Why Does The Retail Recession In The United States Continue To Grow In A Bad Way?

The closing trend of traditional retail stores in the United States lasted until 2018.

According to Cushman&Wakefield, a consultancy, the United States will close more than 12000 stores this year, compared with 7000 in 2017. Surprisingly, some retailers in Europe continue to grow against the trend and continue to expand their stores.

If Primark swept the United States

In the retail market, the German supermarket Aldi and Lidl are putting great pressure on giant grocery retailers such as Krogh and Kroger, WAL-MART and WAL-MART.

The expansion of Al Di and Germany's legacy to the US traditional food retailers is not only a worry, but a real impact.

According to the Wall Street journal, an expert from Bain strategy consultants said that the growth of these cheap supermarkets in the United States was very fast, and the annual growth rate could reach 10% by 2020, which is 5 times the growth rate of the traditional food retail industry.

"Al Di and Richard are cutting the market share of us grocery retailers with a knife and a knife."

Mike Paglia Mike Paglia, a global retail consultancy, Kantar Retail, commented.

Do not play the Primark of the electricity supplier

In July this year, Primark's latest store opened in Broolyn, New York, covering an area of 60000 square feet (about 5574 square meters).

In September 2015, Primark successfully entered the US market and opened the first flagship store of 77000 square feet (65032 square meters) in Boston.

You know, the United States has always been a difficult market for British retailers.

After nearly 50 years of development, Primark now has more than 300 stores in the world.

Data from research firm Coresight Research show that Primark's overseas stores earn 35 million 200 thousand dollars in fiscal year 2017, which means that its 8 stores in the United States have brought about 281 million dollars in revenue.

Primark's traffic in the United States is also growing.

Primark pair

The potential is full of confidence, and the company plans to invest outside the northeastern United States in 2019.

But in other parts of the US, Primark is still not known to shoppers, especially those who do not go shopping centers or use social media.

The success of Primark in the US is that its price is lower than most existing discount retailers.

Analysts at Bernstein say Primark is 40% cheaper than H&M and 20% cheaper than Forever21.

According to the data of Macquarie Group Ltd. Macquarie, the average price of women's jeans in Primark, H&M and Zara is 9.38 US dollars, 12.05 US dollars and 26.79 US dollars respectively, while Primark's men's sweaters can be as low as 8.04 US dollars, and the average price of H&M and Zara is 24.11 US dollars and 21.43 US dollars respectively.

Primark originated in Ireland. At the beginning of 1969, its core competitiveness is low price, and its market positioning is mainly for low-income people who are sensitive to price.

After that, Primark began to enter the core business circle through acquiring other brand stores, and from simple discount stores to mainstream fashion retailers.

Although the competitive strategy in the mainstream market is still low, Primark can create a youthful and fashionable atmosphere as much as possible in decorating, consuming experience and in store services, and strive to enhance its brand image. Its target audience has also become a young people who want to pursue fashion but earn little.

The reason why Primark can achieve low price is first because it saves the intermediaries of dealers. Secondly, because Primark has a very efficient supply chain, the basic products of its products are put into production in Asia, and the whole design, production and pportation process is controlled within 3 months.

Tidal current is produced near Turkey and other countries, and the whole process is controlled within two months.

On the basis of this model, Primark has done faster and more.

The director of Primark once said that H&M will predict fashion in two years ahead of time, and Primark will only have 6 months ahead of time to quickly replicate the big style, sell what it produces and reduce storage.

Stephen springham, a senior retail analyst at London based retail consulting firm, emphasized that the success of Primark was due to its fast turnover of goods and sales in the competition with the electricity supplier.

In addition, Primark will also increase sales by establishing large stores and lowering profits. When the order is large enough, it can get lower prices from suppliers.

In addition to lowering profits, Primark has other means to save costs, such as resolutely not doing business.

Analysts believe that at present, from the perspective of economic efficiency, Primark has no intention of making electricity providers. After all, the unit price is so cheap, plus freight input, it is a loss.

But they are actively maintaining the sense of existence in social media, and on the one hand, promoting more consumption and weakening their cheap impression.

This is why analysts have never stopped questioning the absence of Primark in the electricity supplier market, and Primark still has reasons for not catching up with the electricity market.

Because online sales can, of course, push Primark to a wider range of consumers, but the added costs of logistics and return will be unbearable.

The Irish Times reported that Primark has also tried online sales of some products.

In 2013, Primark had bundled with ASOS, but the result was poor.

So far, Primark has completely abandoned online sales.

In response, Verdict Retail consulting analyst Kate Omrod (Kate Ormrod) said that at present, Primark is still enjoying the benefits brought by the expansion of the entity store in the global scope. When the profit margins brought by the expansion of physical stores are dried up, Primark will definitely consider online sales.

But not doing electric business is not the same as giving up online business. Like many brands today, Primark also has a dedicated social media account, which is highly active, making use of social and word of mouth marketing to expand its popularity.

Al Di continued shop expansion

Hardi (Aldi) entered in 1976.

The number of stores has doubled in the past 15 years, of which 150 stores have been opened in 2017, and now there are about 1800 shops in 35 states.

Hardi said that since 2013, its monthly user base growth basically maintained at 60%, and according to the Research Institute Market Force Information in April this year, the analysis of the American grocery store, in the past 8 years, the loyalty of Hardi customers continued to grow.

In June last year, Al Di announced that it would invest $3 billion 400 million in the US market for expansion in 5 years, and plan to achieve the goal of 2500 stores in 2022.

Judging from the number of stores, it will surpass Albertson and Taghit and become the third largest chain enterprises after WAL-MART and Kellogg.

Market participants believe that Hardi's survival and development in the United States lies in the fact that he always adheres to and adheres to the principle of "low quality and high quality", and cost control is an important magic weapon for Hardi.

First of all, on the shelf display, Al Di insisted on the principle of "efficiency maximization", except for a small number of daily necessities, food shelves or freezers, and other goods were displayed and sold in cartons or pallets at the factory.

This approach maximizes business space and tally time, so that the cost of goods storage and upper and lower shelves is greatly reduced, and the efficiency of Hardi stores is much higher than that of WAL-MART.

Hardi's unique business model is that in various discount stores in the United States, its SKU (category value) is particularly low.

At first, the SKU of Al Di had only a few hundred. Since 2015, the proportion of high-end products has gradually started to increase.

But even then, the number of SKU in 2017 increased to more than 2000, and more than 90% of them were private brands.

By contrast, the average SKU of their competitors is 40000 to 50000.

If discount stores are mainly economies of scale, the greater the SKU, the better the synergy.

However, because of the less SKU of Al Di, the purchase volume of every SKU is huge.

Forbes magazine pointed out that this mode of business can never compete with those big supermarket chains.

This simplification significantly reduces the difficulty of procurement, storage, sales and management of goods, thereby reducing the cost of operation and management of enterprises, and makes it an absolute advantage for suppliers and suppliers to carry out quality control and price negotiations. Suppliers can not resist the sales channels and huge scale effects of the company.

Secondly, compared to WAL-MART's 1000 square meters of super stores, the business area of Al Di is the smallest with about 150 square meters, the largest of which is about 700 square meters.

Although there are a large number of 1000 square meters of storefront, but because they are not in the bustling business district, the rent will naturally be much lower.

In order to further expand in the US market, the company not only uses contactless payment, but also works with Instacart to provide goods distribution service for users.

RIET offered a low price.

As an old rival in the European market, Riad and Al Di have been competing for decades.

Now, the competition between them has spread to the US market and brought a chain reaction to the whole supermarket industry in the United States.

With Hardi's huge expansion in the US market, he is also stepping up the pace of opening stores in dozens of cities in the United States.

Analysts predict that the two companies will reinvent the US grocery retail market. They will not only eradicate some of the weaker retail chains from the market, but will also seek more consumers from larger retailers.

According to the research, the reason for his success in the United States is due to its overall low market price.

Relevant researchers said that Germany had played a destructive role in the same industry.

For example, with the entry of Germany, WAL-MART also began to implement a price reduction strategy, which gave great pressure to CHO and other peers.

Like Hardi, there are no decorations in the store. The purchase will be placed directly on the shelves, sold out of the box, and refuse to provide a wide array of retail department stores.

Stores only sell products that are sold, and their prices are highly competitive.

According to the survey of the US market, the size of the shop in the United States is about 35% larger than that in Germany, and the decoration is also more modern.

But most importantly, he claimed that under the premise of guaranteeing quality, it would provide customers with less than 50% of their competitors' price, "let consumers Hua Xiaoqian buy high quality products".

Caitlin Gins, an associate professor of marketing at the University of North Carolina, says many businesses have been affected in the region where they have been stationed, forcing them to reduce commodity prices to a certain extent.

The study investigated 48 kinds of foods, including dairy products, meat products, canned foods and frozen foods. It was found that the retailers in competition had different price reductions, of which half gallon milk prices were reduced by about 55%.

However, there is no such phenomenon in the region where Germany has not been stationed.

Caitlin Gins's research also found that in the market where Germany was stationed, the average price of the goods was reduced by 19%, Food Lion and Kellogg decreased by 15% and 13% respectively, and the price of WAL-MART and Publix decreased by 4%.

Through the reduction of middlemen, he maintained his low price.

"They have their own products," Gins said. "It has its own brand, and its products come directly from suppliers."

It is also known as "the supermarket of the poor". Each shop has a small area, mainly selling food, daily necessities and small household electrical appliances.

According to the method of centralized bulk ordering, only one type of product is normally used for each product. Generally, the order quantity of a product is no less than 50000 pieces, which makes the cost of procurement, negotiation, warehousing and logistics far lower than that of other retailers who pursue variety.

This business model has made it the fastest growing supermarket in the world.

Dieter Schwarz took over the business from his father in 1977 and eventually made him a $96 billion retail kingdom.