PU/FBA/MKG/Logistics & Supply Mgt.

Retail Logistics , 2022

OVERVIEW OF RETAIL LOGISTICS

Retail comes from the Old French word tailer, which means "to cut off, clip, pare,
divide" in terms of tailoring (1365). Like the French, the word retail in both Dutch and
German (detailhandel and Einzelhandel, respectively) also refers to the sale of small
quantities of items.

Retailing is a function of distribution of goods and services to reach the final consumers
at the right time and when needed. Thus, it is one of the activities within the overall
distribution function. Includes all the activities involved in selling goods or services
directly to final customers for their personal, non-business use. A retailer is any business
enterprise whose sales volume comes primarily from retailing. Retailing deals with
breaking bulks ready for small consumers and plays a big role in the distribution channel.

We can therefore consider retail logistics as one part of the physical distribution systems.
Retail logistics includes transportation of goods to the points of retail sales and storage
there. It also covers any additional activities for door delivery of goods to the customers.

It is often taken for granted that products will be available to buy in the shops. The
abundance of goods that is available in a supermarket or a department store is made
possible by retail logistics but we sometimes forget how the products were supplied. We
expect our lettuces to be fresh, the new Playstation to be available on launch day and our
clothes to be in good condition and ready to wear. With the introduction of e-commerce
we have come to demand complete availability and at times, seek home delivery of some
products. It is retail logistics that make all of these possible by providing form utility,
place utility, time utility as well as possession utility.

Form, Place, Time and Possession utility

Example:
 A Consumer wants to by a tube of toothpaste, a product of Uniliver - FORM
 To be made available at a retail outlet close to her residence -PLACE

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 It should be available at 8:00 pm on a Saturday evening when she wants it-TIME

 She can pay for the toothpaste and take it away-POSSESSION.

As part of its logistics activities, the company’s physical distribution function makes this
possible through retailing.

Characteristics of Retailers
Retailers have certain characteristics which include, but not limited to the following:
 The final contact with consumers
 Operate out of their shops and sell a large assortment and variety of goods
 Located closest to consumers
 Buy from companies, distributors or wholesalers
 Highest margins in the network
 Provide personalized services to their customers
 Deals with breaking bulks for small consumers

Types of retail outlets

Classification by Product - Retail is usually classified by type of products as follows:
 Food products
 Hard goods or durable goods ("hardline retailers") - appliances, electronics,
furniture, sporting goods, etc. Goods that do not quickly wear out and provide
utility over time.
 Soft goods or consumables - clothing, apparel, and other fabrics. Goods that are
consumed after one use or have a limited period (typically under three years) in
which you may use them.

Classification by marketing strategy - The following are types of retailers classified by

marketing strategy:

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 Department stores: very large stores offering a huge assortment of "soft" and
"hard goods; often bear a resemblance to a collection of specialty stores. A retailer
of such store carries variety of categories and has broad assortment at average
price. They offer considerable customer service.
 Discount stores: tend to offer a wide array of products and services, but they
compete mainly on price. Offers extensive assortment of merchandise at
affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands.

 Variety stores:- these offer extremely low-cost goods, with limited selection;

 Demographic: retailers that aim at one particular segment (e.g., high-end retailers
focusing on wealthy individuals).

 Mom-And-Pop: is a retail outlet that is owned and operated by individuals. The

range of products are very selective and few in numbers. These stores are seen in
local community often are family-run businesses. The square feet area of the store
depends on the store holder.

 Specialty stores: A typical specialty store gives attention to a particular category

and provides high level of service to the customers. A pet store that specializes in
selling dog food would be regarded as a specialty store. However, branded stores
also come under this format. For example if a customer visits a Reebok or Gap
store then they find just Reebok and Gap products in the respective stores.

 General store: a rural store that supplies the main needs for the local community.

 Convenience stores: is essentially found in residential areas. They provide limited

amount of merchandise at more than average prices with a speedy checkout. This
store is ideal for emergency and immediate purchases.

 Hypermarkets: provides variety and huge volumes of exclusive merchandise at

low margins. The operating cost is comparatively less than other retail formats.

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 Supermarkets: is a self service store consisting mainly of grocery and limited

products on non food items. They may adopt a Hi-Lo or an EDLP (everyday low
price) strategy for pricing. The supermarkets can be anywhere between 20,000 and
40,000 square feet (3,700 m2). Example: Shoprite supermarket.

 Malls: has a range of retail shops at a single outlet. They are endowed with
products, food and entertainment under a roof.

 Category killers or Category Specialist: By supplying wide assortment in a

single category for lower prices a retailer can "kill" that category for other
retailers. For few categories, such as electronics, the products are displayed at the
centre of the store and sales person will be available to address customer queries
and give suggestions when required. Other retail format stores are forced to reduce
the prices if a category specialist retail store is present in the vicinity.

 E-tailers: The customer can shop and order through internet and the merchandise
are dropped at the customer's doorstep. Here the retailers use drop shipping
technique. They accept the payment for the product but the customer receives the
product directly from the manufacturer or a wholesaler. This format is ideal for
customers who do not want to travel to retail stores and are interested in home
shopping. However it is important for the customer to be wary about defective
products and non secure credit card transaction. Example: Amazon, Pennyful and
eBay.

 Vending Machines: This is an automated piece of equipment wherein customers

can drop the money in the machine and acquire the products.

Some stores take a no frills approach, while others are "mid-range" or "high end",
depending on what income level they target.

Other types of retail store include:

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 Automated Retail stores: These are self service, robotic kiosks located in
airports, malls and grocery stores. The stores accept credit cards and are usually
open 24/7. Examples include ZoomShops and Redbox (an American company that
specializes in the rental of DVDs, Blu-ray Discs, and video games via automated
retail kiosks).
 Big-box stores: These encompass larger department, discount, general
merchandise, and warehouse stores.

Retailers can opt for a format as each provides different retail mix to its customers based
on their customer demographics, lifestyle and purchase behaviour. A good format will
lend a hand to display products well and entice the target customers to yield more sales.

Retail Organizations
Retail organizations achieve many economies of scale, such as greater purchasing power,
wider brand recognition, & better trained employees. The major types of retail
organizations are:

1. Corporate Chain Stores: Two or more outlets that are commonly owned &
controlled. Such stores usually employ central buying and merchandising, and sell
similar lines of merchandise. Their size allows them to buy in large quantities.

2. Voluntary Chain: Wholesaler-sponsored group of independent retailers engaged

in bulk buying and common merchandising.

3. Retailer Cooperative: Independent retailers who set up a central buying

organization and conduct joint promotion efforts.

4. Consumer Cooperative: A retail firm owned by its customers. This type is

usually started by community residents.

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5. Franchise Organization: Contractual association between a franchiser and

franchisees. Normally based on some unique product, service or method of doing
business. Prominent in fast foods, video stores, health/fitness centers, auto
rentals. Eg: McDonald's, Pizza Hut, Taco Bell, Burger King.

6. Merchandising Conglomerate: A free-form corporation that combines several

diversified retailing lines, forms under central ownership, along with some
integration of their distribution-and-management function.

RETAIL SERVICE TYPES

New store types emerge to meet widely different consumer preferences for service levels
& specific services. Retailers can position themselves as offering one of four levels of
service:

1. Self-service.
2. Self-selection. Customers can ask for assistance. Higher operating expenses than
the previous one.
3. Limited-service. More sales assistance because customers need more information
4. Full-service. Provides salespeople who are ready to assist in every phase of the
locate-compare-select process.

Non-store Retailing
This consists of four major categories:

1. Direct Selling: This the oldest category and consists of three types:

 One-to-one selling: A salesperson visits & tries to sell products to a single
potential user.

 One-to-many: A salesperson goes to the house of a host who has some people in
the house.

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 Multilevel: A variant of direct selling in which companies recruit independent

businesspeople who act as distributors for their products. These distributors in turn
recruit & sell to sub-distributors, who eventually recruit others to sell their
products, usually in customer homes.

2. Direct Marketing: Includes telemarketing, TV direct response marketing and

electronic shopping.

3. Automatic Vending: Vending machines offer 24 hour selling, self-service and

unhandled merchandise. Eg: COKE, Pepsi.

4. Buying Service: A storeless retailer serving specific clienteles- usually the

employees of large organizations, such as schools, hospitals, unions, and
government agencies.

RETAILER MARKETING DECISIONS

1. Target-market decision: This is a retailer's most important decision. Until the
target is defined, the retailer cannot make consistent decisions. Retailers should
conduct periodic marketing research to ensure that they are reaching and satisfying
their target customers.

2. Product Assortment and procurement decision: The retailer must match the

target market's shopping expectations. The manager has to decide on product-
assortment breadth and depth. Another product assortment dimension is the
quality of the goods. The real challenge is to develop a product differentiation
strategy:

 Feature some exclusive brands not available at competing retailers.

 Feature mostly private branded merchandise.
 Feature blockbuster distinctive merchandise events.
 Feature the latest or newest merchandise first.
 Offer merchandise customizing services.
 Offer a highly targeted assortment

Once the retailer decides on the product-assortment strategy, the retailer must
decide on procurement sources, policies, and practices. Retailers are rapidly

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improving their procurement skills. Stores are learning to measure direct product
profitability, which enables them to measure a product's handling costs from the
time it reaches their warehouse until a customer buys it and takes it out.

3. Services and store atmosphere decision: The service mix is one of the key tools
for differentiating one store from another. The store's atmosphere is another
element.

4. Price Decision: This is a key positioning factor and must be decided in relation to

the target market, the product-and-service-assortment and competition. Retailers
must pay attention to pricing tactics. They will plan markdowns on slower-moving
merchandise. A growing number of retailers have abandoned "sales pricing" in
favor of everyday low pricing (EDLP). This could lead to lower advertising costs,
greater pricing stability, a stronger store image of fairness and liability, and higher
retail profits.

5. Promotion Decision: Use promotion tools that reinforce image position.

6. Place Decision: Retailers have a choice of locating their stores in:

 Central business districts (downtown). Such areas attract high rents.

 Regional shopping centers. Large suburban malls containing 40-200 stores.

Malls are attractive because of generous parking, one-stop shopping,
restaurants, & recreational facilities.

 Community shopping centers. Smaller malls. Between 20-40 smaller stores.

 Strip malls. Contain a cluster of stores, usually housed in one long building.

 A location within a larger store. Certain well known retailers-McDonald's,

Dunkin Donuts- are locating units in airports, schools, Wal-Marts.

Performance Indicators for Retail Outlets:

Retailers can assess a particular store's sales effectiveness by looking at four indicators:

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1. Number of people passing by on an average day.

2. % who enter the store.
3. % of those entering who buy.
4. Average amount spent per sale.
Trends in Retailing
Main developments that retailers need to take into account as they plan their competitive
advantage:

 New Retail Forms constantly emerge to threaten established retail forms.

 Shortening Retail Life Cycles. Retail forms are rapidly copied.

 Nonstore Retailing due to electronic age.

 Increasing Intertype Competition. Competition between store and nonstore

retailers is common.

 Giant Retailers are emerging.

 Changing Definition of One-Stop Shopping. Now specialty stores within malls are
becoming increasingly competitive with large department stores in offering one-
stop shopping.

 Portfolio Approach. Retail organizations are increasingly designing and launching

new store formats targeted to different lifestyle groups.

 Growing Importance of Retail Technology.

 Global Expansion of major Retailers due to mature and saturated markets at home.

 Retail Stores as Community Centers or Hangouts. Establishments that provide a

place for people to congregate (cafes, tea shops, book-shops, etc.).

Discussion Questions:

1. What are the top Five Retailers in Ghana?

2. What do they do?

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3. What are their competitive strategies?