Retail Management

Retail Management

Defn of RetailingRetailing involves all activities in selling goods or services to the final customers

for personal, non business use.-Philip Kotler

Retaillier--French word“To cut a piece or To break bulk”

Retail means,‘First point of customer contact’

Functions of a retailer

• Utility as a form• Time utility• Place utility• Ownership utility

Evolution of Retail in India

Evolution of retail formats in India

Traditional formats

•Itinerant sales man•Haats•Melas•Mandis

• Established formats

•Kirana shops•Convenience/department stores•Fair price shops•Cooperative stores•Pan/bedi shops

• Emerging formats

•Exclusive Retail outlets•Hypermarkets•Malls/Specialty Malls•Multiplexes•Rural oriented formats•Fast food outlets

Major Retailers

• India’s top retailers are largely lifestyle, clothing and apparel stores

• This is followed by grocery stores • Retail giants such as Pantaloon,

Shoppers’ Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores

Recent Trends

• India is rated the fifth most attractive emerging retail market: a potential goldmine.

• Estimated to be US$ 332.8 billion(Rs.1,330,000 crore), of which organized retailing (i.e. modern trade) makes up 5.8 percent

• Currently(April 21st,’09) 5%• Ranked second in a Global Retail

Development Index of 30 developing countries drawn up by AT Kearney.

• India has the highest number of outlets in the world - widely spread retail network but with the lowest retail space (@ 2 sq. ft. per person)

• Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is nearing to the size of Indian retail industry.

• Wal-Mart - over 4,800 stores where as

none of India's large format store (Shoppers' Stop, Westside, Lifestyle) can compare.

• The sales per hour of $22 million are incomparable to any retailer in the world. Number of employees in Wal-Mart are about 1.3 million

• Developed economies like the U.S. employ between 10 and 11 percent of their workforce in retailing (against 7 percent employed in India today).

• M&M –Mom & Me stores- motherhood and childhood (maternity wear)

• M&M tie-ups – Startrite of UK– Brainy baby of US– Mary Meyer of US– CAM of Italy– Avado of Australia etc.

• Spar(Dubai-based Landmark group and spencer’s retail)– Two in Bangalore one in Hyderabad

• Newu –Dabur’s retail- Beauty stores• Dabur’s Tie ups

– Moda of Turkey– QVS of Australia

Expansion plans:

• Spencer’s Retail:2000-3000 by 2011– 750 in two years

• Magamart: 30 large stores by 2010– 20-22 in the next three years

Zedds footware retail1500sqft10 outlets in 2010(Franchises)

Railway Budget2009

•Modernize 50 railway station•World class•Vadodara, pune, Bhuvaneshwar

CavinKare into resturant business

• Chennai Based• CK’s Foodstaurant• Indo-American

CINNABON INDIA

• Wadhawan hospitality with Us based Focus Brands• Cinnabon Bakeries• 150 outlets

Mothercare

•In collaboration with TATA•21 retail outlets

What’s wrong with

• Subhiksha• Globus• Pyramals

Can these retail brands still live?

• Hot spot destination for retail in Tamil Nadu as Coimbatore.– Fun Republic– Brookefield Plaza

Key Drivers of Retailing in India• Consumer pull –population• Young population• Rising Income• Generators of wealth• Explosion of media• Change in consumer behavior• The rural market wake up• Building chains around brand• Technological changes

• 890 million people below 45 years in India

• 300 million middle class-”Real” consumers

• Increasing population of women

Applicable areas

PROVISION STORES

SHOPPING MALLS

RETAIL STORES

Store Formats

• By location• By ownership• By Merchandise categories• By size• By price• By concessions

Store formats By Location

• Chain store format-multi locational

• High-street format- busy shopping place

• Destination format- particular area

• Convenience store format- wide array of pdts

Store Format by Ownership

• Franchise format• Independent store format• Corporate Chains

Independent retailers-one store ownership

Chain stores-many-one ownership

Franchises-many stores –many ownership

Basic forms of Franchising

Product and Trade Name Franchising

BusinessFormat

Franchising

Dealer agrees to sell certain products provided by a manufacturer, but can use any sales tactics

he chooses. Ex-Next,DAMRO

Dealer must sell the franchiser’s product in the exact way the franchiser prescribes.

Ex – McDonalds, Wendy's

Store format by merchandise categories

• Family store - eg: Chennai silks• Specialty store- eg: Park avenue by raymonds-

Men’s speciality store• Departmental store - eg: Shopper’s Stop(>

10000sqft)• Supermarkets - eg: Spencers, More

etc.(>3000sqft)• Emporium

Store format by size

• Super store(>5000sqft)• Shopping Mall(>20,000sqft)• Shopping centre(>1000sqft)• Hypermarket(>20,000sqft)

Store format by Price

• Discount format• Every day low price format• Category killer format• Factory outlet format• Warehouse format• Single price denomination

format(1dollar shop)

Store formats by concessions

• Stopover store format• Kiosk

Non store –Based retailers

• Electronic Retailing• Catalog retailing• Catalog and direct –mail Retailing• Direct selling• Television home shopping• Vending machine retailing

Theories of Retailing

• Environmental Theory• Cyclical Theory• Conflict Theory

Environmental theory

• Darwin’s theory

“Survival of the fittest”

– Customers– Competitors– Changing technology

Cyclical Theories

• The Wheel of retailing• Accordion Effect

– Open accordions– Closed accordions

Cyclical theory

• Wheel of retailing(Mc Nair)

Wheel of Retailing

High End Strategy•High pricesExcellent facilities and servicesUpscale consumers

Low End Strategy• Low prices Limited facilities and services Price- sensitive consumers Limited product offerings

Medium StrategyModerate pricesImproved facilitiesBroad base of value and service conscious consumers

Retail Strategy Alternatives

Wheel of Retailing• Innovative retailer (Entry phase)• Traditional retailer (Trading up phase)• Mature retailer (Vulnerability phase)“Accordian Effect”- Closed and Open

accordian effects‘Wheel of retailing + Accordian theory = Cyclical Theories’

Conflict Theory

Conflicts between• Thesis• Antithesis• Synthesis

The Retail Life Cycle

• Innovation• Accelerated Development• Maturity• Decline

Retail Shoppers

RETAILSHOPPERSDemographics

Retailer Actions

Needs and DesiresLife-Styles

Shopping Attitudes and Behavior

Environmental Factors

Consumer Demographics

• Market size• Gender• Age• Household size• Marital and family status• Income

• Birth rates• Mobility• Where people live• Employment status• Occupation• Education• Ethnic / Racial background

Consumer Lifestyles-Social factors

• Culture• Social class• Reference groups• Family life cycle• Time Utilization

Consumer Lifestyle-Psychological factors

• Personality• Class conscious• Attitudes• Perceived risk

Impact of perceived risksTypes of perceived risk•Functional•Physical•Financial•Social•Psychological•Time

Factors affecting perceived risk•Retailer’s newness•Consumer’s budget•Consumer experience•Alternatives•Visibility•Information•price

Consumer

Outcome•Purchase new product•Stick with old brand•Talk to friends•Seek more information•Non-purchase

Retailing influence of consumer demographics:

• Gender Role• Consumer sophistication and confidence• Poverty of time• Component life-styles

Consumer profiles:

• Generation Y: 6-24• Generation X: 25-36• Baby Boomers: 37-55• Seniors: 56 and older

Generation Y Strategies

• Getting young people involved in the store• Being conscious of the rights• Being honest• Trying advertising with sports and music• Getting them involved in community service• Developing partners with schools• Creating “touchy-feely” departments

Generation X strategies

• Not rushing to buy• Presenting a lot of options and product

information• Using technology whenever and however

possible

Baby Boomers Strategy

• Selling Nostalgia• Selling Natural• Selling youth and fitness

Consumer Needs and Desires

• In-home shopping• Online shopping• Out shopping

Shopping Attitudes and Behavior

• Shopping enjoyment• Attitudes towards shopping time• Shift feelings about retailing• Why people buy or don’t buy in a shopping

trip• Attitudes by market segment• Attitudes towards private brands

Where people shop

“Cross shopping”

Types of consumer decision making

• Extended decision making• Limited decision making• Routine decision making• Impulse purchases

– Completely unplanned– Partially unplanned– Unplanned substitution

Retailers action

• Mass marketing strategies• Concentrated marketing strategies• Differentiated marketing strategies

Environmental Factors

• Inflation• Economy• Price wars• Entry of new formats• Changing societal values and norms• More working people at home• Govt. regulations

Consumer Decision Process

Stimulus Problem Awareness

PurchaseEvaluation of Alternatives

Post-purchase Behavior

Information Search

Types of Needs

1. Psychological needs: • Social experience• Learning new trends• Status and power• Self reward2. Conflicting Needs

Sources of information :• External sources• Internal sources

Retail Planning ProcessEstablish Mission

Analyze Situation

Identify opportunities

Set Objectives

Develop Implementation

Plans

Obtain and Allocate

Resources

Monitor Progress &

Control

Wal-Mart: “To give ordinary folk the chance to buy the same thing as rich people”

McDonald’s: “Quality, Service, convenience, and value”

Café’ Coffee Day: “To be the best café’ chain in the country by offering world class coffee experience at affordable prices”

Situation Analysis

• SWOT analysis• PEST analysis: Political, Economic, Social

and Technological factors• BCG Matrix• Porter’s Competitive advantage framework

Elements in situation Analysis

• Market factors: size, growth, business cycles, seasonality

• Competitive factors: Barriers to entry, Scale economies, Bargaining power of vendors, Competitive rivalry

• Environmental Factors

Growth Strategies

Retail Format Development

Market Expansion

Diversification

Market Penetration

Existing

Target market Segment

New

Customer Service

A set of activities and programs undertaken by retailers to make the shopping experience more rewarding for their customers

Customer Service Strategies

• Customization Approach• Standardization Approach

Customer Evaluation of SQ

• Role of Expectations• Perceived Service

Cues Affecting Customer Perception of SQ

• Tangibles– Appearance of store or website– Display of Merchandise– Appearance of salesperson

• Access– Short waiting lines– Convenient operating hours– Convenient store locations– Providing information on order status

• Understanding and knowing customers– Providing individual attention– Personalization of website– Recognition of regular customers– Notes sent to customers on new merchandise

• Competence– Knowledge and skill of employees– Depth of information provided

• Security– Feeling safe in parking lot– Describing security on internet transactions

• Responsiveness– Returning customer call– Giving prompt service

• Trust worthiness– Reputation and honoring commitments– Guaranties and warranties– Return policies

• Reliability– Accuracy in billing– Delivering merchandise when promised

The Gaps Model

Service Gap

Customer Expectations for SQ

Management Perceptions of customer Expectation

Retailer communic

ations about SQ

Customer

perceptions of SQ

Actual service

delivered

Standards of service

to be delivered

Delivery GapStandards Gap

Knowledge Gap

Communication Gap

Knowing what the Customer Wants: Knowledge Gap

• Researching Customer Expectations and Perceptions– Comprehensive studies– Gauging satisfaction with individual

transactions– Customer panels and interviews– Interacting with customers– Customer complaints– Feedback from store employees

Setting Service Standards: The Standards Gap

• Commitment to service quality• Developing solutions to service problems• Defining the role of the service providers• Setting service goals• Measuring service performance

Meeting and exceeding service standards: The Delivery Gap

• Giving information and training• Providing emotional support• Improving internal communications and

reducing conflicts• Empowering store employees• Providing Incentives

Communicating the service promise: The Communications Gap

• Realistic Commitments• Managing customer expectations

Service Recovery

• Listening to the customer• Providing a fair solution

– Distributive Fairness– Procedural Fairness

• Resolving Problems Quickly– Giving clear instructions– Speaking the customer’s language

Loyalty Strategies

• Pull loyalty strategies• Pure loyalty strategies• Push loyalty strategies• Purchase loyalty strategies• Purge loyalty strategies