How Retail Institutions are Evolving
Mergers, Diversification, Downsizing
Cost-Containment and Value-Driven Retailing
Mergers, Diversification, and Downsizing
Mergers: combination of separately owned firms (e.g., Sears (departmental) Store and Lands’ End (Apparels)
Diversification: retailers become active in businesses outside their normal operations (e.g., Limited Brands shift from apparels to beauty products)
Downsizing: unprofitable stores are closed or divisions are sold off (e.g., Kmart, Australian department store)
Methods for Cost Containment
Standardizing procedures, store layouts, store size, and product offerings
Using secondary locations Placing stores in smaller communities Using inexpensive construction materials Using plainer fixtures/Furniture and displays Buying refurbish (second quality) equipment Joining cooperative buying and advertising groups
The Co-operative Retail Trading Group (CRTG)
Was set up in 1993 to centralize the buying power for member Co-operative Societies.
In 2002 for the first time in its 158 year history, all Co-op food buying is controlled through a single buying point based in Manchester.
CRTG is now controlling 100% of Co-op food buying in the UK.
Over 3,200 Food Stores, which are sited in every UK television area.
Convenience Store Strategy Mix(7-Eleven)
Location:Neighborhood
Merchandise:Medium width and low depth of assortment
average quality
Prices:Average to
Above average
Atmosphere andServices:Average
Promotion:Moderate
Conventional Supermarket Strategy Mix
Is a Departmentalized food store with a wide range of food and related products.
Here sales of general merchandise is rather limited.
Eg: Wegmans Rochester, New York RPG’s FoodWorld
Conventional Supermarket Strategy Mix
Location:Neighborhood
Merchandise:Extensive width and depth of assortment;
average quality;manufacturer, Private brands too
Prices:Competitive
Atmosphere andServices:Average
Promotion:Heavy use of newspapers, flyers, and coupons
Combination Store Strategy Mix
Are the stores that unite the supermarket and general store in one facility
Otherwise known as Combos
Where General Merchandise of 25-40 %
Example: Fred Meyer’s, which combines a grocery supermarket and a department store.
Combination Store Strategy Mix
Location:Community shopping center
or isolated site
Merchandise:Full assortment plus health
and beauty aids and general merchandise
Prices:Competitive
Atmosphere andServices:
Average
Promotion:Heavy use of
newspapers, flyers
Box Store Strategy Mix Otherwise known as limited-line store.
A food-based discounter that focuses on a small selection of items Moderate working hours Carries less than 2000 items, few refrigerated perishables. Rely more on low-priced private label brands
Example: Save-A-Lot, Maryland USASave-A-Lot's store format is a limited-selection
store, also known as an "edited assortment
carries about 90% of customer's every day food needs.
Box Store Strategy Mix
Location:Neighborhood
Merchandise:Low width and depth of
assortment; fewperishables; few national
brands
Prices:Very low
Atmosphere andServices:
Low
Promotion:Little or none
Membership club Stores
Are discount food retailers with size of 1,00,000 Sq. feet.
Example: Sam’s Warehouse stores
Warehouse Store Strategy Mix
Location:Secondary site, often in
industrial area
Merchandise:Moderate width and
low depth of assortment; emphasis on
manufacturer brandsbought at discount
Prices:Very low
Atmosphere andServices:
Low
Promotion:Little or none
Or through direct mails
Specialty Store Strategy Mix
A category Killer: Toys “R” Us,
Is a Kids store for toys, videogames, baby products etc.
Specialty Store Strategy Mix
Location:Business district
(main / Cross roads) or shopping center
Merchandise:Very narrow width and
extensive depth of assortment; average to
good quality
Prices:Competitive to Above average
Atmosphere andServices:
Average to excellent
Promotion:Heavy use of displaysExtensive sales force
Traditional Department Store Strategy Mix
Location:Business district, shopping
center or isolated store
Merchandise:Extensive width and depth of assortment; average togood quality With none of category predominating
Prices:Average to
Above average
Atmosphere andServices:
Good to excellent
Promotion:Heavy ad and catalog
use; direct mail; personal selling
Full-line Discount Store
All that expected at department store along with it additonals like
Electronics, furniture's, appliances, auto accessories, gardening tools
Full-line Discount Store Strategy Mix
Location:Business district, shopping
center or isolated store
Merchandise:Extensive width and
depth of assortment; average to
good quality
Prices:Competitive
Atmosphere/ Services:Slightly below
average to average
Promotion:Heavy on newspapers;price-oriented selling
Factory Outlet Strategy Mix
Location:Out of the way site
or discount mall
Merchandise:Moderate width and
poor depth of assortment;
low continuity
Prices:Very Low
Atmosphere/ Services:Very low
Promotion:Little
Brooks Brothers: Realizing the Power of the Factory Outlet
Business and casual clothing for men and women , New York city
Flea Market Strategy Mix
Location:Isolated store
Merchandise:Extensive width and
poor depth of assortment;
low continuity; variable quality
Prices:Very Low
Atmosphere/ Services:Very low
Promotion:Limited
Single-channel Retailing: Sell to consumer through one store format
Like Corner shoe shop or E-bay online only
Multi-channel Retailing: Sells through multiple channels
Like Wal-Mart selling through Wal-Mart stores, Sam’s Club.
Helps the firms:
To reach different customer groups
Share cost among various Formats
Diversify its supplier base
Direct Marketing
Customer is first exposed to a good or service through a non-personal medium and then orders by mail, phone, fax, or computer
Annual U.S. sales exceed $235 billion
Other leading countries include* Japan* Germany* Great Britain
*France*Italy
Newer Roles for Catalogs & TV Specialog: smaller version of general
catalog, product wise customized
TV Retailing has two components Networks: (Gharvakhri furniture :
presentation through cables)
Informecials: TVC shopping (30-minutes serial type)
Non-store Retailing
Retailing strategy that is not store-based
It exceeds $300 billion annually 78% comes from direct marketing Web-based retailing is fastest growing
area
Nontraditional Retailing
Nontraditional retailing also includes formats that do not fit into the store and non-store based categories:
Video kiosks
Airport retailing
Trade Area Analysis
Trade area analysis provides retailer with vital information like
Store patronage
Local market opportunity
Competing businesses
Study of all those barriers that can stop consumers from visiting the site
Every Trade Area consist of three parts
Primary Trading Area:Contributes 50-80 % of the stores customersNearest Area Within 2-3 kilometers of stores location
Secondary Trading Area: Contributes 15-25 % of the stores customers Customers are comparatively dispersed. Area near to 7 kilometers
Fringe (extreme) Trading Area: Highly dispersed people Spreaded over 9 kilometersContain shoppers who travel distance to patronize
a store.
The greater the Primary and fringe areas the better it is for the retailer.
This is an overall idea about a trade area but there is no format which decides a trade area for a store
Size and shape of trade areas varies upon certain factors
Factors Determining Size & Shape of the Trade Areas
Store Type: Some have their own trading area
(as higher the assortment and promotion and attraction higher would be its trade area).
Some don't have there own trading area nor their own traffic Eg: Florists in lobby, restaurants at the malls
Store Size: Higher the stores size ( in variety and assortment) larger would be its trading area and vise versa
Examples: Hypermarket like Giant Supermarket like FoodWorld.
Merchandise Type:
If convinience goods: purchased from Kirana stores
Thus small trading area
But If other types of convinience goods Like rice, dal, require bit planning
Thus would be from supermarkets and trading area of supermarkets are larger.
If shopping goods: like clothing & electronics they are purchased less frequently
Customers would spend more time
Thus trading area of such retail outlet would be higher
For Specialty goods and Luxury goods Like car
High pre-search and huge time investment
Thus trading area in this the largest
Location of Competition
Intra-store competitionSimilar merchandise
(Subhiksha & FoodWorld)Customer to prefer one Trade area shrinks
Inter-store competition Dissimilar merchandise(shopper’s stop, Titan, Archie’s & Barista)Pulled to such areas thus increased trade area
Housing Patterns
In urban: Primary trading area would be high
(as located nearby)
In suburban areas secondary & Fringe trading areas would be high
Travel Time:
The greater the distance between the Point-of-origin to the store greater would be the trade area
But this is applicable to all those successful branded outlets who has drawing power.
Once through with the describing and analysis of the trade areas on a grass root level.
One should not stop there need to keep analyzing to have a shift in stores location strategies.
FoodWorld came up with FoodExpress
¼ size
Attracting small community customers who tend to buy from neighborhood stores.
Examples:
Examples: The Piramal Groups bookstore chain Crossword.
Which came up with its shrinking strategies
Earlier crossword was (5000-10,000 sq.) Spreaded over 8 cities.
For which to survive they required 50,000 households in that trade area
Was difficult due to intensive competition as well as heavy traffic problems.
Thus had to shrink to Crossword Corners (now in multiplex, Malls, High streets)
The response was too good lowered its investments to 5-10lkh Rs.
How to Measure & Define Trade Area
Aim is to have highest probability of attracting the customers in the selected area.
Various popular methods are available likeTrend analysis,
Analog models (first compare their 2 stores then potentials in the prospective stores)
Regression model. (relationship betwn potential sales & independent factors)
GIS
Geographic Information System
GIS is a combination of computer hardware and software which is used for spatial analysis.
Atlas GIS by Strategic Mapping Inc & MapInfo by MapInfo Corporation are the two most commonly used packages
In India InfoTech enterprises, Genesys and Tata infotech has a joint venture with MapInfo. COM to develop GIS applications.
Conti.. GIS can be used by a retailer to
Evaluate Market demographics Assess customers Competitive locations Define trade area
GIS Analysis can be categorized in to: Basic Mapping & Report generation Spatial Analysis and customization
With this software retailers can map demographic factors like income & show locations of stores and customers on the map.
It even helps in aggregating sales data, calculating distance and estimating market share for a new store.
GIS is a package for simple & complex level extent of usability depends on the package one can afford.
It is also important that users recognize it as only a tool not an end in itself.
Types of Locations
Isolated stores:
A freestanding retail outlet situated most on a street or highways
This stores have no vicinity of other retail players with whom they to share the customers.
Conti..
Unplanned business district:
A location in which two or more store either stand together or closely but had not planned so.
They came together as it suited them.
All Stores here sell similar or related products
1. Central Business District (CBD)
2. Secondary Business District (SBD)
3. Neighborhood Business District (NBD)
4. Strings (Eg: Car Accessories, Jewelry etc.)
The Planned Shopping center
Is a set of architecturally similar commercial establishments constructed on a site which is owned and managed centrally
Such stores will have one or more anchor stores along with variety of other stores
Best Planned shopping center Sector-18 in Noida
It is in the satellite township of Noida UP and has emerged as the areas biggest landmark.
It has already attracted International Fast Food chain McDonald's.
It has two superstores (Nanz & Giants)
Ebony a Delhi based department store having 40,000 sq. ft. shopping space.
Reasons for success of Sec-18.
Shops got good value of money because of the customer profile
Surrounded by lots of youth and computer literate people (who both work and reside in the same town)
Spending power of these people is quite high
Credit even goes to the Town planners as they developed the area so beautifully shopping + Entertainment (Cineplex and hotels)
Lands are cheaper compared to prime locations in Delhi (Connaught place).
There is no other conveniently located shopping complexes in east Delhi (10 kms. away from Sec-18)
Inflow from Delhi also increased (Multi-lane flyovers connecting Delhi Noida).
Shopping Malls The Mall of America is the largest mall in US In 78 acres of land
It houses 4 department stores 400 other shops 45 restaurants 9 night clubs 14 cinema screens 12,750 on site parking space 7 acre theme park A synthetic rain forest Has 4 themed streets to connect the anchor stores Great combination of upscale and low price retailers
in its tenant mix.
Crossroads
One of the largest mall in India At Haji Ali in south Mumbai Launched by Piramal Enterprises They aimed at introducing the “Shoppertainment” Concept
in India. Spread across 60,000 sq.ft. Offers 250 top Indian as well as International brands in
fashion, jewelry, footwear, watches. It has an entertainment center “Jammin” covering 3 floor In the entrance one can find a big Video Display wall On the other side works of catoonists A piano bar and a china garden
Shoppers Stop an Indian department stores promoted by the K Raheja Corp Group started in the year 1991
With its first store in Andheri (Mumbai )
Shopper’s Stop Identified the big metros like (Delhi, Mumbai, Kolkata, Chennai, Bangalore) Class A cities as target cities
Significant factors for selecting them was: Urban population, Average household income levels Sales of other consumer goods Penetration of Credit Cards
They then invited quotations for the lease or selling rates of lands.
Later to estimate the market size they took help of ORG-MARG an independent market research firm.
Then they did a Micro Profile analysis:
Analyzing of different customer profiles at each prospective locations, using data on product sales in various stores.
After the analysis Shopper’s stop was in a position to decide the site suiting it.
It targeted for broader trade area, which usually cover the entire city
Except for Mumbai where it has 3 stores.
Because of its brand it has better drawing power.
Finally Shoppers’ Stop goes for a Wardrobe audit – to ensure that stores size a merchandize mix is a perfect fit.