The world’s largest retailer earned bouquets as well as a few brickbats when it recently opened a Hispanic version of its large store format, named Supermercado de Walmart. The signs around the store are in Spanish as well as English, selling traditional Mexican national brands as well as traditional Hispanic food like tacos, tortas, aguas frescas, sopes, carnitas and barbacoa at the chain’s customary low prices. 

The surprise, if any, was that this store was not in a city in Mexico but in Houston, Texas, USA.

Wal-Mart’s logic behind the format is that it would be more relevant to the heavily-Hispanic population in the catchment of the store in Houston, and that it was a natural evolution to what they had been doing for years. 

However, some customers and observers do not agree. Quite a number of people are up in arms against this “pandering to immigrants”, which they see as a threat to the unity, homogeneity and identity of the United States of America. One internet commentator condemned this segregation with a rather unique view, saying that segregating customers like this was actually “racist” and belittled the Hispanic customers who live in that area.

We should probably wait for the dust to settle on this debate. Spanish-speaking customers may actually respond positively – or not – to this new format. Yes, some defensive or aggravated English-speaking customers may also boycott Wal-Mart over this move. 

As for me, I believe that it is a good move for Wal-Mart to test how far customization can help their business and how finely they can tune their response to customer demands, because they will need all the learnings they can get to effectively tackle markets that are even more different around the world.

Of course, many retailers and marketers in a market such as India would be puzzled by all this fuss. After all, if a Chennai-based company opened stores in Maharashtra, it wouldn’t put up signs in Tamil, neither would a Punjab-based retailer expect its customers in Imphal to understand promotions in Punjabi. Fragmentation and customization is a fact of life to the Indian retailer.

Or is it really that clear? 

In fact, India has its share of marketers who seem to think and plan mainly in upper income metropolitan-English, and this bias creeps in not only in the content and structure of promotions but also, unfortunately, influences the merchandise mix. Even while PowerPoint presentations are made about how diverse the country is, and how it is possibly more like many countries rolled into one, we often make use of cookie-cutters for designing our product plan, our marketing strategy and everything else that defines the retail store and the customer experience. 

Now, before I am labelled unfair for making sweeping generalizations, let me also say that other than any such urban English bias, there are also another couple of reasons why a retailer may take a template-based or cookie-cutter approach to the market.

Firstly, if you’re launching a new retail chain, there is a need to derive efficiency by driving scale as quickly as possible. Repeating the product formula across locations allows a retailer to increase the impact of merchandising efforts in terms of additional margins due to volume margin terms and better negotiating power with the supplier. Also, the management effort is used in a much more focussed manner, lowering effective management costs.

Secondly, there is the need to demonstrate a consistent image across the entire footprint of the chain, and to appear to be a chain. Repeating the product and presentation formula reinforces the common image and branding.

However, the pertinent question is whether there is any point in following a consistent identity if it appears alien and irrelevant to most of your target customers? In a category such as grocery, where the customer don’t really shop across multiple stores in a chain, is it better to be locally relevant rather than consistent across the country or even a region? Clearly, if you have a national or international template that is locally irrelevant, you don’t have any chance of succeeding with the consumer. 

On the other hand, is it really organisationally possible for a chain-store to be local, and if so how can it best strike the balance between chain-wide consistency and tweaking the offer to provide local focus? 

To my mind the starting point is the definition of an identity based on a clear value proposition and operating principles. This includes a range of factors from the visual elements of branding to how the staff stack shelves or interact with the customer. 

The next step is to make the merchandise locally relevant, because that is what creates the transaction. The answer to “how much local” would also provide the answer to “how the locally-relevant merchandise should be managed”. Organisational models could range from entirely centrally-managed local merchandise and data-driven decisions, to central management of range architecture and purchases but local pull-based replenishment, to outright purchase from local vendors by the specific store’s management to create a truly local store. 

Of course, devolving range and purchase decisions to local management raises issues about maintaining control as well. To a certain extent processes and system can help to mitigate the risk of fragmentation of the identity or potential mismanagement. 

But the strongest glue is culture, as the manifestation of the organisational identity. Culture defines most strongly “the way” the organisation works. 

Imagine the business as an individual with a well-defined personality. In different cities that individual might speak different languages and dress in different clothes, but still express the same values.

With a well defined and well expressed organisational personality, localisation can occur without fear of corruption of the brand identity, consistency and controls. Then the chain-store can truly become a local store and part of the consumer’s life as it is.

The other choice, of course, is to wait for a significant part of the local consumer to adapt to your international or national template. Would you be prepared for that?

In a recent workshop on fashion styling, we were discussing how the retail seasons have evolved. In the developed economies, from the traditional two seasons – spring-summer and autumn-winter – the number of seasons grew as fashion brands discovered or invented (take your pick!) sub-seasons to create and satisfy distinct demand in specific time periods. For many companies, the number of “seasons” has grown to 10-12 now including transitions and “promo season” series.

India, you would think, essentially has two seasons, the summer and the festive season. However, in the last decade or so, as exposure to the global culture has increased, other “seasons” such as the “Valentine’s Day” have emerged and proved important for retailers.

In fact, events such as the “Sabse Sasta Din” (“the cheapest day”) on the 26th January (India’s Republic Day) created by Kishore Biyani’s Big Bazaar in 2006 should also qualify as seasons, given the huge sales upsurge during the event. In fact, the impact has been such that many other retailers and brands have also taken this concept rather seriously this year. In fact, after a rather dull consumer response in the festive season in 2008, many of our clients reported rocking sales in the last week of January 2009 on the back of heavy promotional campaigns.

More recently while voter awareness campaigns such as “Pappu can’t vote” have been effective marketing initiatives to get many of us out of our comfort zones and exercise our voting rights, many retailers and brands have also seized this opportunity of citizens’ awakening by offering up to 20% discounts to those who have voted. The economic slowdown is certainly getting people to think differently and more creatively. So, “Jago re” (awaken) brands, retailers and countrymen – go ahead and fashion your own season!

Wal-Mart has just opened a new store Supermercado de Walmart in Houston (Texas). The Houston Chronicle reports that the Supermercado aims to reach out to the Hispanic population, tailoring the foods more to Hispanic tastes and needs and adding signs in Spanish. Wal-Mart is also reportedly planning to open a Mas Club this summer, based on its Sam’s Club warehouse outlet, but focussed again on Hispanic customers. (The original article is here: Wal-Mart gives its Supermercado concept a tryout).

Going by some of the negative comments attracted by the article, it is legitimate to ask: what will Wal-Mart’s existing customers think, and how will they behave?

I guess the answer is clearly not black or white (or beige, red, yellow or brown for that matter).

Wal-Mart is segmenting and localizing its offer as a smart information-rich retailer should.

Some customers who hold a tightly parochial view may feel alienated when they read about this development and may stop shopping at Wal-Mart, but most probably won’t bother as long as their local Wal-Mart continues to deliver what they want at prices they like.

Vibrant societies and economies are true melting pots; rather than exclude, filter and ensure conformity, they imbibe and blend newness. The fact is that real assimilation causes both to change – the ones coming in and the society / geography taking them in – and we have to accept that change often brings some pain with it, as expressed by the reader commenting on Houston Chronicle’s website.

The first waves of European settlers created a change when they started landing in North America 500-odd years ago, and so has every wave of immigrants since – Chinese, Japanese, German, Irish, Italian, Eastern European, Korean, Indian, Caribbean and so on. The first settlers will always be suspicious and exclusive in their approach towards the second set, the second lot of the next and so on.

The wave of economic homogenization driven by the post-war baby boom and infrastructure expansion was possibly one of the largest in recent history (other than the Soviet Union and the Chinese Cultural Revolution, which were more political than economic). However, we’ve seen the US market grow in diversity in the last 2-3 decades – not only because of differences due to race or country of origin, but also due to geographic, economic and otherwise cultural differences.

Today many of the diverse segments today in the US are large enough to express their unique needs, and expect them to be fulfilled. While the cookie-cutter approach served well during the years of national expansion across homogenized markets, that approach is counter-productive today. A retailer like Wal-Mart can’t be expected to ignore that fact.

Retailwire.com prompted a discussion on what, if anything, should grocers and other stores be doing to accommodate the growth in stay-at-home dads?According to the US Bureau of Labor Statistics, the recession is putting more men out of work than women, which has led to an increase of stay-at-home dads who are increasingly taking on the traditional women’s roles of childcare, housework, school life, and shopping.

Here’s my contribution to the Dad wishlist: salespeople who don’t look down their noses when asked a (“stupid”) question Mom would never have dreamt of asking. (Also, considering this is the gender that apparently never stops to ask for directions, please treat the question as close to a life-or-death emergency.)

Advertising Age recently carried an article titled “The Death of Customer Segmentation”, by Michael Fassnacht.

He questions the traditional marketing hypothesis that the better we segment consumers, the better we know what is relevant and the better we can market to them.

Fassnacht argument is that:

1. Segments are becoming more volatile [totally agree!]
2. Consumers are never part of just one segment [fashion companies discovered that a few years ago, and began marketing to “purchase occasion segments” rather than plain-old consumer segments defined by demographic and static psychographic profiling], and
3. Consumers are preferring to choose what information would be relevant and of interest.

This last point is of particular importance, since electronic media – especially websites that customize themselves based on analysis of the users behaviour and history – are becoming more prevalent communication platforms. In fact, for the last few years “mass customization” and “a consumer segment of one” have been fashionable phrases thrown about in marketing circles.

Fassnacht quotes Amazon, Apple and social networking sites such as Facebook and MySpace to support his well-structured argument.

However, it may be a challenge for traditional retailers and brands to apply the learnings from these brands in their physical stores.

Going further and on a lighter note  – or perhaps not 🙂 – if we are to believe the philosophy of the Vedas, the Universe has a head start on “self-segmentation” and “customization of consumer experience” technology. According to it, the world and our experience of it is “Maya,” an illusion product of our mind, and we are free to create and mold it, and experience it as long as we hold the illusion.

If that’s the case, our modern techies and marketers have a long time to go before they climb that technology curve.

The original article is available here: The Death of Consumer Segmentation?