Capgemini outlook: Multiple formats, can your organisation handle them?
From out-of-town sites to the high street, retailers are attracting new sets of customers by creating directly targeted store experiences. Whether it is the lunchtime grab-and-go, such as Sainsbury's Local, or the DIY-er with builder aspirations like B&Q Warehouse, multiple format retailers are here to stay, but they are not without their challenges. How to manage this diversity without central control functions going into overload is a problem retailers need to think about.
2 December 2005
Publication
“Capgemini outlook: Multiple formats, can your organisation handle them?
Alex Watson-Gandy, senior consultant in Capgemini’s retail supply chain practice Alex Watson-Gandy, Capgemini
From out-of-town sites to the high street, retailers are attracting new sets of customers by creating directly targeted store experiences. Whether it is the lunchtime grab-and-go, such as Sainsbury’s Local, or the DIY-er with builder aspirations like B&Q Warehouse, multiple format retailers are here to stay, but they are not without their challenges. How to manage this diversity without central control functions going into overload is a problem retailers need to think about.
Are category or department-led business plans the answer? Although these may be the most natural options, when formats are directed at distinctly different customers there is a risk key functions in your organisation cannot give the same focus to all formats. It is like trying to hit moving targets: the risk is you don’t hit any of them with sufficient effectiveness.
At first glance, the pure format-led approach might seem an option with format heads developing high-level business plans in line with the overall brand strategy. However, it is inefficient to create duplicate business functions for every format, particularly new and risky ones.
To add complexity, the increasing implementation of Enterprise Resource Planning (ERP) systems and their focus on efficiencies through end-to-end processes might imply a process-driven organisation, but at what level does format and category drive the business?
In truth, a combination of these options is the most likely answer. Format could take the lead, but other parts of the organisation may need to remain category driven. A focus on the customer is obviously critical, and format and categories should be supported by strong business models including strategies for price, range and promotions. A strong core offer communicating the retailer’s brand values needs to be in place.
The level of support required for this format and category matrix depends on the percentage of your core offering present in each format as well as the number of formats. The higher the level of complexity, the greater the need for additional category or format resource.
Increasingly site optimisation and intelligent store clustering are on the cards where sites are optimised for look, range, price and promotion through category selection. But the supporting systems for this model are still in their infancy, and managing without automation is tricky.
Research has shown our desire for change is driving retailers to continually generate innovative new formats and invent creative ways to rejuvenate existing brands. As format churn increases, retailers are looking for an evolving business model that will support the development of formats and expansion into new categories -- and for supporting systems to make the same leap forward.”
