By Brian Kilcourse, Managing Partner
November 3, 2009
The opening line from the song, “Callecitas de Cartagena” translates to “Streets of Cartagena, full of glory.” Indeed, the historic Colombian city is steeped in its past, having been the port of loading for Spanish galleons and all that looted South American gold. This year Cartagena played host to GONDOLA 2009, a trade show organized by Fenalco, the Colombian National Federation of Merchants, and RSR had the opportunity to speak at the event. The focus of the conference was on how South American companies can win in their own markets.
It’s an understatement to say that companies all across the globe have been impacted by the current recession. But according to The Economist magazine, “…Colombia may prove to have weathered the world recession better than any other of the larger Latin American countries. After a slight contraction at the end of 2008, the economy has been growing modestly this year… Colombia can expect growth of just 2.5% next year and 3% in 2011”. [1] But the picture isn’t necessarily all rosy. For example, last week Colombia’s largest retailer, Exito, posted a net 3Q profit that was down 9.1% compared with the same period in 2008. The company's net profits over the first nine months of the year have fallen 31% from the same period a year ago. One brokerage firm attributes the negative trend to be the result of the decline of domestic demand in Colombia. As one South American retailer told us, “for many Colombians, ‘disposable income’ doesn’t exist.”
Just as the effects of the recession seem to be almost universal, so are the insights from Retail Winners that our research has shown us. Specifically, retailers and their partners have told us through surveys that:
• There’s a need to localize the Value Proposition, in response to demands for relevant solutions to their lifestyle needs
• There’s a need for near real-time visibility into operations, to drive operational efficiencies and direct more labor towards customer-facing activities without increasing labor costs
• There’s a need to enable better visibility into the supply chain, to enable a more agile response to changing demand
• There’s a need to empower the Cross-channel consumer, to encourage a consumer bias for “our” products and services
These summary recommendations from RSR’s recent research made up main thrust of our presentation to the conference.
Certainly, localizing the value proposition is something that big retailers in Colombia appear to already be good at. It’s probably not surprising that the two biggest retailers in Colombia are… French. Both Carrefour and Groupe Casino have big operations in South America, and support several different brands and value propositions. The domestic French retail environment is hyper-heterogeneous, and both companies are experienced in localizing their value propositions while still managing far flung global supply chains. Without anything more scientific than a stroll through several stores and conversations with product vendors on the show floor at GONDOLA, it appeared to us that local assortments are supported to a large degree by local vendors, distributors, and wholesalers.
Better Visibility – into both operations and the supply chain – seems to be an almost universal need for retailers and their trading partners. As we said in last week’s Retail Paradox Weekly, “because of the multi-national interdependency that exists between manufacturers, logistics providers, aggregators, and retailers, participating companies today are under great pressure to eliminate disruptions that can affect the total supply chain.” And that can only be accomplished if retailers can see into the supply chain. By the same token, it is virtually impossible to either improve the customer experience or improve efficiencies further without the ability to apply store-level metrics to operational processes and see the results.
Enabling the Cross Channel Consumer appears to be important in Colombia, just as it is in the United States, but with a twist. According to the Miniwatts Marketing Group, a Bogota, Colombia based company that monitors Internet usage, penetration rates, and population information for 269 countries, world regions and territories around the world, over 45% of the Colombian population regularly uses the Internet (compared to over 70% penetration in the U.S.), with over 10% growth in 2009 alone. The interesting part of that growth is in that over 56% of the new volume is from mobile Internet access, compared to less than 4% growth in broadband access. Like many cultures around the world, mobile commerce is happening now. As we’ve pointed out more than once, U.S. retailers lag far behind other parts of the world in adopting the M-Commerce channel for the benefit of consumers.
If the event in Cartagena proves anything, it’s that retail markets across the globe have a lot to learn from each other. In Colombia, local networks of suppliers and intermediaries continue to thrive (for example, in stores we visited it was sometimes hard to find goods that weren’t produced locally – compare that experience to your next visit to Target!). Efficient localization is something that European giants have successfully exported to new markets. And smart phones continue to gain consumer acceptance all over the world. U.S. companies, who excel at standardization and technology-driven automation, continue to lead in “operational excellence.” But as Winners have shown us time and again, ultimately it’s all about giving customers a reason to be loyal – no matter which market you operate in.
[1] No Recession Here, Oct 15th 2009, The Economist print edition
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