The Retail Revolution

Article excerpt

The retail business once seemed fairly simple: the humble merchant chose from the goods available from manufacturers and wholesalers, then offered the array to his customers, at prices largely determined by the manufacturers. Not any more, reports the Economist's Reid. "In the past 15 years, retailing has undergone a many-sided revolution from which it has emerged as a leader in business innovation and the management of complexity. Top retail firms are now run by polished professionals" and exercise enormous sway over both manufacturers and consumers.

Retail firms have grown, first at home, more and more abroad, into some of the largest companies on earth. The Wal-Mart discount chain, launched in 1962 when founder Sam Walton opened a store in Rogers, Arkansas, is now the world's biggest retailer, ahead of Metro, a diversified German chain. Wal-Mart, with more than 2,500 stores, had receipts of more than $67 billion in 1993, making it, in terms of sales, the fourth largest American company. (If it sustains its rapid growth, by 2000 the firm may be the largest company in the world.) Today, Wal-Mart's sales revenues outstrip those of its main suppliers. Similarly, each of Europe's top half-dozen food retailers has greater sales than any of the Continent's food manufacturers except Nestle and Unilever.

"The traditional supply chain, powered by manufacturer `push,' is becoming a demand chain driven by consumer `pull,'" Reid writes. "Retailers have won control over distribution not just because they decide the price at which goods are sold, but also because both individual shops and retail companies have become much bigger and more efficient. …