Retailing Management

Some retail humor……………..• A retailer was dismayed when a competitor selling the same type of

product opened next-door to him, displaying a large sign proclaiming "Best Deals.“

• Not long after that, he was horrified to find yet another competitor move in next door, on the other side if his store. It's large sign was even more disturbing—"Lowest Prices.“

• After his initial panic, and concern that he would be driven out of business, he looked for a way to turn the situation to his marketing advantage. Finally, an idea came to him. Next day, he proudly unveiled a new and huge sign over his front door.

•"Main Entrance!"

Main topics to be covered in this presentation

• convenience store

• 101 shopping mall

• store location analysis

• warehouse club field study report

convenience store• A little history on 7 Eleven• They have more than 4600 stores in Taiwan

Toshifumi Suzuki

Consumer buying behavior in NCTU

• Students make up the largest customer segment

• They seek to satisfy their utilitarian needs• They engage in habitual decision making

Floor layout

• Customers tend to shop in a more deliberate and efficient manner

• Time spent on the whole buying process is crucial

Figure 1: Layout of NCTU 7-Eleven

Entrance Media Shelf HH Necessities

Drinks

Machine

Refrigerator

(beverages)

Storage D

oor

Refrigerator (dairy products)Fast Food (microwavable)

Refrigerator(ice cream & frozen desserts)

Counter

Confectionery Products

Fresh Food: (Bread/Toasts)

Instant NoodlesFast Food (hotdogs/soup/eggs)

Fresh Food (buns)

Canned & Food Specialties

Fats and Oils

CookiesChips

Basic Necessities & Cosmetics

Shelves

Assortments mixCategory Major Brand(s)Group 2024 Ice Cream and Frozen Desserts

Uni-President

Group 2026 Fluid Milk Uni-President Group 2037 Fruit Juices Uni-PresidentGroup 2038 Frozen Specialties 7-ElevenGroup 2051 Bread & other Bakery products

Uni-President

Group 2052 Cookies & Crackers RitzGroup 2064 Candy & other Confectionary Products

Wrigleys

Group 2065 Chocolate & Cocoa Products

Meiji

Group 2066 Chewing Gum WrigleysGroup 2086 Bottled, Canned Soft Drinks & Water

Uni-President, Wei Dan

Group 2096 Potato Chips, Corn Chips & Snacks

7-Eleven

Group 2099 Food Preparations Uni-President, Wei Dan

Is NCTU 7-Eleven successful in attracting their targeted market to shop with them?

• Their superior location is a major advantage over their competitors

• There is a wide array of fresh food which is replenished daily

• They can consider preparing more fresh food rather than microwavable

Taipei 101 shopping mall

Some quick facts

• 2.36 million square feet of office space• 893,000 square feet of parking space• 796,000 square feet of retail space• Some of Taipei 101’s office occupants include

Consumer buying behavior of segment 1

• Segment 1 - White collar workers and young working professionals working in the Hsin Yi district

• Age between 24 to 35, annual income of USD 30,000 to USD 50,000, fashion followers, middle upper class of society

• Buying behavior• Seek to satisfy their hedonic needs• Look upon celebrities as reference groups to

guide them on the latest fashion

Consumer buying behavior of segment 2• Segment 2 - High net worth individuals (both

local and international)• Annual income of at least USD 100,000, upper class of society, attend social functions regularly

• Buying behavior• Price of products are least of their concern• They value the entire shopping experience more• Obtain information from their own social

networks on places to patronize to get the latest fashion goods

Retail Mix• Understanding the consumer’s needs is the

foundation of a good retail strategy• If you offer a retail mix oblivious to the market

environment and your consumer’s need, they will patronize other shopping malls in the area

• Mall layout & design, Store mix, Retail communication mix

Mall layout & design

Types of Stores

• Up to 55% of the mall is allocated to public space

• Wider aisles• High ceilings throughout the entire mall• Warm lighting is used to create a soothing

ambience• Classical music is played in the background• Clean toilets

Mall layout and design

Exquisite Window Display

Floor Guide & DescriptionLevel Floor Guide Description ExamplesBasement 1 Grand Market High quality food court and

shops for urban livingJason’s market, Grand Market Food Court

Level 1 Avenue 101 Popular regional brands Kenneth Cole, Bally, Ted Baker

Level 2 The Designer Walk

Design oriented international brands

De Beers, Jean Paul Gaultier, Kookai

Level 3 The Galleries Couture

European and global flagship stores

Cartier, Louis Vuitton, Celine, IWC

Level 4 City Square High end restaurants and cafes

Wasabi Buffet, Maxim’s de Paris

Level 5 Financial Centre

Financial centre and banquet halls

International Banquet Hall

Table 1: Description of each level in Taipei 101 shopping mall

Retail communication mix

• Taipei 101 website, monthly magazine, direct mails and Celebrity endorsements

• Taipei 101 partnered with Taiwan tourism board to feature Taipei 101 in international advertisements

Building a sustainable and competitive advantage

• Taipei 101 is successful in creating depth for designer products however there isn’t sufficient mass market labels in the mall

• Improve the Taipei 101 shopping mall website• Partner designer labels to feature new

products on the Taipei 101 website

Regional/Global Competition•Taipei 101 should look at the global competition

•Work together with the other shopping malls in the Hsin Yi district

•Conduct coordinated sales promotions to attract shoppers

H&M’s Retail Location in Taipei City

??

Introduction

• Hennes & Mauritz (H&M), is a well known Swedish apparel company worldwide, with 1,800 stores spread across 35 countries.

• “Offering fashion and quality at the best price.” • Aim to be located in the best business location.• Taipei is the essential business center in

Taiwan.

Factors To Consider• Target market

– Fashion pursuer, good quality, middle price• Cost of operating stores

– H&M only leases the stores instead of buy them.• How many stores to open

– Experiment the market or promote the brand • The characteristics of the trade area

– CBD, natural and physical barriers, store accessibility, demographic, level of competition

• The characteristics of the retail site– Traffic & accessibility, visibility, adjacent stores, restrictions and costs

• Estimate potential sales• Lease negotiation

Trade Area

Taipei City

Trade AreaTrade Area Type Accessibility Competition

LevelDemographic

TypeZhongxiao CBD Very High Very High Employees,

fashion pursuers

Zhongshan Artistic, Shopping

Medium High Unique fashion

pursuers

TPE Train Station

Transportation center,

cram schools, old CBD

Very High Medium Employees, students, travelers

Ximen Teenager recreation

High Medium Students

Tienmu Residence Medium Medium Foreigners, residents

Zhong Xiao E. Rd.

Breeze Center

Sogo BR4

Sogo at&t

MinYao

Sogo

Din Hao

Small Retailers, Apparel & Accessories Specialty Stores,

Restaurants, Bars

MRTMRT

Mango

Retail Site-East Zone

Taipei City Hall

Neo 19

NYNY

Movie Theater

Taipei 101

Zhong Xiao E. Rd.

MitzukoshiA9, A11, A8

A4Eslite Book Store

MRT

Mango

BellaVita

UniPresident Mall

Retail Site-Xinyi District

Retail SiteRetail Sites Accessibility Visibility Adjacent

StoresRestriction

& CostEast Zone Very High High Department

Stores, Small

Retailers, Restaurants

13,000NT/ping/month

XinYi District High Medium Department Stores

10,000NT/ping/month

Estimate Potential SalesXinyi District (Sales at Mango: NT5,940 ,000)

H&M Mango

Average Store Size 136ping 121ping

Probability of Mango customer shopping at H&M:(136/5)/[(136/5) + (121/5)] = 0.529

Forecasted Sales at H&M = $0.529 * 5.94m = $3.14m

Using Huff Gravity Model with λ= 1

East Zone (Sales at Sogo: NT4,000,000,000)

H&M Sogo

Average Store Size 136ping 3636ping

Probability of Sogo customer shopping at H&M= (136/5)/[(136/5) + (3636/5)] = 0.036

Forecasted sales at H&M = 0.036*(4b/3636*136 )= NT$5.3m

Costco warehouse club field study report

Organization Structure

The Directors

Human Resource Management

• The organization and management of employees is crucial to help retailers perform its critical business functions.

• Employees are a valuable asset to any retailer.• In manufacturing machines• In retailing labor intensive

HR Management

Requirements:• Every employee has to start work from the

bottom regardless of education level• 3 month probation period

HR Management

Reason:• Reduce employment turnover rate • Build up a pool of committed and loyal

employees• Understand how each department functions• Facilitate the buying and selling activities

Hsinchu Personnel

• To take into consideration the size and management practices of Costco.

• Administrative Personnel• Floor Personnel

Administrative Personnel

DEPARTMENTS PERSONNEL

ADMINISTRATIVE  

Senior Management 5

Membership Department 10

Accounts Department 3

Marketing Department 5

Purchasing Department 5

IT Department 2

Logistics Department 30

TOTAL ADMINSTRATIVE PERSONNEL 60

Floor Personnel

FLOOR PERSONNEL  Pharmacy 5Optical 5Tire Center 5Food Preparation 15Operations and Maintenance 4Floor Helper/ Sample Personnel 10Checkout Counters 36TOTAL FLOOR PERSONNEL 80   TOTAL PERSONNEL NEEDED 140

FLOOR PERSONNEL  Pharmacy 5Optical 5Tire Center 5Food Preparation 15Operations and Maintenance 4Floor Helper/ Sample Personnel 10Checkout Counters 36TOTAL FLOOR PERSONNEL 80   TOTAL PERSONNEL NEEDED 140

Floor Personnel

FLOOR PERSONNEL  Pharmacy 5Optical 5Tire Center 5Food Preparation 15Operations and Maintenance 4Floor Helper/ Sample Personnel 10Checkout Counters 36TOTAL FLOOR PERSONNEL 80   TOTAL PERSONNEL NEEDED 140

Information Systems

• Electronic data interchange (EDI)• Intranet• Extranet: Costco’s CRX

(Collaborative Retail Exchange) program• No RFID usage

Information Systems

• CRX: Vendor Managed Inventory System

• Inventory method: continuous review system (monitored continuously with each sale)

Intranet

Extranet

Merchandise Management

• It is about managing a portfolio of merchandise inventory.

• Uses their retailer’s information to monitor the performance of their merchandise portfolio.

• Buyers want to offer the right quantity of right merchandise.

• Want to avoid over stocking or a stock out situation• Want to satisfy financial objectives

Merchandise Management Process

1. Buyers forecast category sales

2. Develop an assortment plan for merchandise in that category

2. Setting inventory level

4. Negotiates with vendors

1. Forecasting Sales

• Costco offers a majority of staple merchandises

Staple Merchandises CategorySales over many seasons YesSales of a specific style over many seasons

Yes

Sales vary dramatically from one season to the next

No

Sales

Time

1. Forecasting Sales

• A record of sales for each SKU is available.

• Buyers forecast future sales from extrapolating historical sales.

• Information from vendors about market research on merchandise categories is useful in buyer’s forecasting.

2. Assortment plan

• A list of the SKUs that a retailer will offer in a merchandise category.

• Have to reflect the firm’s retail strategy, trade off between too much and too little assortment etc.

2. Assortment Plan

• Costco’s retail strategy: offering good products at good value.

• Costco offers a few SKU per category (4000SKU)- Fewer SKUs will reduce inventory investment, space

Retail store is its warehouse…

2. Assortment Plan• Costco’s retail strategy: offering good products at good

value.

• Costco offers a few SKU per category (4000SKU)- Fewer SKUs will reduce inventory investment, space- Avoid low merchandize turnover rate- Better control E.g. Dairy products

• Costco offers National and Private Brand• Costco considers complementary SKU

3. Setting inventory level• Costco will make frequent ordering and shipments- Limited warehouse space- Keep inventory investment low

• Need to carry buffer stock to avoid stock out- Affected by lead time- Fluctuation in demand- Vendor’s product availability

4. Negotiating with Vendors

• National Brand Products- Discuss performance of previous season, vendor’s offering for

coming season- Quality & Uses of product- Product’s market research- Price (10% sales profit) - Slotting fees, exclusivity items, terms of purchase and

transportation costs.

5. Buys Merchandise

• Requires a good information system

• Requires a good supply chain management

Supply Chain Management

Retail store is the warehouse, saves on labour and cost

Averitt Express

The major components of retailingLearning Points:

1.Store layout2.Merchandise Mix3.Retail Strategy4.Consumer Buying Behavior5.Retail Mix6.Location7.Human Resource Management8.Information System9.Merchandise Management10.Supply Chain Management

The Retail Team of amateurs with Dr Trappey!

Thank You!