GLOBAL OPERATORS MANAGING LOCALLY

DAVID ORGEL

VANCOUVER, British Columbia -- A revolution in consumer buying habits is leading international supermarket operators to invest store and regional managers with heightened decision-making powers, according to speakers at the 38th annual CIES Executive Congress here.

As they grapple with how to please more knowledgeable and demanding consumers, operators are pursuing a two-pronged approach to business: leveraging their size for centralization in areas like logistics or buying efficiencies, and localizing many decisions relating to marketing, display, store differentiation and building customer loyalty.

The theme of the CIES Congress was "Consumer Renaissance: The Knowledge Buyers," with seminars and speeches focusing on how to tailor business for changing customer attitudes and the boom in new technologies. The CIES event drew more than 600 attendees, including 232 retailers, 322 suppliers and a wide range of other executives for its three-day run here.

In one of the key seminars, three top supermarket executives outlined how they are balancing the need for central support functions with the imperative for local flexibility.

Consumers have "literally seized power," said Daniel Bernard, president and chief executive officer of Carrefour, based in Paris. "Customers want more for less. They expect better prices, more advantages, more convenience, services and variety for less money, less risk and less time.

"We realized that the age-old question of whether or not to centralize no longer had any meaning; some things need centralizing and others do not. The decision for the customer must be decentralized, whereas all competitive resources and tools should follow a common philosophy, and a common organization." Carrefour has been putting

more decision-making control in the field, Bernard stressed.

"Due to the size of our stores, each one has its own middle- and long-term strategy, each store develops its own micromarketing and ranges corresponding to the local market."

However, Bernard said Carrefour is committed to centralizing many support functions involving areas such as technology and purchasing. "We have strongly reinforced our resources in purchasing and even in international purchasing and synergy between countries," he said. "We have also pushed logistics to make an overall gain within the supplying chain. We have developed the use of data systems. We can also develop technical partnerships with the manufacturers to achieve higher optimization. Creativity has been enhanced and new markets, new departments and new services have been developed through concept harmonization throughout the world."

Richard Currie, president and CEO of Loblaw Cos., Toronto, stressed that sweeping changes in the supermarket business have transformed organizational needs. "As supermarket marketing and technology changed and became more complex, top management became less and less able to understand, let alone control, the decisions that had to be made in the field and at the stores," he said. "That means what used to be done at the top now must get done at store level. And that means a massive upgrading of technical skills at store and distribution levels and a more truly strategic and highly developed interpersonal skills role for top management."

Loblaw has managed to maintain central purchasing roles while relying heavily on direction from the stores. According to Currie, the company's practice is to "collect and share the data from and with stores, order centrally, sell decentrally, one store at a time, and give individual pricing and display flexibility to the store, with the only store requirement being to input their selling information precisely to a central source for information sharing, product mixing and buying leverage."

Differentiating merchandising for each store is crucial because of the wide differences in selling dynamics by locale, Currie said.

"Success in one region is no guarantee of success in another," he said. "As an example, in one section of Canada, we have three individual divisions, each doing sales of over $1 billion per year, which are less than 50 miles apart because the merchandising and operations of the stores is so different because of their customers."

Another operator that puts a focus on empowering local managers is Tengelmann, Mulheim, Germany, said Hans Christian Bremme, managing director.

"For the roughly 1,300 supermarkets owned by the Tengelmann Group in Germany, the decisions are taken by the regional management," he said. "Since the crucial element is not prices, but rather a marketing mix consisting of the variety of goods, regional products, services, fresh food and also attractive offers, decisions must be based on specific local factors. Each regional management therefore has complete sovereignty in location evaluation and range and pricing policies. Only national operations by the corporation's suppliers apply to the whole country."

Bremme explained how Tengelmann balances more power for regional managers with the need to coordinate support functions across its operations.

"The contrasting notions of centralization and regionalization, if correctly handled, are not necessarily conflicting but complementary ones," he said.

"Buying from the biggest industrial partners is carried out centrally. It goes without saying that there should be a uniform and centralized procurement and pricing policy for all German and European corporate group suppliers.

"This is not the case for those articles which are strongly regional in character or belong to the fresh food sector and are therefore distributed over short distances. Here, the responsibility for purchasing lies not with the group's head office but with the regional store in question."