Retail Disruptors: The Spectacular Rise and Impact of the Hard Discounters

265 Pages·2018·2.115 MB·English

by  Jan-Benedict Steenkamp

i
Praise for
Retail DisRuptoRs
‘Hard discounters are a proven concept with plenty of opportunities to expand
both in geographies around the world as well as in different product categories
and more business sectors. It is critical to everyone in business to fully
understand these developments. This book provides the best possible insights
regarding the phenomenon of hard discounting, as [both] a learning about
business models and as a valuable base for day-to-day and strategic decisions. A
book worth every minute to read.’ Harry Brouwer, executive Vice President,
Unilever food solutions – Global
‘A must-read for any brand marketer. Hard discounters have come like a “thief
in the night”, responsible for reducing manufacturer brand sales by half trillion
dollars annually. Many national brands stuck their heads in the sand and are now
under the hammer to defend their brands against the hard discounter “brands”.
Yes, while we were asleep at the wheel, Aldi, Lidl and others built “brand”
connections with consumers. Is it too late to save your brand? You’d better hope
not.’ John Gerrie, Chairman, fMCG association aNZ
‘Retail Disruptors is a seminal work that defines the strategy, tactics and impact
of the global hard discounter phenomenon. Itʼs essential reading for everyone
that competes with or sells to this dynamic sector of retailing.’ John failla,
founder, store Brands Decisions, Us
‘Finally a book that analyses the discounters from an international, global
perspective! Most publications focus on national markets. Not this book. This
makes the book definitely a “must read” for everyone professionally involved
in the retail business today. But also shoppers, interest groups, investors and
policy makers can learn from the unique insights and considerations revealed
in the book. Philippe Gruyters, Managing Director european Marketing
Distribution (eMD), europe’s largest grocery alliance
‘Professors Steenkamp and Sloot have written a “must-read” for anyone
interested in retail. The book allows one to truly understand the disruptive
powers of discount formulas. It should therefore be on every retail professional’s
night stand.’ Dave Pieters, former General Manager, Coles australia
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‘In the last 25 years, hard discounters have achieved remarkable success in the
Western world. So far, conventional retailers and brand manufacturers have
failed to find the right answers as to how to deal with this retail disruption. The
very insightful book by Steenkamp and Sloot uncovers the primary secrets of the
hard discount business model. It will be very helpful for retailers and marketers
around the world to understand why they are so successful. Just one warning:
understanding hard discounters doesn’t mean that you can beat them!’ Kees
Buur, former Buying Director Health and Beauty, a.s. Watson Benelux
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retail Disruptors
The spectacular rise and impact
of the hard discounters
Jan-Benedict Steenkamp
with Laurens Sloot
iv
Publisher’s note
Every possible effort has been made to ensure that the information contained in this book
is accurate at the time of going to press, and the publisher and authors cannot accept
responsibility for any errors or omissions, however caused. No responsibility for loss or
damage occasioned to any person acting, or refraining from action, as a result of the
material in this publication can be accepted by the editor, the publisher or any of the authors.
First published in Great Britain and the United States in 2019 by Kogan Page Limited
Apart from any fair dealing for the purposes of research or private study, or criticism or review,
as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be
reproduced, stored or transmitted, in any form or by any means, with the prior permission in
writing of the publishers, or in the case of reprographic reproduction in accordance with the terms
and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be
sent to the publishers at the undermentioned addresses:
2nd Floor, 45 Gee Street c/o Martin P Hill Consulting 4737/23 Ansari Road
London EC1V 3RS 122 W 27th St, 10th Floor Daryaganj
United Kingdom New York NY 10001 New Delhi 110002
www.koganpage.com USA India
© Jan-Benedict Steenkamp and Laurens Sloot, 2019
The right of Jan-Benedict Steenkamp and Laurens Sloot to be identified as the authors of this
work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
ISBN 978 0 7494 8347 0
E-ISBN 978 0 7494 8348 7
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Names: Steenkamp, Jan-Benedict E. M., author. | Sloot, Laurens, author.
Title: Retail disruptors : the spectacular rise and impact of the hard
discounters / Jan-Benedict Steenkamp and Laurens Sloot.
Description: 1 Edition. | New York, NY : Kogan Page Ltd, [2018] | Includes
bibliographical references and index.
Identifiers: LCCN 2018026418 (print) | LCCN 2018037577 (ebook) | ISBN
9780749483487 (ebook) | ISBN 9780749483470 (pbk.) | ISBN 9780749483487
(eISBN)
Subjects: LCSH: Discount houses (Retail trade) | Hypermarkets. | Grocery
trade. | Retail trade.
Classification: LCC HF5469 (ebook) | LCC HF5469 .S74 2018 (print) | DDC
381/.149–dc23
Typeset by Integra Software Services, Pondicherry
Print production managed by Jellyfish
Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY
RETAIL DISRUPTORS_01_SLOOT_9780749483470.indb 4 8/7/2018 8:02:47 AM
v
To Valarie Steenkamp, my soulmate in everything, and
to the three ‘disruptors’ in my life, Iris, Tristan, and Alex
Steenkamp. They are proof that disruption is to be cherished
rather than feared.
Jan-Benedict Steenkamp
To my mother who gave me the gift of self-confidence and
to Gerdien whose love and dedication makes our family
strong and happy.
Laurens Sloot
vi
THIS PAGE IS INTENTIONALLY LEFT BLANK
vii
CoNteNts
List of figures xi
List of tables xii
List of abbreviations xiv
About the authors xv
Preface xviii
Acknowledgements xx
01 How hard discounters are disrupting the traditional
retail model 1
Ascendancy of hard discounters 1
Back to basics: what is a hard discounter? 4
Hard discounters as brands 5
Retail disruptors as a sign of our times 9
Implications for retailers and brands 11
The next frontier: The United States 13
How this book can help you 15
Notes 16
Part One Hard discounter strategies 19
02 Understanding the hard discounter business model 21
High volume per SKU 21
Irresistible value for money 26
High profitability 29
Store network expansion 32
Managerial takeaways 34
Notes 36
03 strategies of key hard discounters: aldi, Lidl, trader
Joe’s and Dia 38
Aldi – the inventor of the hard discount concept 38
Lidl – the only firm Aldi fears 44
viii Contents
Trader Joe’s – the upscale hard discounter 49
DIA – the convenience hard discounter 51
Managerial takeaways 54
Notes 55
04 Hard discounter success around the world 57
Germany – conventional retailers co-opting the hard-discount
concept 57
United Kingdom – breakout into the world’s most sophisticated
private-label market 60
Australia – leveraging the opportunities offered by a cosy
duopoly 64
Hard discount in emerging markets – Biedronka and BIM 67
Hard discounter life-cycle model 70
Managerial takeaways 72
Notes 73
05 the next frontier – dissecting the Us grocery
retailscape 75
Developments in the US market 77
Brand discounters 80
Hard discounters in the United States 82
Online retailing 86
Amazon 88
Implications for the grocery industry 89
Managerial takeaways 94
Notes 95
Part tw O C ompetitive counterstrategies
for conventional retailers
99
06 How are conventional retailers being impacted by
discounter entry? 101
Positioning of conventional retailers 101
How hard discounters create their blue ocean 105
Impact of hard discounter entry on the shopper’s mindset 107
Impact of hard discounter entry on various retail formats 111
Managerial takeaways 116
Notes 116
Contents ix
07 How conventional retailers can compete with hard
discounters 118
Initial reactions towards hard discounters 118
Four strategic reactions to hard discounter encroachment 120
Fight-back strategy 121
Downgrading strategy 127
Value-improvement strategy 128
Value-redefinition strategy 129
Choosing a strategy 131
Implementing the response strategy 133
Managerial takeaways 142
Notes 143
08 strategies to reduce procurement costs 146
The dominant role of cost of goods sold in retailers’ P&L
statements 146
P&L statements of branded versus private-label suppliers 147
Capturing more value from brand suppliers 149
Cell I: reduce brand assortment 149
Cell II: increase slotting allowances 152
Cell III: intensify category management 153
Cell IV: forge exclusive relationships with brand suppliers 154
Saving money on private-label procurement 156
Saving on total procurement bill by scaling up 158
How much can be saved on cost of goods sold? 159
Managerial takeaways 162
Notes 164
Part three B rand manufacturer strategies
versus hard discounters
165
09 Competition – creating winning brand propositions
versus private labels 167
Brand portfolio renovation 168
Improve brand logic 171
Innovation 177
Advertising 184
Use sales promotions – in moderation 187
Experiment with new ways of value creation 189