retail environment handouts(bba bbm) bharathier university by- birat shrestha

8/13/2019 Retail Environment Handouts(BBA BBM) Bharathier University by- Birat Shrestha

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Retail Environment Handouts 2013/14 IB&MS

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-Reference Handout-

Course Instructor: Birat Pd. Shrestha

IB&MS (Bharathiar University) - BBA/BBM

September 16, 2013January 17, 2014

RETAIL ENVIRONMENT


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Course of StudySkill Based Subject-1 : RETAIL ENVIRONMENTSubject Description : This course presents the basics of retailing, trends in retailing,

evolution of retailing and global retail markets.

Goals: To enable the students to learn the basics in retailing, evolution and trends in

retailing.

Objectives: On successful completion of the course the students should have: understood

the features of retailing learnt the theories of retail development learnt retail developmentin India and global retail markets

Contents:-

UNIT I

Retail: MeaningFunctions and special characteristics of a RetailerReasons for

studying. Retailing

Marketing-Retailer Equation

Marketing concepts applied toretailingRetailing as a career Trends in Retailing.

UNIT IIRetail Model and Theories of Retail DevelopmentLife cycle and phase in growth of

retail marketsBusiness models in retail other Retail models.

UNIT III

Strategic Planning in Retailing: Situation Analysis ObjectivesNeed for identifyingconsumer needsOverall strategy, feedback and control consumer decision-making

process.

UNIT IVRetail in India: Evolution and Size of retail in India Drivers of retail change in India

Foreign Direct Investment in retail Challenges to retail developments in India.

UNIT V

Global retail markets: Strategic planning process for global retailing Challenges facingglobal retailersChallenges and Threats in global retailingFactors affecting the

success of a global retailing strategy

REFERENCE BOOKS:

Swapna PradhanRetailing Management Text and Cases, Tata McGraw Hill2nd

edition, 2004

Barry Berman and Joel R EvansRetailing ManagementA Strategic Approach,Prentice Hall of India, 8th Edition, 2002.

James R. Ogden, Denise Ogden Integrated, Retail ManagementBiztantra 2005

Gibson G VedamaniRetail Management Functional Principles and Prectice, Jaico

Publishing House, Second edition, 2004.


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UNIT I

Retail: Meaning

Its about linking products to target consumers Encompasses the selling of goods & services to final consumers Includes cars, apparels, FMCGs, meals in restaurants to banking It has started to give a consumer lifestyle experience The key issues that a retailer must resolve

How can we best serve our customers with fair profit?

How can we stand competition with more consumer choices?

How can we grow by retaining loyal consumers? Retail management is now a strategic management Total retail experience (displays, visuals, interactions, payments) Customer service (wrapping, deliveries to cars, valet parking) Relationship retailing (long-term value, customer respect)


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The Framework of Retailing

Big chains Neighborhood stores Direct retail bases Direct marketing (mail order, catalogue) Companys own sales force Departmental store & supermarkets Discount store Exclusive (apparel, electronics) store Full service retailer

Functions of a Retailer

Last stage of channel of distribution

Involved in physical movement & ownerships

Collection of assortments from various sources Sorting (buying in large quantities & selling in small quantities) Communicating with customers, wholesalers, & manufacturers Product displays & information Product feedback to manufacturers Transporting, storing, marking, advertising, pre-paying Wrapping, delivery, & installation


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Relationship among Retailers & their Suppliers

Exclusive distribution Agreements with few retails in specified area to carry certain brands Work together to maintain image, advertisements & shelf space Retailers limit the brand selection in specified product lines

Intensive distribution Suppliers sell through as many retailers as possible Lets retailers offer many brands & product versions Competition among retailers selling same products will be high Retailers assign little shelf space, set high prices & nor advertise

Selective distribution Supplier sell through moderate number of retailers Combines exclusive & intensive distribution Higher sales than exclusive distribution carry competing brands Marketing support to retailers with adequate shelf space


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Marketing-Retailer Equation Marketing Concepts Applied to Retailing

Identifying, anticipating and satisfying customer requirements profitably Can look at the marketingretail equation from two perspectives

one being that of a manufacturer second from the point of view of the retailer

Distance between the manufacturer of a product and the actual consumer has increased(manufactured in one country & sold to a market in another)

Use intermediaries to get their product to the final consumer Marketing channel design is largely based on the level of service desired by the target

consumer

Retailer provides valuable inputs to the manufacturer on the products and the consumers Other perspective of looking at the marketing retail relationship is from that of the retail

industry itself

Every retailer needs marketing Activities from retail marketer to achieve a profitable exchange with a customer Relationship marketing and interactive marketing Attract customers into the retail environsshop, restaurant, supermarket or the virtual

Internet store

Persuade those customers to make a purchase from the store

Common Marketing Channels

1. Manufacturer Wholesaler Retailer Consumer2. Manufacturer Retailer Consumer3. Manufacturer Consumer


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Trends in Retailing

1. E-commerce(25% of total retail sales)2. Kids in retail trade (influencers & teens in US have credit card access)3. Knowing the customers (infos on customer demographics & lifestyles)4. The American mall in decline (no. of trips to mall declining)5. Challenging the category killer (competition from themselves)6. Precision shopping (small store formats for quick shopping-saves time)7. Entertaining the customers (entertainmentization of retailing)8. Globalization of retail trade (having international operations)9. Smart cards (worldwide 2.8 billion cards have been distributed)10.Decline in retail sales growth (low growing consumer spending)

Ref: Oklahoma Cooperative Extension Service Trends in Retail Trade

Reasons for Studying Retailing - Retailing as a Career

One of the fastest growing parts of the world economy Service oriented entrepreneurial profession Store & logistics management, central management Attracting people, promoting & selling brands People oriented business (interactions with customers) Its about selling lifestyle fashion to people Positions ($18,000 - $ 90,000) Plus

Department manager

Customer service representative Store manager Merchandise manager Operation director Market research analyst Senior Human Resource, Marketing, & Finance Executive


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UNIT II

Retail Model

Needs of the consumers grew and changed Emergence of commodity specialized mass merchandisers in the 1970s Use of technology entering retail sector Introduction of the barcode Specialty chains developed in the 80s Large shopping malls also were coming in the 80s First created for the convenience of suburban populations Now found in many main city thoroughfares Malls house swimming pools, arcades and amusement parks The rise of the Webamazon.com Retail formats influenced by social & economic landscape Consumers now are more demanding and is focused specialized stores Retailers influenced by the availability of real estate and the increase in its prices Retailers faced with the challenge of adding on new services & differentiation This has led to specialization & specialty stores Retailers forced to look at new formats due to margin pressures

Scrambled Merchandising

Involves a retailer increasing its width of assortments (product lines) Retailers add goods & services that may be unrelated to each other & to the firms

core business

Retailers want to increase overall revenues Fast-selling, highly profitable goods & services are the ones added Consumers make more impulse purchases & like one-stop-shopping


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Different target markets may be reached The impact of seasonality & competition is reduced The popularity of a retailers core product line can be overshadowed

Exclusive liquor store carrying snack food items Drugstore, cosmetic stores, book stores, florists, video stores are all affected

by supermarkets scrambled merchandising

Theories of Retail Development

Retail development revolve around the importance of: Competitive pressure The investments in organizational capabilities and The creation of a sustainable competitive advantage

This requires the implementation of strategic panning by retail orgns Growth in retail is a result of understanding market signals & responding to the

opportunities arising in a dynamic manner

Theories of retail of retail development can be classified as: Environmental Theory Cyclical Theory

1. The wheel of retailing2. The retail accordion3. The retail life cycle

Conflictual Theory1. Environmental Theory

A change in retail is attributed to the change in the environment in which theretailers operate

Survival of the fittestCharles Darwins theory of natural selection


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Retailers confront an environment, of customers, competitors and changingtechnology & needs to adjust to survive

Success or decline of different forms of retail enterprise is many a time attributed tothe business environment

The decline of department stores in the western markets is attributed to the generalinability of those retailers to react quickly and positively to environmental change

Retailers that successfully adapt technological, economic, demographic & legalchanges are the ones that are most likely to grow & prosper

The ability to adapt to change, successfully, is at the core of this theoryThe Major Environmental Factors

1. Changes related to the consumer: Demographic changesincrease or decrease in population, age groups, racial

groups, socio-economic groups

Attitudes & preferences to purchasing, brands & products Changes in lifestyle (fast food as time is more important), e-banking, credit

card payments

Economic influences based upon real incomes, confidence, numbers ofwomen working

2. Changes in technology: Microwave cookers, food freezers, cars, Internet, computer applications to

business, J-I-T systems

3. Changes in competition:

Competitive strength, alternative distribution channels, nature & type ofretail organization

2. CyclicalTheory

Change follows a pattern ad phases can have definite identifiable attributesassociated with them

Trace common patterns in retail development over time It includes the earliest theories of retail change Three primary cyclical theories:


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1. Wheel of retailing2. Retail accordion3. Retail life cycle

1. The Wheel of Retailing

Retail innovators often first appear as low-price operators with low costs & lowprofit margin

Over time, the innovators upgrade the products they carry & improve their facilities& customer service with higher prices

As innovators mature, they become vulnerable to new discounters with lower costs Stage I: Entry phase (low-end strategy)

New innovators enter market No frills, low prices, limited facilities & services, limited product mix Price-sensitive consumers

Stage II: Trading up phase (medium strategy) Retailers trade up Moderate prices with improved facilities & higher quality products Expanded product mix in refurbished store Broader base of value-&-service-conscious consumers; more services

Stage III: Vulnerability phase (high-end-strategy) Mature retail organization High prices with higher quality products, excellent facilities & services Broad assortment of goods with service emphasis; Upscale consumers


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The Wheel of Retailing Four Principles

1. There are many price sensitive shoppers who will trade customer services, wideselections, & convenient locations for lower prices

2. Price-sensitive shoppers are often not loyal & will switch to retailers with lowerprices. However, prestige-sensitive customers like shopping at retailers with high-

end strategies

3. New institutions are frequently able to have lower operating costs than existinginstitutions

4. As retailers move up the wheel, they typically do so to increase sales, broaden thetarget market, & improve their image


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2. Retail Accordion

Key observer in retail evolutionHollander At any point of time, one type of retailer would outnumber the other The situation would continually change through in & out of store fashion Retailer initially enter a market as a general retailer With experience they focus down on particular product/sector/ or consumer groups Over time they begin to diversify their offer to grow, but again will revert back to

specialization

The premise of retail accordion is that the changes in retail operations are related tostrategies that alter the width (selection) of merchandise mix

Establishment of small-scale specialist food retailers such as grocers or bakers,followed by the takeover of the food retail sector by large-scale superstores with

diverse product ranges

Re-emergence of the small store in the guise of convenience formats asTescosMetro, Sainsburys Local, Central with limited ranges for a different market but

trading under the same name, brand & reputation

Specialization Occurring Reasons

Store sizes in some locations being unable to accommodate greater variety in orderto compete

Greater disposable income & large urban populations allowing for profitablesegmentation

The importance of the specialist shopping experience & convenience stores

Established retailing brands wanting to obtain more specialist coverage of themarket

Reasons for the Trend to Become More General

Expansion of the complementary lines as part of the retail offer A skimming policy (carrying more of the profitable lines & creaming these off from

those of the competition)

A move to increase density of shoppers in-store by providing a complete rangeoffering (one-stop shopping)


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The growth of large shopping centers with outlets which allow for the expansion oflines & ranges

3. Retail Life Cycle & Phase in Growth of Retail Markets

Life Cycle Stage

Introduction Growth Maturity Decline

Sales Low/growing Rapid acceleration High,

leveling off

Dropping

Profitability Negative to BEP High yield High/declining Low to BEP

Positioning Concept innovation Special need Broad market Niche

Competition None Limited Extensive/

saturation

Intensive/

consolidated

Introduction Stage

Significantly alters at least one element of the strategy mix from that of traditionalcompetitors

Sales & then profits often rise for the first time in a category There are risks that the new institution will not be accepted by the shoppers


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There may be large initial losses due to heavy investments At this stage, long-run success is not assured

Growth Stage

Sales & profits exhibit rapid growth Existing firms expand geographically Newer companies of the same type enter Cost pressures (large staff, complex inventory system, & extensive controls) may

begin to affect profits

The interactive video kiosks is an institution in the growth stageMaturity Stage

Characterized by slow sales growth Overall sales may continue to go up, but in a lower rate Profit margins may have to be reduced to stimulate purchase Caused by market saturation from institutional formats retailers, competition,

changing social interests, inadequate management skills

The goal will be sustainability The liquor store, a form of specialty store went to a maturity stage due to

competition from membership clubs, mail-order wine retailers, supermarkets,

lifestyles changes, attitude regarding liquor, & drinking age requirements, & limits on

non-alcoholic items that liquor store are permitted to sell

Decline Stage

Industry wide sales & profits for the format fall off Many firms abandon the format The newer formats attract consumers The decline stage can be avoided or postponed by repositioning the institution Conventional supermarkets have slowed their decline by placing new units in

suburban shopping centers, redesigning interiors, lengthening store hours, having

low prices, expanding the use of scrambled merchandising, closing unprofitable

smaller units, & converting to larger units


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3. Conflictual Theory

The competition or conflict between two opposite type of retailers leads to a newformat being developed

The imbalances caused by the innovations leads to the development of new formats Retailing evolves through a dialectic processblending of two opposites to create a

new format

Thesis: individual retailers as corner shops all across the country Anithesis(challenge to the thesis): a position opposed to the thesis develops

over a period of timecalled department store

Synthesis(blending of the theses & antithesis): the resultposition betweenthe thesis & antithesisSupermarkets & hypermarketsthis synthesis

becomes the thesis for the next round of evolution


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Types of retailer response to innovation (Brown, 1987)1. Shock2. Defensive retreat3. Acknowledgement & assessment4. Adaptation

Example is self-service supermarkets As supermarkets took market shares from specialist retailers, they formed voluntary

groups & buying alliances (Ex:Spar)

E-tailers & multichannel operators were formedGrowth/Evolution of Retail Institutions

Mergers Diversification Downsizing

Cost Containment & Value Driven Retailing

Standardizing operating procedures, store layouts, size, products Using secondary locations, freestanding units, abandoned sites Placing stores in smaller communities, where building regulations are less strict,

labor costs are lower, & construction & operating costs are reduced

Using inexpensive construction materials (bare cinder-block walls, concrete floors,false ceiling)

Using plainer fixtures & lower-cost displays Buying refurbished equipment Joining cooperative buying & advertising groups Encouraging manufacturers to finance inventories


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Business Model in Retail (Types)

Retail Formats Store based retailing

Form of Ownership Merchandise offered

Non-store retailing Service retailing

Store Based Retailing

Form of ownership Independent retailer (owns one retail unit) Chain retailer (operates multiple outlets with common brand name) Franchise (licensing the name) Leased departments (rented to an outside party) Consumers co-operatives (owned by customer members)

Store-Based Retail Strategy Mixes

Type of retailer Location of the store

Neighborhood, community, business district, shopping centers Merchandise carried

Width of assortment (number of different product lines)

Depth of assortment (selection within the product line) Price

List price Discount facilities

Atmosphere Services offered


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Promotion involvement Store promotion Private label brands

Store Based RetailingMerchandise Offered

Food-Based

Convenience Store

Its a well-located food-oriented retailer in neighborhood The store facility is small with long hours opening Carries medium width & low depth of assortment The prices are average to above average with moderate promotion It has a average atmosphere & services with personalized shopping experience as an

appealing factor to shoppers

Its usefulness is when customer does not want to travel to or shop at a supermarket Products:Milk, eggs, bread, sandwiches, tobacco, snack foods, soft drinks,

newspapers, magazines, beer, wines, video rentals

Ex: 7-Eleven, Circle K, Caseys General StoreConventional Supermarket

Its a departmentalized self-service food store with wide range of food & relatedgroceries

It is located at neighborhood offering greater customer convenience Carries extensive width & depth of assortment with average quality of manufacturer,

private, & generic brands

It has a competitive price, average atmosphere with heavy use of newspaper, flyers,& coupons promotions

Self-service cuts off the stores operating costs of attendants Car & refrigerator contributed to the supermarkets success by lowering traveling

costs & adding to the life span of perishables

Rely on high inventory turnover (volume sales)


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Ex: Kroger, Safeway, Albertsons, Ahold USA, IGA, SuperValuFood-Based Superstore

Its a larger & more diversified than a conventional supermarket It occupies 30,000 to 50,000 sq.ft of space in community shopping center or isolated

site

20 % to 25 % of sales are from general merchandise, including garden supplies,flower, small appliances, & film developing

It carries full assortment of supermarket items, plus health & beauty aids & generalmerchandise with competitive prices

It caters to consumers complete grocery needs along with fill-in generalmerchandise and is a self-service store

Its efficient, offers one-stop shopping, stimulates impulse purchases, & feature high-profit general merchandise

Consumers feel more comfortable shopping in food-based superstores Atmosphere & services are average The promotion includes heavy use of newspapers & flyers Management expertise is better focused

Combination Store

It unites supermarket & general merchandise in one facility It is located in community shopping center or isolated site They are large from 30,000 up to 100,000 plus sq.ft. leading to operating efficiencies

& cost savings

It carries full selection of supermarket & drugstore items or supermarket or generalmerchandise with average quality at a competitive price

Consumers like one-stop shopping & will travel to get there With an average atmosphere & service, impulse sales are high Many general merchandise have more margins than food items The promotion is by heavy use of newspapers & flyers with self-service


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A supercenteris a combination store blending an economy supermarket with adiscount department store, a US version of the even larger hypermarket

Stores usually range from 75,000 to 150,000 sq.ft with 50,000 & more itemsthan carried by a combination stores

Ex: Meijers / Wal-Mart, Kmart, TargetBox (Limited-Line) Store

Its a food-based discounter focusing on a small selection of items, moderate hoursof operation, few services & limited manufacturers brands

It is located in neighborhood & carries low width & depth of assortments, fewperishables, & few national brands with very low prices

The atmosphere & services are low, with little or no promotions The box stores cannot fulfill one-stop shopping needs Box stores rely on low-priced private label brands Ex: Save-A-Lot, Aldi

Warehouse Store

Its a food-based discounter offering a moderate number of food items in a no frillssettings & low atmosphere & setting It appeals to one-stop food shoppers, concentrates on special purchases of popular

brands, use cut-case displays, offers little service, posts prices on shelves, & locates

in secondary sites in industrial areas

They have moderate width & low depth, emphasizing on manufacturer brandsbought at discounts, with very low prices

Shipments are made directly to the store

Customers pack their own groceries; Little or no promotions are done Many customers do not like shopping in warehouse setting, as products are usually

acquired when special deals are available, & brands may be temporarily or

permanently out of stock

Ex: Cub Foods


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General Merchandising

Specialty Store

Specialty stores concentrates on selling goods or service line, such as young womensapparel, mens shirting, kids clothing

Its located at business district or shopping center It carries a narrow width but deep assortment from average to good quality, in the

chosen category & tailors the strategy to a given market segment. The prices are

competitive to above average

The store maintains a better selection & sales expertise The popular categories are: apparel, personal care, auto supply, home furnishings,

electronics, books, toys, home improvement, pet supplies, jewelry, & sporting goods.

The promotion is little or none

Customers shop at specialty stores because of the sales personnel expertise, choiceswithin a category, customer service policy, intimate store size, & average to excellent

atmosphere

Shoppers looking for just one or few basic items & quick checkout Category killer (power retailer): A large specialty store featuring enormous selection

in its category with relatively low prices

Ex: Gap, Old Navy, The Limited, Toys R Us, Sam Goody, Barnes & Noble, Sephora,Home Depot, Sports Authority, Staples

Traditional Department Store

It is a large retail unit with extensive width & depth of assortment of goods &services, offering average to good quality

It is organized in separate departments of apparel, cosmetics, food, drinks,appliances, furniture, home care etc.

The prices are average to above average with good to excellent atmosphere &services.

Heavy Ad & catalog, direct mail, & personal selling is involved Its located in business district, shopping center, or isolated store

They dont have brand exclusivity & sign licensing agreements with fashion designersto use their names


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Many department store has a weak focus & image on market segments Ex: Macys(targets mid-class shoppers interested in assortments & moderate prices)

Bloomingdales(aims more upscale consumers with more trendy merchandise &

higher prices),J.C. Penny (dropped consumer electronics), Sears(opened in less

developed towns), Belk, Inc (Belk, McRaes, Profitts)

Full-Line Discount Store

It conveys the image of a high-volume, low-cost outlet selling a broad productassortment for less than conventional prices (competitive)

It has extensive width & depth of assortment (average to good quality) The product lines includes electronics, furniture, appliances, auto accessories,

gardening tools, & housewares

Its located at business district, shopping center, or isolated store. The atmosphere &services are slightly below average to average

Shopping carts & centralized service are provided. Customer service is not providedwithin store departments but at centralized area. Products sold via self-service with

minimal assistance

Heavy use of newspapers, price-orientation & moderate sales force are used forpromotions

Nondurable (soft) goods feature private brands, durable (hard) goods emphasizewell-known manufacturer brands. Less fashion-sensitive merchandise is carried.

Building, equipment, & fixtures are less expensive

Variety StoreIt handles an assortment of inexpensive & popularly priced goods & services like

apparels & accessories, costume jewelry, candy, toys, in price range

It has a good width & some depth of assortment; below average to average qualityat average prices

Its located in business district, shopping center, or isolated store The atmosphere & services are below average, & heavily use newspapers & self-

service to promote it

There are open displays & few sales people The stores do not carry full product lines, may not be departmentalized, & do not

deliver products


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Dollar discount store: sell similar items to those in conventional variety stores but inplainer surroundings & at much lower prices (Dollar General, Family Dollar)

Closeout chains: sell similar items to those conventional variety stores but featurecloseouts & overruns

Off-Price Chain

It features brand-name (sometimes designer), apparel, & accessories, footwear(primarily womens & family), linens, fabrics, cosmetics, &/or housewares at

everyday low prices in an efficient, limited service environment.

Its located at business district, suburban shopping strip, or isolated store It carries moderate width, but poor depth of assortment; average to good quality It has community dressing rooms, centralized checkout counters, no gift wrapping, &

extra charges for alterations. The atmosphere & services are below average

The chains buy merchandise opportunistically, as special deals occur Off-price chains aim same shopper as traditional department stores, but with 40% to

50% reduced prices. Newspapers & limited sales forces are used to promote

The target customer is middle to upper middle income shoppers, who is fashion &value conscious.

Shoppers are also lured by the promise of new merchandise on a regular basis &appeals to peoples interest in one-stop shopping

Off-price chain establish long-term relations with suppliers through active buying &being less demanding & doing product samplingEx: TJX (T.J. Maxx, Marshalls)

Factory Outlet

Factory outlet is a manufacturer-owned store selling closeouts, discontinuedmerchandise, irregulars, cancelled orders, in-season, first-quality merchandise

Its located out-of-the-way site or discount mall It carries moderate width but poor depth of assortment; some irregular

merchandise; lower continuity; with very low prices, atmosphere & services

Little promotion is done & is a self-service based Manufacturer can control the sales of their discounted merchandise


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Outlets are profitable despite prices up to 60% less due to low operating costs (fewservices, low rent, limited displays, plain store fixtures)

Manufacturer decides on store visibility, sets promotion policies, removes labels, &ensures that discontinued items & irregulars are disposed properly

As many specialty stores & department stores are increasing private label sales,manufacturers need revenue from outlet stores to sustain their growth

Ex: Bass (footwear), Brooks Brothers (apparel), Harry & David (fruits & gift items),Levis (apparel), Liz Claiborne (apparel), Pepperidge Farm (food), Samsonite

(luggage), Totes (rain gear)

Membership Club

A membership (warehouse) club appeals to price-conscious consumers, who must bemembers to shop there

It straddles between the line of wholesaling & retailing Small business owners & employees pay a membership fee to buy merchandise at a

wholesale prices

It is located at isolated store or secondary site (industrial park) It carries moderate width but poor depth of assortment; lower continuity The prices are very low, & so are the atmosphere & services To promote little advertising, direct mail & limited sales force are used The store layout will have plain fixtures, wide aisles to give forklift trucks access to

shelves.

A typical club carries general merchandise, consumer electronics, appliances,computers, housewares, tires, apparel, sundries, health & beauty aids, tobacco,

liquor, & candy - Ex: Sams Club (from Wal-Mart)

Flea Market

At flea market, many retail vendors sell a range of products at discount prices inplain surroundings

It is rooted in the centuries-old tradition of street sellingshoppers touch & sample& haggle over prices

Located in nontraditional sites like racetracks, stadium, arenas, or at sites abandonedby other retailers


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They have extensive but poor depth of assortment with variable quality; lowercontinuity

The merchandise includes antiques, clothing, cosmetics, watches, consumerelectronics, housewares & gift items

The prices are very low & so are the atmosphere & services The promotion is limited with self-service Some flea market impose entry & parking fee. Can have traffic congestion Ex: Rose Bowl Flea Market (held on second Sunday of month), web based -eBay,

amozon.com

Non-store retailing

Direct selling Mail order Tele marketing Automated vending

Service Retailing

Banks Car rentals Service contracts Service providers


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Retail Business Model


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UNIT III

Strategic Planning in Retailing (Elements of a Retail Strategy)

Situation Analysis

It is a candid evaluation of the opportunities & threats Analysis of the firms current status & the direction Spotting trends to satisfy customers & stay ahead Organizational Mission

Commitment to a type of business & to a distinctive role in the marketplace Reflected in firms attitude toward consumers, employees, suppliers,

competitors, governments & other stakeholders

Lets a firm gain customer following & distinguish itself from competitors


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First decision - business base around the goods & services sold or aroundcustomer needs (Its about selling products within certain category or the

entire solution)

Second decision - place in the market as a leader or a follower Third decisionmarket scope (broad or narrow customer base)

Ownership & Management Alternatives Sole proprietorshipan unincorporated retail firm owned by one person. All

benefits, profits risks, & costs accrue to that individual

Partnershipan unincorporated retail firm owned by two or more persons,each with a financial interest & all the risks distributed

Corporationa retail firm that is formally incorporated under state law. It isa legal entity apart from individual officers (or stockholders). Funds can be

raised through the sale of stock. Legal claims against individuals are not

allowed due to limited liability. The transfer of ownership & long-term

existence is guaranteed. The use of professional managers is encouraged.

Franchiseecombining independent ownership with franchisor support(strategic planning, name, loyal customer base, global image with

maintaining standards)

Goods/ Service CategoryGoods Establishments

Durable goods store (automotive, furniture, jewelry, appliance, hardware) Non-durable goods store (apparel, food, eating outlets, drug, liquor,

gasoline)

Service Establishments

Personal services (laundries, dry cleaning, beauty saloon, photographicstudios, healthcare services)

Amusement services (movie theaters, bowling alleys, dance halls, golfcourses, skating rinks, amusement parks, coin-operated game arcades)

Repair services (automobile repairs, car washes, consumer electronics &appliances repairs, watch & jewelry repairs)

Hotel services (hotels, motels)


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Personal Abilities Practical learning Experience Formal qualification

Financial Resources Establishment, renovation, interior Land & building, inventory (products), fixtures (display cases, signs, lighting),

equipment (cash resister, marking machine, computers), personnel

(salespeople, cashiers, manager)

Time Demands Level of involvement of the owner, serving hours & days Delegation of activities Skill based personal service, self-service, or automation Family involvement or hiring professionals

Situation AnalysisSWOT Analysis

StrengthsCurrent

Loyal customer base; reputation in certain category Little competition; acceptance by a specified TG; service

Long-term

Distinctive image; exclusive relationship; low rent location Excellent supplier& community relationship; loyal employees

WeaknessesCurrent

Difficulty in employing part-time personnel during seasons Space, assortment, depth limits; lack of technical equipments

Long-term


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Bargaining power with suppliers; location No long-term management succession plans

OpportunitiesCurrent

Hiring of professionals Vacant adjacent store; Website development

Long-term

Larger store would increase the bargaining power with suppliers; On-linesales

ThreatsCurrent

Competition; Opening of similar stores targeted to same customer base;economic recession

Long-term

Demographical changes; lifestyle changes; changes in shopping behaviorObjectives

Sales Volume sales Discount strategy Wide product assortment, low margin

Profit As a percentage of sales ROI for lager investment stores Cutting costs & maintaining customer service Narrow product assortment, high margin

Satisfaction of publics Stockholders, customers, suppliers, employees, govt.


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Customer satisfaction with total retail experience Favorable purchase terms, shipment, return policies Cordial labor relationship for better customer treatment

Positioning (Image) The perception among customers to be built Innovative, conservative, specialized, broad-based, discount-oriented,

upscale

Mass merchandising or niche retailing (focused strategy) Bifurcated retailing (era of mass & niche retailing, where firms that are

neither competitively priced nor particularly individualistic may have difficulty

competing)

Ex: Bebe (the apparel store chain) designs, develops, & produces adistinctive line of contemporary womens apparel & accessories, which it

markets under BEBE SPORTS & bebe O brand names.


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Identification of Consumer Characteristics & Needs

Choice of target market Mass marketing

Location (near large population base) Goods & services mix (wide selection of medium quality items) Promotion efforts (mass advertising) Price orientation (popular prices) Strategy (one general strategy for a large homogeneous group)

Concentrated marketing Location (near a small or medium population base) Goods & services mix (selection geared to market segment-high or

low-quality items)

Promotion efforts (direct mail, E-mail, subscription) Price orientation (high or low) Strategy (one specific strategy directed at a specific limited group of

customers)

Choice of target market Differentiated marketing

Location (near large population base) Goods & services mix (distinctive goods/services aimed at each

market segment)

Promotion efforts (differentiated media & message for each segment) Price orientation (high, medium, & low-depending on market

segment)

Strategy (multiple specific strategies, each directed at heterogeneousgroups of consumers)

A retailer is better able to select a target market & satisfy customer needs if it hasa good understanding of consumer behavior


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Overall Strategy (Controllable Variables)

Goods/service strategy Quality of goods & services Width & depth of assortment New & regular items Criteria for buying decisions (terms & conditions) Level of inventory

Store location strategy Specific sites Business district String (unplanned shopping area with retails groups) Shopping center (regional, neighborhood)

Pricing strategy Ranges of prices to be set Consistent with the firms image Quality of goods & services

Promotion (communication) strategy Physical attribute, atmosphere, surrounding area Storefront, interior, layouts, displays, webpage

Color, lighting, scents, music, personnel

Flyers, advertisements, personal selling, sales promotion Managing a business

HR & operations (credit management, computerization) Tasks, policies, resources, authority, responsibility, rewards Employee hiring, firing, training, compensation, supervision Store maintenance, energy management, store security


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Consumer environment Demographic trends, lifestyle patterns

Competitive environment Entry of a new store in the same area with similar TG Expansion of the existing store (location or assortment)

Technological environment Computerized inventory control & checkout systems Bar code reading equipments

Economic environment Unemployment, interest rate, inflation, tax rate, GDP

Seasonality Stock plan of seasonal products

Legal environment Sherman Act & the Clayton Act (deal with monopolies & restraint on trade) Federal Trade Commission (deals with unfair trade practices & consumer

complaints)

Robinson-Patman Act (prohibits suppliers from giving unjust merchandisediscounts to large retailers that could adversely affect small ones)

Telemarketing sales rule (protect consumers) Zoning laws (prohibit firms from operating at certain sites & demand that

building specification be met)

Blue laws (limit the times during which retailers can conduct business)Specific Activities

Tactical moves Store location (trading area analysis; level of competition, building or modifying

facilities)

Managing the business (chain of command design; organizational structure; hiring,training, & supervising personnel; asset management; daily operations)


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Merchandise management & pricing (space allocation & assortments; newmerchandise & clearing slow moving merchandise; supplier negotiation; price setting

with store image & discount tactics as per competition)

Communicating with the customer (storefront, displays, interiors, Ads, flyers,personnel selling)

Control & Feedback

Control Review Business mission, objectives, target market Retail audit Analyzing the retail performance Revision of strategy

Feedback Signals or cues Analysis of positive & negative feedbacks to capitalize on opportunities


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Consumer Decision-Making Process

Understanding of consumer behavior (what, when, where, from whom, how often,who decides, why)

Consumer behavior influenced by demographics & lifestyles What(features, durability, distinctiveness, value, ease of use) Where(location, assortment, credit, sales help, hours, service) The manufacturer wants the consumers to buy its brand (what) at any location

carrying it (where)

The retailer wants people to buy the product, not necessarily the manufacturersbrand (what), at its store or non-store location (where)


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Stimulus

Social cue (friends, employees, relatives, family) Commercial cue (advertisements, sales pitch, store displays) Physical drive (hunger, thirst, cold, heat, pain, fear, joy) Person should be aroused (motivated) for the stimulus to work & take it to the next

process of problem awareness

Problem Awareness

Recognition that a good or a service might solve a problem Recognition of unfulfilled desire People are more hesitant to react on unfulfilled desire Recognition of unfulfilled desire takes place when a person becomes aware of a

good or a service that has not been bought before or a retailer that has not been

patronized before

An item that may improve a persons lifestyle, self-image, or it may offer neperformance features

Information Search

Determining the alternatives that will solve the problem Asserting the characteristics of each alternative Commercial sources (retail salespeople, Ads, POP displays) Noncommercial sources (Consumer Reports) Social sources (friends, relatives, family) Gathering information about each alternatives attributes External search & internal search

Evaluation of Alternatives

Selecting out of two or more options that are different & attractive The importance of each criterion is determined

The attributes are usually of differing importance to each person (price, quality,design, durability, image, economy)


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Ranking of the alternatives from most favorite to least favoritePurchase Act

Place of purchase Store or non-store location (online/website) Store location, store layout, service, sales help, store image, price

Purchase terms Price Method of payment (cash vs credit acceptance)

Availability Stock on hand Delivery

Post-Purchase Behavior

Further purchase or re-evaluation Is the performance as promised? Do actual attributes match the expectations? Cognitive dissonancedoubt regarding the purchase

After-care (after-sales, phone call, service visit, E-mail) Money-back-return, buy-back guarantee

Types of Consumer Decision Making

Extended decision making Consumer make use of the full decision process Lot of time is spent gathering information & evaluating alternatives The products are expensive, complex, & a first time product (house, car) Consumer traits impact (age, education, income, class consciousness)


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Limited decision making Consumer uses each stage in the buying process but is quick to move Items include bought ones but not regularly (clothing, vacation, gifts) Consumer attributes affect decision making but the impact lessens as the

perceived risk falls & experience rises

Income, purchase importance, & motives play strong roles Routine decision making

Consumer buys out of habit & skips steps in the purchase process The key step is problem awareness, where re-purchase is automatic Includes items bought regularly (newspaper, groceries)

Impulse Purchase & Customer Loyalty

Impulse purchase (enjoys shopping; more discretionary income; POPs) Completely unplanned(no intention of making a purchase unless in contact

with a retailer; related to routine or limited decision making; key step is

problem awareness)

Partially unplanned (has plans to buy a product category, but hasnt decidedon the brand unless in contact with the retailer; involved with extended,

limited or routine decision making)

Unplanned substitution(intends to buy specific brand but changes mindwhen in contact with the retailer)

Customer loyalty Regularly patronizes a particular store that is liked or trusted This helps a customer reduce the decision making process Tend to be time-conscious, & is less price sensitive


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UNIT IV

Retail in India: Evolution and Size of Retail in India

Retailing in India is divided as follows Organized sectors (licensed retailers who pay tax & are backed by corporate

hyper markets & retail chains, supermarkets, department stores)

Unorganized (traditional formats of low-cost retailing like owner managedkirana shops, mom & pop stores)

Most Indian shopping takes place in open markets or millions of small, independentgrocery and retail shops

Shoppers typically stand outside the retail shop, ask for what they want, and can notpick or examine a product from the shelf

Access to the shelf or product storage area is limited Once the shopper requests the food staple or household product they are looking

for, the shopkeeper goes to the container or shelf or to the back of the store, brings

it out and offers it for sale to the shopper

Often the shopkeeper may substitute the product, claiming that it is similar orequivalent to the product the consumer is asking for

The organized retail market is growing at 35 percent annually while growth ofunorganized retail sector is pegged at 6 percent

Retailing in India is one of the pillars of its economy Retailing in India accounts for about 15% of its GDP The Indian retail market is estimated to be US$450 billion It is one of the top five retail markets in the world by economic value In November 2011, Indian central government announced major reforms paving way

for giants such as Walmart, Carrefour and Tesco, as well single brand majors such as

IKEA, Nike, and Apple to enter one of the fastest growing retail market of 1.2 billion

people

Until 2010, intermediaries and middlemen in India have dominated the value chain The 60%+ margins for middlemen and traditional retail shops have limited growth

and prevented innovation in Indian retail industry


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The Economist forecasts that Indian retail will nearly double in economic value,expanding by about $400 billion by 2020

In 2011, food accounted for 70% of Indian retail, but was under-represented byorganized retail. India's organized retail had a 31% share in clothing and apparel,

while the home supplies retail was growing between 20% to 30% per year


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Drivers of Retail Change in India

Population Socio-economic factors

Increasing middle-class & affluent class Changing consumer profile & demographics Changing Income Profiles Changing consumption patterns

Increase in the number of international brands available Increasing urbanization Credit availability Improvement in the infrastructure Increasing investment in technology & real estate building Diminishing difference between Rural and Urban India

World class shopping environment for customers


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Foreign Direct Investment in Retail

India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale The approval requirement was relaxed, and automatic permission was granted in

2006

Between 2000 to 2010, Indian retail attracted about $1.8 billion in foreign directinvestment

International retail giants are wanting to enter the Indian market The Indian government restrictions on the FDI are creating ripples among the

international players like Wal-Mart, Tesco, etc

As of now the Indian government has allowed 51% FDI in the sector to one brandshops like Nike, Rebook, etc.

International players are taking alternative routes to enter the Indian retail marketvia strategic licensing, franchising agreements

Challenges to Retail Developments in India

The industry is facing a severe shortage of talented professionals, specially at themiddle management level

Most Indian plays are under serious pressure to make their supply chains moreefficient to deliver the quality & service level demanded by consumers

Lack of adequate infrastructure in respect to roads, electricity, cold chains, & ports.This has hindered supply chain, which has lead retailers to assort to multiple vendors

thus increasing costs & prices

Government system is plagued with differential tax rates creating price confusionsover different states

Stringent labor working hours & minimum wages. This creates complexity in hiringpart-time employees

The sector does not have industry status that makes them difficult to raise financesfrom banks & fund their expansion plans

Government restrictions on FDI limiting foreign exposure to best retail managementpractices


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Non- availability of government land & zonal restrictions has made difficult to find agood retail location

High rental costs


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Major Retailers in India


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UNIT V

Global Retail Markets: Strategic Planning Process for Global Retailing

1. Asses your international potential Your domestic position in that industry Effect of international activity in current operations The status of your resources Estimate of your sales potential

2. Get expert advice & counseling Trade association Consulting firm Business department of Universities

3. Select your countries Economic strength, political stability Regulatory environment, tax policy Structural development, population, cultural factors Technological stage of the country

4. Develop, implement, & review the international retailing strategy Identifying & managing your objectives Specific tactics, scheduled activities & resource allocation Exploit unique local conditions & circumstances Study the local competition


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International Retailing Strategy: Factors to Consider in Global Retailing

Institutional factors Ownership form; Goods/service category; Existing distribution channel Level of competition; Level of technology (media, transportation) Government restrictions; Desirability of a standardized approach

Consumer factors Retailing preferences; Population trends; language Level & distribution of income; Level of literacy/education Cultural values & lifestyle patterns

Store location factors Availability of desirable areas & sites; Leasing/purchase terms Level of transportation facilities Hours of operation

Operations factors Availability & caliber of personnel; Appropriate management style Facilities; Expected pilferage (shoplifting) rates

Merchandising factors Width & depth of assortment; Merchandise quality; Inventory control Level of innovativeness; Availability & caliber of suppliers

Pricing factors

Pricing level; Use of set pricing Vs negotiable pricing Typical purchase terms

Image & promotion factors Store atmosphere; Interior layout & displays Advertising & personnel selling


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Challenges Facing Global RetailersChallenges & Threats in Global Retailing

Opportunities Foreign markets used to supplement domestic sales Foreign market will offer growth Offerings of goods, services, technologies not yet available in foreign markets Competition may be less in foreign markets Tax or investment advantages in foreign markets Countries are more open to the entry of foreign firms Superior & efficient communication & transportation systems

Challenges & threats Cultural differences between domestic & foreign markets Management style may not be easily adaptable Foreign governments may place restrictions on some operations Poorly distributed personnel income in some foreign markets Inadequate distribution system & technology (roads, refrigeration systems) Institutional formats may vary greatly among countries Different currencies involvement

Standardization or differentiation of the retail marketing program


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Factors Affecting the Success of a Global Retailing Strategy

Timingbeing first in the market doesnt ensure success, but being there beforeserious competition does increase ones chances

A balanced international programmarket selection is critical A growing middle classexpandable income, translating into sales Matching concept to market

In developed markets, where quality & fashion are more appreciated,specialty stores are entering with success

In developing markets, discount/combination (food & general merchandise)retailers have been successful

Consumers are more interested in price, assortment, value, & convenience Solo or partneringjoint venture makes easy to enter Store location & facilitiesforeignretailers often have to adapt their concepts to

different real-estate configurations in other markets

Product selectionproduct assortment of developed nations coming to developingnations would be overwhelming

Service levelsretail service level coming to developing nations from developednations, will be a real point of distinction


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IB&MSRetail Environment BBA/BBM

Activity 1: Readings

Trends in Retailing (E-document/Internet) Reasons for studying Retail Management Retailing as a career

Activity 2: Article Presentations

Search for an article related to Retail Environment Read and analyze the article Bring a copy of the article Present the article in the class


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Assignment 1 (Individual)Retail Environment Report (International)

Select a retail store brand (international - the companies to be mutually exclusive) Analyze it on the basis of - its type; major retail emphasis; special characteristics; marketing

concept application

Keys to success (strategy)growth oriented objectives; appeal to a prime market; distinctivecompany image; focus; strong customer service for its retail category; multiple points of

contact; employee relations; innovation; commitment to technology; community

involvement; constantly monitoring performance

Report Preparation & PresentationRetail Companies

International

(Wal-Mart; Marks & Spencer; Macys; Victorias Secret; Tiffany's; Kroger; Home

Depot; Target; Costco; Albertson; Walgreens; Lowes; Sears Roebuck; Safeway;

Amazon; Montgomery Ward; Williams-Sonoma; Bloomingdales; 7-Eleven; Banana

Republic; GAP; Old Navy; Subikchya, Shoppers Stop; Big Bazaar; Sharper Image;

Eddie Bauer; Brookstone; Royal Silk; Spencer Gifts; Lands End; Toys R Us;

Nordstrom; JC Penny; Tesco, Sainsbury, Central, IKEA etc.)


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Assignment 2 (Group) - Retail Environment Report (National)

Select a retail store brand (national - the companies to be mutually exclusive) Analyze it on the basis of - its type; major retail emphasis; special characteristics; marketing

concept application

Keys to success (strategy)growth oriented objectives; appeal to a prime market; distinctivecompany image; focus; strong customer service for its retail category; multiple points of

contact; employee relations; innovation; commitment to technology; community

involvement; constantly monitoring performance

Retail Marketing Strategy Name of your planned retail store (Brand name)

Type of that retail store (Supermarket, Departmental Store, Discount Store,Convenience Store, Specialty Store, Variety Store, Full-Line Store etc.)

TG (Who will be its core customers) Location strategy (Where its to be located & why?) Competitor analysis (Who will be its major competitors & why?) Why customers should come to it? (Benefits) Supply source (What kind of deal will it have with companies?) What kind of image will it earn? (Positioning) Product assortments (Product lines that it will carry) Marketing program (7 Ps, & making customers loyal)

Report Preparation & PowerPoint PresentationRetail Companies

National(Nameste; Saleways; Bluebird; Home Grocery; Gemini; Bhatbheteni; CG Mart;

KK Store; BigMart etc.)

References: Book, Handouts & Internet

retail environment handouts(bba bbm) bharathier university by- birat shrestha

Documents