The US Retail Landscape Continues Shift to Centralization

The industry trend towards centralized retail merchandising continues in the US with two recent retailer announcements: both Whole Foods Market (500 stores) and Albertsons Companies (2,253 stores) are shifting to more centralized operating models. Whole Foods states, “These changes are designed to improve support for our stores and distribution centers as we remain committed to delivering an exceptional customer experience in stores and online.” The changes are intended to streamline the retailers’ regional merchandising, operations, team member services and technology departments to a corporate model to gain efficiencies – but these changes will require brands to adapt their go to market approach.

What does this mean for brands?

One upside from centralized, corporate merchandising is a simplified selling process. Instead of having to sell across a dozen fragmented divisions across the US in the case of the Albertsons Companies, developing a deeper relationship with the corporate buying team will be the focus. It will also be possible for brands with strong data-driven success stories from other retailers to be able to scale more quickly across more stores. This shift will also enable tighter stock management, as corporate planograms should lead to leaner, more uniform assortments that are not as regionally fragmented across divisions.

On the flip side, centralized buying models could mean that small brands are more likely to get lost. The risk profile goes up, dealing with one corporate team making the decisions – the old strategy of “nail and scale” region by region will no longer be possible. It will also be necessary for brands to have access to more operating capital, as more investment up front will be required to be successful in more stores. Bigger companies may squeeze out the smaller players if they are unable to adapt.

The question will be, how can small players continue to innovate and bring forth category-disrupting ideas that will convince corporate buyers to take a chance?