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Momentum

The store format evolution

Marcos Gouvêa de Souza (mgsouza@gsmd.com.br), CEO,


GS&MD – Gouvêa de Souza

The rule is clear. Retail store formats are born, grow,


become mature, reach their peak and tend to disappear. In
spite of the attempts to reinvent them in this declining age.
What’s new is the evolution cycle has been happening in a
much faster way, as a result of a more dynamic process in
which consumers, companies and the society, leveraged by
the technological changes, are structurally transformed.
And in retailing it would not be different.

Observing this perspective in a global range, many formats


that have disappeated in more mature markets, or were
reshaped in a new configuration, are still present, strongly,
in emerging markets. Maybe the most significant case is the
department stores.

While in the US market chains as Macy’s, Dillard’s and


Bloomingdale’s have been struggling for more than 20
years, losing market share and reducing sales and profits,
and trying to reinvent themselves and consolidate the
segment to survive, in countries as Chile, Mexico,
Argentina, China and India these formats are still strong.

In countries with a different structure, as the UK, France,


Germany, Spain, Italy and Belgium, in which public
transportation have a strong presence (far from the US,
where cars make the difference), the reinvention of the
department stores included a significant expansion of the
food areas.
Chains as Printemps, Galleries Lafayette, Kaufhof,
Selfridges, Rinascente and El Corte Inglés, at the same time
brought in more food to their traditional department stores,
diversified their operations, creating specialized chains as a
way to cope with the challenge of reverting a declining
trend.

In Brazil, the traditional department store format, with


chains as Mesbla and Mappin (with a few exceptions in the
North and Northeast), was replaced by more modern
fashion-oriented chains, as Renner, C&A, Riachuelo and
Marisa, who have been growing fast and increasing their
market share. They differentiate themselves by focusing on
different consumer profiles and by bringing in services,
specially financial ones, to increased their share of wallet in
the consumer’s expenses.

And these brands, when thinking of increasing businesses,


have gone to the specialized chains arena, as Marisa has
been doing with an underwear chain (as C&A tried in the
past) and Renner did recently purchasing homewear chain
Camicado.

A store format struggling to survive, and already dead in


the mature markets, is the variety stores, whose best
example in Brazil is Lojas Americanas. This is a format that,
in mature markets, did not resist to the evolution of other
concepts, as the specialized stores and the hypermarkets.

In this aspect, the hypermarkets themselves have been


facing the reinvention challenge in the modern world
(including Brazil), pressed by warehouse clubs, convenience
stores, hard discounters, specialized stores, foodservice,
more convenient supermarkets and even the internet,
specially in the electronics and digital goods categories.

It’s worthy to highlight the efforts Carrefour, the world’s


largest hypermarketer, have been doing to develop a new
generation of hypermarkets, the Planet project, tested as a
pilot in Lyon, France, from August last year on and since
then implemented in several other places, in Italy, Spain,
Belgium, Turkey, Romania and Poland.

It is an irreversible cycle. A store format leads another to


decline and will be in the downward side sometime in the
future, having to work on its reinvention.

The new components are more dramatic behavior changes,


as the strong growth of foodservice and the rise of the
digital channels (internet, mobile and, soon, interactive TV),
that will generate even more substantive changes in the
market share of some store formats. Specially for more
planned-purchase product categories, to which the
convenience, safety and pragmatism of the digital retailing
are more relevant.