ARE YOU BLIND TO REGIONAL VARIATIONS ?

[Anonymous]

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?

[Author]

August 30, 2005 at 10:07 AM