Mass Merchandise

Taking the store online and into smaller boxes

“Traditional mass retailers have been slow to make their online channels as effective and efficient as their brick and mortar stores.”

You know it’s a tough year for mass merchants when Walmart, the world’s most valuable retail brand, drops a few percentage points in brand value. Walmart faces the same challenges as its peers around the globe: price competition from pure e-commerce brands—in particular, Amazon—and the growing popularity of small-box discount stores in the dollar and convenience categories.

For the past several years, Europe’s mass leaders Carrefour, Auchan, and Casino have been exploring new formats for their hypermarkets in combination with smaller stores and new services. Carrefour City, Auchan’s A 2 pas, and Petit Casino respond to local markets and serve shoppers close to home, saving them transportation costs. Traditional big box formats have also been redesigned for better shopping experiences, some with drive-through options.

In North America, small-format stores have proliferated to take advantage of new shopping habits. Low-income shoppers, unsure of the next paycheck, typically make more trips closer to home and spend less per trip. In response, Walmart has doubled the number of 12,000-square-foot Walmart Express stores it plans to open. It’s taking an offensive stance online as well, revamping its site search capabilities to raise conversion rates by 20 percent.

Generally, traditional mass retailers have been slow to make their online channels as effective and efficient as their brick and mortar stores. Kaufland, Germany’s leading hypermarket brand, is a relative newcomer to TV advertising and engaging its customers in social media, but will not launch e-commerce until 2015. With Amazon launching grocery delivery in Germany, Kaufland’s online experience will need to be best in class.

Lojas Americanas wants to be Latin America’s Amazon, and has invested heavily in e-commerce to complement its brick and mortar and catalog channels. The brand developed its own scalable logistics system, able to deliver orders in 48 hours throughout Brazil.

In Australia, the mass battle is brewing between three players that make the list: Big W, Target, and a recently reinvigorated Kmart (the latter two, not to be confused with their North American counterparts, are locally owned and operated in Australia). All three have potential to improve their experiences online, where they face increasing competition from direct competitors and other e-tailers.

One of the brightest spots in mass can be found in South Korea at emart. The retailer doesn’t have a cookie-cutter format but every location seems to be neat, colorful, and lively. Its electronics megastore in Seoul’s Yongsan district has nine levels, each floor dedicated to a single category such as cameras, TVs, or computers. Advertising and promotions are both clever and whimsical. Recently, emart sent remote-controlled helium balloons with Wi-Fi capability out into the streets. These balloons, in the shape of the company’s mascot, enabled customers to wirelessly download coupons via the brand’s mobile app. The delightful experience led to a surge in online and offline sales, with a 157 percent increase in the e-commerce channel.

Summary

Consumers still love big, everyday-low-price stores filled to the rafters with consumer goods and groceries. But behaviors are changing. Mass merchants must fight harder to attract the low-income and fixed-income shoppers that built some of the world’s biggest retail brands.


Mass Merchandise Innovations and Opportunities

Expand into new categories

Besides its famous experiment with same-day delivery via drones, Amazon made news by adding a number of niche stores, including flowers and fine art, to its e-commerce empire. The online retailer also made it easier for consumers to find and manage magazine subscriptions with its new one-click feature.

Augmented reality, digital beacons

Argos began life as a catalog-based retailer, and then pioneered the click-and-collect format in the U.K. This year, it introduced digital concept stores—where tablets take the place of catalogs—so items can be selected in-store, picked up, and paid for in minutes. For those who order online, Argos is testing the use of short-range wireless to inform customers when orders are ready to be picked up. To make the experience more engaging, the catalog also features augmented reality.

Add some high-end excitement

Following a series of acquisitions that have made it the biggest sports retailer in Canada, Canadian Tire opened “ProShop” mini-boutiques in 50 of its big box suburban stores, including higher end, higher margin merchandise from rival retailer Sport Chek.

Tap into employee and customer creativity

Auchan has put innovation at the center of its business strategy. Its “Creative Attitude” crowdsourcing initiative solicits thousands of ideas from employees and customers for improvements and product suggestions, with the best ideas implemented in its stores.