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Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Management Ventures, Inc.Management Ventures, Inc.
The evolving meaning of “value” in the current environment
•Presented by Vincent Verdier•MVI
•November 2008
2 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Copyright and DisclaimersCopyright and Disclaimers
Copyright © 2008 Management Ventures, Inc. All Rights Reserved.20 University Road, Cambridge, MA 02138 USA (617) 588-4100 [email protected]
No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Management Ventures, Inc.
The printing of any copies for back up is also strictly prohibited.
DisclaimersThe analyses and conclusions presented in this seminar represent the opinions of Management Ventures, Inc. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion.
This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.
3 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Defining what VALUE stands for is Defining what VALUE stands for is becoming more complexbecoming more complex
• “Customers told us we were not giving them value. From that day on we determined to follow the customer and not the competition.”
• Terry Leahy 2004, CEO Tesco
Source: Tesco, Financial Times, May 2008
• In response to why more ABC1 shoppers are visiting Aldi:
• “If you went back 10 years, the majority of what I sold was in tins and packets. Now what I’m selling has switched over to fresh foods, chilled foods and ready-prepared foods, and this is a far more appealing range to that kind of consumer.”• Mr Paul Foley, MD Aldi UK & Ireland
4 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
VALUE is a ratio between quality and price: VALUE is a ratio between quality and price: but room to manoeuvre shrinksbut room to manoeuvre shrinks
Low Quality Perception
High Quality Perception
High PricePerception
Low PricePerception
Source: MVI Research and analysis
Premium Supermarkets
Discounters
TraditionalSupermarkets
EDLP Supermarkets
VALUE
5 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
For non-grocery, Amazon has built the For non-grocery, Amazon has built the best VALUE positioningbest VALUE positioning
Source: MVI Research and analysis
Low Quality Perception
High Quality Perception
High PricePerception
Low PricePerception
VALUE
AM
AZ
ON
•Lower price of shipping
•Added categories, including premium products and brands
•Global credit card, access to loyalty card support
6 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Retailers position their VALUE offer by Retailers position their VALUE offer by different meansdifferent means
“Value” private labelsEDLP strategy giving
the best “value”Good “value”?
A mix of price and quality
“Our consumers are spending less.
It is about them getting better value
from Waitrose”.M. Price, MD Waitrose
Source: MVI Store visit; Financial Times, Nov. 2008
Tesco, UK
Wal-Mart, Argentina Carrefour, RomaniaAuchan, Russia
7 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
And VALUE does not have the same meaning And VALUE does not have the same meaning everywhere, which impacts place of purchaseeverywhere, which impacts place of purchase
• There are wide geographical differences defining in which type of stores the “cheapest” product can be found...• 1. Western Europe: Fragmentation of the historical HM
shopping trip in favour of price-focus retailers• 2. US/LatAm/China: Consolidation of the HM shopping trip,
still seen as the cheapest place where to shop
• ...Which impacts retailers strategies:• 1. Strategies focusing on building Frequency:
– Straight discounts; Focus on destination categories (i.e. fresh)
• 2. Strategies focusing on building Basket:– 3 for 2 promotions, cross-merchandising
8 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
So how do retailers evolve to achieve the So how do retailers evolve to achieve the best VALUE offering?best VALUE offering?
• Retailers as shoppers’ defender
• Redefining “value” in shoppers minds
• Private labels: focus on price or quality?
• Implications
9 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Being on the side of the consumer is Being on the side of the consumer is becoming more importantbecoming more important
Source: MVI Store visit; Lidl; Leclerc; Dia Argentina - CIES
Lidl Spain:“We have negotiated for you!”
Dia Argentina:“If you pay more,
it’s because you want it!”
Leclerc France: “More purchasing power
for you, now!”
10 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Redefining VALUE in shoppers’ minds: the Redefining VALUE in shoppers’ minds: the advantages of EDLP retailersadvantages of EDLP retailers
• “All retailers which became successful, such as Wal-Mart and Tesco, did so by implementing a clear EDLP strategy”• Gilles Petit, ex-MD Carrefour Spain
• An efficient business model that reinforces the value positioning
Source: El Pais, May 2007; MVI Store visit
Mercadona, Spain
Kaufland, Poland
11 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
But even EDLP retailers must keep refreshing But even EDLP retailers must keep refreshing the way they communicate on pricethe way they communicate on price
Source: MVI Store Visit
“At Colruyt, you constantly take advantage of promotions run at other retailers. To do so, we collect all circulars, look for promotional prices and compare them with our prices. When necessary, we adapt our prices.Every week, 4,000 prices are collected this way, on top of the regular checks we are undertaking. So you can enjoy the best prices for each product, anytime.At Colruyt, you benefit from all promotions run at other stores!”
Colruyt’s Extra reductions card
Source: Colruyt, MVI Store Visit
12 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Private label is receiving more marketing Private label is receiving more marketing attention in-storeattention in-store
• Globally, retailers are increasing communication on their ranges of private labels
• In the current environment, mainstream retailers are trying to increase awareness of price competitive private labels
• At the same time, the discounters have found that messages concerning quality are increasingly effective
13 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
For traditional SM, trading down shoppers For traditional SM, trading down shoppers through PL can a risky strategythrough PL can a risky strategy
Tesco has put signs across the
front of its UK stores to promote
its new “discounter” private label
ranges.
Hit is advertising a wider range of “discounter”
private labels as German price sensitivity has
increased
Source: MVI store visits
14 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
While discounters like Lidl are communicating While discounters like Lidl are communicating quality and value of their private labelsquality and value of their private labels
Source: MVI store visits
Germany
Germany
France
Hungary
15 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
And supporting PL’s quality and added-value And supporting PL’s quality and added-value at POP allows retailers to gain market-shareat POP allows retailers to gain market-share
Source: MVI Store Visit
•Price advantage•Functional elements•Emotional elements•Quality communication
16 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
ConclusionsConclusions
• The crisis is global, however retailers’ responses are local:• Which channel/retailer drives the VALUE positioning in
your market?• How can you align to this positioning?
– 4Ps– Basket driven strategy?– Traffic driven strategy?
• PL are gaining greater exposure, especially at POP• Shopping environments which reduce the amount of
point of purchase advertising benefit private label sales
17 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
So where are your brands positioned in this So where are your brands positioned in this environment?environment?
Low Quality Perception
High Quality Perception
High PricePerception
Low PricePerception
Source: MVI Research and analysis
VALUE
Thank You!Thank You!
. . . A Partner in Your Success. . . A Partner in Your Success
Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI
Vincent VerdierAnalystEMEAMVI
EMEA Headquarters6 More London PlaceTooley StreetLondon SE1 2QY