Value, Location, Value

Dec 17, 2003
George Anderson

By George Anderson

Retailers looking for business to improve once the economy fully kicks in may be waiting for an event that will not come, according to a new report from McKinsey & Co., Competing
in a Value-Driven World

The authors suggest consumers may not be returning to some stores because “companies offering the powerful combination of low prices and high quality have captured the hearts
and wallets of consumers in the United States and Europe. This economy-wide shift to value cuts across most ages, consumer segments, and income groups. The consequences can be
dire for incumbents.”

In the ten years between 1992 and 2002, reports McKinsey, value operators such as mass merchandisers, warehouse clubs, and dollar stores grew sales at a annual compounded rate
of 11.8 percent compared to 5.3 percent for all retail.

Price was a clear impediment, for example, to grocers gaining a greater share of the retail market. Twenty-seven percent of consumers participating in the survey said high prices
were the primary reason they had for not shopping in supermarkets.

Moderator’s Comment: Are we just at the beginning of a massive shift in consumer behavior as suggested by McKinsey & Co.’s research?

Competing in a Value-Driven World concludes there is plenty of room for value retailers to grow. The only thing stopping nearly two out of every
three from shopping in these stores is the time it takes to get to them.

McKinsey advises those in the middle, between value and luxury retailers, “to find sources of differentiation, keep costs in line, and manage pricing effectively.”
Anderson – Moderator

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