Given the emergence of the savvy consumer, a survivor of the global financial crisis, and their unwillingness to outsource their consumption decision-making-process to retailers and marketers in their quest for demonstrable value-for-money, sellers have had to increasingly make their offering accessible and tailor-made to individual needs in order to secure initial and especially repeat purchases.
In practice, this means that retailers have had to embrace multichannel access routes – making the product available wherever, whenever and however the consumer wants to buy – combined with store-level assortment, where a ‘blunt’ assortment based on national tastes is gradually replaced by an increasingly local offering that is more sensitive individual needs.
For instance, assume that a superstore/hypermarket offering is currently made up of 70% national and 30% locally focused produce based on very obvious and traditional tastes. As the savvy consumer becomes more accustomed to shopping around – physically and virtually – then retailers that closely match their needs at the right price will sell more…
As a result, the retail assortment mix will gradually move to 50/50 local/national in response to offtake. Within an increasingly competitive and flatline market, those retailers that can eventually manage a 70/30 mix – i.e. a 70% local offering – will flourish…
Taking an example of a 100,000+ sq. ft. UK superstore, open 24/7, with 450+ staff and an annual sales turnover of £200m, it becomes obvious that its CEO is in fact in charge of a medium-sized business operation, and will want to be treated as such. In practice, this means they will be highly qualified, remunerated by results-based packages, and will demand increasing degrees of local autonomy, especially in the case of product assortment.
Being closer to the real market, with demanding shoppers that vote with their feet, the retailer will use store-level assortment to optimise store traffic, in fact buying to meet local needs… And this is simply the beginning, with big stores leading the way for most retail…
For suppliers, this means finding a way of servicing superstores at local level. In practice, suppliers will need regional KAMs capable of distilling brand and category strategies down to local level, managing their business unit, its information-streams, co-ordinating the internal-external business relationships as a National Account Manager manages the retail head office, but obviously on a smaller, but increasingly important scale…
For a supplier wishing to optimise this local trend, it will be necessary to build a team of sufficient size to service 1,000 such superstores, which, at say 30 stores per KAM, means at least 30 highly motivated and energetic individuals with ambitions to match their NAM colleagues…
Meanwhile, their logistics colleagues will need to find a way of delivering smaller quantities more frequently at local level, whilst the finance department will need to manage the increasingly complex invoicing, trade funding and cash flow implications of store-based relationships, in order to side-step any deductions issues…
For brand marketers this means moving away from the idea of 100% national coverage for brands, and instead settling for regional ‘patchwork’ distribution that matches local need. In addition, it means a shift in emphasis away from national fragmented TV to optimise the local advantages of 1:1 social media…
An untidy, but pragmatic response to the real world. So much for the medium and long term… Fortunately however, in the short term, the consumer is accustomed to accepting compromises in relation to their needs being met. For instance, a consumer who feels like a cup of Nescafé ideally should be able to buy sufficient product to make one cup. However, in practice they are obliged to buy a 20-cup jar. Meanwhile, a retailer who would like to be able to order and sell a single jar is obliged to order a 24-jar case from the manufacturer, who in turn can only afford to manufacture in 10,000-jar runs…
In time, the savvy consumer will become increasingly conscious of, and dissatisfied with, this degree of compromise and will begin searching for alternatives.
In a flatline market, this will eventually cause competing coffee suppliers – and hopefully Nestlé – to attempt to create a competitive edge by attempting to ‘localise’ their coffee offering by meeting actual need via smaller packs, at acceptable prices… Store-level assortment will then be a natural extension of the process.
Incidentally, for those who think that 1:1 tailor-making is still safely a long way in the future, it might be worth considering that Amazon is effectively providing 1:1 need-satisfaction within 24 hours, 1-click ordering simplicity, and even easier ‘returns’ with an assortment that embraces most categories, the ultimate in local assortment…
