likewise similar retailers that purchasers locate the "most enjoyable to shop": Specific Retailers Consumers Find Most Fun To Shop Source: Meyers Research, Aug, 2004

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Today: What is it about Wal-Mart and Target that makes them so fruitful, with customers, as well as from a business point of view when all is said in done? What lessons can Exchanges gain from this, given their destinations and the tightening influences under which they work? Q&A

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The Leaders – Snapshot of Current Vital Statistics: Source: Company 10Ks & 10Qs; Hoyt & Company, LLC, 2003 - 2004

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While Wal-Mart and Target are altogether different retailers, both have an indistinguishable destinations from all other retailers– particularly: Grow beneficial deals by adjusting and centering all promoting, marketing, purchasing and coordinations works on at least one of the accompanying goals: Exchanges Increase client tally (new customers) X Increase trip frequencies (current customers) Yes Increase exchange estimate (current customers) Yes Increase efficiency (Human and Financial) Yes Reduce costs (COG's and Operations) Yes As you will see, the ways that Wal-Mart and Target have accomplished these destinations speak to today's industry Best Practices.

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The 800 lb. Gorilla In Every Retailer's Living Room! $284B – Largest organization on the planet – more noteworthy than the GDPs of Austria, Colombia, Czechoslovakia, Denmark, Greece, Norway, Portugal, Sweden, Switzerland, Ukraine and Vietnam $20K in benefit every moment ! 13% WW CAGR – anticipated to do $1 trillion by 2014 $233B U..S. deals – CAGR of 9.9% to 2007 3,711 U.S. stores: 1,706 Super Centers 1,370 Discount 549 SAM's Clubs 86 Neighborhood Markets 500+ new stores/redesigns made arrangements for 2005 Objective is to wind up distinctly the biggest retailer in each market in which it works (now #1 in just two nations out of 10)

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So what are the key development drivers that empower Wal-Mart to support the force of this juggernaut? How about we take a gander at these from the stance of what's pertinent to Exchanges as far as: Marketing and Merchandising Buying Logistics

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The key components of the Wal-Mart advertising blend – exquisite and complex – route past just "Constantly Low Prices": 1. EDLP made conceivable by EDLC – Global purchasing and determined weight on COGs and working costs 2. Use of consumables (sustenance and non-eatable CPG things) to drive activity and exchange measure 3. "OPP/great/better/best" promoting stepping stool (private names –> national brands) Localization – Demographic varieties 5. Ancillary organizations – portable hearing assistants, optics, stores inside stores, and so forth 6. Consumer-driven versus provider driven plan of action – all stipends are crashed into cost and not used to finance working benefits

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The key components of the Wal-Mart showcasing blend (cont'd) 7. Shop-capacity – wide passageways, mucho signage, sufficiently bright, simple to explore 8. Speed to advertise – new things and advancements – every minute of every day + 48 hour turnaround 9. Community association – parking part spectacles, angling challenges, secondary school walking groups, and so on. 10. Retail-tainment – in-store TV sets, in vogue advancements (Shrek 2 and Britney Spears) 11. EDLP support – move backs, activity rear way, extraordinary purchases and various leeway things 12. Clicks and blocks cooperative energy – what you can't get in-store, you can get online 13. Store directors have expansive tact – can tailor varieties, approve nearby shows and suggest new circulation of neighborhood things

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Wal-Mart technique to drive trips/give one-quit shopping accommodation – offer need (read "nourishment") things! Wal-Mart's March To The Top of the U.S. Natural way of life: 2001 - 2010 (Food & Drug Sales Only) 35% 2010 $195B Bigger than Kroger, Albertsons, Safeway and Ahold consolidated 2007 $162B +17.0%/Year Compounded Vs. 4.0% For Supermarkets! 2004 $112B Bigger than Kroger & Albertsons Combined 2003 $95B 2002 $82B Surpasses Kroger as the country's #1 nourishment retailer 2001 $63B Source: Retail Forward, Food Industry Outlook, February, 2004; ACNielsen, 2002 and 2003

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The Wal-Mart Merchandising Ladder BEST = Typically National Brands BETTER GOOD OPP = Opening Price Point in the class (commonly, Private Labels) Source: MVI 10/28/2004

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Wal-Mart Buying – What lies behind the style Wal-Mart purchaser duties: Development of creative marketing arrangements Understand client needs and patterns and set the pace of new item advancement & mark technique Management of a various provider base – from real brands to possess name Achievement of marketable strategy targets Development and conveyance of the classification's exchanging methodology

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Wal-Mart Buying – How Buyers are Measured Sales Units Dollars Profit dollars Margin % Turns Markdowns (e.g., looked after edge) In-stock Comparable store deals development (in specific classes) Wal-Mart Buyer – Key Performance Measures Less substantial measures: Respect for the individual Service to clients Strive for greatness

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To accomplish their goals, Wal-Mart purchasers proactively use providers to help maintain their business: Wal-Mart Buyer –> Supplier Expectations Annual arrangement - moving 12 months by month and quarter New things Tab thoughts Modular recommendations MCAPS - group store promoting Weekly checking: Item P&Ls versus arrange Sales, introductory edge, markdowns, commitment edge Problem stores/locale, and also things Competitive circumstances Co-oversaw Inventory Replenishment New thing/limited time Economic request amounts Source: MVI, Selling Wal-Mart 10/28/2004

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Sales Measurements Overall % Increase Comps Avg. Deals/Store Sales at Full Price versus Markdown Measurements Markups and Markdowns (Dollars, Units and %) Prior and current retail value Margin Measurements Initial edge Average retail value Average cost Gross benefit at thing level Gross benefit/thing/store Margin blend Inventory Measurements Replenishable store stock Non-replenishable store stock Warehouse stock Lost deals from OOS Excess stock DC outs Total possessed stock Return Measurements Customer damaged returns Store Claims Wal-Mart Vendor Scorecard Extensive estimations for Wal-Mart and Suppliers Source: Hoyt & Company Records

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Wal-Mart Logistics – How does Wal-Mart stack up versus its driving rivals? Wal-Mart has the most noteworthy stock turns… Wal-Mart Turns versus Kmart + Target: 1998 - 2003 Source: Company Reports; MVI, 10/28.2004

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Wal-Mart Logistics – How does Wal-Mart stack up (cont'd) … and the most reduced # of days deals close by: Wal-Mart versus Driving Competitors: # Days Inventory On Hand: 1998 - 2003 Source: Company Records; MVI, 10/28/2004

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Wal-Mart – Key Inventory Management Drivers: Replenishment & Logistics Co-oversaw/seller oversaw stock Two-Tier Distribution (Replenishment versus Limited time) Collaborative Planning, Forecasting and Replenishment (CPFR) – works with providers to decide suitable levels The Future: Radio Frequency IDs (RFID) Systems UCCnet Internet EDI Merchandising Systems Modular-based marketing Modular Category Assortment Planning System (MCAPS)/Store of the Community

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Why is Wal-Mart so great at coordinations? Since the purchaser's interested in purchase depends on stock administration and production network development: Wal-Mart Buyer Open-To-Buy What the purchaser can arrange here Depends on how much $ he/she has tied-up in these "basins" New Item In The DC In Transit In Store Promotions – PLUS – Replenishment Seasonal On Order In Route + = why providers are so anxious to work with Wal-Mart in creating most extreme deals off the least conceivable stock base.

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Net on Wal-Mart: EFFICIENCY! Reliable, clear situating – "Constantly Low Prices" – everybody knows correctly what Wal-Mart remains for Relentless concentrate on the basics Cost concealment and cost decrease is a mantra Cooperation with providers to accomplish shared targets Combination of nourishment (consumables) and customary markdown makes a low cost one-quit shopping mecca Lightning velocity to rack on new things/stylish advancements "Fun place to shop" – in-store TV, on pattern advancements, parking garage party and tie-ins with nearby group occasions Fierce contender – will cost comp anything, anyplace Store supervisor attentiveness implies stores can be traited and customized demographically

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"Expect More/Pay Less" $47.1B in '04 deals – a 15.1% expansion versus '03 (less Mervyn's and Fields) 8.9% CAGR amongst now and 2007 – projected to do $61B versus today's $47B 1,313 stores – 1,177 Targets + 136 Super Targets Comparisons to Wal-Mart are hazardous: Different plan of action Different customer Different marketing system No endeavor to contend on same premise Is a great deal more like an Exchange in collection and operations: Careful adjust of top of the line versus item stock – PLs and exclusives are key Limited CPG nourishment portrayal (evolving rapidly) Super focuses are NOT the essential development motor Distinct retail establishment legacy and introduction

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Target Cha