Professional Documents
Culture Documents
What is Retailing
Retailing encompasses the business
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
The 10 Largest
Retailers in the U.S
Company
$ Sales
# of stores
# of employees
4,414
1,383,000
(million)
Wal-Mart
219,812
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
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
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
BARISTA COFFEE
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
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
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
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
Potential Pitfalls
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
FIGURE 11.1
CONCEPTUALIZATION OF
PRODUCT MIX
WIDTH
Product lines = 4
Product Mix = 12
D
E
P
T
H
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.
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
Department Stores
Broad variety and wide assortment
Fashions, appliances, electronics,
furnishings
Sears, JC Penney, Marks & Spencer.
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
Stores
Category specialists
Carry a narrow variety of
merchandise and offer a
wide assortment, e.g.,
OfficeMax
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
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.
Prices:
Low
Atmosphere/ Services:
Below average
Promotion:
Use of newspapers;
brands not advertised;
limited selling
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)
HYPER MARKET
Its a combination of a supermarket and a department store.
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
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
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
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
SPECIALTY
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
33.7
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
14.7
In a workplace
8.7
5.5
Other
6.7
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
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
Traditional retailers
They try to use the Internet
to penetrate the market,
provide convenience, and to
diversify customer base.
Home Depot
A
Checklist
of Retailer
Decisions
in Utilizing
the Web
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
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
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
MARKETING MIX
AND
PRODUCT LIFE CYCLE
What is a Product?
Product: bundle of physical, service,
and symbolic attributes designed to
enhance buyers want satisfaction
CHANNELS
OF
DISTRIBUTION
How a
Distributor
Effects
an
Economy
of
Effort
Multi-Channel Retailing
A retailer sells to consumers through
multiple retail formats
1) Web sites
2) Physical stores
Approaches to
Retailing Channels
Information
and the
Retailer
Information
and the
Consumer
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
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.
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
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:
Organizational Mission
Retailers commitment
to a type of business
and to a
distinctive role in the marketplace.
Environmental Scanning
Vision / Mission
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
Strategic Control
Environmental Scanning
Vision / Mission
Goals and Objectives
Strategy Implementation
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
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
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
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?
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
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?
Empower Front-Line
Employees
Express Sincere
Understanding
SERVICE RETAILING
Four Characteristics of
Services Retailing
Intangibility
Inseparability
Perish ability
Variability
Characteristics of Service
Retailing
Intangibility
Characteristics of Service
Retailing
Perish ability
Characteristics of Service
Retailing
Variability
Lessons in Service
Retailing
POSITIONING STRATEGIES
An image represents
how a given retailer is
perceived
by consumers and others.
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
Marketing
Research
in
Retailing
External
Databases
ABI/Inform, Business
Periodicals Index, etc.
Government
U.S. Census of Retail
Trade
Statistical Abstract of
the U.S.
Public records
Primary Decisions
In-house or outsource?
Sampling method?
Probability
Non probability
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
level
Percentage of residents
owning homes
Total disposable
income
Per capita disposable
income
Occupation
distribution
Trends
Number of
wholesalers
Availability of
product lines
Reliability of
product lines
Zoning restrictions
Costs
Minimum wages
Zoning
Importance of Location
Location
Location is a critical factor in a retailers success.
Location
Shopping Centers
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
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
Elements in Trading-Area
Selection
Population
Characteristics
Economic Base
Characteristics
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
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
*
*
*
*
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
Location/ Site
Evaluation
Checklist
UPCOMMING RETAILERS
IN A
BIG WAY