Hypermarkets and Mass Merchandisers: Strategies to Remain Relevant

February 2014

Hypermarkets and mass merchandisers face increasing challenges from internet retailers and smaller store formats with a competitive offer and greater expansion prospects, such as convenience stores, discounters and variety stores. This report analyses the performance of big-box retailers against competing channels and shows where they retain expansion prospects, mostly in emerging markets. It also covers innovations taken by key operators to offset these challenges and remain relevant formats.

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Pressure on large store formats in developed markets set to intensify

Shifts in consumer behaviour resulting from unfavourable demographic trends and the rise of internet retailing have led to more challenging conditions for hypermarkets and mass merchandiser operators. As these challenges are expected to become even more pronounced, efficiency gains will take precedence over expansion to maintain profits, especially in developed markets, encouraging a focus on innovation and new concepts.

A more targeted approach towards expansion in emerging markets

Although emerging markets still offer vast expansion opportunities for international hypermarket operators, they will need to be more targeted, as several markets, notably BRICs, are moving towards maturity, with highly challenging conditions in first-tier cities and local players making inroads against global retailers, thus intensifying competition.

Optimal store size: more compact units with flexible store concepts

Although expansion opportunities in developed markets are limited, potential for opening new stores with smaller sizes of up to 7,000 sq m remains, through flexible concepts allowing hypermarkets to be more closely adapted to each catchment area and to target some locations close to residential areas enabling store visits within busy lifestyles. Reduced store sizes with smaller non-food areas may also boost sales per sq m.

Innovations in store format and assortment

Hypermarket players aim to retain the format’s relevance, especially against internet retailers, by specialising in fresh food and a few core non-food food categories, often using smaller stores. Beyond retailing, they will seek to offer more services targeting single and small households, notably including young adults and elderly shoppers.

Boosting multi-channel synergies to gain advantage over pure play internet retailers

Multi-channel strategies will increasingly focus on synergies between store-based and online activities and offset the decline in non-food sales, notably by boosting click-and-collect delivery options, including drive-through locations. Retailers will seek other uses for selling space no longer used for non-food, notably to fulfil online orders, and bolster supply chain efficiencies to gain a price advantage against pure play internet retailers.

What this report includes

  • Top-level strategic analysis of how major consumer trends will influence global markets
  • Consumer insight
  • Impact across all relevant consumer markets
  • Unique graphics and case studies
  • Key market snapshots
  • Accompanying presentation to synthesise main findings

Why buy this report

  • Identify factors driving change now and in the future
  • Understand motivation
  • Forward-looking outlook
  • Briefings and presentation should provoke lively discussion at senior level
  • Take a step back from micro trends
  • Get up to date estimates and comment

Introduction

Scope
Key findings
Competitive context in hypermarkets: High level of concentration
Competitive context in mass merchandisers: Challenging conditions

Channel Performance and Challenges From Other C hannels

Hypermarkets and mass merchandisers lose out to other channels

Channel Performance and Challenges From Other Channels

Demographic challenges: Smaller households, ageing populations
Surplus space for hypermarkets due to recent over-expansion
Decline of larger stores against small stores: Global vs local factors
Hypermarket saturation against modern grocery formats in Europe
Compact stores the bright spot for Western Europe’s hypermarkets
Shift to internet retailing: Challenges for physical grocery retailers
Online vs store-based: Between cannibalisation and opportunities

geographic Strategies to Offset Saturation in Developed Markets

Global hypermarket players facing developed market decline
Hypermarket growth increasingly biased towards emerging markets
Mass merchandisers: Declining sales in most markets bar Canada
China: Slowdown for global hypermarket players against local ones
Southeast Asia: Opportunities for local and global hypermarkets
Latin America: Solid hypermarket growth driven by largest players
F uture market entries in hypermarkets: Focus on smaller markets
Rising level of car ownership to boost growth in emerging markets

Format and Assortment S trategies

Key assortment and format strategies to retain formats’ relevance

Format and Assortment Strategies

Reduced size and more targeted store concepts for hypermarkets
F resh food a key element in hypermarkets’ recovery strategies
Food and drink internet retailing: French and UK retailers pioneers
Leveraging store-based presence to build multi-channel synergies
F ocus on non-retailing services to give stores a broader appeal
Retailers seek solutions to use hypermarkets’ surplus selling space

C onclusion

Key recommendations for hypermarkets and mass merchandisers
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