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Posts Tagged ‘Store Format’

In the past decade, Toys “R” Us experienced a substantial decline in market share with the increasing competition of retail giants such as Wal-Mart and Target. Today Wal-Mart has 25% of the toy market.

The major challenge facing Toys “R” Us was the low frequency of customer visits to its stores. While Wal-Mart and Target see customers coming back every week, Toys “R” Us has a much longer return cycle of over 6 months.

Toys “R” Us has successfully implemented a strategy to increase store traffic by placing its toy stores side-by-side to stores of its growing chain – Babies “R” Us – which receives more frequent customer visits, on average once a month. The plan going forward is to convert all its 600 US stores into this new format.

Toys “R” Us reported positive same store sales in 2007 after years of decline. Closing under performing stores and investing in the new format are the bets to reshape the future of the toy chain. 

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Tesco, the largest retailer in the United Kingdom and third worldwide after Wal-Mart and the French retailer Carrefour SA with sales over $80 Billion, started its American operations last November by opening the first 20 stores in the West Coast.  The grocery store chain is called Fresh & Easy Neighborhood Market.   

 

 The chain’s strategy is to offer high quality, fresh and nutritious food on 10,000 sq-ft stores – between the size of a convenience store and a supermarket – located on local neighborhoods. Many people questioned the format picked by Tesco given the one-stop shop culture in the US translated into the success of the big boxes and mass merchandisers. Tesco spent over 3 years studying the American retail market and found that actually Americans visit multiple stores to get what they want. Tesco’s executives believe people will continue shopping on mass merchandisers and clubs to find lower prices but the neighborhood stores will bring a differentiated assortment, with more focus on fresher and ready-to-eat products versus packaged goods, and offer more shopping convenience to customers.

Tesco’s debut into the US market has been long expected. Tesco brings its expertise on operating multiple retail formats – convenience stores (Tesco Express), supermarkets (Tesco Metro), super-centers and a large format (Tesco Extra). It has successfully penetrated in 12 markets, always tailoring the retail format to the local market dynamics and customer needs. For instance, in Japan, where Wal-Mart has struggled to create a solid, growing operation and Carrefour already withdrawn, Tesco has successfully opened small convenience stores, adapting itself to the habits of the Japanese customers. 

Another 120 stores are planned to open by the end of 2008 across California, Arizona and Nevada. 

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