Question

A power player is any U.S. retailer with sales equal to or greater than 10 percent of those of the category leader.

Department Stores: Department stores have survived the rise of sectors specializing in narrower product ranges, as well as the challenges of discount stores and other off-price retailers, and finally E-commerce. Gerald Storch, CEO of Hudson’s Bay, parent of Saks Fifth Avenue and Lord & Taylor, says, “Increasingly, consumers don’t think of stores as physical locations, they think of stores as brands. The opportunity is to customize on a mass scale so you simulate the selling experience on a mobile device.”

Drugstores: National healthcare questions have been driving a lot of what has been going on in the drugstore industry. CVS is moving on several fronts: It broadened its pharmacy reach by acquiring Omnicare, which distributes prescription drugs to nursing homes, assisted living facilities, and so on. CVS has unveiled the makeover of the Navarro Discount Pharmacy sites it acquired. Carrying the banner “CVS pharmacy y mas,” the South Florida stores feature bilingual associates and 1,500+ “trusted Hispanic products.” It also acquired Target’s pharmacy businesses for about $1.9 billion.

General Apparel: Fast fashion has been rising among the ranks of apparel retailers. “There is an underlying sense of rebellion that comes through in today’s fashion,” notes Marshal Cohen, a chief industry analyst with NPD Group. “The fashion industry has undergone one of the most dramatic makeovers in recent history, no doubt influenced by the Millennial consumer.”

Home Improvement and Hardware: These have had to deal with some flooring issues. First, it was hardwood laminate flooring that was said to emit formaldehyde in excess of California state standards. Soon after, came a study of vinyl floor tiles, which found that 58 percent of samples bought from large home improvement dealers contained phthalates, several forms of which have been banned from children’s products since 2009. The Home Depot clicked on several fronts, including online.

Jewelry and Accessories: Signet, which bills itself as the world’s largest retailer of diamond jewelry, acquired Zale Corp. The company now operates stores and kiosks under a variety of banners, including Kay, Jared, and a number of regional brands in its Sterling division, along with Zale, Peoples, and Piercing Pagoda in its Zale division. Zale operations have been growing same-store sales faster than the company as a whole, and Signet expects that to continue.

Mass Merchants: Amazon has joined the ranks of mass merchant power players, selling everything from digital downloads to consumer electronics, toilet paper, books, and groceries. Its limited face-to-face interaction with consumers belies Amazon’s vast physical presence around the country, where a network of fulfillment centers puts it near to customers. Amazon’s mass-market tactics include spreading same-day delivery to more segments of the population.

Supermarkets: Although mergers and acquisitions have been a way of life, grocery remains the most fragmented segment of retailing. Albertsons took over the remnants of Safeway’s network, covering much of North America, and Kroger completed its first full year with Harris Teeter stores under its wing. Then, after A&P and its affiliate brands were forced into bankruptcy in 2015, it was ultimately decided to sell off all the store locations to several major chains.

Women’s Apparel: The biggest news was a deal that closed in August 2015—Ascena Retail Group’s acquisition of Ann Taylor and Loft parent company Ann Inc. Ascena paid $2 billion to bring Ann Inc. into a diverse stable of brands that included Lane Bryant, Dress Barn, Maurices, and Justice.

Questions:
How can an independent retailer compete with power retailers?

What is the greatest opportunity for each of the retail categories described in this case?

Answer 1

How can an independent retailer compete with power retailers?

An independent retailer can compete with power players through services such as troubleshooting, delivery, installation, etc. Such programs help stand out from the local retailers and build a sense of belonging in the community where the store works. Another way they can compete is to join forces with other independent retailers in the area , possibly host customer-specific events, and cross promotions in their stores. Finally, selling niche products that power retailers may not carry is another perfect way for independent retailers to compete with power retailers.

What is the greatest opportunity for each of the retail categories described in this case?

Department stores: Elevate their customer service

Drugstores: Home delivery; sales to nursing homes and assisted living facilities

General Apparel: Clothing to appeal to minority groups

Home Improvement and Hardware: Offer DIY Courses and in home installations of products

Jewelry and Accessories: Create an inviting atmosphere where customers are not intimidated to touch or try on, along with having a website with clear images and easy returns available.

Mass Merchants: Web-based sales – have a clear and easy to navigate website

Supermarkets: Offer home delivery and meal solutions to compete with companies such as Blue Apron, which deliver everything you need to cook your meal at home.

Women’s Apparel: Lower-priced points through discount labels.

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