module 10

Hard discounters bm

• Assortment

• stores

• supply chain

Assortment hard discounters

• low SKUs

• PL oriented (90%)

• Rock-bottem prices (PL up to 50% cheaper than nb)

stores hard discounters

• small stores, in low-rent districts

• low staffing level

• basic and functional environment

supply chain hard discounters

• simple buying process (low SKU and pl share)

• stable long-term relationships with suppliers (10 years instaed of 1-2 years)

value equation

price x quality x convenience

hard discounters in value equation

• price → reset price point (not only food)

• price quality relationship → high quality low price

• convenience: fast 

how hard discounters get quality

• partnership with high quality suppliers

• continiuos quality testing

convenience in hard discounters

• fast, since low SKU

• suprise effect with products like matresses etc. giving larger assortment

dilemme hard discounters: middle income

• a brands for one-stop shoppers

• against business model: efficiency

solution: very limited brands make it→ carefull selection

why brand manuf see opp in collaborating with hard discounters

• reach new shopper segments

• seize the moment (share is grwoing + shelf space is decreasing)

risks for manuf

• brand erosion: stores are cheap → brands do aswell…

• cannibalization → sales from con retailers just move over and you dont reach new consumers

• retaliation by conventional retailers: delisting/less brand support

minimize brand erosion

• use innovative, dynamic brands (brands with strong growth outside hard discounters)

• invest in outer package (better looking outer package design 

• keep the price difference between brand and pl is suffciently big (75%-150%)

how to avoid cannibalization + retaliation

• create different offerings for hard discounters than conv retailers (size differences)

• select a smaller (niche) brand for hard discounters 

pinched conven retailers

• amazon: endless aisles

• hard discounters: rationalized assortment

vicious cirlce of discounting

counter hard discount strategies

offer convenience (roll, out convenience stores → small stores in neigbourhood with high quality products)