FUNCTIONS OF RETAILING

OVERVIEW OF RETAILING

RETAILING
TO DEFINE RETAILING , CONSIDER IT FROM VARIOUS PERSPECTIVES, DEMONSTRATE ITS IMPACT, & NOTE ITS SPECIAL CHARACTERISTICS

RETAILERS MUST BE CUSTOMERFOCUSED, NOT PRODUCT-FOCUSED, ------- CARL STEIDTMANN, DIRECTOR & CHIEF ECONOMIST OF PRICEWATERHOUSECOOPERS

6-step process for customer-focus

1. Create a great environment 2. Listen to your customer 3. Consider the Lifetime Value of your customer 4. Use direct mail 5. Employ relationship marketing principles 6. Provide rewards to your best customers

Retailing consists of
Business activities involved in selling goods & services to consumers for their personal, family, or household use

In contrast, wholesaling is an intermediate stage in the distribution process

Impact on economy
Retailing is a major part of world commerce Retail sales & employment are key economic contributors Retail trends often mirror trends in a nations overall economy Out of global retail sales of $6.6 trillion U.S. retail accounts for over $3 trillion

Retail in modern format

Country India China Indonesia Thailand Malaysia Taiwan Modern format(%) Total($) 3 200 bn 15 325 bn 30 75 bn 40 32 bn 45 20 bn 81 40 bn ------------------------------------------------------Source: Operations Research Group

Top 10 retailers worldwide

Rank No. of stores owned 1 Wal-Mart (USA) 4178 2 Carrefour (France) 8130 3 The Kroger Co. (USA) 3445 4 Home Depot (USA) 1134 5 Royal Ahold (USA) 7150 6 Metro AG (Germany) 2169 7 Kmart Corporation (USA) 2105 8 Sears Roebuck (USA) 2231 9 Albertsons Inc. (USA) 2512 10 Target Corporation (USA) 1307 Source: Price Waterhouse Coopers Retailers Sales 2000 (US $ Mill.) 100,000 61,047 49,000 45,738 45,729 44,189 37,028 36,823 36,362 36,362

Sector-wise sales world estimates

Sector Retail Financial services Construction engineering Packaged goods Chemicals Energy Electronics Automotive Telecom Pharmaceuticals, diagnostics
Source: ICRIER, working Paper No.80

Sales (US $ Trillion) 6.6 5.1 3.2 2.0 1.4 1.2 1.1 1.0 0.8 0.3

Share of retailing in total employment in select countries

Country USA Brazil Poland China India Share of retail in total employment (%) 17 15 12 6 6-7

Source: CSO India: M.G.Study, 2000

Retail function in distribution

Manufacturer Wholesaler Retailer consumer

Final

Relationships among retailers & their suppliers Complex relationships among retailers & their suppliers must be understood:
1. Retailers are part of the distribution channel;

2. Retailers are also major customers of goods & services for resale, store fixtures, computer equipment, management consulting & insurance

Retailers & their suppliers may have divergent viewpoints that need to be reconciled

Comparing exclusive, intensive, & selective distribution

Exclusive No. of retailers Potential for conflict Support from supplier (retailer) Suppliers sales Retailers assortment Product (retailer) image Competition among retailers L L H L L H L Intensive H H L H H L H Selective M M M M M M M

Exclusive distribution: Generally smoothest Stimulates both parties to work together Yet, also requires retailers to limit its assortment in product categories From manufacturers perspective, may limit their long-run total sales potential

Intensive distribution: Sell through as many retailers as possible Often maximizes suppliers sales & lets retailers offer many brands & product versions Consequently competition among retailers selling same items is high

Selective distribution: Sell thru moderate no. of retailers, combines aspects of both exclusive & intensive distribution Allows suppliers to have higher sales than in exclusive distribution & lets retailers carry some competing brands Encourages suppliers to provide marketing support & retailers to give adequate shelf space Yet, this approach does not have the channel cooperation of exclusive distribution or the sales potential of intensive distribution

Special characteristics of retailing

Small average sales Impulse purchases

Retailers strategy

Popularity of stores

2. Importance of developing & applying a retail strategy

Any retailer should apply these 6 steps: 1. Define the type of business in terms of the goods or service category & the companys specific orientation 2. Set long-run & short-run objectives for sales & profit, market share, image, 3. Determine the customer market to which to appeal on the basis of its characteristics & needs 4. Devise an overall, long-run plan that gives general direction to a firm & its employees 5. Implement an integrated strategy that combines such factors as store location, product assortment, pricing, & advertising & displays to achieve objectives 6. Regularly evaluate performance & correct weaknesses or problems as they are observed

3. Marketing concepts applied to retailing

customer orientation Retailing concept Retail strategy

Coordinated effort

Value-driven

Goal orientation

1. Customer orientation: retailer determines the attributes & needs of its customers & endeavours to satisfy these needs to the fullest 2. Coordinated effort: retailer integrates all plans & activities to maximize efficiency 3. Value driven: retailer offers good value to customers, whether it be a discounter or upscale; i.e. prices appropriate for level of products & customer service 4. Goal orientation: retailer sets goals & then uses its strategy to attain them

Unfortunately, this concept is not grasped by all retailers: Some indifferent to customer needs, plan haphazardly, , have prices that do not offer value, & have unclear goals Retailing concept is easy to adopt 3 issues that relate to a retailers performance in terms of retailing concept:
1.Total retail experience 2.Customer service 3.Relationship retailing

Total retail experience

Irrespective of the type of outlet, shoppers encounter a total retail experience in making a purchase
No. of sales people Displays, Prices Brands carried, Inventory on hand

If some part of the total experience is unsatisfactory, consumers may not buy a given good or service One of the biggest challenges for todays retailers is generating customer excitement

Customer service
Customer service has a strong impact on total retail experience Among customer service strategy are:
Store hours Parking access Shopper- friendliness of store layout Credit acceptance Level & caliber of salespeople Amenities such as gift wrapping Rest room availability Employee politeness Handling special orders Delivery policies Time spent at check-out lines Customer follow-up

Leading retailer in customer service is Nordstrom

Relationship retailing
Seek to establish & maintain long-term bonds with customers Retailers must thus concentrate on total retail experience:
monitor satisfaction with customer service stay in touch with the customers

To win in the long run customer must also win in the long run Due to advances in computer technology, it is now much easier to build database