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Introduction to Retail Management

What is Retailing
Retailing encompasses the business

activities involved in selling goods and


services to consumers for their personal,
family, or household use. It includes every
sale to the final consumer.

Issues in Retailing
How can we best serve our customers
while earning a fair profit?
How can we stand out in a highly
competitive environment where
consumers have too many choices?
How can we grow our business, while
retaining a core of loyal customers?

KEY REQUIREMENTS

An Ideal Candidate for


Retailing Career
Be a people person
Be flexible
Be decisive
Have analytical skills
Have stamina

The 10 Largest
Retailers in the U.S

The 10 Largest Retailers in


the U.S., 2006- 2007
Rank

Company

$ Sales

# of stores

# of employees

4,414

1,383,000

(million)

Wal-Mart

219,812

Home Depot 53,553

1,348

256,300

Kroger

50,098

3,534

288,000

Sears

41,078

2,960

310,000

Target

39,362

1,381

223,500

Albertsons

37,931

2,400

220,000

Kmart

37,028

2,150

240,525

Costco

34,797

369

64,500

Safeway

34,301

1,773

193,000

10

J.C. Penney

32,004

3,770

270,000

WAL MART.

COSTCO .

J.C. Penney.

Albertsons

Master Cuts

The High Costs and Low


Profits of Retailing

The 10 Largest Retailers in the U.S

Retail Institutions

A Classification Method
for Retail Institutions
I
Ownership
II
Store-based
Retail Strategy Mix
III
Non store-based
Retail Strategy Mix

Ownership Forms
Independent
Chain
Franchise
Leased department
Consumer cooperative

The Organization of Retailing


Ownership categories:
1. Independent retailer: Operates only one retail outlet that is
conveniently located to the customer
2. Retail chains: Two or more outlets are under a common
ownership, and involves central purchasing and decisionmaking
3. Retail franchises: Here a franchisor allows the franchisee to
operate one or more units of the franchisor.
4. Retailer cooperatives: Associations of independent retailers,
mostly owned by dissatisfied customers who engage in
centralized buying and promotion.
5. Leased Department: When a section of a department in a
retail store is leased / rented to an outside party.

Independent Retailers
2.1 million independent U.S. retailers
50% of these are run by owners and their
families
Account for 40% of total stores and 3% of
U.S. store sales

Competitive State of
Independents
Advantages

Disadvantages

Flexibility in formats,
locations, and strategy
Control over investment
costs and personnel
functions, strategies
Personal image
Consistency and
independence
Strong entrepreneurial
leadership

Lack of bargaining
power
Lack of economies of
scale
Not a Labor intensive
operations
Over-dependence on
owner
Limited long-run
planning

Chain Retailers
Operates multiple outlets under common
ownership
Engages in some level of centralized or
coordinated purchasing and decision
making
In the U.S., there are roughly 100,000
retail chains operating about 750,000
establishments

Competitive State of
Chains
Advantages

Disadvantages

Bargaining power
Cost efficiencies
Efficiency from
computerization,
sharing warehouse and
other functions
Defined management
philosophy
Considerable efforts in
long-run planning

Limited flexibility
Higher investment
costs
Complex managerial
control
Limited independence
among personnel

EXAMPLE OF RETAIL CHAINS : WESTSIDE

CAF COFFEE DAY

BARISTA COFFEE

EXAMPLE OF RETAIL CHAINS : BATA

LOUIS PHILIPPE

VAN HEUSEN

WESTSIDE

BIG BAZZAR

MUSIC WORLD

Franchising
A contractual agreement between a
franchisor and a retail franchisee, which
allows the franchisee to conduct business
under an established name and according
to a given pattern of business
Franchisee pays an initial fee and a
monthly percentage of gross sales in
exchange for the exclusive rights to sell
goods and services in an area

Business Qualifications Sought by


McDonalds for Potential Franchisees

Personal Integrity
Entrepreneurial
Spirit
Ability to motivate
and train

Ideal
Franchisee

Ability to manage
finances

Financial
resources
Willingness to
complete training
Willingness to
devote time

Competitive State of
Franchising
Advantages

Disadvantages

small capital required


acquire well-known
names
operating/management
skills taught
cooperative marketing
possible
exclusive selling rights
less costly per unit

Over saturation could


occur
franchisors may
overstate potential
locked into contracts
agreements may be
cancelled or voided
royalties are based on
sales, not profits

From the Franchisors


Perspective

Benefits

national or global
presence possible
qualifications for
franchisee/ operations
are set and enforced
money obtained at
delivery
royalties represent
revenue stream

Potential Problems
potential for harm to
reputation
lack of uniformity may
affect customer loyalty
ineffective franchised
units may damage
resale value, profitability
potential limits to
franchisor rules

EXAMPLE OF FRANCHISING : ARCHIES

EXAMPLE OF FRANCHISING : McDonalds

EXAMPLE OF FRANCHISING : PIZZA HUT

DOMINOS PIZZA

Leased Departments
A leased department is a department in a
retail store that is rented to an outside
party
The proprietor is responsible for all aspects of
its business and pays a percentage of sales
as rent
The department store sets operating
restrictions to ensure consistency and
coordination

Competitive State of Leased


Departments
Benefits

Potential Pitfalls

lessees may negate


provides one-stop
store image
shopping to
procedures may conflict
customers
with department store
lessees handle
problems may be
management
blamed on department
reduces store costs
store rather than lessee
provides a stream of
revenue

Example of leased department:


A cosmetics counter in a department store.

APNA BAZAAR

Retailing Formats
Overview of Retail Formats
General Merchandise Retail
Specialty stores
Department stores
General merchandise Discount stores
Off-Price retailers
Catalog showrooms
Hypermarkets

Food Retailing
Supermarkets
Warehouse clubs or wholesale clubs
Convenience Stores

U.S. Procter & Gamble


Products

Source: Reprinted by permission of The Procter and Gamble Company.

FIGURE 11.1

CONCEPTUALIZATION OF
PRODUCT MIX
WIDTH

Product lines = 4
Product Mix = 12

D
E
P
T
H

A wide product mix facilitates one stop shopping

General Merchandise Retailing

Specialty Stores
Narrow product line but wide assortment
and Particular type of merchandising.
Specialize in a product category.
Example Proline Fitness, The Gap, Ikea, Big
and Tall.

Home furniture, household goods,


consumer electronics - durable goods.
Size of store 8000 sq feet.

Specialty Store Strategy


Mix
Location:
Business district or
shopping center

Merchandise:
Very narrow width and
extensive depth of
assortment; average to
good quality

Prices:
Competitive to
Above average
Atmosphere and
Services:
Average to excellent
Promotion:
Heavy use of displays
Extensive sales force

General Merchandise Retailing

Department Stores
Broad variety and wide assortment
Fashions, appliances, electronics,
furnishings
Sears, JC Penney, Marks & Spencer.

Leased departments (cosmetics, jewelry)


Size : 20,000 to 40,000 Sq ft
In India : Shoppers Stop, Globus, Westside,
Life Style.

Traditional Department
Store Strategy Mix
Location:
Business district, shopping
center or isolated store

Merchandise:
Extensive width and
depth of
assortment; average to
good quality

Prices:
Average to
Above average
Atmosphere and
Services:
Good to excellent
Promotion:
Heavy ad and catalog
use; direct mail;
personal selling

General Merchandise Retailing

General Merchandise
Stores

General merchandise discount stores sell


high volumes of merchandise, offer limited
service, and charge lower prices.
All-purpose discount
stores
Offer a wide variety of
merchandise and limited
depth, e.g., Wal-Mart

Category specialists
Carry a narrow variety of
merchandise and offer a
wide assortment, e.g.,
OfficeMax

SIZE : 80,000 to 1,30,000 sq feet

Full-line Discount Store


Strategy Mix
Location:
Business district, shopping
center or isolated store

Merchandise:
Extensive width and Low
depth of
assortment; average to
good quality

Prices:
Competitive
Atmosphere/ Services:
Slightly below
average to average
Promotion:
Heavy on newspapers;
price-oriented; selling

General Merchandise Retailing

Off-Price Retailers
Brand name and designer merchandise
Priced below regular retail prices
Overruns, irregular products, out-of-season merchandise,
excess inventories
Products are manufacturers second or sale through
factory outlets
Outlet Store are discount wing of 20,000 to 80,000 sq ft
Types of off-price retailers
Factory outlet stores, e.g., Ralph Lauren outlet store
Department store outlets, e.g., Off Fifth for Saks Fifth
Ave
Close-out retailers, e.g., TJ Maxx
Single-price retailers, e.g., Dollar Store
In India Pantaloons and Levis are such examples.

Brooks Brothers: Power of the


Factory Outlet

Off-Price Chain Strategy


Mix
Location:
Business district, shopping
center or isolated store
Merchandise:
Moderate width and
poor depth of
assortment;
average to good quality;
low continuity

Prices:
Low
Atmosphere/ Services:
Below average
Promotion:
Use of newspapers;
brands not advertised;
limited selling

General Merchandise Retailing

Catalog Showrooms
High turnover merchandise
Brand names at discount prices
Orders placed from catalogs, knowing product code and
number.
Size : 20,000 to 2,00,000 Sq feet
Category Killers focus one category with size of 20,000
to 1,20,000 sq ft
Category killers are also known as MBO (Multi Brand
Outlets)

General Merchandise Retailing

HYPER MARKET
Its a combination of a supermarket and a department store.

Carrefore is the first retail organization which came up with a


Hypermarket.
35% are grocery products.
Size : 80,000 to 2,20,000 sq feet.
Provides restroom, restaurant, banks and ATM, Pharmaceutical,
petrol station.
International Operator : Carrefore , Wal-Mart, Target, Tesco
In India : Giant, Big Bazaar, Star India Bazaar.

Carrefour Shanghai

Hyper Market
Strategy Mix
Location:
Community shopping
center or isolated site

Merchandise:
Full assortment plus health
and beauty aids and
general merchandise

Prices:
Competitive
Atmosphere and
Services:
Average
Promotion:
Heavy use of
newspapers, flyers

Food Retailers
Conventional Stores
Stores located near residential areas.
Popularly known as C-Store
Size : 3000 to 8000 square feet of store space
In India Retail stores in petrol pumps like HP Speed
Mart and In & out
International Retailer : 7-Eleven, SPAR, Circle K

Convenience Store
Strategy Mix
Location:
Neighborhood

Merchandise:
Medium width
and low depth
of assortment;
average quality

Prices:
Average to
Above average
Atmosphere and
Services:
Average
Promotion:
Moderate

Wendys and Pilot

Food Retailers
Supermarkets
Stores

with more than 8000 but less than 20,000 square feet
of space.
Combination of food, groceries and non-food items
It includes 70% Food stuff and 30% Grocery.
Facilitate one-stop shopping
Carry drug items, as well as non-food items
International Retailers : Safeway, Kroger, Tesco.
In Indian : Nilgiris Food world, Subhiksha, Food bazaar,
Reliance Fresh.
Overall number of Items in a Supermarket is over 25000
Items

Supermarkets

Conventional
Supermarket Strategy Mix
Location:
Neighborhood

Prices:
Competitive

Merchandise:
Extensive width
and depth
of assortment;
average quality;
manufacturer,
private, and generic brands

Atmosphere and
Services:
Average
Promotion:
Heavy use of
newspapers, flyers,
and coupons

Food Retailing
Warehouse Clubs
Requires members to pay an annual fee
Operate in low-overhead, large warehouse-type facilities
Offer limited lines of brand name and dealer-brand
groceries, apparel, appliances, and other goods at a
substantial discount
Sell to final consumers who are affiliated with different
institutions, as well as to businesses, e.g., Sams Club,
Costco
Size : 1,04,000 to 1,70,000 sq feet

Warehouse Store Strategy


Mix
Location:
Secondary site, often in
industrial area
Merchandise:
Moderate to low width and
moderate depth of
assortment; emphasis on
manufacturer brands
bought at discount

Prices:
Very low
Atmosphere and
Services:
Low
Promotion:
Little or none

Retail Formats
Non-Store Retailing
Direct selling
Direct mail retailing
Internet/Electronic retailing
Television home shopping
Automated Vending machines
Information Kiosks
Airport Retailing

DIRECT MARKETING
DATABASE MARKETING
AND
NON STORE RETAILING

Nonstore Retailing
Catalog and Direct
Selling
Direct mail and Direct selling

Women comprises up to 70 % of all


Sales people
Catalogs and direct mail are especially
popular with 3039 year olds because of
ease of shopping and time pressure.
Network marketing (multi-level marketing)
Amway, Modicare, Herbalife

Direct Marketing
Customer is first exposed to a good
or service through a non personal
medium and then orders by mail,
phone, fax, or computer.

Executing a Direct
Marketing Strategy

Direct Marketing Categories


GENERAL

SPECIALTY

offer full lines of


offer narrow product
products from clothing lines
to house wares
J.C. Penney
L.L. Bean
QVC

Franklin Mint

Strategic Business
Advantages of Direct
Marketing

Reduced costs
Lower prices
Large geographic coverage
Convenient to customers
Ability to pinpoint customer segments
Ability to eliminate sales tax
Ability to supplement regular business
without additional outlets

Strategic Business
Limitations
of Direct Marketing
Products cannot be examined prior to purchase
Costs may be underestimated
Response rates to catalogs under 10%
Industry reputation sometimes negative

Snapshot of
U.S. Direct Selling Industry
Major Product Groups

% of Industry

Home/ family care products

33.7

Personal care products

26.4

Services

16.9

Wellness products

16.5

Leisure/ educational
products

6.5

Snapshot of
U.S. Direct Selling Industry
Place of Sales

% of Industry

In the home

64.4

Over the phone

14.7

In a workplace

8.7

Over the Internet

5.5

Other

6.7

Direct Selling and Mary


Kay

Database Retailing
Collection, storage, and usage of
relevant customer information
*
*
*
*
*

name
address
background
shopping interests
purchase behavior

Nontraditional Retailing
Nontraditional retailing also
includes formats that do not fit into
the store and non-store based
categories:
Video kiosks
Airport retailing

Borders Title Sleuth Video Kiosk

Airport Retailing
and Waldenbooks

Features of Airport
Retailing
Large group of prospective shoppers
Captive audience
Strong sales per square foot of retail
space
Strong sales of gift and travel items
Longer operating hours
Duty-free shopping possible

Retail majors target Mumbai


new airport for retail opportunities
Some of the leading retail firms, including the Tata Group,
RIL, Reliance ADAG, GVK Group and Larsen and Toubro
are bidding for the Navi Mumbai airport project.
International companies in the fray include Dnata, which is
promoted by the Emirates Group, and Singapor Changi
Airport International (CAI).

Monday, May 07, 2007


Source: Business Standard

Non store Retailing


Vending Machines

Vending machines are becoming more popular and


advanced:
More vending machines accept credit cards.
Some actually show short videos of the product.
They are more conveniently located.
They offer 24-hour convenience.
They eliminate the need for a salesperson.
Frequently purchased items are Soft drinks, candy,
Cigarettes, News paper
In Japan you can get almost anything in vending
machines, e.g., jewelry, flower, beer, bread, etc.

Non store Retailing


Television Home Shopping

Television home shopping includes:


Cable channels selling to consumers in their homes
Direct-response advertising shown on broadcast
and cable television.
Asian Sky Shop as an example.

Non store Retailing


Internet Retailing
Internet Retailing is becoming a very popular way of
conducting business.

Traditional retailers
They try to use the Internet
to penetrate the market,
provide convenience, and to
diversify customer base.

New dot.com companies,


e.g., ebay

Many traditional retailers are now starting


to use this option as well,
E.g. : The Future Group

The Role of the Web


Project a retail presence
Enhance image
Generate sales
Reach geographically-dispersed
customers
Provide information to customers
Promote new products
Demonstrate new product benefits

The Role of the Web


Provide customer service (e.g., e-mail)
Be more personal with consumers
Conduct a retail business efficiently
Obtain customer feedback
Promote special offers
Describe employment opportunities
Present information to potential
investors, franchisees, and the media

Web, Non store-Based, and Other Forms of


Nontraditional Retailing

Home Depot

Web-Based U.S. Retail Sales

A
Checklist
of Retailer
Decisions
in Utilizing
the Web

Reasons NOT to Shop


Online
Trust
Fear
Lack of security
Lack of personal communication

Recommendations for
Web Retailers
Develop or exploit a well-known,
trustworthy retailer name
Tailor the product assortment for Web
shoppers
Enable the shopper to click as little as
possible
Provide a solid search engine
Use customer information

Combination Store
Strategy Mix
Location:
Community shopping center
or isolated site

Merchandise:
Full assortment plus health
and beauty aids and
general merchandise

Prices:
Competitive
Atmosphere and
Services:
Average
Promotion:
Heavy use of
newspapers, flyers

Box Store Strategy Mix


Location:
Neighborhood

Merchandise:
Low width and depth of
assortment; few
perishables; few national
brands

Prices:
Very low
Atmosphere and
Services:
Low
Promotion:
Little or none

Membership Club
Strategy Mix
Location:
Isolated store or
secondary site
Merchandise:
Moderate width and
poor depth of
assortment;
low continuity

Prices:
Very Low
Atmosphere/ Services:
Very low
Promotion:
Little;
some direct mail

Vertical Marketing
Systems
Independent Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
Independent Manufacturer
Independent Wholesaler
Independent Retailer

Vertical Marketing
Systems
Partially Integrated Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
Two channel members own all facilities and
perform all functions

Vertical Marketing
Systems
Fully Integrated Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
All production and distribution functions
are performed by one channel member

How Retail Institutions


are Evolving

Mergers,
Diversification,
Downsizing

Mergers, Diversification,
and Downsizing
Mergers: combination of separately
owned firms (e.g., Sears and Lands End)
Diversification: retailers become active
in businesses outside their normal
operations (e.g., Limited Brands)
Downsizing: unprofitable stores are
closed or divisions are sold off (e.g.,
Kmart)

Retailing Decisions
It is the task of a retailer to appeal
to the target market.

Merchandise mix

Service mix

The product assortment and


brands that will be carried by
the store

Types of services offered


to customers

A lot of retailers are trying to extend the merchandise


mix by providing products that are not related to the existing
merchandise mix (scrambled merchandising) in order to offer to
consumers a one-stop shopping opportunity.

MARKETING MIX
AND
PRODUCT LIFE CYCLE

Marketing Mix is that mixture which is


evolved out of assembling of important
functions of marketing.
The marketing mix is a mixture of four
basic inputs: Product.
Price.
Place (Distribution).
Promotion.

What is a Product?
Product: bundle of physical, service,
and symbolic attributes designed to
enhance buyers want satisfaction

Product Life Cycle

Retail Life Cycle


Retail institutions pass through
identifiable life stages
introduction
growth
maturity
decline

Retail Life Cycle

CHANNELS
OF
DISTRIBUTION

How a
Distributor
Effects
an
Economy
of
Effort

Consumer and Industrial Marketing Channels

Level of Investment: The Value-Added versus Costs of


Different Channels

The Retailers Role in the


Sorting Process

Multi-Channel Retailing
A retailer sells to consumers through
multiple retail formats
1) Web sites
2) Physical stores

Approaches to
Retailing Channels

How Information Flows in a


Retail Distribution Channel
Information
and the
Supplier

Information
and the
Retailer

Information
and the
Consumer

Suppliers Need To Know


From the Retailer
Estimates of
category sales
Inventory turnover
rates
Feedback on
competitors
Level of customer
returns

From the Customer


Attitudes toward
styles and models
Extent of brand
loyalty
Willingness to pay a
premium for
superior quality

Retailers Need To Know


From the Supplier
Advance notice of
new models and
model changes
Training materials
Sales forecasts
Justifications for
price changes

From the Customer


Why people shop
there
What they like and
dislike
Where else people
shop

Consumers Need To Know


From the Supplier
Assembly and
operating
instructions
Extent of warranty
coverage
Where to send a
complaint

From the Retailer


Where specific
merchandise is
stocked in the store
Methods of payment
acceptable
Rain check and
other policies

RELATIONSHIP MANAGEMENT
IN
RETAIL

Relationship Management
Disagreements may occur:
i) control over channel
ii) profit allocation
iii) number of competing retailers
iv) product displays
v) promotional support
vi) payment terms
vii) operating flexibility

Elements Contributing to Effective


Channel Relationships

Special Characteristics
Affecting Retailers
Small
Average
Sale

Impulse
Purchase
Retailers
Strategy

Popularity
of
Stores

RETAIL STRATEGIES

Retail Strategy
Strategy is the fundamental pattern of present and
planned resource deployments and environmental
interactions that indicate how the organization will
achieve its objectives.

An overall plan for guiding a retail firm


Influences the firms business activities
Influences firms response to market forces

Developing an Overall
Retail Strategy
Controllable
Variables:
Store location
Managing business
Merchandise
management
and pricing
Communicating
with customer

Retail
Strategy

Uncontrollable
Variables:
Consumers
Competition
Technology
Economic
conditions
Seasonality
Legal restrictions

Retailer Strategy Mix


A strategy mix is the firms particular
combination of:
store location,
operating procedures,
goods/services offered,
pricing tactics,
store atmosphere,
customer services, and
promotional methods

The Wheel of Retailing

Retail Strategy Alternatives

Strategic Planning
Environmental scanning (anticipate or understand
change pressures)
Normative planning or vision/mission
Strategic Planning: mission and objectives
Strategy Implementation: programs and projects to
achieve objectives
Strategic Control: performance measures to determine
whether objectives are achieved

Environmental Scanning:

Long-range scenarios
Economic forecasts
Estimates of market size and growth
Industry/Competitor analysis
Forecast of customer requirements

Vision / Mission
Goals and Objectives
Strategy Implementation
Strategic Control

Environmental Scanning

Vision / Mission:

Defines the business


Defines position relative to the expected
situation in the market place
Written vision statements

- Sometimes a product of serendipity


- More often a result of painful collective effort

Goals and Objectives


Strategy Implementation
Strategic Control

Organizational Mission

Retailers commitment
to a type of business
and to a
distinctive role in the marketplace.

The Focused Organizational Mission of Frischs


Restaurants

Environmental Scanning
Vision / Mission

Goals and Objectives:

Goals/objectives are used interchangeably


Notion of a cascade of goals and objectives

Broad corporate goals: overall profits, growth


More specific functional objectives: market share,
revenue by product
Unit-level objectives that support functional objectives

Strategy Implementation
Strategic Control

Environmental Scanning
Vision / Mission
Goals and Objectives
Strategy Implementation:
Programs and projects define specific actions /
steps necessary to achieve mission and objectives
- Launch product X by June 1
- Improve outgoing product quality
- Increase creativity in Product Design
- Improve morale in Marketing

Structural and human resource planning usually


included

Strategic Control

Environmental Scanning
Vision / Mission
Goals and Objectives
Strategy Implementation

Strategic Control Systems:

Changes to targets, measurements, or performance

RELATIONSHIP
RETAILING

Relationship Retailing
Seek to establish and maintain long-term
bonds with customers, rather than act as if
each sales transaction is a completely new
encounter
Concentrate on the total retail experience
Monitor satisfaction
Stay in touch with customers

Building and Sustaining


Relationships in Retailing

To explain
what
value really
means and
highlight its
pivotal role in
retailers
building and
sustaining
relationships

Effective Relationship
Retailing
Use a win-win approach
It is harder to get new customers than to keep
existing ones happy

Develop a customer database


Ongoing customer contact is improved with
information on peoples attributes and
shopping behavior

Retail Value Chain


Represents the total bundle of benefits
offered to consumers through a
channel of distribution
Store location and parking, retailer
ambience, customer service,
brands/products carried, product quality,
retailers in-stock position, shipping,
prices, image, and other elements

3 Aspects of ValueOriented Retail Strategy


Expected
Augmented
Potential

Customer Service
Expected customer
service is the
service level that
customers want to
receive from any
retailer such as
basic employee
courtesy

Augmented
customer service
includes the
activities that
enhance the
shopping
experience and give
retailers a
competitive
advantage

Potential Pitfalls to Avoid in


Planning a Value-Oriented
Retail Strategy
Planning value with just a price perspective
Providing value-enhanced services that
customers do not want or will not pay extra for
Competing in the wrong value/price segment
Believing augmented elements alone create
value
Paying lip service to customer service

A Value-Oriented Retailing
Checklist
Is value defined from a consumer
perspective?
Does the retailer have a clear value/
price point?
Is the retailers value position
competitively defensible?
Are channel partners capable of
delivering value-enhancing services?
Does the retailer distinguish between
expected and augmented value
chain elements?
Has the retailer identified meaningful
potential value chain elements?
Is the retailers value-oriented
approach aimed at a distinct market
segment?
Is the retailers value-oriented
approach consistent?

Is the retailers value-oriented


approach effectively communicated
to the target market?
Can the target market clearly identify
the retailers positioning strategy?
Does the retailers positioning
strategy consider trade-offs in sales
versus profits?
Does the retailer set customer
satisfaction goals?
Does the retailer periodically
measure customer satisfaction
levels?
Is the retailer careful to avoid the
pitfalls in value-oriented retailing?
Is the retailer always looking out for
new opportunities that will create
customer value?

Classifying Customer
Services

Fundamental Decisions
What customer services are expected and what customer
services are augmented for a particular retailer?
What level of customer service is proper to complement a firms
image?
Should there be a choice of customer services? Should customer
services be free?
How can a retailer measure the benefits of providing customer
services against their costs?
How can customer services be terminated?

Customer Service
Available
Activities undertaken by a retailer in
conjunction with the basic goods and services
it sells.
1. Store hours
2. Parking
3. Shopper-friendliness
4. Credit acceptance
5. Salespeople

Typical Customer Services


Credit
Delivery
Alterations/
Installations
Packaging/ gift
wrapping
Complaints/ Return
handling

Gift certificates
Trade-ins
Trial purchases
Special sales
Extended store
hours
Mail and phone
orders

Miscellaneous
Customer Services
Interior designers
Personal shoppers
Ticket outlets
Parking
Water fountains
Pay phones
Baby strollers

Restrooms
Restaurants
Baby-sitting
Fitting rooms
Beauty salons
Shopping bags
Information

A Customer Respect
Checklist
# Do we trust our customers?
# Do we stand behind what we sell?
# Is keeping commitments to customers
important to our company?
# Do we value customer time?
# Do we communicate with customers
respectfully?
# Do we treat all customers with respect?
# Do we thank customers for their business?
# Do we respect employees?

Turning Around Weak


Customer Service
Focus on
Customer Concerns

Show That You Are


Listening

Empower Front-Line
Employees

Express Sincere
Understanding

Apologize and Rectify


the Situation

SERVICE RETAILING

Four Characteristics of
Services Retailing
Intangibility
Inseparability
Perish ability
Variability

Characteristics of Service
Retailing
Intangibility

No patent protection possible


Difficult to display/communicate service benefits
Service prices difficult to set
Quality judgment is subjective
Some services involve performances/experiences

Characteristics of Service
Retailing
Perish ability

Services cannot be inventoried


Effects of seasonality can be severe
Planning employee schedules can be complex

Characteristics of Service
Retailing
Variability

Standardization and quality control hard to achieve


Services may be delivered in locations
beyond control of management
Customers may perceive variability
even when it does not actually occur

Selected Factors Affecting


Consumer Perceptions of
Service Retailing

Lessons in Service
Retailing

POSITIONING STRATEGIES

Image and Positioning

An image represents
how a given retailer is
perceived
by consumers and others.

The Elements of a Retail


Image

Positioning Approaches
Mass merchandising is a positioning
approach whereby retailers offer a discount
or value-oriented image, a wide or deep
merchandise selection, and large store
facilities
Niche retailing occurs when retailers identify
specific customer segments and deploy
unique strategies to address the desires of
those segments rather than the mass market

Selected Retail
Positioning Strategies

Store Positioning

OPERATION AND
MANAGEMENT

Ownership and
Management Alternatives
Sole proprietorship is an unincorporated
retail firm owned by one person
A partnership is an unincorporated retail
firm owned by two or more persons,
each with a financial interest
A corporation is a retail firm that is
formally incorporated under state law; it
is a legal entity apart from its officers

Checklist to
Consider
When
Starting a
New
Business

Checklist
for
Purchasing
an Existing
Retail
Business

Business Model
Four Axis of Retail
Growth (Indicative)

Home
Solution

Food

Markets

Apparel &
Accessorie
s

Products

Electronics

2004-2005
3 Megastore
5 Supermarkets

2001-2003 1999-2000
2 Megastore
1 Supermarket1 Megastore
Departme
nt Stores

18 Megastores
87 TruMarts

s
Convenience
Stores

Hypermarket

Formats

2006-2008
Supermarket

Customers

MARKET RESEARCH IN RETAILING

The collection and


analysis of
information relating
to specific issues or
problems facing a
retailer

Marketing
Research
in
Retailing

The Marketing Research


Process

Secondary Data Sources


Internal
Sales reports
Billing reports
Inventory records
Performance
reports

External
Databases
ABI/Inform, Business
Periodicals Index, etc.

Government
U.S. Census of Retail
Trade
Statistical Abstract of
the U.S.
Public records

Internal Secondary Data

Primary Decisions
In-house or outsource?
Sampling method?
Probability
Non probability

Data collection method?

Survey
Observation
Experiment
Simulation

Survey Methods
In-person
Over the telephone
By mail
Online

A Semantic Differential
for Two Furniture Stores

Mystery Shoppers
Retailers hire people to pose as
customers and observe operations
from sales presentations to how well
displays are maintained to service
calls

Trading-Area Analysis

Trading-Area Analysis
A trading area is a geographic area
containing the customers of a
particular firm or group of firms
for specific goods or services

Location
Criteria to consider include:
population size and traits
competition
transportation access
parking availability
nature of nearby stores
property costs
length of agreement
legal restrictions

Chief Factors to Consider


in Evaluating Retail
Trading Areas
Population Size and Characteristics
Total size and density
Age distribution
Average educational

level
Percentage of residents
owning homes

Total disposable
income
Per capita disposable
income
Occupation
distribution
Trends

Chief Factors to Consider in


Evaluating Retail Trading Areas
Availability of Labor
Management
Management trainee
Clerical

Chief Factors to Consider in


Evaluating Retail Trading
Areas
Closeness to Sources of Supply
Delivery costs
Timeliness
Number of
manufacturers

Number of
wholesalers
Availability of
product lines
Reliability of
product lines

Chief Factors to Consider


in Evaluating Retail
Trading Areas
Economic Base
Dominant industry
Freedom from
Extent of diversification
economic and
seasonal fluctuations
Growth projections
Availability of credit
and financial facilities

Chief Factors to Consider in


Evaluating Retail Trading Areas
Competitive Situation
Number and size of
existing competition
Evaluation of
competitor strengths
and weaknesses

Short-run and long-run


outlook
Level of saturation

Chief Factors to Consider in


Evaluating Retail Trading Areas
Availability of Store Locations

Number and type of store


locations
Access to transportation
Owning versus leasing
opportunities

Zoning restrictions
Costs

Chief Factors to Consider in


Evaluating Retail Trading Areas
Regulations
Taxes
Licensing
Operations

Minimum wages
Zoning

Importance of Location

Location
Location is a critical factor in a retailers success.

Central business districts: In the middle of busy downtowns,


commercial and cultural heart of a city

Secondary business district: Shopping areas that form at the


intersection between two important streets, consisting primarily of
convenience and specialty stores.

Neighborhood business districts: Shopping areas that meet the


needs of the neighborhood and tend to be located on a main street
of a neighborhood.

Location
Shopping Centers

Shopping centers consist of a group of stores that are planned,


developed, and managed as one entity.
Regional shopping centers consist of at least 100 stores that
sell shopping goods to a geographically dispersed market.

Community shopping centers have fewer than


40
retailers, with a department store, a supermarket, and several
smaller specialty retailers.
Neighborhood shopping centers have between 5 and 15
retailers and serve the neighborhood providing convenience in
the form of a supermarket, discount store, a laundry service,
and other smaller specialty stores.

Choosing a Store
Location
Step 1: Evaluate alternate geographic (trading)
areas in terms of residents and existing retailers
Step 2: Determine whether to locate as an
isolated store or in a planned shopping center
Step 3: Select the location type
Step 4: Analyze alternate sites contained in the
specific retail location type

The Segments of a
Trading Area

The Size and Shape of


Trading Areas
Primary trading area - 50-80% of a stores
customers
Secondary trading area - 15-25% of a
stores customers
Fringe trading area - all remaining
customers

Destinations versus
Parasites
Destination stores
have a better
assortment, better
promotion, and/or
better image

Parasite stores do
not create their own
traffic and have no
real trading area of
their own

It generates a
trading area much
larger than that of
its competitors

These stores depend


on people who are
drawn to area for
other reasons

Elements in Trading-Area
Selection
Population
Characteristics

Economic Base
Characteristics

Nature and Saturation


of Competition

Site Selection and


McDonalds

3 Types of Locations
Isolated
Store

Planned
Shopping
Center
Unplanned
Business
District

ISOLATED STORE
Features
Total site area
Total sq. ft. leased
Principal tenant
Number of stores
Minimum # of people in
trading area
Driving time of trading
area
Location

Regional Center
30-100+
400,001-2,000,000+
1, 2 or more department
stores
50-100
100,000+
Up to 30 minutes
Outside central city on
highway

Isolated Stores
Large-store formats
Wal-Mart
Costco

Convenience stores
7-Eleven

UNPLANNED STORE
Features
Total site area
Total sq. ft. leased
Principal tenant
Number of stores
Minimum # of people in
trading area
Driving time of trading
area
Location

Community Center
10-30
100,000-400,000
Branch department store
15-25
20,000-100,000
Up to 20 minutes
Close to residential
areas

Coco Walk:
A Life-Style Center

Roosevelt Field

PLANNED STORE
Features
Total site area
Total sq. ft. leased
Principal tenant
Number of stores
Minimum # of people in
trading area
Driving time of trading
area
Location

Neighborhood
Center
3-10
30,000-100,000
Supermarket or
drugstore
5-15
3,000-50,000
Less than 15 minutes
Along major
thoroughfare in single
residential areas

Hong Kong Mega mall

Pedestrian Traffic
The most crucial measures of a locations
and sites value are the number and type
of people passing by.
Proper pedestrian traffic count should
include
*
*
*
*

age and gender (exclude very young children)


count by time of day
pedestrian interviews
spot analysis of shopping trips

Vehicular Traffic
Important for
convenience stores
outlets in regional shopping centers
car washes
suburban areas with limited pedestrian
traffic

Parking Considerations
Number and quality of spots
Distance of spots from stores
Availability of employee parking
Price to charge customers for
parking

How Many Parking


Spaces?
Shopping centers = 4-5 spaces per
1000 square feet of gross floor space
Supermarkets = 10-15 spaces per
1000 square feet of gross floor space
Furniture stores = 3-4 spaces per 1000
square feet of gross floor space

Location/ Site
Evaluation
Checklist

Corner Influence and Old


Navy

UPCOMMING RETAILERS
IN A
BIG WAY

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