Retail Marketing: Planning & Development

• Strategic marketing for retailing, • knowing your customers • Fundamentals of Merchandising, • establishing a pricing strategy,

Strategic marketing for retailing,

• The Retail Concept- is a management orientation through which the retailers try to focus on the needs of their target market and satisfy theit needs more effectively than the compititor

Strategic marketing for retailing,
• Retail Market- Can be defined in terms of a group of customers with similer needs These needs can be worked out in terms of • Geographical locations • Demographics • Life style • Buying Situation

Strategic marketing for retailing,
• Retail Strategy- is a statement worked out to identify • The reletive target market

• The specific format to be used to satisfy the target market
• Work out the basis on which to build sustainable compititive advantage

Strategic marketing for retailing, • Sustainable competitive advantage can be gained by-

• Focus on customer loyelity
• Positioning of the retail outlet

• Location
• Human resourse management

• Efficient supply chain management
• Devlop unique merchendise

Strategic Retail Planning Process
Define a business Mission
Conduct a business audit

Identify strategic opportunities
Evaluate strategic opportunities

Establish specific objectives and allocate tesources Devlop a retail mix to implement strategy

Knowing your customer: Understanding the retail customer
Understanding how information was sought by the customer The process of evaluation of various product and services

How when and where the customer uses the product
The payment process The post purchase behaviour The competitor and how the customer perceives him

• Factors influencing the retail customer

Understanding the retail customer

• Range of merchandise
• Convenience

• Time to travel
• Socio-economic background and culture • The stage of the family life cycle

Understanding the retail customer • The customer decision making process • Identification of a need • Search for information • Evaluating alternatives • The purchase decision

Understanding the retail customer
• • • • • • Factors effecting consumer behaviour Personality Lifestyle Culture Social class Family and house hold influence


Fundamentals of Merchandising
Merchandising management involves a process by which the retailer tries to offer the right quantity of the right merchandise in the right place at the right time along with meeting the financial goals of the company

Fundamentals of Merchandising
Merchandise management is the planning and implementation of the acquisition handeling and monitoring of merchandise categories for an identified retail organisation

Fundamentals of Merchandising
Key emphasis

Forward planning
Monitoring handling

Retail Merchandising is the process of developing, securing, pricing, supporting and communicating the retailer’s merchandise offering.

It means offering the right product at the right time at the right price with the right appeal!!

Fundamentals of Merchandising
• • Categorising the buying process Meaning of Category

A category is an assortment of items which the customer may percieve as substitites for each

Fundamentals of Merchandising
• Category Management

Category management is the process by which a retail business is managed with the objective of maximising the sales and profit of a category

Fundamentals of Merchandising
• Categorising Merchendise • Merchendising group • Department • Classification SKU

Fundamentals of Merchandising

Merchendise Plan-

The Objective
Defining the target Market Establishing performance goals

Which maerchndise needs more or less emphasis

Fundamentals of Merchandising
• Phases in merchendise Plan

• • • •

Maketing Consideration
Mercchendising strategy option Types of customer needs Financial plan Merchendise assortment search

Steps In The Retail Merchandising Process
1. 2. 3. 4.

Develop the merchandise mix and establish the merchandise budget. Build the logistic system for procuring the merchandise mix. Price the merchandise offering. Organize the customer support service and manage the personal

Retail merchandising requires management of the merchandise mix including:

Planning Merchandise Variety


Controlling Merchandise Variety
Planning Merchandise Assortment/Support Controlling Merchandise Assortment/Support Merchandise Mix Strategies



Developing the merchandise mix allows

Retail merchandising requires management of the merchandise budget including:

Planning And Controlling Retail Sales 2. Planning And Controlling Inventory Levels 3. Planning And Controlling Retail Reductions 4. Planning And Controlling Purchases 5. Planning And Controlling Profit Margins

 Merchandise

Variety Assortment Support

(# of product lines)
 Merchandise

(# of product items)
 Merchandise

(#of product units)

Planning Merchandise Variety Involves Planning And Controlling Product Lines
Retailers use MANY factors to evaluate product lines!!


1.The compatibility among product lines. Must Consider: Product substitutes Product complements Unrelated products

  

2.The physical attributes of each product line. Must Consider:

 Product bulk
 Product standardization

 Product service levels
 Product selling methods

FACTORS USED TO EVALUATE PRODUCT LINES The role branding plays in the success of the product line. Must Consider:
 How brands can distinguish a retailer from competitors  How brands can build store loyalty  The advantages and disadvantages of offering different types of brands – no names, vendor brands, store brands (private labels) and licensed merchandise


The market appropriateness of each product line. Must Consider:

 How well the product matches consumption patterns and buying needs of targeted consumers  The relative advantage, affinity, trialability, observability and complexity of new product introductions  Market trends– provide products the market wants!!


The impact of lifestyle on product line acceptance. Must Consider:

 Targeted customers’ activities, interests, and opinions  The match between consumers’ lifestyle and retailer’s image  Usefulness of trade shows to identify product lines for targeted consumers’ lifestyles


No rules for what should be included in the merchandise mix and what should be excluded
Two useful management methods I. Category Management: each product managed as a business unit at the store level II. ABC Analysis: each product line is rank ordered based on performance

 Must  Must

organize the merchandise mix as to the number of different product lines carried decide on:


Sizes Colours Material Styles


Goal is to ensure that product choice meets targeted consumer needs Must carefully plan the number of units to have on hand to meet the expected sales for the brand, size, color combinations Must develop merchandise lists 1. Basic Stock List (staple items) 2. Model Stock List (fashion items) 3. Never Out List (key items and best sellers)


Involves monitoring and adjusting the types of product lines that are added and dropped from the merchandise mix Two widely used methods to control assortment and support: 1. Inventory turnover: rate at which the retailer depletes and replenishes stock 2. Open-to-buy:amount of new

Merchandise Mix Strategies
Different optimal variety and assortment strategies possible!!
• Narrow Variety/Shallow Assortment
Vending machines Newsstands Door-to-door

• Wide Variety/Shallow Assortment
Variety Stores General Stores

Discount Stores

• Narrow Variety/Deep Assortment

• Financial management tool used to plan and control the total amount (in dollars) of inventory carried in stock at any time • Determines how much a retailer should invest in inventory during a specified period • Remember: Merchandise Budget controls dollars; Merchandise Mix controls product units

Pricing in Retail

If you get your customers because of price, you are going to Loose them because of price.

Basic Pricing Strategies
Mark-up Pricing

• Markup on cost can be calculated by adding a pre-set (often industry standard) profit margin, or percentage, to the cost of the merchandise. • Markup on retail is determined by dividing the dollar markup by retail.

Vendor Pricing

• Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller retail shops to avoid price wars and still maintain a decent profit. By pricing products with the suggested retail prices supplied by the vendor, the retailer is out of the decision-making process. Another issue with using pre-set prices is that it doesn't allow a retailer to have an advantage over the competition.

Competitive Pricing

• Consumers have many choices and are generally willing to shop around to receive the best price. Retailers considering a competitive pricing strategy will need to provide outstanding customer service to stand above the competition.

Pricing below competition simply means pricing products lower than the competitor's price. This strategy works well if the retailer negotiates the best prices, reduces costs and develops a marketing strategy to focus on price specials.

Prestige pricing, or pricing above competition, may be considered when location, exclusivity or unique customer service can justify higher prices. Retailers that stock high-quality merchandise that isn't available at any other location may be quite successful in pricing their products above competitors.

Psychological Pricing

Psychological pricing is used when prices are set to a certain level where the consumer perceives the price to be fair. The most common method is odd-pricing using figures that end in 5, 7 or 9. It is believed that consumers tend to round down a price of $9.95 to $9, rather than $10.

Other Pricing Strategies
• Keystone pricing is not used as often as it once was. Doubling the cost paid for merchandise was once the rule of pricing products, but very few products these days allow a retailer to keystone the product price. Putney Pricing strategy is being used by some retailers to increase margins. • Multiple pricing is a method which involves selling more than one product for one price, such as

• three items for $1.00. Not only is this strategy great for markdowns or sales events, but retailers have noticed consumers tend to purchase in larger amounts where the multiple pricing strategy is used.

• Discount pricing and price reductions are a natural part of retailing. Discounting can include coupons, rebates, seasonal prices and other promotional Markdowns. • Merchandise priced below cost is referred to as loss leaders. Although retailers make no profit on these discounted items, the hope is consumers will purchase other products at higher margins during

As you develop the best pricing model for your retail business, understand the ideal pricing strategy will depend on more than costs. It is difficult to say which component of pricing is more important than another. Just keep in mind, the right product price is the price the consumer is willing to pay, while providing a profit to the retailer.


Classification of Retail Operations

Level of Service

Classification of Retail Establishments

Product Assortment



Classification of Ownership
Independent Retailers Chain Stores



Level of Service
Full Service

Self Service

Factory outlets Discount stores Warehouse clubs

Exclusive stores



Mass Merchandising
Retailing strategy using moderate to low prices on large quantities of merchandise and lower service to stimulate high turnover of products.


Hypermarket and Supercenter
A large retail store combining a supermarket and a full-line discount store.



Retail store combining groceries and general merchandise goods with a wide range of services.



Nonstore Retailing
Automatic Vending

Direct Retailing

Major Forms of Nonstore Retailing

Direct Marketing

Electronic Retailing


Direct Retailing
Direct Retailers sell products:


Door-to-Door Office-toOffice

Home Sales Parties



Direct Marketing
Direct Mail

Types of Direct Marketing

Catalogs & Mail Order


Electronic Retailing
56 On Line


Electronic Retailing
Shop-at-Home Networks

Types of Electronic Retailing

On-Line Retailing

On Line



Basic Forms of Franchising
Basic Forms of Franchising
Product and Trade Name Franchising

Business Format Franchising

On Line



Retail Marketing Strategy
Define & Select a Target Market

Key Tasks in Strategic Retailing

Develop the “Six Ps”



Defining a Target Market
Demographics STEP 1: Segment the Market Geographics




Choosing the Retailing Mix
Product Place Personnel Presentation

STEP 2: Choose the Retailing Mix

Price Promotion



The Retailing Mix
Product Personnel Promotion

Target Market





Product Offering
The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.

On Line



Retail Promotion Strategy

Public Relations


Retail Promotion Strategy

Sales Promotion


Factors to Consider in Site Selection
Economic growth potential Area competition



Location Decisions
Freestanding Store Shopping Center Tenant Mall Tenant

On Line



Shopping Center and Mall Locations
● ● ● ● Expensive leases Failure of common promotion efforts Lease restrictions Anchor store domination

• Design attracts shoppers
• Activities and anchor stores draw customers • Ample parking

• Unified image


High Price

Low Price

Good Value

Quality Image



Presentation of the Retail Store
Employee Type & Density
Merchandise Type & Density Fixture Type & Density

Factors in Creating Store’s Atmosphere


Visual Factors


Personnel and Customer Service
Trading Up

Two Common Selling Techniques
Suggestive Selling



Global Retailing
Reasons for Global Expansion

Spread of communication and mass media Lowering of trade barriers and tariffs

Growth potential in underserved markets



Factors Used to Analyze Global Retail Markets
Market Size & Economics Infrastructure & Distribution Competition Operations Financial & Tax Reporting

Merchandise Acceptability
Partnering Capability


Global Retailing
Consistent Secure Global and Long-Term Domestic Corporate Perspective Position Strategies

Prerequisites for Going Global

73 On Line


Trends in Retailing

Trends in Retailing

Convenience and Efficiency

Customer Management



Customer Management Strategies
Customer Relationship Marketing Loyalty Programs



• • • •

Importance of location decision: Requires complex decision making Costs lots of money Little flexibility once a location has been chosen • Attributes of location have a strong impact on the retailer’s strategy

Type of Retail Stores
• The Isolated Store or a free standing location

Part of a business district
Part of a shopping center'

Why Is It Important To Choose A Store Location Carefully?
• Location can differentiate the store and provide a competitive advantage • Location affects marketing strategy
Determines customer patronage Impacts store image and personality

• Location affects the financial strategy
Determines cost Affects store volume

Criteria to be considered:
• • • • • • • • • Size & characteristics of population Level of competition Access to transportation Availability of parking Attributes of nearby stores Property costs Length of agreement (if lease) Population trends Legal restrictions

Site Evaluation
• Accessibility
• Locational advantages

• Terms of occupancy
• Legal considerations (e.g. environmental considerations, zoning restrictions, building codes, signs, licensing requirements)

Checklist for Site Evaluations
Local Demographics

• • • • •

Population and/or household base Population growth potential Lifestyles of consumers Income potential Age makeup Population of nearby special markets, that is, daytime workers, students, and tourists, if applicable Occupation mix

Checklist for Site Evaluations
Traffic Flow and Accessibility

• • • • • • • •

Number and type of vehicles passing location Access of vehicles to location Number and type of pedestrians passing location Availability of mass transit, if applicable Accessibility of major highway artery Quality of access streets Level of street congestion Presence of physical barriers that affect trade area shape

Checklist for Site Evaluations
Retail Competition • • • • • Number and types of stores in area Analysis of “key” players in general area Competitiveness of other merchants Number and location of direct competitors in area Possibility of joint promotions with local merchants

Checklist for Site Evaluations
Site Characteristic • Number of parking spaces available • Distance of parking areas • Ease of access for delivery • Visibility of site from street • History of the site • Compatibility of neighboring stores • Size and shape of lot • Condition of existing building • Ease of entrance and exit for traffic • Ease of access for handicapped customers • Restrictions on sign usage • Building safety code restrictions • Type of zoning

Checklist for Site Evaluations
Cost Factors • • • • • • • • Terms of lease/rent agreement Basic rent payments Length of lease Local taxes Operations and maintenance cost Restrictive clauses in lease Membership in local merchants association required Voluntary regulations by local merchants

Site Selection
• Trade area -- contiguous geographic area that accounts for the majority of a store’s sales and customers
• Primary trade zone -- Usually 3-5 mile radius; generates 60-65% of customers

• Secondary trade zone -- Usually 3-7 mile radius; generates 20% of customers
• Tertiary trade zone -- Usually 15 - 50 mile

Steps involved in choosing a site
Step-1 Market entification
Step- 2 Determining the market potencial

• • • •

Demographic feature of the population
The charecteristics of the households in ares Compitition and compatibility Laws and regulations Trade Area Analysis

Steps involved in choosing a site
• • Step3 and 4- Identify Alternate Site and Sselect the site Trafic

• • • •

Accsessebility of the market
Existing stores in the area and their type Amenities avalable To buy or to lease Product mix to be offered

Steps in selecting a site:
• Evaluate alternative geographic areas in terms of the characteristics of residents and existing retailers (trading-area analysis) • Determine whether to locate as stand-alone, unplanned business district or planned shopping center • Make a decision about location type • Analyze alternate sites

Retail Trading Area
• Is the area from which a retailer attracts its customers or obtains its business • Clear delineation has several benefits

Demographic and socioeconomic characteristics of consumers can be determined  Focus of promotional activities can be ascertained  Impact of branch store can be determined  Geographic weaknesses can be highlighted

Size and shape of the trading area depends on:
• Store type • Store size • Location of competitors • Travel time • Traffic barriers • Availability of products

How To Evaluate A Trading Area
• Spotting techniques
License plate surveys Customer surveys Customer credit, delivery or service records Customer participation in contests and sweepstakes

How To Evaluate A Trading Area
• Quantitative procedure Converse breakeven point method Huff’s probability model

Chapter 2 Retail Formats
Faiza Nasir

Merchandise’s Division

 Product  Product  Product

Length Depth

• Inventory control count that represents one or more items that will be sold together. For example, a retail bed store would consider one bed frame with four wheels equal to one SKU (even though the frame and the wheels come from different suppliers), because a frame is never sold without wheels, and wheels are never sold alone. Conversely, a frame, a box spring, and a mattress would be considered three SKUs, because any of the three items might be sold separately.

Store vs. Non-Store formats

Store Formats by Location
a) Chain store
 

Multi-locational Operates multiple outlets under common ownership

Engages in some level of centralized or coordinated purchasing and decision making

b) High street format:

A retail chain that seeks to locate itself in busy shopping areas (generally less than 2,000 sft, with no parking facilities and focused merchandise categories)

c) Destination format:

Independent retail stores located specifically in an area with alluring propositions (usually large in size, with ample concessions, huge parking space, wide merchandise categories)

Competitive State of Chains
Advantages  Bargaining power  Cost efficiencies  Efficiency from computerization, sharing warehouse and other functions  Defined management philosophy  Considerable efforts in long-run planning Disadvantages  Limited flexibility  Higher investment costs  Complex managerial control  Limited independence among personnel

Convenience Store Strategy Mix
Location: Neighborhood Prices: Average to Above average
Atmosphere & Services: Average

Merchandise: Medium width and low depth of assortment; average quality

Promotion: Moderate

Store Formats by Ownership
a) Independent
  

Generally higher level of independent retailers exists 50% of these are run by owners and their families Why so many? Ease of entry

b) Franchise:

A contractual agreement between a franchisor and a retail franchisee, which allows the franchisee to conduct business under an established name and according to a given pattern of business Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for the exclusive rights to sell

Competitive State of Independents

Flexibility in formats, locations, and strategy Control over investment costs and personnel functions, strategies Personal image

Consistency and independence
Strong entrepreneurial leadership

Disadvantages  Lack of bargaining power  Lack of economies of scale  Labor intensive operations  Over-dependence on owner  Limited long-run planning

Competitive State of Franchising

Disadvantages  oversaturation could small capital required occur  franchisors may acquire well-known overstate potential names  locked into contracts operating/management  agreements may be skills taught cancelled or voided cooperative marketing  royalties are based possible on sales, not profits exclusive selling rights less costly per unit

 

From the Franchisor’s Perspective
Benefits  national or global presence possible  qualifications for franchisee/ operations are set and enforced  money obtained at delivery  royalties represent revenue stream Potential Problems  potential for harm to reputation  lack of uniformity may affect customer loyalty  ineffective franchised units may damage resale value, profitability  potential limits to franchisor rules

Store Formats by Merchandise Category
a) Family store  Store dealing in all categories of related item (For e.g. apparel store offering merchandise to suit the wardrobe of a family) b) Specialty format:  Narrow product lines with good depth. Specializing in a given type of merchandise, offering attentive customer services. c) Department store format:  Large in size having several departments working as SBUs d) Super market format:  Departmentalized, specializing in foodstuff, grocery and limited non-food categories, free access displays so that customers can pick from shelves. e) Emporium:  Selling a variety of a particular group of merchandise (sari emporium).

Specialty Store Strategy Mix
Prices: Competitive to Above average
Merchandise: Very narrow width and extensive depth of assortment; average to good quality Atmosphere and Services: Average to excellent Promotion: Heavy use of displays Extensive sales force

Department Store Strategy Mix
Location: Business district, shopping center or isolated store Prices: Average to Above average
Atmosphere and Services: Good to excellent Promotion: Heavy ad and catalog use; direct mail; personal selling

Merchandise: Extensive width and depth of assortment; average to good quality

Conventional Supermarket Strategy Mix
Location: Neighborhood Merchandise: Extensive width and depth of assortment; average quality; manufacturer, private, & generic brands Prices: Competitive
Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers, and coupons

Store Formats by Size
a) Superstore format  Single-level large store, twice the size of a supermarket, offers non-traditional goods and services like pharmacy, flower shop, bookstore, salad bar, bakery etc. b) Shopping Mall:  Spread over a large area, arrangement of retail stores and places for leisure activities. c) Shopping Center:  Plaza combining five or more tenant spaces developed under one building. d) Hypermarket:  Wide variety, offering in large quantities in each category selling huge volumes at low margins.

Store Formats by Price
a) Discount format  Bazaar format, believing in discounts more often. b) EDLP format:  Specialize in a particular merchandise line, assuring consistently low prices. c) Category killer format:  Large specialty store having enormous selection of its product category at relatively low prices. d) Factory-outlet format:  Owned and operated by the manufacturer e) Warehouse format:  Large sale of discontinued merchandise, has large width and depth in many categories it retails. f) Single-price denomination format:  Scrambled merchandise at just one price point, generally at a low one.

Discount Store Strategy Mix
Prices: 25% or more below MRP
Merchandise: Extensive width and depth of assortment; average to good quality (overruns, irregulars, cut-sizes) Atmosphere/ Services: Slightly below average to average Promotion: Heavy on newspapers; price-oriented; selling

Factory Outlet Strategy Mix
Prices: Very Low
Merchandise: Moderate width and poor depth of assortment; low continuity (cancelled orders, discontinued merchandise)

Atmosphere/ Services: Very low

Promotion: Little

Warehouse Store Strategy Mix
Location: Secondary site, often in industrial area
Merchandise: Moderate width and low depth of assortment; emphasis on manufacturer brands bought at discount

Prices: Very low
Atmosphere and Services: Low

Promotion: Little or none

Store Formats by Concessions
a) Stopover store format  Like petrol pump, offers instant use or ready-to-eat categories of merchandise. b) Kiosk:  Small freestanding pavilion c) Alliances:  With brands that customers trusts

• Seasonal

• Structured
• Un-structured • Thematic

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