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8/13/2019 Chap 2 Retailers & Retail Format
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RETAILERS& RETAILFORMATS
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RETAILERS& RETAILFORMATS
The Concept of Retail Marketing has caught on like lighting.
It creates a Distribution Network that cuts off various intermediaryCosts and create much smoother Interface between Manufacture &Customer.
Retail Industry is a dynamic one as it tries to satisfy changing customerprofile and their needs with time.
The Store change their Format, Style of Presentation and Assortment
i.e Variety and depth of Merchandise as per the requirement.
In this unit you will Study Different Types of Retailers, Retail Formats andtheir Characteristics Features.
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CLASSIFICATIONOFRETAILERS
Legal Form
Operational Structure
Classification of retailers Based on Legal Form
Proprietorship Partnership Limited company
Classification of retailers Based on Operational Structure
Independent traders Chain Stores (Multiples) Co-operatives
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CLASSIFICATIONOFRETAILERS
Range of Merchandise
Degree of Service
Classification of retailers Based on Range of Merchandise
Variety Stores (Departmental Stores) Specialty Stores (Niche Retailers)
Classification of retailers Based on Degree of Service
(LOW)
Self Service & Self Selection
(HIGH)
Large No. of Customer Services such as High Credit,Home Delivery, High Involvement of Sales Staff.
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CLASSIFICATIONOFRETAILERS
Pricing Policy
Location
Classification of retailers Based on Pricing
LOWER PRICE (Discount Stores) HIGH PRICE (Convenience Stores)
Edge of town Location
Clusters Location
Shopping Centers or Complex, Destination stores & Convenience Stores
are based on locations.
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CLASSIFICATIONOFRETAILERS
Size of Outlet
Based on Customer Contact
Classification of retailers Based on Size of Outlet
Small Stores
(025,000 Sq. Feet)
Surplus Stores
(2500050000 Sq. feet)
Hyper Markets
(over 50000 Sq. Meters)
Classification of retailers Based on Method of Customer Contact
Retailing through Stores NonStore Retailing
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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICINGDEPARTMENT STORES
Large Store Selling.
A Broad Variety and Deep Assortment.
Offer Considerable Services and
Organizedinto Separate Departments.
Characteristics of DEPARTMENT STORES
Located in central market area.
Availability of Parking Space.
Freedom for Customer to move
around stores.
Relatively High Prices.
Large number of specialized good.
Personal assistant in shopping.
Staff expertise in particular product demonstration
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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICING
SPECIALTY STORES
Narrow Product Line.
High degree of Customer Service.
Few Products with wide Variety of
Range, Quality and Colour
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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICING
DISCOUNT STORES
Offer Lower Price due to Limited Service andLow Cost.
CHARACTERISTICS OF DISCOUNT STORES
Very Low Price.
Low Gross Margin.
High Degree of Self Service.
No Free Services, such as Delivery.
Depends upon Heavy Advertising in nearby large population centres
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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICING
SUPER MARKETS
It is a Self Service Food store offering Groceries.
The size is of under 25000 sq.mt.
Relatively large, low cost, low margin, high volume self service store.
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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICING
SUPERSTORES
Are Large Supermarkets.
Offering from Traditional Goods & Services like Pharmacy, Flower Shop,Book Store, bakery under one roof.
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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICINGHYPER MARKETS
The size is of over 50000 sq.mt. of Selling Area or More
Retailing Groceries, General Merchandise goods, pharmacy, FlowerShop, Other Concessions etc with wide variety of Offerings in largeQuantities
Selling Huge Volumes with Less Margin
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TYPESOFRETAILERSBASEDONOPERATIONALSTRUCTURE
INDEPENDENT TRADER
An independent retailer owns one retail unit.
Advantages
There is flexibility in choosing retail formats, location, assortment (variety), prices, hoursetc., & devising strategy based on the target customers.
Investment costs for leases, fixtures, workers, & merchandise can be brought down. Thereis no duplication of stock or personnel function.
Independents frequently act as specialist in a niche of the particular goods/servicescategory. They are then more efficient & can lure (attract) shoppers interested inspecialized retailers.
Independents exert strong control over their strategies, & the owner-operator is typically on
the premises. Decision making is centralized & layers of management personnel areminimized.
Independents can easily sustain consistency in their efforts because only one store isoperated.
Independents have Independence. No meetings, union, stockholders & labor unrest etc.
Entrepreneurial drive.
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TYPESOFRETAILERSBASEDONOPERATIONALSTRUCTURE
INDEPENDENT TRADER
Disadvantages
Less bargaining power with the suppliers as they buy less quantity.
Cannot gain economies of scale (i.e. cost advantages that a business obtains due toexpansion) in buying & maintaining inventory. Transportation, ordering, & handling costs are
high.
Operations are labor intensive.
They are limited to certain media for advt. because of financial constraints.
Family-run independents is overdependence on the owner. It is difficult to keep it up &running.
Limited time allotted to long-run planning, since owner is intimately involved in day-today operations.
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EXAMPLESOFINDEPENDENTTRADERS
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TYPESOFRETAILERSBASEDONOPERATIONALSTRUCTURE
MULTIPLE OR RETAIL CHAIN STORES
Advantages
Less bargaining power with the suppliers as they buy less quantity.
Cannot gain economies of scale (i.e. cost advantages that a business obtains due toexpansion) in buying & maintaining inventory. Transportation, ordering, & handling costs are
high.
Operations are labor intensive.
They are limited to certain media for advt. because of financial constraints.
Family-run independents is overdependence on the owner. It is difficult to keep it up &running.
Limited time allotted to long-run planning, since owner is intimately involved in day-today operations.
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TYPESOFRETAILERSBASEDONOPERATIONALSTRUCTURE
MULTIPLE OR RETAIL CHAIN STORES
Disadvantages
Flexibility may be limited. Consistent strategies on pricing, promotions, &product variety must be followed throughout all units which may be difficult toadapt to local diverse market.
Investment is high due to infrastructure & store as multiple store has to bestocked.
Managerial control is complex due to geographically dispersed branches.
Limited independence to the personnel.
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EXAMPLESOFMULTIORCHAINSTORES
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TYPESOFRETAILERSBASEDONOPERATIONALSTRUCTURE
CO-OPERATIVE SOCIETIES
A consumer cooperative is a retail firm owned by its customer members.
A group of customers invests, elects officers, manages operations & share profits.
They account for tiny piece of retail sales.
Cooperatives are formed because they think they can do retailing function, traditional
retailers are inadequate & prices are high.
They have not grown because consumer initiative is required, expertise may be lacking,
expectations have frequently not been met, & boredom occurs.
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EXAMPLESOFCOOPERATIVESOCIETIESSTORE
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CONCESSIONAIRE/ LEASEDDEPT
A leased department is a department in a retail store usually a department,discount, or specialty store that is rented to outside party.
The leased department proprietor is responsible for all aspects of its business &normally pays a %age of sales as rent.
The store sets operating restrictions for the leased department to ensure overallconsistency & coordination.
Advantages (from the storesprespective)The market is enlarged by providing one-stop customer shopping.
Personnel management, merchandise displays, & reordering items are undertaken by lessees.
Regular store personnel do not have to be involved.
Leased department operators pay for some expenses, thus reducing store costs.
A %age of revenue is received regularly.
Disadvantages (from the storesprespective)
Leased department operating procedures may conflict with store procedures.
Lessees may adversely affect the stores image.
Customers may blame problems on the store rather than on the lessees.
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CONCESSIONAIRE/ LEASEDDEPT
Advantages for Leased department operators
Stores are known, have steady customers, & generate immediate sales for leased departments.
Some costs are reduced through shared facilities like security equipment & display windows.
Their image is enhanced by the relationships with popular stores.
Disadvantages for Leased department operators
There may be inflexibility as to the store hours they must be open & the operating style.
The goods / services lines are usually restricted.
If they are successful, the store may raise rent or not renew leases when they expire.
In-store locations may not generate the sales expected.
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EXAMPLESOFCONCESSIONAIRE/ LEASEDDEPT
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Franchising involves a contractual arrangement between a franchisor (a manufacturer,
wholesaler, or service sponsor) & a retail franchisee, which allows the franchisee to
conduct business under a established name & according to a given pattern of business.The franchisee pays an initial fees & a monthly %age of the gross sales in exchange for
the rights to sell goods & services in an area.
A franchisee operates autonomously in setting store hours, chooses a location, &
determines facilities & displays.
Three structural arrangements dominate retail franchising
Manufacturer-retailerA manufacturer gives independent franchisees the right to sell goods &related services through licensing agreement. (Eg., Auto/truck dealers like GM, Petroleum
products dealers like IOC).
Wholesaler-retailer
Voluntary - A wholesaler sets up a franchise system & grants franchises to individualretailer. (Eg., Auto accessories stores, Consumer electronics stores).
CooperativeA group of retailers sets up a franchise system & shares the ownership &operations of a wholesaling organization. (Eg., Food stores).
Service sponsor-retailerA service firm licenses individual retailers so they can offer specificservice packages to customers. (Eg., McDolands).
FRANCHISING
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FRANCHISING(FRANCHISEES)
Advantages of Franchisees
They own a retail enterprise with a relatively small capital.
They acquire well-known names & goods/services lines.
Standard operating procedures & management skills may be taught to them.
Cooperative marketing efforts (like national advt.) are facilitated.
They obtain exclusive selling rights for specified geographical territories.
Their purchases may be less costly per unit due to the volume of the overall franchise.
Disadvantages of Franchisees
Oversaturation could occur if too many franchisees are there in one geographical area.
Due to overzealous selling by some franchisors, franchisees income potential, required
managerial ability, & investment may be incorrectly stated.
They may be locked into contracts requiring purchases from franchisors or certain vendors.
Cancellation clauses may give franchisors the right to void agreement if provisions are not
satisfied.
In some industries, franchise agreements are of short duration.
Royalties are often a percentage of gross sales, regardless of franchisee profits.
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FRANCHISING(FRANCHISORS)
Advantages of Franchisors
A national & global presence is developed more quickly & with less franchisor investment.
Franchisee qualification for ownership are set & enforced.
Agreement require franchisees to abide by stringent operating rules set by franchisors.
Money is obtained when goods are delivered rather than when goods are sold.
Because franchisees are owners & not employees, they have greater initiative to work hard.
Even after franchisees have paid for their outlets, franchisors receive royalties & may sellproducts to the individual proprietors.
Disadvantages of Franchisors
Franchisees harm the overall reputation if they do not adhere to company standards.
Lack of uniformity among outlets adversely affects customer loyalty.
Intra-franchise competition is not desirable.
The resale value of individual units is injured if franchisees perform poorly.
Ineffective franchised units directly injure franchisorsprofitability.
Franchisees, in greater number, are seeking to limit franchisorsrules & regulations.
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NONSTORERETAILING
The Different types and aspects of Non Store Retailing
It contains Mail Order Catalogues, Direct Response Advertising & Direct MailMAIL ORDER
Advantages of Mail Order Catalogues
Free Credit
Price Stability over the lifetime of the catalogue
Savings in Transport Fares and Petrol
Wide selection of Merchandise
DIRECT RESPONSE ADVERTISING
It is used in advertising in Newspaper or Magazines to describe a product or
stimulate the customer to write or telephone for it.DIRECT MAIL
It is used in advertising Literature sent directly to the potential customer for
purpose of selling goods or services.
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NONSTORERETAILING
DIRECT SELLING
Direct Selling of a product by a Salesman. It Contains
DOOR TO DOOR TRADING
Selling by Salespersons is being done to Launch New Products
E.g. Milk. Bread, Eggs & Vegetables
MOBILE SHOPS
They are Travelling Shops and are distinct from Vehicles from which Milk,
Bread, Newspapers etc are delivered.
MARKETS
Sellers bring their Merchandise on One Particular Day to Particular Place
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NONSTORERETAILING
AUTOMATIC VENDING
Non-store retailing that makes it possible to serve customers where stores
cannot.
Maintenance and operating costs are high.
Small convenience products are available in vending machines.
Banks are providing this type of Services
ELECTRONIC RETAILING
RETAILING THROUGH TELEVISION
Customer watch a TV programme demonstrating Merchandise and then
place a order over telephone
e.g. Asian Sky Shop, TSN, TVC
RETAILING THROUGH INTERNET
Customer place an order through mail or phone
e.g. Jabong.com, Flipkart.com, Homeshop18.com
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RETAILINGCONCEPT
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INTRODUCTION
CUSTOMERS
Customer are the important element for the retailers
Why Customers shop, how they select a shop and how they select among that
stores merchandise
Assortment of Merchandise whether a wide variety or limited
Quality and fashion level of goods.
Price Generally important at lower end
Services Such as Credit, delivery etc
COMPETITION
A Retailers Competition does not only come from those competitors who are using
the same Retail Format but also from new competitors who are coming up from
new formats.
e.g. Department store competing with other department store, super market
competing with other supermarkets etc
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INTRODUCTION
ENVIRONMENTAL TRENDS
ECONOMIC FACTORS
As Indian Economy gets Integrated in the world economy, global trends
start affecting Indian economy such as global recession
DEMOGRAPHIC FACTORS
There has been significant growth in number of towns and significantincrease in population of Urban India due to migration from Rural areas.
SOCIAL FACTORS
Nuclear family is becoming a norm in India with increasing number of
women working outside the four walls of Home.
PSYCHOLOGICAL FACTORS
Consumerism is on increase in India. Media and cable tv proliferation has
given exposure to Indian consumers to new Idea, new life style and new
desires.
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INTRODUCTIONENVIRONMENTAL TRENDS
BRAND PROFUSION
India has seen Brand explosion in almost all goods. Earlier there was only
one brand of salt i.e Tata Salt but now there are number of brands
available.
PSYCHOGRAPHIC CHANGE
There has been a perceptible change in mental attitude of people at
large. Hygiene is a prerequisite for any investment related toconsumption and food item.
DEMOGRAPHIC CHANGE
Geographic location is populated by people with distinct characteristics
of demand and consumption.
POLITICAL CHANGE
India is facing severe political instability. This is causing frequent policy
change and creation of pressure group.
TECHNOLOGICAL CHANGES
Tremendous change in Information Technology. IT has provided ways to
network and increase market share with profitability
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RETAILMIXPLACEConvenience of Shopping
It involves Time, Place, Effort and Other facilities
StoresDcor and Interiors
It should be compatible with Products
It should be compatible with the Target Customers
Store Location
Target Customers
Type of Retailer or Retailers Image
PRODUCT
Breadth of Merchandise
A store with many lines and departments of merchandise has breadth of
assortment; a narrow line store is a specialty store
Depth of Merchandise
Depth of assortment refers to Variety of Colors, Styles, Sizes and Prices thata Retailer Offers (SKU Stock Keeping Unit)
Quality and Fashion level of Goods
High Quality, newest fashions and exclusivity are major consideration for
high income, fashion conscious customers
Low Price and value of money are major consideration for relatively Low
income Customers.
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RETAILMIXPRICEEarlier Price was considered as Direct Indicator of Quality.
Price has become a tool in the Marketers armour to Increase Market Share
without Compromising Quality.
Today Price is Indirect Indicator of Quality and fashion level Goods.
Higher Quality Goods and Newest Fashion usually command higher Price
PROMOTION
This is based on the AIDA theory of Promotion i.e Awareness, Interest, Desire,
ActionAwareness
Retailers To make Customer aware of his Offerings
Should Communicate to the Customer properly
Interest
Customer shows some interest in the product.
Retailer Sales Persons can help in knowing the product better.
Desire
The retailer can convert desire of the Customer to Purchase.
Action
Purchase.
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THEORIESOFRETAILCHANGE
Four theories of Retail institutional Change have Oriented in North America
Theory of Natural Selection in Retailing.
It is based on Theory of Charles Darwin of Natural Selection in Origin of
Species
Various factors have helped the growth out of town stores.
Changes in Consumer Characters.
Demographic e.g. Population age changes
Social e.g. Product and service preference.
Economic e.g. Changes in Real incomes
Changes in technology
i.e. greater Ownership, use of Motorcars, Food freezers and
Microwave ovens.
Changes in competition.
i.e. Changes in levels of Competitive Strength within the areas of
influence
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THEORIESOFRETAILCHANGE
Theory of Wheel of Retailing.
A better known theory of retailing wheel of retailing proposed by
Maclcomb McNair says,
New retailers often enter the market place with low prices, margins, and
status. The low prices are usually the result of some innovative cost-
cutting procedures and soon attract competitors.
With the passage of time, these businesses strive to broaden their
customer base and increase sales. Their operations and facilities increase
and become more expensive.
They may move to better up market locations, start carrying higher
quality products or add services and ultimately emerge as a high cost
price service retailer.
By this time newer competitors as low price, low margin, low status
emerge and these competitors too follow the same evolutionary process.
The wheel keeps on turning and department stories, supermarkets, and
mass merchandise went through this cycles.
W R
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WHEELOFRETAILING
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WHEELOFRETAILING
1. High Price2. Many Services
3. Expensive
1. Low Price
2. Few Services
3. Austere (Strictin manner)
I II III
Existing
Retailer
Innovator X
Innovator X
Innovator Y
Old RetailerExistingRetailer
Innovator Y
Innovator X
Newest
Innovator Z
Time
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THEORIESOFRETAILCHANGE
General Specific General Cycle or Accordion theory.
The Tendency for Retail Business to become Dominated by Generalists, then
Specialists and then Generalists again.
The greater variety of Customer Goods available could not be accommodated
in the old general store.
Growth of cities meant that Consumer Markets allowed Profitable
Segmentation.
It provided a Social content to the Shopping trip, which was required asSociety became more Complex and Impersonal
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GENERALSPECIFICGENERALCYCLEORACCORDIONTHEORY
GENERALIST
SPECIALIST
GENERALIST
SPECIALIST
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THEORIESOFRETAILCHANGE
Retail Life Cycle Theory
The concept of product life cycle as explained by Philip Kotler is applicable to
retail organization.
This is because retail organization pass through identifiable stages ofinnovation, growth, maturity and decline. This is commonly termed as the
RetailLife Cycle
Attributes and strategies changes as institutions mature.
The retail life cycle is a theory about the changes through time of the retailing
outlets
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Innovation
Growth
Maturity
Decline
TIME
TotalRetailsales
RETAILLIFECYCLE