COVER STORY
Store war in America has a misleading name . It is the ‘ War of Categories ’ rather than the war of stores . Different retailers fight different wars with different retailers for different categories .
The major battles for retailing supremacy are : the battle for grocery , apparel battle , the battle of pharmacy , the battle for DIY products , battles for home improvement , battles of category killers like footwear , luggage , cosmetics , eye care , etc .
Category war takes retailers beyond the boundaries of the retailing world . Some battles are played by retailers as invaders . They invade the dairy , bakery and ready to eat HoReCa ( Hotels , Restaurant and Cafes ) segment . Every retailer may not restrict itself only to one of the above battles . It may engage in different battles with the same competitors or different battles with different competitors . Every store may be engaged in different battles depending upon the competitors in their catchment area . Such crossfire makes the American store war more complex and difficult to fight . But the customers benefit . Hence , America is a ‘ Consumer ’ s Nation ’.
Store Format : A Formation On The Battlefield
The formation is an important element of any battle . It is a grouping of the forces for the war . Formation considers the strengths and weaknesses of our force and also of the competition . In the case of retail war , the customer is the most important aspect and not just competition . Retailers ’ formation must respond to customers ’ needs , likes , dislikes , preferences and expectations . The formation is the stance that indicates intentions . American retail war is the war of different formations . In retailing language , it is called formats . Every format has a different DNA and a different business model associated with it . For example , supermarket earns gross profit margin of around 13.5 % to 15 %. Superstore earns 19 to 22 % and pharma stores and department stores earn 30 % plus .
A Warehouse store business model emphasizes subscriptions . A business model of the Discounters works around private labels . Offprice retailers have developed a business model that keeps prudent purchasing as a focal point .
A formation in Retail is called ‘ Format ’. It decides how to arrange the resources ( Merchandise , categories , sections , etc .), where to launch an attack ( Store location and retailers to be targeted ), how to attack ( Business model ), and the theme of attack , ( Convenience , range , One-Stop-Shop , Value for money ).
Walmart Defeat : Battle For Pharmacy
Medicines are sold in America by multiple format stores , pharmacy chain stores , superstores and supermarkets . The formations of these three formats are different . Drug store , Walgreen earns about 20 % gross profit margin with 19 % market share , another drug store , CVS earns 18 % with a market share of 25 %. But Walmart is incurring a loss on pharmacy , with a 4.7 % market share which equals $ 19 Billion . Walmart ’ s competitors Target superstores has sold its pharmacy division to CVS pharmacy as a result about 1,600 Target superstores will have CVS drug store inside them ( called ‘ store-in-store in the retailing language ). Walgreen and CVS deal better with ‘ Pharmacy Benefit Managers ’ ( PBM ), an institution that works like an intermediatory between customers , retailers , insurers and pharma companies . The formation of pharma retailers is working overpowering Walmart . Target changed its formation . It came out with a different format , store-in-store letting the competitor run the subsection .
Food retailing remains the most dominant format in the US . It is categorized into different segments though . The categorization is based on different parameters like the customer needs they cater to , the class of customers , the variety they offer , the nature of branding they use ( whether national brands of private labels ; premium brands or value for money ; or ‘ me-too ’ brands ) location , size of the store , etc . Superstores are equivalent to hypermarkets in Europe . They offer a deep assortment with the proposition of a one-stop shop . Walmart leads in this format followed by Target . The area is huge around 150,000 square feet of the store area plus backend space and store godown . Supermarkets and superstores ( hypermarkets ) are grocery stores with a full range of food and groceries . They serve all kinds of food - raw , packaged , ready to cook , half cooked and also ready to eat . These stores provide the full range of food required by people of all cultures and sub-cultures staying in the catchment area . It includes all vegetarian and non-vegetarian food like fresh meat and poultry , fish and seafood , dairy , dry and wet grocery , packaged foods , and frozen foods .
The catchment area of the store is the ‘ sphere of influence ’ of the store from where most customers of the store come for shopping . The catchment area is the function of the population of the area , offerings of the store ( products and services ), uniqueness of the proposition , competing stores in the vicinity , area of the store ( larger the size larger will be the catchment area ), preparedness of people in the locality to travel , what kind of product mix / range / price / promotion can attract the footfall , availability of public transport , quality of roads , vehicle population in the area , etc . Supermarkets in America have a catchment area of 3 to 5 miles whereas superstores have a catchment area of 7 to 10 miles .
An interesting feature of the grocery retail warfare was that despite the dominance of a few national and regional grocery chains stores , many ‘ Mom and Pop ’ stores and small regional chains continued to thrive . The investments and computerization of the supply chain dramatically increased assortments . The Stock Keeping Units ( SKU ) tripled from 1970 to 1990 and store size increased by on an average 1,000 square feet per year . Although both trends later tapered off .
A study conducted in America , from 1994 till 2006 , by a professor , concluded : The per capita stores remained stable at 1.14 stores for 10,000 people ; The mean store lifespan was 23 years with average new store launches slightly more than the store closures ; New Walmart stores accounted for 54 % of the total newly launched chain stores . The overall market share of chain stores remained the same .
Till the year 2018 , Supermarket was the most preferred format of the American consumers for the primary grocery shopping visit . About 49 % of the customers used to shop for groceries in supermarkets . In 2021 it reduced to 39 %. Supermarket ’ s loss was the discounters ’ gain ( Walmart and Target ), 33 % of customers chose these discounters
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