Discount & Variety Retail Industry Trends

Expansion of Supercenters

Both Target and Wal-Mart are adding and converting existing stores to supercenters, which combine grocery products with general merchandise. Offering a full selection of groceries helps drive traffic, since consumers buy food more frequently than most other goods. With thousands of supercenters, Wal-Mart has become the largest grocer in the US.

Changing the Retail Landscape

Wal-Mart and other discount retailers have fundamentally changed how many other companies must operate to survive. Discount department stores dominate or hold large shares in many major retail categories, including groceries, apparel, toys, and pet care products. Aggressive pricing and relentless promotions depress retail prices, increase pressure on margins, and have resulted in bankruptcies and closings of both midsize and large competitors. At the mercy of companies like Wal-Mart, suppliers may alter products, packaging, or purchasing and delivery terms to maintain relationships.

Implementing RFID

Discount department stores are mandating the use of radio frequency identification (RFID) for a growing number of suppliers. RFID tags can store more product information than standard bar codes and allow companies to better track merchandise flow through the supply chain. RFID is key to automatic replenishment systems, helps get new products to retail faster, and reduces out-of-stocks. While the cost of RFID tags is falling, the additional expense still challenges suppliers of low-ticket items.

Growing Popularity of Cheap Chic

Demand for designer-inspired products at discount prices continues to grow, with more companies adding inexpensive, but stylish, merchandise. Major retailers, including JCPenney, Kohl's, and Payless Shoes, have followed the lead of Target, the cheap chic pioneer. Because fashion trends change rapidly, cheap chic allows consumers to get the latest looks without paying too much. Target is experimenting with limited edition designer collections to generate excitement and drive customers to stores before merchandise runs out.