Retail

Management
Mkt 531
The Origin Story Of Sweet Green
• Contractual arrangement between a franchisor (a
manufacturer, a wholesaler, or a service sponsor) and a
retail franchisee, which allows the franchisee to conduct a
given form of business under an established name and
according to a given pattern of business.

Franchising
• Product/Trademark Franchising – Arrangement in
which the franchisee acquires the identity of the
franchisor by agreeing to sell the latter's products and/or
operate under the latter's name.
• Business Format Franchising – Arrangement in which
the franchisee receives assistance in site location, quality
control, accounting, startup practices, management
training, and responding to problems – besides the right
to sell goods and services.

Types of Franchising
• Name recognition. Already well-known to customers and provide
a competitive edge.
• Minimal risk & Higher Success Rate – A proven business
method, Franchisors have developed a Plan & system that works,
created the concept, researched the market, developed the product
and service offerings
• Support – Pre & Post launch Support in relation to operations,
Technical, marketing, designing and location.
• Training Assistance at your location & their location & Online,
also via phone support
• Hiring / Managerial Assistance provided, fewer mistakes happen
at start up with exploration of general knowledge

Franchise Advantages
• Greater purchasing power / Economies of scale – Cost
savings on inventory items from bulk purchase
• Professional advertising
• Willing to share their trade secrets
• Don’t Require an Extensive Business Background or
Education
• Franchisee makes you a partner in a larger business structure
• The whole aim of franchising is to duplicate the original
• If you ask those who work up close and personal with
franchisees, they’ll tell you it’s about relationships
• Fees – Franchise Fee – one-time, nonrefundable
• Royalty Fees – a percentage of weekly or monthly gross income and continued
payments for the term of franchise Agreement
• Advertising Fees required to contribute to an advertising pool
• Renewal Fees – Franchise contracts are for a limited time only
• Loss of Control – Franchisors exercise significant control over store appearance,
Purchase, production & sale of services, operations & location for the sake of
uniformity among all outlets.
• Fewer opportunities for initiatives – New Product development / Marketing /
Management Strategy
• The preselection process – a former restaurant manager would likely be more
successful if he or she acquired a fast-food restaurant rather than, perhaps, a muffler
shop.
• Required purchases. Purchase certain materials from franchisor / authorized agents.
• Termination clause. The franchisor retain the right to terminate the franchise
agreement on certain conditions

Disadvantages
• Constrained Decision Making – Limits
franchisee involvement in the strategic
planning process.
• Channel Control – Occurs when one member
of a distribution channel can dominate the
decisions made in that channel by the power it
possesses.

Some Limitations of the Franchisee

• A licensed dealership is a mix of franchise and
independent retailer. The licensee has the right
(sometimes this is exclusive) to sell a brand of products.
Unlike a franchise, the dealer can sell a variety of brands
and there are generally no fees to the licensor.
Dealerships may or may not be identified as an
authorized seller or by the company's trademark. Think of
cars and trucks as the most common example of a
dealership.

A licensed dealership
• The concept of the retail life cycle refers to the succession of
identifiable stages a retail format goes through over time
• In the development stage, the new format is introduced to the market.
• There is departure from the strategy mix of existing retail institutions,
as at least one element of the marketing mix is altered in the new
format.
• In the introduction phase, sales and profits are low, but growing.
Costs and risks are high because long run success is not assured at
this stage.
• The growth phase is characterized by rapid growth of both sale and
profits. Existing companies expand their markets and new
competitors with the same retail format enter the market. Towards
the end of this stage, growth acceleration begins to decline and cost
pressure may emerge.

The Retail Life Cycle

• The next stage is characterized by maturity of the retail
format which is brought on by market saturation, in
turn caused by a high number of firms in this retail
format and competition from new formats. Sales
growth declines and profit margins may have to be
reduced in order to stimulate purchases. Once maturity is
reached, the main goal is to prevent the business from
declining and to sustain profit as long as possible.
• In the final stage (decline), sales volume declines and
price sand profitability diminish. Companies can try to
avoid decline by repositioning the retail format but many
companies abandon the format all together and start
introducing new formats to keep their customers or
attract new ones
 Industry Life Cycle

Growth Stage ShakeOut Maturity Decline

• • • Opened new
Faced Butlers • Fall of
competition outlets
enters the • Faces Sale
from Bateel
market competition on • Wide use
Developm but
• Bombay best selling
expanded item from of deals
ent Stage their product sweets foreign • Pie in the
• Lals offerings and Laduree import
Sky opens
• Lindtt is
and soon foreign widely specialized
became a availabilit available
brand •
Chocolate
y of Butlers opens
Shop
essential new outlets
Chocolate

Prolonging the Life Cycle: Just In Time, Lean Production or Finding New
Uses for the product ( Lals creates a Community space with it’s
Halloween and holiday events)
• Strategically, retail leaders should keep a close watch
on their performance in the six dimensions of retail
excellence: customer focus, merchandising,
operations, infrastructure, people, and, most
important, customer proposition.
• Material underperformance in any of these dimensions
can be deeply problematic, but if a retailer doesn’t
have a compelling customer proposition—a reason for
customers to choose that retailer over competitors—it
simply won’t survive.
Industry Life cycle
What are the key differences
between product life cycle
and industry life cycle?
Retailers should monitor their performance in the six dimensions of retail
excellence
1. Acknowledgement: There is a lot of denial associated with
the fall of sales but a hard look needs to be taken at the TRS.
• The rate of sale, or sell-through, is one of the core ways to
measure the health of a retail business. Both ends of the sell-
through equation can be equally bad for business. If your rate
of sale is very low it means that you're not selling products as
quickly as you could or should. An overly high rate, on the
other hand, means you're cutting it too close with the inventory
and may be losing sales due to lack of products. The ideal
place (bliss point)* is somewhere in the middle

5 stages of Retail
Turnaround
2. The Reason: Analysis of the entire company to figure out what is
not working and what is working well
3. Be the Lion: Act quickly and aggressively to fix a decline so it
does not result in death or well extinction ( Block Buster, Radio
Shack). Create Goals and Strategies. Find a way to lower Cost of
Goods Sold.
4. Don’t be myopic: It is not only about cost, so when constructing
an overhaul, one needs to consider all facets, like competitors or loss
of sales due to limited channels, etc
5. Make it Last : The turnaround should not be a short term fix or
fad but a sustainable model that should be implemented in the
company.
SWOT
The Pestle Analysis is
a tool used for
Analyzing the External
Macro Environment

Pestle Analysis
SWOT &Pestle Analysis
Outlawing of Billboards
• The Rise of Social
Influencers/ Bloggers
• More information available
online
• Increased Digital Campaigns
• Opportunities to reassert brand
image and values over a more
economic and wider spread
platform (Global)

Another Advantage
What are some other
advantages that we
have seen as a result
from an occurrence in
our Pestle?
 Bargaining
Rivalry among
Power of
Competitors
Buyers
Industry
Competitivene
ss

Threat of Threat of
Substitutes New Entrants

Bargaining
Power of
Suppliers

Porter’s Five Forces

• Scrambled Merchandising refers to a practice by
wholesalers and retailers that carry an increasingly
wider assortment of merchandise. It occurs when a
retailer adds goods and services that are unrelated
to each other and to the firm's original business. For
example Amazon, Target, Zappos, etc..

Scrambled Merchandizing
Starbucks SWOT
 Strengths
Well-known brand
• Established history
• Stores are profitable
• Loyal customer base
• Quality goods
• Efficient website
Opportunities
• Could drive a transformation
agenda
• Re-invigorate its brand to
attract a new demographic
(younger people)
• Design and develop high
margin own brand(s)
SWOT
Weakness
• It has a tired image with dull
presentation
• Ageing demographic
• Too wide a range of merchandise
• Long terms leases across estate
• It is trapped in a discounting spiral – it
discounts heavily to shift goods.
Customers wait until discounts before
they buy which erodes margins
Threats
May not withstand pressures from external
environment
• Its loyal customer base will decline over
time
• Avoiding change and myopic
• Being famous for discounting & spot
sales prevents high margin sales
• Its loyal customer base will decline over
time
• Scrambled Merchandising refers to a practice by
wholesalers and retailers that carry an increasingly
wider assortment of merchandise. It occurs when a
retailer adds goods and services that are unrelated
to each other and to the firm's original business. For
example Amazon, Target, Zappos, etc..

Scrambled Merchandizing
• The wheel of retailing
concept was introduced
by McNair from
Harvard University
• The idea itself intends
to describe how the
retail institutions
transform during their
evolutionary life cycles.

Wheel of Retailing
• Step 1 of the Wheel of retailing – Establishing and penetrating in
the market
• The theory pays attention to the new retailers which often enter the
market place with low prices as well as low profit margins and
sometimes low status.. Example – When book stores like Barnes and
nobles started, they started by a unique model of bringing all the
books under one roof with amazing discounts. This was the first
stage for them in the wheel of retailing.
• Step 2 of the Wheel of retailing – Expanding in the market
• During the time and while they gain more experience of the market,
these retailer businesses strive to enlarge their customer base with
the purpose of increasing sales, gaining a higher profit margin as
well as acquiring a significant market share. Example – Barnes and
nobles then started expanding the market with more and more stores
so that they increased their sale, their brand value and ultimately,
their margins started increasing as well.
• Step 3 of the Wheel of retailing – Stabilized business model attracting margins.
• In this stage of the Wheel of retailing, the company is already in an established
position and hence the rates are enough to get a decent margin. Because of the
margin it is getting, the company keeps expanding moderately and increases its
reach to attract as well as retain more customers. Example – Once Barnes and
nobles established itself strongly, the margins grew and it created more and more
showrooms. The result was that a lot of small shops closed down and most people
flocked in Barnes and nobles.
• Stage 4 of Wheel of retailing – The entry by another retail competitor who
challenges, and then brings down the original.
• By adding higher qualitative products to the market or by providing additional
services, or by simply moving to a better market location the retail businesses then
target another segment. Therefore, their operations and facilities increase and
become more expensive. Ultimately, these retail businesses might emerge as a high
cost price retailer. Overall, in this stage, the cost is high for the original retailer.
Therefore, this presents an opportunity for another retailer who can then enter in the
market again in stage 1, with an objective to penetrate the market. Example –
When Barnes and nobles established itself strongly, people still had to visit the
store. Thus, Amazon entered the market with its own unique retail offering. People
could now browse books and order them from their home and get it home delivered
• Based on this, the wheel of retailing concept is seen as a
cycle and an evolutionary theory and it represents one of
the theories of structural change in retailing. As the
theory involves the beginning represented by one state
and return to the same state after some time in the future,
the theory is perceived as being cyclical.
• The discussed theory cannot apply to all retail businesses
as there are also businesses such as boutiques, vending
machines and convenience stores which are being
operated with a high margin basis from the entry phase.
Barnes and Nobles
Target Market and Target
Audience