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Retail Marketing
Retail Marketing
MARKETING
In the growing market, retail marketing has become one of the major emerging trends in
the entire economical cycle. It is the retail market only which provides the consumer a
basic platform to encounter with goods and a shop keeper for the first time. Retail
market consists of a fixed location like boutique, store, departmental store etc, here in
these location consumers meets the shop keeper and purchase goods in return of certain
value. Maintaining a certain profit margin, these shop keepers sell goods to their
consumers. The basic motive of these shopkeepers is to satisfy the consumers and fulfill
their needs and demands.
Retail marketing strategy has become one of the basic elements of marketing strategy
which includes a lot of planning and proper execution of this planning. Now let us first
focus on the basic nature of retail. Firstly in retail, a marketer needs to focus primarily
on the needs and desires of the customers.
Retail marketing even focuses on satisfying the customers, maintaining a proper profit
margin for the owner of the goods. Customer needs are the basic key factors of retail.
Retail marketing consists of 5 basic pillars, first is saving the precious time of the
customers. Second is setting the right prices of the goods, third is creating a proper
connection with the emotions of the customers, fourth pillar is paying the right respect
to the customers and lastly solving the problems of the customer is another pillar of
retail.
Creating customer loyalty is the basic function of retail, as once you create customer
loyalty towards your brand it will be easier for you to stay in the market for a longer
period of time. Creating customer loyalty is not a very easy task, as it takes years for a
brand to create customer loyalty.You can only create customer loyalty if you have a retail
marketing plan, some of such marketing plans are the sales promotional activities .
Reward program includes special gifts on purchase of bulk goods and loyalty cards are
special privileged cards which are offered to customers in order to provide them huge
discounts and free gifts. These sorts of special sales promotional activities not only
increase the sales target but at the same time increase customer loyalty also.
With so many new sales promotional programs promoted by the retail marketing
strategies, now it is possible to create a healthy relationship with the customers.
Previously creating emotional bonding with the customers was not taken into
consideration, and thus customers were only treated as customers who were just
supposed to pay the price of the goods. Thus, this resulted in lower customer loyalty and
it gave rise to huge number of product switching.
Retail Marketing is the range of activities undertaken
by a retailer to promote awareness and sales of the company’s
products. This is different from other types of marketing because
of the components of the retail trade, such as selling finished
goods in small quantities to the consumer or end user, usually
from a fixed location. Retail marketing makes use of the common
principles of the marketing mix, such as product, price, place and
promotion. A study of retail marketing at university level includes
effective merchandising strategies, shopping and consumer
behavior, branding and advertising. Retail marketing is especially
important to small retailers trying to compete against large chain
stores.
Product
The cornerstone of the retail marketing definition is the product.
In the retail environment, merchandise is classified according to
the category into which it falls. These categories include hard or
durable goods such as appliances, furniture, electronic goods and
sports equipment; food; and soft goods or consumables. Soft
goods include clothing, furnishings, cosmetics, paper goods and
other items with a typical life span of three years or less. For
example, in a small business selling handmade crafts, the
products would likely all fall under a single category.
Place
The place where retail marketing occurs helps to define the
process. A retail operation can be store-based retail or non-store,
according to the Internal Revenue Service’s Retail Industry
Handbook. More than 90 percent of U.S. retail stores are small,
single-store, owner-managed operations; however, these
generate less than 50 percent of sales from retail stores
countrywide. A definition of retail marketing includes the places
where it occurs, such as in-store, online and points of sale. This
also applies to non-store operations such as retail sales taking
place from the business owner's home.
Price
Pricing is a major aspect of any retail marketing strategy. The
price of merchandise helps to define the methods of retail
marketing employed, as well as the target market, store location
and retail format used to sell it. Pricing in the retail environment is
based on fulfilling objectives such as covering the cost of sales
and overhead, and in accordance with the four basic retail pricing
strategies. These are everyday low pricing, high/low pricing,
competitive pricing and psychological pricing. In a small retail
business such as selling handcrafts, pricing may be based purely
on the cost of sales, because overhead costs, if they exist, are
minimal.
Promotion
Retail marketing relies heavily on the promotional aspect of the
marketing mix, as can be seen by the number of print
advertisements for consumer goods such as clothing, food and
furniture. Promotions take place in both traditional media such as
television, print, outdoor billboards and radio, as well as new
media such as the Internet. The choice of promotional channels is
influenced by factors such as the competitive retail environment,
the profit margin on sales and the budget available for promotion
purposes. The success of retail marketing is defined by the
success of the business in selling its merchandise. Promotion may
be more difficult for small businesses, because of their lower
advertising budgets, but social media provides a low-cost method
of promotion.
Types of Retailers
There are 7 main types of retailers which can be defined by the size of their business
and the way they in which they sell their products.
5. E-tailer – This type of retailer enables customers to shop on-line via the internet
and buy products which are then delivered. This type of retailer is highly convenient
and is able to supply a wider geographic customer base. E-tailers often have lower
rent and overheads so offer very competitive pricing.
A department store is a set-up which offers wide range of products to the end-
users under one roof. In a department store, the consumers can get almost all
the products they aspire to shop at one place only. Department stores provide a
wide range of options to the consumers and thus fulfill all their shopping needs.
Merchandise:
Electronic Appliances
Apparels
Jewellery
Toiletries
Cosmetics
Footwear
Sportswear
Toys
Books
CDs, DVDs
Examples - Shoppers Stop, Pantaloon
Discount Stores
Discount stores also offer a huge range of products to the end-users but at a
discounted rate. The discount stores generally offer a limited range and the
quality in certain cases might be a little inferior as compared to the department
stores.
Wal-Mart currently operates more than 1300 discount stores in United States. In
India Vishal Mega Mart comes under discount store.
Merchandise:
Almost same as department store but at a cheaper price.
Supermarket
A retail store which generally sells food products and household items, properly
placed and arranged in specific departments is called a supermarket. A
supermarket is an advanced form of the small grocery stores and caters to the
household needs of the consumer. The various food products (meat, vegetables,
dairy products, juices etc) are all properly displayed at their respective
departments to catch the attention of the customers and for them to pick any
merchandise depending on their choice and need.
Merchandise:
Bakery products
Cereals
Meat Products, Fish products
Breads
Medicines
Vegetables
Fruits
Soft drinks
Frozen Food
Canned Juices
Warehouse Stores
A retail format which sells limited stock in bulk at a discounted rate is called as
warehouse store. Warehouse stores do not bother much about the interiors of the
store and the products are not properly displayed.
Mom and Pop stores are the small stores run by individuals in the nearby locality
to cater to daily needs of the consumers staying in the vicinity. They offer
selected items and are not at all organized. The size of the store would not be
very big and depends on the land available to the owner. They wouldn’t offer
high-end products.
Merchandise:
Eggs
Bread
Stationery
Toys
Cigarettes
Cereals
Pulses
Medicines
Speciality Stores
Malls
Many retail stores operating at one place form a mall. A mall would consist of
several retail outlets each selling their own merchandise but at a common
platform.
E Tailers
Now a days the customers have the option of shopping while sitting at their
homes. They can place their order through internet, pay with the help of debit or
credit cards and the products are delivered at their homes only. However, there
are chances that the products ordered might not reach in the same condition as
they were ordered. This kind of shopping is convenient for those who have a
hectic schedule and are reluctant to go to retail outlets. In this kind of shopping;
the transportation charges are borne by the consumer itself.
Example - EBAY, Rediff Shopping, Amazon
Dollar Stores
Dollar stores offer selected products at extremely low rates but here the prices
are fixed.Example - 99 Store would offer all its merchandise at Rs 99 only. No
further bargaining is entertained. However the quality of the product is always in
doubt at the discount stores .
Retail in India: Industry Structure
The retail industry in India is highly fragmented and
unorganised. Earlier on retailing in India was mostly done
through family-owned small stores with limited
merchandise, popularly known as kirana or mom-and-
pop stores. In those times, food and grocery were
shopped from clusters of open kiosks and stalls called
mandis. There were also occasional fairs and festivals
where people went to shop. In the twentieth century,
infusion of western concepts brought about changes in
the structure of retailing. There were some traditional
retail chains like Nilgiri and Akbarallys that were set up
on the lines of western retail concepts of supermarkets.
The government set up the public distribution system
(PDS) outlets to sell subsidised food and started the
Khadi Gram Udyog to sell clothes made of cotton fabric.
During this time, high streets like Linking Road and
Fashion Street emerged in Mumbai. Some manufacturers
like Bombay Dyeing started forward integrating to sell
their own merchandise. Shopping centres or complex
came into existence, which was a primitive form of
today’s malls.
CASE STUDY
Pantaloons – A Success Story in Organized
Retail
Retail plays a major role in increasing circulation and sales for all kinds of consumer goods and
services. Countries like USA, U.K. and China are successful examples of the same. Consumer
retail is the second-largest industry in the United States, both by the number of establishments
and by the number of employees. Wal-Mart, the world’s largest retailer, is also the world’s largest
employer. It has become the most successful retail brand in the world due to its ability to
leverage size, market segmentation, and its efficacy in assuming market dominance. Wal-Mart
heads the Fortune magazine list of top 500 companies in the world.
In India over 94% of the retail sector consists of traditional mom-and-pop stores and street-
vendors. With no large players, infrastructure being far from adequate and a tiny part of the
population being able to afford it, , Indian retail never attracted large business houses and
majorly focused on niche product segments and luxury goods.. This was till they realized that
retail in India is a USD $353 billion industry[BMI India Retail Report 2010] growing at a
CAGR of 10% and contributing more than 25% to the country’s GDP. Today it might seem
implausible that this important sector of the country’s economy had been overlooked by
Corporate giants. However they cannot be squarely blamed too. Indian retail has traditionally
been an unorganized sector, where retailers lacked the means as well as the will to develop or
expand. Retail could also never enjoy the support of the Indian consumer, who is famous for
being miserly and treated shopping as a form of leisure than a necessary evil, thus enjoying the
thrill of discovering bargains and discount deals on his own.
Small gains, lack of infrastructure, an unattractive Indian consumer and absence of regulation
never provided opportunities for retail giants to capitalize. Meanwhile, the Government preferred
to remain silent while the unorganized retail sector provided a meager standard of living to
millions in the country. Poverty plagued a majority of the population and the corporate giants
preferred to spend their resources in areas like power and telecom where large-scale
opportunities were abundant. Today the retail industry has witnessed a remarkable
transformation.
Pantaloon’s Story
Pantaloon’s success and continuous growth in the Indian organized Retail market can be
attributed to a number of factors, some of which have been derived from the strategies of large
retailers in the west, while others are completely tailor-made for the Indian market. What is
evident at the outset is that Biyani has foreseen and understood the Indian retail roadmap better
than anyone else.
Pantaloon’s major advantage over its competitors in the retail sector has been its unique
understanding of the Indian organized retail market with all its quirks, shortcomings and
challenges. By creating a retail business from the ground-up and expanding rapidly, Pantaloon
has followed a Wal-Mart-like pattern of growth. However, unlike Wal-Mart, it decided to
experiment with as many retail formats, product-mixes and brands as was possible in order to
gain maximum knowledge about the uncertain Indian mindset. In fact, newer entrants in the
organized retail market would learn the ways of the unique Indian organized retail sector as well
as find a way to combat Pantaloon’s dominant market share in almost all forms of organized
retail a daunting task.
Pantaloon has experimented with every retail format possible. Most of their experiments have
proven to be successful and Pantaloon continues to experiment while expanding existing
ventures. However, the real reward of these experiments is the knowledge and experience
gained- This was most elusive in a previously untouched and unknown organized retail sector.
This is an example of Pantaloon adapting itself to the Indian market rather than attempting to
copy a Wal-Mart. The experimentation process did not end with testing different store formats
alone: Pantaloon is also experimenting with a variety of products. From men’s wear the company
has moved on to introduce furniture, sportswear, kitchen appliances, food, electronics and
children’s apparel. Again, it seems to know what works and what doesn’t in the Indian market,
something that would not have been this apparent even 1 decade ago.
Pantaloon has also introduced a number of private brands. For example, it has experimented with
launching clothing lines based on famous Bollywood blockbusters.. Within the brand retailing
space, Pantaloon has also tied up with some of India’s most popular brands like Gini and Jony to
sell them at their stores. Rather than attempt to compete with existing popular brands the
company has decided to partner with them and leverage them in the ambiguous Indian market.
These brands have achieved success and a loyal fan following; Pantaloon’s move has brought in
more customers then they could retain.
The competitors do have the opportunity to learn from the experiences of India’s largest retailer,
but the experience that comes with managing these diverse retail formats in the Indian scenario is
something that new entrants will have to learn on their own. Due to the pace at which Pantaloon
had moved, it has made several sectors of organized retail out of anybody’s reach.
In accordance with its experimentation policy Pantaloon has formed key joint ventures with a
number of popular names like Staples and Starbucks. With its first-mover advantage, it actively
shut doors for the competition by snapping up major brands before others could get to them.
Versatile Retailing
A robust Supply chain serves as the backbone of a successful retail chain in the long-run.
Although the company ignored these aspects in initial phases due to the inadequacies in
infrastructure, it rightly favored experimentation over organization. But to continue to grow at
the pace it had acquired in the first few years, it needed to pay attention to its sourcing network,
transportation system and other logistics.. What Pantaloon is and will always have to improvise
on is the absence of basic infrastructure like transportation and regulation. The pace of expansion
of the retail industry is likely to outstrip that of development of the country’s infrastructure.
Pantaloon will have to be innovative in deciding as to how it compensates for these inadequacies
while efficiently managing its supply chain.
Money: The Ultimate Differentiator
Pantaloon has the upper hand as compared to most potential foreign and domestic competitors.
However the same characteristics that have made it an exclusive and versatile retailer can prove
to be a disadvantage. Much of Pantaloon’s competition comes from either retail ventures of other
large Indian industrial houses (Reliance Retail, Birla’s retail venture) or foreign retail giants
(Wal-Mart). In other words, Pantaloon’s competition is rich, very rich. While the competition
may not have made inroads into the Indian market as thoroughly as Pantaloon, it still has enough
money to compensate for this shortcoming.
Summary