Localization: The Revolution in Consumer Markets By Darrell K.

Rigby and Vijay Vishwanath Summary:

From the era of Standardization, consumer markets are moving towards localization. Previously Wal-Mart, Best Buy and McDonalds focused standardization of store formats, merchandise mixes, operating and marketing processes internationally. But consumer communities are moving towards Diversity very fast. Thats why retailers, consumer goods companies are offering different types of stores, product lines, and alternative approaches to pricing, marketing, staffing and consumer services to local markets. Standardization discourages experiments and is easy to copy but Customization encourages local experiments and difficult to copy and can be competitive advantage. In 1970s, 40 lifestyles were sufficient to define U.S population but now it increase to 66% on the basis of ethnicity, age, wealth, urbanization, housing styles and even family structures and etc. Second many large brands have expanded at their maximum. Third, if areas are available, there communities create resistance for standardized chains. Fourth standardization is hinder to innovation and experiment that lead to attractive new products, services and processes. But technology in the form of scanners, data-mining softwares, radio frequency identification of objects have provided deep insight of local costumers preferences and buying behaviors. BestBuy, Tesco, VF and even Wal-Mart are working on localization. Wal-Mart stores localization starts on drawing boards. Store near office should keep features of ready-made meals. Wal-Mart logistics system manages 110 distribution centers in U.S alone. Retail Link program is used to create maps of daily sales items in every store which helps its suppliers what is needed and when. Similarly Wal-Mart keeps 3 canned chili types are kept nationwide for 60 types further are placed according to local tastes. In five years, Retail Link also helped in placing from 5 to 200 planograms which raised growth of soups. But there should be balance between localization and standardization according to where, when, what should we localize? Too much localization will corrupt the brand and increases in prices while too much standardization can reduce market share and profit. For Example WalMart that ant and roach killer sell in Southern and Northern united state brought difference because northern states focused as it roach killer and didnt bought unless it was replaced with ant killer. Localization focus should be relatively on such small variables which can affect bulk of customers. Instead of making decision for each separate store, companies are searching for communities having similar likeness. For example American Eagle Outfitters found similar buying pattern in Western Florida and Texas and California customers. American Eagle now promote in these locations collectively. Drugstores, departmental stores, mass merchants, big-box retailers, restaurants, apparel companies and varies of customers good manufactures used customization-by-clusters strategy. In clustering members of same cluster have strong association and weak between Amat-UL Mateen Noor UMT

different clusters. For example if a manager has to decide about the stocking of 100,000 items in 1,500 stores for 1 year, for each stock she would have to make 54.8 billion decision which are too much and can be meaningless thats why if she makes decision on the basis of timing, place then she would have to make 2.6 million decision which a computer can handle. Best Buy identified five types of customers from its 700 stores. First type is of JILL who is busy mother and wants quick personalized help in technology. The company designed store and kept household appliances, lightening systems and toys.Buzz customers need latest technology.Barry is busy and rich who want personalized services.Ray is those who need technology in proper budgets.Geek Squads are small business customers who need office equipment. By keeping them in mind, Best Buy designed products and services staff according to their needs. For cluster making, information gathering is most important and different types of companies required different number of clusters. Sorting the product in right cluster is also very important. If senior citizen product is piled with college communities this will drop sells. By learning localization with Lowes Lin and Target companies are gaining advantages. Cadbury added kiwi-filled chocolate Cadbury kiwi Royale in New Zealand, Kraft developed Fiesta fruity pebbles for Hispanias, Coca-cola make four coffees flavor for Japan, Procter and Gamble introduced different flavors in Pringles according to countries needs. VF did extensive market search to know about its customers demands, color and style patterns. Immigrant and non immigrant Americans, even different stores in same metropolitan areas showed diverse results. According to VF due to localization, sales can increase 40% but at the same time it can reduce inventory and price to 50%. Centralization and Decentralization in localization shit is another issue. Decentralization is not good for two reasons: First local manager has lack of data and skills for buying deicisions.Second, it can bring cost complexity and inconsistency in business and business owners are less willing to accept too much decentralization.J.S Penney found that due to decision leeway, managers tired to minimize risk by ordering variety of products rather than hot products. Due to which sales slowed down and popular products moved back. In 2000, the new CEO developed fixture modules and centralized the systems which increase store sell to 5%. But in centralization, coordination was needed to shorten the view of demand patterns. For this, data from internet sales, store scanners, loyalty cards, and data from third-part such as ACNielsen were used. Product suppliers and retailers relationship is also needed with Central Coordination. Manufacturers and retailers have deep knowledge of where the products sell and can get demand of locals and clusters. Local manager has now more powerful role still in centralization by focusing on store guests and find innovative solution of local challenges .Wal-Marts store managers focus on pricings and hot items.BestBuy employee displayed a shirt in front of store about IPods stock which increased store ranking from 240 to 60.7-eleven has created a system called centrally decentralized. Amat-UL Mateen Noor UMT

Localization requires high investment and data collection and analysis and for clustering some economies of scale will need to remove. Investment return in localization is slow but bring more opportunities in longrun.Quick move of companies to localized markdown strategies creates ease in pricing, promotion and marketing of localization. The thinking of homogeneity due to globalization is proving wrong. Instead of it, as the communities are becoming diverse the same will be companies diverse strategies.

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