International retailing

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International International RetailingRetailing

BY BY NISHANTH HNISHANTH H

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The Role of RetailingThe Role of Retailing► Retailing:Retailing:

An important part of many marketing An important part of many marketing channels, includes all the activities channels, includes all the activities involved in selling products and services involved in selling products and services to the ultimate, or final, consumer.to the ultimate, or final, consumer.

► Retail Sales:Retail Sales: Sales to final consumers; wholesale sales Sales to final consumers; wholesale sales

are those to other businesses that in turn are those to other businesses that in turn resell the product or service, or use it in resell the product or service, or use it in running their own businesses.running their own businesses.

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Economic ImportanceEconomic Importance Sales Profits

Company ($ millions) ($ millions) Employees1. Wal-Mart 219,812 6,671 1,383,0002. Home Depot 53,553 3,044 256,3003. Kroger 50,098 1,043 288,0004. Sears Roebuck 41,078 735 310,0005. Target 39,888 1,368 223,5506. Albertson’s 37,931 501 220,0007. Kmart 36,910 (95) 240,5258. Safeway 34,301 1,254 193,0009. JC Penny 32,004 98 270,00010. Walgreen 24,623 886 106,000

In the U.S., 3 million retailers generate

$2.5 trillion in revenues annually!

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Retailers’ Uniqueness Retailers’ Uniqueness in the Channelin the Channel

Provide Product

Assortment

Emphasize Store

Atmospherics

Sell Smaller Quantities of Product

More Frequently

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Types of RetailersTypes of Retailers

► Independent Independent Retailers:Retailers: Own and operate Own and operate

only one retail only one retail outlet.outlet.

►Chains:Chains: A retail chain A retail chain

owns and owns and operates operates multiple retail multiple retail outlets.outlets.

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Types of RetailersTypes of Retailers►Franchising:Franchising:

Retail franchising is a form of chain Retail franchising is a form of chain ownership in which a franchisee pays the ownership in which a franchisee pays the franchisor (parent company) fees or franchisor (parent company) fees or royalties and agrees to run the franchise royalties and agrees to run the franchise by prescribed norms, in exchange for use by prescribed norms, in exchange for use of the franchisor’s name.of the franchisor’s name.►McDonald’sMcDonald’s►Jiffy LubeJiffy Lube►Holiday InnHoliday Inn

There are 3,000 franchise companies in the U.S. that operate 558,000

separate establishments!

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Top 10 International Top 10 International Retail FranchisesRetail Franchises

1.1. McDonald’sMcDonald’s2.2. Great WrapsGreat Wraps3.3. SubwaySubway4.4. Kentucky Fried ChickenKentucky Fried Chicken5.5. Kumon Math and Reading CentersKumon Math and Reading Centers6.6. Meineke Discount Muffler ShopsMeineke Discount Muffler Shops7.7. TCBY TreatsTCBY Treats8.8. Thrifty Car RentalThrifty Car Rental9.9. Blimpie Subs & SaladsBlimpie Subs & Salads10.10. Mail Boxes Etc.Mail Boxes Etc.

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Types of RetailersTypes of Retailers

► Leased Departments:Leased Departments: Leased departments are sections in a Leased departments are sections in a

retail store that the owner rents to a retail store that the owner rents to a second party.second party.

► CooperativesCooperatives

►Retail Cooperatives:Retail Cooperatives: Independent retailers banding together Independent retailers banding together

to counter chain store competition.to counter chain store competition.

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International Retailing International Retailing DefinedDefined

All the activities involved in All the activities involved in selling products and services to selling products and services to final international consumers final international consumers for their personal consumption.for their personal consumption.

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Retail Formats: Variations in Different Retail Formats: Variations in Different MarketsMarkets

►Specialty StoresSpecialty Stores Retailers offering a narrow product line and wide Retailers offering a narrow product line and wide

assortmentassortment - Virgin Records (music products)Virgin Records (music products)- Mango (youth fashion)Mango (youth fashion)

►Specialized MarketsSpecialized Markets Markets that house stores specializing in a Markets that house stores specializing in a

particular product category particular product category - Jade market (Hong Kong)Jade market (Hong Kong)- Spice market (Istanbul)Spice market (Istanbul)

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►Department Stores Department Stores Offer a broad variety of goods and wide Offer a broad variety of goods and wide

assortments assortments U.S. and Canada: recent substantial lossesU.S. and Canada: recent substantial losses Europe: expansion of national chains throughout Europe: expansion of national chains throughout

the European Unionthe European Union Asia: on the declineAsia: on the decline

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►General Merchandise Discount StoresGeneral Merchandise Discount Stores Sell high volumes of merchandiseSell high volumes of merchandise Offer limited serviceOffer limited service Charge lower pricesCharge lower prices Types:Types:

- All-purpose: offer wide variety of All-purpose: offer wide variety of merchandise and limited depthmerchandise and limited depth

- Category specialists (category killers): carry Category specialists (category killers): carry a narrow variety of merchandise and offer a a narrow variety of merchandise and offer a wide assortmentwide assortment

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►Off-Price RetailersOff-Price Retailers Sell brand name and designer merchandise at Sell brand name and designer merchandise at

below regular retail pricesbelow regular retail prices Overruns, irregular products, previous seasons’ Overruns, irregular products, previous seasons’

productsproducts Examples:Examples:

- Factory outlet storesFactory outlet stores- Close-out retailers (broad, inconsistent Close-out retailers (broad, inconsistent

assortments)assortments)- Single-price retailers (all products for the Single-price retailers (all products for the

same price)same price)

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►Catalog Showrooms Catalog Showrooms Offer high-turnover, brand name goods at discount Offer high-turnover, brand name goods at discount

prices prices Internationally, however, goods sold through this Internationally, however, goods sold through this

venue tend not to be brand name, but, rather, goods venue tend not to be brand name, but, rather, goods that have not sold the last season through the catalog that have not sold the last season through the catalog

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International Food International Food RetailersRetailers

►Conventional Conventional SupermarketsSupermarkets Self-service retailers Self-service retailers

with annual sales with annual sales higher than $2 million higher than $2 million and less than 20,000 and less than 20,000 square feet of store square feet of store space space

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International Food International Food RetailersRetailers

►SuperstoresSuperstores Combination stores (food and drug) Combination stores (food and drug) Hypermarkets – combine supermarket, discount, and Hypermarkets – combine supermarket, discount, and

warehouse retailingwarehouse retailing

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Food RetailersFood Retailers ►Warehouse Clubs (Wholesale Clubs) Warehouse Clubs (Wholesale Clubs)

Require members to pay an annual feeRequire members to pay an annual fee Operate in low-overhead, warehouse-type facilities Operate in low-overhead, warehouse-type facilities Offer limited lines of brand-name and dealer-brand Offer limited lines of brand-name and dealer-brand

merchandise at a substantial discountmerchandise at a substantial discount

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Food RetailersFood Retailers ►Convenience StoreConvenience Store

Small residential retailers or retail chains consisting Small residential retailers or retail chains consisting of small neighborhood stores of small neighborhood stores

Open long hoursOpen long hours Carry limited lines of higher-turnover necessitiesCarry limited lines of higher-turnover necessities One-stop shoppingOne-stop shopping

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Nonstore RetailingNonstore Retailing► Internet RetailingInternet Retailing

Also known as interactive home shopping or Also known as interactive home shopping or electronic retailingelectronic retailing

Includes both new dot-com companies and Includes both new dot-com companies and traditional retailers attempting additional market traditional retailers attempting additional market penetration penetration

Increase company diversificationIncrease company diversification►Vending MachinesVending Machines

Increasingly popularIncreasingly popular Extent of use varies from country to countryExtent of use varies from country to country

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Nonstore RetailingNonstore Retailing►Television Home ShoppingTelevision Home Shopping

A venue for selling merchandise to consumers in A venue for selling merchandise to consumers in their homes using cable channelstheir homes using cable channels

Examples: infomercials and direct response Examples: infomercials and direct response advertisingadvertising

Popular in North America and Europe, and Popular in North America and Europe, and becoming increasingly popular in Asian marketsbecoming increasingly popular in Asian markets

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Nonstore RetailingNonstore Retailing►Catalog Retailing and Direct Mail Catalog Retailing and Direct Mail

RetailingRetailing Venues for selling merchandise to consumers using Venues for selling merchandise to consumers using

catalogs and other types of direct mailcatalogs and other types of direct mail It allows for the international expansion of retailersIt allows for the international expansion of retailers Must be adapted to local market needs and practices Must be adapted to local market needs and practices Obstacles in developing countries:Obstacles in developing countries:

- deficient telephone servicedeficient telephone serviceunreliable mail serviceunreliable mail service- low incomelow income- unavailability of credit cards unavailability of credit cards

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Nonstore RetailingNonstore Retailing►Direct SellingDirect Selling

A retailing venue whereby a salesperson, A retailing venue whereby a salesperson, typically an independent distributor, contacts a typically an independent distributor, contacts a consumer, demonstrates product use and consumer, demonstrates product use and benefits, takes orders and delivers the benefits, takes orders and delivers the merchandisemerchandise

Direct selling firms are most active in the growth Direct selling firms are most active in the growth markets (in emerging markets, in particular)markets (in emerging markets, in particular)

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Network MarketingNetwork Marketing►Variation on direct sellingVariation on direct selling► Involves signing up sales Involves signing up sales

representatives to go into business for representatives to go into business for themselves with minimal start-up themselves with minimal start-up capital and sell more "distributorships" capital and sell more "distributorships" and merchandiseand merchandise

►Network marketing is growing rapidly, Network marketing is growing rapidly, especially in emerging marketsespecially in emerging markets

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Developing Retailing Developing Retailing StrategyStrategy

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Uncontrollable FactorsUncontrollable Factors

►ConsumersConsumers►CompetitionCompetition►Economic ConditionsEconomic Conditions►SeasonalitySeasonality

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Controllable FactorsControllable Factors

► LocationLocation Central Business District Central Business District

(CBD)(CBD) Strip CentersStrip Centers Shopping MallsShopping Malls Freestanding SitesFreestanding Sites

► Goods and ServicesGoods and Services

► Pricing Pricing

► Marketing CommunicationsMarketing Communications

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Types of Strategy MixTypes of Strategy Mix► Specialty StoresSpecialty Stores►Department StoresDepartment Stores► Convenience StoresConvenience Stores►Margin and Turnover Strategy Margin and Turnover Strategy

MixesMixes►Gross MarginGross Margin► Inventory TurnoverInventory Turnover

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Ethical and Legal Issues Ethical and Legal Issues in Retailingin Retailing

► Consumer FraudConsumer Fraud► Supplier Labor PracticesSupplier Labor Practices► Retail TheftRetail Theft► Slotting AllowancesSlotting Allowances► Use of Customer Use of Customer

InformationInformation► Ecological Ecological

ConsiderationsConsiderations

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► International Retail Companies have several inherent challenges International Retail Companies have several inherent challenges that they face in their line of business. Product innovation and that they face in their line of business. Product innovation and product mix happen to be the biggest challenges for these product mix happen to be the biggest challenges for these companies both at global as well as country specific domestic companies both at global as well as country specific domestic levels. The survival and growth of the brand is directly dependent levels. The survival and growth of the brand is directly dependent upon these challenges. The global retailers have to be tuned in to upon these challenges. The global retailers have to be tuned in to the international as well as domestic specific fashion in each of the international as well as domestic specific fashion in each of the countries and get their product mix right for each of the the countries and get their product mix right for each of the markets. Service quality and merchandising methods too, play an markets. Service quality and merchandising methods too, play an important role in the brand visibility and reputation. Pricing of important role in the brand visibility and reputation. Pricing of products is yet another challenge faced by the brands. products is yet another challenge faced by the brands. Developing and emerging markets are highly price sensitive. Developing and emerging markets are highly price sensitive. When the international brands are trying to make an entry into When the international brands are trying to make an entry into the new markets, they have got to have an entry strategy that the new markets, they have got to have an entry strategy that takes into account the price sensitivity and profitability as well. takes into account the price sensitivity and profitability as well.

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► Procurement and Supplier reliability as well as quality marks one Procurement and Supplier reliability as well as quality marks one of the challenges that these companies face as they happen to of the challenges that these companies face as they happen to source materials and products from several countries. Quality source materials and products from several countries. Quality and reliability as well as in time supplies and logistics is always a and reliability as well as in time supplies and logistics is always a challenge that can make or break the business which is highly challenge that can make or break the business which is highly seasonal in each country. In the recent years we have seen the seasonal in each country. In the recent years we have seen the emergence of ethical practices playing a vital role in the emergence of ethical practices playing a vital role in the procurement policies of these international companies. The procurement policies of these international companies. The companies have got to ensure that their sourcing partners do not companies have got to ensure that their sourcing partners do not employ child labour or employ unethical methods in employ child labour or employ unethical methods in manufacturing the products and as principle buyers these manufacturing the products and as principle buyers these companies are held responsible. Ethical buying has gained global companies are held responsible. Ethical buying has gained global visibility and these companies have had to be watchful to ensure visibility and these companies have had to be watchful to ensure compliance or risk unwanted publicity and public outcry.compliance or risk unwanted publicity and public outcry.