The retail revolutions in the UK and US. Similarities and differences, the winners and losers - Essay Example

?Compare and contrast the retail revolutions in the UK and US. What are the similarities and differences and who are the winners and losers? Table ofContents Table of Contents 2 Introduction 3 Global Retailing Industry 3 USA Retail Revolution 4 UK Retail Revolution 6 Similarities and Differences between the Two Retail Revolutions in these Countries 9 Conclusion 11 Reference 12 Introduction The influence of UK supermarkets has been persuasive in reaching new arena of freshness through the IT driven distribution system, setting up pizza fashions, adopting and discarding ideas and in introducing new configurations of production and distribution processes. Undoubtedly, in the last several years, the retail industry has changed considerably just to get better and enhanced. Uprising in every aspect of production, distribution, technological, marketing and delivery have ultimately led to the revolution of the retail industry. This project would focus on this specific industry, the revolutions taken place in USA and UK, the similarities and differences of the retail markets in these two countries. The analysis would further lead to the identification of gainers and losers of this industry. Global Retailing Industry At the end of the 20th century, both North America and Europe have experienced the surfacing of the supermarkets to take prevailing grocery retail form. As the income level increases, the super marketers expanded their product range to seek convenience as well as new tastes and stimulus of the customers. In the later years, with the advancement of technology, introduction of barcode has enabled these stores to effectively manage number of merchandises and their prices (Anand & Nambiar, n.d., p.1-2). Furthermore, the retail stores have introduced 'just-in-time' store replacement and the capability to manage more individual product items. In the coming years, the logistical systems integrated store replacement and computer driven depots integrated in one single electronic system leading to the establishment of superstores. There have been a considerable amount of changes from the last decade to this date. One of the few similarities, which still remain same from the last decade, is that Wal-Mart still holds its top position with distinction across the globe. Other than the dominance of Wal-Mart, there is little or even negligible changes from that of the mid-1990s. The world economy has experienced a considerable amount of shift with changes in the retailer’s operating systems and consumer demand with the incorporation of enhanced technology. Furthermore, intensive competition, saturated customer base and limited legislation have pushed the leading food retailers to cross the borders. Since middle of the 1990s, a number of governments have encouraged their economies to open up, leading to the entrance of the foreign investment and free markets. The entire situation has become favourable for the leading retailers to expand further to capture the global market. In the wake of recent economic downturn, there has been cutback in the corporate IT expenses and other capital spending. Furthermore, the consumers have become more sensitive to the price as well as conservative in the buying behaviour. This has been more prominent in the advanced economies. The global recession has forced the retailers to look more into the cost more effectively. In the second half of the 1990s, the supply chain innovations have been stronger and have continued till date. In the recent times, change in the consumer preference would fuel the online retail services. As of now, the US has remained the biggest area for the online retail with around 37.2 percent of the total market share (IMAP, 2010, p 3-4). USA Retail Revolution The retail revolution of the USA started with the opening of departmental stores in the 1860s, and the constant evolution of the retail industry in USA continues till date. Historically, the production sector has been credited with all innovation and contribution to the growth of the society, and the retail or the distribution sector was viewed as a sector that added little value to the society. However, the dramatic growth in the retail industry from 1860 to 1900 resulted in a sector that was customer facing, innovation driven and extremely amenable to technology. It has been argued that the erstwhile departmental stores have directly or indirectly catalyzed a large number of innovations. For example, departmental stores contributed to the concept of skyscrapers - a very essential feature of today’s metropolis and also pioneered the concept of capturing user data and analysing it for managerial decision making. However, departmental stores have been credited with a more far reaching contribution to the society – way back in 1800s, it became a few of the places where it was acceptable for a woman to be alone. This acceptance level, in a way, changed the way women lived their lives (Tamilia, 2002). The US retail industry has taken a steep evolutionary path since the days of departmental stores and now is one of the most important pillars of the biggest economies of the world – the US economy. As on 2004, the US retail industry employed more the 17 million employees, generated about $3 trillion in revenue and had 5.85 billion square feet of leasable floor space across 46,990 stores. The egalitarian departmental stores gave way to shopping centres in post World War 1, which then graduated to malls from 1950s to till about 1980s. Post 1980s, the US retail industry was characterized by the advent of supercenters and lifestyle centres. Additionally, the evolution of the US retail industry was characterized by emergence of a rage of specific store formats like dedicated food courts, speciality and discount stores (Harders, 2004). However, the most dramatic growth in the retail industry has been led by the advent of the Internet and Information technology. Retails industry is, and rightly so, the most customer focussed industry. Retail industry sells manufactured and product goods to final customers, and hence it is extremely imperative for the retail industry to be able to track, analyse and forecast buyer behaviour. Internet and Information technology and the retail industry in general (and the US retails industry in particular) has had a symbiotic relationship. While IT has helped the retail industry master the art and science of capturing and analysing buyer data, the IT industry could leverage these innovations to create immense value for its clients from other sectors. Technological innovations like CRM (Customer Relationship Management) packages, RIFD, bar codes were initially ideated for/in the retail industry but these innovations have since then experienced much more widespread usage. However, the latest and potentially the most disruptive transformation has been the Internet. As on 2006, only 6% of the entire retail sales were done online. However, an additional 55% used the Internet to research about products, types and discounts available. This has made Internet the most important decision influencer for the retail buyer in US (Monsoory & Mehra, 2010). UK Retail Revolution The retail revolution happened in UK in the year 1861. The supermarkets, chain stores and some self service stores had led to the retail revolution in United States of America also entered into UK. Until the time, the UK retail trade was majorly dominated by the small shops which were mainly a family business. The retailers used to keep a wide range of goods; however, there was no space to display the same and the customers were not able to touch the goods. The retailers and the customers, both were used to enjoy good relationship. The profit margins used to be pretty high, more than 20 percent. By that time, there were not so many departmental stores except F.W, Selfridges, Woolworth & Boots. The comfortable relationship between the retailers and the customers, the retailers and the companies were pretty much disturbed when key superstore chains like Tesco, Sainsbury’s and Fine Fare entered into the market. All these organisations have larger floor areas as well as wider shelf space. The total sales amount from any product was much higher. Furthermore, their large sizes have given them the bargaining power against the old small proprietary stores. The revolution started off with retailer entered and moved themselves into the large malls. Bright, clean and air conditioned shopping environment has given themselves a competitive edge over the traditional ones. The co-operative societies have paved the way in the first retail revolution. This has pioneered both the new techniques of mass production and brand new retailing operation in the wholesale societies. Each of the outlets was an individual society for the shopping members and the cooperative staffs. These cooperative societies were dedicated to offer low cost, cash only and no credit shopping to the employed class. With the time, these cooperative societies have gained enough momentum both in terms of the members as well as the turnover value. From the year 1862, till 1903, the number of branches in UK increased from 400 to a stunning 1455. While in the year 1863, the revenue amount was ? 2.5 million and in the year 1914, the revenue amount has come to a value of ? 88 m. The co-operative society movement has emerged as a wider revolution in the arena of retailing. The revolution happened not only in the co-operative society, rather in case of the large organisations. The numbers of firms’ branches, which would have over the ten outlets, would grow from the 4671 in the year 1890 to some 44,487 in the year 1910. Adding to it, there has been a considerable growth in real large chains with some 500 or more than 500 outlets. The numbers in the chains has increased due to expansion and moreover, through mergers and acquisitions. The importance of this entire process of concentration has been derived from the fact that it signalled a considerable growth in the retail market, integrated nationally and this happened much before any other country in this globe. The second revolution came up with several innovations changing the role and responsibilities of the retailer and the shoppers. Furthermore, it also involved standardisation of the pricing, packaging and the required quality and technology such as the bar scanning technology. Introduction of electronic point of sale data and the loyalty cards are some significant invention, which were much revolutionary in the 1970s. At this time, the new stores were named as ‘self service’. The major and significant attribute of this second revolution was the emergence of the superstore and retail outlets with over 2300 square metres of shop space. Between early 1980s and the 1990s, one of the leading retail outlets in UK, Tesco has increased the number average size of their stores by around 2 and ? times. All the new stores, built in this time period, were built with more than 4250 square metres. In the year 2000, the competition commission regulates the UK food shopping market to have a space of minimum 1400 square meters to meet the core shopping requirements and consumer behaviours. The expansion of the big stores was “quite dramatic until the planning permission restrictions of the middle and late 1990s... (Harvey, Quilley & Beynon, 2003, p.234). This was mainly due to the lax accounting rules on the sunk capital. There have been a number of features which have led to the transformation of the retail outlet nature. At first, there has been concentration and consolidation of the market share. By the year 1990, the leading five supermarkets controlled around 60 percent of the total market share for the groceries. During the period starting from 1991 to 1996, the entire food market had experienced a growth from ?63 billion to some ? 82 billion. More precisely, within this total share, the leading three retail firms contributed 28.5 percent to around 35.2 percent to the entire growth. By virtue of the prominent positioning, Asda, Sainsbury’s and Tesco successfully dominate the UK retail market. In the UK retail industry, the focus has been always on the competition to fetch the market share as much as possible. Tesco overtook Sainsbury and now it has become one of the largest employers in the United Kingdom with more than 170000 employees. On the other hand, the acquisition of ASDA by Wal- Mart has become a threat to the UK retailing companies. This is a further realignment to the structure of the retailing industry in UK. Similarities and Differences between the Two Retail Revolutions in these Countries Many researchers have argued that the ‘first retail revolution’ in UK has some distinctive characteristics. In this revolution it would not be wrong to say that almost dual market sere formed in the UK retailing industry. On one hand, the multiple chains emerged with small range of goods at low prices, which had targeted the urban working class. On the other side, there were these retail outlets which included both the departmental stores and the small ones, which used to keep high value specialist and quality merchandises for mostly the middle and the upper classes. During the second revolution, happened in UK, there had been two overlapping change in the demand side as it has brought the dominance of the leading three and the emergence of a superstore. The earlier aspect refers to the structuring of the demand as different prominent retailers were targeting or focusing on different demand types. The superstores have positioned themselves as the one stop shop for weekly shopping, which had also contributed to the demand formulation. These two features of the superstore retail economy are different from each other; however, they can conflict if situation arises (Harvey, Quilley & beynon, 2003, p. 235). The retail revolution in USA happened in several stages. The first stage of the retail revolution can be attributed to the emergence of a considerable number of discount stores with large economies of scale; one big name was Wal-Mart which was established back in the year 1962. The second stage started from the 1980s. During that time, there was a shift in the operation of the retail chains starting from the national to international sourcing. One reason for crossing the borders is surely the search for the cheapest suppliers as well as lowest labour cost. In the third stage, in the year 1990s, the ‘transnationalization’ of various retail chains happened. During the1990s, Latin America transnational consumer merchandise super market chains and companies experienced aggressive expansion in the specific region with neo liberal opening. At the same time, these regional and national chains are associated with the leading global chains such as Wal-Mart, Royal Ahold, Target, K-Mart and Carrefour. As a consequence, the transnational supermarkets as well the leading retail conglomerates rapidly took over the Latin American retail sector. This has brought in considerable changes in the consumer markets, the production and distribution processes of the retailing industry. The leading global chains have increased the percentage of Latin American market from around 10 percent to some 20 percent in the year 1990 to some 60 percent by the year 2000. The hypermarkets, supermarkets, large chain stores, membership clubs and warehouses emerged as the dominant players by the twenty first century. During the time 1980s and 1990s, the retailers started looking into the low income segments. In the period of 1990s, the strategies include the study of the consumption patterns of the low income groups which was earlier seen to be a simple labour class and not as potential customer base. As now, these groups were also included in the customer base the retail organisations in USA have opportunity to explore the entire customer base of low, middle and high income groups (Robinson, 2008, p.189-192). Conclusion In the era of globalisation, no organisation is bound to the border of its own home country. Now, it would be hard to decide which one is the winner and who loses in the retail war. Wal-Mart, Tesco, Marks& Spencer etc are the renowned names in the worldwide retail sector. However, during the retail revolution, the multiple chains in UK used to offer goods at low prices while the retail outlets had been offering quality products to the middle and upper class. On the other hand, the retail chains in USA offered the products to entire lower, middle and upper customer base. If the present scenario is to be considered Wal-Mart has taken a noticeable entry into the UK market by acquiring one the leading UK retailer, ASDA; while the UK retailers are yet to take the lead in USA. So, still the USA retailers are one step ahead of their UK counterparts. Reference Anand, V. & Nambiar, V. (No Date). INDIAN FOOD RETAIL SECTOR IN THE GLOBAL SCENARIO. [Pdf]. Available at: http://www.sathguru.com/Note_on_Retail_Industry.pdf [Accessed on April 03, 2011]. Harders, B. M. (2004). Planning for Retail. [Pdf]. Available at: http://scholar.lib.vt.edu/theses/available/etd-08182004-101659/unrestricted/PlanningforRetailv2.pdf [Accessed on April 03, 2011]. Harvey, M., Quilley, S. & Beynon, H. (2003). Exploring the Tomato: Transformations of Nature, Society and Economy. Edward Elgar Publishing. IMAP. (2010). Retail Industry Global Report — 2010. [Pdf]. Available at: http://www.imap.com/imap/media/resources/IMAPRetailReport8_23CB9AA9C6EBB.pdf [Accessed on April 03, 2011]. Monsoory, K. & Mehra, P. (2010). Retail Industry Development and Impact of Technology. [Pdf]. Available at: http://www.soe.ucsc.edu/classes/ism158/Spring10/Projects/Retail%20Industry%20and%20Impact%20of%20Technology.pdf [Accessed on April 03, 2011]. Robinson, I. W. (2008). Latin America and global capitalism: a critical globalization perspective. JHU Press. Tamilia, D. R. (2002). The Wonderful World of the Department Store in Historical Perspective: A Comprehensive International Bibliography Partially Annotated. [Pdf]. Available at: http://faculty.quinnipiac.edu/charm/dept.store.pdf [Accessed on April 03, 2011]. Read More