The Retail Value Chain: How to Gain Competitive Advantage through Efficient Consumer Response (ECR) Strategies

385 Pages·2009·2.8 MB·English

by  Sami Finne

i
The Retail
Value Chain
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The Retail
Value Chain
How to gain competitive advantage through
Efficient Consumer Response (ECR) strategies
SAMI FINNE & HANNA SIVONEN
LondonandPhiladelphia
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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 publishers and authors cannot accept respon-
sibility 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 2009 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 reproduc-
tion outside these terms should be sent to the publishers at the undermentioned addresses:

120 Pentonville Road 525 South 4th Street, #241
London N1 9JN Philadelphia PA 19147
United Kingdom USA
www.koganpage.com
© Sami Finne and Hanna Sivonen, 2009
The right of Sami Finne and Hanna Sivonen to be identifi ed 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 5456 2
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
Finne, Sami.
The retail value chain : how to gain competitive advantage through effi cient consumer
response (ECR) strategies / Sami Finne and Hanna Sivonen.
p. cm.
Includes index.
ISBN 978-0-7494-5456-2
1. Retail trade--Management. 2. Consumers. 3. Competition. 4. Consolidation and
merger of corporations. I. Sivonen, Hanna. II. Title.
HF5429.F4973 2008
338.8(cid:2)9--dc22
2008028275
Typeset by Saxon Graphics Ltd, Derby
Printed and bound in India by Replika Press Pvt Ltd
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Contents
Foreword vii
Acknowledgements ix
Introduction 1
1 Change drivers in the retail value chain 5
Industry consolidation 6
Internationalization 11
Value chain integration 18
Convergence 21
Consumer and product trends 28
Sustainability 37
E-business 45
2 Retail formats 50
Chain operations 51
Shopper segmentation and target group selection 53
Key success factors in retailing 55
Alternative retail strategies 83
Summary 104
3 Collaboration in the retail value chain 106
Collaboration and supply chain management 107
Quick response (QR) 108
Effi cient consumer response (ECR) 110
Retail partnership levels 122
ECR as an industry community 127
vi Contents
4 Demand management 130
Format development and category portfolio management 135
Category management 156
Space management 173
Summary and some insights into the future 187
5 Store operations 188
Store ordering 189
Product replenishment process 192
Implementation of assortment changes 195
Campaign implementation 198
Customer service 200
Store management and key performance indicators (KPIs) 205
Centralized store operations 212
Chain-level execution 213
Store refurbishment 216
Supplier role in store operations 219
Summary 221
6 Information technology trends in the retail value chain 223
Main trends 224
Key development areas of retail IT 234
Fact-based management with shopper information 254
Summary 277
7 Loyalty programmes and shopper information sharing 278
Loyalty concepts 281
Partners and joint programmes 290
Opt-in customer clubs 292
Use of shopper data 296
Data sharing in the retail value chain 309
Customer information sharing study 314
Key future trends in customer loyalty 330
8 The future 333
Globalization and consolidation 334
Operational effi ciency 337
Fact-based management 340
Innovation and exclusivity 342
Customer dialogue management and service extensions 344
Adapting to the local environment 346
Success formats 348
References 354
Index 355
vii
Foreword
If ECR is to progress beyond the considerable strides already made, then
it has to focus hard on extending the search for knowledge on an industry-
wide basis. How do we best understand consumers’ needs? How do we
operate supply chain processes to create most value and least waste?
Sustainability is a key challenge for the supply chain and ECR can help
attain it. At Tesco, we build our business back from the customer – but we
need our supplier partners to help us to do this. Knowledge is key, but
sharing the knowledge makes it useful and this is why ECR continues to be
important.
Sir Terry Leahy
Chief Executive
Tesco plc
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ix
Acknowledgements
The Retail Value Chain was an extensive project involving several people we
would like to thank sincerely.
The Retail Value Chain is largely based on an original Finnish book by Sami
Finne and Tuomas Kokkonen. Special thanks to Tuomas who has been
closely involved in this project, reviewing and commenting on all chapters.
Your uncompromising and constructive style contributed much to the quality
of the book and, as always, it has been a pleasure to work with you.
The inspiration for this project came from the effi cient consumer
response (ECR) community. Thanks especially to Professor Saara Hyvönen
from the University of Helsinki and Professor Arto Lindblom from the
Helsinki School of Economics, Kristina Metso from ECR Finland and Antti
Sippola, Co-chairman of ECR Finland, as well as Bernard Karli and
Stephanie Pfenning from ECR Europe – your supporting comments
encouraged us to undertake this project.
We would also like to thank the following retail industry leaders and
experts who were willing to share their experiences and views for this
book: Saliha Barlatey, Chairman of ECR Operations Committee (Nestle);
Kenneth Bengtsson, Chief Executive Offi cer and President of ICA AB;
Stefan Fröberg, Supply Chain Business Unit Director for Aldata; Dr Brian
Harris, Chairman of the Partnering Group; Peter Kabuth and Ralf Kern
from SAP; Bernard Karli from ECR Europe; Matti Karlsson, CEO of Sello;
Rob Turtle, Director of Pricing and Promotions at dunnhumby; Jenni
Virnes, Product Marketing Manager of Corporate Venturing at UPM-
Kymmene Corporation, and all 22 other interviews carried out for the
original Finnish version of the book. We also thank the 16 retailers from 11
countries participating in our shopper-information sharing study, and