To tweak a phrase, "Own globally, market locally."
That seems to be the message implicit in the current devolution of the late 1990s era of consolidation. As is pointed out in this week's news feature referenced on the front page, that era was powered by a quest for bigness.
The thinking was that since Wal-Mart Stores has achieved such size, acquisitions would give longer-established retailers that didn't seem to have the capacity for organic growth a way to bulk up rapidly. Manufacturers, spying the increasing size of retailers, also started to consolidate in a bid to maintain size parity with retailers.
Now, for reasons that attach in part to local marketing, some of the retailer consolidations of the earlier era are coming under challenge, or are coming apart. What happened is that large-scale retailers acquired smaller retailers and imposed more expert operations. That's all to the good, except that in doing so the local-marketing qualities that made smaller retailers successful tended to be sacrificed on the altar of efficiency.
Safeway is something of an example in that regard: "One mistake Safeway made with Genuardi's, Randalls/Tom Thumb and Dominick's was that it took specialist retailers and turned them into generalists," said one trade observer quoted in this week's news feature. To cite one example that's by no means related to Safeway alone, acquiring companies tend to sweep out specialized local product and private labels in favor of labels used elsewhere in the larger operation. In some instances, that's done to support centralized buying.
But whatever the reason, local-marketing flavors tend to get diluted. Changes of this sort, and others, awaken the suspicions of shoppers who already feared the incursion of outsiders, so they direct their dollars elsewhere.
The lesson in this is that while backstage efficiencies are fine, and are what justify acquisitions, the touch must be deft and must not change much that shoppers perceive about a retailer. Conversely, of course, an acquiring company can't keep hands totally off a new property, as Ahold is demonstrating so ably about its U.S. Foodservice operation. See Page 1.
Dead Net
Let's look now at the holy grail of product purchasing, namely shedding the encumbrance of practices involving allowances, rebates and so on. As has been cited often in this space and elsewhere, it's evident the industry recognizes the need to "buy clean" and abandon such tactics. Now, a top executive in the food-distribution industry has blurted out that verity, and it's none other than Safeway's Steve Burd. "In order to [convert to dead-net pricing], it's a little like digging up the scrolls from the Dead Sea," as he was quoted in last week's SN.
And that's really the problem. So much history is heaped on buying practices that there's much to excavate before meaningful change can be effectuated. More than that, there's danger that the first mover may experience a temporary competitive disadvantage. But there's little doubt that change is in the air and movement is under way.
