6.12. SR 10-18-1999 - Laserfiche WebLink

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Chapter 10 Page 7 of 25 stock. Wal-Mart turned the tables on the suppliers, telling them what products it wanted, where and when, and driving them harder than ever on prices. . Now supermarket chains are hoping to emulate Wal-Mart's efficiency. Early last year, consulting firm, Kurt Salmon Associates Inc., released a study concluding that grocers could cut their costs -- and prices -- by 11 percent or more than $30 billion a year, by moving toward "paperless" links with their suppliers. The scheme, dubbed Efficient Consumer Response (ECR), would mean more effective merchandise assortment and store promotions and eventually a continuous replenishment of shelves based on what's actually sold each day. However, it won't be an easy transition. The big players in the grocery business -- particularly wholesalers -- make much of their money by stocking up on discount merchandise that the manufacturers ofr. Fleming Cos., for instance, a $13 billion food wholesaler, makes roughly a third of its profits through such forward buying. The big discount deals would he cut sharply under ECR. And even ifECR eventually brings Wal-Mart-like efficiency, nobody wants to give up today's profits first. That's a major reason why progress toward this much needed streamlining has been slow. Yes, the middleman is an endangered species because ofthe EDI hookups between manufacturers and large discounters. But here again, the small retailers may become a thing of the past, lacking funds and information to survive. Retailing in Transition In a study several years ago, the following forecast was provided: "By the end of this decade, more than half oftoday's retailers will be out of business." They explained: "there is too much retail space for the market, too much "copy cat" sameness among retailers, and far too much leverage on the books. These conditions leave no room tor marginal performers." They further predicted: "that by the end ofthe century, some lines oftrade will virtually be owned' by only four or five major players."lO It now appeal's that this prediction made in 1990, is being corroborated by the retailing change of power in the mid-nineties. . In the retail discount field such performers as Wal-Mart, Kmart and Home Depot, among other discount chain leaders, have set the pace which ultimately will eliminate thousands of smaller retailers in drug stores, family clothing, general merchandising, hardware and lumber stores. According to studies by consultants, G.A. Wright, Inc. of Denver Colorado, there at first glance "does appear to be evidence to support the contention that the retail industry is consolidating.' The largest firms are in fact controlling a larger and larger share ofthe industry. Large retail firms (those with sales over $100 million) increased their share of industry employment from 35% in 1985 to 39% in 1989 and to 45% in 1993."J~ "In 1985, small firms (sales under $1 million) employed 21 % more workers than the large firms; but by 1993 the small firms employed 22% fewer workers than the large firms." 12 ".....it does indeed appear that the (retail) industry is increasingly falling under the control of a . relatively small number of very large firms. flU As an example of the domination of the large retail firms, The Wright report cited that employment http://www.shilsreport.org/chap 1 O.html 10/6/99