Global retail trends

Retailers around the world are expanding their own-brand efforts as one way to distinguish themselves from competitors and to offer better values to consumers. This is just one major trend that will impact on international retailing in the future.

Developing own-brands is a retail trend that a group of international retailers agreed on, including four chain retailers from Chile to China, and supported in part by comments from two American wholesalers, each serving smaller chains and independents in dozens of countries around the world. They held a panel discussion during the National Hardware Show® in Chicago.

(l-r) Ray Colman, Paul Ingevaldson, Dr. Li, Guillermo Aguero, Ron Beal, Steve Gilman and Matt Nannery

Panelists included Ray Colman of Ireland’s Woodies; Paul Ingevaldson of Ace Hardware; Dr. Li of OBI China; Guillermo Aguero, president and CEO of Chile’s Sodimac; Ron Beal, senior vice president of Orgill, Inc.; Steve Gilman, international director of B&Q: and Matt Nannery, acted as the moderator.

Besides private brands, the retailers agreed that the home continues to be a focus of “improvement” by consumers, though in some cases, it isn’t “Do It Yourself” but “Buy it Yourself”, with installation handled by others.

They also concur on the fact that home décor and housewares are growing in importance as merchandise categories. Housewares appear to be a stronger category for overseas retailers than for US-based home centre outlets, but lawn, garden and outdoor living categories are universally growing in importance.

Ingevaldson, senior vice president of US wholesaler, Ace Hardware, said one big difference in other countries is that stores in mall locations are successful, whereas hardware stores in US malls are almost non-existent.

All the panelists believe that retailers today need to make the front areas of their stores more attractive to women customers in order to draw them in. Colman, CEO of Woodies, claimed that 60% of its customers are women. Other panel retailers said their numbers were lower but still most important.

Both American wholesalers on the panel said that they are experimenting with new store designs and departmental identification to help their international customers compete with chains and attract more female customers.

Ace is developing departmental identification oriented to showing product uses, not product or category names, according to Ingevaldson. For example, paint departments are being called, “Color your Life” and plumbing areas designated as “The Water Works.”

Because the US dollar is so weak against the Euro and some other currencies, American-made products become very attractive to foreign retailers, who are seeking new and different products to differentiate their offerings from those of competing retailers.

International consumers especially like the prestige of buying a well-known American brand name. Dr. Fengjiang Li of OBI China reported that his company has been very successful with Kohler products in that country.

Concentrated retailing
Manufacturers must recognise that in most countries around the world, not just in Europe, the trend is towards three major chains dominating their markets. It already is true in the US (Home Depot, Lowes and Menards), and England with B&Q, Focus Wickes and Homebase, as well as in Switzerland with Coop Bau, Migros and Jumbo.

John Herbert of BHB addressing Worldwide DIY Council members

This is the prediction made by John W. Herbert, managing director of Germany’s home centre association, BHB, at the midyear meeting of the Worldwide DIY Council, held in Chicago prior to the National Hardware Show®.

Although it hasn’t happened yet in Germany, he predicted there will be such a shakeout in the next few years. It would have happened already had not a number of German chains aggressively expanded into other countries such as Poland, Hungary, Czech Republic and even Italy, where several have become strong players in each market.

Because of this industry consolidation, chains will be seeking new trading concepts and going after target groups of customers, as Home Depot is doing with its Expo Design centers and other retailing variations. Herbert said Expo is a great concept, which he thinks will be adopted by other retailers in other countries, in order to go after the higher-end markets consisting of well-to-do customers who won’t “do it themselves”.

Europe may be ripe for such ventures, he explained, because there is a definite trend to higher quality products and a desire among European consumers to focus on their homes as an integral part of their lifestyle. He also said there is a noticeable trend towards convenience in the European lifestyle, with shopping convenience and comfort an important consideration.

European home centers also are looking to increase their use of private brands. They see own-brands as one way to distinguish themselves from competitive stores.

The German home centre scene is particularly challenging, he explained, since sales have been relatively flat. The country, he said, is over-stored, but none of the firms wants to close any outlets for fear of losing market share.

In comparing European chains to retailing in the US, he said he was particularly impressed with American productivity, management and employee enthusiasm, and the industry’s “speed of action”. European home centres are not as quick to react and he warned that for some members, it will take some time for new concepts and ideas to be accepted.

In selling to overseas retailers, he urged Council members to be patient — and persistent. He cited his own experience as general manager of Knauber’s, when the idea of stocking ceiling fans was first broached to him. It took some time for Knauber to be convinced, but finally, they tried them, and now, he said, ceiling fans are stocked by all the chains in Germany.

He also pointed out that the US dollar’s weakness against the Euro gives members an excellent selling point. He noted, too, that members interested in the European market need to consider the two European shows devoted to hardlines — obviously, Practical World in Cologne, but he also mentioned the smaller DIY & Garden Show, which is held in London every January.

On the American home front, retailers of all kinds, including hardware/home centres, are trying to figure out how best to appeal to the rapidly growing Hispanic population, now a larger segment of US population than African-Americans. In 2002, they represented $580 billion in sales, which is expected to grow to $926 billion in four years. Very home-and-family-oriented Hispanics spend more than others on home-items, clothing, etc.

Kmart seems to be doing the best job of catering to consumers of Spanish heritage by issuing Spanish-language inserts and with Spanish signs in some sections of their stores. A great many small Spanish food stores have been opened since most regular supermarkets do not target Hispanics as a group. This is an important market segment which has not fully been recognised by most retailers.

New product selection

A panel of American retailers picked dozens of new products from among the thousands on exhibit at this year’s National Hardware Show®

For more than 30 years, Do It Yourself Retailing magazine has been asking a group of successful retailers to walk the aisles and pick out exciting new products which they think offer big sales potential. Called “Retailers’ Choice”, these products are then presented to the industry in the magazine’s November issue, so the thousands of retailers receiving the magazine can benefit from the committee’s hard work.

This year, their selections were presented at a luncheon meeting during the Chicago show so retailers wanting an early look could hear the presentations and then dash out to the show floor to check them out themselves.