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Service marketing in retail sector

Service marketing in retail sector

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Retail marketing
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Service Marketing Assignment

ABVIIITM, GWALIOR

SERVICE MARKETING IN RETAIL SECTOR

Submitted to: Prof. Deepali Singh

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Submitted by: Pankaj Rawal (ipg_2008064)

Table of Contents
Service marketing in Retail sector ................................................................................... 2 Contribution in GDP ....................................................................................................... 2 IT and Retailing Services ................................................................................................ 2 Types of products in retail market ................................................................................... 3 Retailer services .............................................................................................................. 3 Transfer mechanism ........................................................................................................ 4 Challenges....................................................................................................................... 4 Levels of retail services ................................................................................................... 5 Major Players of retail sector World Wide ....................................................................... 5 Major Players of Retail Sector in India............................................................................ 5 Retail Marketing Mix ...................................................................................................... 6 Retail marketing planning ............................................................................................... 9 Consumer behavior and retail services .......................................................................... 11 Service design and delivery ........................................................................................... 14 Brand Equity ................................................................................................................. 15 Customer Service .......................................................................................................... 15 Communication Mix ..................................................................................................... 16 Pricing........................................................................................................................... 19 Drivers of service switching .......................................................................................... 21 Common CRM applications in Retailing ....................................................................... 22 Service guarantee .......................................................................................................... 22 Service quality .............................................................................................................. 22 Models used in Retails service sector ............................................................................ 27 List of Case Studies ....................................................................................................... 27

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Service marketing in Retail sector
Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers are part of an integrated system called the supply chain. A retailer purchases goods or products in large quantities from manufacturers or directly through a wholesaler, and then sells smaller quantities to the consumer for a profit. Retailing can be done in either fixed locations or online. Retailing includes subordinated services, such as delivery. Second hand retails are non-profit sales online retailing used for B2C (Business to Customers) transactions and mail orders.

Contribution in GDP
Contribution of total services in worlds GDP is on average 62.9%. The retail sector shares in GDP for some countries are as follows: India USA China Brazil 10% 10% 10% 6%

IT and Retailing Services
Types of retailing services by implementing IT:         Supply chain system Enterprise retail system Store operation system Inventory management system RFID (Radio Frequency identification) E-tailing services M-commerce MIS (Management information system)

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Types of products in retail market
 Food products  Hard goods or durable goods - furniture, appliances, electronics, sporting goods, etc. these goods do not quickly wear out and provide utility over time.  Soft goods or consumables - apparel, clothing, and other fabrics. These goods are consumed after one use or have a limited period in which you may use them.

Retailer services
There are the many types of retailers by marketing strategy:  Department stores: A very large stores offering a huge collection of "soft" and "hard goods; often endure a resemblance to a collection of domain stores. A retailer of these stores carries range of categories and has broad variety at average price. They also offer substantial customer service.  Specialty stores: A typical specialty store provides attention to a particular type and provides high level of service to the customers. Branded stores come under this format. For example if a customer goes to a Reebok or Gap store then they will find just Reebok and Gap products in the particular stores.  Hypermarkets: It provides variety and huge volumes of high-class merchandise at low margins. The operating cost is relatively less than other retail layouts.  Discount stores: it tends to offer a wide range of products and services, but they compete on price offers extensive range of merchandise at reasonable and cut-rate prices.  Warehouse stores: warehouses that offer low-cost, high-quantity goods loaded on pallets or steel shelves; warehouse clubs charge a association/membership fee;  Variety stores: these offer particularly low-cost goods, with limited choice  General stores: a rural store that deliveries the main needs for the local public  Supermarkets: It is a self-service store containing mainly of grocery and limited products on non-food items.  Convenience stores: It is found basically in residential areas. They provide narrow quantity of merchandise at more than regular prices with a quick counter. This store is perfect for 3

emergency and speedy purchases.  Malls: It has a variety of retail shops at a single opening. They provide with products, food and entertainment under a roof.  E-tailers: The customer can shop and order by the means of internet and the products are dropped at the customer's doorstep. Here the retailers use drop shipping system. They take the payment for the product but the customer gets the product directly from the manufacturer or a wholesaler.

Transfer mechanism
There are numerous means in which consumers can have goods from retailers:  Counter service: where products are out of reach of buyers and must be obtained from the seller.  Delivery: where goods are transported directly to consumer's homes or workplaces. Ordering by telephone is now common, newspaper, television advertisement or a local restaurant menu. Direct marketing, comprising telemarketing and television shopping channels, are also used to make telephone orders.  Door-to-door sales, where the salesperson sometimes travels with the goods for sale.  Self-service: where goods may be controlled and examined earlier to purchase.

Challenges
To accomplish and maintain a position in an existing market, a potential retail establishment must overcome the following obstacles:  Regulatory barriers including  Limitations on real estate purchases:  Limitations on foreign investment in retailers.  Critical taxation structures.  Lack of developed supply chain and integrated IT management.  High competitiveness among present market participants, resulting low profit margins.  Absence of properly educated and trained work force.

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Levels of retail services
    Self-service: The keystone of all discount stores, it allows customers to save money by doing locating, comparing and selecting process on their own. Self-selection: Customers find their goods own its own, though they can ask for help. Limited service: it this customer need more support and information. Full service: Sales people are ready to assist in locate, compare and select process. The high staffing cost, the higher quantity of specialty goods, slower-moving items, add up to high-cost retailing.

Major Players of retail sector World Wide
      Wal-Mart (US) Carrefour (France) Metro (Germany) Tesco (UK) Target Corp. (US) Amazon (US)

Major Players of Retail Sector in India
       Pentaloon Retails K. Raheja Group Tata Group Landmark Group Bharti Walmart Relience Provogue india

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Retail Marketing Mix
Retail marketing mix is the term used to define many elements and methods required to frame and execute retailing marketing strategies. It is used to regulate the optimum mix of retail marketing activities and co-ordinate the elements of the mix. The goal of such co-ordination is to have a separate retail image in consumer’s mind. The mix varies according to market and the type of product or services. Elements of firm's retail marketing mix              Communication with customers customer service, merchandise assortments Personal selling People Physical evidence price, Process Store ambience Store design Store image Sales incentives Store location

Composition of Key elements of marketing mix The 7P's of the retailing marketing mix are as follows: Place (store location) 6

     

Channel management Channel structure Retail distribution Retail logistics Retailer image Target market

Product (merchandise)       Price       People    7 Availability Customer interaction Efficiency Competitiveness Costs Incentives Profitability Status Quality Value for money After-sales services Branding Packaging Product development Product features and benefits Product management

  

Effectiveness Internal marketing Staff capability

Process      Database management Order processing Service delivery Standardization Queuing System

Promotion       Advertising Developing promotional mix Direct marketing Public relation Sales management Sales promotions

Physical evidence      Exterior design Equipment Interior design Surrounding environment Other tangibles (like business cards, Stationary billing etc.)

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Retail marketing planning
The marketing mix planning Retailers should be channeled by three basic principles:    The mix must be steady with the target customer’s expectations Elements must be reliable with each other to have systematic co-operation The mix must have effective competitive strategy.

Retail marketing plan consists of:     Setting objectives Identifying various other options available. Formulate the whole plans Sequencing of all planned retailing activities. Types of retail marketing planning ICT is a key enabler in retail that allowed the retailers to grow at faster rate. As a result the retail sector is having more productivity and having a large number of consumers. Short-term       Tactical planning retail marketing position Strategies for a year Objectives for a year Actions budgets and controlling. Coordinating retailing activities within subdivisions

Long-term 9

    

Major factors affecting the retailer. Forces affecting the retailer. Long-term objectives. Resources required. Regular updates

Strategic retail planning  This is the process of having a strategic fit within the retail organization’s abilities and its changing and challenging opportunities.     developing a clear corporate mission supporting objectives creating business portfolio Coordinating functional strategies.

Corporate level Planning  Retail management should plan which business the retailer should stay in and which new areas to pursue.    Design a system to troubleshoot the unforeseen situations. Taking advantage of opportunities at right time. Defining the corporate mission and objective.

Approaches to planning  Top down approach: In this approach Retail management set its goals and plans for all the level of management.  Bottom up approach: In this approach various components prepare own goals and plans and send them up for approval 10

Importance of Retail marketing planning        Aggressive and complex marketing environment Each element has conflicting needs External and internal factors Maximizing return on investment Maximizing revenue Maximizing profit Minimizing costs

Consumer behavior and retail services
Objective for identifying the Consumer behavior in retail sectors      Study the buying behavior of the customers Study the reason for buying from a particular outlet. Study the new trends in buying patterns. Understanding the needs of the customers Providing the recommendations to serve efficiently, quickly and conveniently

Steps to be followed to predict consumer behavior      Adaptation with the current retail concepts Collecting database from an individual through questionnaires. Analyze and interpret the data obtained from analysis. Obtaining the conclusions Providing suggestions based on analysis made from primary and secondary data.

Factors responsible for the development of the retail sector:     11 Rising incomes improvements in infrastructure Liberalization in the Indian economy Shift in consumer demand to foreign brands

 

Internet revolution of domestic and foreign retail chains

Key challenges for retail industry LOCATION: the retailer must refer to the strategic plan:  Exploring alternate areas.  Determining the type of store required  Evaluating the alternative store sites     MERCHANDISE PRICING TARGET AUDIENCE: Consumer Pull SCALE OF OPERATIONS: It includes all the supply chain activities.

Other challenges           Absence of developed supply chain Absence of integrated IT management. Cost of business operations Facing competition. Lack of well trained work force. Lack of skills. rapid price changes Restrictions in real estate purchases. Taxation. Uneasy approval for foreign investment

Six types of perceived risk:  Functional  Will the product perform as we expect it to?  Will this product be as good as what it was from time?"   12 Physical Social –

 What will people think about the product?   Psychological Financial –  Can a customer afford the purchase?  Time

Factors that influence actual behavior of the customer     Cash (Household Income) Competition Convenience Customer involvement

Customer Expectations           Creating Trust Customers’ Problem Solving Ability Customer Convenience Employ’s Service Ability Employ’s Involvement Ensuring Quality Personal Interaction Keeping Promises Physical Evidence Store Interior and Layout

Customer Delight: GOING BEYOND SURVIVAL    13 Consolidation Diversification Processes

1. Internal process 2. External process    Average transaction value Items per receipt Conversion rate

Service design and delivery
A consumer goes through several stages before purchasing a product or service. NEED INFORMATION GATHERING

EVALUATION OF ALTERNATIVES PURCHASE OF PRODUCT/SERVICE POST PURCHASE EVALUATION

1. Step 1 - Needs leads customers to buy products and services. Need act as catalytic agent which activates the buying decision of customers. 2. Step 2 – A customer tries to gather information related to the products or a service based on his needs. A customer can gathers information through the following sources:
 

Personal Sources – family, friends, coworkers etc. Commercial sources - Sales people, Advertisements, Packaging of a particular product, Displays.

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 

Public sources – Radio, Newspaper, Magazine Experiential sources – Past experiences of people who have already used the similar type of product.

3. Step 3 – In this step we evaluate the many alternatives available. After gathering information customer tries to choose the available best options. 4. Step 4 –In this stage customer purchases the product. 5. Step 5 - Post purchase evaluation

Brand Equity
 Strategic Positioning: Building store's identity by determining  who are the customer to be served  What are their needs?  What are the learning from past experiences based on need analysis?  Merchandise Assortments  Success depends on figure out a niche in the marketplace.  The focus of the merchandise assortments is on related items only.  Visual Merchandising:  organized and displayed layouts  Design and concept.  Pricing

Customer Service
An effective Customer service starts with an approach and strategy whose purpose is not just to sell product but also build a strong and long term relationship with the customers. For the very first time, Customers believes a company when their questions are answered properly, get what they needed at right time, get the product delivered and installed Marketing Marketing consists of all the possible means through which a customer and consumer can be approached through various seminars, newspapers, e-mails, workshops, campaigns etc. Design of logo 15

of a company matters a lot to make the company easy to recognize. Retail communication mix Retail promotion program’s main motive is to generate more and more sales. And in order to attain this goal retailers adopt several methods (like persuading, informing and targeting customers. Thus, the key functions of the retail promotion programs are:  Information: It is the primary function of a retail promotion program. Retailers provide information to the customers about company, its products and services they offer.  Persuading: Persuading involves attracting people to visit their store and purchase its product and services.  Reminding: reminding its customers regularly about company’s products/ services and benefits, to gain customer loyalty.  Paid Impersonal Communications: Sales promotional Advertisement, websites and store atmosphere are perfect examples for paid impersonal communication.  Paid Personal Communication: Sales people provide the paid personal communication to the customers. The process of Personal selling involves sales people to assist customers to satisfying their needs by providing the required information.  Unpaid Impersonal Communication: To generate unpaid impersonal communication we need publicity. It can be done usually through the means of a news story, in media.  Unpaid Personal Communication: retailers communicate with the customers through word of mouth between people about the retail product and services.

Communication Mix
Communication is an essential part of the retail marketing strategies. Mainly, communication is used to provide the required inform to the customers about the retailer and its services. It is also used as a tool for establishing the store image. 4 types of communication mix:  Advertising

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1. ―Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor.‖—American marketing association 2. It promotes the sales of the product/services to influence the public views about a company positively, and also get political supports and supporting a particular cause. Features of advertising 1. Competitive act. 2. Mass communication process. 3. Informative action. 4. Non-personal presentation. 5. Persuasive Act. Types of advertising 1. Consumer oriented Or Persuasive Advertisement. 2. Classified Advertising. 3. Financial Advertising. 4. Informative Advertising. 5. Institutional Advertising or Corporate Advertising.  Sales Promotion. ―Sales Promotion consists of diverse collection of incentive tools, mostly short term designed to stimulate quicker or greater purchase of particular product or services by consumers or the trade.‖ The characteristics of Sales Promotion are:  Personal Selling. 1. Personal Selling.  Objective of Personal Selling.  Advantages Of Personal Selling  Disadvantages of Personal Selling. 2. Publicity and Personal Relations.  Publicity and Public Relation.

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The most common tools are:         Advertising Direct Marketing Promotion Personal Public Relations Sales Selling

Different approaches for targeting and positioning the customer

Advertising Direct marketing Personal selling Public relations

For advertising a company uses following mediums:      Advertisements Brochures and booklets Point of purchase display Posters and leaflets Press

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Television, radio and internet etc.

Determining the Advertising budget
As there is not any formula to determining the advertising budget. Following are the main methods to determine the budget:  The percentage of Sales method: It is the commonly used method to determining the advertising budget. According to this method the budget is having fixed percentage of sales. In this method we simply apply and allows the retailers to set a limit on their promotional activities which depends on the market conditions for advertising needs.  The Competitive Parity Method: In this method budget is based on the estimated amount of money spent by the competitors. It is much riskier is risk because of wrong information can be there which leads to under estimating or over estimating the market conditions to grab the growth opportunities.  Research approach (or Task and objective Method): In this method budget is determined on the basis of a research of effectiveness of advertising media. And formulating the advertising goals and defining necessary tasks to complete the goals. After that we determine the cost for each step.

Pricing
According to the concept of retailing, the retailers don’t sell products in wholesale; instead they sells the goods in small units to the end customers.  Cost plus Pricing Mechanism

Cost plus pricing mechanism works on the the following principle: Cost Price of the product + Profit (Decided by the retailer) = Final price of the merchandise.

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According to this strategy the retailer adds specific extra amount to actual cost of the product to earn share in the profits.  Cost plus Pricing
1. 2. 3.

The profit of the retailers is taken into account. It is an easy way to determine the appropriate price of the products. Increase in retailer price is directly proportional to increase in cost price.

Manufacturer Suggested Retail Price (Recommended retail price or List Price)

Manufacturer suggests retail pricing strategy, according to that the retailer fixes the price of the goods  Competitive Pricing

According to the competition in the retail market with excellent customer service to the customers.
1.

The price of the goods is almost similar to the existing competitor’s and adds more attractive benefits for the customers.

2. 3.

Customer satisfaction is first priority. Building a long term relationship

Pricing Below Competition In pricing below competition, the price of the goods is kept lesser than the competitors. Prestige Pricing (Pricing above competition) In prestige pricing mechanism, the price of the goods is set little bit more than what the competitors offers but only under the following circumstances:     20 Brand image of the store Excellent customer service Exclusive Brands at the store. Merchandise not available at any other store

 

Latest Trends Prime location of the retail store

Psychological Pricing
 

Certain price which the consumer willingly to pay in exchange with some additional benefits. To sets a psychological price is based on expectations of the customers.

Multiple Pricing In multiple pricing, the retailer sells many products at a single price. Discount Pricing In discount pricing, the retail company sells its goods at discounted price to clear out the stock.

Elements of retail Price In this the cost of the goods and other expenses are involved. These expenses may be Fixed or variable.  Fixed costs:  Overhead cost  expenses that may not vary according to manufacturing cost  Variable costs:  Expenses that vary with service or goods quality.  Actual cost doesn’t depends on the number of product produced  Depends on advertising or promotion expenses.

Drivers of service switching
   21 Core service failures Service encounters failures Service recovery failures

 

Inconvenience. Pricing

Common CRM applications in Retailing
 Retail STAR: Cam Commerce’s Retail STAR integrates a CRM module into its retail application. The features focus on customer retention and maximizing the current sale, including suggested up-sells, buyer history, and email marketing.  Epicor Retail Solutions: The best-of-breed retail CRM application from Epicor includes campaign and promotion management, key performance metric management, rewards management, and a rich customer database to help retailers connect with clients.  Microsoft Dynamics CRM: This fully integrated CRM software is available in two packages: Microsoft Dynamic RMS Store Operations for individual stores and RMS Headquarters for larger operations. Supports CRM, marketing, and inventory management.  NetSuite Multi-Channel Retail Management Suite: NetSuite Multi-Channel Retail Management Suite can help both online and traditional businesses manage their retail marketing. Includes features such as email marketing management, search engine marketing and in-store discounting.  Counter Point by Radiant Systems: Today, both small retailers and larger buyers need the ability to market to their customers and track their efficiency. Counterpoint allows users to manage email marketing, discounting, customer information, and more.

Service guarantee
      Unconditional: no elements of surprise Comprehensible: easy to understand and awareness of the benefits of the guarantees. Meaningful: make importance to the customers and provide values to service failure. Easy to invoke: more on service provider and less dependent on the customer. Easy to collect: design problem-free guarantees process. Credible: offers made in a believable manner

Service quality
Five key dimensions of retail service quality: 22

Physical aspects:  store appearance  Store layout.

Reliability:  keeping promises  ―Does things right‖.

Personal interaction:  inspire confidence  trust from the customers

 

Problem solving:  Handle the potential problem. Policy:  operating hours,  Parking and so forth.  payment options,  store charge cards,

Needs of service quality           Competitive pressure. Coordinate processes across many locations. Customer driven processes Horizontal business processes approach. Easily accessible information Employee empowerment Greater information Sharing. Organizational and process flexibility. Rules-based and real - time decision support systems. Quick response. Worldwide relationships.

Categorization of retail failure  Service delivery failures

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FAILURE CATEGORY

DESCRIPTION

policy failures slow /unavailable service system pricing failure packaging errors Out of stock Product defect Alterations and repairs 

Service policy Incompetent employees failure Inconsistency in labels and scanner Incorrect labels, missing items Items advertised but not on shelf poor manufacturing quality Incorrect alteration and repair delays

Failure to respond to customer needs and requests Special order or request Damaged or incorrect delivery of special orders, or orders requiring personalization Admitted customer error Customer acknowledging his mistake for making incorrect purchase

Un prompted and un solicited employee actions Mischarged Pricing error, incorrect change, failure to honor, promised sales price Attention failure Moody staff, ignoring the customer, shrinking of responsibility Embarrassments Failure of removing security tags, incorrect size delivery Accused shoplifting Wrongly adjudicate a customer as a shoplifter

Retail Service quality gaps Gap 1: consumer’s and management’s expectations 24

  

Market research orientation, Level of management upward communication,

Gap 2: improper service quality standards.     Commitment to service quality Goal setting Task standardization Perception of feasibility

Gap 3: service performance gap.     Employee job fit Perceived control Technology job fit Team work

Gap 4: service delivery   Horizontal communication Propensity to overpromise

Gap 5: This gap depends on size and direction of the four gaps     Gap 1 Gap 2 Gap 3 Gap 4

For closing retail service quality gap: Gap 1 can be closed by:    Understanding customer expectations by doing complaint analysis, research etc. Improve understanding by direct interaction in between company and the customers Improvement in upward and downward communication

Gap 2 can be closed by: 25

     

Establishing realistic quality goals Improving customer oriented service standards Measuring performance Providing requisite training Reinforcing and Communicating Rewarding managers and employees

Gap 3 is closed by:          Better decision-making with accountability develop reward systems for employees developing innovative recruitment Encouraging teamwork. ensuring service performances Resolving conflicts among employees Technical training Troubleshooting problems understanding importance of a particular job

Gap 4 is closed by:      Effective advertising Allowing service providers to show advertisements before customers. consistent service standards identifying uncontrollable reasons in service performance Service distinctions

Gap 5 can be closed by minimum promises and performance at maximum efficiency.

Tools to address retail service quality analysis:    26 Seeking Sustainable Success: Integrating Social Responsibility and Quality in the government sectors and Service. Pareto Chart : Quality Tool Process Optimization Flowchart

Models used in Retails service sector
   Game theory model for pricing Adaptive forecasting model Pentagon and triangle model (Value chain model)  Pentagon 1. Place 2. Product 3. Communication 4. Value 5. People  Triangle 1. System (IT) 2. Logistics 3. Partners (relationship management)  Strategic Profit Model 1. Margin management 2. Asset management   Gap model Franchising model

List of Case Studies
Some case studies are available for different retail companies are at following link: http://businesscasestudies.co.uk/case-studies/by-industry/retail.html#axzz2CYzBd3kD

Some specific case studies available for the retail services marketing are as follows:  Infosys retail solutions case studies: (http://www.infosys.com/industries/retail/casestudies/Pages/index.aspx)  Kraft Foods Partners with Infosys to Implement SAP Test Automation Center of Excellence  Empowering NOL to Keep Pace with China Customs' Regulations 27

 ShoppingTrip360 Caselets  IT Process Standardization for a European Retailer  Next Generation Loyalty and Procurement System Helps ABS Ramp up Customer Satisfaction  Hannaford Brothers: Improving the Odds  SYSCO Transforms its Distribution Supply Chain  Building a Strategic IT Road Map  The Binding Glue for a Large Supply Chain Revamp  Enterprise Effectiveness through Yantra Implementation  Global PeopleSoft HRMS Upgrade  LMUK Builds UK's Largest Loyalty Program   APEX Digital Imaging, Inc. :( http://apexdigitalimaging.com/blog/case-study-retail-service/) Supply chain case studies:(http://www.supplychain.rrd.com/wwwGTS/supply-chaincasestudies/retail.asp)  Consumer Electronics Retailer  Complete Retail Packaging Solutions North America  Complete Retail Packaging Solutions Europe  Next Generation Route to Market    Loncolon Harris case study: (http://www.lincolnharris.com/services/Retail-Services-CS.asp) Automotive Retail Services : (http://www.colliers.com/en-US/AutoRetail/About/CaseStudies) IBM case studies: (http://www01.ibm.com/software/success/cssdb.nsf/topstoriesFM?OpenForm&Site=gicss67retl &cty=en_us)  Bernard Chaus innovates with fashion trend analysis ... Using a cloud-based solution backed by IBM to improve retail visibility and decision making  Hong Kong Department Stores  J. J. Keller and Associates, Inc.  ALAIN AFFLELOU achieves a clearer view of performance ... Creating new insight into operational performance with IBM Business Analytics  Tele Ticket Service drives improved ticket sales ... Launching new business intelligence services with IBM software and IBM Business Partner Numius  28 Subhiksha Rise & Fall – Case Study (http://www.retailmantra.com/subhiksha-rise-fall-case-

study/)  TRENT: (http://www.indiaretailing.com/case_study-main.asp)  TRENT - Powered by SAP NetWeaver, mySAP ERP A Case study  How to fuel an innovationin concept: The NRL thrust A Case study

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