This author has penned a number of prior Supply Chain Matters commentaries offering evidence that fundamental structural changes related to consumer shopping habits are occurring in multiple retail sectors among developed regions. Recent reports of earnings from two very influential global retailers provide even more evidence.

Wal-Mart reported its fifth consecutive decline in U.S. sales adding concerns that consumers have opted for other brick and mortar or online options. According to Wal-Mart, traffic among U.S. stores has been declining for more than a year.  That is after multiple attempts to re-organize stores and merchandise stocking strategies. In earnings reporting, the retailer’s senior leadership continues to attribute this trending to pressures on household incomes. The current initiative is to accelerate plans to open 300 smaller retail outlets containing pharmacies and fuel filling stations while testing online grocery delivery. Sales in the smaller format grocery and convenience outlets increased 5 percent in the latest quarter.

This week, U.K. based Tesco PLC posted its sharpest drop in quarterly revenues in 40 years, declining 3.7 percent in the latest quarter. Somewhat similar to Wal-Mart, Tesco previously embarked on wide-scale initiatives to improve store selection and customer service. In February, the U.K. retailer announced a plan to invest $335 million in price incentives to more aggressively compete with discount chains.  However, according to a Wall Street Journal report, two other U.K. supermarket chains, J Sainsbury and Morrison Supermarkets also lost ground.  Ironically, Asda Stores, a unit of Wal-Mart, increased its market share. The WSJ further notes that Tesco shares have declined a quarter of their value since early 2012.

While geographic market nuances are always a factor, so are consistent discernable trend.  Evidence is reflected in quantitative and survey data and increasingly in retailer financial results. General and food retailers must address these structural buying trends occurring in their respective markets, and so must their supply chain organizations.  Big and massive distribution scale is being subsumed by smaller, convenient and personalized shopping that combines online with brick and mortar assets.  Businesses processes, technology and indeed management practices of the past no longer suffice.  The new focus is indeed smarter, personalized and more convenient shopping and supply chain response.

In a previous commentary that addressed recruiting the new era of retail and online fulfillment leaders, I argued that there are two leadership competencies that will differentiate tomorrow’s executive leaders in retail.  They are a deep understanding of social-media fueled marketing and Internet focused retailing, and a deep awareness, understanding and appreciation of end-to-end supply chain inventory deployment and fulfillment capabilities.  From our lens, recruiting for retail C-level executives has been too focused on classic merchandising, finance or traditional brand marketing.

The time clock continues to tick and the retailers and leadership teams that “get it” will outshine those that do not.

Bob Ferrari

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