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Retail Marketing
Retail industry in india $410bn by Oct. 2010 Growing at 22% annually
15 million retail outlets (32% in urban areas) Very high retail density (shops/ households) 75% stores sell FMCG Food sales account for over 60% of total
retail sales
Retail formats- classification
Store- based vs. E-Tailing
Ownership Based: Independents: mom-and-pop stores Chains Franchising: McDonald’s, Petrol Pump stores Leased department: Food courts, Cosmetics in
stores Consumer Cooperatives: Apna Bazaar
Store based formats
Type ExampleRetail Mix Elements
Location Assortment Services Prices & Promotions
Traditional departmental store
Shopper’s Stop, JCPenney
Business district, shopping centre, or isolated store
Extensive width & depth, average to good quality
Good to excellent
Average to high prices, heavy advertising
Full-line discount store
Wal-Mart, Target
Business district, shopping centre, isolated store or strip centre
Extensive width & depth, average to good quality
Slightly below average to average
Low prices, price oriented, moderate sales force
Specialty store
Planet M Business district, shopping centre, or regional mall
Very narrow width, extensive depth
Average to high/ excellent
High prices, heavy use of displays
Hypermarket Big Bazaar, Carrefour
Stand-alone Average Low Low
Supermarket Food Bazaar, Subhiksha
Business district, shopping centre, or regional mall
Narrow width (mainly groceries), extensive depth
Average Average prices, self-service
Box (limited line) store
suburban shopping strip, or isolated store
Few items, few SKUs, Low priced private label brands
customer brings bags
Self-service, price lower than supermarkets
Convenience store
Kirana stores
Every neighbourhood
Average width and depth (fill-in merchandise)
Personalized service, home delivery
Average to above average prices
Variety store Dollar shop
Business district, shopping centre, or isolated store
Good width and depth, below average to average quality
Below average
Self service
Off-price chain
T.J. Maxx, Filene’s Basement
Business district, suburban shopping strip, or isolated store
Moderate width but poor depth, low continuity
Below average
Newspaper advertising, brands not advertised
Factory outlet
Out-of-the-way site or discount mall
Moderate width, poor depth, some irregular merchandise
Very low Little, self-service
Membership Club (Warehouse stores)
Sam’s Club
Isolated store or secondary site
Moderate width, poor depth, low continuity
Very low Little
Flea market Chor Bazaar
Isolated site, race track or arena
Extensive width, poor depth, variable quality
Very low Limited, self-service
Drugstore Planet Health
Stand alone, strip centre
Very deep Average Average to high
Home improvement Centre
Lowe’s Stand-alone, power strip centre
Very Deep Low to high Low
Store based formats
Choosing a retail format
Shoppers Retailer’s Objectives
Competitors
Define Value Proposition
Find out the enablers and deterrents in the environment
Find out what it takes to deliver the value proposition
Location
SizeMerchandis
eDisplay Service Price
Decide on store or non-store format and their derivatives
RETAIL FORMATS - FUTURE GROUP’S FORMATS
Reasons for preference
Proximity Merchandise Ambience
Determinants Positioning of the
store Product categories Brands
Retailing and Brand Management
A brand manager’s objectives Make sure the brand is present in the right retail
channel Ensure visibility and shelf space at retail outlet Pricing and in-store experience in line with the
brand’s positioning Get data to monitor the brand and competition
A retailer’s objectives Maximize profits from each product category Get maximum return on investment in space,
goods Build a consistent brand image for the store itself
THE RETAILER’S PERSPECTIVE
Money can be made from 3 sources Customers- The price that is charged Suppliers- bargaining power Operations- Efficiencies in SCM and store
management
The business model of a retailer reveals where it is making money from: Walmart- Discount store, Suppliers & Operations High-end departmental stores: Premium pricing
Retail Pricing StrategiesCompetition-oriented Pricing
Retailer uses competitors’ price as a guide
Demand-oriented Pricing
Retailer determines the range of prices acceptable to the target market
Flexible Pricing The practice of offering the same products and quantities to different customers at different prices
High-low Pricing Use of high everyday prices and low leader specials on featured items
Leader Pricing Retailer advertises and sells selected items in its goods/ service assortment at less than the usual profit margins
Everyday Low Pricing(EDLP)
Retailer strives to sell its goods and services at consistently low prices throughout the selling season
Prestige Pricing Pricing based on the assumption that consumers will not buy goods and services at prices deemed too low as they associate quality with price
Variable Pricing Altering prices to coincide with fluctuations in costs or consumer demand
EDLP is possible only for products having stable demand Fashion products have Hi-Lo pricing Luxury products have a constant high price, with only a
clearance sale to flush out stocks
Category Management
SleepersProducts that don’t move fastNeed to be pushedOptimize no. of items Tie in promotions with winners
WinnersCash GeneratorsHigh share, grow fasterMaximize cash generation, defend against competitors
QuestionablesNo fit with store strategies and plansDelete poorest performing itemsEvaluate the options of increasing prices
Morning StarsHigh share of retailer’s salesSteady or declining growth rateReview pricing mixRejuvenate or milk the category
Assessing Economic Performance Gross Margin Return on Inventory (GMROI)
gross margin percentage X sales-to-stock ratio OR
gross margin/ average inventory Gross Margin Return on Floor Space (GMROF)
gross margin/ space provided Direct Product Profitability
The shopper profiles would vary according to the format, the product categories carried and the positioning of the store.
Shopper profile for an upgraded Kirana (viz.Subhiksha):
Shopper Profiles
•Occasionally used items e.g. cooking ingredients, packed food etc•Ease in finding the product in store
•Variety – category & brands• Repeat visit, loyal to store• Purchase decision at store• Variety displayed in shelf
• Pre-planned purchase• Large use of coupons• Long list – variety in category might increase shopping basket
Major challenges Delivery- shipping, distribution and warehousing Customer acquisition cost Building Trust
The most successful online ventures are those that do not involve physical movement of goods. Eg. E-commerce, banking, ticket booking and reservations
A shopper will only buy those products online for which she is ready to wait a day or more, because the delivery of the product takes days
Reducing prices is not a good option for an E-tailer. Customization can provide value.
E-Tailing
Loyalty programs have to take into account the target customer
A database can help the retailer target well Targeted programs
Give focus Enable targeted communication Reduce marketing spend Result in higher conversion
Problems with card programmes: targetting during purchase
Customer Relationship Management
A book-store’s customers
Customer Relationship Management
Behavioural (Patronage)
Attitudinal (Loyalty)
Hi LoHi Tribes WannabesLo Others Non-
Customers
• Tribes: Most profitable customers. They should be leveraged by involving them in events- say, a reading session by an author
• Wannabes: Loyal, but do not spend much. Ask them to volunteer for events to give them social gratification. Thus, they can be used as ambassadors.
On entering a store, people usually move along walls and to their left.
End-of-aisle promotions work the best. Destination categories are usually kept at the end of the store,
so that shoppers pass through the length of the store to get to them, thereby increasing the chances of purchase of other categories.
The arrangement of products on walls depends upon the product category being displayed- for shoes, people like to compare different brands and even pairs- hence shoes are placed next to each other on a wall. In case of apparel, shoppers make stand-alone purchase decisions, hence they can be stacked on top of each other.
Fixtures, floor and ceiling materials, wall finishes, lighting, music and scent all contribute are all important parts of the store layout.
Exterior and interior signage(the store graphics) communicate the store’s identity to the customer.
Store layout and design
•
•
Emergence of multiple franchisee model — This model is largely adopted by
companies offering products in value and semi-premium branded segments to enable greater
scale,limit dependence on a few players and leverage local hands-on knowledge of the market.
Jumbo King, the Mumbai-based snack major,and PepsiCo India are following this model.
Rural retailing — Rural India accounts for more than 70 per cent of all Indian households
and close to two-fifths of the total consumption pie.Retail companies have realised the
importance of tapping the rural consumer base.For example, DCM Shriram's Hariyali Kisaan
Bazaar and ITC's Chaupal Sagar.
16
Key trends … (1/4)
• Collaborative model for international products — Joint ventures (JVs) are emerging as
the preferred model for new entrants,wherein foreign players leverage the knowledge of the
local player and focus on key issues such as quality,pricing,promotions and brand
management. Key examples include the Bharti Group JV withWal-Mart for retail and
wholesale retail and the Staples JV with Pantaloon Retail Ltd to launch its products in the
Indian market.
Sources: The Retailer, Ernst & Young, October 2009; Retail rivals close ranks to beat blues 'The Economic Times, August 10, 2009
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Key trends … (2/4)
•
•
Vertical integration — Retail companies are looking at integrating their business models
vertically to explore additional sources of revenues.For example,Dabur India Ltd’s retail foray
into health and beauty retail business through a retail chain known as‘NewU’,and Nokia
opening its concept stores.
Collaboration in back-end resource sharing — Another interesting trend in the Indian
retail market is the collaboration of back-end resources by aligning their sourcing operations
and sharing private labels,logistics, warehouses and hiring details on a transactional payment
basis.For example,the Future Group, theAditya Birla Group, the RPG Group and the
Reliance Group have come together to reduce their operational costs and improve margins.
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Key trends … (3/4)
•
•
Increasing market reach — Retail companies now seek to increase their footprint inTier
II,III,IV cities and towns to capture the domestic demand.For example,the Raymond Group
has plans to open more than 200 stores across the country by mid-2011 and theTata Group's
retail venture,Westside,is planning to expand its franchisee base inTier II andTier III cities.
Innovation in new retail formats — Retailers are not only investing in their
operations,but are also exploring the possibility of adopting new business models or formats.
For example,Reliance Retail has devised a new business model under which it will open small
employee-friendly retail outlets at the premises of large corporate organisations.The
Network18 group has ventured into online and on-air retail marketing and distribution
through HomeShop18.
Sources: Raymond to open 200 stores, The Hindu, January 10, 2010; Westside plans expansion via franchise route in small cities, The EconomicTimes, May 22, 2008; Reliance Retail to open outlets at corporate, The Economic Times, January 10, 2010
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Key trends … (4/4)
Player
Tata Group
Future Group
Store brands (products)
Landmark (books and music),Croma (multi-brand electronics), World ofTitan (watches),
Tanishq (jewellery), Titan Eye+ (eye wear), Westside (lifestyle retail store),Star Bazaar
(hypermarket chain), FashionYatra (family fashion store)
Central (shopping mall),Big Bazaar (hypermarket),Pantaloons (fashion outlet),Blue Sky
(sunglasses), Brand Factory (multi-brand readymade garment),KB's Fair Price (essential
products),Navaras (jewellery), Planet Store (multi-brand sports and lifestyle speciality retail),
aLL (fashion garments),Ethnicity (Indian ethnic wear), HomeTown (home needs), eZone
(electronics),Furniture Bazaar (home furniture),Electronics Bazaar (under Big Bazaar,
electronics stores), Home Bazaar (satellite version of HomeTown),Collection I (lifestyle
furniture),Gen M & One Mobile (mobile phones), M-Port (electronics),Shoe Factory
(footwear) and Depot (books and music)
13
Key players* … (1/3)
Player
Reliance Group
RPG Group
K Raheja Group
Store brands (products)
Reliance Fresh (neighbourhood store),Reliance Mart (supermarket),Reliance Super (mini-
mart),Reliance Digital (consumer durables and information technology),RelianceTrends
(apparel and accessories),RelianceWellness (health,wellness and beauty),iStore (Apple
products),Reliance Footprint (footwear),Reliance Jewels (jewellery),RelianceTimeOut (books,
music and entertainment),RelianceAutoZone (automotive products and services) and
Reliance Living (home ware,furniture,modular kitchens and furnishings)
Spencers (multi-format retail store),MusicWorld ( music and home video store) and Books &
Beyond (book store)
Shopper's Stop (clothing,accessories,fragrances,cosmetics,footwear and home furnishing
store),Crossword (book store),Inorbit Mall (fashion,lifestyle,food and entertainment) and
Hyper City (hypermarket)
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Key players* … (2/3)
Player
Landmark Group
Bharti Group
Mahindra Group
Aditya Birla Group
Vishal Retail
Store brands (products)
Lifestyle (garments and accessories),Home Centre (household and furniture,garment and
retail),Splash (high street fashion brand) and Funcity (family entertainment brands)
Field Fresh (fresh and processed fruits and vegetables — multiple-format store)
Mom and Me (infant and maternity care)
More (supermarket and hypermarket formats,earlier known as“Trinethra’)
Vishal Mega Mart (multiproduct stores)
* This list is indicative
15
Key players* … (3/3)