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Retailing
Retailing is the set of business activities that adds value to
the products and services sold to
consumers for their personal use. The value creating functions
are :
Providing an assortment of products and services. Breaking bulk
(offering the products in smaller quantities). Holding inventory.
Providing services.
In retailing variety (breath of merchandise) represents the
number of merchandise categories a
retailer offers and assortment (depth of merchandise) represents
the number of different items in a
merchandise category.
With an objective of studying the retail marketing strategy we
visited company owned stores of
United Colors of Benetton and Puma in Vasant Vihar, which gave
us valuable insights. Both thesestores can be categorized as
Department-Speciality Stores.
The most critical element in retail strategy is Building a
sustainable competitive advantage. The
retailer in effect builds a wall around its position in retail
market. When the wall is high and thick, it
will be hard for the competitors to enter and compete for the
retailers target customers. We
studied both the retail stores considering the following
critical factors:
1. Customer loyalty: Loyalty means that customers will be
reluctant to patronize competitiveretailers. Loyalty programs. They
update their customers about the new arrivals or upcoming
sale by sending text messages on their phones. Puma also has
customer loyalty program in
which customers earn point each time they make a purchase which
can redeemed in the
next purchase.
2. Location: The classic response to the question What are the
three most important thingsin retailing ? is location, location,
location. Location is the critical factor in consumers
selection of a store. For example, most people shop at the
supermarket closest to where
they live. A competitive advantage based on location is
sustainable because it is not easily
duplicated. Benetton has developed a strong competitive
advantage with its location
selection. It conquers one area of the city at a time and then
expands in the region,
saturating a major market before entering a new market. The
following elements of location
were studied to understand its importance:a. Demography &
Lifestyle : The area needs to have consumers who are in the
retailers targetmarket. Thus the area must have the right
demographic and lifestyle
profile. Both the stores are located in centre of the Vasant
vihar market in South
Delhi which is considered urban with people from relatively high
income group. It is
also near to several colleges and offices attracting
youngsters.. The foreign
embassies in the area brings some regular African customers in
Puma store who
account for almost 50% of the sales.
b. Economies of Scale : Most of the retail chains open multiple
stores in an areabecause promotion and distribution economies of
scale can be achieved. A retailers
total promotional costs are the same for a newspaper
advertisement for one or ten
stores. But the threat of cannibalization cant be disregarded
resulting in diminishing
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4. Store Layout, Design and Display : Both the stores have a
free-form layout also known asboutique layoutwhich arranges
fixtures and aisles in an asymmetric pattern. It provides an
intimate, relaxing environment that facilitates shopping and
browsing. UCB store has typical
posters promoting equality among races. The men section is kept
at ground floor or first
floor due to the higher sales and also because the buying
behavior of men is quite specific
when compared to women. Since kids are accompanied with their
parents so it is kept at top
floor. The reason behind this is that by the time a customer
reaches the top floor he/shegoes through the product ranges of
his/her category. Puma follows its own Retail 2.0
guidelines for layout and merchandising. The lighting and music
played also adds to the
positive mood of customer.
5. Human Resource Management: Retailing is labor intensive
business, in which employeesplay a major role in providing services
for customers and building customer loyalty.
Knowledgeable and skilled employees committed to the retailers
objectives are critical
assets that support the success o companies . Both the stores
keep a large emphasis on
training their employees with product information and how to
please their customers with
quality service experience.
6. Customer Service : Retailers can build a sustainable
competitive advantage by offeringexcellent customer service. The
quality of service can vary from person to person and from
day to day. Retailers that offer good customer service instill
its importance in their
employees over a long period of time through training. It takes
a considerable time and
effort to build a tradition and reputation for customer service,
but good service a valuable
strategic asset.
Recommendation on Layout and Merchandise Assortment:
The standard conversion rate of a retail store in a market area
is 38%. However, in Puma store is
18% which is very low. The lifestyle products in its store are
gaining huge popularity among
youngsters because of the names like Ferrari and BMW embossed in
them. This segment also has a
more margin as compared to sports products. The store can keep a
separate section for promoting
the sales of these products.
In UCB stores inventory build up is high. The store is not able
to sell 60% of the seasons stock, which
is the industry standard. This is partly because of store
layout. UCB store is designed in a way that
while in store the desired product can be easily located. To
keep customers shopping, the retailer
can design its store in a way that confronts shoppers with items
that pique their interest and keep
them browsing. One of the things that really keeps people in
stores longer are new and unexpected
discoveries. "This is what transforms shopping into an
experience, and not just a transaction."
