1. What are four to five ways that specialty retailers differ from discounters (a la Wal-Mart)?
Inventory turns: According to the data provided in the Williams-Sonoma Inc. case study (1990) average specialty store turns were just under 2x. If you look at the data from the Wal-Mart Article discount stores have turns many times that, actually turns around the neighborhood of 8x.
Margins: Discounters such as Wal-Mart go for the high volume low margin approach. Sine their whole approach revolves around offering low prices, this goes hand in hand with low margins.
Customer Service: Specialty stores focus on offering customer service. Selling their high prices and high margin offerings requires a high level of customer assistance and service from its sales force. Customers feel like they deserve and are paying for knowledge and service when they shop at stores such as Williams-Sonoma.
Atmosphere/Experience: When someone walks into a specialty store they are being sold on a concept. A specialty retailer selling higher end goods would not prevail if their physical stores had the atmosphere of a Wal-Mart for example. Wal-Marts concept is large selection at low prices. So like-wise, Wal-Mart's clientele would probably question the low prices concept if they walked into a store with displays and fixtures similar to Williams-Sonoma's. Also Williams-Sonoma is selling style, or a lifestyle. Discount retailers however, are not; they are selling the concept of wide selection at low prices.
2. What is the primary force impacting the company (Porter)?
I believe that Williams-Sonoma's primary force of competition is jockeying for position. Williams-Sonoma is constantly at odds with the competition. The company has to keep careful watch of its competition and continually fight for market share.
Department Stores: According to the case study, department stores maintained substantial purchasing power over wholesalers and manufacturers. These chains also made strides to improve operating performance and have also lowered their margins in order to drive sales. This poses a threat to Williams-Sonoma.
Specialty Stores: These competing retailers pose a number of threats to Williams-Sonoma. According to the case study these stores have expanded more rapidly than Williams-Sonoma has. This has forced the company to compete or even lose out on prime real estate locations at malls and other shopping venues. Also by increasing the share of imported and unbranded merchandise, they were able to improve margins faster than Williams-Sonoma.
Maxx benefits from chaos by picking up the pieces, merchandise at a discount, when other retail stores close, or have overruns, or unexpected changes in demand and in return pass these savings on to their customers who shop for value (Levine-Weinberg, 2016) This is the demand-side benefits of scale when the consumer rather pay less for name brand merchandise than to pay more for the same designer in the department store. The stores that where having difficulty in the retail market left themselves vulnerable by not defending their position and T.J. Maxx proactively attacks this opportunity with its purchasing power and passes the savings to its customers. This proactive process of attacking and defending is what Wee (2016) calls the holistic and balanced perspective of handling competition. Moreover, this business warfare strategy of attacking struggling competitors is called offensive marketing warfare strategy (Grewal, 2014).
The success of Wal-Mart is so great, that many people believe that Wal-Mart is becoming a monopsony . Suppliers are forced to deal with Wal-Mart because of the large percentage of sales at Wal-Mart cash registers. As such, Wal-Mart also has the ability to dictate prices of the goods it receives from the suppliers. Every day, more and more retail stores close their doors for good because Wal-Mart controls such a huge margin of the retail sector.
Wal-Mart was not always the superstore that it is today. In the late 1940’s, Sam Walton took up the ownership of a Ben Franklin’s store in Newport, Arkansas. Even during the time before Wal-Mart, Walton was all about keeping prices low. It is every business’s objective to find the right balance between the prices of an item to meet the demands of the consumer in order to maximize revenue. How could Walton still make a profit while keeping the prices low for the consumer? Even while still operating the Ben Franklin’s store, he would purchase products from wholesalers and minimally markup the price. Where most retailers would rely on markup prices to gain profit, Walton would rely on pure volume in order to make up for the low prices (Frank, 2006). This was a smart decision on his part because it makes sense that if a consumer can get the same product for a lower price then they will purchase the cheaper product. It was not until 1962 that Sam Walton opened the first Wal-Mart store, also in Arkan...
This nationally recognized mass merchandiser that stood as Kohl’s other leading adversary in the market has everyday low prices that were able to compete with Kohl’s promotional events. Wal-Mart also outdid their competition when it came to number of store locations around the country. The weaknesses of this reputable company come to light when shoppers are looking to buy clothes and are not presented with nearly the selection that the department store can offer. Also, their service is not considered to be as helpful as the department stores that can input more expertise when trying on
Additionally, ‘extreme value’ retailers also impact the rivalry among competitors. Recently, Target, Kroger and others have added dollar sections and major bargains to their format. Price sensitive consumers are attracted to the dollar store grocery deals; also, discount stores such as the 99 Cent Only stores compete on perishable items, such as produce and dairy. They seem to be affecting the supermarkets market share, as described in Retailing in the 21st Century:
The key issues for K-Mart strategies are finding the right cost level for an opportunity to be aggressive, and differentiating the product for consumer in terms of different consumer and different intangible product attributes. K-Mart and Sears should be combined with a new overall corporate competitive strategy using a cost focus. This may turn out to be the only sensible strategy, and the one which best describes the strategy adopted. Strategies of cost leadership and product differentiation are often described as if they were mutually exclusive you can either pursue one or the other, but not both.
Some 400,000 specialty retail stores operate in the US with combined annual sales of $350 billion
In the Grocery industry today there are 4 major companies that dominate the United States market share; Kroger, Safeway, Super value and Publix. With the competitive advantage of being the largest stores in the industry these retail giants should have competition at a minimum and should be thriving (Farfan, US Largest Retail Supermarkets - Complete List). The application of Porter’s Five Forces that influence an industry shows that these retailers do have many advantages but being vulnerable in even one of the areas can make a significant difference in market share and profitability.
Wal-Mart's history is one of innovation, leadership and success. It started with a single store in Rogers, Arkansas in 1962 and has grown to what is now the world's largest - and arguably, the most emulated - retailer. Some researchers refer to Wal-Mart as the industry trendsetter. Today, this retailing pioneer has annual revenues of over $100 billion, 3,000 stores and more than 750,000 employees worldwide. Wal-Mart operates each store, from the products it stocks, to the front-end equipment that helps speed checkout, with the same philosophy: provide everyday low prices and superior customer service. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Wal-Mart to achieve economies of scale which reduce its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. This allows Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart’s ability to replenish theirs shelves four times faster than its competition is just another advantage they have over competition. Wal-Mart leverages its buying power through purchasing in bulks and distributing the goods on it’s own. Wal-Mart guarantees everyday low prices and considers them the one stop shop.
Wal-Mart’s competitive environment is quite unique. Although Wal-Mart’s primary competition comes from general merchandise retailers, warehouse clubs and supermarket retailers also present competitive pressure. The discount retail industry is substantial in size and is constantly experiencing growth and change. The top competitors compete both nationally and internationally. There is extensive competition on pricing, location, store size, layout and environment, merchandise mix, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Top retailers vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping. Large scale functions such as these give the top competitors a significant cost advantage over small-scale competition.
Another thing to consider is a statement made on CNNmoney.com in regards to Dollar Generals consistent store growth that they are only "cannibalizing sales at their other stores and eroding their profits"
First, Nordstrom is unique through its excelling customer service. As a full-service retailer, Nordstrom assists customers in every phase of the shopping process. Because they carry more specialty goods, customers will need and want more assistance leading to increased value of customer service. One of their policies is that they will accept any merchandise that people bring back without asking any questions. As a result, people feel more confident about purchasing products from there, since they can buy something with the comfort and knowledge that Nordstrom has an excellent return
Wal-Mart is known to beone of the best supply chain companies in the world. Throughout the years Wal-Mart has adapted strategies that keep up to their name. Unlike many retailers, Wal-Mart purchases goods directly from manufacturers, skipping a few steps of the supply chain cycle. Buyers use advanced negotiation skills to make sure they are receiving the best price on purchases. Wal-Mart also has their own trucks picking up from warehouses, reducing the price significantly on transportation. Long term relationships with vendors are extremely emphasized to understand prices and cost structure. These practices build Wal-Mart to its name and keeps low prices for retail customers all over the world. Supply Chain studies have shown that in 1998, Wal-Mart would fill up stock in 2 days compared to their competitors which would complete it in 5. Part of the reason Wal-Mart would replenish so
Department stores do not manufacture products nor create their own brands of merchandise, their products are not differentiated. As a result, consumers have low switching costs, customer loyalty is low, as they can easily purchase similar products elsewhere. These lower the barriers to entry, allowing new entrants a chance to gain customers.
A firm 's competitive advantage is achieved through offering customers a greater value, either by way of lower prices or by providing greater benefits and service that justifies a higher price. Nordstrom strengthens its competitive advantage and generic strategy through cost leadership and differentiation in order to differentiate themselves from other high end retailers. Nordstrom has consistently maintained a unique reputation from their establishment in 1901 to the today. Since developing a strong competitive advantage from inception, Nordstrom has been able to adapt to changing environments and market conditions to maintain their success. Nordstrom has set the bench mark in the retail sector through customer service and product quality.