Posted tagged ‘consolidation’

Have we seen this challenge before?

March 20, 2009

“David, there is nothing new under the sun.”

And with that brief message, my mentor Carl, shared the first lesson about this challenging issue.

I am very fortunate to have Carl as my mentor. Besides being blessed with remarkable business acumen and a wealth of experience leading companies and divisions in the food, electronics, housewares and fashion industries, Carl possesses the most important traits that a mentor must have. He is a very giving person with a strong desire to share, better others and educate.

Carl went on to explain that in the 1940’s and 1950’s, the food industry experienced the very same issues that these houseware companies are going through now. When his mother shopped at the local grocer,  he made the decision about what brands she could be purchasing. Choices were limited. Yet, less than a generation when his wife shopped, she was the one who chose the brands.

What had occurred in the intervening years was a change in how food was sold. The grocer of the past was replaced by the retailer. This new brand of retailer stopped being a merchant and became more of a landlord. In reality, he was selling space and his “tenants” were the products that he sold.  Those who paid more for their position and location received more favorable space.

To compete, the supermarket owner had to leverage a different kind of appeal, one of better selection and lower price. Their key measure was the return on investment against cost per square foot. Their goal was to stock the floor with products that gave them the best return.

There were some exceptions and those retailers although new at what they were doing, learned about these exceptions very quickly. There were certain items that, even if they didn’t meet the ROI criteria, still had to be carried in the store. If these staples were not in the store, the consumer would have to go to another store. If the consumer did, the storeowner risked the possibility that the consumer would begin to shop in another place for not only those staples but for other items as well.

Sounds familiar, huh? A large store model replacing the mom and pop stores and more items competing for the attention of the consumer. The retailer controls the space and influences price and margins. Customers flock to these stores for convenience and better price.

So the first lesson then was that there is historical precedence to this dramatic change. In our next post, we’ll learn about the methods that Carl used to meet this challenge in the very same industry that our housewares executives are working.

%d bloggers like this: