BrainTrust Query: Localization and Limited Buys
by Carol Spieckerman
Back in the
early ’80s, J.C. Penney was the only retailer of its size that maintained
a decentralized buying structure. Each J.C. Penney store had individual
buyers who could either go along with the corporate buyers’ recommendations,
or they could make individual choices that they believed were best for
that particular store (or, as was most often the case, they combined
both strategies). Penney’s reasoning was that the store buyers knew their
this system even as J.C. Penney’s competitors subsequently moved away
from regional buying offices and toward completely centralized buying
structures. Their competitor’s philosophy was that good product was good
product and that any benefits from regionalizing assortments would be
trumped by the economies of scale achieved through chain-wide buying.
By 2000, Penney, teetering on the brink of bankruptcy, began moving toward
a centralized structure as well.
time, the pendulum has since swung away from generalization and back
toward localization and specificity. Fortunately,
retailers and brands are learning how to execute locally through their
existing centralized buying models.
launched its My Macy’s localization strategy, which leverages proprietary
software and newly created teams of district planners and merchants to
ensure that each Macy’s store is relevant to the community it serves.
Best Buy is
encouraging its store teams to go off-script by instituting everything
from community-specific store hours to merchandising variances that place
regionally relevant items front and center in certain stores. And, in
a radical departure from the previous corporate-knows-best information
flow, Best Buy is gathering insights from individual stores in order
to drive incremental opportunities that otherwise might escape notice.
began sorting its stores into “clusters” with similar attributes after
realizing that some stores were selling one riding mower per month while
others were running completely out of tools under its one-size-fits-all
purchasing structure. And Walmart, through its Store of the Community
program, intentionally distributes certain products and brands to limited
stores based on the attributes of particular communities, and even neighborhoods.
One of the
more common problems I’ve begun to encounter in my consulting practice
is retail suppliers misunderstanding, or not knowing at all, their retail
partners’ visions for their products, brands or services. When a supplier’s
efficiency-through-scale expectations are completely out of alignment
with a retailer’s more limited intentions, misunderstandings – and in
some cases, business failures – result. For example, a consumer electronics
client that I worked with recently was stunned when one mid-tier retailer
eliminated its brand entirely from one geographic region due to the growing
strength of its top competitor in that market. The client had always
been an “all-store” resource and assumed that wouldn’t change.
and specialization proliferate, it’s critical that suppliers
retailers’ visions for their brands
and products . . . and that supplier teams arm themselves
and their retail
partners with localized insights and exception reporting that may get
lost in a big data roll-up (and that may run counter to consumer data
). We actually
encourage our clients to bring dedicated and qualified analytical resources
into their organizations before they hire salespeople.
Not only does this
planning, it also provides
a direct line to retailers’
planning teams which further facilitates information-sharing.
How should suppliers be adjusting to the shift toward localization
and limited buys by many larger retailers? What areas will this
impact in particular? Are retailers and suppliers making the most out
of localization and targeted distribution opportunities?