Retailing research and theory offers a clear prescription: Localization is a good thing, enabling retailers to match the needs and preferences of the clientele who enter their stores on a regular basis. But a long-standing form of conventional wisdom also asserts that retailers gain economies of scale by stocking the same items in all their outlets. Such consistency also reassures customers that, whether they visit a Whole Foods in Nevada or New Hampshire, they can find some of their favorite products.
Yet at Whole Foods, the consistent product line is only a portion of the offerings in each store. Managers are responsible for selecting the local products and items that will appeal to their regional shoppers, as well as for customizing the look and feel of their individual stores. Such responsibilities can weigh heavy on a manager who has various other tasks to address as well. Furthermore, individual store managers may have less access to and ability to process vast amounts of customer data than a corporate entity might. A store manager who has not received extensive training in how to make assortment decisions thus could wind up relying on assumptions or heuristics that lead to inappropriate assortments, insufficient inventory, or poor product selections for consumers.
So why do it? The purpose of assigning these responsibilities to store managers is to make sure that each store has a local, homey feel. In Detroit for example, Whole Foods uses vinyl records to mark the aisles, emphasizing the Motown connection. Artistic graffiti covers the dairy department, and the products produced by a Detroit-area salsa company receive a prime location. Therefore, consumers sense that the store is their own, likely enhancing their loyalty and patronage to it.
Standardizing a product mix across a national chain thus might seem beneficial, in terms of the efficiency it provides in scale economies and limiting managers’ duties. But ultimately, people want to feel as if they are buying from a local provider, one that knows what they want, participates in their community, and provides a product mix designed just for them.
What are the advantages and disadvantages of developing localized assortments from the retailer’s perspective?
Source: Steve Rowan, Retail Wire, March 6, 2015