PBM Grocery

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ASSGINMENT

PRODUCT AND BRAND MANAGEMENT

SUBMITTED TO: SUBMITTED BY:

PROF. JUHI SHAH MOHAMMED BHARMAL (NR11008)

VAIBHAV CHAUHAN (NR11022)

PRATIK GOVANI (NR11052)

NIKITA KANTHARIA (NR11063)

ANAND PANARA (NR11090)

RAVI SHAH (NR11142)

ZIL SHAH (NR11145)

KARISHMA SHARMA (NR11146)

KANDARP THAKKAR (NR11162)

CHIRAG VYAS (NR11176)

DATE:

12TH MARCH, 2013


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N. R. INSTITUTE OF BUSINESS MANAGEMENT

N.R INSTITUTE OF BUSINESS MANAGEMENT Page II


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PREFACE

The M.B.A curriculum has been architecture with the view of enabling the students to

have an opportunity to implement their theoretical knowledge on the real life practicalsituations. In the management field, you cannot create success storied if you are not good

learner, your knowledge in the particular field to achieve and attain the desire goals and

heights.

Mere bookish or theoretical knowledge cant help you in any field whether it is

management, technology, research or any other field. The only thing that can help you is

having a sound practical knowledge of the concerned field is a part of our learning in

management field and also fortunate of the MBA programme.

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ACKNOWLEDGEMENT

We are delighted to express our gratitude for all those who gave us full support,

directly or indirectly in preparing this report. But we would like to mention that it was due to

the operation of group of people mainly our professors and our friends who have played an

important role to help us in preparing this report.

We are very grateful to our project guide, Prof. Juhi Shah, who has been a source of

professional guidance and support in the completion of this study.

Last but not the least; we would like to thank our families and friends, who have given

us a chance to learn the chapter of hardworking, honesty and humbleness. They are always

ready to give us the moral support and put our efforts in the right and successive way.

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INDEX

Topic Page

Preface ..................................................................................................... II

Acknowledgement ................................................................................. III

Index .............................................................................................................. IV

1. Introduction ............................................................................... 1

2. Spencers 13

3. Walmart 27

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Introduction

The food and grocery retail industry has been of interest to researchers for many years

from a wide array of perspectives. A literature review was carried out to identify the previous

research efforts and directions related to the present focal area. To the extent possible, the

researcher tried to reproduce the original terminology used by the authors, to preserve the

originality of the views. The review of literature set off with an overview of Indian retailing

in general and growth and development of food & grocery retailing in particular followed by

consumer shopping behaviour in retailing, shopper behavior versus choice of retail formats,

previously proposed models of store choice and patronage to introduce a conceptual frame

work of this study. Then the far-reaching literature relating to important constructs in theproposed model of store choice and patronage behaviour is surveyed. Finally, this chapter

ends with identification of research gaps and justification of proposed research.

Overview of Indian Retailing

The retailing sector is Indias largest industry after InfoTech, in terms of contribution

to gross domestic product (GDP) i.e. 12 percent and also being the second largest

employment generator (8 percent of total employment) after agriculture sector. The retailingin India is largely unorganized and predominantly consists of small, independent, owner-

managed shops. Of the estimated 15 million retail outlets in the country, only about 4 percent

of them are larger than 500 sq. ft. in size. India has been one of the highest density of retail

outlets percapita in the world with a widely spread retail network but with the lowest per

capita retail space @ 2 sq. ft per person. Indian retailing continues to be one of the least

evolved industries. The Indian retailing buoyed by favorable political and economic outlook

with government legislation permitting foreign direct investment of 51% in single-brand

retail and 100 percent in cash and carry retail business. The Indian retail market stood at Rs.

1,330,000 crore with annual growth of about 10.8 percent for 2007-081. Of this, the share of

organised retail in 2007-08 was estimated to be only 5.9 percent, which was Rs. 78,300 crore.

But this modern retail segment grew at the rate of 42.4 percent in 2007, and is expected to

maintain a faster growth rate over the next three years.

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Moving forward, organized retailing is projected to touch Rs. 2, 30,000 crore (at

constant prices) by 2010, constituting roughly 13 percent of the total retail market (India

retail report, 2009). This generic growth is likely to be driven by changing lifestyles and

wider brand choice, strong surge in income levels, which in turn will be supported by

favorable demographic and psychographic patterns.

Growth and Development of Food and Grocery Retailing

Food and Grocery is by far the most promising area for the corporate majors to get

into organised retail businesses. The Food and grocery is the second-largest segment of the

retail trade constitutes 53 percent of total private consumption expenditure (USD 154 billion)

and 70 percent of total retail sales (KSA Technopak Report, 2007). Most of the food andgrocery products reach the consumers through traditional markets which are unorganized

(Bajaj et al, 2005). But the very fast changing trends in food and eating habits of consumers

have contributed immensely to the growth of Western format typologies such as

convenience stores, discount stores, super markets, specialty stores and hyper markets for

various conspicuous reasons namely, demand, supply, socio-cultural, demographic,

psychographic, economic, technology and government policies.

In a developing country like India, a large chunk of consumer expenditure is on basic

necessities, especially food related items. Hence food, beverages and tobacco account for 60

percent of the consumer spending and sales constitute 70 percent of total retail sales is the

'way to go' for retailers to attract consumers initially. According to KPMG study entitled

Grocery Retailing in Asia pacific The organized Indian food/grocery-retailing sector is

forecast to grow at a compound annual rate of 33 percent between 2004-2007 even as the

Economic Times Intelligence Group (ETIG) has predicted a CAGR of 13 percent from 2001-

2007, for the entire Indian retail sector. But the growth of organized retailing in India has

changed the business landscape and buyer behavior.

Out of the Rs.13,30, 000 crore total Indian retail market, food & grocery retail is the

single largest block estimated to be worth whopping Rs.7,92,000 crore (59.5 percent), which

has grown from Rs 3,81,000 crore in 1999 to Rs 4,50,000 crore in 2004 to Rs. 7,43,900 crore

in 2006, but 98.9 per cent of this market is dominated by the neighbourhood kirana stores and

organised food and grocery retailing accounted for a meagre 1.1 percent (Rs. 9000 crore),

which has increased significantly from 0.8 percent (Rs. 5800 crore) in 2006 to 0.6 percent



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(Rs. 3,500 crore) in 2005 and 0.5 percent (Rs.2950 crore) in 2004. However, the modern

Food & Grocery retail accounts for a meagre 11.5 percent of total organised retail market in

2007-08.

Indias total retail market was worth US$ 328 billion and its grocery and food retail

market was calculated at US$ 236 billion and US$ 228 billion respectively2. This has made

India the sixth largest grocery market in the world and expected to grow to US$ 482 billion in

2020 to occupy fourth position after US, China and Japan. India is the second largest

producer of fruits & vegetables (15 percent and 14 percent respectively) after China (34

percent). The sector is defined by the low gross margins, but there is a tremendous growth

potential in the organised sector in the form of hypermarkets, supermarkets and hard discount

chains.

With significant consumer spending in India on grocery products, grocery retailers

dominated the retailing scene in India, accounting for 90 percent of store-based outlets and 66

percent of value sales in 2007-08. But, food and grocery retailing continues to be in the hands

of unorganized independent kirana shops (98.9), as organised retailing outlets such as

supermarkets, hypermarkets, convenience stores and discounters combined accounted for a

miniscule one percent of food and grocery retailing value sales in 2007-08. The highly

fragmented nature of retailing in India was evident in the fact that the top 50 retailers in India

accounted for only 3.5 per cent of store-based retail value sales in 2007. The constant value

compound annual growth rate for store-based retailing is expected to be 7 percent over the

forecast period 2007-2011. Growth among grocery retailers is likely to be dampened by the

mature formats such as independent grocers and other grocery retailers. This would arise as

result of the shift in consumer demand from traditional to modern trading formats and as one-

stop shopping has become order of the day.

Changing Trends of Store-based Grocery Retail Formats

For the last two decades, retailing industry has gone through a metamorphosis and

wide transformation so far as introduction and induction of different formats is concerned

(Sinha and Kar, 2007). Many researchers and retail analysts describe the growth of retailing

in India as evolution, especially when they discuss retail formats. But, there is a unique

scenario prevailed in India as it is more of revolution than evolution (Vedamani, 2008). There

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is retail evolution happening with more and more formats being defined by the day, not only

by the market place but by the method of retail mediation with customers, by physical store

characteristics, by merchandise characteristics, by convenience etc. At the same time these

newly defined formats co-exist with the primitive ones. In fact, it is the store format that

creates a unique identity for retailers, enabling recall in the minds of customers. It is difficult

to fit a successful international format directly and expect a similar performance in India

(Sinha and Kar, 2007, p.5).

Therefore, it is important for retailer to look at local conditions and insights into the

local buying behaviour before shaping the format choice. Considering the diversity in terms

of taste and preferences existing in India, the retailers may go for experimentation to identify

the winning format suited to different geographies and segments. Therefore, most of grocery

retailers are region-centric at this point of time. Now a number of retailers are in a mode of

experimentation and trying several formats which are essentially representation of retailing

concepts to fit into the consumer mind space. There are retail formats that sell multiple

products under one roof, there are formats that sell a definite set of products, and there are

formats that specialises in just one niche product category; also, there are formats that can

attain optimum business from just 10-20 sq.ft of retail space and there are formats that need a

minimum of one lakh square feet to be able to operate efficiently (India retail report, 2009). It

is therefore difficult to classify retailing merely on the basis of product category.

The Indian food and grocery retailing can be divided into fresh groceries, branded

packaged foods, personal hygiene products and toiletries and dry unprocessed groceries. The

food & grocery sector is characterised by a large number of traditional formats like the

independent grocers, the pan/beedi shops, Haats, bazaars, government fair price shops and

co-operatives like Kendriya Bhandaar, Apna Bazaar, Sahakari Bhandaar, etc. dominate this

sector. In comparison, modern retail formats viz., convenience stores, discount stores,

supermarkets and hypermarkets accounted for a small proportion of sales. However, the

growth rate of modern retail format sales has been significant for the last seven years because

new wave of consumerism and higher standards of hygiene and attractive ambience. The

market is thus getting organised from being micro constituents to macro players. Retailers are

now developing formats in terms of location, layout, size, design, merchandise, service

experience offerings, etc in order to meet the specific needs of their target customers.



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Neighbourhood Kirana Store Formats

Accounting for over 66% of all forms of retail outlet, independent grocers, or Kirana

stores as they are popularly referred to mom-and-pop or brick and mortar or traditional

formats in the country, was the most common format of retailing in India. Independent

grocers growth has been phenomenal despite increasing growth and number modern retail

outlets during the review period. The independent grocers registered an estimated sales value

of Rs 4,270,813 crore in 2007 from Rs 290,200 crore in 20001 with CAGR of 7.8 percent in

2001-2008 and 6.3 percent in 2006/20073. The total number of independent grocers retail

outlets also had seen a huge growth rate of 2.8 percent in 2006/2007 with CAGR of 3.2

percent in 2001-2008. The total number of independent retail outlets increased to 88, 71,500

in 2007 from 7, 56,700 in 2001. The Table 2 presented the total sales, retail outlets and

selling space of independent grocers from 2001-2007.

Supermarket Store Formats

Unlike western countries where supermarkets are prominently visible, in our country

this is lacking, these are large, low cost, low margin, high volume, self service operationsdesigned to meet the needs for food, groceries, & other non-food items. The supermarkets

offer relatively less assortments but focus on specific product categories. They do not play

the game on price rather use convenience and affordability as their salient features. These

were the formats at the forefront of the grocery revolution, and today, it controls more than

30 percent of the grocery market in many countries. These are located in or near residential

high streets. These stores today contribute to 30 percent of all food & grocery organized retail

sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to

2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. with more than

30,000 SKUs and having a strong focus on food & grocery and personal sales. In India

Food World, Food Bazaar, Nilgiris, and Adani are the leading supermarket operators.

Hypermarket Store Formats

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Hypermarkets have emerged as the biggest crowd pullers due to the fact that regular

repeat purchases are a norm at such outlets. Hypermarkets not only offer consumers the most

extensive merchandise mix, product and brand choice under one roof, but also create superior

value for money advantages of hypermarket shopping. Hypermarket is a combination of

supermarket and a department storewith asales area of over 2,500 sq.m and with at least 35

percent of selling space devoted to nongrocery product. The stores occupy an area which

ranges from anywhere between 80,000 to 2,20,000 sq.ft, offering a variety of food, and non-

food products like clothes, jewellery, hardware, sports equipments, cycles, books, electrical

and computer equipments and etc. The growth and development of hypermarket is

phenomenal with total sales of Rs 40,123.5 million from 128 outlets with total selling space

of 5,46,900 sq. mtr in 2007 from Rs 1150.0 million from a meagre 4 outlets with total selling

space of 14000 sq.mtr in 2001 shown in table 5. The major leading players in hypermarket

format are Big Bazaar of Pantaloon Retail, Star India Bazaar of Trent India, Hypercity of K.

Raheja group, Adani, Giant, Reliance retail and ITCS Choupal Sagar being the Indias first

rural hyper market.



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Evolution of the Indian Retail Sector

Phases in the evolution of retail sector

Weekly Markets, Village and Rural Melas

Source of entertainment and commercial exchange

Convenience stores, Mom-and-pop / Kirana shops

Neighborhood stores/convenience

Traditional and pervasive reach

PDS outlets, Khadi stores, Cooperatives

Government supported

Availability/low costs/distribution

Exclusive brand outlets, hypermarkets and supermarkets, department stores and shopping

malls

Shopping experience/ efficiency

Modern formats/ international



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RETAIL INDUSTRY IN INDIA :

The Indian retail industry is the fifth largest in the world. Comprising of

organized and unorganized sectors, India retail industry is one of the fastest

growing industries in India, especially over the last few years. Though initially,

the retail industry in India was mostly unorganized, however with the change of

tastes and preferences of the consumers, the industry is getting more popular

these days and getting organized as well. With growing market demand, the

industry is expected to grow at a pace of 25-30% annually. The India retail

industry is expected to grow from Rs. 35,000 crore in 2004-05 to Rs. 109,000

crore by the year 2010.

The Indian retail market, which is the fifth largest retail destination globally,

has been ranked as the most attractive emerging market for investment in the

retail sector by AT Kearney's eighth annual Global Retail Development

Index (GRDI), in 2009. As per a study conducted by the Indian Council for

Research on International Economic Relations (ICRIER), the retail sector is

expected to contribute to 22 per cent of India's GDP by 2010.

In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross

Domestic Product) of the country. In 2009, it rose to 12%.

A McKinsey report, 'The rise of Indian Consumer Market', estimates that the

Indian consumer market is likely to grow four times by 2025. Commercial real

estate services company, CB Richard Ellis' findings state that India's retail

market has moved up to the 39th most preferred retail destination in the

world in 2009, up from 44 last year.

With rising consumer demand and greater disposable income, the US$ 400

billion Indian retail sector is clocking an annual growth rate of 30 per cent. It is

projected to grow to US$ 700 billion by 2010, according to a report by global



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consultancy Northbridge Capital. The organized business is expected to be 20

per cent of the total market by then. In 2008, the share of organized retail was

7.5 per cent or US$ 300 million of the total retail market.

India's overall retail sector is expected to rise to US$ 833 billion by 2013

and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR)

of 10 per cent. As a democratic country with high growth rates, consumer

spending has risen sharply as the youth population (more than 33 percent of the

country is below the age of 15) has seen a significant increase in its disposable

income. Consumer spending rose an impressive 75 per cent in the past four

years alone. Also, organized retail, which is pegged at around US$ 8.14 billion,

is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013.

Further, this sector is expected to invest around US$ 503.2 million in retail

technology service solutions in the current financial year. This could go further

up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent.

FUTURE OF RETAIL INDUSTRY IN INDIA:

According to industry experts, the next phase of growth is expected to

come from rural markets.

According to a new market research report by RNCOS titled, 'Booming

Retail Sector in India', organized retail market in India is expected to

reach US$ 50 billion by 2011.

Number of shopping malls is expected to increase at a CAGR of more

than 18.9 per cent from 2007 to 2015.

Rural market is projected to dominate the retail industry landscape in

India by 2012 with total market share of above 50 per cent.



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Organized retailing of mobile handset and accessories is expected to

reach close to US$ 990 million by 2010.

Driven by the expanding retail market, the third party logistics market is

forecasted to reach US$ 20 billion by 2011.

Porters five forces

1. Rivalry Among Existing Firms The range of competitors within the overall industry

include chain and independent supermarkets (Krogers, Safeway, others); mass

merchandisers and super centers (Wal-mart, Target); convenience stores; wholesale

clubs (Sams); restaurants and fast food chains (who compete for consumer food

dollars); natural food stores (Whole Foods, Wild Oats); local farmers markets, and

internet grocers. Historically, the concentration of competitors has been fragmented

by geography. However, through recent consolidations, the emergence of regional and

national chains has started to prevail along with the decline of the independent/local

shops.

This trend may actually help alleviate some of the price competition in the industry

that was previously driven by small, highly fragmented competitors. This

consolidation trend will also eliminate any overcapacity in the industry over time.

Furthermore, the M&A activity has allowed many companies to spread their fixed

costs over a wider range of output, thus creating more efficiency in operations. Often,

it is cheaper for a company to acquire an incumbent due to the location of their stores

and access to customers rather than to raise the capital for entirely new stores. Also,

these acquisition activities may help companies to gain enough economies of scale tobetter compete with the Wal-marts and Sams Clubs. The overall industry can be

characterized as mature with relatively few options for growth outside of acquisitions.

Growth is constrained by the small US population growth and increased consumer

spending on food consumed outside the home.

Thus, industry growth is likely to come from demand stealing from competitors.

However, two of the fastest growing areas within the industry (at the expense of

conventional grocery) are organic foods and prepared foods. According to the Food



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Marketing Institute (FMI), organic food sales are estimated to grow from $6 billion in

1999 to $13 billion by 2003.

While the retail grocery industry has been somewhat resistant to the economic

downturn in the US economy, there has been a consumer trend towards private label

brands rather than national brands. This trend is actually beneficial to retailers for a

couple of reasons. First, private labels increase brand identity of the store as well as

raise consumerswitching costs among stores.

Second, private labels are often sold at a 20-40 percent discount over national brands

but are higher margin products for retailers (typically 35-40% margin vs. 27% for

national brands). In addition, the organic food segment may be further aided by therecent USDA requirements for organic labeling of products. This set of standards, to

be in effect as early as October 2002, will educate the consumer on what organic is as

well as introduce regulation into the organic market. It is likely that natural food

stores will use this informational complexity to promote and educate consumers

regarding their products. However, it is unclear whether this organic labeling

requirement alone will further help to differentiate natural food stores from their

conventional counterparts or whether it will reduce the lines of differentiation

between the competitors.

Lastly, exit barriersplay a role in determining the level of competition among rivals

within an industry. Specifically, the location of grocery stores is often one of the most

crucial factors in determining the success of the store. Success depends upon how

close the store is located to its customer base as well as how close competitor stores

are positioned. Thus, competitors are often entrenched in the location of their stores

and will likely pursue aggressive tactics to ward off competition into their areas. This

creates increased competition in the market.

One trend that has developed includes the movement of retail grocers into cities with

larger customer bases in order to face less competition from the super centers located

in and on the outskirts of suburbia.

2. Threat of Substitutes The relative price of substitutesplays a role in determining a

companys profitability. Organic food is priced at a premium to conventional food



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reflecting the high labor costs in cultivating the product (Exhibit 1). The price

premium may be one reason why organic food has not become mainstream. Another

reason is that consumers either lack education about its benefits (or dont care) so that

the price premium does not appear to be justified. However, when comparing upscale

organic and prepared foods to competitors such as restaurants, the benefit/cost ratio

appears more justified. Furthermore, market research conducted by FMI has

categorized 11 percent of shoppers as dedicated to healthy eating. These shoppers

tend to be better educated, more affluent, couples or singles without children, and

generally in better physical shape than the rest of the population. Thus, this target

market segment for natural food stores probably has a very low prope nsity for

substitution.

Lastly, technology costs are key in the retail grocery industry in order to increase

efficiency in operations and aid marketing aids. Point-of-sale systems can help to

increase inventory turnover and sales and lead to better targeted customer marketing.



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SPENCERS

About the Company

Spencers Retail Limited is a multi-format food-first retailer providing a wide range of

quality products to discerning young customers - well-travelled citizens of the world, looking

out for authentic flavors and experiences in a fun-filled shopping environment.

Brand positioning Makes Fine Living Affordable embodies this approach, delighting

shoppers with the best products and services that enable a fine living at reasonable prices

while providing them with a warm, friendly and knowledgeable retail environment.

Part of the Rs. 9,000 crore RP-SG Group, we run about 200 stores (including about 30 large

format stores) across 45 cities in India, employing more than 7,000 people. As one of the

earliest entrants in the retail space in India, we have been instrumental in introducing Indian

consumers to the concept of organized retailing, becoming the countrys first grocery chain

back in 1920, and offering the joys of hypermarket shopping in 2001.

A food first retailer we offer both fresh and packaged foods as well as groceries.

Date of Establishment 1996

Revenue

Rs 1,251 crore (2011-12)

Address Spencer's Retail Limited, 7th Floor, 5 Clive Row,

Kolkata- 700 001

Branches Mumbai, Gurgaon, Ghaziabad, Lucknow, Calicut,

Hyderabad, Vizag, Vijayawada, Aurangabad Durgapur

and Kolkata

Management Team Vineet Kapila -President.



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Satya Srivastava - Senior Vice President -

Commercial

Nihar Ranjan Ghosh - Senior Vice President -

Human Resource

Karthik Kuppuswamy - GM IT & Supply Chain

Management

Indranil Guha - Additional GM - IT Integration

Market Share - Around 20% market share of total organization

Marketing Program

Spencer run a loyalty program to

Spencers Smart Rewards is a program designed to reward privileged

customers of Spencers like you, and to help make fine living affordable.

As a privileged customer, you can earn reward points when you shop at

Spencers. Thats not all, Spencers will launch exclusive promotions and benefits

for program members from time to time. So gear up for a lot more coming yourway.



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BENEFITS

by participating in the program you start earning points for every purchase you

make at spencers. thats not all you start earning points from day 1 of applying for

registration! to earn your points, just hand over your smartrewards card to the cashier every

time you shop at spencers.

for every rs.100 you spend at spencers, you earn 10 points.*

additionally, spencers will launch exclusive promotions for program members from time to

time which you can take advantage of. such offers when launched would be communicated

to you either in spencers stores or though the contact information you have submitted at

the time of registration.

Products

All brand under all product lines - Private Brands

Spencer's boasts of a wide range of private brand products that encompasses both foods as

well as non-foods FMCG category.

'Spencer's smart choice' is the leading instore brand which has a plethora of products ranging

from juices, noodles, cookies, honey, Air freshner etc. Spencer's also has the 'clean home'

range of home improvement products and 'Tasty wonders' range of snacks and impulse food

range.

Apart from this Spencers has very successfully launched its general mechandize products

under the brand name of MAROON which includes Non Stick, Hard Anodized, Home Plastic

and Foils.

Product Innovations



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Some Of the Innovative change in service & Change in product lead them to make the

market grabber.

INNOVATIONS

Throughout its long history (the first ever Spencers store opened in 1895), Spencers has

been a recognized and respected player in the Indian grocery business, synonymous with

quality goods and services, trusted by Indias exploding population of the upwardly

mobile middle class.

Spencers has continually helped reshape the retail landscape in India, introducing a host

of innovations to make shopping even more convenient and enjoyable for the consumer.

These include:

RETAIL DESIGN INITIATIVES

The Retail Design team helps Spencers deliver its brand promise in a way that is

sophisticated, but not snobbish. This results in differentiation without alienation of loyal

customers or loss of the brand equity acquired over the years.

Central to the retail design strategy is a unique brand position - Taste the World, derived

from the consumers own transition from a price-conscious purchaser to a global-minded,well-travelled citizen of the world, looking out for authentic international flavors and

experiences. Spencers has consequently evolved from being a preferred grocery retailer

to being a passport to a stimulating world. This is evident in:

Storefront Design the store entrance resembles that of an entrance arch, leading

in the shopper to a world that is welcoming and exciting

Interior Design to ensure that shoppers enjoy a warm and friendly ambience, an

upscale look and feel, the joy of exploring and the convenience of locating what they

want

Shopfit Design from chefs tables to signage aids, the emphasis is on attractive,

space-efficient, and low-maintenance presentation of modern, international goods

alongside local flavors and product experiences

Innovative Use of Materials, Finishes, and Lighting - from color-corrected

lighting warming up the foods and vegetables area, to carefully selected veneers and

textures that complement the attractive, color palette of bright orange, white, and Swiss



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coffee, our store interiors have a fresh, cheerful, and expansive feel

Graphics & Signage - shopping at Spencers is a visual treat, enhanced by bright

orange Heritage boards that tell the Spencers story, curved signage featuring the

signature Taste the World tagline, and category-specific color arches suspended over

zones and departments to provide visual relief and act as navigational aids

Originally rolled out at the Spencers hypermarket at South City Mall, Kolkata, the new

retail design program is being implemented at all stores.

VISUAL MERCHANDISING INITIATIVES

The Visual Merchandising program uses a mix of theatre and edutainment to depict

Spencers as a Food First retailer with a Taste the World mindset. This is evident in:

Feature Displays - Hotspots and focal points around the store carry thematic

product displays to welcome shoppers and give them the opportunity to pause and absorb

the ambience that constitutes a Taste the World experience, before continuing their

journey of exploration.

Presentation of Merchandise - Category-specific color coding (fresh green for

food, sophisticated violet for fashion, blue for electronics and multimedia, and red for

furniture and home goods) make for easy navigation, while visual metaphors of farm-

fresh and Taste the World drive home our brand promise. An Eiffel Tower and Big

Ben here, a Chinese pagoda and Thai hut there - frame highly stylized displays at focal

points. Fiberglass models of aquatic food, breads, and cheese denote the fish counter and

delicatessen.

PRODUCT INITIATIVES



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All supermarkets and hypermarkets sell the same things, right? Wrong. While we do

stock popular ranges, we go to a great deal of effort to ensure you a unique range of

products

Gourmet Centre - Run by an expert Food Scientist cum Cordon Bleu Chef, our

food innovation wing researches world cuisines and develops recipes for a wide range of

popular and trendsetting dishes. These form the basis for developing our own range of

products, which include delicious cookies and sauces, pickles and jams. Ingredients for

these dishes are also retailed through our stores, for those whod like to prepare the dishes

at home.

Spencer's Patisserie - The Fresh Baked Daily -Spencers Patisserie is Spencers

LIVE Bakery offering simple, specialty and exotic range of freshly made bakery and

confectionery items. The recipes are authentic, gathered from the best ones from all

across the world, including Indian favorites. The products are an ideal mix of simple,

specialty and exotic varieties from all across the world, including Indian favorites. Be it

Focaccia-the Italian flat bread, Baguette-the French classic, Spicy Salsa Picante Bread-the

Mexican twist, Masala Bread-pure Indian, White Bread-the simple one, Multigrain &

Whole Wheat Bread-for the health conscious are some of the breads. Hot Puffs, the dry

fruit cakes, Exotic cookies , mouth-watering cakes and pastries like Blueberry Cheese

Cake, Trio of Chocolate ,Black Forest cater to all.

Gourmet store - Kolkatas first Gourmet store is spread over an area of 1500 sq.

ft. It is has more than 4000 products to choose from and offers the finest ingredients of

gourmet cuisine and recipes to guide in the making of lip smacking delicacies from across

the world.

The store offers a wide range and assortment of gourmet breads, biscuits, 500 different

types of beverages, chocolates, 100 variants chilled & frozen food items, 200 variants of

300 types of cheese, cold-cuts, 60 variants in vegetarian and non-vegetarian convenience

foods, exotic and organic fresh fruits and vegetables, 300 types of pastas and noodles, oils

and vinegars. The products serve as ingredients to cuisines of Thailand, China, Indonesia,

America, Chile, Argentina, Italy, France, Spain, Sri Lanka and UK to name a few.

If you want to taste the world then a visit to Gourmet Centre at Spencers, South city

hyper is a must



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Wine & Spirits - Wine ignoramuses or aficionados we cater to both, with a

wide range of wines expertly selected from as many as 181 countries. Spencers was, in

fact, the first Indian retailer to offer a selection of Wine & Spirits in its stores, and the

first to present an in-store wine and cheese tasting experience to shoppers.

Meat, Chicken, Fish - our counters for fresh non-vegetarian items truly represent

the finest fresh cuts a shopper can get. Seafood lovers, be sure to take your pick from the

live fish-tanks on display.

Edutainment Booklets Want to serve wine but not sure how? Want a recipe for

preparing cheese fondue? Curious to know why organic food is supposed to be better for

you? Pick up a booklet and find out. From the story of olive oil to the origins of cocktails,

these tell you a little more about the products on offer and how to use them.



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STORE EVENT INITIATIVES

In-store event initiatives ensure that a visit to Spencers is always a memorable

experience.

Live Kitchen - Live Counters with Master Chefs preparing gourmet delights are

always popular at buffets we brought the concept to our stores in the form of the

Spencers Chef Corner, a first-of-its-kind in-store experience that involves customers

even as it showcases the ingredients displayed in our Specialty Bays. From Salads to

Sushi, from Pastas to Satays and from Cheese Fondue to Cool mocktails,Spencers Chef

Corner gives customers an opportunity to learn more about their favourite world

cuisines.

Modern Menu Footsore and still not done with your shopping? Stop by at our

food court and treat yourself to a shake, swirl or savoury.



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Make Unique

DIFFERENTIATORS

In the Indian milieu, there are only two routes to survival discounting and

differentiation. Most retailers choose to play the price game. We, however, preferred to

focus instead on establishing ourselves as the preferred shopping destination for

discerning young customers looking for a range of quality products that let themparticipate in a global lifestyle.

Our brand positioning Makes Fine Living Affordable embodies this approach,

delighting shoppers with the best products and services that enable a fine living at

reasonable prices while providing them with a warm, friendly and knowledgeable retail

environment.

The following characteristics distinguish the Spencers brand and create memorable 360

shopping experiences for consumers:

Products we offer the widest range of food and

lifestyle (fashion, home, entertainment) brands, with a

special expertise in food

Quality we lay a huge emphasis on all-round

quality: in products, stores, service standards, and

customer engagement programs and that too since our

inception at 1863

Heritage we are Indias oldest retailer, with many firsts to our credit

Multiple Formats from daily to weekly and specialty shopping, we fulfill every

need and provide maximum convenience

Promotions we seek to offer the right products at the right time at the right

price, with promotions carefully designed to suit the buying cycle and shopping basket of



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the consumers

Brand Imagery our stores and staff seek to make our customers feel right at

home, being international, Gucci Outlet contemporary, accessible, empathetic and trusted



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Structure of Business

Spencers follow the two type of format for retailing

FORMATS

As the pioneer in organized food retailing in India, the modern-day Spencers started

operations back in the early 90s, in South India. We run more than 200 stores across 35

cities in India.

Currently, we offer customers two retail store formats:

1. Convenience stores, called Spencers

2. Hypermarkets, called Spencers hyper

Spencer's are neighborhood stores that cater to the daily and weekly top-up shopping

needs of consumers. Ranging from 1,500 to 15,000 sq. ft. in size, they stock, at minimum,

an assortment of fruits and vegetables, food and non-food Fast Moving Consumer Goods,

staples and frozen foods. The larger of these stores, having a floor area of more than

10,000 sq ft sometimes offer a selected range of baked, chilled and frozen foods;personal and home care products; baby care; basic apparels and electronics and

electricals.

Spencer's hyper are megastores, which combine a supermarket with a department store.

At least 15,000 sq. ft in size, they stock, on average, 70,000 items, giving shoppers

fantastic deals across food, fashion, home and entertainment all under one roof.

Spencers hyper are destinations for more than just shopping. Country and theme

festivals, the Spencers Chef Corner with master chefs showing you how to prepare exotic

dishes, Modern Menu our in-store food court, wine or cheese tasting sessions theres

always something extra happening at a Spencers hyper.



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Brand Extensions -- Expansion

Retail chain Foodworld has been bought over by the RPG group. All stores will be rebranded

under the Spencer's banner once formalities are completed.

Some of the brands are own by the Spencers,

OWN BRANDS

Private Brands in Spencers offer a wide range of products from food, personal care,

fashion to home utility items. Spencers Smart Choice, Tasty Wonders, Clean Home and

Maroon are some of our brands which host a varied choice that fulfils almost all needs of

a modern household. Rice, pulses, whole spices, dry fruits and nuts, sauces, instant

noodles, breakfast cereals, honey, breads, beverage, wafers, pickles, jams and cookies- to

name a few in our food range. While our personal care range covers face wipes, tissues,

baby needs, hand wash etc. Detergents, dish wash, toilet cleaners, floor cleaners support

the home needs. Whats more- our pickles are customized to regional flavours as well.

Our South Indian range of pickles has a wide assortment catering to regional tastes.

Maroon is a brand for premium home care solutions. From cooking to serving- Maroon is

your complete kitchen partner. From a range of premium storage and kitchen utensils, to

beautifully designed melamine ware and foil wraps, you will also find smart backpacks

and convenient travel accessories.

Fruits and Vegetables. Another category where our Private Brand Spencers Natures

Best offers you freshly packed greens which include some select exotic herbs and

aromatic ingredients.

In fashion, we have choices, both contemporary and classic. Sporty or stylish, as you

prefer. Office or occasion-specific formals, casuals for lounging or leisure, and

accessories like leather items, junk jewelry and footwear to complete the look. Trendy

designs in comfortable fits and cheerful colours, to express personal style. Some of our



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popular labels gucci outlet are Island Monks and Mark Nicolas (both for men and

women), Asankhya (womens ethnic wear), Scorez (sportswear), La Bonita (footwear).

Your quest for fashion ends right here.

All our private brand products are conveniently priced and come with a promise of great

quality. All these brands and products are available in all stores.

FMCG food and non-food

FMCG food only..currently in breakfast cereals, snacksand savouries

Home Essentials

Home cleaning products

Range of stationery range

Ethnic wear for women

Casual wear for both men and women

Formal wear and footwear for men

Sportwear for men and women



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Kidswear

Footwear for all

Fashion Accessories



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Walmart

The company was founded by Sam Walton in 1962, incorporated on October 31, 1969,

and publicly traded on the New York Stock Exchange in 1972. It is headquartered in

Bentonville, Arkansas. Walmart is also the largest grocery retailer in the United States. In

2009, it generated 51 percent of its US$258 billion sales in the U.S. from grocery business. It

also owns and operates the Sam's Club retail warehouses in North America.

Walmart has 8,500 stores in 15 countries, under 55 different names. The company

operates under the Walmart name in the United States, including the 50 states and Puerto

Rico. It operates in Mexico as Walmex, in the United Kingdom as Asda, in Japan as Seiyu,and in India as Best Price. It has wholly owned operations in Argentina, Brazil, and Canada.

Walmart's investments outside North America have had mixed results: its operations in the

United Kingdom, South America, and China are highly successful, whereas ventures in

Germany and South Korea were unsuccessful.

Key people: S. Robson Walton, Chairman

Mike Duke, President/CEO

Revenue: US$ 446.950 billion (2012)

Total equity: US$ 71.315 billion (2012)

Subsidiaries: Asda, Sam's Club, Seiyu Group, Walmex

Businesses: Apparel/footwear specialty, discount store,

cash & carry/warehouse club, discount department store,

hypermarket/ supercenter/ superstore, supermarket



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Walmart's brand Positioning

There is no doubt Walmart is the best-positioned global retailer. We believe that we

have all the pieces in place to build on our success and deliver value for our customers and

shareholders again this year. We continue to strengthen our next generation Walmart efforts,

investing in people, technology, innovation and infrastructure. It is rooted in our culture to

stay out in front of change. The world moves more quickly each day, and we aim to be a the

forefront of bringing about change in retail, both in our stores and through e-commerce.

Five key strategies:

1) Developing our people;

2) Driving the productivity loop;

3) Winning in Global e-Commerce;

4) Reinvigorating our customer-focused culture; and

5) Leading on social and environmental issues.



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Walmart's brand extension:

WalMart is the largest retailer in the world, and its headquarters is located in

Bentonville, Arkansas. The group includes WalMart discount stores, WalMart Super Centers,

Bud's Discount City stores and Sam's Club stores.

The enormous WalMart discount stores are large stores that offer a huge range of

products at floor prices, such as household goods, clothing, appliances, sports equipment,

tools, garden utensils, automotive products, pharmaceuticals and nutrition. Sometimes you'll

also find gasoline, a hairdresser or even an optician.

The WalMart Supercenters combine the advantages of traditional discount stores

with the extended service of a supermarket. Bud's Discount City stores are large department

stores, that provide about three quarters of the total Walmart range. The remaining 25%

consists of sell-out lots, overstocks and slightly damaged items, all of them with a substantial

discount.

Sam's Clubs are a combination of high storage capacity in a huge warehouse, and

retail trade. Customers purchase a Sam's Club membership card, and can then buy larger

quantities and more expensive equipment than in a regular Walmart, but at even lower prices.



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Marketing Strategy:

Walmart has been aggressive in reversing it is 7 consecutive quarters of same store

sales declines with a variety of marketing tactics. Walmart's Grocery business continues to bea growth factor for their company's business strategy and they are rapidly embracing social

media and developing mobile strategies at a rapid clip.

Merchandising

Walmart Broadened their Product Assortment (adding back products they cut back)

along with a simplified Ad Match Guarantee with Low Prices Every Day on Everything.

Walmart introduced Christmas Price Guarantee, virtually eliminating the risk of buying

something at Walmart only to find it for less elsewhere. Walmart will issue a gift card for the

difference IF you do find an item cheaper elsewhere.

Addressing the cash crunch of their customers AND avoiding a mass "cutting back" on

purchases with Walmart Christmas Layaway plan.

Smaller Format Stores and Local Focus

Go local and small format with their 10,000 sq ft Walmart Express and

launching Walmart Express in a Chicago food desert..

Focusing on more food and finding more locations, at approximately 50,000 sq ft with

Walmart Neighborhood Markets

Walmart's Social Media and Mobile Strategies

Creating a local presence in their consumers mind along with a micro-merchandising

strategy at the store level with My Local Walmart Facebook.

Making Walmart "virtual" to be with the customer anytime and anywhere launching

new Walmart Shopping Apps.

Walmart Mobile Marketing Strategy - Getting Close to You through Your SmartPhone.

So I was not surprised when I read in StoreFrontBackTalk about Wal-Mart's latest

mobile acquisition - Grabble.

http://walmartstores.com/pressroom/news/10573.aspxhttp://walmartstores.com/pressroom/news/10573.aspxhttp://walmartstores.com/pressroom/news/10732.aspxhttp://walmartstores.com/pressroom/news/10732.aspxhttp://foodbeverage.about.com/b/2011/08/09/walmart-express-a-peek-at-the-first-express-store-in-chicago.htmhttp://foodbeverage.about.com/od/Market_Updates/a/Connecting-The-Dots-On-Walmart_2.htmhttp://foodbeverage.about.com/b/2011/11/11/walmar-is-watching-you-walmart-launches-new-mobile-apps.htmhttp://foodbeverage.about.com/b/2011/11/11/walmar-is-watching-you-walmart-launches-new-mobile-apps.htmhttp://foodbeverage.about.com/b/2011/11/11/walmar-is-watching-you-walmart-launches-new-mobile-apps.htmhttp://storefrontbacktalk.com/e-commerce/what-wal-mart-didnt-say-about-its-magic-pos-box-acquisitionhttp://storefrontbacktalk.com/e-commerce/what-wal-mart-didnt-say-about-its-magic-pos-box-acquisitionhttp://walmartstores.com/pressroom/news/10732.aspxhttp://foodbeverage.about.com/b/2011/08/09/walmart-express-a-peek-at-the-first-express-store-in-chicago.htmhttp://foodbeverage.about.com/od/Market_Updates/a/Connecting-The-Dots-On-Walmart_2.htmhttp://foodbeverage.about.com/b/2011/11/11/walmar-is-watching-you-walmart-launches-new-mobile-apps.htmhttp://foodbeverage.about.com/b/2011/11/11/walmar-is-watching-you-walmart-launches-new-mobile-apps.htmhttp://storefrontbacktalk.com/e-commerce/what-wal-mart-didnt-say-about-its-magic-pos-box-acquisitionhttp://storefrontbacktalk.com/e-commerce/what-wal-mart-didnt-say-about-its-magic-pos-box-acquisitionhttp://walmartstores.com/pressroom/news/10573.aspx


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Well, just think for a moment. If the point of sale system can send a receipt to your

phone, isn't it possible that the data pipe goes the other way and it can receive data from your

phone? Not so boring now?

Walmart's Retail Marketing Strategy

Walmart apparently wants to connect with their customers seamlessly through social

media, My Local Walmart and mobile marketing. Connecting at the POS just means Walmart

has what is called Proximity Technology to connect with your phone, probably through Blue

Tooth.

Their Walmart Shopping App has the future potential to direct you through the storebased on your shopping list... that happens when they have these mini black boxes throughout

the store to know where you are to tell you where to go. Real time tracking of consumer

behavior.

Well they know how long you were at the store, total purchase amount, etc. It is the last

point of contact with the consumer before they leave and I am not sure exactly how they

leverage this. I hope to connect with Evan so we can bounce around some ideas in a future

article. In the mean time I will continue to connect the dots at Walmart.

Offering a broad assortment with even lower prices

Meeting local needs and leveraging global resources



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SWOT Analysis

Strengths

Wal-Mart has an abundance of strengths which is obvious due to its incredible

success. Wal-Mart is the largest employer in the United States and the company is one of the

few places left for people to get a decent job without a college education. Wal-Mart also has

the second largest net sales in the world. This incredible number of sales is due significantly

to Wal-Marts aggressive growth strategy. In 2003 alone they added 425 new stores all over

the world. An increase in customer demand for SuperCenters encouraged the company to

add 4,000 more. Overall they added 48 million square feet of retail space (Wal-Mart

Company Profile 6). They can also attribute their large amount of sales to the fact that theyhave stores all over the world. Their truly global presence is apparent in their operation of

around 1,350 Wal-Mart Discount Stores, 1,700 SuperCenters, 85 Neighborhood Markets

and 550 Sams Clubs in the United States, with numbers continuing to growand about

1,300 locations in Canada, Mexico, the UK, Germany, Asia and South America (Wal-Mart

Company Profile 5).

One of Wal-Marts competitive advantages is their remarkable logistics

system. They are able to ship merchandise from any of their numerous distribution centers in

order to provide the cheapest and most efficient route. They even have their own distribution

center for their online orders. The invention of sharing sales data with suppliers through

computer programs has allowed Wal-Mart to consistently keep their shelves stocked with

popular items. Technology in general is an unbelievable strength that Wal-Mart is able to

invest in to improve their company. Having a website has allowed for increased sales all

over the world. This not only provides convenience for customers, but with a logistics

system like the one Wal-Mart has in place, online orders have become a breeze to fill.

Even though Wal-Mart has been criticized for their low wages, they are actually doing

a lot of good for lower income people. They can save a family about $1,000 a year with their

low prices (Wal-Mart Storm 3). Wal-Mart can beat out many competitors with their

aggressive pricing strategy. They have the ability to cut prices on some products, such as

toys, by thirty percent in order to stimulate more sales. Wal-Mart has even been able to lure

in higher-income customers when they open store in more urban areas. Since Wal-Mart has

become the nations largest food retailer, people from all income levels are shopping there for



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their necessity items. They have even been working on a more upscale appearance of their

stores to attract these customers. The service that Wal-Mart offers to its customers is a great

advantage as well. They have a strong image that it is a friendly and helpful place to shop

where people are always willing to make your experience a good one. The added incentives

are the constant price rollback, as well as the store-within-a-store. A great deal of Wal-

Marts success can be attributed to the fact that the company was based on identifying,

knowing, and understanding what exactly customers want from a retailer.

A few final strengths are linked to the public criticisms that Wal-Mart has

been facing. They are paying particular close attention to environmental issues and have

vowed to increase use of renewable energy, reduce waste and carry environmentally

sensitive productsWal-Mart will soon be selling baby clothes made using organically

grown cotton and has plans to improve its truck fleet efficiency by twenty-five percent in the

next three years (Two Public Relations 3). Wal-Mart has also recently been pushing for a

higher minimum wage, a step that is surprising to many other retailers in the industry.

Weaknesses

In the eyes of some of the general public, Wal-Mart has weaknesses that affect not

only their image, but the lives of other people. Some view Wal-Mart as a retailing giant that

has taken over the retail industry. Because of Wal-Marts low prices and well-known name,

they have been able to capture the sales of an unbelievable number of consumers, and have

therefore made it extremely difficult for small retailers to survive. Ethical shoppers, those

who are concerned with the well-being of small retailers, are angry at the monopolizing

power Wal-Mart has been able to gain in the past few decades. Most small shops have been

forced to close due to lack of sales. Some people refuse to shop at Wal-Mart because of these

issues. This poor image that Wal-Mart has in some peoples eyes has taken a toll on its stock

price as well.

Many environmentalists are concerned with the large scale buildings that are not

sensitive to the environment. These buildings also cause a problem of traffic pollution and

congestion which can damage small communities. The employees of Wal-Mart can suffer a

great deal as well. Many receive only poverty-level wages and horrible health care benefits.

Problems with these healthcare benefits lead to employees applying for public aid, which in

turn means that taxpayers are the ones paying for Wal-Mart employees healthcare costs



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(Wal-Mart Storm 2). Wal-Mart has been accused of discriminating against female

employees and violating child labor laws. Because of these criticisms, employee morale has

been decreased as well.

Wal-Mart sometimes has a disadvantage in the location of their stores. Although

Wal-Mart has grown and expanded a great deal into the international market, they still do not

have a large part of the European market. They are only present in the UK and their

competitors are gaining in the other surrounding countries. Wal-Mart also needs to consider

the consequences of placing their stores too close together. Instead of increasing the volume

of products per store, they open another one. Wal-Mart has already been facing a problem

with a decrease in Saturday store sales. A lack of products, as well as a decrease in the

quality of them, may be attributed to this loss of sales. They have also been said to have poor

presentation and marketing of products on the floor.

Price deflation is a serious dilemma that Wal-Mart and many discount stores are

facing as well. They often buy too much of one product and then have to put it on sale or

clearance in order to turnover the merchandise. Instead of increasing sales with low priced

items, Wal-Mart is actually lowering their profits. Consumers will only buy so much of a

particular product, even if it is priced low. Wal-Mart has a tendency to overstock and

therefore reduce gross margins when they sell products for reduced prices.

Also, after seeing disappointing numbers, Wal-Mart has repeatedly said that their

company would have increased earnings in the following quarter. Unfortunately, they have

not been able to keep this promise. Wal-Mart has a weakness in that they promise unrealistic

earnings, and then do not meet their expectations. This causes their stock to constantly

waiver. Even as the economy is rising, Wal-Marts stock is not necessarily seeing an

increase.

Finally, Wal-Mart can have problems with their flexibility. Since Wal-Mart sells

products across many sectors, such as clothing, food, or stationary, it may not have the

flexibility of some of its more focused competitors (SWOT Analysis 1). These

competitors have the ability to make changes and improve on a certain product lines when the

needs of their customers change. Wal-Mart, however, may have too much merchandise and

not be able to focus in on sectors that need to be improved. They also might not have the

available information, resources and know-how to make any changes.



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Opportunities

Since Wal-Mart is the largest retailer in the United States, it has a very good

opportunity to become the largest retailer in the world. They do not always carry a diverse

selection of products, so they could expand stores and merchandise to attract more customers.

An area that could especially be increased is their musical products. Wal-Mart does not carry

a large quantity or mixture of musical products such as instruments, and these can be high

profit items. Their image could be improved if they focused on having certain products, such

as CDs and DVDs available on their release dates.

Along the same lines, Wal-Mart could diversify their store types. They have

been successful with implementing Neighborhood Markets, and have even tried a mall storerecently. By focusing on a specific target market in a specific area, Wal-Mart could be the

number one retailer for everyone. They already have the available resources to try new store

types in new segments. It is also a logical step to increase and expand their current

SuperCenters, which are expected to increase sales dramatically in the future. The reason it

is expected to drive growth so affectively is SuperCenters are considered extremely high

growth stores, more productive than supermarkets and expecting to produce $500 in sales per

square foot (Wal-Mart Company Profile 8). Wal-Mart has yet to penetrate to many East

and West Coast food markets that occupy the top 50 (food retailing markets) (New

Competitors 1).

Another great opportunity is to improve on the areas which they have been criticized.

Wal-Mart has already announced a new health care plan which would increase benefits to

employees. They are very concerned with child labor laws, so they have said that they will

pay especially close attention to their overseas suppliers and their labor practices. Also, Wal-

Mart has the opportunity to work on improving the environment. They have such a large

image that any programs they support have the ability to produce tremendous results. By

working on solutions to these concerns they can help improve their image and increase their

market share.

Wal-Mart is such a major player in the retail industry that its decisions can

have an effect on the global economy, the environment and society. They have the ability to

slightly decrease the price of inflation because of their low prices. Also, due to their low

prices, there is an increase in wages in developing countries. For the United States, wages



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may be low, but in other places where manufacturing goods is cheaper, wages can actually be

considered high. By offering jobs and increasing the wealth in other countries, it is possible

for a substantial middle class to exist there and also increase Wal-Mart sales by having stores

in those areas (Wal-Mart Storm 4.

Continued international expansion is a huge strategic opportunity for Wal-

Mart. There is actually more opportunity for growth in developing countries and Asian

markets than there is in the United States (Variety Stores 8). Creating alliances and

licensing agreements are ways to move into these market segments. Other growth

opportunities include the Internet and improved supply chain management through radio-

frequency identification (RFID).

Threats

In order to keep prices low, Wal-Mart has had to cut costs in other areas. This

includes squeezing suppliers to offering their products at much lower prices. This has driven

competitors to do the same, which is causing profits to plunge downward drastically. A

threat to Wal-Marts image is the fact that for the few years after they open up a new store,

the wages of that county fall by three to five percent. Another threat is the rapidly growing

chain of Dollar General discount stores. These stores are able to open in smaller areas where

there are not enough customers to support Wal-Mart. The deep discount that is offered at

Dollar stores competes greatly with Wal-Mart.

The economy has a slight effect on Wal-Marts customers. They have an

advantage because the do offer cheap products that appeal to people in the time of a

recession. However, most of Wal-Marts customers do not directly experience most of the

governments attempts to stimulate the economy. Wal-Mart must work very hard to compete

in times of uncertainty. Another threat that Wal-Mart faces is brand-name recognition.

Although they carry and have increased their assortment of name brand products, most

consumers searching for name brand products will not look at Wal-Mart to find them. Wal-

Mart lacks a direct sales force to increase sales, whereas smaller retailers are focusing more

and more on this aspect therefore increasing their competition.

A major threat to Wal-Mart is the areas that they are expanding into may not

be easily attainable. It will be difficult for them to gain a good part of the market share of



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hard-line products such as home improvements. These areas have greater competition and

Wal-Mart does not have a clear cost advantage. International expansion may also create slow

or rough short-term growth. The international market is predicted to have excellent long-

term growth success, but these earnings may not be seen in the near future. Also, Wal-Mart

has huge expansion plans that are very public. If these stores do not open on time, or are

subject to delays and build issues, then analysts predictions will not be met and share price

may suffer (Wal-Mart Company Profile 9). On the contrary, if Wal-Mart successfully

meets all of its deadlines, investors may still be hesitant to invest in their company. In the

past, when retailers meet their expectations, and the economy is doing well, they tend to

under perform. Also, two of Wal-Marts main product lines, apparel and food, are very slow

growth sectors, and Wal-Marts dominating position in the industry may make investors

believe there is little room for the company to grow.

Wal-Marts image has been seriously threatened by the numerous accusations

of being bad for the country (Two Public Relations 1). The documentary movies that

are being produced could seriously hurt the companys sales, especially since they are being

premiered right as the holiday shopping season is starting. The shopping experience some

customers have at their store is also a threat to Wal-Mart. Customers are often complaining

about the long checkout lines and the insufficient quality of the products that are offered.

Once this idea is spread throughout a community, it is difficult to change the publics

opinion.

Also, RFID could possibly be a threat to Wal-Mart by ruining relationships

with suppliers. This system promises to do a great deal for supply-chain management.

However, there is always the possibility that technology promises more than it can actually

offer. Some manufacturers of low-cost consumer products may not see the advantages of

implementing such a system and not want to comply with Wal-Marts mandate for the new

system.

Documents

PBM Grocery