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Retailing and Home Depot

To Hattiesburg, Mississippi Hattiesburg-a small town full made up of university students mostly has been losing its customers to nearby large towns and cities such as Mobile, New Orleans and Biloxi. However, the new mall Turtle Creek Mall is expected to lure back the crowd inside the town. This huge center has many big-box retailers such as Bed, Bath and Beyond, Old Navy etc. it is expected that the new retail facilities will increase retail square footage by 30 percent. Also Target’s introduction has also increased the economic development of the city.

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The city’s expanding roads, and the conversion of a K-mart, a new 14-screen movie theater and a new Best Buy have all contributed to the increased retail development of Hattiesburg. Hattiesburg has a sound economic base and a young population. It has the state’s largest university with a population of 15,000 plus students. The city also has a diversified economic base due to a university, industrial base and healthcare facilities. The major objective of the new mall is to influence the purchasing behavior of the residents. The loss of shoppers is due to excellent roads and connecting highways.

However, the introduction of new giant retailers is expected to turn around the trend. The introduction of the new mall is seen as a win-win situation for the retailers situated at Hattiesburg. Case2: Small Chains, Big Store Location Tactics: Large retailers prefer perfect store locations, whereas smaller retailers seek out lower-quality cheaper locations. This case examines the location strategy of two such retailers. Wireless Toyz looks out for corner locations at busy intersections. They look out for the middle-class areas, blue-collar neighborhoods that have a minimum population of 50,000 people with in the trade area.

Wireless Toyz acquires locations that need renovation and are completely useless to look at, for example former gas stations. Wireless Toyz leases out small space, but when they lease a larger space, they usually lease out half of it to another retailer. It considers strip malls as its ideal location or seeks locations with Wal-Mart and target as anchor tenants. Wireless Toyz has expanded from 27 to 63 locations. In 2004, its sales increased by 30 percent for year in a row. DTLR is also seeking locations sized 3,500 to 4,000 square foot in Mid-Atlantic States and also in metropolitan markets.

DTLR thinks dealing with competition and resistance from neighboring rivals as the biggest channel in choosing a location. It welcomes competition from national chains, and has grown from 18 to 40 stores and plans to add 10 stores per year. Case 3: Home Depot in New York City: Home Depot at Manhattan is its first three-story store complete with a doorman and a concierge. This new store caters to different markets: decorators, building contractors, superintendents, brownstone owners, and households that own or rent apartments.

Even according to the Eastern Division president, Home Depot, it is the first time that they have done everything under one roof. Before coming to Manhattan, Home Depot had been running stores successfully in downtown Detroit, Seattle, and Lincoln Park neighborhood of Chicago. Home Depot is now planning to expand out of the downtown markets. The new Manhattan is in a natural preservation area and the building cannot be modified, thus it has a huge signage indicating its presence. The store offers an unparalleled 20,000 different products and special ordering can increase this limit to 100,000 products.

However, despite all the variety offered, Home Depot does not have lumber department and does not stock plasterboard, insulations or plywood. The Chelsea neighborhood had a variety of independent retailers, however now it is full of category killers such as Old Navy, Bed Bath & Beyond and Best Buy. Store such as Home Depot will increase sales for all the retailers in the neighborhood. The concierge helps people find products and sends customers to proper aisles. In order to appeal to a diverse market, the signs are posted in English, Spanish and Mandarin.

Home Depot is committed to pricing its products uniformly at all locations in New York area. The challenges in the Manhattan area are higher, with increased payroll, cost of occupancy and also increased traffic too. Case 4: Shopping Center Unrest: The Battle Over Leases: A lot of factors have led to increased litigation between retailers and shopping center developers. Over what time of retailers can fill out the empty spaces. This has been further increased due to increased mergers, acquisition, and reorganization of retail outlets.

These agreements concern reciprocal easement agreements (REAs). A significant example is of the major battle between May department Stores and Taubman Centers. May Stores wanted to replace a lord & Taylor store with a Foley’s Men and Home store. Tauban took up the position that May already had a convention Foley’s department store and the mall would benefit from Nordstrom or other higher-end retailer. This stems from the definition of a department store given by REA. According to REA, the replacement space must contain a variety of varied merchandise.

The definition of an anchor store has also led to legal actions. Initially, the term described a department store however, now it is loose term including discounters, grocery stores and theaters. Costco and target stores have also been used as replacement anchors. Another area of conflict is when an anchor tenant divides the store into smaller units. Part 4 Comprehensive Case: Retailing in Germany Even though Germany is the world’s third largest economy and the sixth largest retail market, it is the weakest retail opportunity among the Western Europe countries.

The sector is almost a no-growth industry because of the tough regulatory environment. It has thus; dampen the chances of Germany’s retail industry growth as compared to Britain, Spain and France. The industry is also expected to grow slowly in the next five years. Germany has the highest living standards among the large Western European countries. However, this standard is lower than most of the smaller countries in the region and well below that of United States. Its population is also the 13th largest globally. This makes it the most population dense country in the region.

However, Germany’s population is predicted to stay flat during the next five years but nonetheless it will continue to stay slightly skewed towards a bit older generation. There is inequality present and its income is somewhat concentrated amongst the top 20 percent of the population. Germany is also an exception among European countries to have not benefited from strong housing markets. The stagnant housing market has contributed to the weaker consumer spending lately. Germany’s FDM are one of the largest in the world.

However, a weak domestic economy, price-conscious consumers and inflexible laws have made the market tumble. The huge discount retailers Aldi and Schwarz Group’s Lidl have been in trouble owing to their huge sizes and thus have moved outside the country. Metro, even though the largest German retailer in the world is the second to Edeka Gruppe in sales in Germany. Metro plans to expand somewhat in the local market but its main focus will remain the foreign markets. For Edeka, the local market holds more promise as it generates 95 percent of its sales there.

In 2004, Wal-Mart had its fifth anniversary in Germany. However, still it holds just 2 percent of the total foods markets and posted losses for the year. Now Wal-Mart has sought to open new format stores in Essen and other cities and also focus more on the sales of private label items. German house market can be blamed for the sluggish growth of the home goods market. In addition, low-income growth and high unemployment have had a role to play in it too. Small family-owned retailers are facing the biggest threat from it.

The first wave of consolidation was felt by the furniture market, which is over saturated by retailers. As such, growth even in good economic times is declining. OBI Baumarkt is the largest home-improvement chain in the country. OBI plans to expand to China and Greece while Ikea has been making its relationship with the German consumers even better. Germany is Ikea’s largest retail market with a 20 percent share. Even though Ikea has been criticized for its inflated prices, it keeps on improving its market share. Staples has introduced the office supply superstores idea in Germany.

It entered the market by acquiring Maxi-Papier and now has 60 locations across Northern Germany. Internet sales and catalogue sales are on the rise in Germany. Catalogue sales account for about 9 percent of the sales. As predicted, the largest and the ones perceived to be the best have the entire market share. These are Amazon, Quelle, eBay, Tchibo etc. other foreign players are also entering the market. Even though consumers do not like eBay’s policies and regulations too much, eBay’s gross merchandise sales have been increasing at an impressive rate.

Even Amazon has overtaken its German competitors now. Looking forward, one can predict that a second wave of consolidation will take over the entire retail industry of Germany. The largest and the biggest operations will suffer the most due to their size and costs. Wal-Mart will also need to bolster its German markets. The shakeout will most likely also come at the expense of Edeka and Rewe. However, the outlook favors drugstores while making standalone pharmacies its victim. Soft goods industry has already faced the shakeout, which has taken the smaller retailers down.

But the question remains which big retailer will have to wrap up its operations. The growth of the retail industry depends on many factors. The most important is the deregulation of the industry and the modernization of the economy. Retailers have been constrained by four major regulations: the mandated union representation on corporate boards, restricted store hours, constrained pricing flexibility and limits on big box retail construction. However, some changes have been seen in these regulations recently. The change will likely come, but at an expected slower pace.

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