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Bodega Aurrera Express Format Innovation and In-fill Strategies

Bodega Aurrera Express Format Innovation and In-fill Strategies

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Published by Aaron Chio
Bodega Aurrera Express in Mexico. What makes this format unique and what can be applied to the US (perhaps in the form of a Hispanic store) or other global markets.
Bodega Aurrera Express in Mexico. What makes this format unique and what can be applied to the US (perhaps in the form of a Hispanic store) or other global markets.

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Published by: Aaron Chio on Mar 17, 2009
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RETAILNETGROUP STRATEGY ALERT No. 24 IssueFormat Innovation: Bodega StoresFebruary 2009
To read this article in your browser,click here.
 Retailers all over the world are increasingly focusing on in-fill strategies as someretail segments & markets show signs of maturity.Last week Wal-Mart de Mexico announced that 2/3 of all its openings during 2009would be in the form of a relatively new small-box Bodega-style store that willhelp them in-fill markets in key regions across Mexico.We believe the expansion of this Bodega format has far reaching implicationsoutside of Mexico and for a wide range of demographic & ethnographic segments,both for North and Latin America.Read on to learn more about the key characteristics of this store & why webelieve this is an important development.Aaron Chio,Senior AnalystRetailNetGroup.com 
In This Issue
New at
Over the last month, RNGsubscribers can find:
* Updated Curriculum cases,
 including:- Future Insights & AnalyticEngines- Private Label Differentiation- Survival Pricing & PromotionStrategies- Retailer Branding Strategies- Extreme Value & DiscountSupermarkets.
* 12 new photo galleries* Sales & stores updates formore than 200 retailers/banners
Bodega Aurrera Express: Key Characteristics
Wal-Mart de Mexico has experimented with different Bodega-style store concepts,from the larger sized Bodega Aurrera (41,000 sq.ft) to mid-size stores Mi Bodega(16,000 sq. ft) to the smallest of all Bodega Aurrera Express (4,000 sq. ft). All of the Bodega stores target primarily the +60% Mexican population that belongs tothe E to D+ socio economic segment (SES).In Mexico, each store serves a slightly different purpose, with Mi Bodega aimed atrural areas as a destination store while Express is intended to be an in-fill storetargeting convenience & closer-to-home consumption.This is
a fresh store and features an edited assortment with a focus on foodessentials. It resembles a soft discounter, given its assortment focus on brandedvs private labeled items.We can infer some interesting things about Bodega Aurrera Express' storeeconomics based on their highly-urbanized (high shopper density) real estatemodel:
Smaller ticket but more transactions.
This type of store calls forshoppers to visit it a few times a week while spending a short amount of money on each visit. In a sense, this is very similar to how the Bodegas'core shopper behaves in the formal trade.
Lower margins?
A higher mix of consumables vs. discretionary/generalmerchandise items compared to a hypermarket could mean lowermargins. Private label helps offset this, but so far Bodega Express'private label selection seems to be limited (see section below). Due toinformal & open markets competition in Mexico perishables can be lowermargin than center store foods or GM - in the US this is just the opposite.
Lower operating costs.
The store runs with less than 15 people. Thishas one key implication for suppliers: retailers typically will try to shiftlabor as a way of reducing costs & improving efficiency.
Less capital intensive.
Lastly, as mentioned before, investment onsmaller stores is lower compared to big boxes, making it easier for aretailer to expand rapidly.These four characteristics tend to be true for most small-box discounters.Outside of the economic model, Bodega Express lacks some unique featurestypically associated with discounters/small boxes.
* Four new Strategy AlertsNot a subscriber?
Wal-Mart's OtherFormats
Wal-Mart runs a variety of formats in
Central and LatinAmerica
that fill similar widevariety of needs (RNGsubscribers can see photogalleries of some of thesestores, includingDespensa Familiar,Pali,Maxi Bodega,Mas  x Menos,Hiper Paiz)
Prior Strategy Alerts
RetailNet Group has published over 20 Strategy Alerts with the mostimportant themes that retailers &suppliers should be aware of today tobe ready for the future.Here is a sample of our latest reports,for a full list, visitretailnetgroup.com 
RNG Topic Survey
What do you want to learn more about in 2009?
 Click here for our short surveywhich will help us deliver the most important andrelevant topics to you.
Store Branding & Positioning
No frills & convenient: No sign fixture on the façade of the store, which also hasa pharmacy for shopping convenience.(click images to enlarge)The store offers a dignified, well lit, & organized shopping experience that doesnot feel like a E/D+ store. Aisles are short and fixtures not high, improvingvisibility. The store consolidates all the products that can be found at a typicaltraditional trade store (i.e. mom & pops).Not a lot of proliferation of private label, which is mostly at the OPP level. Belowphotos of Great Value & Aurrera.
Meet Our Analysts
Dan W. O'Connoris the President& CEO of the RetailNet Group.He also is the Founder of Management Ventures, Inc.(MVI), a WPP Group company.Dan is a widely known industryspeaker and thought leader.Email|LinkedIn  Aaron Chiois a Senior Analystleading RNG's development of new research, insights andgrowth strategies in LatinAmerica.Email|LinkedIn|Twitter  Tim O'Connoris Vice Presidentat RNG, currently responsible forRNG's Growth StrategiesCurriculum and European marketinsights.

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