In the time of recession in EU and US, more and more shoppers seem to be switching from full service retailers to discount stores. Is it a threat to existing discount stores?

Concept of discount retailing:

A discount store is a type of department store, which sell products at prices lower than those asked by traditional retail outlets. Discount stores are not dollar stores, which sell goods at a dollar or less. Discount stores differ because they sell branded goods and prices vary widely between different products. Most discount department stores offer wide assortments of goods; others specialize in such merchandise as jewelry, electronic equipment, or electrical appliances. Many of the major discounters are now opening "super centers", which add a full-service grocery store to the traditional format. . Although discount stores and department stores have different retailing goals and different markets, a recent development in retailing is the "discount department store".

Details about Wal-Mart:

Operational , supply chain and marketing strategies:

All successful retailers have identified their Unique Selling Proposition (USP), which is the aspect of their business that makes them different from their competitors , that USP drives marketing, merchandising and even the in-store customer experience. It is proved that without uniqueness no one can stay just with brand in this industry, and also shows that no brand is invulnerable and longevity does not guarantee a future for any discount retail store. An example of this fact is Exxon Mobil’s retail failure. And here only Wal-Mart beats its all competitors and I will now enlighten their all strategies involved in their superiority.
Wal-Mart's position starts at two ends of the spectrum - make as many things as widely available to as many people as possible with small margins. Wal-Mart’s business strategy we can classify into three main domains:
1.CustomerIntimacy
2.ProductLeadership
3. Operational Excellence

1. Customer Intimacy: Customers would be provided what they want, when they want it, all at a value. Wal-Mart strategy is from beginning customer friendly and they say,
“We do not sell articles to our customers, but instead, we buy articles for our customers”. Wal-Mart excels at operations and execution often by providing a reasonable quality at a very low price. The focus is on efficiency, streamlining operations, Supply Chain Management, no-frills, volume counts. The “10-Foot Attitude” was another customer service approaches Walton, owner and founder, encouraged. He asked associates to make a pledge, telling them, “I want you to promise that whenever you come within 10 feet of a customer, you will look him in the eye, greet him, and ask him if you can help him”. The “Buy American” program was a Wal-Mart retail strategy, which means average American can buy and use branded product from Wal-Mart.

2. Product leadership: Wal-Mart also maintains status quo with the other two disciplines by offering innovative (new to market products - walmart.com, now selling music on-line similar to itunes). Right now, one of their most talked about strategies has been their entrance into the online social space with Wal-Mart - The HUB (School Your Way). They want to become the next MySpace, but they seem to be a long way off Wal-Mart’s winning strategy in the U.S. was based on selling branded products at low cost. Wal-Mart is a one stop shop for average American families where they can get gas, a tune-up, new tires, groceries, apparel, electronics, pharmacy services, and basically everything they need for their daily lives. Wal-Mart enjoys a competitive advantage by offering those comprehensive products and services through everyday low prices.


3. Operational Excellence: For any firm employees are the most effective factor and backbone of any industry and there Wal-Mart shows its excellence which allows them to stay in competitive market for years together being the best. They explains, “Treating each other as we would hope to be treated acknowledging our total dependency on our associate – partners to sustain our success”. Employees are the basis for success of the company and drive the day-to-day operations. Wal-Mart’s employees, feeling like associate partners, gives them a feeling of empowerment and pride that drives the company’s culture. Every associate that had been with Wal-Mart for at least one year, and who worked at least 1,000 hours a year, was eligible for profit sharing of the company. Using a formula based on profit growth, Wal-Mart contributes a percentage of every eligible associate’s wages to his or her plan, which the associate can take when they leave the company, either in cash or in Wal-Mart stock. One of the significant costs for retailers was shoplifting, or pilferage. Wal-Mart addressed this issue by instituting a policy that shared 50 percent of the savings from decreases in a store’s pilferage among that store’s employees through store incentive plans. Wal-Mart also instituted several other policies and programs for its associates such as incentive bonuses, a discount stock purchase plan, promotion from within, pay rises based on performance not seniority, and an open-door policy.

Now it is a time to discuss how full service retailers can be a threat to discount retail service providers. In my eyes full service retailers can not be a threat to discount retailers because of following reasons:

1. First thing is the USP that drives the discount retail honchos far ahead of the full service retailers. Wal-Mart, Target, Kmart like discount honchos have their uniqueness in product service, product promotion, business strategy. It is true that many of the full service retailers are now becoming discount retailers in the time of recession to catch the average consumers’ eyes, but they are more prone to short time profitability rather looking for long term profitability. This is the area where discount retailers can easily beat the full service retailers.

2. Second thing is obvious the customer service, that is undoubtedly far better for the discount retailers than the full service retailers. Since the discount retailers are more looking forward to long term profitability, they are inventing lots of customer friendly services which can not be fetched by the full service retailers.

3. Discount honchos have already created a steady market for their own and they have unquestionably more wealth from the full service retailers and this in turn can beat the full service retailers, because these big fishes can withstand by getting less profit for sometimes but for the full service retailers it is a tough task, because it is necessary for them to compete with discount honchos to give quality product in low prices.

4. Discount retailers are now expanding their market through out the world and they are now going beyond to their own country border, which gives them wide range of market compare to full service retailers and there again they can take over the full service retailer and can hit them under the belt.