Volitility in the most stable of markets

International retailers need to be conscious of how a market could change affecting the viability of their operation.  Tescos' operation in Thailand is an often used example of this given the significant threat to their Thai chain in the wake of the unexpected military coup in 2006.  To the outsider Thailand appeared a very stable nation...  And so we turn to what you might think to be one of the most stable countries in the world; America.  Now I'm not suggesting a coup d'état in America; I'm pretty sure that is unthinkable, but talked about legal changes that would really threaten the viability of Tescos American operations.  California is home to around 125 of 175 'Fresh and Easy' stores, and there is talk of an outright ban in the purchase of alcohol through self-service tills.  Tesco installs self service tills exclusively as an essential part of it's low cost strategy.  As the only grocer in the state to operate self-service tills it is clear that this law is specifically targeting the 'new kid on the block', and if it comes into effect will have a huge effect, forcing Tesco to rethink their strategy and presumably refitting their stores with at least some conventional cashier tills - all on top of a chain that is said to be underperforming and being challenged from a range of commentators.  So in even the most stable of nations it is best to have a plan B.

Calling time on Argos??

Internet retailing has provided great opportunities and challenges to more traditional forms of retail commerce.  Today's striking news that Argos' LFL sales are down some 9.6% surely will bring the company to fully examine their strategic options.  Make no mistake, a 9.6% fall in sales is massive & even more difficult for a retailer such as Argos who cannot quickly flex their marketing to stimulate greater sales - after all their catalogue is printed with fixed prices etc...

For a long time I have thought that Argos has been too conservative in the face of a changing retail environment.  E-commerce and the growth of supermarkets into non-food areas have introduced great challenges, but I believe also great opportunities for the company.  What is it that Argos are great at??  They don't have a great product offer - that can be replicated by Tesco deliver or Amazon...  Their real unique selling point lies in their ultra efficient store operations and selection of convenient locations around the UK.  So how best to utilise this resource.  Well in the face of growing e-commerce threat why not use these stores as collection hubs for the consumer - they could give their local store as their address and collect on a weekly basis all of their non-perishable on-line shopping.  As a consumer there is nothing more annoying than to get home from work and find that three different couriers have tried to deliver packages & I now need to embark on a road trip to 3 different depots to collect my orders...  far rather collated at a store of my choice with a simple customer focused collection method.  This service could be free to the consumer with the on-line retailers giving Argos a cut and saving considerably on the otherwise increased courier costs.  It does seem that there is a current gap in the market to better serve the on-line retailers and while the current Argos model is surely doomed in a few years they would be best placed to serve this new need.  & while their at it what about an Argos drive through....

1,155,347,700 customers are waiting

That's quite a big number & surely quite a big opportunity for the worlds largest retailers to chase.  It is of course the population of India a retail market that has thus far been largely closed to international retailers due to protectionist laws preventing multi-brand retailers from holding a majority stake in retail ventures in the country.  As we have seen gradually across the world such restrictive laws have been relaxed, and it seems that within months India will follow suit finally opening the market up to the likes of Tesco and Wal-Mart.  Large scale investment into the Indian market by the likes of Tesco will not only provide a great opportunity for them, but the necessary investment in distribution infrastructure and change of retail culture will no doubt expose opportunities for a whole raft of international retailers.

Is Colin really a fashion icon?

Traditionally we have seen retailers internationalising from a highly developed retail market to a less well developed retail market...  But as markets around the world are developing there are opportunities for innovative retailers from less developed retail markets to expand globally...  One such retailer has come to my attention - Colin's clothing, nope no joke, Colin's clothing from Turkey has big ambitions including 100 stores in the UK.  While a Turkish clothing retailer is well placed in terms of supply chain the big question here is - would you buy your clothes from Colin?!

Tescos being 'Buffetted'

I have long commented on the questionable wisdom of Tesco entering the US.  Given the choice of markets in across the globe, why would Tesco (the retailer that is ‘good’ but certainly not ‘unique’) enter the already crowded retail market of America – crowded actually with some very good grocery retailers of their own.   It is very strongly my view that there are many countries in Asia particularly  that hold far greater promise.   What is also striking is their entry strategy, departing from their usual acquisition followed by growth, the enter with nothing and build up all the expensive infrastructure themselves – the expensive way.  I have felt like a lone voice, but am reassured this week by the comments made by Warren Buffett (huge financier & speculator) which indicate that I am not alone.  Buffett described Tescos US entry as ‘foolhardy’.  Frankly I find it very hard to imagine a good business case for the US entry, and would not be surprised if they retreat loosing many millions of their investment in the process.  Of course it could also be that I’m wrong and that Tescos make a success of it, but I would still maintain that there would have been better investment markets out there that would have provided a stronger short, medium & possibly even long term return.

Focus on a variety store!

Focus the DIY chain with 178 stores has gone into administration.  The chances of them being brought out of administration as a going concern are negligible I would imagine. They are simply too small to be able to compete with B&Q & Homebase.  Frankly Wickes really appears to struggle to keep up as our third biggest DIY chain, and their stores are generally miserable affairs against the size and colour of a large B&Q.  It is of course sad to see the demise of any retailer and the personal difficulties that it will mean for many employees, however it is an inevitable part of competition and it the current economic climate the weak are struggling – this year alone Oddbins, British Bookshop and Stationers & Allworths have folded & for sure there will be more before the year is out.

What is of note though is that as true as competition will lead to the demise of some retailers it will also allow others to flourish.  I will never forget the media commentary at the time of Woolworths bankruptcy proclaiming the death of the variety store and how the format was no longer relevant in today’s society.  What rubbish...  Who was the retailer that bought all of MFIs stock when they closed their doors?  And is now talking of taking on Focus’ stock and stores?  Small independent chain The Range.  They are, you might have guessed, a very flourishing variety store...

Limited Line Discounter growth

2008 saw growth in the sales of the Limited Line Discounters.  The growth was widely attributed to the recession and weak consumer sentiment leading customers to seek cost reductions in their every day lives.  There is no question that Aldi & Lidl are significantly cheaper than the mainstream competitors.  The market share of Aldi & Lidl is still growing (currently 3.3% & 2.6% respectively), but not because they are attracting significantly new customers.  Rather, those that tentatively (tentatively because frankly the stores are mostly a bit grim) dipped their metaphorical toes into a Lidl or Aldi store back in 2008 have actually found the products to be surprisingly good.  This is of course good news for the discounters who have really struggled to communicate their strategy in the UK.  They sell good stuff cheaply while the UK consumer assumes a strong correlation between price and quality and have assumed that the products are poor quality substitutes to the usual Tesco fare...  With limited marketing budgets word of mouth is likely to form their best means for growing their customer base but before their market shares grow considerably when they can be really classed as 'mainstream' grocers they will have to improve their overall professionalism.  Product availability has to be assured & mould vegetables on display just will not do!