COVER STORY: Global ambitions
If the state of global retailing today proves anything, it's the prophetic impact of the refrain from one of Disney's most famous ditties: "It's a small world after all." Now more than ever, when you explore the latest consumer trends, operational challenges, and even competitors that are driving the food industry worldwide, you realize that some things aren't so different, whether you're in Houston or Hong Kong.
This might help explain why a growing number of lookalike supermarket concepts are turning up in different parts of the world -- and why more foreign-based retailers are looking to move onto American turf, following Tesco's example, say industry insiders.
But as any expert on international retailing will attest, food retailing is by no means a one-size-fits-all model, and companies from any home base must proceed with caution if they choose to branch out in new global markets -- or even attempt to borrow great ideas from other operators in other geographies.
"The key for implementing best practices [from other parts of the retailing world] is to know how to study, learn, and adapt best practices across markets," explains Neil Stern, partner at Chicago-based McMillan/Doolittle. "It has been relatively rare that concepts have traveled directly and completely from overseas to the U.S. without major revisions along the way."
Still, the visible influence that global trends have already had on U.S. formats shouldn't be underestimated, he points out. "Looking back, the European hypermarket was essentially a failure in the U.S., but Wal-Mart's further experimentation and eventual adoption [of the concept] to the supercenter has changed retailing history."
Countless grocers in the United States have successfully borrowed ideas from retailers in other countries. For instance, Bloom, the experimental concept launched in 2004 by Salisbury, N.C.-based Food Lion, features merchandising ideas and checkout setups inspired by its sister chains in Belgium and elsewhere. In the same vein, ethnic-oriented retailers such as Coppell, Texas-based Minyard Food Stores have implemented ideas taken from stores in their shoppers' countries of origin.
And even American innovation incubator Wegmans, based in Rochester, N.Y., has learned much from Italian-style merchandising at retailers such as Iper, notes Stern.
Today there's no shortage of global formats and merchandising techniques for grocers to study. Just some examples: European markets that showcase fresh produce and ready-made meals are flourishing, urban formats are popping up in increasingly dense Canadian markets, and Hong Kong and Bangkok are home to beautiful stores that highlight organic and natural foods, along with ethnic culinary delights.
This can work in both directions, of course: Wal-Mart has been involved in global innovation as well, as shown by one of its Supercenters in Brazil, which features a layout consisting of various "zones," such as the Beauty Center, Home World, and Organic World. Electronics World, being more male-focused, is placed near a coffee shop where men can make themselves comfortable during shopping excursions, according to Wal-Mart spokesman Kevin Gardner.
U.S. grocers are smart to keep their eyes on what retailers in other countries are doing, observers note. In many cases, those retailers are up against the same competitive threats -- and they could learn from the responses that many of their more progressive overseas counterparts have taken.
"Two areas of the store that demonstrate the greatest opportunity for improvement among U.S. retailers are fresh departments and the integration of pharmacy and over-the-counter goods with foods that relate to a healthy lifestyle," says Patrick Rodmell, managing director of Watt International, a global design firm based in Toronto.
Rodmell points to Boots -- a pharmaceutical, health, and beauty retailer in the United Kingdom -- for inspiration in health-and-wellness marketing.
"They do a great job with their customer loyalty card, the Boots Advantage card," he notes. "They really capitalize on it. One thing they commit to is the importance of special promotions. So when you go in a Boots store, there's a Point Promotion kiosk where you can get a personalized list. You'll also see shelf talkers in the store."
Another food retailer that's done an exceptional job with health-and-wellness education is Tesco, he says. "Last time I counted, they had upwards of 10 Tesco magazines in their stores which talked about lifestyle issues, food choices, and health."
Tesco has also been a leader in shelf-ready packaging, a progressive practice among European retailers, notes Anthony Ruback, principal at London-based Riverhead Consulting.
"In the U.K., shelf-ready packaging is becoming very much the norm," explains Ruback. "The benefits are considerable. Product presentation and planogram compliance are more disciplined, presenting clear item blocking on the shelf and facilitating customer purchasing. On the cost side, store labor and replenishment costs are reduced, and inventories are better managed.
"It will be interesting to see if Tesco's arrival in the United States will trigger a shift to shelf-ready packaging in other grocery sectors," he adds.
When it comes to fresh product presentation, Rodmell lauds Soriana, Mexico's second-largest supermarket chain, as well as San Antonio-based H.E. Butt Grocery Co. for its HEB stores in Mexico. "Soriana has done a pretty good job of defending their marketplace [against Wal-Mart]," he observes. "It's all about their focus on fresh."
As for HEB, "they're a great example of how an American banner has created a concept that resonates with the Hispanic consumer in Mexico," he says.
In the Canadian market, where Rodmell is based, several grocers are developing successful fresh-focused urban formats, particularly in Toronto.
"Sobeys has created Metro Market, a small-footprint grocery store that's very fresh-dominant and prepared-dominant. That has resonated extremely well with the urban consumer. And Longo's has created The Market by Longo's, an urban format in an office tower. I would describe it as a mainstream Mediterranean supermarket. The store captures the essence of the Mediterranean experience, but in a very un-intimidating way."
In recognition of its progressive design, Longo's was presented with a first-place NASFM Retail Design Award during this year's GlobalShop trade show.
According to Rodmell, the leading Canadian retailers are demonstrating a rather advanced segmentation strategy, whereas many U.S. retailers are just beginning to see the importance of segmenting formats for different demographic groups. That has helped them hang on in the face of competition from Wal-Mart and other formidable chains, he says.
Another area of the business that can help U.S. grocers win market share is branding, he observes. "Sainsbury's, for example, has created a differentiated brand experience. When you walk in their stores, you know where you are. In the U.S. you can go into many grocery stores where if you didn't see a sign on the outside, you might not know where you are."
The primary challenge for U.S. grocers is that their organizational structures lack integration between areas such as store design, advertising, merchandising, and private label, says Rodmell. "In the U.K. and now more in Canada, there's a central control system to manage all those elements to make sure everyone is singing from the same song sheet," he says. "It's starting to happen more in the U.S., but many retailers are still in that 'silo' mentality."
Sowing Wild Oats
Despite the room for improvement on the home front, however, some U.S. grocers do serve as inspiration in kind for food sellers overseas. One example is the exportation of talent, as is the case with Bruce Simon, who spent six years in store leadership roles at Austin, Texas-based Whole Foods Market. Simon was recently recruited by pan-Asian retailer Dairy Farm Co. to serve as general store manager for ThreeSixty, a new natural and organic concept in Hong Kong.
"My interest in supporting the growing movement of natural and organic foods across global markets has always been very strong," notes Simon. "When Dairy Farm approached me through a headhunter, I was intrigued and gratefully accepted the offer. Another strong reason for me to relocate is the idea of giving the opportunity for my 8-year-old daughter, Rudy, whom my wife and I adopted from China, to learn more about Chinese culture."
ThreeSixty, a 23,000-square-foot unit located in the Landmark shopping mall in Hong Kong's Central district, opened its doors in November, and since that time the store has attracted a lot of attention from the local market. It's the only retail food store in Hong Kong that sells certified organic milk, says Simon. The format's features include a prepared food hall called "Circle of Friends," and a wellness center staffed by experts in natural and homeopathic medicine.
"To date, Hong Kong's mature food retail market has been filled with basic commodity and gourmet brands, but has been devoid of a complete, wholesome, natural, Asian offering," says Simon. "ThreeSixty meets this need. This is an idea whose time has come."
In addition to carrying natural and organic foods, and environmentally friendly nonfood items, ThreeSixty also features conventional products as well as a variety of ethnic and artisan items. Shelf tags designate each item's distinguishing characteristics, plus the product's country of origin. The store's selection even includes a bona fide U.S. import: a selection from the Wild Oats private label line.
The ThreeSixty concept was designed to be an educational outlet, since organic and natural food is still an emerging business in Hong Kong, says Simon. To that end, ThreeSixty's mantra is "Changing the world one bite at a time." Shoppers can learn more via leaflets in the store, an in-store kiosk, friendly store associates, or ThreeSixty's Web site (www.threesixtyhk.com).
Bangkok and beyond
Another new store that bears some similarities to ThreeSixty is Central Food Hall in Bangkok, Thailand. London-based design firm Fitch says it created the 40,000-square-foot concept to be a "new kind of food experience store."
Catering to an audience of 80 percent local residents and 20 percent ex-pats, the store features a selection of food from around the world, as well as local, top-quality produce.
"The layout encourages shoppers to meander through vibrant displays of fresh food; watch fishmongers, butchers, and cheesemongers at work; talk to wine experts; smell freshly baking bread; and satisfy their taste buds with a selection of fresh food and drink counters," Fitch notes in a case study.
One of the store's most distinctive features is an area called "The Street," where shoppers can enjoy Thai street food cooked on the spot. There's also the Asian Corner, offering an 80-seat in-store eating area with its own outdoor verandah, serving Thai, Laotian, Vietnamese, Korean, Chinese, and vegetarian dishes.
Its nonfood offering, meanwhile, features a health and beauty zone with wide aisles and low, curved display units.
At the extreme of high-quality food retailing is Eataly, a concept in Italy focused on local foods and culinary education, and a follower of the so-called "slow food" movement, by which local foods are grown and prepared following humane standards and Fair Trade practices.
Owner Oscar Farinetti apparently has his sights on the U.S. market. According to an article in "The Atlantic Monthly," he plans to open a small Eataly (just 8,000 square feet) in New York City's Rockefeller Center next year, and may eventually open more units in New York.
Back home, meanwhile, an 118,000-square-foot Eataly opened in Turin at the end of January, in an old vermouth factory. Part of the store features specialty packaged goods and fresh foods, including fresh-baked breads, exotic meats, and exquisite local veggies and cheeses, while another area is dedicated to teaching and education. It also includes a formal restaurant and several smaller theme eateries.
Similar Eataly stores are scheduled to open in locations across Italy, suggesting that a trip there may be in order for U.S. grocers looking for clues to the next big thing in retailing.
This might help explain why a growing number of lookalike supermarket concepts are turning up in different parts of the world -- and why more foreign-based retailers are looking to move onto American turf, following Tesco's example, say industry insiders.
But as any expert on international retailing will attest, food retailing is by no means a one-size-fits-all model, and companies from any home base must proceed with caution if they choose to branch out in new global markets -- or even attempt to borrow great ideas from other operators in other geographies.
"The key for implementing best practices [from other parts of the retailing world] is to know how to study, learn, and adapt best practices across markets," explains Neil Stern, partner at Chicago-based McMillan/Doolittle. "It has been relatively rare that concepts have traveled directly and completely from overseas to the U.S. without major revisions along the way."
Still, the visible influence that global trends have already had on U.S. formats shouldn't be underestimated, he points out. "Looking back, the European hypermarket was essentially a failure in the U.S., but Wal-Mart's further experimentation and eventual adoption [of the concept] to the supercenter has changed retailing history."
Countless grocers in the United States have successfully borrowed ideas from retailers in other countries. For instance, Bloom, the experimental concept launched in 2004 by Salisbury, N.C.-based Food Lion, features merchandising ideas and checkout setups inspired by its sister chains in Belgium and elsewhere. In the same vein, ethnic-oriented retailers such as Coppell, Texas-based Minyard Food Stores have implemented ideas taken from stores in their shoppers' countries of origin.
And even American innovation incubator Wegmans, based in Rochester, N.Y., has learned much from Italian-style merchandising at retailers such as Iper, notes Stern.
Today there's no shortage of global formats and merchandising techniques for grocers to study. Just some examples: European markets that showcase fresh produce and ready-made meals are flourishing, urban formats are popping up in increasingly dense Canadian markets, and Hong Kong and Bangkok are home to beautiful stores that highlight organic and natural foods, along with ethnic culinary delights.
This can work in both directions, of course: Wal-Mart has been involved in global innovation as well, as shown by one of its Supercenters in Brazil, which features a layout consisting of various "zones," such as the Beauty Center, Home World, and Organic World. Electronics World, being more male-focused, is placed near a coffee shop where men can make themselves comfortable during shopping excursions, according to Wal-Mart spokesman Kevin Gardner.
U.S. grocers are smart to keep their eyes on what retailers in other countries are doing, observers note. In many cases, those retailers are up against the same competitive threats -- and they could learn from the responses that many of their more progressive overseas counterparts have taken.
"Two areas of the store that demonstrate the greatest opportunity for improvement among U.S. retailers are fresh departments and the integration of pharmacy and over-the-counter goods with foods that relate to a healthy lifestyle," says Patrick Rodmell, managing director of Watt International, a global design firm based in Toronto.
Rodmell points to Boots -- a pharmaceutical, health, and beauty retailer in the United Kingdom -- for inspiration in health-and-wellness marketing.
"They do a great job with their customer loyalty card, the Boots Advantage card," he notes. "They really capitalize on it. One thing they commit to is the importance of special promotions. So when you go in a Boots store, there's a Point Promotion kiosk where you can get a personalized list. You'll also see shelf talkers in the store."
Another food retailer that's done an exceptional job with health-and-wellness education is Tesco, he says. "Last time I counted, they had upwards of 10 Tesco magazines in their stores which talked about lifestyle issues, food choices, and health."
Tesco has also been a leader in shelf-ready packaging, a progressive practice among European retailers, notes Anthony Ruback, principal at London-based Riverhead Consulting.
"In the U.K., shelf-ready packaging is becoming very much the norm," explains Ruback. "The benefits are considerable. Product presentation and planogram compliance are more disciplined, presenting clear item blocking on the shelf and facilitating customer purchasing. On the cost side, store labor and replenishment costs are reduced, and inventories are better managed.
"It will be interesting to see if Tesco's arrival in the United States will trigger a shift to shelf-ready packaging in other grocery sectors," he adds.
When it comes to fresh product presentation, Rodmell lauds Soriana, Mexico's second-largest supermarket chain, as well as San Antonio-based H.E. Butt Grocery Co. for its HEB stores in Mexico. "Soriana has done a pretty good job of defending their marketplace [against Wal-Mart]," he observes. "It's all about their focus on fresh."
As for HEB, "they're a great example of how an American banner has created a concept that resonates with the Hispanic consumer in Mexico," he says.
In the Canadian market, where Rodmell is based, several grocers are developing successful fresh-focused urban formats, particularly in Toronto.
"Sobeys has created Metro Market, a small-footprint grocery store that's very fresh-dominant and prepared-dominant. That has resonated extremely well with the urban consumer. And Longo's has created The Market by Longo's, an urban format in an office tower. I would describe it as a mainstream Mediterranean supermarket. The store captures the essence of the Mediterranean experience, but in a very un-intimidating way."
In recognition of its progressive design, Longo's was presented with a first-place NASFM Retail Design Award during this year's GlobalShop trade show.
According to Rodmell, the leading Canadian retailers are demonstrating a rather advanced segmentation strategy, whereas many U.S. retailers are just beginning to see the importance of segmenting formats for different demographic groups. That has helped them hang on in the face of competition from Wal-Mart and other formidable chains, he says.
Another area of the business that can help U.S. grocers win market share is branding, he observes. "Sainsbury's, for example, has created a differentiated brand experience. When you walk in their stores, you know where you are. In the U.S. you can go into many grocery stores where if you didn't see a sign on the outside, you might not know where you are."
The primary challenge for U.S. grocers is that their organizational structures lack integration between areas such as store design, advertising, merchandising, and private label, says Rodmell. "In the U.K. and now more in Canada, there's a central control system to manage all those elements to make sure everyone is singing from the same song sheet," he says. "It's starting to happen more in the U.S., but many retailers are still in that 'silo' mentality."
Sowing Wild Oats
Despite the room for improvement on the home front, however, some U.S. grocers do serve as inspiration in kind for food sellers overseas. One example is the exportation of talent, as is the case with Bruce Simon, who spent six years in store leadership roles at Austin, Texas-based Whole Foods Market. Simon was recently recruited by pan-Asian retailer Dairy Farm Co. to serve as general store manager for ThreeSixty, a new natural and organic concept in Hong Kong.
"My interest in supporting the growing movement of natural and organic foods across global markets has always been very strong," notes Simon. "When Dairy Farm approached me through a headhunter, I was intrigued and gratefully accepted the offer. Another strong reason for me to relocate is the idea of giving the opportunity for my 8-year-old daughter, Rudy, whom my wife and I adopted from China, to learn more about Chinese culture."
ThreeSixty, a 23,000-square-foot unit located in the Landmark shopping mall in Hong Kong's Central district, opened its doors in November, and since that time the store has attracted a lot of attention from the local market. It's the only retail food store in Hong Kong that sells certified organic milk, says Simon. The format's features include a prepared food hall called "Circle of Friends," and a wellness center staffed by experts in natural and homeopathic medicine.
"To date, Hong Kong's mature food retail market has been filled with basic commodity and gourmet brands, but has been devoid of a complete, wholesome, natural, Asian offering," says Simon. "ThreeSixty meets this need. This is an idea whose time has come."
In addition to carrying natural and organic foods, and environmentally friendly nonfood items, ThreeSixty also features conventional products as well as a variety of ethnic and artisan items. Shelf tags designate each item's distinguishing characteristics, plus the product's country of origin. The store's selection even includes a bona fide U.S. import: a selection from the Wild Oats private label line.
The ThreeSixty concept was designed to be an educational outlet, since organic and natural food is still an emerging business in Hong Kong, says Simon. To that end, ThreeSixty's mantra is "Changing the world one bite at a time." Shoppers can learn more via leaflets in the store, an in-store kiosk, friendly store associates, or ThreeSixty's Web site (www.threesixtyhk.com).
Bangkok and beyond
Another new store that bears some similarities to ThreeSixty is Central Food Hall in Bangkok, Thailand. London-based design firm Fitch says it created the 40,000-square-foot concept to be a "new kind of food experience store."
Catering to an audience of 80 percent local residents and 20 percent ex-pats, the store features a selection of food from around the world, as well as local, top-quality produce.
"The layout encourages shoppers to meander through vibrant displays of fresh food; watch fishmongers, butchers, and cheesemongers at work; talk to wine experts; smell freshly baking bread; and satisfy their taste buds with a selection of fresh food and drink counters," Fitch notes in a case study.
One of the store's most distinctive features is an area called "The Street," where shoppers can enjoy Thai street food cooked on the spot. There's also the Asian Corner, offering an 80-seat in-store eating area with its own outdoor verandah, serving Thai, Laotian, Vietnamese, Korean, Chinese, and vegetarian dishes.
Its nonfood offering, meanwhile, features a health and beauty zone with wide aisles and low, curved display units.
At the extreme of high-quality food retailing is Eataly, a concept in Italy focused on local foods and culinary education, and a follower of the so-called "slow food" movement, by which local foods are grown and prepared following humane standards and Fair Trade practices.
Owner Oscar Farinetti apparently has his sights on the U.S. market. According to an article in "The Atlantic Monthly," he plans to open a small Eataly (just 8,000 square feet) in New York City's Rockefeller Center next year, and may eventually open more units in New York.
Back home, meanwhile, an 118,000-square-foot Eataly opened in Turin at the end of January, in an old vermouth factory. Part of the store features specialty packaged goods and fresh foods, including fresh-baked breads, exotic meats, and exquisite local veggies and cheeses, while another area is dedicated to teaching and education. It also includes a formal restaurant and several smaller theme eateries.
Similar Eataly stores are scheduled to open in locations across Italy, suggesting that a trip there may be in order for U.S. grocers looking for clues to the next big thing in retailing.