retail marketing

RETAIL MARKETING

ByBinoy john varghese

Miit,ayur

Retail - Any business that directs its marketing efforts

towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution .

Retailer - A dealer or trader who sells goods in small quantities, or one who repeats or relates .

Retailing -All activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use or Retailing includes all the activities involved in selling goods / services directly to final consumers for personal , non-business use.

Retailing derived from French word “retailler” means ‘a piece of’ or ‘to cut up’.

INTRODUCTION

From customers point of view, retailer serves

by providing goods that he needs in the required assortment and at the right place and time.

From customers point of view, retailer serves by providing goods that he needs in the required assortment and at the right place and time.

From an economic standpoint the role of a retailer is to provide real added value or utility to the customer.

FUNCTIONS OF A RETAILER

Five different perspectives - By serving the

consumers by way of functioning as a marketing intermediary and creating time, place and ownership utility.

1. First utility arises from the need of providing a finished goods and services in the form that is acceptable to the customer.

2. The retailer performs the function of storing the goods, and providing us with an assortment of products in various categories

3. The retailer creates time utility by keeping the store open when the consumers prefer to shop.

4. By being available at a convenient location, he creates place utility.

5. Finally when the products are sold ownership utility is created.


The Retailer also serves the manufacturers

by Performing the function of distributing the goods to the end users.

Creating a channel of information from manufacturer to the consumer.

By serving as a final link in the distribution chain.

Recommending products where brand loyalty is not strong or for unbranded products.


Retailer is customer focused, not Product –

focused. Manufacturer may reach customers through:

• Dealers• Company showrooms• Super / Hypermarkets

Manufacturers will decide on Retail Distribution:• Intensive• Selective • Exclusive

INTRODUCTION – CONCEPTS, ROLE & ENVIRONMENT

Four theories of evolution/ retailing are:

1. Environmental theory2. Cyclical Theories

a) Wheel of Retailingb) Accordion theory c) Retail lifecycle theory

3. Conflict theory4. Evolutionary theories

a) Dialectic Processb) Natural selection

RETAIL EVOLUTION THEORIES

Darwinian approach-Retailers with most appropriate

structure and formats will survive. If there are different environmental conditions, they

need to adopt in order to succeed. E.g.: Economy and culture. They must also respond to the evolution of market

conditions or else they will face extinction. Major environmental factors

1. Changes related to customers-Demographic, attitude and preferences, life style and economic influences.

2. Changes in technology.3. Changes in competition.

1.ENVIRONMENTAL THEORY

Cyclical Theories : Begin with one state and

return to that state at some time in future.Cyclical Theories

a) Wheel of Retailingb) Accordion theory c) Retail lifecycle theory

Evolutionary: Changes similar to biological evolution

2.CYCLICAL THEORY

10

a) WHEEL OF RETAILING

Entry Phase-Low prices-Limited facilities-Limited service

Vulnerability Phase-High prices-Excellent facilities-Excellent service-Declining ROI

Trading-up Phase-Moderate to high prices-Elaborate facilities-Increase in skills

Wheel represents phases through which some types of

Retailers pass: Retailers enter by attracting customers – low price, low

service Expand market – More expensive merchandise, More

Trading up services, open more convenient locations. process increases costs & price of their merchandise, creating opportunities for new low price retailers to enter e.g. Discount stores & category specialists

Finally they mature as high cost high price retailers who become vulnerable to new entrants-inability to adapt.

Some Retailers don’t begin as low price, low service entrants, e.g. Upscale fashion specialty stores.

a) WHEEL OF RETAILING

In rural markets, Retailers sell many categories under one

roof: shoes, cosmetics, foods, cloth, medicines. However the assortment is shallow and customers have limited choice.

Starting with general stores - neighboring localities Slowly switching to specialist stores - like gifts,

restaurants, entertainment at a certain distance These specialist retailers when mature start adding variety

and become general stores. Some become category killers – is a retailer that carries

such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition.

Department stores have both width and depth of merchandise.

b) THE ACCORDION THEORY

Retail development pass through 4 stages- Introduction stage – slow rate of growth due to

limited resources and experiences. Growth stage – Rapid growth as efficiency and

experience increase. Maturity stage – Level off due to increased

cost and high competition and reduced efficiency.

Decline stage – Decrease in market share and profitability. May sometimes withdraw from market.

c) RETAIL LIFE-CYCLE THEORY

c) RETAIL LIFE-CYCLE THEORY

Time

Retail development

Introduction

Growth

Maturity/Saturation

Decline

Level of sales

Cash flow

0

Competition between retailers causes changes

in the nature of retail environment. It is due to the imbalance caused by

innovations (Brown, 1987) – Four stages of response.

Types of retailer response to innovation.1. Shock.2. Defensive retreat.3. Acknowledgement and assessment.4. Adaptation.

3. CONFLICT THEORY

Evolutionary Theories : Changes similar to

biological evolutionEvolutionary theories

a) Dialectic Processb) Natural selection

4. EVOLUTIONARY THEORY

Retail formats emerge by adopting

characteristics from other forms of retailers in much the same way as the child is the product of the pooled genes of the parents.

Specialty stores with high margins, low turnover plush operations

Discount stores with low margins, high turnover low operations

Both the above were synthesized to form category specialist stores.

a) DIALECTIC PROCESS

A new value proposition by one retailer gives

rise to two retailers with same value. E.g. Tesco always copied Sainsbury In India too the grocery sector is facing a price

led dialectic process…some of them are sure to die

a) DIALECTIC PROCESS

Thesis

Antithesis

Department Store

Discount Store

Discount Dept. StoreSynthesis

Those Retail Institutions Succeed which adapt

to changes in customers, Technology, competition and legal environment.

Department stores have tried to combat specialty stores by opening specialty counters within the stores.

Interest in physical fitness and increased number of women in workforce have made specialty outlets within grocery stores.

b) NATURAL SELECTION

Two different approaches to quality management.

a) Product-attribute approach – match the product conformance to standardized

requirements. Controls companies output by using internal

standard setting prospective. Training -led management style.

b) Consumer-oriented approach – Holistic process of service delivery to be controlled

by considering expectation and attitude of customers.

Marketing-led approach. E.g. Perceived service quality Gronroos model and

Parasuraman, Zeithaml & Berry model.

Management of service and quality in retailing

Gronroos, 1982 – focus on IMAGE, a gap

between expected and perceived service. Aggregation of functional and technical

variables. Functional quality– How technical elements

are transferred to customers. Technical quality– What the customer is

actually receiving.

PERCEIVED SERVICE QUALITY GRONROOS MODEL

Traditional marketing

activities

Expected service

Perceived service

Perceived service quality

Image

Technical quality

Functional quality

Technical solutions

Knowhow

Computerized systems

Machines

Attitudes Internalrelation

Beha

vior

Service

MindedCustomer

contacts

Accessibility

Appe

aran

ce

MANAGING PERCEIVED SERVICE QUALITY GRONROOS MODEL

What? How?

Parasuraman et.al., 1985, customer evaluate quality as

difference between expected and perceived service. Five service-quality gaps are identified. Realization of these gaps and reducing and closing the

gaps led to improved satisfaction. Gap 1: ignorance of customer expectations Gap 2 : requirement for service design stds Gap 3 : not delivering to service stds Gap 4 : inconsistency between performances &

promises(service delivery & external commn.) Gap 5 : the service shortfalls

PARASURAMAN, ZEITHAML & BERRY MODEL

Word of mouth

Personalneeds

Pastexperience

Expected service

Perceived service

Service delivery

Translation of perceptions into service-quality specifications

Mgmt perceptions of consumer

expectations

External com

To consumers

CONSUMER

MARKETER

Gap 1Gap 2

Gap 3

Gap 4

Gap 5

SERVICE DELIVERY QUALITYPARASURAMAN, ZEITHAML & BERRY MODEL

QUALITY CHARACTERISTICS

Merchandise Performance Features Reliability Conformance to

stds Durability Serviceability Aesthetics Image

Services

Tangibles Reliability of staff Responsiveness of

staff Assurance /

Competence Empathy

Retail sales driven by Ability (disposable

income) and willingness (consumer confidence)

Worldwide retail sales Est.$7 Trillion. Expenditure on Household Consumption

increased by 68% between 1980 and 1998 Top 200 retailers account for 30% worldwide

demand Over 50 of the Fortune 500 and 25 of Asian

Top 200 are Retailers

GLOBAL RETAIL INDUSTRY

Top 7 Global Retailers

Rank Name of RetailerSales

(USD Bn)Grocery Sales

(%)

1 Walmart - USA 235 44%

2 Tesco- UK 63 75%

3 Carrefour-France 58 84%

4 Home Depot -USA 55 51%

5 Kroger - USA 55 70%

6 WalGreens -USA 52 75%

7 Aldi Group- Germany 48 18%

Retailer links Producers to Customers Retailer is a person, agent, agency, company or organization

reaching the Goods or Services to ultimate consumer Retailer in close contact with the customers Sell small quantities of items on a frequent basis Convenience in terms of location , payment and credit

facilities , range of merchandise , after sales service, etc. Offer selection – merchandise assortment Retailers perform specific activities:

• Anticipate customer wants• Stock product assortments• Acquire market information• Finance Retail business

Why retailing so important?

Retailing is Big Part of Economy

Services

(50%)

Government

(15%)

Manufacturing(18%)

Retail

(17%)

Employment Projections for 2010 by BLS (Bureau of Labour Statistics, US)

FDI in Retail in India; Chinese lesson A.T. Kearney‘s Global Retail Development Index

ranks India first Retailing in India - unorganized sector Organized retail at 2 % , 85% in US, 20% in China At 270 million, one of the largest consumer base GDP growth, increased literacy, increase in media

penetration 60% of India is under the age of 30 - propensity

to shop is higher

Retail in India

Corporate

No of Outle

tRemarks

Reliance Retail 700+ Biggest Retail Chain & fast Expanding, operating in 14 States.

Big Bazaar 164 Fast Expanding, Big Size Stores

Bharti - Walmart 105

03

Retail Stores in NCR, Punjab, UP & Rajasthan, Expanding quickly to SouthCash & carry Stores

Aditya Birla 500+ Concentration in South(acquired Trinethra and Fab Malls)

Spencers 210 Oldest Retailer in India, operates in 27 Cities

Metro-AG- Germany

4 Cash and carry stores located at Mumbai, Hyderabad & Kolkatta, Expanding Slowly

Corporate- Indian Retail

2007 2008 2009 2010 2011 2012 20170

200

400

600

800

1000

1200

336 376 421 471527

590

1011

12 17 29 51 74 97

282

Current Size & Future Projections for Indian Retail Market

Total Retail Organized Retail

US$ B

illion

Rapid Transformation Anticipated

28% share

Reach a share of 28% by 2017

Anticipated Indian Retail

Country Share of Organized Retail

Years taken to reach the level from < 5%

China 20% 10

Poland 20% 8

Brazil 36% 15

Thailand

40% 18

US 85% 50

India 17% (estimated)27% (estimated)

510

India looking at rapid GROWTH compared to other countries

Growth Of Indian Retail

2007 2012* 2017*0

200

400

600

800

1000

1200

336

590

1011Size of Indian Retail

US

$ B

n

Indian Retail expected to grow close to 12% p.a. in the next 10 years

*Projected

Source: Technopak Analysis, CSO & Other Sources

Private Consumption US $568 Bn (62%) Rural India consists of 720 Million consumers

across 627,000 villages 17% of these villages account for 50% of the

rural population

HIGH PRIVATE CONSUMPTION

Organized Vs Unorganized Retail Sector

Organized Retail Sector Unorganized Retail Sector

Factor Organized Retail

SectorUnorganized Retail Sector

Definition Modern form of retailing

Traditional form of retailing

Examples Hypermarket, Retail chain etc.

Mom n Pop stores, hand cart, pavement vendors etc

Market Share 2% 98%

Market Growth

35% 6%

Challenges Poor supply chain management, aggressive expansion etc.

Use of labour intensive technology, lack of government support etc.

Organized Vs Unorganized Retail Sector

Comparative Penetration of Organized Retail

USA Taiwan Malaysia Indonesia China India

85% 81%

55%

30%20%

3%

15% 19%

45%

70%80%

97%

Organized Traditional

Organized Retail is 2 % of the total Retail

Industry and expected to Grow by 10% by 2012.

• Increasing Consumer aspiration• Growing no of Nuclear families• Growing Size of working women segment• Demand from tier II and III cities and rural

markets.• Large young working Population

Growth of organized Retail in India

In India Organized Retailing is 2% Retail sector highly fragmented Retail chains like Wal-Mart, Sears, McDonalds

brought Rapid Growth and consolidation of Organized Retail

Rapid rise of Income levels and accompanying changes in lifestyles greatly contributed to growth of Organized Retail

ORGANISED RETAILING

In India, increase in Disposable income,

Purchasing Power of growing Middle Class conducive conditions for growth of Organized Retail

Indian Retail environment different from that of western countries:• Cities congested, large population in rural areas• Smaller purchases, limited household space

ORGANISED RETAILING

Self-service : Self service is the corner-stone of all

discount operations. Customers carry out their own locate-compare-select process to save money.

Self-selection: customers can find their own goods , although they can ask for assistance.

Limited service : retailers in this category carry more shopping goods , and customers need more information and assistance. The store also offer services such as credit and merchandise return privileges

Full service : salespeople are ready to assist in every phase of locate-compare-select process . High cost of retailing

Need for Retailer’s service

Store retailers : specialty store ,

supermarket , department store , convenience store , discount store, etc

Non-store retailers : direct selling (multi-level/network marketing) , telemarketing , automatic vending , buying service .

Combination

Types of Retail Formats

44

Store-based Retailers operate from a fixed location

that requires consumers to travel to the store to view and select merchandise and/or services.

Store-based Retailers • Department stores• Specialty stores• Supermarkets• Supercenters• Category killers• Convenience stores


45

Non-store based Retailers attempt to reach

the consumer at home, work, or any place other than a store where they might be susceptible to purchasing.

Non-store based Retailers• Street peddling• Direct selling• Mail-order• Automatic-merchandising machine• Electronic shopping


Retailing may take place through:

• Retail Store• Mail Direct• Internet Sales• Door-to-door

Retail services like Restaurants, Hotels, Parlour, Health Services, Car rentals, Travel

In USA Retail generates $3 trillion through 23 Mn. Employees. Wal-Mart generates $245 Bn. sales through 1 Mn. nationally and 0.3 Mn. Foreigners.

RETAILING CONCEPT

Strong economies have a strong Retail sector Entry in retail sector is easy, hence results in

fierce competition Retail must perform its primary role of catering

to customer satisfaction Retail earns modest profits of 9-10% Retail stores of different sizes face distinct

challenges. Their sales volume influences:• Merchandise purchase• Promotion & - Expenses Control

RETAIL

Last decade has seen tremendous changes in

Retail Business – from made to order to ready to wear, from counter sales to self service, emphasis on value addition and cost reduction.

Family run retail business giving way to modern professional retail.

Retail improving inventory management through systems – faster turnover, better profitability, fast changing customer preferences for assortment of goods and services. BETTER CUSTOMER CARE

RETAIL

Direct End-User Interaction Platform for Promotions & POP displays Lower unit sales Retail location critical Services as important as Core Products Large number of Retailers to meet

geographical coverage and population density

RETAIL CHARACTERISTICS

1. Ownership Business:

• Proprietorship, • Partnership, • Limited liability company

2. Operational Structure: • Independent Trader, • Chain Of Stores, • Franchising, • Consumer Cooperative

3. Width & Depth Of Merchandise:• Specific Product Category• Wide Range

RETAIL BUSINESS CLASSIFICATION

4. Type Of Pricing:

• Low pricing, minimum Service• Premium Merchandise, High Service• Premium pricing, distinctive Image

5. Consumer Interaction:• Direct interaction• Mail Order• Tele-Selling• Vending machines• Door-to-door• Mobile Vending

RETAIL BUSINESS CLASSIFICATION

GROCERS - Major business is grains,

provisions, spices, edible oils. Grocers may be dealing in many other items.

GENERAL STORES - Deal in items Daily needs and stocking number of categories, is identified as a general store.

CHEMIST- Deal in Ethical Pharmaceutical Products. Require a license and a Qualified Pharmacist. Such outlets also deal in diverse FMCG products.

RETAIL MANAGEMENT ..2

MODERN FORMAT STORE – a) Part of a chain of stores with self-

service facilities b) Part of a chain, but does not have self-

service Facilitiesc) Stand-alone (not part of a chain) with self-service facilities

FOOD STORE : Deal mainly in food products - milk, beverages, tea, coffee, squashes, ketchup, jams, chocolates, biscuits, bakeries etc.


TOBACCO KIOSK : Deal in tobacco products

like Paan, Cigarettes, etc. are called Pan Bidi shops. Many of them also deal in packaged consumer products like toilet soaps, toothpaste, washing soaps, biscuits, confectionery, batteries etc.

COSMETIC STORE : Deal in Ladies Personal care products / Cosmetics, General toiletry products, Men’s toiletry products, Baby Care Products.


Customer Orientation:

• Attributes & Needs satisfaction Coordinated Efforts:

• Maximize Business Efficiency Value driven:

• Good Value for Money• Goal Orientation• Achieve Goals

RETAIL CONCEPT

1. Communication with Customers2. Identify Customers Needs3. Provide Products and Services to4. Satisfy Customers5. Elicit Feedback to Improve Services – Word Of

Mouth

RETAILING CONCEPT

Customer Service approach:

1. Create a conducive environment2. Listen to your Customers3. Direct mail4. Relationship Marketing – Long Term5. Rewards for Regular Customers

RETAILING CONCEPT

Consumer spend their money at Retail which drives

the economy. Retailers realize Revenue when Consumers buy products or Services from them.

The revenue passes up the Consumer Goods distribution chain viz. to Wholesalers, Distributors and Manufacturers.

Retail Industry employs 17-20% Workforce that drives the Economy.

Retail trends often mirror trends in a nation’s overall economy.

Retailers add value by Providing the Right Product at The Right Place at the Right Time.

ROLE

Vertical Retail Concept: Traditional stores and

Shop-in-Shop concepts – mixture of system and individuality, e.g. Sale of Non-food items like newspapers, magazines with snacks, beverages

Consumption Related Trends: Increasing Consumers with Purchasing Power & More Migrant Consumers Demand for Broad selection of Products Demand for Good quality Products e.g. Honest, Original and Green Products

New Concepts & Trends

Retail Management By Chetan Bajaj Retail Management By Berman & Evans Retail Management By Levy & Weitz

BOOKS FOR REFERENCE

RETAIL MANAGEMENT ..3CASE STUDY:

Facts Of the Case – No assumptions Key Issues List alternatives Evaluate alternatives Recommend Course Of Action

RETAIL MANAGEMENT ..2TOTAL RETAIL EXPERIENCE

Merchandising & Display Brands and Quality Of Goods Inventory Carried Customer Service Pricing Support Functions: Parking Create Customer Excitement

RETAIL MANAGEMENT ..2TOTAL RETAIL EXPERIENCE

Possible Pitfalls:Discount stores – Ample StockNeighborhood Store – Overly Trendy ProductsFull Service Store – KnowledgeableTheme Restaurants – Novelty wears off, food

so-so, Prices highMEET CUSTOMER NEEDS

RETAIL MANAGEMENT ..2OPPORTUNITIES:

Management –Raise capitalPurchaseUse MIS to Control OperationsEmploy for Sales Counters, Stores and

Cash CountersUndertake Marketing Activities

Entrepreneurial Opportunities

RETAIL STRATEGY

OVERALL ACTION FRAMEWORK Mission Goals Consumer Market Overall Activities Feedback and Control Mechanism


Forward Retail Planning – FOCUS

Analysis Of Requirements Of Business Set realistic Goals Differentiate Itself for Target Customers -

Benchmarking Knowledge Of Business Environment – Legal,

Economic, Competitive Synergize efforts Reduce Business Risk – Feedback and Control


MISSION

Commitment to A Business – Business Decision

Around Goods and Services sold or around Consumer needs.

Specific or Generic approach


Distinctive Role In Market – A Leader or a FollowerLeader – Unique strategyFollower – Emulate standard Practices with better execution than competitor.

Market Scope – Customer Base Dynamic Decision In Sync. With Retail

Environment


Ownership and Management: Sole Proprietorship –Individual accrues Profits,

Risks, Costs. Is Liable for Legal Claims. Limited Capital and Expertise.

Partnership – Share Profits, Risks, Costs. Owners Liable for Legal Claims. Better Capital Investments and Capabilities.


Corporation – Incorporated under law. Funds through Sale of Stocks. Ownership Transfer is easy. Private Limited Company – Limited number of Individuals with Limited Liability. Public Limited Company – Open to Public to Invest In Stocks. Profits and Dividends attract Taxes. Managed by professional managers.


Business: Start A New Venture – Flexibility of retailing

Factors Buy an Existing Business – Balance Of

Advantages should be Positive – weigh the negatives carefully

Become A Franchisee – Combines Enterprise with Known Brands. Brand also puts a number of rigid Quality and Business Restrictions.


Types Of Retail Goods & Services Durable GoodsFurniture, Electrical Appliances,Hardware, Timber, Jewelry,Automotive and Spare Parts Non-DurableApparel – Cloth, Garments, Food Group – Green

Grocers, Packaged Foods, General Merchandise, Eating Places, Petrol Stations, Chemists, Stationery


Service Establishments Personal Services Dry Cleaning, Health Care, Photographic Goods,

Barber Shops, Amusement Services, Movie Theatres, Clubs, Amusement Parks, Game Arcades

Repair ServicesAutomobile, Electrical Gadgets, Watch & Jewelry, Electronic Gadgets


Hotel Services

Hotels, Resorts Professional Services

Lawyers, Doctors & Surgeons, Chartered Accounts, Stock brokers, Real Estate Agents

Potential Retail Business Owners Aptitude for a Particular Business


Personal Aptitude

Knowledge, Experience, Qualifications,Inborn Skills and Acquired Skills

Financial ResourcesLand and Building, Fixtures, Equipment

Time DemandsOwner’s Availability

PersonnelSales People, Inventory, Cashiers


RETAIL OBJECTIVES – STRATEGY Sales – Growth, Market Share Profit – Level, ROI, Efficiency Satisfaction – Total Retail Experience Positioning – Up-market, Mid-Priced, Discount

Oriented, Mass Market, NicheValue Scale-Quality, priceFashion Scale-Fashion, Style, AssortmentImage Projected


Target Market – Customer Group To Be Attracted

and Satisfied.Mass – Broad Spectrum of CustomersConcentrated – Specific groupDifferentiated – Two or more distinct Groups with

Different Retail Approaches


RETAIL MANAGEMENT ..3TARGET MARKET TECHNIQUES

STRATEGY MASS MARKET CONCENTRATED DIFFERENTIATED

LOCATION Near LargePopulation

Near SmallMedium Pop.

Near LargePopulation

RETAILMIX WideAssortment,Medium Qual.

DeepAssortment,High/ LowQual.

Distinct Goodsfor TargetMarket

PROMOTION Mass Advtg. Direct mail DifferentMedia forTarget Groups

PRICING Popular High or Low High, Mediumand Low

STRATEGY LargeHomogeneousGroup

SpecificStrat.Directed atSpecific Gr.

Strategiesdirected atHeterogeneousGroups

RETAIL MANAGEMENT ..3CONTROLLABLE

VARIABLES

RETAIL STRATEGY

UNCONTROLLABLE VARIABLES

Store Location Consumers

Managing a Business

Competition

Merchandise @ Pricing

Technology

Communicating Economic Conditions

Seasonality

Legal Restrictions

Mission Situation Analysis Ownership Goods/Services category Sales Objectives Profit Customer satisfaction Image Mass Target Customer Concentrated Differentiated Controllable Overall strategy Uncontrollable Short Term Specific activities Competition Evaluation Control Adjustment


RETAILERS MARKETING DECISIONS:

-Target Market: Focus resources & Retail Mix-Product Differentiation Strategy: Product Assortment Breadth & Depth-Services: Pre-purchase, Post-purchase,Ancillary-Price: Target market, Product Mix, Competition -Promotion: Promote & Reinforce Image-Location: Vicinity of Target market


MARKET SEGMENTATION- TARGET MARKET

Sex, Age, Family Size -Type, Marital, Status, Socio-economic Class, Occupation, Geographic: Metros, large TownsPsychographic: lifestyles, Personality, Values

Services: Advertising, Displays, Special Offers; Delivery, Gift Wrapping, Returns, Tailoring, Installation; Cheque Cashing, Parking, Restaurants, Rest rooms


Pricing: High Profit %, Low Volume & Low Profit %, High Volume

Loss Leader, Discounts -Clear Merchandise

EDLP Every Day Low pricing vs. Discounts

Promotion: Frequent Shopper Rewards, Coupons, Sampling, Ads.

Location: Sales effectiveness –Number of people pass by - % Enter – % Buy- Average Amount per Sale

CASE STUDY – CONVENIENCE STORE


MERCHANDISE MANAGEMENT: A Key Strategy: Develop & Implement

Merchandising - Plans Of Proper Assortment Of Goods & Services As In Demand, make them Available at Places, Times, Prices & Quantity to Satisfy Target Customers

Merchandising Decisions dramatically affect Performance.

Investments in Merchandising Skills & Talent produce Better results than Investments in Technology or other Skill Specialties. 70 -80 % Results Depend on Merchandisers.


MERCHANDISING PLAN: All Merchandising Decisions Based on Plans-

1. Needs Of Target Market2. Type Of Retail Business3. Marketplace Positioning: Mass - Wide & Deep Assortment – Broad Customer Market:Niche –Specific Market Segment – High Customer Loyalty – Shields against Conventional Competitors


4. Defined Value Chain – (Trends )

- Expected: Hygiene, Timely Service, Knowledgeable, Stock Popular Products, Returns/ Redressal

-Augmented: Special Services, Differentiated

Brands, Loyalty Prog.-Potential: Elements not yet Perfected or Opportunities not yet exploited.5. Product Trends


Merchandising Plans will drive

Decisions:Product Lines to CarryShelf Space to Allot to Different

ProductsInventory TurnoverPricing – Across Categories & WithinPromotionsAssortment – Breadth: Narrow or

WideDepth: Deep Or Shallow


Scope Of Responsibility for Personnel:Full Merchandising Functions – Buying

& Selling: Selection Of Merchandise, Pricing Displays, Customer Transactions.

Separate Buying & Selling Functions.Micro Merchandising – Shelf space

Basis Demand PatternCross Merchandising – Carry

Complimentary Goods & ServicesWater, Soda, Soft Drinks, Juices, Ethnic


Merchandise Plan - Forecasting :

Staple Merchandise – Regular Daily Need Products, Stable Sales – List Of products, Inventory Level, Colours, Brands, Style Size

Assortment Merchandise – Apparel, Furniture, Autos. Variety Of products to enable Customers a Selection. Demand Varies, Forecast difficult. Decision On Product Lines, Styles Designs & Colours. Model Stock Plan - Colour, Size, Qty.


Fashion Merchandise – Cyclical

sales due to Changing tastes and Life Styles

Seasonal Merchandise – Seasonality In Sales – Summers Cottons, Winters Woolens – Forecasting for Season

Fad Merchandise – High Level Of Sales In a Short Time. Toys, Games are short lived Fads. Extended fads – Residual sales Continue for longer Periods. Never Out List – Always in stock


PRICING STRATEGY IN RETAILING:Retailer Prices Goods & Services to:

- Achieve Profitability- Satisfy Customers- Be Consistent with Overall Image, Sales, Profits, ROI

Pricing Options:- Discount Orientation- At-the-market Orientation- Average Pricing- Upscale Orientation


Discount Orientation:

- Low pricing as competitive advantage- Low status Image, Fewer shopping frills, Price based customers, Low operating costs, High Inventory T/O.

At-the-market Orientation:Middle Class shoppers

- Offers excellent service, Good atmosphere


- Profit margins > = Moderate- Quality > = Average - Price Range Difficult to Expand as Competition from Discount Stores or Prestige Stores Squeezes the Range

Upscale Orientation:- Prestige Major Competitive Edge- Smaller Target Market, Higher Operating Costs, lower Inventory T/O Means Customer Loyalty,


Distinctive Services & Product Offerings, High unit Profit marginsPROVIDE A GOOD VALUE IN CUSTOMERS’ MIND FOR THE CHOSEN PRICE ORIENTATION.CUSTOMER NOT NECESSARILY LOOKING FOR THE BEST PRICE BUT FOR GOOD VALUE – REAL & PERCEIVED -FOR MONEY.


Research on price In Buying Decisions reveals Different Motivations for Different market Segments.

CONSUMER PURCHASE & PRICING:Price Elasticity Of Demand –

Sensitivity to Price Changes. Small % Change in Price Substantial % Change in Demand – High Price Elasticity. Urgency to purchase is low or acceptable substitutes exist.


Large % Change in Price Small % Change in Demand – Demand In-Elastic. Urgency to purchase is high or there are no acceptable substitutes. Occurs with Brand or Retailer Loyalty.

Unitary Elasticity - % Change in Price directly off-set by % Changes in Quantity Demand


In Retailing computing Price Elasticity is Difficult due to other factors of Product Mix also interplay. Demand hard to predict. Price Sensitivity varies by Market Segment based on Shopping Orientation:-Economy: Shop around for Lowest Price. Segment Growing rapidly.

- Status: Perceive Retailers as different, Look for Prestige Brands and customer Service.


- Assortment oriented: Seek Retailers with Strong Assortment in Product Categories and look for Fair Pricing

- Convenience Oriented: Shop only when they Must at nearby locations with long hours. Prepared to pay higher Prices.- - Loss Leaders: Price below cost to

attract more customers.- - Predatory Pricing: Seek to Reduce

Competition by selling at very low Pricing


Unit Pricing: Indicate Pricing at a unit, e.g., per Kg – to enable quick comparisons by customers.

Sharp Practices:Bait and Switch Advertising:Lures customer with exceptionally

low prices. On contact customer informed of stock-out and offer another product.


Conflicts In Pricing:Manufacturer Wholesaler

RetailerCo. Price Distributor’s Price (a-b%)

Wholesale Price (a-w%)Price To Retailer (a)Price To Consumer (a+ c%)Gray Market Goods: Imported Goods

at Lower Prices.


Market Pricing: High Competition, customers seek lowest pricing. Price increase leads to brand switching.

Administered Pricing: Strong product Differentiation, Control by retailer on Price charged. For customers Image, Assortment, Personal service more important than Price, e.g. Fashion apparel stores, upscale restaurants.


PRICING OBJECTIVES:Market Penetration – Achieve large

revenues by setting Low prices and sell high unit volumes – an aggressive strategy to discourage competition

Market Skimming – Profit is Objective.Charge Premium Prices and attract

Customers seeking Service, Assortment & Status. Does not maximize Sales. ROI or early Cash Recovery Objectives met.



Selling Pr. Demand Sales Av .Cost Op. Exp. Tot. Cost

9 114000 1026000 7.6 104000 970400

10 104000 1040000 7.85 94000 910400

11 80000 880000 8.25 88000 748000

12 60000 720000 8.75 80000 605000

Selling Pr. Tot. Profits Markup % Av. Inv. Hold Inv. T/O R O Inv.%

9 55600 16 12000 9.5 61

10 129600 22 13000 8 127

11 132000 25 14000 5.7 114

12 115000 27 16000 3.8 82

Unit Sales Sales Goal ROInv. %

Profit Profit/Unit

Prestige Pricing:Premium pricing to convey exclusive

image for the product or Service. Evoke perceptions of Quality and Prestige. Habeebs Parlour, Delhi Golf Club, Luxury hotels.

Odd – Even Pricing:Odd Pricing to indicate lower “Good”

deal.Even Pricing to indicate higher quality.


Bundled Pricing:Offering two or more Products or

Services at one price.Fixed & variable Pricing:Variable pricing for highly

differentiated or unbranded products. Fixed pricing for Branded products.


PLANNING & CONTROLRetailer forms a New Strategy or

Adjusts an Existing one, gathering and analyzing feedback reveals effectiveness of Operation. Feedback can be obtained for:- Attributes, Buying Behaviour- Alternative Store location- Inventory Planning- Product Mix Offering


- Pricing- Promotion- Store image

Research efforts related to risk involved:- Higher risk : Store Location- Lower risk: Introduction of New Product Line

Information Gathering and Processing is ongoing for Feedback & Control


Non-systematic or Incomplete ways

of obtaining information due to constraints of Time, Costs or Lack of Research Skills:- Using Intuition: Gut feel- Assuming Past Trends to Continue and follow past practices- Copy Competition- Devising a Strategy based on few individuals perceptions


Example: Movie tickets cost –

weekdays vs. weekends and matinee vs. evenings

Toy store orders for holiday season basis last year’s demand +. Research indicated higher optimism and desire to gift. Stock-out before peak, unable to get delivery of extra stocks.

Chain Store in new Location – doing 40% of expected business. Research shows Store name and Image unknown, ad media choice incorrect


Retailer’s Objectives direct Strategic Planning – some Routine. Non-routine require careful evaluation

Strategy outlined, new data required for its operation acquired and files updated or retrieved from storage, analyzed and interpreted. All this at Information Control Centre. Decisions made and put into operation.


Retail Information System – RISEnvironment Mission,

ObjectivesCompetitors, Economy

Strategic Plans(a) DATA COLLECTION INFORMATION (b) DATA STORAGE+ ANALYSIS CONTROL RETREIVALINTERPRETATIONCENTRE © UPDATING DATA

FILES

FEEDBACK Retail OperationIMPLEMENTATION


Performance results are fed to ICC and compared with objectives set. Regular and Exception reports ( Giving reasons for deviation) generated and sent to Operational Managers for necessary action.

Building RISHow active RIS role – Reports in routine or as-and-when


Internal or Out-sourced- Some Specific Researches can be out-sourced.Cost Of RIS – 0.5 to 1.5% of revenueQuanta of Data – Edit raw data and share interpretationFrequency of Data dissemination – who receives which reportData Storage – Easy retrieival, adequate Longitudinal analysis (Period to Period)


RETAIL PROMOTIONAll communication that informs,

persuades and reminds the target market about marketing mix of the Retail business.

Objectives of Communication:- Increase customer Flow- Increase Purchase BY Target Market


- Increase sale of Specific productor Product Category- Develop Store Image

Communication Promotion Mix:- Advertising- Sales Promotion- Publicity- Personal Selling


Department or Large Stores manage through Promotion department of the store. Small Retailers pool resources with manufacturers for Promotions.

Advertising – Paid Communication using Impersonal mass media: Print – news papers, magazines, direct mail and AV media like TV, radio.Local, vernacular language Print media used by small retailers.


Cable TV is also used by small retailers.Large retailers use a combination of media.

Sales Promotion is a paid Impersonal communication offering additional value to customer. Encourages customer visits and Promotes trial and repeat Purchase of focus Products or Services Special events, In-store Demonstration, Contests


Publicity -Un-paid form of

Communication that provides Information about the retail through media.

A Powerful Business strategy evolves through knowledge of Target Customers, Clarity of Business Objectives. Effective selection of media for Promotion Strategy.

Major shift to Nuclear families in ’90’ s have shifted focus on to kids in Promotional strategies


ATMOSPHERICS & RETAIL SPACE MANAGEMENT

REFERS TO THE PHYSICAL CHARACTERISTICS OF THE RETAIL STORE LIKE EXTERIORS, INTERIORS, LAYOUT PLANNING AND VISUAL MERCHANDISING.

PLAY A SIGNIFICANT ROLE IN ATTRACTING CUSTOMERS AND RETAINING

THEM IMPROVING QUALITY OF SERVICE EXPERIENCE POSITIONING THE RETAIL OUTLET OPTIMUM RETAIL SPACE UTILIZATION


DIMENSIONS OF ATMOSPHERICS:

PRESENTATION LIGHTING STYLING COLOUR PLANNING DESIGN USE OF WALLS/

MATERIALSAPPEAL TO CUSTOMERSEXTERIORS – STORE FRONT, DISPLAY

WINDOWSINTERIORS – LIGHTING, COLOUR, FACILITIES

ENHANCES DISPLAY & PROVIDES RELEVANT INFORMATION


ATMOSPHERICS PLANNING RELEVANT FOR

ALL RETAIL SET-UPS, ESPECIALLY:- PLANNED SHOPPING CENTRES- LIFESTYLE STORES

A TIDY WORK ENVIRONMENT ATTRACTS A HIGH STORE PATRONAGE

ATMOSPHERICS PLAY AN IMPORTANT ROLE:- CREATE POSITIONING FOR RETAIL OUTLET- ATTRACT NEW CUSTOMERS- ORGANIZE STORE AND MERCHANDIZE- ENRICH SHOPPING EXPERIENCE


ATMOSPHERICS ROLE IN RETAIL STRATEGY ATTRACTS NEW CUSTOMERS CREATES A USP FACILITATES EASY MOVEMENT INSIDE

THE STORE FACILITATES ACCESS TO MERCHANDISE

INSIDE THE STORE ENSURES OPTIMUM SPACE UTILIZATION ENSURES EFFECTIVE & DESIRED

PRESENTATION INSIDE THE STORE REDUCES PRODUCT SEARCH TIME

INSIDE THE STORE


CHOICE OF FIXTURES, DÉCOR,

SIGNAGE ENABLE CUSTOMERS PERCEPTION. PROPER PLACEMENT OF SIGNAGES INDICATING PRODUCTS OFFERED INCREASE EFFECTIVENESS. CUSTOMERS NECESSITY TO ASK QUESTIONS INCREASE STRESS LEVELS. UNIFORMS WORN BY STORE EMOLOYEES ALSO REDUCE CUSTOMER STRESS AND ANXIETY TO ASK QUESTIONS.

QUALITY OF STORE FIXTURES SIGNIFY A RETAILER CUTTING CORNERS OR MAKING LARGE PROFITS.


SIGNAGE, LAYOUT AND FURNISHINGS ADD

TO AMBIENCE AND EFFECTS STORE-BROWSING COMFORT OF CUSTOMERS.

IN STORE ELEMENTS SUCH AS COLOUR, LIGHTING AND MUSIC MAY AFFECT PURCHASE DECISIONS MORE THAN POP AND DISPLAYS. TO IMPROVE IN STORE ATMOSPHERE, PERFUMES GET DESIRED EFFECT – ESPECIALLY TO GET RID OF CERTAIN ODOURS. IF THESE ARE COMPLEMETARY TO THE STORE, THE SERVICE QUALITY EXPERIENCE IMPROVES.


MUSIC PLAYS AN IMPORTANT ROLE IN

ENHANCING CUSTOMER’S TIME SPENT IN THE RETAIL OUTLET – ESPECIALLY SOOTHING MUSIC, NOT THE FAST PACED.

STIMULATE RETAIL ENVIRONMENT PLEASURE EFFECT: CLASSICAL HINDI MUSIC

ENHANCES SHOPPERS’ ENJOYMENTAROUSAL EFFECT: SLOW INSTRUEMENTAL

MUSIC RESULTS IN SUBDUED ACTIVITY IN SERVICE SETTINGS LIKE RESTAURANTS.


DOMINANCE: CUSTOMERS FEEL DOMINANT

( IN CONTROL). ENVIRONMENTAL ASPECTS - COLOUR OF INTERIORS, HEIGHT OF CEILING DETERMINE CUSTOMER DOMINANCE. FURNITURE AND FIXTURES MAY IMPACT THE DURATION OF TIME SPENT IN-STORE.

PHYSICAL ENVIRONMENTSTORE LAYOUT/DESIGN EMOTIONS SHOPPINGMERCHANDISE DISPLAY BEHAVIOUR MUSIC AROMA CUSTOMER’S

SENSES


KEY COMPONENTS OF RETAIL ATMOSPHERICS

EXTERIOR ATMOSPHERICS INTERIOR ATMOSPHERICS STORE LAYOUT VISUAL MERCHANDISING


EXTERIOR ATMOSPHERICSSTOREFRONTMARQUEEENTRANCESDISPLAY WINDOWSSIZE OF BUILDINGACCESSIBILITYVISIBILITY


INTERIOR ATMOSPHERICSFLOORING LIGHTINGODOUR/ AROMAFIXTURESWALLSTEMPERATUREAISLESCONVENIENCES/HYGIENE


STORE LAYOUTSHOPPING FLOOR SPACETRAFFIC FLOWDEPARTMENTS LOCATIONSPACE / MERCHANDISE

CATEGORYSIGNAGE


VISUAL MERCHANDISINGASSORTMENTTHEMEENSEMBLERACKS AND SHELVESCASH COUNTERS


CONTROL RETAIL STRATEGYRules to stay Competitive:Commitment – Enthusiasm in BusinessShare – Staff Involvement in Decision makingListen & Communicate – Customers and StaffAppreciate – Good efforts Celebrate – Good AchievementsMotivate – Challenging goals and rewards for

High performersExceed – Deliver more than promisesControl – Operating CostsSwim Upstream – Evaluate Competition and

do something Different.


INTEGRATING RETIAL STRATEGY

Situation Analysis Objectives

Strategy Target Market

Specific Activities

Control


OPPORTUNITY ANALYSISOverall Direction & Goals: Top DownMiddle Level: Inputs from Internal and

External Sources. Generate Ideas early.

Generate Specific Plans with Deadlines.S ALES OPPORTUNITY GRIDRates the promise of New and

Established Goods, Services, Store outletsRETAIL PRICE, FLOOR SPACE, DISPLAY COSTS, OPERATING COSTS, MARKUP; SALES ESTIMATES, GROSS AND NET PROFITS IN Rs. AT FIRST, SIX AND 12 MONTHS.


DEFINING PRODUCTIVITYEfficiency with which a Retail Strategy is

carried out. Reach Sales and Profit Goals keeping Operating Costs under control.

PERFORMANCE MEASURESCriteria used to assess effectiveness and

setting standards for each performance. Measures used: Total Sales Turnover, Average Sales per store, Sales by Goods/ Service Category, Gross Margin/ ROInvst., Op.Income, Inventory T/O, Financial ratios, Profitability


RETAIL INSTITUTION BY OWNERSHIPRetail Institution refers to basic format or

structure of a Business.


retail marketing

Education

goods services

cyclical theory

environmental theory

customers low price

marketing of goods

time utility

retail evolution theories

new low price retailers