The course of large-scale retailing is predictable. Behemoths like Wal-Mart, Ahold, and Carrefour will, wherever possible, procure globally and attempt to sell locally.
The idea is that even if a retailing giant has only a few stores in one market, they can still buy products at the same price that the giant leverages in its biggest markets. By buying globally, every market could benefit from prices lower than any market operation could have secured on its own.
To make this easier, you’ll start seeing the same brands and private labels all over the world. Wal-Mart, for example, has started selling in the U.S. the trendy “George” brand of clothing it acquired when it bought the ASDA chain in Britain.
Food is, in general, a bit of a sore spot in these ambitions. American movies and music may have made blue jeans a fashion statement in the farthest corners of the globe, but the food people eat and the way they expect it to be merchandised – some cultures accept fish as fresh if it is frozen, others want it refrigerated and still others want it swimming – is extremely variable not only from country to country but from region to region and, often, from neighborhood to neighborhood.
Still, there is a lot that can be done in the way of global procurement in the food industry. Some is just a matter of demanding suppliers reorganize. A food manufacturer may have separate divisions in different countries, but big retailers can, and will, demand one centralized contact point.
On commodity items, big retailers can buy Chilean grapes in Chile or New Zealand and ship it all over the globe. But this still leaves open the question of handling specialty foods, and it is both an obstacle and opportunity.
Clearly, the specialty food offer is not amenable to the kind of mass globalization that you can do with television sets or even with oranges. The great temptation for the retail giants, as they rush to fulfill their mission of driving costs out of the system by standardizing procurement, will be to simply not carry much in the way of specialty foods.
In effect, these giant retailers may become like the network TV shows of old, appealing to the great mass of people by appealing to a lowest common denominator. What is the minimal offer of food that can be made that will keep people coming back to the stores?
Of course, the problem the networks had is that someone invented cable. This opened the door for dozens of specialized channels, none of which satisfy very many people, but all of whom have their passionate adherents.
If the big boys decide to go the path of being procurement-driven organizations – only looking to carry items where they have a compelling cost advantage – then one would expect that specialty food would be de-emphasized in the global chains. But the flipside of the same coin would be specialty foods becoming the essential keystone of those looking to compete with this global buying power. Certainly one would expect more specialized stores, such as ethnic stores geared towards particular groups or high- service stores geared toward those who seek a high-end experience.
Those competitors have to be different and dramatically so. They may be different in service type – warehouse clubs and convenience stores are the obvious examples – or they may be different in specialization – whole foods and all the ethnic-oriented supermarkets are prime examples.
In many cases, specialty foods can be the draw for non-food stores. You already see large specialty food assortments in various discount clothing stores and in high-end department stores. If the major food retailers don’t emphasize specialty foods, non-food retailers will increasingly use them as a draw.
Of course, there is another path. The global-procuring retailers can allow for the specialty food exception. In general merchandise, Wal-Mart, for example, has always allowed local store managers a lot of discretion. Does that store need beach chairs or snowshoes?
There is a great opportunity for these giant retailers to set up the “manager’s choice” area – and let the manager work with a specialty food distributor to fill up that particular store with wonderful specialty foods geared toward consumers in that neighborhood.
I don’t think the conventional chains will do it – they are blinded by their desire for procurement efficiencies – but they should. Otherwise, the search for the special items that add richness to life will lead consumers to support a plethora of new competitors. And the Goliaths may find that they are competing against more Davids than they can count.