Warehouse plans to phase out its one-stop shop Outlets

Author: Vaimoana Tapaleao
Article: Warehouse plans to phase out its one stop outlets
Source: NZherald.co.nz
Publication Date: Friday October 10th 2008

By: Bergen Graham

The article by Viamoana Tapaleao is about retail giant The Warehouse’s recent decision to phase out its one stop shop outlets. The decision has been made due to the outlets not achieving the results that the warehouse had originally planned for. The warehouse extra was opened with the intention of creating a one stop shop for consumers where they where able to combine their general Warehouse shopping with there supermarket shopping. The company aimed to achieve a 10% halo benefit in general merchandise and apparel by introducing groceries to their shelves. However after three years in the market The Warehouse has announced it will withdrawal from the market place.

The Warehouse Extra was New Zealand’s first store with an integrated food and non-food product range. These types of stores have seen huge success in other western countries like America and Canada, with Wal-Mart dominating over 35% of the US food marketplace in America [2]. The Warehouse however was not able to follow their success and this is mainly due to their inability to align their services with consumer demands. The retail value proposition (RVP) for the warehouse extra was convenience, price and selection; however it was unsuccessful in combining these three factors to create value within the market place.

The Warehouse Extra may have achieved convince by creating an umbrella store where you are able to buy both food and non food products in one store, but not when it comes to location and accessibility. The three Warehouse Extra stores in New Zealand are located in shopping malls and in industrial regions away from residential areas. This generally means that consumers have to travel quite far to get to The Warehouse and pass supermarkets on their way. In the article a customer quotes “you’ve got to drive out there that is another expense”. The increasing cost of transport and food prices in New Zealand has encouraged consumers to value convenience when it comes to location. The price and selection that The Warehouse offers is also not significant enough to motivate consumers to drive out of there way to buy there groceries specifically from them.

In my opinion the success of Wal-Mart in North and Central America can not be achieved in New Zealand’s market place, as there is just not the demand for it. Supermarkets are already so conveniently located within New Zealand and offer very competitive prices. There are also over five different types of supermarket chains that cater to most of the New Zealand’s differing market groups leaving little room for demand of a new store. Consumption patterns of New Zealanders are also different to that of Americans, who place more value on quantity rather than quality. Mega stores, like Wal-Mart, cater to this demand and are the reason why these types of stores are more widespread in the US market place than in New Zealand.

Reference
The business week magazine viewed on the internet at: http://www.businessweek.com/magazine/content/03_40/b3852001_mz001.htm (viewed Friday, 3rd may) [2]