coles department store

Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 1 Entry Number: JBA-07-0043 Question 12 ‘The retail lines between stores are blurred; coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Word Count: 3986 Entry Number: 2007-0043 Kelly Willingale Simplot NSW Index: 1.0 Executive Summary ……………………………………………………………………. 2.0 Introduction …………………………………………………………………………….. Page 3 4 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 2 Entry Number: JBA-07-0043 3.0 What is Channel Blurring……………………………………………………………… 3.1 The Channel Blurring Process ……………………………………………………. 4.0 Drivers of Retail Channel Blurring…………………………………………………… 4.1 Supermarket Drivers………………………………………………………………. 4.2 Specialty and Department Store Drivers ………………………………………… 4.3 Supplier Drivers …………………………………………………………………… 4.4 Consumer Drivers …………………………………………………………………. 5 6 7 7 10 13 16 5.0 Paradigm Shift across Retail Channels – Implications for the Future ……………… 18 6.0 Conclusion ……………………………………………………………………………… 7.0 References ………………………………………………………………………………. 20 21 1.0 Executive Summary Channel blurring can be described as „expanding the definition of traditional markets‟. It has evolved over time with retail channels continuing to sell more products that are not within their traditional forms. Channel blurring Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 3 Entry Number: JBA-07-0043 is not a new phenomenon. Discount variety stores were selling general merchandise and food in Australia since the 20‟s, when George J Coles began operations in Victoria. The channel blurring process is composed of three main drivers: retailers across multi-channels, suppliers and consumers. Each component of the process interact to affect market conditions. By penetrating new categories, retailers can achieve increased sales growth and increased store traffic by becoming a shopping destination for customers. Extending product range into less traditional areas is also a response to consumer demands for convenience, ease of shop and variety of choice. For suppliers, channel blurring has created more distribution points for products, while also increasing product penetration. Be becoming multi channel operators, suppliers are less reliant on a particular channel for sales growth. With wider product choices and more stores offering an extended range, shoppers have more alternatives than ever. This may lead to less store loyalty as consumers shop for stores that cater to all their needs in one stop. The importance of understanding and responding to consumer demands will increase as channel blurring intensifies. As retail channels continue to be less-defined over time, there will be more challenges for retailers and manufacturers in understanding who their shoppers / consumers are and what the purpose of their visit is. Investment in long term planning of core competencies and redefining the store format will be advantageous to all players in the retail sector. Retailers and suppliers will also need to stay close to their consumers and continue to deliver alternatives to match demands in this very dynamic industry. 2.0 Introduction The Australian retail industry continues to experience channel blurring, a phenomenon that it set to continue. Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 4 Entry Number: JBA-07-0043 Channel blurring has occurred as a result of various influences from retailers, suppliers and consumers. Retailers are seeking growth and increased store loyalty, while suppliers are increasing distribution of product into new markets. Consumers are also enjoying wider product variety and convenience from having to shop at fewer stores to acquire their desired purchases. Channel blurring is not limited to the traditional supermarket channel, but also specialty stores such as pharmacies and department stores. It continues to be a challenge for retailers and suppliers, as the industry continues to look outside their traditional formats by penetrating new categories. In this research, we will investigate the retailer drivers, as well as the manufacturer drivers and the impact that this has had on shoppers, who have also played a role in channel blurring. After identifying what is causing this shift, we will discuss the implications of channel blurring for the Australian retail market. 3.0 What Is Channel Blurring? Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 5 Entry Number: JBA-07-0043 Channel blurring can be described as „expanding the definition of traditional markets‟. It has evolved over time with retail channels continuing to sell more products that are not within their traditional format. Australians have witnessed supermarkets penetrating new categories in areas such as Health and Beauty, as well as pharmacies increasing their offering to incorporate grocery items. Channel blurring is not a new phenomenon and is set to continue. This phenomenon began much earlier in the US and continues to be a major challenge for retailers in the US with larger format stores such as warehouse and discount dollar stores incorporating multi-channel offerings to shoppers, increasing share year on year. The retail industry in Australia is set to follow in the footsteps of the US retailers. In 1914, George J Coles and Coy began operations with a discount variety store based on formats from the US and UK. It was not until 1958 that Coles saw the opportunity in food retailing. In 1962, after many acquisitions, George J Coles and Coy customers were delighted to a „New World of Shopping‟ with the opening of the „New World‟ store in Frankston, Victoria. This was a new concept for food retailing, selling groceries, general merchandise, fresh meat, dairy, fruit and vegetables and frozen foods, all within the one store. „Coles New World Supermarkets offered customers more choice, greater savings, and a consistently higher standard of quality than ever before. Coles, in fact, was one of the first Australian retailers to take advantage of the customer trend toward supermarkets1.‟ Over the next five years, the Coles Group are planning to co- brand some of their existing Kmart and potentially Liquorland stores under the „Coles‟ supermarkets store brand to create a super store, similar to Walmart in the US2. Petrol discounting will also continue as retailers attempt to maintain store traffic. With specialty and discount stores stretching beyond their traditional domains to generate additional foot traffic in their stores, the extent of channel blurring will increase. There are many instances where supermarkets and specialty stores have increased their range beyond the „traditional grocery lines‟ to provide consumers with 1 http://www.answers.com/topic/coles-myer-ltd McMahon, Stephen. „Coles long way back to the top‟. July 27 2006 //www.smh.com.au/news/business/coles 2 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 6 Entry Number: JBA-07-0043 greater choice, convenience, all in a one-stop. Some examples are provided in the proceeding section of this research. Channel blurring can be summarized by the model below. 3.1 The Channel Blurring Process Retailer Drivers: - Development of new categories leading to incremental sales - More „high-value‟ products entering grocery - Increase profits - Competitive advantage - Increased margin on new products Paradigm shift in Traditional Retail Channels - Reduced shelf space for traditional selling lines - Existing products need to work more efficiently to maintain their existence - Increased number of product lines - Impact on industry profits - Blurring on pricing Supplier Drivers: - Increase distribution of new and existing lines - Increase sales - Increase profit - Competitive advantage Consumer Responses: - Convenience of having to stop only once - Longer trading hours for shoppers - Competitive pricing between the different channels = cheaper price of goods - Wider array of goods Source: Channel Blurring Process designed by Author Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 7 Entry Number: JBA-07-0043 4.0 Retailer Drivers of Channel Blurring 4.1 Supermarket Drivers From a supermarket perspective, achieving aggressive sales growth is a difficult task, particularly when population growth is stagnant. However it is evident that growth can be achieved by increasing market share, increasing store numbers and by reducing cost of goods sold. Another option for achieving growth for supermarkets is via expansion into new categories and increasing the frequency of store visits. Since the 1960‟s, consumers have had the convenience of shopping for their grocery, meat, deli, vegetables and frozen goods, and only shopped once per week. Since then, shopping habits more shoppers are time poor and are demanding convenience. Supermarkets have responded to this by introducing extended trading hours, as well as introducing a wider range of products. In the last ten years, the impetus for growth in supermarkets has shifted to new categories such as health and wellness, and general merchandise items such as toasters, DVD‟s, and books/magazines. Interestingly, these categories are higher in value than many traditional categories, which further contribute to increased value sales and profit growth. More retailers in Australia are moving into personalized services such as „Coles Baby Club‟, which is aimed at providing parents with information on parenting and health for babies. This pharmacy-style service increases consumer loyalty and foot traffic for Coles supermarkets. This complements Coles‟ recently expanded baby products department which houses a wide range including baby food, infant formula and nappies categories3. The expansion of new categories is a retailer strategy, seeking to deliver a competitive advantage. By providing shoppers with these options, supermarkets can enhance the shopping experience while providing a one stop shop for time-poor consumers. By expanding the range, these retailers can also increase foot traffic and lengthen the amount of time spent in the store. Once the domain of pharmacies and health shops, categories such as pain killers 3 Retail World July 25 – August 5, 2005 Vol 58, No 14 pp 119 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 8 Entry Number: JBA-07-0043 and vitamins now derive the majority of their sales from the supermarket channel. The latest range extension of nicotine patches will further contribute to the shifts of once pharmacy-only products to the shelves of regular supermarkets. The trend for over-the-counter pharmacy products to be sold in supermarkets will continue. If we look at Walmart in the US, it is predicted that sales will reach the half trillion dollar mark as the store becomes a leading source for immediate healthcare by 20104.‟ Von‟s Companies, Inc (owned by Safeway US) are the largest supermarket chain in southern California operating 328 supermarkets incorporating drug stores. The company is vertically integrated in operating in its own milk processing facility, ice cream producing plant, a bakery and a delicatessen. Some of Vons lifestyle stores are now adding Jamba Juice counters 5 . With a visit to one of these stores in California in November 2006, it was incredible to see such a wide range of goods available across multiple categories including pharmacy, organics and general merchandise. A Typical Vons Store in Southern California, US Some retailers overseas such as Whole Foods in the US, Tesco and Sainsbury in the UK and Carrefour in France are actively looking for new ways of engaging their shoppers and genuinely meeting shopper needs with solutions, suggestions and ideas. Australian supermarkets are doing this to some extent with recipe card ideas, however there are still many opportunities to expand further across non-traditional formats. 4 5 Todd Hale, AC Nielsen Consumer Insights Other News, News Publication 2006 Jamba Juice is a major juice bar chain throughout the US. Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 9 Entry Number: JBA-07-0043 “The average shopper shops at 2.2 stores each week to obtain all their items, and the fact that they are willing to go to different stores to purchase various items suggests that supermarkets are missing an opportunity to capture more consumer dollars by delivering and communicating a greater selection and value to their shoppers.” Phil Lempert, Supermarket Guru 20026 6 Phil Lempert is a Television & Radio News Reporter/ Newspaper Columnist/ Author/ Consumerologist/ Food Marketing Expert. Source: Dorgan, Tim. „Little Guy Lessons, Shopper Marketing, the Hub Magazine, by pp4-5 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 10 Entry Number: JBA-07-0043 4.2 Specialty and Department Store Drivers Supermarkets are not the only retailers penetrating new categories to increase store traffic. Specialty stores in Australia including pharmacies and department stores are following the foot steps of those in the US, by expanding their product range to include grocery lines into their everyday offer. By breaking the traditional mould with alternative formats and new store concepts, these stores can reach specific customer bases and new sources of profitability. Walgreens is a US retail pharmacy chain operating 5000 stores and is planning to reach 7000 stores by 2010. The foundation for this retail chain is to provide the most convenient access to healthcare services and consumer goods in America. As shown in the image below, this store offers a wide range of pharmacy and grocery products to its consumers. The stores also provide shoppers with discount coupons across pharmacy and grocery lines to increase shopper loyalty. Source: Walgreens Online Catalogue and Online Coupon www.walgreens.com.au More pharmacies in Australia are following this trend by offering groceries in their stores. One example of this is a St Marys pharmacy in Sydney‟s Western suburbs which includes an IGA Everyday supermarket. It is particularly good for elderly patients who are less mobile and can therefore purchases their grocery essentials while picking up their medication. Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 11 Entry Number: JBA-07-0043 Another example of retail blurring is the proliferation of new categories including snacks, sweets and household categories in stores such as Kmart and Big W. By concentrating on bulk packs in these categories and limiting the range, there is less price comparison than offerings in supermarkets. Bulk buys of grocery lines also increase the value perception among shoppers. If we look at other specialty stores such as bookshops, coffee shops, music and sporting stores, we are witnessing new ideas and multi channel formats designed to enhance the shopping experience and increase consumer loyalty. An example of a retailer which enhances the shopping experience is Cabela‟s, a sporting and outdoor store chain operating with 15 stores across the US. A visit to a store is considered to be “a retail experience, a museum experience and a destination experience, all rolled into one.” At most of the stores, shoppers will find indoor mountains teeming with museum-quality wildlife displays, huge aquariums, and restaurants. By enhancing the shopping experience for consumers, Cabela‟s has been successful at becoming a leading sporting and outdoor store chain in the US. By focusing on the end consumer, the store has become a destination one stop shop for locals and tourists. Cabela‟s Vice President, Mike Callahan believes „We are in the age of multi-channel shopping‟7. Caleba‟s store at Texas, US, courtesy of www.calebas.com 7 Article from „Little Guy Lessons, Shopper Marketing, the Hub Magazine, by Tim Dorgan pp4-5 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 12 Entry Number: JBA-07-0043 Despite being on every street corner in New York, Starbucks in the US also have an outlet within a Macys store. This works well for both Macys and Starbucks as it ensures that consumers shop for longer in the store while building the Starbucks brand by improving the quality perception as it exists in an up market department store. Closer to home, US based, Borders Book Shops, recently opened a new store in Parramatta, Sydney, with a coffee shop designed to enhance the shopper experience and prolong the time visited in the store. Additional margins on higher value categories, such as those in health, beauty and general merchandise is also a driver for supermarkets in expanding into new categories. These margins are known to be significantly higher than that of traditional grocery lines. Successfully achieving higher margin from these categories will also place additional pressure on suppliers to match these margin benchmarks. Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 13 Entry Number: JBA-07-0043 4.3 Supplier Drivers As sales are not ahead of population growth, it is a challenge for suppliers in delivering new sales growth. Expanding and developing new channels is a strategy for suppliers in increasing product penetration. By increasing distribution in new markets, suppliers are able seek price and margin improvements on products. This instance works particularly well for discretionary or impulse lines such as those in the chilled beverages category. If we look at Coca-Cola for example, with a very concentrated grocery market in Australia, the three key supermarket players are able to extract better discounts and pricing from suppliers. Due to the higher trade support associated with higher volumes, the profit margin for Coca-Cola is greatly reduced. The margin that retailers can make on categories such as general merchandise, health and wellness will also place additional pressure on suppliers of grocery lines to match this margin. These new categories set a new benchmark for margin targets whereby suppliers are expected to match. Comparatively, suppose Coca-Cola was less reliant on supermarkets for volume and also concentrated on other channels such as convenience and specialty stores. Although turnover would be considerably lower, there would also be a lower trade support to go with it. Effectively, profit margins would be much higher when compared to the cost of doing business solely with supermarket retailers. By spreading business across multiple channels, suppliers are able to decrease their reliance on one or limited channels. If a supplier is experiencing decline in a particular channel, then expanding into new channels can arrest this decline. The analgesics is a mature category, however the launch of Nurofen painkillers by Boots Healthcare in 2004 recaptured sales in supermarkets8. By penetrating more markets such as grocery, Boots Healthcare is less reliant on the traditional pharmacy sector for growth. There has been an increase in the frequency of supermarket visits per week in the last decade. The catalyst for this has been longer trading hours, as well as increased store numbers, particularly in many suburban locations. With 8 AC Nielsen Grocery Report 2005 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 14 Entry Number: JBA-07-0043 greater range available at supermarkets, more consumers are emergency shopping for items not traditionally sold in supermarkets, such as irons and heaters. In the last two years, many suppliers launched products outside their traditional domain into supermarkets in new areas of health, wellness and insecticides as shown below. Examples of recent product launches into the supermarket trade Aldi in Australia has also led to a lot of blurring with job lots and limited quantities on general merchandise such as laptops and televisions now available to shoppers. This not only benefits the supplier who is able to manufacture and sell low cost goods based on agreed quantity buys, but also benefits Aldi who is not only a destination for groceries, but also larger and higher value items. Aldi then becomes a value destination, putting pressure on specialist retailers mainly carrying branded goods, at a considerable price premium on similar products available at Aldi. Early penetration of new markets gives suppliers an initial competitive advantage. A recent example is the launch of Gillette Fusion into the Australian market. This new product saturated multi channels while providing advertising support and POS across channels including supermarkets, department stores and pharmacies. This was supported by a TV campaign, sponsorship of the television coverage of Twenty 20 Celebrity Challenge, as well as the Fusion Truck promotion designed to sample the new product. By having more points of contact with consumers, Gillette is able to increase the likelihood of trial and repeat purchase, while not needing to price Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 15 Entry Number: JBA-07-0043 discount. With increased distribution and by being „first to market‟, Fusion razors can maintain a competitive advantage against potential “me-too” products that may launch later. Snapshot of Gillette website www.gillette.com.au highlighting the availability of Gillette Fusion In 2004, Simplot Australia launched the Edgell Light Lunch range. It was a Ready-To-Go convenience style product, in the format of a shelf stable salad, with a disposable fork, designed for lunches and snacking. It was launched only in supermarkets. Based on the product style, it was a missed opportunity to saturate the market in a similar way that Gillette has done. The product was unsuccessful due to the lack of awareness of the product and by not being available in channels where consumers would look for a convenient lunch or snack. If Simplot Australia saturated more markets in the launch such as vending machines, takeaway outlets, school canteens and even co-branding with McDonalds, there would have been a greater chance of product survival. There are opportunities for suppliers to ensure they have distribution in all key areas close to consumers. For example, prepaid phone cards and recharge cards were once only available in phone and communication stores, which limited the exposure and likelihood of purchasing the product. Today, these cards are available in multiple channels including newsagents, post offices, tobacconists, pharmacies, supermarkets, service stations and in stores located near train stations and bus stops. Convenience is the key, particularly for immediate purchases such as phone cards. Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 16 Entry Number: JBA-07-0043 Finally, with new categories entering more channels, there is reduced shelf space for existing products. This places additional pressure on suppliers to maintain efficiency of their products. Pressure for squeezed shelf space will also make it more difficult for suppliers to win and maintain shelf space. By reducing the number of facings for existing products, additional demands are also placed on retailers who need to replenish stock more often to reduce out of stocks. 4.4 Consumer Drivers Today‟s consumers are time poor; they want to spend as little time as possible shopping for groceries. These consumers want convenience and easy access to their groceries, particularly staple products. They also want a wide variety of choice and ease of shop across multiple categories in the one-stop shop. As shown in the chart below, range and convenience highlight as the main drivers of store loyalty among consumers. Source: AC Nielsen Shopper Trends Report 2006 While retailers have reacted to consumer demands for convenience by extending their trading hours, there are many opportunities to drive consumer loyalty further. According to research undertaken by AC Nielsen, nearly Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 17 Entry Number: JBA-07-0043 2/3 of Coles and Woolworths shoppers are prepared to pay a bit more to shop there and majority of shoppers look for convenience as a key driver for loyalty9. Impulse purchases remain an important part of retailing, particularly in the convenience sector. Consumers may be willing to pay a premium for impulse products but if they become more price conscious between convenience channel and supermarket channels, the likelihood of purchase may reduce. For example, a consumer can purchase a 2L coke at a supermarket for RRP $2.00, compared to RRP $3.20 for a 600ml Coke in convenience outlets. Based on the convenience store price, this equates to $0.53 for every 100ml of Coke and $10.66 based on 2L volume. Impulse buys such as soft drink 600ml, offer supermarkets opportunities to off-locate impulse fridges. With shopper‟s pantry filling 2L soft drink when on special, a chilled fridge placed near the soft drink aisle may prompt immediate purchase of the 600ml variant. As the chilled 600ml is available for impulse purchases, supermarkets can command a price premium, but still at a more competitive price than the convenience store. With wider shopping options and more stores offering an extended product range, shoppers have more alternatives than ever. This places pressures on supermarket retailers to maintain their store traffic and increase sales growth. With pressure to increase sales, supermarkets will price promote more regularly to encourage pantry stocking. However, as mentioned earlier, convenience and wide product range are the main drivers of store loyalty. Supermarkets will therefore have to ensure that they stay close to their consumer demands. With a wider array of goods available to consumers in more retailer channels, consumers are more likely to trial new products. This is evident in supermarkets with products such as electric toothbrushes. With a lower price than in other channels, it is a low perceived risk to consumers to trial this product, even through it may be less functional than similar products in specialty stores. This is also the case with cooking utensils in supermarkets where consumers can enjoy the same value for money as mass merchants albeit a limited range. An increased range of products such as those in general merchandise will also cater to those emergency shops when other channels are not options to the consumer. 9 AC Nielsen Shopper Trends Report 2006 Page 133-135 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 18 Entry Number: JBA-07-0043 5.0 Paradigm shift across Retail Channels - Implications for the Future The importance of understanding and responding to consumer demands will increase as channel blurring intensifies. As retail channels continue to be less-defined over time, there will be more challenges for retailers in understanding who their shoppers are and what their shopping purpose is. Investment in shopper research will be advantageous for retailers in determining the effectiveness of new product launches and level of store loyalty. Retailers in the industry will need to ensure that they continually respond to shopper demands and consumer needs, and not just focus solely on competitor movements. With more channel blurring occurring, retailers need to realise that their definition of „competitors‟ should expand beyond their direct rivals, and rather, view other channels that offer similar products as potential threats. Channel rivalry will see a need for retailers in personalising their products and services for customers, and not just focusing on price and cost reduction strategies. They will also need to ensure they get the product mix right to ensure they get the perfect range. “Retailers must stay close to their shoppers and the rest will take care of itself”. Tim Dorgan „Shopper Marketing‟, The Hub Magazine10. Retailers are also at risk of what critics call, „identity crisis.‟ Can retailers be all things to all people? By keeping close to the consumer, retailers can minimise the risk of over complicating their core business and losing sight of the business objectives. With clear planning, increased penetration into new categories can be a successful way to drive growth; however the core business competencies must not be ignored. The proliferation of channels has made it possible for consumers to buy just about anything anywhere. The success of shopping centres such as Westfields, demonstrates the demand for shopping for all needs in the one location. It is evident that the two main drivers of store loyalty are convenience and product range. It is important for retailers to carefully define what convenience means to their customers. …is it based on a one-stop stock up shopping trip or is it getting in and out of a store as quickly as possible. This challenges supermarkets as customers want to do all their shopping at once, but in the shortest possible time. 10 Retail World Nov 22 – Dec 3 2004 Vol 57, No 23 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 19 Entry Number: JBA-07-0043 With channels redefining their store formats, retailers will need to carefully plan the best range of products to suit their customers. While increasing product range is advantageous for consumers, it is also important to ensure that consumers are not discouraged by any major changes to store layouts. While channel blurring provides many opportunities for suppliers in extending product distribution, it also encourages greater competition among suppliers. As channel blurring continues, competitors will also become blurred. By carefully planning and defining marketing strategies, suppliers will be able to overcome the threat of not fully understanding the market place and who the target audience is across different channels. Increased distribution across multiple channels also expands the media choices for suppliers. This can provide more options as different channels may have varying effectiveness in delivering the marketing message to the target audience. It will be those suppliers that consider these new alternatives that will be the most effective. With greater shopping options, suppliers may find that there as less loyal consumers. Manufacturers will need to personalise their offers for customers potentially by developing exclusive brands and implementing loyalty programmes. Suppliers will need to stay ahead of consumer trends and ensure that new product launches meet the demands of shoppers. With reduced shelf space available to traditional grocery lines, manufacturers will need to closely monitor the quality and quantity of new line launches. They will also need to ensure their existing products are working as efficiently as possible to avoid risk of product deletion. Today‟s retail industry is reminiscent of the old days when peopled relied on the town‟s general store to purchase their food and clothing. It is interesting that decades later, the industry is shifting back to these old ways of selling. Are retailers capitalising on an idea that is centuries old? Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 20 Entry Number: JBA-07-0043 6.0 Conclusion As the retail industry consolidates, stores will continue to expand beyond the traditional formats. Channel blurring will continue to be a challenge for retailers and suppliers as consumers become more savvy shoppers, and less loyal to brands and stores. Blurring will continue to occur across different channels: department stores, pharmacies and discounters will continue to sell more food, while supermarkets will add focus in areas of general merchandise. Convenience stores will redefine themselves and lessen their dependence on selling petrol and cigarettes11. Retailers will need to understand the purpose of their customers shopping trips and continually respond to shopper trends. Suppliers will need to closely monitor market conditions, and drive strategies that will impress today‟s shoppers. Australian retail is becoming an even tougher market and all retail players will need to carefully plan their activities according to their business objectives. Channel blurring will continue to occur and it will be those players that proactively respond to market demands that will win in this game. 11 AC Nielsen Market Report 2005 Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 21 Entry Number: JBA-07-0043 7.0 References AC Nielsen Grocery Report 2006 AC Nielsen Shopper Trends 2006 AC Nielsen Progressive Grocer Report (US) 2005 Casy, Bernadette. „Channel Blurring Becomes an Identity Crisis‟ DSN Retailing Today Feb 7, 2005 Clayton, Dr Kenneth C. „Trends in the US Food Supply Chain‟, September 19,2005 Coinstar Inc „Five Things to think about in your Stored Value Category January 2006 FMI Payment Systems Conference Dorgan, Tim. „Little Guy Lessons, Shopper Marketing, the Hub Magazine, by pp4-5 Drake, Bill. „Marketing implication of retail food industry consolidation, Cornell University September 2001 (Smart Marketing) Gregori, Jeffrey & Chesack, John.‟ Let‟s put the consumer back in category management – Finally!‟ Retail Marketing AC Nielsen Homescan Spring 2006 report Hale, Todd. „AC Nielsen Consumer Insights Other News‟, News Publication 2006 Hale, Todd. „AC Nielsen Predicts the Face of Retail by 2010‟ Other News, New Publication 2006 Hale, Todd. „Understanding the Wal-Mart Shopper‟ Todd Hale, SVP Client Service, AC Nielsen Hausman, Jerry and Leibtag, Ephraim. „Measuring the Effect of Wal-Mart‟ MIT and Economic Research Service, U.S. Department of Agriculture Revised Draft, October 2005 McMahon, Stephen. „Coles long way back to the top‟. July 27 2006 //www.smh.com.au/news/business/coles Noddle, Jeff. „Forging the Future of Grocery Retailing‟ SupaValu online report March 14-17, 2006 Retail World, Feb 21- Mar 4, Vol 58, No 3, Retail World, May 1-May 12 2006, Vol 59, No. 8 Retail World, Nov 22 – Dec 3 2004, Vol 57, No. 23 Shoebridge, Neil. „Do Something Different‟ BRW March 2-8 2006 Tosh, Mark. „Retail Lines lose definition – channel blurring special report‟, Drug Store News April 29, 2002 www.calebas.com www.walgreens.com www.cvs.com www.gristedes.com Question 12: „The retail lines between stores are blurred, coffee in the chemist shop, confectionary in department shops and contact lens liquids in supermarkets- what is happening and will it continue? Page 22 Entry Number: JBA-07-0043 www.met.com www.dlibrary.com.au www.answers.com/topic/coles-myer-ltd