RETAILING

Special characteristics affecting retailers:

Small average sale impulse purchases

Retailer’s strategy
↓
popularity of stores: imp. bec. people get used to place

retailing: purpose of purchase important → end user, personal consumption

wholesale: buy + sell to another user

W→ R → C’er
Maximizing efficiency for supplier and manufacturer. By retailing the retailers needs and wants match with c’er
Manufacturer makes use of : economies of scale → efficiency ↑
Specialization →
C'ers consume small quantities but want variety→ large variety of products → utility maximization for the c'er.
Convenience place + time → time + place utility , in order to realize this manufacturers establish manuf. Outlets
in every corners.
→ retailer take this function → sorting process, collects assortments of products from diff. manufacturers and
makes assortments , combines them meaningful to its target market.
Ex. migros→ collects assortments of products and depending on the c'ers they make meaningful assortments.
→ demanded by the end user.

Retail outlets: we expect the retailer to attract c’ers to these outlets. Difficult to reach all c’ers.
→ mail order sales can be the solutions. → ↑ place utility
→ electronic sales. ↑ time utility
saving time not exact
preferred by the people having time scarce. Time utility.
Captive people → disabled
→ old people in terms of time saving these sales can se good ideas.
→ little children
working women → ↑ the number of working people
time saving, depending on products → standardization → labeled products
impulse purchases are eliminated by mail order, but in retailing the impulse purchases are imp. → ↑ the amount
of purchases in addition to mailing list

sorting process: bulk breaking function

from the c’er points of view: most c’er want one stop.
Shopping which are supermarkets + shopping centers aimed to satisfy this need of c’er.
Specialty stores→ hyper markets
• butchers
• vegetable stores not satisfying this need
• bakery
• pharmacy
located near each other → butcher + bakery + drug store
→ they together form a shopping center, traditional neighborhood.
→ c’ers want to have comparative shopping

isolated store: big specialty stores, furniture stores: lots of alternatives

restaurants from strings, but who wants to differentiate itself, location will be isolated.
Retailer assortment strategies:

Wide Narrow → category narrow

Department store specialty store
Deep supermarket off – price chain
Supermarket lawn care services

Variety store fast food restaurant

Shallow retail catalog vending machine
Showroom box store

# of varieties flea markets under a certain product group.

Toy “R” us: category killer: in that category it has everything → wide + deep assortments

Merchandising:

Refers to all activities where a good is acquired and made available to c’ers at place, time, price, quantity

• merch. Philosophy: some people responsible for sale + purchase

• sales philosophy: sales + purchases functions are considered separately

elements of retail strategies:

→ situation analyses: org. mission: reason for existence
need appr: identify need product appr.: satisfy with product
ownership + man alternatives
goods / service category
→ objectives: sales, profit, satisfaction of public, image
→ identification of consumers → mass marketing
→ market segmentation
→ multiple segmentation
leased store: divan in migros: → assortment
→ specialization
→ attract additional c’ers
→ impulse purchases will be imp.
Adv. of divan: → impulse purchases
→ c’er body will increase

flower shop in migros → do not have any loyal c’ers

newspaper stand

such stores are parasite stores for retailers. They do not attract c’ers. They do not have their own loyal c’ers.
→ c’er satisfaction ↑ bec. of one stop shopping.
→ overall strategy: controllable variables
location decision, product mix ( merc. Decision ) , pricing, quality dec.
→ uncontrollable variables
regulations, economic / political conditions, competitors, c’ers

→ specific activities: daily + short term operations

responses to environment
→ control

seasonality: uncontrollable: at least at the SR we cannot control it. → ice-cream

controllable variables:
1. store locations + operations
2. product / service offering
3. store / wage promotion
4. pricing

dept of assortment: diff. items, size, color

width of assortment: diff. products.
Psychological pricing: attract c’ers→ impulse purchases
Marketing concept: needs + wants of the c’ers is imp.
Profit is imp.

Applying retailing concept:

C’er orientation
Coordinated effort: diff. plans
All these activities integrated to ↑ efficiency
Goal orientation
↓
retailer concept → retailer strategy

retailer strategy:
location / distribution
pricing
product ( merchandising )
promotion – image

total retail experience concept: especially in store type retailing , total experience is very imp. related to
promotion / image
how do c’ers position the brand?
- past experiences of c’ers
- total experience: how the functions?
Size of, color of building?
Sales people, packaging imp. → positioning depends on the total experience.

Empowerment: give power to employees to make decisions. To reach the objectives , employees are empowered.

Relationship marketing: long – term

( with all chain Mutually beneficial
member) After sales relations → - discounts
- congratulations cards
Consumer + Suppliers

High end strategy: high quality, high price product, elaborate services, interior + exterior of the store is
attractive, located to high income areas. Retailer personal is skilled.

Low end strategy:

Wheel of retailing model:

A new institution ( supermarkets entering first ) can enter a market only if it has a low end strategy. ( low prices,
limited facilities, price sensitive c’ers.)
Retail institutions: - ownership: franchising
- strategy: hypermarket, specialty stores, convenience stores.
Medium strategy:- moderate prices
- improved facilities
- broader base of value – service conscious consumers.
High end strategy: - high prices
 - excellent facilities
- upscale consumers

Scrambled merchandising:
Pharmacentical shops: traditionally they sell drugs, today→ cosmetics, toys, slippers, sea-side items

LOCATION DECISION:

Most strategic bec. it has LR effects, fixed investment and shops , influences our decisions ( pricing,
merchandising, image, target market )
Location difference:
Nişantaşı hisarustu
C’ers higher income univ. Students with limited income
( young people ) fashion concept different

pricing will be accordingly

changing location will be diff. after years therefore it is a fixed I.

• appropriate location: can help the retailer to be successful , even other strategies are mediocre.
• Wrong location

Trading area: from which the retailer attracts its customers ( gravity approach )
- primary: most of the c’ers are attracted
- secondary
- fringe
→ communication purposes are imp. when you know the primary area
→ chain store: no over lops in the primary area wanted
- discourage competitors
- ↑ c’er satisfaction → adv.

major factors to consider in evaluating a retail area:

- population size + characteristics : size → total size + density → easier to attract
( demographic variables imp )
- availability of labor
- closeness to source of supply : ↓ delivery cost
- promotion potential
- economic base: when + how people in that region earn their incomes ? ↓ variety decreases the risk element
- competitive situation: level of saturation : c’er demand is satisfied→ diff. to attract
- availability of store locations: diff. to find locations, there can be no more available locations.
- Regulations

Site decisions:

• pedestrian traffic: # of people, types of people

• vehicular traffic: # of vehicles, types of vehicles , traffic congestion
direction of traffic imp. → home bound
• parking facilities
• transportation
• store consumption – affinity, retail balance ( other stores )
• specific site: visibility, size and shape of it

Affinity: if stores in a given area complement each other, then the presence of each store will be beneficial for
both of the stores → synergy + complement each other

Retail balance: mixture of the stores

# of stores for each product / service is equal to location’s target potential
Parasite stores: do not have a trading area of their own destination store has comparative adv. over others.
Perceived as most travelling distance→ impulse purchase
C’ers loyalty is very high.

Why int. retailing? –cash flow

Europe – early dev. stage
Internationalization of retailing ↑ : 1980’s 654
1970’s 182
1990’s
IR inst. take their most of turnovers from their domestic businesses.
Push factors seem to be more effective→ problems, constraints faced in the domestic market are imp bec of the
early stage.

Fig. 1,3 stages of int. dev.

An int. institutions enter the market with reluctance
→ high perceived risk + cost
• caution: learning curve →
• ambition: carrefour
all inst. do not follow the solve model
with perceived risk there is a concept → psychic distance
perceived risk
↓
distance → actual ( km ) A = B one location seems to be farther away
→ psychic distance ( perception )
- culture: country similar in culture reduce the distance
- perceived risk element
- diff: financial diff., finding the location

R’er side:

- physic distance is one factor influencing the investor’s decision.

R’ers try to get experience in domestic market first , then they decide to go out→ 1st they go to low risk overseas
market. Some of the experiences can be transferred to the overseas market.

Mavi in new York→ ambitious international retailing.

Fig. 1.4 international dev. Positions.

global→ - target market is homogeneous

- some retailing strategy can be applied without any change.
- least alternative to c’ers needs + wants.
Ex. Mc Donald’s : as in product assortment
- ayran , mc extra, mc royal
although they are global , they take into consideration the local taste → other r mix elements are constant.

multinational→ each inst. Act as independent entities

c’ers needs and wants are imp.

transnational→ in micro marketing

cost effectiveness is most imp. In global → benefit from e of s → efficiency ↑
in transnational we do not sacrifice from c’ers needs + wants and also from the cost effectiveness and efficiency.

Xenophobia: afraid of distance, don’t want to go far away

Fig. 1.5 options for marketing + entry:

→ licensing: no equity owned by the parent co. SPAR supermarkets. Mother co is Dutcu and they have licensing
agreement with Sezginler Gıda. Pay loyalty fee→ in return they get international name and same know – how.
→ Concessions: mother co. more control over R’er
 operation of shops within shops → timberland
agreement more than licensing → enter the market and get 1st time experience in the
market → Pierre Cardin in Printemps
→ Franchising: Franchisee + Franchiser ( parent co )
difference with licensing → more control , very close control bec. they are global firms
( Benetton ) Parent co decide everything assortment determined by the head quarter but franchisee can chose the
assortments.
Although they are global they have a margin to c’er needs + wants.
Beymen Franchisee
Marks + Spencer → initial franchisee was Turk Petrol, due to some financial reasons they bought it to FIBA
holding. ( Finansbank )

Joint Adventure → chose a partner knowing the market and enter the market.
Terminate the agreement because it should benefit both parties.
1950’s→ MIGROS→ Swiss co ( federal of Swiss corporation )
+ Istanbul Municipality
1975’s→ Migros sold its shares to Koç Holding.
1992→ Continent ( French ) + Dogus Holding ( Tansas )
1998→ terminated

Acquisition → buy the store ( Marks + Spencer buying e.g. Karamursel )

Self – Start – Entry → internal expansion

1989→ Metro ( 1997 – joint venture with Koç Holding ) → still direct entry
Carrefour → 1992 direct investment
1996 joint venture with Sabancı
→ CarrefourSa

Co can have more than one entry made:

Licensing – Japan
Franchise – Turkey Marks + Spencer
Joint vent - Canada

Alliances / Collaborate: Diff. retail institutions came together + decide to support each other.
Can take place in diff. areas: * political lobbies
* purchasing
* logistics
ex. Beymen Advantage Card→ Alliance with City Bank
Moscow: Koc entered with shopping center + Row store
Migros 30%
Row 20%
Koc + Enka 50%
Russia: Row gross store ( whole sale + distribution )
Distribution of products of Koc + Turk Henkel
Roe torg ( 1994 ) in Turki countries ( wholesale + dis )
→ active sales , more active in sharing channel
functions: standard, financial supp.
Cash + carry: no support from wholesale, retailer pays and get products.

Toys R us: * direct I in Austria, Canada, France, German, UK, Malaysia, Spain, Singapore
* franchise: Saudi Arabia, United Arab Emirates, Mideast Nations

J.C.Penney: * direct I : Canada, Japan

* License: Portugal, Singapoure
* Anchora Mall in Taiwan
anchor store: main store that has the widest area of attraction → Akmerkez ( Beymen ), Galleria ( Printemps)

* Mail order: Brazil, Russia, Thailand

Table 3.1 Common market entry mechanisms in international retailing:

→ Non – controlling interest: + min risk

- passive position
→ Franchising: + rapid entry to the market
+ using local managers, local owners. As a franchisee, he is more motivated
bec. he is the owner.
- control problem
→ Joint ventures: + more control
+ finding a suitable partner is more imp. ( win – win situation )

→ Mergers + Takeovers: second preferred type of entry

+ location problem solved, chance to chose location, company
+ cash flow immediate ( kebabçı )
→ Internal expansion: 41% of international entries between 60 – 93
+ direct investment , more control
- experimental opening possible
• soft opening: trial opening ( classis ) , experimental opening
• hard opening

Different Motives ( Chapter 4 ) : why people enter international markets?

Hoolander’70
→ political stability or instability has impact on retailing decision.
→ centripetal / centrifugal forces.
(attracting towards the center) ( away from the center )
pull push
→ inadvertent internalization due to political dev. in Europe. ( unintentional )
political fragmentation of east Europe
ing flags, de colonization
Resilient attitude : adaptive to ing political conditions.

→ noncommercial motives:
→ political reasons
retail establishment to USSR markets
Mc Donald’s→ free system, dist. system are thought
Body shop: trade not aid poeicy
Ex. Education sector→ schools of Fethullah Gulen ( imp. political reasons )

→ commercial reasons:
→ import + export relations
→ defensive reasons to enter market ( defensive expansion ) to inhibit an entrance of competitor.

→ legal conditions force entry

→ economic dev. level of country
→ country of destination should be similar to domestic markets.

Push Factor: specific to the country , domestic markets

Internalization decision: reactive internalization
- co specific: retail dev. stage of instit.
- Specific to external environment: eco, political cond.
If the co is big , large size → market saturation → push r’er to the outside
→ artificial market saturation ( market is not actually saturated but there are some
legal constraints )
Italy ,Belgium, UK → restrictions to protect interests of small retailers

Pull factor: international retailing → proactive

- doesn’t wait saturation at home but actively go out + identify opportunities for faster growth, niche
opportunities ( life – style retailers find gap in the market that they can fill )
- identify markets that are similar to home market so that they transfer their experience to these markets.
Levi ++ “Global Realities” : Exploit global realities
Distinct retailer formula Mc Donald’s
→ previously, push factors were important. Then the pull factors determine your choice.
# or extend of internalization depend on the # of big
retail institutions
tax regiue
other legal factors traditional pull factors / appr.
availability of location
- identify some opportunities : - size of market
- retail formula retailing concept : need + wants of c’ers
ex. Life style , Benetton → Proactive
( fashion + os + e )
Body shop : philosophical + ethical values
Mc Donald’s: desire to share c’er service to the standard of a developed nation.

Fig 4.2 Interpretation of motives for internationalism:

Institutional factors
C’er factors
Store location
Operations selected factors to consider when engaging in international Retailing.
Merchandising
Pricing
Image + promotion

Liu + Mc Godrict Chapter 5

Sourcing: with globalization it becomes important

Traditional importing international sourcing
- M’ers are passive - proactive: actively search for the source, decision making
based on needs
- driving + limiting forces identified.
Driving Sources: ( pull factors ) → 1. cost reduction
- to find lower price quality supplies
ex. Japan, South Korea → China, Indonesia → labor cost
↓
wages ↑ less attractive
2. alternatives for lower price + high quality products
3. increasing level of reliability of their sources, supplement the domestic s’er ( you work both with domestic
and international ) some products available only abroad.
4. single European market encourages international sourcing because of the challenges + opp. in the market, E of
scale be coming more important.
→ some r’ers prefer the domestic s’er because of some strategic reasons , policies→ 90% of merchandise locally
→ ↑ trend of internalization of retailing helps sourcing, expansion of retailing → M, tax costs ↓
ex. Benetton : produced in Turkey

Inhibiting Factors:
 1. cost → M – cost
transportation cost
longer lead time, transit time
want to keep a buffer of inventory, the longer it keeps, the more is the cost.
2. the co may not understand ( soft obstacles ) the international business procedures or the proc. of the
foreign country.
There may be domestic market nationalism.
Iraq → political reasons why no out sourcing
Resistance to change: co culture + exp. may be such that, they have establishes domestically so difficult
to go internationally because of competition.
3. Fluctuations in EXA rates
4. Travel costs
5. Language + Culture problems
→ international sourcing conducted by the wholesaler – R’er manufacturers

Wholesalers: big disadv., away from s’er + c’er market, whereas r’er close to both. R’er get more info from
countries where you do sourcing.

R’ers get benefit from both s’er + c’er side

W→ business with domestic suppliers. Domestic suppliers mostly get their goods from abroad, merchandise
imported from other countries.
W→ form alliances because of the short coming.
Migros→ W + R form alliances among themselves
Manufacturers → mostly involved in international sourcing.

Other adv. for r’ers:

- distinctive assortment offering + use the goods sourced to build r’er own brand
Exclusive brands → Italy
Another brands → Far east
Imp. is the R’ers own image, ↑ the competitiveness.
Opp. for dev. countries → manufacturing R’ers product
for R’ers own brand
Manufacturers: Pull + Push factors
- Quality
- Low P.
- More advanced technology
- Negotiability: in dom. few s’ers
- Association with foreign subsidiary
- To introduce competition to dom. market
- To establish presence in the for. market

Adv. of domestic sourcing:

- lead and transit time shorter
- monitoring the process possible
- less management time
→ Due to these advantages, R’ers may pay up to 15% premium for domestic sourcing.
FC + VC important by deciding.

Country Decision: - economic

- politic
- legal environment
- trade environment ( X – control, bilateral )

Company Decision: - sales history

- mark up, reputation
- country of origin
- S’ers experience in international market
financial strength, S’ers size, location
→ Multiple Sourcing:
→ by going international, the retailer becomes closer both the c’er and sources.

OPT: Outward Processing Trade:

US exports synthetic + reimport it as finished products

 buying organization for the r’er:

1. a r’er can work in affiliated buying office
2. independent office

Affiliated: ( manufacturing representatives ) they carry goods of diff. manufacturers + they identify foreign s’er
for the r’er + get quotations + shipment made.
→ they represent the firm to the supplier.

International trading firm

Overseas buying office buying organizations in general
Internal buying

Sogo suo sua → Japanese trained co, passively reacting to the needs of r’ers.

→ integrated: world wide info system, they have cross functional teams + full support at top management.
→ passive
→ proactive

Chapter 6

Legislative environment + impact of it over r’er institutions:

Government can affect the power r-ship in the channel.

power→coercive
legitimate
expert
reward
referent power

1. Relative concentration: has impact of a power of a retail inst. The more concentrate, the more power it
has in the channel.
2. Switching cost: if it is high, the s’er has the power. If switching requires more I, it will be diff.
3. Significance of the product:
R  higher concentration level
↑ the more power relative to manuf.
↑ profit bec. of negotiation power against manuf.
→ profiting at the expense of supplier.

What happens when there are legislations?:

→ some legislative acts restrict the potential for economic
scope→ limit the size and scape
→ reduce the potential of economies of scale ( limit the negotiation power )

When there is no legislative constraints:

→ as the eco. dev. , as disposable income ↑ , # of retail outlets ↑
→ after a certain point there is a reverse trend, # remains constant or decrease + shop size expands bec. you
benefit from economies of scale + scope.
→ concentration starts.

 Governments issue legal constraints to protect small r’er + to protect the residents:
ex. In France in 1973, Loi Royer act: regulate building + expansion of large scale retail outlets ( hypermarkets ).
Get permission from a local commission:
Local gov. officials, repr. of local chamber of commerce, repr. of a c’er group.

In 1996, Loi Rofferen → restricts the opening of news stored by r’ers.

Carrefour, Continent are influenced by the push factor of their country.

Ex. Belgium Padlock Laco ( 1975 ) restricting growth of stores protect small r’er + s’ers.
Germany ( 1977 ) Baunutzungs reordnung as a response coming from the small indep. r’ers.

Fig. 6.1 Simple Model Of Legislative Effect:

Comparison of market with groceries, we see that the # of markets are↑ whereas the # of groceries, small stores↓.

Chapter 7

Strategic alliance: - forms based on mutual needs

- form coalitions + partnerships

• Formal retail alliance types:

1. Equity participating alliance
2. Alliance with central secretaries
In the first one, there is cross share holding between members, in the second just they form on alliance to
coordinate retail activities. ( buying + branding )
First→ seen only in alliance ERA ( European Retail Alliance ) members share each others share.

• Adv. of retail alliance:

→ lowest price becomes the Benchmark price, compare the price against that price→ share info as they get price
from s’er.
→ Central Purchasing: alliance in domestic stores ( MARKETİM → they buy centrally, to fight against big r’ers,
buy in large quantities + get discounts which is shared by members )
→ orders are also decided by the central alliance
→ meetings: pricing + merch. range discussed, s’er r-ships, transportation methods→ all retail operational
functions are discussed.
To share experiences, for the learning process meetings are made.
→ organizational learning is institutionalized.
Experiences + competences shared + transferred

Fig. 7.2 A hierarchy of alliance types:

→ loose aff’ns: sharing of info imp.

retail consortium in UK
form task forces for such issues on security
→ N’l buying clubs: → common purchasing, done centrally, benefit from eco. of scale.
→ Co – marketing agreements: → Shop – in – Shop, Licensing Agreements,
Franchising → later if it is successful it will end up in joint venture.
→Equity alliance
→ Alliance with central sectret.
→ Joint ventures
→ Partial acqusition
→ Controlling interest or full merger with retained identity of subsidiary.

Why alliance? → to reduce risk

Inherent perceived
→ Competitive disadvantage: to overcome this you form alliances.
→ Brand – image transfer is important
→ Trading format transfer ( Mc Donald’s )
→ Facilitate your entry to the market

* Table 7.2 Key benefits + alliance types:

Procurement in specific product areas
↓
purchasing

* Table 7.1

* Fig. 7.4 Scape + Commitment of retail alliance forms.

CHP 2

European retailing: forecast Turkish by looking at this

Retailing imp. → 30% of bus based on retailing
Of the working population 14% employee in retail sector, which creates 13% added value for the economy.
• Δ R format in European bus: dep. store
variety stores loose market store
food retailing → growth, leader in Europe
non – food large specialist dev → Toys’r’us, Mr. Bricolage

• Emergence of discount stores: introductory stage in south Europe ( Italy ), in Germany,

Netherlands
reached the maturity stage

• Acceleration in the retail life cycle: # of years it takes for a R format to reach maturity:
dep. stores: 100 years
variety: 40 years
hypermarkets: 20 years → diff. countries in diff. dev. stages in Italy introd, in Spain growth, in worth
non-food sp: 15 years ( France, Germany, Belgium ) maturity

A decade behind Europe → Turkey

• Diversity of demand: C’er more demanding, mobile which leads to diversity of D → fragmented retail
format ( appealing to spectacular segments )

• Competition: - within types ( inter ) shift from inter to intra

- btw types ( intra )
- vertical competition: compet. within in the channel of distribution.
Manuf → W → R → C’er
Compet. between manuf. and retailer → retailer more strong. Balance shifts to words
The R’er.

• Concentration: becoming more concentrated.

Top 5 food r’ing groups → in UK 45% the R market
In Netherlands 44%
Italy 20%
Spain 12%
# of people → 1955 – 1991
72 emp / shop 105 emp / shop

• Diversification: 1980 → major growth tactic of R’ers.

90’s → shift towards concentration
 Adv: - spread risk eliminated
- know – how, experience can exploit in other sectors, with other format.

• Internalization: saturation level → expanding market share becomes more expensive.

Legislation, info. system similar tastes of c’ers, esp. above transcultural goods

• Legislation: Italy – strict → Spain – more supple ( loose )

• Organ. + Management: fundamentally seems to be not chancing much → methods + tools changed
( electronics, inventory control, barcodes, scanning )

• Capitalization: family based + financed through diff. sources ( private funds, stocks, banks etc. )

4 different stages of development in Europe r’ing

south Europe intermediary - consent higher advanced

concentration weak - productive / emp. Higher
segment → does not exist - compet: inter + intra more intense
usage of new tech → low Denmark, Luxemburg, Netherlands, France
small scale family bus new tech. , new formats.
( R sector in most of Anatolian
cities )
turnover → low

Average of 12 EC countries 406 000 ECU dropped to 114 000 ECU in Portugal

Advanced: Germany, UK → R’ing bus / 1000 inhabitants

In Germany 63 R institutions / 1000 inhabitants
In UK 56
→ they are bigger + concentrated , therefore this rate is low.

 # of people emp / bus → EC average 4,1

Germany 6,5 bigger institutions
UK 9,5

 Turnover ( gross rev. ) > 800 000 Ecu → 8 times the turnover of traditional countries.

 Largest companies → Germany

Highest profit margin → UK ( 6% net good groups )
( France 1,5% )
Turkey 5% traditional

 Segmentation: - superstores
- discount supermarkets
- qualitative supermarkets
- high discount s. → max. amount of discount, but there is no service.
- convenience market

 Usage of marketing techniques → strategy of differentiation. Dev of R’ers own brand.

In UK 41% of good sales come from own brands.

 Concentration High → 5 co. 45% of market in UK

41% of market in Germany.

Market proximity: - closeness to s’er

- closeness to c’er
 - closeness to competitors
- closeness to the other outlets of the same chain
- closeness to parent co.

Civil risk: related to the cu’s internal security

Factor costs: land, capital, factor of production

Logistics: outsourcing by the airplane: imp. cost, risky using only one type of transportation is a risk
element.

Competition: → indirect competition: depends on the positioning. If you position yourself as a convenience
store, all these stores are the competitors, others are indirect competitors.
→ direct competition

Saturation: related to pop size: # of c’ers per store. If the # of c’er ↓ + # of stores ↑ → saturation

↓ factors ↑ factors
growth segmentation
nation internalization → concentration: to reach critical size
# shops sales area
stock service provided
# independent retailers affiliation
turnover growth margin

→ saturation in the domestic market leading to international

→ unsatisfied needs in international markets

CHAPTER 9

Cornerstone: market used as a foundation to enter a region.

Ex. Brazil → South America
↓
chance to learn about adjacent markets
→ tactical investment.

Paradox: international market is more risky then the national market. → the conditions leave us to enter
international market with less info.

→ assess competition: - # of competitors

- positioning of the competitors
→ in order to identify the gap + niche positioning is important

Gap is not enough to go into the market, there should be need in the market.

Marks & Spencer: franchising → least risk / to remote countries

70’s Canada  acquisition 50% → no direct investment, because they want to learn
the market.
Pull Factors: + English
+ similarities in culture
+ economic prosperity + stability
+ springboard to USA ( tactical 1 )
1988 → to USA with acquisition ( full )
1975 → French: direct investment : they know the market, not too much risk.

16 stores in France → jumped to adjacent markets. Belgium, Holland.

Spain partnership bec. these are distinctive from the markets that they are used to in business.
 Greek

Franchising:

→ learn about the bus in that country → learning exp. for the franchiser.
→ establishing your name

Image trajectory:

Old inst. it → know it in domestic

International → established right away. Price, quality imp.
repeat purchases, trial → dependability, honesty take time to establish.
Ex. Bosch, Migros
2 dimension : - quantity → intensity of the image, how well it is established.
- quality of image
quantity time

image concept
moves within time

quality

→ Anecdotal evidence to make image research

Price comparison between cus.
↓
absolute level : UK → lower but c’ers believe that prices to be the same in diff. countries.
Expectations put down the diff. in international research
Internal reference standards: vary from cu to cu, international comparison becomes more diff.

Adjacent M & S → France  food

→ Spain  Bra’s

Table 9.1:

What portion of money to what → spending pattern

How much you spend + save → saving ratio
Expatriates + tourists imp. bec. they may be more positively oriented. ( Mc Donald’s )

= 7 ELEVEN =

1927 Southland ice co: 8 plants, 21 stores

1932 S. Thompson
1947 74 convenience stores
creative adv. agency→ name of outlet
1950 end within USA → Florida, Washington, California
1970 extensive coverage: entering overseas
- Canada, Mexico, UK
rather than direct franchising, it uses area franchising

Area Franchising: Sub franchising within their regions. Get some royalty payment ( Franchisee )

1973 Japan: F’or wanted to help Japan to develop the retail business.
 Distance considered as a positive factor
ITO YOKADO CO. ltd was the family of the business area license.
1976 Area license to Australia
1980 Taiwan, Hong Kong, Chine

US → looser than other cus. Only requirement within franchising is merchandise: consistent with quality +
quantity + value
No requirement within the supplies, price → there is no uniformity, there will be blurred image ( no
standardization )

Japanese market: - top 3 retailers have 50% of the market

- 50 000 convenience stores ( c – stores ). There is capacity for 50 000 more.
- subsidiary of Ito Yokada Co. ( good reputation )
- profits high + sales high → very efficient due to that they are c’er focused and they
use technology.
- 95% independent franchising ( very strict ), they find store owners and they convert
those stores to c – stores with long – term, strict contracts.
In return for loyalty → - in order to realize consistency + standard. They give man
support to these owners. Pos. system ( point of sales ), shares utility costs with
them, ITO guarantees min. gross profit annually.
- to ↑ productivity + net profit : work together the f’ee + parent co.
- f’ee commission: calc. on the basis of each stores gross margin ( not standard )

Factors of facilitate this efficiency:

→ store expansion policy: unique → they use str. of market dominance, which impries that the stores
form a clusters of 50 – 60 stores.

• leads to: → local saturation

→ concentration market presence ( high visibility )

• as a result of this: → keep compet. away

→ distribution efficiency
→ brand awareness
→ adv. efficiency
→ eff. in support of franchisee

1993 5401 stores in Japan divided into 47 prefectures, these stores are divided to only 21 of
them.

→ information system:
PoS cash registers  speed very fast, record imp. Data ( time purchaser )
↓
info sent to the comp. to host a co. and sent to store computers → stores use info while giving orders
( quantity + assortment ) : identify the small moving items, replace with large:
→ space efficiency , do not have opp. losses.
→ c’er loyalty enhanced

Graphic Order Terminal ( GOT ) : portable computers, sales info provided, sales people using when
they get orders → ISDN ( Integr. Services Digital Network )
Allows us item by item control : efficiency ↑
profit ↑
inventory ↓
through this research they identify the peak hours:
7.00 – 9.00 / 13.00 – 15.00 / 17.00 – 23.00 : delivery takes place related to the peak hours.
 Per year 50 – 65% of product line is replaced.
Soft Dring Lines : 4 000 available, 7 eleven sells 70 – 80 of them → they choose the most demanded.

Iterative Dec. Mak: certain steps to realize the decision.

( used at all levels ) → situation analyses
→ hypothesis
→ order
→ verify: check if actually sells.
→ inventory low successful because they focus on the target
→ offer low choice, low range market sell what the c’er wants.

Manufacturers: info is shared also with them.

→ ↑ cooperation
↓ total cost of the info system
special agreements with some products. They act as partners: what the r’er will sell is
what the final c’er wants.
→ differentiate from the competitors
Label: hour of production
Guarantee to some manufacturers: no return policy

→ additional services: 1987  pay your electricity through the stores computer ( no charge )

→ c’er satisfaction ↑, new c’er attracted.

- photocopy, fast photo, vending machine for tel cards.
- Product personalization: made to order lunch boxes indicates how the co is committed to S and c’er
need
- Fresh flower
- Shop America ( catalog service ) : not expand so much, because dom. suppliers complained about.

→ Distribution system changed:

- conventional system: many vehicles are used, links in the channel are large + each vehicle carries the
product
of one supplier.
- combined delivery system: products consolidated before delivery to the store, it is easy to consol
because they are clusters.
Temperature controlled del. system → products sep. acc. to their temperature
1974 70 delivery / day / store dropped to → 1992 11 del / day

1. franchisee agreements
2. extensive usage of technology + electronic data
3. restructure distribution system
→ for these reasons it was successful than the mother co.

Southland Corp: - fast food

- petroleum
1983 - Citgo Petrol Co. → vertical integration
- real estate
- auto repair
1987 - Canadian buys the company: high level of debt

Voots: - going away from the core business

( why decline ) - high competition
- econ. stagnation
→ international operation ↑, US ↓

→ C’ers change image, perceive these stores as insulting

price: - for some product they get discounts
- for some products they pay premium c’er get confused

 dirty, inconvenient, product range poor → store assortment + c’er demand do not overlop.
→ Syndicate of Jap. businessman
→ 1990 ITO YOKADO takes over
51% owned by ITO
49% 7 eleven Japan
→ knowledge + experience transferred

1992 annual Rep.: in order to retain sustainable compet. adv. , identify the target ( conven. oriented c’ers )
→ speed
→ quality
→ price : fair
→ store environment: clean, friendly, safe
→ selection → offer what they want

Revitalization:
1. merchandising: enough choice but they are selective
2. pricing
3. delay ring
4. store – base
5. bus. concentration
6. outsourcing
7. debt restructure

1. what done in Japan, mostly transferred to US the items that not sell are removed and the space
allocated to news. Items + best selling product → rapid response to Δ in D.

Accelerated inventory man. systems: by extensive use of electronic data

2. price str. should match with c’er perception of price level. Insult pricing → too high for
merchandise offered.
To have a clear image of P level, they use fair price everyday system to control prices.
ITO YOKADO says c – stores has to come to on convenience. Premium pricing if only market
conditions require ↓
High price: bec. of the life stage of the product
Not because of co’s internal problems
Check what c’er want + market requires.

3. delay ring of man. levels → fired some man.

→ faster, quicker dec. – making
→ closer to the c’er, to the root
→ cost↓

4. a) close of some stores: shrink age on the store base

b) remodeling of stores: external façade → 3 colors: lightning↑ both inside and outside, aisles widened,
shell height↓, posters on window removed. Usage of more open cases.
 5. in 7 – eleven US → vertical integration : petroleum diversification
distribution business, food processing, petroleum → they get rid of
they concentrate on convenience business

6. distribution → since they go out of bus. , they go outsource

→ reducing the direct costs
able to get better service because you are working with experts in that area.
→ disadvantages: loose control, when you outsource

7. debt arrangement: backed by ITO YOKADO , therefore they have a better debt structure.
In April 30, 1999 → Southland Δed its co name to 7 – eleven in c.
Cultural specificity: some strac. + success specific to culture.

Successful because:

1. Japanese emphasized: incremental

continues improvement
long – term
2. communication with c’er: c’er dedicated c’er focus whereas US dedicates on corporate: needs not known

Table 6: A: Dimensions to retail internationalization

Financial 1: first no financial 1, there is only the transfer of name
massive, multi – layered I in 1991

B: international sourcing:
Buyer decisions: retailer brand very imp. in the success of Japanese co.

C: international retail operations:

Reason → distance: no push factor in US market
to push 7 – eleven to Japan → risk↓
ITO YOKADO → successful in Japan, expanding there, no push factor
1. defensive: protect their name
2. to expand: find a pull factor, imp. opport. in the US market
3. repay the Americans for the franch. r-ship
4. bailing the American franch.

Country of origin impact: US tradition in franchising is hands-off bus format

Japan: deep involvement is the tradition because it’s a r-ship oriented society.
→ within the co.

Posdata Applic.: if a product is sold during peak time or normal period, it is shown by diff. color.

- sales info
- weather
- temper
- events sold-out merch. data
- deliv. dates
- items

- global store expansion

- concentration rate of the stores

→ conceptual model of str. considerations

→ internalization pf R’ing

1st : if the R’er is not able to fulfill certain criteria, they will be unsuccessful and they couldn’t make
international retailing.
 international retailing: I should differentiate its products
if there is diff. adv. → it is able to act so like a monopoly in the market and benefit from its conditions.
if diff. adv. → -sell more
- they perceive as if we have sth. diff.
- price war is imp. escape from it.
in order to diff. the products, there is a model PLİN ( prod, lifestyle, image, niche )
consider these 4 compon + make sure that all of them exist simultaneously an these are interdependent

Product:

Those R’er who want to go international , they emp. prod. extensively. In all these 4 compon, the r’er should be
able to diff. itself in the dom. market first → only then you diff. yourself international.
→ you should have an unique product offered to international market also Demand Form of Geneity ( global
appr. ) → everyone wants the same.

Life style:

to create a match bet. the store env. and life style of the target c’er
domestic → international market
store env. : all the r’l mix elements are considered.
Prod. - merchandising + assortment decisions
Dist. - location
- pricing
-communication
→ R’er will be successful in diff. it is formal if he is able to do it.

Lifestyle determined by personal value systems:

how people live?
how people spend their time and money?
if much of the time allocated to traveling, sleeping→ little time for purchasing, in order to overcome this
convenience is imp. → one stop shopping
in addition for time for traveling, time has more value than money → we will not be facile about prices home
delivery can be a solution.

Niche:

small gap → identifying unsatisfied need or want and try to satisfy it.. not all the gaps are the opp.
 specialized in that area + present a R mix approp. with the c’ers profile in the gap we target to satisfy.
C-stores needed in Turkey.
choice of format, price imp.→ the R mix should match the target market.

Image:

Perception, mental picture in c’ers mind. if at home we have unique co. name, brand, private label, if we are a
leader co. at home, we assume that we have favorable image for international r.
ex. 7-eleven favorable image in US→ area franch in Japan. overlop bet. how r’er position themselves +
how c’er position them in their minds.

- reposition yourself in the market if there is no overlop

- communicate with the c’er

advertising, PR
exclusive store not perceived by the c’er as exclusive

→ location may be wrong

building may be wrong no comm. of image
brand name written out fashioned
sales people used
Plin: used to guess the success probability of a r’er.

2nd internalization of r’er:

writers review the entry strategies:

- invest: direct entry
- global strategy
- multinational str. ( hypermarket )

1. direct inv: greater risk but more control and experience, you speed up your learning
cycle.
2. global strategy: homogeneity in the market, everyone wants the same.
specialty store
segmentation strategy is global, do not segment by cus.
R’ mix strategy is uniform all over, global, you just replicate the same str. in all around the world.
vertical integration: emphasized more than the multinational bec.:
- to guarantee uniformity
- through vert. int. they’re able to benefit from E of s.
sometimes they also outsource.
logistic functions are centralized, dec. making is
centralized with global str.
info system is imp: only may to have center dec. making
expansion is faster in global bec. there is no adaptation, usage of formula that is already tested.
Short comings: - miss the possible nuances, shades of demand in the local market
- if you are strongly specialized, there is danger of Δing habit and entry of
competitors.
3. Multinational Strategy: adapting is the key word for this strategy.

France  hypermarkets adapted a multinational str + first adapt to: bordering cus, then to the growth
potential cus. ( Spain )

Size of profits margins are very low but there are high sales.
product, pricing dec. Δ from cu to cu. Dec. making is decentralized → pricing dec. very critical, adapt to
ΔS in the market quickly.

responsible power delegated to local store managers.

- training very imp.
- in the man. group we use expatriates in order to sustain corporate image.
Europeans invest 5,5 bill. $ in US market
US invest 2,5 bill. $ in European market
→ US market is more profitable: - purchasing power, disposable I high
- site + land costs lower, utilizes lower
- looser legal constraints in us
European wanted to export hypermarkets in the states but it was not successful.
shortcoming: - do not benefit from E of S, benefit from accumulated knowledge, which is reciprocal
( both ways )
design adver. in each of the cus → in benefit from E of S of communication
- specialize store: no need from benefiting from E of scale
image will be imp., multinational str. will harm you.

location, WHY?

= retailing in Czech + Slovak Republics =

from 1948 → 40 year communist regime

- private sector is liquidated: retail outlets state or cooperatives

- all retail activity managed centrally : to get rid of useless competition
in liberal economy→ to enhance competition rather than avoiding.

Centrally: how much? What? Price level? Profit margin? ( very small ), Amount of space? ( very small )
- names very imp, it has value in itself
stores named after product they care
most of them name “food”, state owned food trade enterprise → resp. for food distribution
1968 → Checks + Slovaks → nationalistic movement
enterprise divided into two: - Czech
- Slovak
introduce Perestroika: getting away from centralization.
→ 1988→ 12 regional enterprises
→ 1990→ district enterprises “getting more local”

with such movements we observe: liberalization

→ Price liberalization: P of food↑ by 32% →D↓ → P↓

market mechanism start working 0,7% monthly increase.
all price subsidies eliminated.

→ Privatizations: 1992  some 18 000 outlets privatisized. in addition thousands of new outlets established.
Reflects:  automization of retail dist.

1993 → Czech republic: 19500 retail outlets

1990 → 450 ↓
s’er face large amounts of wholesalers
1992 → atomistic pragmented market
→ physical structure of dist. doesn’t change.
- size of outlet small, bec. there is finance problem.
→ foreign investors are imp. if there is no money. With foreign investors, we see entry
of western style of retailing.
1990 → c’er satisfy. 10%
1992 → c’er satisfy. 67%
1. quality of merch
2. quality of service importance according to c’ers
3. range variety
4. price

1994 → see Δ from automistic fragmented market

trend toward concentration: # of co. reduced, most of them form voluntary chains, go into franchising
agreements, from buying groups.

Concentration because:
1. in order to differ themselves among the independent retailers
2. have to compete against foreign retailers

→ benefit from econ. of scale

bargaining power ↑
share cost
benefit from central purchasing

Slovakia: former state owned enterprises + coop. are present although there is liberalization
new retail formats introduced

New retail f. : 1. discount stores

2. cash + carry operations
3. petrol stations
4. home delivery of food ( quality of serv. )
 5. specialized, large – scale, non – food outlets.

1993 → biggest Czech retailer ( K Mat ) share it

retail market is only 1%
Top 5 retail co. in Czech → 3% of the market accounted west → 50%

Main foreign investors : K-mant: 13 department stores ( privatized state owned dep. stores )
Dutches ( Ahold ) enter Czech market with a subsidiary in 1991
1995 → establish own supermarkets ( 35 )
name → Mana
sesaw→ discount store
German norma
Scandinavian Rema 1000 discount stores: 24 of them in Czech.
German Delta
German Tengelman ( 15 stores )
→ name „peus“

German + Austria origin „Spar“: couldn’t expand fastly bec. they are dependent on foreign s’ers
Belgium Delvita ( supermarket )
Austria Katreiner

→ Mobile outlets ( 100 vans )

family prost / ice-cream
→ Joint venture: German – Czech → Drink
Dutch – Czech → Bonmark
Dutch – Slovak

searching for a good partner foreign investors

searching for location

unsuccessful
Spanish Grocerry group ( SYP super merch. do ) : enter the Czech republic with very large hypermarkets.

failure: 1. lack pf exp. in large scale outlets

2. problem with suppliers → r-ship perceived arrogance
→ merch. decision : M for goods but Czech prefer domestic
3. location not appropriate

Bata ( non-food shoe center → prod + ditrib. )

→ origin is Czech
→ more than 30 outlets

Specialized furniture + do it yourself sector: Götzen

Bauhaus
IKEA ( simple Scandinavian furn. )
for the r’er to be successful in Czech, you cannot assume a global market → combine experiences of home cu
with demands of c’er in Czech.

Retailing in future: - similar to turkey

- independent r’ers ( small size stores with wide assortment ) will not survive
→ have to strictly specialized, find niche markets
→ have to cooperate
they will not survive bec. no competitive adv.: price, quality, variety ( no competition)

 expanding in future: petrol station ( 1500 stores )

R’ers want to form most profitable formats. There are diff. formats, from which at least online shops are
established.
1970’s → shopping malls becoming popular with ↑ need of one stop- shopping

1980’s → superstores
for the last several years online shopping retailers.

Internet → ways to speed up transactions, everything starting to Δ. C2ers need are more diverse, so r’ers are
expected to satisfy these needs. C’ers do not have much disposal time → save time, money, energy for c’ers.

Today r’er face some imp. frontiers:

 c’er expectations: variety, information, convenience, perceived value
→ r’ers have to hire + retain best HR
 technology: in order to be successful as r’er you have to use techn. in order to survive. use of latest techn. is
not enough. combining techn. with the HR is essential.
 globalization: when you globalize is important
keep c‘ers loyal to organization, you have to demonstrate, long – term r-ships with c’ers
r-ship retailing: you have to be able to track all the details about c’ers. c’ers service gain more importance.

Competition is like war of movement, achieve a strategic is imp.→ you have to make trade-offs about prod.
decisions.

Whether to integrate internet with your traditional business?

Not easy to quit from investments, therefore they integrate into Internet.

Since traditional stores have adv. of knowing their c’ers, they try to combine these info with techn. on internet →
mergers.

C’er power is imp.→ c’er are getting more power than r’ers. C2ers with internet have comparable data info in
their databases. freg. cards→ diff. retailers, diff. offers.
balance between power r-ship moves toward c’ers.

→ empowered c’ers are important for retailers

bargaining power of c’ers ↑ when they become empowered.

diff. co s → Dell computer: half of its total sales comes from online sales.

c’ers do not care in which bus. format in → if you have convenient way to satisfy them in on time. Supermarkets
in Britain sell more gas than shell. since c’ers easily learn the structure, products become commodity.

In stead of ind. pricing, price the whole package at once.

Adv. income is very imp.

R’ing breaks all the geographical barriers → you have to the same price.

Distribution economies were essential but search economies are becoming more imp. in the dev. of cyber stores.

Supply chain → delivery chain: c’ers want any kind of convenience, del. chain more imp.
word – of – mouth: not spend so much in adv.
with the invent of Internet it Δd to word – of – mouse : to inform c’ers on web sites or
e-mails.

→ shopping card: 1936 invented → bar codes invented ( ups scanner ) R’er obtain valuable data on c’ers.
→ 1989: video card
→ cash registers without cashiers ( in some Migros )
burden on c’ers unless P will be more attractive.

In Turkey: black markets, transitional period where state enterprises were dominant
saturation of r’ers + wholesalers move to merging
= TOMMY HILFIGER =

Tommy Hilfiger  Presentation

→ push + pull factors for internalization

→ Turkey: Push
mature dom. market of TH
TH is powerful enough to conduct in business in Turkey

Why London? → physic distance → culture similar to US

cornerstone to Europe

Pull
low trade barr.
disposable income↑
high pop growth
potential of shopping high
lack foreign brands
underdeveloped retail structure
tendency toward American – lifestyle
no restricting regulation against for capital flow.

Economic conditions imp in segmentation: high income people

In Turkey inc. distribution is problematic → TH can benefit from this
Size of specific segment important: Turkey → India
↓
specific segment larger

Entry strategies: - timing ( not good )

- balanced international program
- growing middle class ( aim A + and A c’ers → not imp. in Turkey )
- matching concept to market
- solo or partnering? Test Turkey, special project → Franchise

→ Sourcing: TH designs, sources + markets its collections under TH trademark through it subsidiaries. Str.
licensing agreements to expand its prod. line. prefers outsourcing in new product lines.

Image: cu. of origin rather than Beymen ( dünya markası olarak giriypr Türkiye ye )
1. manufacturer representative
2. franchisee

Price: marginler Türkiye de aynı mı?

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