Wk3 Retailing

7/27/2019 Wk3 Retailing

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To understand what retailing is about To understand some theories in retail

To visit the global retail scene and trends

To understand how relationships in retailwork

To understand about trade and retail formats

To understand the types of retailers

To learn about retail focus on categories To understand retail strategy guidelines

To get a glimpse of retail managementstrategies


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To understand other retail performancemeasures

To look briefly in retail operations

To learn about efficient consumer response To understand some retail initiatives in rural

markets

To look at franchising and e-retailing


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Retail retaillier to break bulk

The term retailer also implies that he deals

directly with the end user or consumer

Last link in the distribution channel

the retailer has more knowledge of thecustomers aspirations and needs and caninfluence the end user buying decisions


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The order sizes tend to be small but many

Retailer caters to a wide variety of customers

and needs to keep a large assortment ofgoods

A lot of the buying in the retail outlet could

be on impulse, hence, managing inventory iscritical

Retail store personnel and the goods

displayed are important elements in the


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The retailers strengths are ensuringavailability and visibility of the product hesells

The targeted customer mix decides theelements of the marketing mix which theretailer has to develop to optimize his

investment


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Any business entity selling products andservices to consumers is retailing

The goods may be sold in a shop, in person,by mail, on the internet, telephone or avending machine

It could be sold in a shop, on the street or inthe home of the consumer


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Just as for products, retail also has a life cycle

Newer forms of retail come up to replace the

old

Retailing includes all activities involved inselling or renting consumer products and

services directly to ultimate consumers fortheir personal or home consumption


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A study of consumer buying habits found that35% of supermarket purchases werespecifically planned

Impulse purchases, substitutions of onebrand for another, generally plannedpurchases where consumers do not have a

brand in mind

These decisions are influenced by the qualityof retailers merchandising efforts


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Price (Value offered, credit, special discounts) Location (convenience, parking, safety, stores

nearby)

Product Selection (assortment, brands,quality)

Special Services (home delivery, specialorders, gift wrap, valet parking)

Helpful Salespeople (courteous,knowledgeable, fast check-out)

Fairness in Dealings (honesty, returnprivileges)


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Ensuring awide variety of product offering

Helping create time, place and possession

utilities

Added services (alteration service for aclothing store)

Retailers add value to products through: Services: credit, delivery, extended store hours Personnel: identify and solve customer problems Location of store


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Form of ownership sole, partnership,corporation

Operational Structure independent, chain,

franchise

Service and Price Orientation full service,limited service, self-service, normal margin,

discounted, off-price

Merchandise Offering general, mass orspecialty Merchandise width - number of non-competing product

lines


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Specialty Stores narrow product line with deepassortment (apparel, furniture, books)

Department Store Several product lines indifferent departments

Supermarket large, low-cost, low-margin, highvolume, self-service operation with a wideoffering

Convenience Store small stores located inresidential areas, open long hours all days of theweek, offers limited variety of fast moving items


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Discount Store standard merchandise soldat a lower price

Franchise Organization Contractualarrangement between the producer andretailers to sell the producers productsexclusively


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Fastest growing industry in the world

Has to constantly re-invent itself in new ways tothrive

Must consider bottom-up pressure exerted byconsumer

Consumer decides which retailer is good for himbased on whats new that the retailer can offer

Retailer must innovate to ensure customerstickiness


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Retailers can be wholesalers but the reverse isnot possible

Retailers focus on the cost and demand sideof the business Need to be profitable with optimum inventory

Inventory turnover must be high even if margins arelow

Must optimize service levels


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Traditional high margins, limited volume,providing personalized services to customers

Modern low margins, high volume, servicesare not personalized


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Most critical point of purchase

Has the power to influence buying decisionsof customers

Companies woo the retailers


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Wheel of Retailing Enumerates ways in which retail organizations

change during their lifetime:

Stage 1- Retail outlet starts simple, with low prices

and margins Stage 2 - It slowly increases prices and margins as

image improves, services are added

Stage 3 - Retailer eventually builds a premium image

Stage 4 - This creates a gap in the market which gets

filled by new outlets at stage 1


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The Retail Accordion Theory

The general-specific-general theory

Outlets start as general retailers

Grows as a specialized retailer

In time becomes even a bigger general retailer


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Theory of Natural Selection

Evolution of retailers is influenced by environmentalfactors i.e. economic, demographic, legal, political

and technological

Retailers who adapt to these factors becomesuccessful


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Retail Life Cycle

Retail is similar to product life cycle

4 stages

Innovation

Quick growth

Maturity

Decline


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Retail world is well organized in developedcountries

Considered a part of the service sector

Service sectors contribution to GDP is veryhigh


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Before, manufacturers called the shots

Today, modern retailers are gaining upperhand

Modern retailers get quantity discounts, sellshelf display space and get special discounts

on promotional stocks

They put conditions on stocking and sellingnew products


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They create their own private brand tocompete with better known company brandson their shelves

Advantages: Lower price

Higher margins for retailer

If successful, gives better bargaining power toretailers

Merchandising is simpler


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Technology to help organize growingnumber of retail partners

Less price cuts to retailers to avoidoverstocking, focus on promotions on theconsumer level

Developing new products and pack sizes

Own outlets


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A successful retailer builds strongrelationships between suppliers andcustomers

Customer satisfaction is a result of totalcustomer experience

Total customer value = product value +service value + image value


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Retailing is the process of reaching out tocustomers through suitable formats

Format is the physical feature of the storeand the services it provides

Retailers use formats to distinguish

themselves from each other


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Location Format Where the store is located in relation to the

customer

Merchandise Based Formats Based on what products the retail format offers

(general or specialized)

Size Based Formats Total space available in the store for the consumer

to roam around in


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Price Based Formats Main attraction: low prices

Concession Based Formats Franchising

Smaller concessionaires complement the offeringsof the major store

Ownership Based Formats Classification is based on who owns the store

Sole, partnership, corporation


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Conventional Retailers Avoiding price competition

General Stores Carrying anything that can be sold in a reasonable

volume

Single/Limited Line Stores Specializing in a certain line of related products


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Expanded Assortment and Service

Specialty Shops Selling special types of products (sporting goods)

Department Stores Combination of many limited line stores and

specialty shops


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Mass Merchandising Retailers

Supermarkets

Catalogue showroom retailers Sell several lines out of a catalogue and display showroom

with back-up inventories Discount Houses

Offer a wide assortment of substantial price cuts

Mass Merchandisers Large self-service stores with many departments that focus

on low margins but high turnover

Hypermarkets Very large stores that carry goods consumers purchase

routinely


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Convenience-Focused Retailers

Convenience Stores

Vending Machines

Door-to-door selling

Telephone and direct mail retailing

Online selling


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Categories basic unit for makingmerchandising and buying decisions

Product lines carried by a retailer

Category Management Focus Parameters Efficient introduction of new products into the

stores Running product promotions effectively

Optimum store assortment reflecting trading areaand customers needs


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Customers needs are influenced by:

Characteristics of the consumer: age, occupation,location, economic status

Buying pattern of consumers in products, brands,variants, pack sizes preferred

How much time spent on shopping

If sales promotions induce consumers to buy more

Frequency of purchases


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Fad generates high sales for a short periodof time

Basic products (staples) reflect continuousdemand

Seasonal Products only relevant in the

appropriate seasons


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Category managers are responsible for theirbusiness and profitability

Relevant points in managing categories: Should reflect trading area of operation

Survey trading area before setting up store

Shelves should be stocked in an appealing manner

Classification should reflect consumers preference

All categories in the store must be visible to ensuremultiple purchases and drive impulse buying


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Selection of Vendor Price Quality Reliability Time for processing orders Terms and conditions Ethics

Selection of Merchandise Quality inspection by sampling Negotiated terms Order and Delivery time Inventory holding rules Re-ordering costs


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The retailer is able to provide service tocustomers by: Merchandising

The format used

The communication process used


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Merchandising A set of activities involved in acquiring goods and

services and making them available at the places,times and prices and quantity that enable a retailer

to reach his goals

Merchandise Planning

Relates to merchandise variety and assortment

Stock turnover ratio (cost of merchandise sold /average inventory value at cost)


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Merchandising

Merchandising Strategy

Wide Assortment Strategy

Deep Assortment Strategy


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Category Management The management of the retail business by looking

at the performance of categories of products ratherthan brands or models


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Positioning Strategy Strategy is built around the identity the store

develops in terms of what it has to offer tocustomers (products, Value added service)

Product Differentiation Strategy Strategy is built around products offered

Operational Superiority Strategy is built around streamlined processes

within the store Store Location

Used as a strategy for competitive advantage


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Gross Margin Return on Inventory Investment Gross Margin * sales to inventory ratio

Gross Margin per Full Time EquivalentEmployee Gauge if employees are maximized

Gross Margin per Square Foot Measure of how well the floor space is being

utilized

Documents

Wk3 Retailing