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 user 2005-08-30 at 10:10:00 am Views: 41
  • #12426

    Are Retailers Blind to Regional Variations?

    August  2005
    The business trip.We’ve all been there. You roll into the standard
    airport terminal, head to the company-approved rental car agency, check
    into the hotel chain that gives you the best frequent traveler rewards,
    and then head out to grab a bite to eat. You could be in San Jose, San
    Antonio, or Chicago, but whatever the location, you have the same food
    options. You could go cheap and quick with Denny’s, upscale with PF
    Chang’s, or in between with the ubiquitous TGI Friday’s. Regardless of
    which you choose, once you get to the retail space housing these
    culinary delights, it hits you–you could be ANYWHERE in the U.S. There
    is no regional variety, no sense that you are more than a ten-minute
    drive from your own home.

    This mass duplication of retail throughout the U.S. has been one of the
    hallmarks of success in our economy. Obvious are the benefits of the
    mass efficiencies that lend to more options at lower prices. Watch
    Europeans go bonkers when they arrive in the U.S. and see how
    inexpensive clothing is. Better yet, watch Americans’ reactions when
    they go to Europe and pay $4 for a Coke (even before the dollar took
    its dive).

    As a result of this success with uniformity, the world looks to America
    as the icon of mass marketing. The strength of American mass marketing
    has gone so far as to scatter KFCs throughout Tokyo and establish a
    McDonald’s on Paris’ revered Champs-Élysées. Given these, and the
    hundreds of other examples of how America’s retailing stamp is
    imprinting itself upon the world, one might think that regional
    differentiation is forever lost.

    If, however, we look deeper, we see that the mass retailers that seem
    so devoted to the “one size fits all” strategy are not only aware of
    regional differentiation, they are changing their strategies to better
    serve such variations. Wal-Mart, the apparent essence of mass
    uniformity with over 3,000 store locations in the U.S., has become
    aware of its weakness in attracting key ethnic groups within key states
    (e.g., California) and is taking steps to target these states with
    advertising programs in Spanish and various Asian languages. Best Buy
    has a concept store focusing on gamers located in an area of Chicago
    where there is a heavy concentration of young, upwardly mobile
    technology enthusiasts (mostly males) who fit the gamer profile. These
    two leading retailers are blazing the trail of regional awareness,
    which is likely to be emulated by the retail world in general.

    Not convinced of the regional variations that retailers face? Consider
    the following facts pulled from the Current Analysis Sell-Through
    Database concerning consumer electronics sales:

     *  Fact: Gateway’s retail notebook market share within Miami
    was half of Gateway’s retail notebook share in Jacksonville, FL in the
    month of May.

     * Fact: In May, the average consumer electronics retailer on the
    West Coast sold 30% more multifunction printers than the average
    retailer in the Northeast.

      * Fact: The average price of a desktop PC within the Denver
    retail market was 5.4% higher than the average price of a desktop PC in
    Indianapolis in the month of May.

      * Fact: In May, the average retail customer in the Northeast and
    West Coast spent considerably more on inkjet cartridges than buyers in
    the Midwest.

    These examples show just a few of the regional variations to which
    retailers and manufacturers are subjected on a daily basis. Given the
    understanding of regional variations, retailers can assort products
    more effectively and manufacturers can promote within metro areas where
    their share is weak. Given the high cost of holding inventory within
    the consumer electronics space, producing an assortment that is likely
    to increase churn will produce savings that will more than offset the
    increased distribution and advertising costs (one can not ignore the
    fact that region-specific assortments and metro-specific promotional
    programs will lead to an increase in marketing costs).The bottom line
    is that regional awareness is one of the newest keys for survival in
    today’s brutally competitive consumer electronics space. The pendulum
    is clearly starting the swing back toward regional awareness. How will
    you embrace this new paradigm?