Inside This Issue - Opinion
Mass retail as ’12 starts to wane
September 17th, 2012
by David Pinto, Editor
On balance, 2012 hasn’t been a watershed year for mass market retailers. With one exception. But more about that later.
If the year that’s soon to end was worth considering in any special context, perhaps it will be remembered primarily for the Walgreens-Alliance Boots merger, an alliance that, on the face of it, has tipped the balance of chain drug industry power toward the Deerfield, Ill.-based drug chain. If this is not readily apparent, and if CVS remains a force of considerable power in chain drug retailing, the global potential of a Walgreens-Alliance Boots partnership dwarfs anything chain drug retailing has yet seen. Still to be determined, of course, is how that potential will materialize — and how it will alter an industry that has not seen much basic alteration — with the exception of the 2007 CVS-Caremark merger — in decades.
Perhaps the year will be remembered for the reemergence of Walmart as a retail force to be reckoned with. And while it’s true that America’s largest retailer has largely righted itself, it is certainly not the game-changing retailer it was as recently as a decade ago. From a consumer standpoint, a trip to a Walmart Supercenter is hardly the experience it once was. While Walmart’s stores have been cleaned up, and its once-depleted merchandise assortment largely replenished, Target today clearly offers a more productive and exciting shopping experience than does Walmart, something that was not necessarily true at the start of this century. So Walmart remains a work in progress rather than the finished product many of its top managers claim it to be. In truth, the company’s Sam’s warehouse club division has become the more interesting and productive Walmart unit.
Retailing students remain impressed with both the performance and the innovative excitement of America’s regional grocery chains — and indeed food retailers such as Wegman’s, H-E-B, Meijer, Stater Bros., Whole Foods, Publix and others too numerous to mention are unquestionably the standard of the world, where excitement, assortment and such difficult-to-master arts as merchandise customization are concerned. But this country’s regional supermarket chains have been turning in impressive performances for some time now — and 2012 produced very little that was new.
No, what was new in mass retailing in 2012 was the emergence of the dollar chains — and, more specifically, Dollar General and Family Dollar — as mainstream retailers. Propelled by a marketing philosophy based on attracting the mainstream consumer, a merchandise assortment designed to compete on that basis, and top-management talent that is the equal of any in mass retailing, the dollar chains offer today’s consumer some irresistible inducements to forgo retailers that were once shopped primarily because they were viewed as “more mainstream.” Atop that, these retailers already have a justly earned reputation for low prices — something most retailers never achieve.
So, heading into 2013, the dollar chains must certainly be viewed as the retailers to watch most closely. That said, other events also bear watching. Among them:
• Target’s urban format. The discount retailer opened its first three urban stores — in Chicago, Los Angeles and Seattle — last summer. How well those stores perform will indicate how quickly the retailer adds additional locations — and how the urban stores ultimately change the dynamics of urban retailing in America.
• Target’s entry into Canada. The retailer’s first Canadian stores are set to open early in 2013, an event which will launch a fierce competitive battle with Walmart for retail supremacy in that country. Target has spent two years preparing for its entry into Canada. But Walmart hasn’t been idle. As a result, the battle for Canada will prove to be the most interesting mass retailing has seen in North America in some time.
• The unveiling of CVS’ store of the future. Actually, no one really knows when CVS’ new prototype store will debut. All that’s known for certain in that America’s leading health care retailer badly needs a dose of excitement. And those industry people — particularly the suppliers CVS has enlisted to help design and stock elements of the new store — insist that the new store will be well worth the wait.
• The initial clues to the directions the Walgreens–Alliance Boots merger will take. Initially these changes will be most apparent in the Walgreens drug stores, most visibly in the alterations to the Walgreens merchandise assortment to accommodate the Boots influence, less visibly, but no less meaningfully, in enhancements to the way Walgreens gets its products to its stores and to refinements in the retailer’s pharmaceutical assortment.
Withal, one thing that won’t change in 2013 is the performance of Costco. A year after the retirement of its founder and CEO, Jim Sinegal — who continues to be found most days in his old Costco office — the warehouse club retailer will remain what it has long been: the most accomplished and successful retailer in the United States.