UNIT 1 CHAPTER 1
RETAILING IN INDIA ROLE, RELEVENCE AND TRENDS
WHAT IS RETAILING
• It is defined as a conclusive set of activities used to sell a product or a service to consumers for their personal or family use. • It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. • Word RETAIL was derived from the French word retaillier meaning to cut a piece off. • A Retailer is a person, agent, agency, company or organization • which is instrumental in reaching the goods to the ultimate consumer. • RETAIL also involves selling of services and any channel could be used like internet, door to door etc.
DRIVERS OF CHANGE IN RETAILING
• Changing demographics and Industry structure. • Expanding computer technology. • Emphasis on lower costs and prices. • Emphasis on convenience and service. • Focus on productivity. • Added Experimentation. • Continuing growth of Non store retailing.
• In some developed countries retail business houses have shares as large as 40% of the market. • In contrast India has very less organized retail business. • The significance of the retail business has increased with the fast growth in the service sector.
. • Much of the rapid growth in organized retail business in the developing countries is due to the entry of global retailers. • Over 50 of the Fortune 500 companies and about 25 of the Asian Top 200 companies are retailers. ahead even of finance and engineering It contributes over 8% to the GDP in the West.RETAIL INDUSTRY AND ECONOMY
• Retail business is the largest private industry.
In India the retail sector is highly fragmented and consists predominantly of small. super markets.RETAIL INDUSTRY IN INDIA
In India the retail sector is the second largest employer after agriculture. More and More players are venturing into the retail business to introduce new and attractive retail formats like malls.
. independent and owner managed shops. There has been a boon in the retail trade in India owing to a gradual increase in the disposable income. department stores etc.
• Location is a critical factor in retail business.CHARACTERISTICS OF RETAILING
• There is direct end user interaction • It is the only point to provide a platform for promotions. • Sales at the retail level are generally in smaller unit sizes.
. • In retail services are as important as the core product.
Westside provides clothing and accessories.
. • Breaking Bulk—To reduce transportation costs manufacturers typically ship large cartons of the product which are then tailored by the retailers into smaller quantities to meet individual needs.g. Retailers specialize in the types of assortment offered and the market to which the offering is made e.FUNCTIONS OF RETAILING
• Sorting—Retailers balance the demand of customers by collecting an assortment of goods from different sources in large quantities and selling them to consumers in small quantities. Shoppers Stop targets the elite urban class and Pantaloons is targeted at the middle class.
It helps to keep the prices stable and enables to regulate production. They also offer credit and hire purchase facilities to the customers. after sales service and dealing with consumer demands complaints are some of the services that add value to the actual product. From Ad’s Salespersons and display shoppers learn about the product/service offered.
• Holding Stock—Retailers maintain an inventory that allows for instant availability of the product to the consumers. Sales people are also hired by the retailers to answer queries about the displayed products. • Additional Services—Providing product guarantee.FUNCTIONS…….
. • Channels of Communication—They act as a channel between the wholesaler and the consumer.
• Transport and Advertising Functions—Small manufacturers can use retailers to provide assistance with transport. This also works the other way round in case the number of retailers is small. storage advertising and prepayment of merchandise.
ACTIVITIES PERFORMED BY RETAILERS
• • • • Arranging an assortment of offerings Breaking quantity Holding stock Extending services
• U.S has a retail density ie concentration of large retail firms some of them even eliminate wholesalers.STRUCTURE AND NATURE OF RETAILING CHANNELS
• Retailing is the last stage in the distribution process. performing more than one activity. a wholesaler. which involves all processes in movement of goods from producer to consumer. • In India traditionally the small retailers played a major role in various sectors until recently. • Most distribution channels have a degree of vertical integration.
. • A typical channel consists of a manufacturer. a retailer and the final consumer.
Kamath Restaurant is managed by a single owner but has many outlets in various cities. banks. grocery shop • (b) Chain store—Is a part of a group of retail stores owned and operated by a single corporate organization.
.g. E. E. consultants.g. any general store. • By Ownership—A retailer could be an(a) Independent retailer where he or his family members own one or multiple stores. While retailers of services deal with intangible goods.g. garages maintenance services etc. e.CLASSIFICATION OF RETAILERS
• Retailers can be classified into the following categories: • Products or Services—Retailers of goods deal with tangible products.
McDonalds.g. VLCC etc • By Number of Outlets– Retailers can operate through a single shop or it can be a part of a chain having multiple outlets.
.. Sony etc are sold through factory outlets only. E. • By Variety of Products Sold—Here they could be (a) Department Stores which offers a wide variety of general products. • (d)Franchise Outlet—Manufacturer gives franchise to a number of independent retailers who are bound to follow certain rules laid by the manufacturer. Benetton. (b) Specialty Store—This offers only specific category of the product but in depth. Nike.
• (c)Factory Outlet—They are owned and managed by the manufacturer eg branded products like Bata.CLASSIFICATION………….
They could also be Full service retailers where they even offer home delivery. free wrapping etc. • By Number of Product Lines Carried—Here they can be divided into General Merchandise. • By Pricing Strategy—Here they could be Discount stores which regularly offer lesser prices and sell in bulk.CLASSIFICATION…………
• Variety Store—Here the focus is on variety i. width of the product mix and less on the depth of the product line.
.e. Limited line and Single line stores. • By Level of Service—Here they could be either Self service stores or Limited service retailers-here they provide more information and assist the customers in their purchase.
• By Size of shop—Here they could be small shops or large shops • By Location—Here they are classified as Fixed shop retailers where they have fixed place of operation.CLASSIFICATION…………
• Off price shops– here the products sold are generally at low prices and are of high quality but outdated. Next they could be Mobile retailers e. • Fixed Price shops—They fix a price range which sounds attractive to the customers each product has a fixed price tag and they are arranged according to the prices. odd lots export rejected etc. hawkers peddlers exhibitions stalls etc.g.
direct mail marketing and automatic vending machines. • Non Store retailers—It includes Direct selling. • By Location of Facilities or a cluster—here they are classified on the basis of their location it could be standing alone or be a part of a cluster of shops. teleshopping. • Temporary stores– These are in fairs exhibitions shopping festivals etc. • Fixed location stores—here they can be one of the outlets in the shopping malls centers arcades etc.(a) freestanding stores—These are stores which are stand alone and unattached to other retailers.
• By Method of operation—Here they are classified as Store retailers which are all retailers of different sizes performing their functions in the physical store are store retailers.
. online retailing.CLASSIFICATION…………. telemarketing.
consumer cooperatives merchandising conglomerates—these are similar to alliances from the same sector share their resources and integrate their management function.TYPES OF RETAILING
• Retailing is divided into foll types: • Store retailing— • Non store retailing – These have been discussed under methods of operation previously.
. • Organized retailing—They are divided into corporate chains voluntary chains franchising.
TRENDS IN RETAIL FORMATS
• Retail Industry is continuously going through changes on account of liberalization. thereby the small mom and pop stores and kirana stores are facing intense competition.
. globalization and customer preferences. • Mon and Pop Stores and Traditional Kirana stores—The retail sector is changing as new stores categories have dominated the market and developed successful retail models. • Consumers are not only looking for the core products or functional benefits but also non functional benefits which need to be compatible to their lifestyles.
• Department stores—A few years ago names like J. Macy’s dominated malls all over America however they have suffered badly due to changing shopping patterns and increased competition from discount stores.
. Sports Authority etc. Target etc have changed the retail industry drastically. • Discount stores—These are giants like the Wal-Mart.
• E-Commerce—The amount of retail business being conducted on the Internet is growing rapidly. Many major retail organizations have online retail stores .TRENDS………. Sears.C. • Category killers—These are giant retailers that dominate one area of merchandise eg Office-Depots.Penney.
• E-Tailers—These are those retailers which are strictly online.g. Some are very high end like Louis Vuitton and some cater to price conscious masses e..
• Specialty stores—They include The Body Shop. They have given their competitors a run for their money. Old Navy. Victoria's Secret etc they concentrate on one type of merchandise and offer it in a way that makes it special.
• The manufacturer chooses the distribution channels after considering factors like production.RELATIONSHIP BETWEEN RETAILERS AND THEIR SUPPLIERS
• Retailers –Suppliers—Effective Operation— Profitability. Luxury goods are an example of this category. • Selective distribution uses only a portion of the outlets available in that area. • Intensive distribution is the use of all the available outlets for a product.
. capability target market etc. The producer then selects the middlemen the retailer being one of them. • Exclusive distribution is the usage of only one single outlet in that large area.
• It indicates how the firm plans to focus its resources to accomplish its objectives They include: • Defining the business of the firm • Setting short term and long term objectives with regard to profitability. • Implementing and integrated plan that covers all aspects of retailing. • Identifying the target market. • Deciding the broad direction the company must take in future. • Evaluating and revising the plan depending on the nature of the environment.
• It is a means of communication about the retail organization. • Internet retailing offers an experience that is totally different from fixed store retailing.
. its products and services. Invites consumers interactively to access the website and facilitates their buying process.THE CHANGING FACE OF RETAILING
• The role of Internet—It offers a way to grow and an existing retail business and increase exposure in the market. It also helps as a proactive marketing tool. • It also provides valuable consumer data to retailers to enable greater targeting. • But those retailers with strong and established brand presence effective physical distribution channels are less inclined towards internet retailing.
• Advanced education for retailers is critical for growth—They must become innovative in their approach and do study and research.DRIVERS OF SUCCESS IN THE RETAIL SECTOR
• Customers are the driving force in change—Excellent customer service and convenience shopping. Retailers must know what the customers want and provide exactly what they want. • Strong visual recognition—They must adapt a new approach as visual marketing has become very important. • Re-Evaluating the marketing plan—Retailers will stand out as leaders in their markets by focusing their advertising efforts on the benefits of a changing customer base.
. They must be aware of their customers needs.
• Planning for success—Retailers must plan for the evolution and shifts in the retail industry. greater appreciation and motivation for retention.DRIVERS OF SUCCESS……….
• The workplace challenge—Employees will become difficult to retain but the retailers have to become flexible with working hours.. Strategic planning is the key to planning for success. They must accept inputs and let them have independent thinking.
• Retails firms may be independently owned. parts of a retail chain. • A Large portion of consumer expenditure in India is incurred on basic necessities.
. owned by manufacturers or wholesalers or cooperative societies. operated as a franchisee.UNIT 1 CHAPTER 2 RETAIL ORGANIZATION
• The term Retail Organization refers to the basic format or structure of a retail business designed to cater to the needs of the end customer. especially food related items. • Organized retail stores are generally characterized by large professionally managed store formats providing goods and services that appeal to customers.
changing consumer demands.
. intense competition have brought about immense changes in the structure of this industry. • A Key impact of technology has been provision of greater information to the customer. Hence the opportunities for price differentiation have nearly vanished. • Technological advances. internet buying etc.CHANGING STRUCTURE OF RETAILING
• Changing environments have caused changes in the nature of retailing with emergence of hypermarkets. warehouse clubs.
. • Type of pricing policy— • Type of retail location— • Method of customer interaction—telephone selling. vending machines . • Length and depth of merchandise— • Nature of service– Full service providers. limited liability company.CLASSIFICATION OF RETAIL UNITS
• Retail units have been classified into the following types: • Nature of ownership—sole proprietorship. franchising or consumer cooperative. partnership. mobile vendors etc. • Operational structure—independent trader. self service etc. chain or multiple store. home delivery.
He assumes complete responsibility for the liabilities of the business.CLASSIFICATION IN DETAIL
• On the basis of Ownership • Sole proprietorship—These firms are owned by one person who owns all the assets of the business and the profits generated by the firm. There are three types of partnerships • General partnership—Partners divide responsibility for management and liability. They should have a legal agreement as to how profits will be shared. • Joint venture– It acts like general partnership but for a limited period or a single project. decisions will be made. new partners will be entered etc. • Partnership—In this two or more people share ownership of a single business. • Limited liability partnership—It means that most partners have limited liability only to the extent of their investment. Equal shares are assumed unless there is a written agreement.
• Independent retail unit—It owns one retail unit. strategy. There is a great deal of flexibility of choosing location. are in full control of their business.
• On the basis of operational structure. They have the bargaining power with the suppliers due to volume purchases. they can act as specialists in niche goods.
.CLASSIFICATION………. • Retail chain– they operate multiple outlets. It has centralized purchasing and decision making. They have independence of operation. They can achieve cost efficiency by doing wholesaling.
Usually this is done in specialty stores. In business format there is more interactive relationship between the franchisee and the franchisers. • Leased department—It refers to the department in a retail store that are rented to an outside party.
• Franchising—It involves contractual arrangement.
. They must adhere to certain operating rules set store timings choose locations displays.CLASSIFICATION………. There are two types of franchisee’s –Product based and business format based. Here the franchisee pays an initial deposit and a monthly percentage of gross sales in exchange to the exclusive rights to sell the goods. They are usually used by existing stores based retailers to broaden their merchandise.
. In this context the Kendriya Bhandar is the best example. To assist the government in holding the price line and ensure distribution of scarce commodities.CLASSIFICATION………. It provides essential commodities of daily needs to the customers at reasonable price range. • It is the Central Government employees consumer cooperative society ltd operated by the name of Kendriya Bhandar. It is a network of 112 stores and 42 fair price shops.
• Cooperative outlets—They are generally owned and managed by cooperative societies.
. They also compete for the same customers..
• On the basis of retail location—Retailers can locate their stores in an isolated location and attract their customers on their own strategies. • Retailers in specialized markets—They set up their stores in specialized market areas in the city. • Retailers in business associated location—Located where a group of retail outlets offering a variety of products are attracting the same type of customers. They are as follows: • Free standing retailers—They are not connected to other retailers and are stand alone stores. • Airport retailing—Here the duty free shops and news stands are included. They could also choose a busy market area.
.VARIETY OF MERCHANDISE MIX
• There are many different retail stores in India and the customer can choose from these for different needs: • Department stores • Discount stores • Specialty stores • Hypermarkets.
UNIT 1 CHAPTER 3 RETAIL CUSTOMER
• • • • • • • • • CHAPTER HIGHLIGHTS CONSUMER BEHAVIOR WHY DO PEOPLE SHOP? FACTORS AFFECTING CONSUMER DECISION MAKING TYPES OF DECISION MAKING CONSUMER DECISION RULES INFLUENCES ON SHOPPING BEHAVIOUR CONSUMER IMAGES OF RETAIL STORES INDIAN SHOPPERS
resources and efforts for buying. • E. • Retailers need to consider the decision making variables and understand them efficiently.CONSUMER BEHAVIOUR
• It is the understanding of how consumers make decisions to use their time. • On the basis of the above findings the marketers evolve the best marketing mix to attract the target market. in case of Pickles marketers will be interested in finding out the type of pickle customers intend to buy. using disposing goods and services.
. the brand preference. reason for using. money.G. the place of purchase and frequency of purchase.
WHY DO PEOPLE SHOP?
• Personal Motives –It includes role playing means shopping activities are learned behaviors and expected and accepted as part of one’s position e. • Self gratification—Shopping may be motivated not by the utility of consumption of the product but by the buying process itself.
. • Physical activity. housewife. • Learning about new trends. • Diversion—It can offer a diversion from the daily routine. mother. father etc.g.
• Pleasure bargaining--
.WHY DO ………………
• Social Motives—It involves social experience outside home. encounters with friends etc. seeking new acquaintances. • Peer group attractions– certain stores provide a meeting place where peer groups gather. • Status and authority. • Communication with other similar interests.
age. • Lifestyle—Activities and interests. learning. occupation. attitude. income. nature of occupation. • Environmental factors—Physical. perception.FACTORS AFFECTING CONSUMER DECISION MAKING
• There are four major factors: • Demographic—it includes gender. education.
. personality. availability of leisure. • Psychological—It includes motives. family size. social environment.
• They are unique to a particular person. marital status. age. quantifiable and easily identifiable population data like income.
. They are objective. family size etc. • It also involves identification of who is responsible for the decision making and buying.
personality. • Perception—It is the process of selecting. E. The same stimulus may be perceived differently by different set of consumers. Mc Donald’s outlets were initially perceived as costly. to overcome this perception among prospective consumers the management introduced a ten rupees softy ice cream to attract shoppers.PSCYCHOLOGICAL FACTORS
• It shows that consumers respond differently towards the same marketing mix due to their respective motives. organizing and interpreting information to produce meaning.G. • Motives are internal energizing forces that orient a persons activities satisfying a need or achieving a goal. perception etc.
PSYCHOLOGICAL FACTORS………….It is the process through which a relatively permanent change in behavior results from the consequences of a past behavior. It comprises knowledge and positive and negative feelings about an object or activity. E.
. Indian consumers give due importance to retailers image to a great extent while selecting the store. • Attitude—It is the customer’s predisposition to respond favorably or unfavorably to an element of retail mix. Various reasons cause a permanent change in behavior through information and experience. • Personality—It refers to all the internal traits and behaviors that makes a person unique. Traits affect the way people behave. Consumers attitude towards a store and its products greatly influences the success or failure of a retail outlet.G.
working class. Consumers interact with friends. lower upper class. middle class. spatial relationships ( i. relatives regarding prospective buying or past purchases and sometimes observe others using the product. upper middle class. • Customers are classified into upper elite class. • The social environment includes all social interactions among people.
. needs learning motives which affect the shopping behavior of the consumer. location of the store) and social factors. The environmental factors influence consumers wants. lower class.e.ENVIRONMENTAL FACTORS
• They cover all physical and social characteristics of a consumers external world including physical objects.
family gatherings outings with friends etc. • E.
• Lifestyle-It refers to an individual’s mode of living as identified by their activities. • It is highly co-related with consumers values and personality.
..ENVIRONMENTAL FACTORS……. interests opinions etc. Indian working women have to balance their wardrobe collection based on requirements on different occasions related to professional workplace.g.
• Need Recognition—It occurs when the consumer realizes a significant gap between his or her present state and some desired level of state. Consumers compare options and finally decide to purchase what seems to be the best alternative based on a set of criteria.
.STAGES OF THE CONSUMER DECISION MAKING PROCESS
• It is the process which the consumers go through when they decide to make a purchase. • Information search—Once the individual has acknowledged a need or problem then he or she looks for information to resolve the need. Here the prospective buyers examine their environment for appropriate information to make decision.
The alternatives which are actively considered during the decision making process constitute the individual’s evoked set.
• Evaluation of Alternatives—After information search the customer is expected to take a final decision on one of the choices. This is then followed by a purchase decision by the consumer. In retailing the purchase stage plays a significant role in consumers decision making process. retail outlet or branch. • Purchase decision—After evaluating various alternatives an individual is in a position to focus on the preferred product category. This includes those retail outlets which the consumer is exposed to and remembers and is compatible with..STAGES………….
• Post purchase dissonance—After purchasing a particular good or service consumers evaluate its performance against their expected level of satisfaction.
. Either the performance meets expectations or it exceeds the expectations or it is below the expectations.
TYPES OF CONSUMER DECISION MAKING
• • • • • Purchases are classified into: Routine buy Modified rebuy New product purchase Extensive decision making—It happens for unfamiliar products or extremely unique or expensive products.
It includes • Physical setting—Location.INFLUENCE OF VARIABLES ON SHOPPING BEHAVIOR
• It refers to all those factors particular to a time or place of observation which do not follow from a knowledge of personal and stimulus attributes. • Task definition—It is more individual specific it includes motivational indications of the shopping behavior. environment.
. • Temporal aspects—Time of the day and time constraints. • Social setting—Involves presence or absence of others while shopping.
Value for price Sales effort and store services Congeniality Post transaction satisfaction.
.RETAIL IMAGE DIMENSIONS
• • • • • • • It includes: Locational convenience Merchandise suitability.
UNIT 1 CHAPTER 4 RETAIL MARKET SEGMENTATION
• • • • • • • • • • Highlights of the chapter Market segmentation Benefits Stages of the consumer decision process Segmenting targeting positioning Criteria for effective market segmentation Kinds of markets Dimensions for segmentation Market targeting. customer profile Survey of buyers intentions
• Market Segmentation is the process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants. • Each of these possess some heterogeneous characteristics. • Segmenting is an aggregating process clustering people with similar needs into a market segment. • Different groups or segments require different promotional strategies and marketing mixes because they have different wants and needs. • Segmentation helps the retailer to customize the product and tailor its promotional campaigns.
BENEFITS OF MARKET SEGMENTATION
• • • • • • Development of Marketing mix. Store location decisions. Understand customer behavior. Merchandising decisions. Promotional campaigns. Positioning—It helps a retailer in positioning itself in the market. E.g. Westside targets middle and upper middle class consumers.
SEGMENTING, TARGETING, POSITIONING.
• There are three stages of Market segmentation—segmenting, targeting and positioning. • The segmentation process begins with the aggregation of customers into groups to maximize homogeneity within the segments. • Once the market segments are identified then detailed profiles of customers in each segment should be developed. • Customer profiles help the retailers in understanding the behavior of target markets. • After the markets are segmented and profiled the retailers have to decide which segments to target and focus on. • After selecting the target segments they have to develop the positioning strategy. • For effective positioning a detailed understanding of the needs of the target segments is necessary.
• Measurable—The size. Barista targets youngsters who seek to enjoy coffee in a fashionable outlet.g.CRITERIA FOR EFFECTIVE MARKET SEGMENTATION
• For Market segmentation to be effective the identified segments must satisfy the following criteria: • Homogeneous within—The customers in a same segment should have similar needs and wants. • Accessible-The target market segment must be reachable. • Substantial—The market segment that a retailer plans to target must be large enough and have enough discretionary income to help the retailer to be profitable. • Heterogeneous between—The customers in different segments should be as different as possible with respect to their needs and buying behavior. purchasing power and the characteristics of the market segment must be measurable.
. • Actionable—E.
. • Industrial market—includes groups or organizations that purchase products for use in production of other products. • Re-seller markets– Includes middlemen like wholesalers or retailers who buy finished goods and resell them for a profit.TYPES OF MARKETS
• There are three types of markets • Consumer—Includes individuals who buy goods for their own use.
DIMENSIONS FOR SEGMENTATION
• Dimensions for Segmentation are Geographic. regions.
. religion. psychographic and behavioral. cities etc. need and ability of the customer to patronize a particular retail outlet. • Geographic—Here the market is divided into geographical units like nations. gender. income etc.The retailer should segment the market on variables which reflect interest. countries.Retailers in India have often segmented markets by cities and focuses on metros and large cities. states. • Demographic—In this the market is divided into groups based on demographic variables such as age. Demographic.
loyalty status. source of purchase. or values. quantity.
. Marketers can compile information variables such as occasions. Values are stable and occupy a central position in a persons cognitive system. • Behavioral Segmentation—Here the customers are divided into groups based on the way they respond to use. frequency of purchase. personality. product usage. benefits user status. • Values refer to belief systems that go beyond behavior.DIMENSIONS FOR SEGMENTATION
• Psychographic segmentation—Here the buyers are divided into different groups based on their lifestyle. or know a product.
. E. the typical customer at Westside may be a sophisticated middle class lady who values her independence. shops for best products and is looking for good value for her money. • Psychographics—The retailer has to profile its consumers lifestyles and values.CUSTOMER PROFILE
• It may contain the following information: • Customer demographics • Family decision making—When families are the target customers the retailer needs to understand the decision making process in the family.g.
. their purchasing behavior.SURVEY OF BUYERS INTENTIONS
• The retailer can develop an effective marketing plan and other elements of a marketing mix if he has detailed information on the requirements of its target segments regarding choice of products. type of packaging they prefer. price they are willing to pay. They can collect this information by the following: • Frequency of customer visits to the store • Weekday weekend shopping patterns • Spending per visit • Planned Vs unplanned shopping • Store loyalty.
psychological and other strategic variables presents an ideal arena for segmentation. • E.MARKET SEGMENTATION IN INDIA
• The Indian consumer market with its large demographic. McDonald’s introduced Vegetarian products to target the large population of vegetarians in India who avoid non veg diet on account of health and religious beliefs.
UNIT 1 CHAPTER 5 RETAIL LOCATION STRATEGY
• • • • • • • • • • Chapter highlights: Importance of location decision Levels of location decision and its determining factors Types of retail location Types of consumer goods and location decision Trading area Site selection analysis Selection of a particular shopping centre How to make a traffic count Retail location theories.
affects transportation costs.
. affects the volume of business. • A location decision is influenced by the flow of pedestrian and vehicular traffic which determine the footfalls in a retail store. • Location is a major revenue factor because it affects the amount of customer traffic.IMPORTANCE OF LOCATION DECISION
• Importance of Location is due to the following factors: • Location is a major cost factor because it involves large capital investment. affects human resource costs.
total retail trade potential. adequacy of parking. • Selection of an Area or type of location within a city—It includes adequacy and potential of traffic passing the site. ability of the site to intercept the traffic flowing past the site. development cost.
. complementary nature of adjacent stores. population growth in the trading area.LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS
• A Retailer has to take the location decision on the basis of three aspects: • Selection of a city-Which includes size of the city’s trading area. total purchasing power. number size and quality of competition.
or located in residential neighborhood.LEVELS OF LOCATION………………. The best e. Planned shopping centers are group of stores which operate as a unit. And there are Periodic markets which operates on a specific day in a week or a month.g. highway stores. • Then there are the specialized markets famous for a particular product category.
• Types of Retail location—It could either be a free standing location.
. business associated location—which could be an unplanned business district or a central business district. of planned shopping centers are Malls.
TYPES OF CONSUMER GOODS AND LOCATION DECISION
• The types of goods sold by a retailer also affect the location decision: • Convenience goods—They imply products that carry a low unit price, are purchased frequently, are bought by habit and are sold in numerous outlets. E.g. candy bars, cigarettes, milk etc. • Shopping goods—They imply products with a high unit price. They are purchased infrequently and involve more intensive selling effort. E.g. men's suits, furniture, automobiles etc.The buyers like to compare the items in several stores.
TYPES OF CONSUMER GOODS………….
• Speciality goods—They imply products with high unit price which are bought infrequently, which require a special effort on the part of the customer to make purchase, and which are generally sold in exclusive franchised outlets. E.g. precious jewellery, expensive perfumes, fine furs etc. These goods are often sought by customers who are already sold on the product, brand or both etc.
• A Trade area is a geographic area from which a retailer draws customers that account for the majority of the stores sales. • The trade area can be divided into two or more zones. The dimensions of these zones depend on the size of the store, its location and nature of the merchandise it deals in. • The zones are primary, secondary and tertiary zones.
customer profile.SITE SELECTION ANALYSIS
• Keeping in view the product mix. and overall business model the retailer has to consider the following factors while selecting a site: • Kinds of products sold • Cost factor in location decision • Competitor’s location • Ease of traffic flow and accessibility • Parking and major thoroughfares • Market trends • Visibility
.SELECTION OF A PARTICULAR SHOPPING CENTRE
• The following factors affect the selection of a particular shopping centre: • Merchants association—Its presence helps in strengthening business and save money through group ad plans. • Leases—It is directly related to zoning as retailers should collect information on future zoning plan and decide how long it will be viable to run the business at a particular location. • Responsiveness of the landlord— • Zoning and planning—Will construction or changes in city traffic affect your store and business.
• Automobile traffic count—Many retail firms depend on drive in traffic for their sales. Thereby this data needs to be collected and suitably modified. all men between sixteen and sixty. e.
. • Pedestrian traffic count—One must decide here who is to be counted.g. The directions should be clear as to the individuals to be counted so the counters will be consistent.HOW TO MAKE A TRAFFIC COUNT
• It is divided into Pedestrian traffic count and Automobile traffic count.
. or information among places in response to localized supply and demand.RETAIL LOCATION THEORIES
• Central Place theory—It states that a central space and market area best express pattern of settlement. This theory is based on the attractiveness of alternate shopping areas against the deterrent effect of distance. • Spatial Interaction Theory—Spatial interaction is defined as the flow of goods. Retailers prefer to serve consumers who live within a range where cheaper delivery prices can be possible.
The price which a bidder is likely to pay will depend on the use which will be made of the site. • Generally the more central the location the more desirable will be the plot. and higher will be the price as more bidders will bid to purchase the land.THEORIES……………
• Land Value theory—It is used for analyzing and explaining the arrangement of urban land uses and the location of economic activities within cities.
UNIT 1 CHAPTER 6 PRODUCT AND MERCHANDISE MGMT
• • • • • • • • • • CHAPTER HIGHLIGHTS Product Management Brand Management and Retailing Merchandise Management Model Stock Plan Constraining Factors Types of suppliers Criteria for the selection of suppliers Category Management Merchandise management planning in various retail segments
. along with related market analysis. • Product management by the retail firm is critical to the satisfaction of the consumer needs.PRODUCT MANAGEMENT
• Products in a retailing context mean anything sold and purchased in a retail transaction. • Product management may be defined as a set of decisions related to the selection and removal of products from the retailer’s portfolio. Selection of the product is designed to meet some unmet needs of the consumer. • Product management is also an implementation of the segmentation strategy of the retailer who attempts to attract the target segment through product profile and pricing strategies. places. events ideas etc. • It could constitute goods or services. • Product is critical to the success of a retail business.
• Product performance review utilizes information collected from various sources like sales reports. • These tools are used regularly by retailers as they possess most of such information about each product. • A retailer is required to consider various issues related to the selection of the product to be retailed. life cycle of the products.
.THE PRODUCT SELECTION PROCESS
• It involves a review of the performance of the existing product range. trends in the product category etc. • These relate to the type of products to be retailed. consumer research etc. quality reports.
.BRAND MANAGEMENT AND RETAILING
• Of the top ten strongest brands in the world. • Location contributes to the brand perception in terms of the brand image of the shopping centre itself. • In many cases ‘STORE’ as a brand is stronger than the ‘BRANDS’ within the store. • Deciding whether or not to opt for the strategy of self own branding. A strong retail brand and a strong private label strategy can be an effective tool to differentiate the stores and the shopping experience. • A retailer’s brand is valuable since it enhances reach and endurance with the consumer. The key issues in retail branding are: • Brand management of the retail outlet. five are retail brands.
planning. Merchandise control involves designing the policies and procedures in order to determine whether the stated goals have been achieved. handling. • Merchandise Management is the process by which a retailer attempts to offer the right quantity of the right product at the right place and time while meeting the firms financial goals. Merchandise planning involves obtaining the merchandise well in advance of the selling season. • It is the analysis. procurement.MERCHANDISE MANAGEMENT
• The primary function of retailing is to sell merchandise thereby it is very important to decide the merchandise mix and quantity to be purchased.
. and control of merchandise investments of a retail operation.
and product units. Merchandise mix management covers the decisions like merchandise variety. assortment and support.
• The Merchandise mix represents the full range of mixtures of products which a retailer offers to its target customers. • It leads to an appropriate combination of product lines. • Merchandise budget is the financial tool for controlling a retailer’s inventory investment. • Merchandise support deals with planning and control of the number of units the retailer should have on hand to meet the expected sales for a particular product. product items. Merchandise assortment refers to the number of different product items the retailer stocks within a particular product line.
the right model. right fabric.
. • Customers categorize retail businesses according to their merchandise mix offered. the right style. • From the point of view of the shopping centre it is the tenant mix which drives the merchandise mix of that particular retail area. the right size. right brand and so on.MERCHANDISE PLANNING IN UNITS
• The most important component of merchandise planning is stock keeping unit plan. the right color. • Merchandise must be in season.
this provides them with free space and goodwill of the retailers. • Retail outlets in today organized sector avail of an effective bargaining position against suppliers and enjoy liberal support in making payments. breadth and depth.
• There are four constraining factors that influence the design of the optimal merchandise mix: • Budgetary constraint—The retailer has to balance the resources and the optimal merchandise mix. • Most local brands just place their products with small retailers. There rarely will be enough financial resources to incorporate all three dimensions of variety.
• A retailer has to consider about the warehouse space. • Most of the small grocery and durable retailers do not have warehouse support. along with the shelf space. If variety is to be stressed enough empty space is needed to separate the distinct merchandise lines.CONSTRAINTS………………
• Selling space constraint—Space available to a retailer is relatively fixed and must return a profit. while deciding about the merchandise order.
. they have to stock in the store only.
Turnover is the result of intelligent buying based on sound assortment planning and realistic estimation. Therefore the retailers merchandise mix should have the potential to generate high sales turnover.
. • Improving turnover is one of the key ways to improve profit.CONSTRAINTS……………
• Turnover constraint—Turnover is an extremely important factor in buying and selling merchandise profitably.
. • Retailers have to consider the competitive environment and competitive dimensions prevailing in the trading area.CONSTRAINTS………………
• Market environment constraints—It refers to the limitation on account of the target market residing in the area within the walking or short time distance to the store. • Target market preferences and taste directs the development of optimal merchandise mix.
two wheelers. local made soaps. gasoline and consumer durables from company owned stores. such as bread.TYPES OF SUPPLIERS
• Manufacturers and primary producers—This category sells cars. handicrafts etc.
. • In semi urban towns the manufacturers approach the retailers to provide the required merchandise at their shops directly. Manufacturers normally have a sales office attached to a production unit or in a convenient location for the retail customers.
.TYPES………. They take ownership of the goods between the producers and the retailers.. • In the Indian context the retailers prefer to deal with the wholesalers dealing in a variety of products as they can purchase most of their merchandise from one shop.
• Wholesalers—They accept small orders from retailers. They usually make profit from the merchandise they sell to the retailers.
. This is a very common source to the retailers in the semiurban areas or in major trading areas.
• Agents—They provide the purchasing and delivery facility to the retailers against negotiated comm issions on the percentage of the total value. • Other retailers—Here the category comprises of those retailers who operate on a larger scale.TYPES……………. Agents are responsible for the safe transport and delivery of goods. They cater to the needs of the immediate consumer along with the small retailers.
. • A. delivery—In order to avoid sales loss. a retailer is generally interested in the assessment of a supplier’s capacity to deliver ordered goods in time as per the specifications. service. service—This encompasses all those facilities and support extended by the supplier to add value to the goods or services.CRITERIA FOR SELECTION OF SUPPLIERS
• A supplier’s initial assessment is made according to his ability to satisfy retailers in four main areas i. price. product range and quality.e. • B. It includes pre and post sales services by the supplier. Delivery.
• Product range and quality—Retailers will assess the product range available with the supplier and the quality standard maintained while manufacturing and delivering. Certain parameters like technical capability design expertise.
. • Price—Retailers will always have relative assessment of the different suppliers while deciding the purchase. benchmarks etc will be considered.CRITERIA FOR SELECTION…………. Retailers will also evaluate the offer from the perspective of a consumer in terms of value for money and consistent price policy.
. pastry and cookies etc. It systematizes grouping of products into small units so as to meet consumer needs. • Today the relevance of category management is driven by the emergence of multiple number of brands in each product category. cakes.CATEGORY MANAGEMENT
• A Category is the basic unit of analysis for making merchandising decisions. As they enjoy similar characteristics retail marketing mix is designed on similar lines to a great extent. • Category management is the process of managing a retail business with the objective of maximizing the sales and profits of a category rather than the performance of individuals brands or models. Products are naturally grouped into similar consumer taste preferences and product characteristics like salty snacks.
• Advantages of category management: • Increased sales—Use of top selling products increases sales per transaction.
. • Reduced Inventory Investment—Menu based purchasing reduces the inventory and handling costs. • Improved Route and Warehouse efficiency—Route merchandising and product selection is simpler and comparatively more efficient.CATEGORY MANAGEMENT………….
These have led the retailers to rethink • Grocery and food retailers—They are basically known as convenience goods. toothpaste.g. eggs.MERCHANDISE MGMT PLANNING IN VARIOUS RETAIL SEGMENTS
• Specialty Retailers—These goods are those for which customers have a preconceived need and for which they make an effort to come to the specialty store to purchase. E. bread. In the case of specialty retailers the merchandise planning system requires high degree of synergy with the ordering system in place. It has been observed that consumers put a minimum amount of thought into the purchase of these goods.
lines etc. vendor.It is used to evaluate and control the performances of the merchandise. • Merchandise management involves decisions related to inventory. which in turn is the largest investment for any retailer. Here the best merchandise performance measure is gross margin return on inventory(GMROI). and re-order. The objectives range from the corporate strategic objectives to the micro level objectives regarding the merchandise assortment.FINANCIAL OBJECTIVES OF MERCHANDISING
• Merchandise planning consists of establishing objectives and devising plans for obtaining these objectives. stocking.
.EVALUATING MERCHANDISE PERFORMANCE
• Retailers usually confront situations where they have to revise various vendors. new arrivals and poor performance of a particular merchandise. relationship with vendor. These decisions may be because of changes in consumer preferences. departments during merchandise management.
Customer service in Retailing Customer service—Managing gaps between expectation and performance Loyalty Programmes Classification of Loyalty Programmes • Sector specific loyalty Programmes • Managing Loyalty Programmes
.UNIT 1 CHAPTER 7 RELATIONSHIP MARKETING IN RETAILING
• • • • • • • • CHAPTER HIGHLIGHTS: Introduction Drivers of relational strategies in retailing The evolution of relationship marketing Relationship marketing strategies in retailing Relationship marketing in the organized Vs Unorganized retail sector.
• The intimate nature of the relationship the industry shares with the ultimate customer suggests that the closer the retailers get to the customers the better they can provide the services to them. services marketing. customer retention.
. maintaining successful relational exchanges. • Relationship marketing is implemented through various components like rewards.INTRODUCTION
• Relationship marketing includes all marketing activities directed towards establishing developing. issues related to interpersonal and social interaction. customer services and involving of customers in planning and execution of retail strategy. Relationship marketing includes service quality.
websites. Systems like call centers.EVOLUTION OF RELATIONSHIP MARKETING
• Customer relationship marketing CRM had its origin in two unrelated places.
. • One was U. Here the emphasis is on understanding customer needs and then solving problems. Under the direction of marketers information technology was developed to increase the efficiency of selling what the company makes. • The second place where the CRM concept developed was in business to business marketing in Scandinavia and northern Europe.S. where it was driven by technology. customer service support teams came up to manage relations with customers. This came to be known as database marketing.
RELATIONSHIP MARKETING STRATEGIES IN RETAILING
• These strategies refer to any effort that is actively made by the seller towards a buyer and is intended to contribute to the buyers customer value above and beyond the core product. These include the following strategies: • Personalization benefits • Special treatment benefits • Rewards • Communication benefits.
These retailers have a wide reach and cater to customers of a wide area. In most cases they have a wide range of merchandise stocked with them so that the customers can have their pick. They provide customized services to their customers. The USP of these stores is the locational convenience they provide to their customers. Both these provide various standardized services to their customers. The unorganized retailers comprise the kirana stores located in neighborhood areas. These stores have a limited reach in the sense that people living in a particular locality visit stores in their own area only.RELATIONSHIP MARKETING IN THE ORGANIZED Vs UNORGANIZED SECTOR
• Broadly the organized sector is divided into two categories in store retailers and non store retailers.
and quality into closer alignment. Customer service refers to the rightful blend of activities involving all areas of retail business. It provides time and place utility for the customer. • The provision of quality customer service involves an understanding of what a customer wants and eventually buys and determining how additional value can be added to the product being offered. • Quality of the product or service is a must as customers will not accept inferior quality product. • Relationship marketing believes in bringing marketing.CUSTOMER SERVICE IN RETAILING
• Quality and customer service are the key elements in this relationship. customer service. This will ensure that the customers strongly believe that the retailer offers good value for money.
. With poor quality core products good relationship marketing cannot be exercised.
The four methods which customers imply to rate the product are: • Knowledge • Standards • Delivery • Communication
.CUSTOMER SERVICE—MANAGING GAPS
• The retailers need to reduce the gap between the expectation of the customer and the performance of the product.
Here the customers expect and get some tangible benefits for their loyalty. maintain.LOYALTY PROGRAMMES
• Retailers focus on loyalty programmes since it is believed that : • Loyalty customers are cheaper to serve—Here retailers are not required to invest. to attract.
. They are therefore willing to pay a higher price up to a point to avoid making a switch. • Loyal customers are willing to pay more for a given bundle of offerings—Customers who stick to one retailer do so because the cost of switching to another supplier is too high. and communicate with loyal customers.
• The word of mouth marketing is very effective and many stores justify their investments in loyalty programmes by seeking profits not so much from the loyalty customers as from the new customers the loyal ones bring.LOYALTY PROGRAMMES
• They act as effective marketers for the stores offerings—The word of mouth marketing is very effective and loyal customers are the strongest advocates for patronization of a particular retail store.
Alders etc.CLASSIFICATION OF LOYALTY PROGRAMMES
• They are classified as follows: • Multi sector programmes—There are unpartnered and partnered loyalty programmes. They have access to data harvested by the programme through its operator. • True Coalition programmes—The programme management is independent of any of the partners. The partners have contracts with the operators of the programme to redeem the currency of the programme.
. • Single operator. Multi partner Programmes—Tesco’s club card is an example of a single operator programme. However the club card holders can collect when they buy from various partners like Marriott. National Tyres.
. Firms in the mobile telecom sectors have been diverting beyond communications into the financial services sector through mobile payments. • Telecom—The overall telecom market around the world has been very volatile with non telecom firms joining the battle for consumers. and mobile cash systems. Most retailers accept that they need to know more about their customers and that the knowledge should be centrally recorded so that it is available to employees when they need it.SECTOR SPECIFIC LOYALTY PROGRAMMES
• Supermarkets and General Retail—Supermarkets face intense competition not only from other supermarkets but also from supercentres and convenience stores.
SECTOR SPECIFIC LOYALTY PROGRAMMES
• Travel and Entertainment—Airlines.e.
. and priced in different ranges to allow their customers to redeem the points as per their disposition. • Hospitality Industry—A hospitality chain must have a mix of both kinds of properties i. business and leisure. It should be accessible and well administered. An important factor to be considered is the user friendliness and communication of the programme. hotels and even car rental firms have focused on improving customer service and offering more relevant options to encourage customers to buy more. small as well as large.
In most franchise agreements franchisees pay a fee to the franchisor. In the same manner the efficient management of the loyalty programme depends on the franchisor.
. Funding issues relating specifically to loyalty programmes become a challenge and a constraint for their successful implementation. This fee supports mass marketing activities.LOYALTY PROGRAMMES IN THE FRANCHISE RETAIL FORMAT
• It faces a distinct set of challenges in the successful launch and operation of a loyalty programme.