chap 2 retailers & retail format

8/13/2019 Chap 2 Retailers & Retail Format

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RETAILERS& RETAILFORMATS


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RETAILERS& RETAILFORMATS

The Concept of Retail Marketing has caught on like lighting.

It creates a Distribution Network that cuts off various intermediaryCosts and create much smoother Interface between Manufacture &Customer.

Retail Industry is a dynamic one as it tries to satisfy changing customerprofile and their needs with time.

The Store change their Format, Style of Presentation and Assortment

i.e Variety and depth of Merchandise as per the requirement.

In this unit you will Study Different Types of Retailers, Retail Formats andtheir Characteristics Features.


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CLASSIFICATIONOFRETAILERS

Legal Form

Operational Structure

Classification of retailers Based on Legal Form

Proprietorship Partnership Limited company

Classification of retailers Based on Operational Structure

Independent traders Chain Stores (Multiples) Co-operatives


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Range of Merchandise

Degree of Service

Classification of retailers Based on Range of Merchandise

Variety Stores (Departmental Stores) Specialty Stores (Niche Retailers)

Classification of retailers Based on Degree of Service

(LOW)

Self Service & Self Selection

(HIGH)

Large No. of Customer Services such as High Credit,Home Delivery, High Involvement of Sales Staff.


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Pricing Policy

Location

Classification of retailers Based on Pricing

LOWER PRICE (Discount Stores) HIGH PRICE (Convenience Stores)

Edge of town Location

Clusters Location

Shopping Centers or Complex, Destination stores & Convenience Stores

are based on locations.


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Size of Outlet

Based on Customer Contact

Classification of retailers Based on Size of Outlet

Small Stores

(025,000 Sq. Feet)

Surplus Stores

(2500050000 Sq. feet)

Hyper Markets

(over 50000 Sq. Meters)

Classification of retailers Based on Method of Customer Contact

Retailing through Stores NonStore Retailing


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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICINGDEPARTMENT STORES

Large Store Selling.

A Broad Variety and Deep Assortment.

Offer Considerable Services and

Organizedinto Separate Departments.

Characteristics of DEPARTMENT STORES

Located in central market area.

Availability of Parking Space.

Freedom for Customer to move

around stores.

Relatively High Prices.

Large number of specialized good.

Personal assistant in shopping.

Staff expertise in particular product demonstration


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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICING

SPECIALTY STORES

Narrow Product Line.

High degree of Customer Service.

Few Products with wide Variety of

Range, Quality and Colour


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DISCOUNT STORES

Offer Lower Price due to Limited Service andLow Cost.

CHARACTERISTICS OF DISCOUNT STORES

Very Low Price.

Low Gross Margin.

High Degree of Self Service.

No Free Services, such as Delivery.

Depends upon Heavy Advertising in nearby large population centres


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SUPER MARKETS

It is a Self Service Food store offering Groceries.

The size is of under 25000 sq.mt.

Relatively large, low cost, low margin, high volume self service store.


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SUPERSTORES

Are Large Supermarkets.

Offering from Traditional Goods & Services like Pharmacy, Flower Shop,Book Store, bakery under one roof.


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TYPESOFRETAILERSBASEDONMERCHANDISE& PRICINGHYPER MARKETS

The size is of over 50000 sq.mt. of Selling Area or More

Retailing Groceries, General Merchandise goods, pharmacy, FlowerShop, Other Concessions etc with wide variety of Offerings in largeQuantities

Selling Huge Volumes with Less Margin


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TYPESOFRETAILERSBASEDONOPERATIONALSTRUCTURE

INDEPENDENT TRADER

An independent retailer owns one retail unit.

Advantages

There is flexibility in choosing retail formats, location, assortment (variety), prices, hoursetc., & devising strategy based on the target customers.

Investment costs for leases, fixtures, workers, & merchandise can be brought down. Thereis no duplication of stock or personnel function.

Independents frequently act as specialist in a niche of the particular goods/servicescategory. They are then more efficient & can lure (attract) shoppers interested inspecialized retailers.

Independents exert strong control over their strategies, & the owner-operator is typically on

the premises. Decision making is centralized & layers of management personnel areminimized.

Independents can easily sustain consistency in their efforts because only one store isoperated.

Independents have Independence. No meetings, union, stockholders & labor unrest etc.

Entrepreneurial drive.


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INDEPENDENT TRADER

Disadvantages

Less bargaining power with the suppliers as they buy less quantity.

Cannot gain economies of scale (i.e. cost advantages that a business obtains due toexpansion) in buying & maintaining inventory. Transportation, ordering, & handling costs are

high.

Operations are labor intensive.

They are limited to certain media for advt. because of financial constraints.

Family-run independents is overdependence on the owner. It is difficult to keep it up &running.

Limited time allotted to long-run planning, since owner is intimately involved in day-today operations.


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EXAMPLESOFINDEPENDENTTRADERS


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MULTIPLE OR RETAIL CHAIN STORES

Advantages

Less bargaining power with the suppliers as they buy less quantity.

Cannot gain economies of scale (i.e. cost advantages that a business obtains due toexpansion) in buying & maintaining inventory. Transportation, ordering, & handling costs are

high.

Operations are labor intensive.

They are limited to certain media for advt. because of financial constraints.

Family-run independents is overdependence on the owner. It is difficult to keep it up &running.

Limited time allotted to long-run planning, since owner is intimately involved in day-today operations.


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MULTIPLE OR RETAIL CHAIN STORES

Disadvantages

Flexibility may be limited. Consistent strategies on pricing, promotions, &product variety must be followed throughout all units which may be difficult toadapt to local diverse market.

Investment is high due to infrastructure & store as multiple store has to bestocked.

Managerial control is complex due to geographically dispersed branches.

Limited independence to the personnel.


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EXAMPLESOFMULTIORCHAINSTORES


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CO-OPERATIVE SOCIETIES

A consumer cooperative is a retail firm owned by its customer members.

A group of customers invests, elects officers, manages operations & share profits.

They account for tiny piece of retail sales.

Cooperatives are formed because they think they can do retailing function, traditional

retailers are inadequate & prices are high.

They have not grown because consumer initiative is required, expertise may be lacking,

expectations have frequently not been met, & boredom occurs.


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EXAMPLESOFCOOPERATIVESOCIETIESSTORE


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CONCESSIONAIRE/ LEASEDDEPT

A leased department is a department in a retail store usually a department,discount, or specialty store that is rented to outside party.

The leased department proprietor is responsible for all aspects of its business &normally pays a %age of sales as rent.

The store sets operating restrictions for the leased department to ensure overallconsistency & coordination.

Advantages (from the storesprespective)The market is enlarged by providing one-stop customer shopping.

Personnel management, merchandise displays, & reordering items are undertaken by lessees.

Regular store personnel do not have to be involved.

Leased department operators pay for some expenses, thus reducing store costs.

A %age of revenue is received regularly.

Disadvantages (from the storesprespective)

Leased department operating procedures may conflict with store procedures.

Lessees may adversely affect the stores image.

Customers may blame problems on the store rather than on the lessees.


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CONCESSIONAIRE/ LEASEDDEPT

Advantages for Leased department operators

Stores are known, have steady customers, & generate immediate sales for leased departments.

Some costs are reduced through shared facilities like security equipment & display windows.

Their image is enhanced by the relationships with popular stores.

Disadvantages for Leased department operators

There may be inflexibility as to the store hours they must be open & the operating style.

The goods / services lines are usually restricted.

If they are successful, the store may raise rent or not renew leases when they expire.

In-store locations may not generate the sales expected.


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EXAMPLESOFCONCESSIONAIRE/ LEASEDDEPT


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Franchising involves a contractual arrangement between a franchisor (a manufacturer,

wholesaler, or service sponsor) & a retail franchisee, which allows the franchisee to

conduct business under a established name & according to a given pattern of business.The franchisee pays an initial fees & a monthly %age of the gross sales in exchange for

the rights to sell goods & services in an area.

A franchisee operates autonomously in setting store hours, chooses a location, &

determines facilities & displays.

Three structural arrangements dominate retail franchising

Manufacturer-retailerA manufacturer gives independent franchisees the right to sell goods &related services through licensing agreement. (Eg., Auto/truck dealers like GM, Petroleum

products dealers like IOC).

Wholesaler-retailer

Voluntary - A wholesaler sets up a franchise system & grants franchises to individualretailer. (Eg., Auto accessories stores, Consumer electronics stores).

CooperativeA group of retailers sets up a franchise system & shares the ownership &operations of a wholesaling organization. (Eg., Food stores).

Service sponsor-retailerA service firm licenses individual retailers so they can offer specificservice packages to customers. (Eg., McDolands).

FRANCHISING


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FRANCHISING(FRANCHISEES)

Advantages of Franchisees

They own a retail enterprise with a relatively small capital.

They acquire well-known names & goods/services lines.

Standard operating procedures & management skills may be taught to them.

Cooperative marketing efforts (like national advt.) are facilitated.

They obtain exclusive selling rights for specified geographical territories.

Their purchases may be less costly per unit due to the volume of the overall franchise.

Disadvantages of Franchisees

Oversaturation could occur if too many franchisees are there in one geographical area.

Due to overzealous selling by some franchisors, franchisees income potential, required

managerial ability, & investment may be incorrectly stated.

They may be locked into contracts requiring purchases from franchisors or certain vendors.

Cancellation clauses may give franchisors the right to void agreement if provisions are not

satisfied.

In some industries, franchise agreements are of short duration.

Royalties are often a percentage of gross sales, regardless of franchisee profits.


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FRANCHISING(FRANCHISORS)

Advantages of Franchisors

A national & global presence is developed more quickly & with less franchisor investment.

Franchisee qualification for ownership are set & enforced.

Agreement require franchisees to abide by stringent operating rules set by franchisors.

Money is obtained when goods are delivered rather than when goods are sold.

Because franchisees are owners & not employees, they have greater initiative to work hard.

Even after franchisees have paid for their outlets, franchisors receive royalties & may sellproducts to the individual proprietors.

Disadvantages of Franchisors

Franchisees harm the overall reputation if they do not adhere to company standards.

Lack of uniformity among outlets adversely affects customer loyalty.

Intra-franchise competition is not desirable.

The resale value of individual units is injured if franchisees perform poorly.

Ineffective franchised units directly injure franchisorsprofitability.

Franchisees, in greater number, are seeking to limit franchisorsrules & regulations.


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NONSTORERETAILING

The Different types and aspects of Non Store Retailing

It contains Mail Order Catalogues, Direct Response Advertising & Direct MailMAIL ORDER

Advantages of Mail Order Catalogues

Free Credit

Price Stability over the lifetime of the catalogue

Savings in Transport Fares and Petrol

Wide selection of Merchandise

DIRECT RESPONSE ADVERTISING

It is used in advertising in Newspaper or Magazines to describe a product or

stimulate the customer to write or telephone for it.DIRECT MAIL

It is used in advertising Literature sent directly to the potential customer for

purpose of selling goods or services.


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NONSTORERETAILING

DIRECT SELLING

Direct Selling of a product by a Salesman. It Contains

DOOR TO DOOR TRADING

Selling by Salespersons is being done to Launch New Products

E.g. Milk. Bread, Eggs & Vegetables

MOBILE SHOPS

They are Travelling Shops and are distinct from Vehicles from which Milk,

Bread, Newspapers etc are delivered.

MARKETS

Sellers bring their Merchandise on One Particular Day to Particular Place


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NONSTORERETAILING

AUTOMATIC VENDING

Non-store retailing that makes it possible to serve customers where stores

cannot.

Maintenance and operating costs are high.

Small convenience products are available in vending machines.

Banks are providing this type of Services

ELECTRONIC RETAILING

RETAILING THROUGH TELEVISION

Customer watch a TV programme demonstrating Merchandise and then

place a order over telephone

e.g. Asian Sky Shop, TSN, TVC

RETAILING THROUGH INTERNET

Customer place an order through mail or phone

e.g. Jabong.com, Flipkart.com, Homeshop18.com


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RETAILINGCONCEPT


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INTRODUCTION

CUSTOMERS

Customer are the important element for the retailers

Why Customers shop, how they select a shop and how they select among that

stores merchandise

Assortment of Merchandise whether a wide variety or limited

Quality and fashion level of goods.

Price Generally important at lower end

Services Such as Credit, delivery etc

COMPETITION

A Retailers Competition does not only come from those competitors who are using

the same Retail Format but also from new competitors who are coming up from

new formats.

e.g. Department store competing with other department store, super market

competing with other supermarkets etc


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INTRODUCTION

ENVIRONMENTAL TRENDS

ECONOMIC FACTORS

As Indian Economy gets Integrated in the world economy, global trends

start affecting Indian economy such as global recession

DEMOGRAPHIC FACTORS

There has been significant growth in number of towns and significantincrease in population of Urban India due to migration from Rural areas.

SOCIAL FACTORS

Nuclear family is becoming a norm in India with increasing number of

women working outside the four walls of Home.

PSYCHOLOGICAL FACTORS

Consumerism is on increase in India. Media and cable tv proliferation has

given exposure to Indian consumers to new Idea, new life style and new

desires.


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INTRODUCTIONENVIRONMENTAL TRENDS

BRAND PROFUSION

India has seen Brand explosion in almost all goods. Earlier there was only

one brand of salt i.e Tata Salt but now there are number of brands

available.

PSYCHOGRAPHIC CHANGE

There has been a perceptible change in mental attitude of people at

large. Hygiene is a prerequisite for any investment related toconsumption and food item.

DEMOGRAPHIC CHANGE

Geographic location is populated by people with distinct characteristics

of demand and consumption.

POLITICAL CHANGE

India is facing severe political instability. This is causing frequent policy

change and creation of pressure group.

TECHNOLOGICAL CHANGES

Tremendous change in Information Technology. IT has provided ways to

network and increase market share with profitability


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RETAILMIXPLACEConvenience of Shopping

It involves Time, Place, Effort and Other facilities

StoresDcor and Interiors

It should be compatible with Products

It should be compatible with the Target Customers

Store Location

Target Customers

Type of Retailer or Retailers Image

PRODUCT

Breadth of Merchandise

A store with many lines and departments of merchandise has breadth of

assortment; a narrow line store is a specialty store

Depth of Merchandise

Depth of assortment refers to Variety of Colors, Styles, Sizes and Prices thata Retailer Offers (SKU Stock Keeping Unit)

Quality and Fashion level of Goods

High Quality, newest fashions and exclusivity are major consideration for

high income, fashion conscious customers

Low Price and value of money are major consideration for relatively Low

income Customers.


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RETAILMIXPRICEEarlier Price was considered as Direct Indicator of Quality.

Price has become a tool in the Marketers armour to Increase Market Share

without Compromising Quality.

Today Price is Indirect Indicator of Quality and fashion level Goods.

Higher Quality Goods and Newest Fashion usually command higher Price

PROMOTION

This is based on the AIDA theory of Promotion i.e Awareness, Interest, Desire,

ActionAwareness

Retailers To make Customer aware of his Offerings

Should Communicate to the Customer properly

Interest

Customer shows some interest in the product.

Retailer Sales Persons can help in knowing the product better.

Desire

The retailer can convert desire of the Customer to Purchase.

Action

Purchase.


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THEORIESOFRETAILCHANGE

Four theories of Retail institutional Change have Oriented in North America

Theory of Natural Selection in Retailing.

It is based on Theory of Charles Darwin of Natural Selection in Origin of

Species

Various factors have helped the growth out of town stores.

Changes in Consumer Characters.

Demographic e.g. Population age changes

Social e.g. Product and service preference.

Economic e.g. Changes in Real incomes

Changes in technology

i.e. greater Ownership, use of Motorcars, Food freezers and

Microwave ovens.

Changes in competition.

i.e. Changes in levels of Competitive Strength within the areas of

influence


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Theory of Wheel of Retailing.

A better known theory of retailing wheel of retailing proposed by

Maclcomb McNair says,

New retailers often enter the market place with low prices, margins, and

status. The low prices are usually the result of some innovative cost-

cutting procedures and soon attract competitors.

With the passage of time, these businesses strive to broaden their

customer base and increase sales. Their operations and facilities increase

and become more expensive.

They may move to better up market locations, start carrying higher

quality products or add services and ultimately emerge as a high cost

price service retailer.

By this time newer competitors as low price, low margin, low status

emerge and these competitors too follow the same evolutionary process.

The wheel keeps on turning and department stories, supermarkets, and

mass merchandise went through this cycles.

W R


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WHEELOFRETAILING


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WHEELOFRETAILING

1. High Price2. Many Services

3. Expensive

1. Low Price

2. Few Services

3. Austere (Strictin manner)

I II III

Existing

Retailer

Innovator X

Innovator X

Innovator Y

Old RetailerExistingRetailer

Innovator Y

Innovator X

Newest

Innovator Z

Time


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General Specific General Cycle or Accordion theory.

The Tendency for Retail Business to become Dominated by Generalists, then

Specialists and then Generalists again.

The greater variety of Customer Goods available could not be accommodated

in the old general store.

Growth of cities meant that Consumer Markets allowed Profitable

Segmentation.

It provided a Social content to the Shopping trip, which was required asSociety became more Complex and Impersonal


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GENERALSPECIFICGENERALCYCLEORACCORDIONTHEORY

GENERALIST

SPECIALIST

GENERALIST

SPECIALIST


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Retail Life Cycle Theory

The concept of product life cycle as explained by Philip Kotler is applicable to

retail organization.

This is because retail organization pass through identifiable stages ofinnovation, growth, maturity and decline. This is commonly termed as the

RetailLife Cycle

Attributes and strategies changes as institutions mature.

The retail life cycle is a theory about the changes through time of the retailing

outlets


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Innovation

Growth

Maturity

Decline

TIME

TotalRetailsales

RETAILLIFECYCLE

chap 2 retailers & retail format

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