Professors Martin and Graham Clarke School of Geography, University of Leeds. Copenhagen, October 2011

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1 Professors Martin and Graham Clarke School of Geography, University of Leeds Copenhagen, October 2011

2 RIBEN is one of 4 Capacity building Clusters created, following a national competition, by ESRC to encourage closer dialogue and collaboration between social scientists and UK industry Aim: to produce a new generation of university researchers work on industry relevant topics Involves 3 leading retail research universities -Oxford -Southampton -Leeds

3 Management Team Principle staff: -Professor Neil Wrigley Director -Professor Michelle Lowe Assistant Director -Professor Martin Clarke Associate Director -Dr Jonathan Reynolds Associate Director Advisory Group 12 Retail Industry and Government Department members chaired by Kevin Hawkins, ex-director of the British Retail Consortium

4 RIBEN will receive core support from ESRC over 5 years ( ) valued at 1.45 million sterling This supports: - 8 Knowledge Transfer Partnerships (KTPs) - 15 ESRC CASE doctoral awards - 15 vouchers for SMEs - 10 business placement wards for PG students at other British Universities However, no FEC support or any admin or travel and subsistence funds this has been seen as a major constraint on the project

5 Collective Research Interests - Retail innovation and entrepreneurship - Retail competition, regulation, planning and development - Retail marketing and retail information/network planning - Internationalization and retail performance in the global economy - Sustainability - CSR and responsible/ethical sourcing - E-commerce and multi-channel retailing

6 Why Retail? - big sector of the UK economy, generating 10% of GDP and 11% of employment - something the UK is good at e.g. Tesco s, Marks and Spencers benchmarked by glocal best practice - Historically, relatively weak links between academia and practitioner compared with other sectors, such as engineering, medicine, aerospace - Part of this can be explained by different time lines that both parties operate on: retail weeks/month, academia years! - Dynamics of the industry changing rapidly e- and t- commerce, consumer choices and profiles changing, etc - In the UK over past 3 years many household brands have disappeared Woolworths, Thresher, Oddbins, Habitat etc. More to follow

7 Factors Generating Retail Turbulence & Market Opportunity New Entrants (start-ups) - Competing Head-to-head with Established Players Competition In All Sectors Competition is Fierce and Increasing Consumer Power Consumers More Demanding Than Ever New Delivery Channels & Technologies - Telephone - Internet - WAP/SMS - Digital TV RETAIL CHANGE Diversification Players Moving Into New Sectors - Supermarkets - Banks Deregulation Markets being Opened Up Globalisation Traditional geographical barriers breaking down Disintermediation - Manufacturers Aiming to By-pass Intermediaries To Reduce Costs

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9 What are the factors that have driven retailers to look outside their home markets? Home market saturation and the lack of new locations provide constraints on growing the business? Emergence of the Euro(global) consumer driven by association with global brands McDonalds, Toys R Us, Nike, Adidas, Apple Entrepreneurial vision: the example of KwikSave in New Zealand Increased margins, lower costs in some markets e.g Aldi generate 6% margins in the UK compared with 2% in Germany, Tesco s costs in Eastern Europe a fraction of those in the UK

10 First US outlet in California in 195? Growth of business based around a franchise model reduced need for capital, low risk First UK outlet in the UK in1974 Woolwich, South East London By outlets outside the USA (66 in Tokyo) By outlets in 120 countries Business model based on a simple but consistent offering all franchisees receive 3 months training at Hamburger University in Chicago

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13 Serve existing customers abroad e.g Marks and Spencers? (cultural similarities) Recognise global centres (fashion) such as Paris, London, New York, Tokyo, etc More relaxed planning environments e.g Reagan s lift of market share limits in the 1980s Economic growth areas (China, SE Asia) Necessity to grow

14 Growth through acquisitions and organic growth 1994 Global Hungary; 1995 Savia (8m sterling) Poland; 1996 Kmart (77m sterling) Czech Republic By 2008: stores in Hungary in Poland inthailand S.Korea Japan - 79 China USA

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18 Why? 1. Push factors: Home saturation? Fiercely competitive in Europe 2. Pull factors English speaking/culture (Ahold?) Weak structure of US market Prior to 1980 anti-trust legislation restricted market share of big supermarket groups : Kroger 5.1%, American 4.7%, Safeway 3.2% Removal of legislation results in massive shifts in the market place (15 out of top 20 retailers subject to LBOs) Opportunities for non US retailers to enter market

19 60% sales/profits overseas Buy distressed chains in NE USA - Purchase of Stop & Shop $2.9bn (176) - Purchase of part of Giant Also massive expansion in to Central and South AmericA

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22 Tries to adopt UK model of retail power: JIT and rapid new store growth 1987 Pays $287m for Shaws in NE USA Buys 20% of Giant 1996 (zero debt; 33% share of Wash/Balt.) Expands in to NJ, Pennsylvania Plans for Giant buyout ($2bn) 1998 Ahold purchase Giant

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24 Then NJ, SE Pen. Plans for Giant buyout $2bn: BUT Ahold purchase Giant - Sainsbury buy Star markets $298m (57)

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27 1946 Ist store 1962 large stores (94000 sq ft) 1970s Go Public 1988 Supercenters ( sq ft) Spoiler tactics in rural USA: walmart/

28 $US Billions Source: Wal*Mart 2000 Annual Report: $400bn

29 discount; 500 new supercenters in the US International 380 new stores Plans to open 80m sq ft in 2007 (Asda=18m in total) 2010 In the US operate 4300 stores (500 new stores in that year alone)

30 Brazil 434 Canada 317 Chile 252 China 279 India 1 Japan 371 Mexico1,469 United Kingdom 371 International Total 4,112 Grand Total 8,416

31 1997/98 21 stores from Wertkauf, 74 from Spar: Price war target? Metro? France? Carrefour/promodes merger 1999 Target? UK? Asda! 6.7bn in June 1999

32 New store openings (organic) Low risk/easy exit More market research

33 Merger: less common but lower risk Acquisition: more likely but higher risk, greater returns!

34 Joint ventures Darty & Kingfisher (management expertise & inc.buying power) Strategic Alliances Wal-Mart and Cifra (more formal)

35 Franchise: fast growth/low cost/local expertise Body Shop (master system), Benetton, Next, Mothercare M&S: remember Ito Yokado!

36 Key Questions are How to grow in int. mkts Where to grow? Fierce battles in the future! But! Intn. not always successful!