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Retail Commercial Model


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Retail Marketing Sales Operation and Management


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C. Hazarika Retailing includes all the activities involved in selling goods and services directly to final consumers for personal, non-business use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. Any organization selling to final consumers whether it is a manufacturer, wholesaler or retailer is doing retailing. It does not matter how the goods or services are sold (by person, mail, telephone, vending machine, or internet) or where they are sold (in a store, on the street, or in the consumers home). Types of retailers Consumers today can shop for goods and services in a wide variety of retail organizations. These are store retailers, non-store retailers, and retail organization . Perhaps the best known type of retailer is the departmental store. Retail store types pass through stages of growth and decline that can be described as the retail life cycle. A type emerges, enjoys a period of accelerated growth, reaches maturity, and then declines. Levels of service Conventional retail stores typically increase their services and raise their prices to cover the costs. These higher costs provide an opportunity for new store forms to offer lower prices and less service. New store types meet widely different consumer preferences for service levels and specific services. Retailers can position themselves as offering one of the four levels of following services. 1. Self service : Self service is the cornerstone of all discounts operations. Many customers are willing to carry out their own locate compare select process to save money.
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Lecture delivered to the participants of Agro-clinic and Agri-Business centers training programme conducted by DEE, AAU at AAU, Jorhat on 09.05.2005
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Associate Professor, Department of Agricultural Economics, AAU, Jorhat 785013 2. Self selection : Customers find their own goods, although they can ask for assistance. 3. Limited service : These retailers carry more shopping goods, and customers need more information and assistance. The stores also offer services (such as credit and merchandise return privileges). 4. Full service : Salespeople are ready to assist in every phase of the locate-compareselect process. Customers who like to be waited on prefer this type of store. The high staffing cost, along with the higher proportion of specially goods and slower-moving items and the many services, results in high-cost retailing.

By combining these different service levels with different assortment breadths, one can distinguish the four broad positioning strategies available to retailers, as shown in figure 1.

2 Broad Bloomingdales Wal-Mart Tiffany Sunglass Hut Narrow Value added High Low Figure : 1. Retail Positioning Map Bloomingdales : Stores that feature a broad product assortment and high value added. Stores in this quadrant pay close attention to store design, product quality, service, and image. Their profit margin is high, and if they are fortunate enough to have high volume, they will be very profitable. Tiffany : Stores hat feature a narrow product assortment and high value added. Such stores cultivate an exclusive image and tend to operate on a high margin and low volume. Sunglass Hut : Stores that feature a narrow line and low value added. Such stores keep their costs and prices low by centralizing buying, merchandising, advertising, and distribution. Wal-Mart : Stores that feature a broad line and low value added. They focus on keeping prices low so that they have an image of being a place for good buys. They make up for low margin by high volume. Although the overwhelming bulk (97 per cent) of goods and services are sold through stores, non-store retailing has been growing much faster than store retailing. Non-store retailing falls into four major categories : direct selling, direct marketing (which includes telemarketing and Internet selling), automatic vending, and buying services. 1. Direct selling is also called multi-level selling or network marketing. Well known one-toone selling is AVON, Electrolux etc. In one-to-many, a salesperson goes to the home of a host who has invited friends; the salesperson demonstrates the products and takes orders. Pioneered by Amway, the multilevel (network) marketing sales

system consist of recruiting independent businesspeople who act as distributors. The distributors compensation includes a percentage of sales of those the distributors recruits as well as earnings on direct sales to customers. These direct selling firms, now finding fewer consumers at home, are developing multi-distribution strategies. 2. Direct marketing has roots in direct mail and catalog marketing. It includes telemarketing (1-800-FLOWERS), television direct-response marketing (Home shopping network), and electronic shopping (Amazon.com. Autobytel.com). Of these, electronic shopping experienced a major take off in the late 1990s as consumers flocked to dot-com sites to buy books, music, toys, electronics, and other products. 3. Automatic vending is used for a variety of merchandise, including impulse goods like cigarettes, soft drinks, coffee, candy, newspapers, magazines, and other products like hosiery, cosmetics, hot food etc. 4. Buying service is a store less retailer serving a specific clientele usually employees of large organizations who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership. Corporate Retailing Although many retail stores are independently owned, an increasing number are part of some form of corporate retailing. Corporate retail organizations achieve economies of scale, greater purchasing power, wider brand recognition, and better-trained employees. Categories of customers Generally the customers can be grouped into three main categories. These are: 1. Bargain hunters visit retail store, pick over last years holiday inventory, and then disappear for months. 2. Casual shoppers chat up with sales staff and buy sometimes. 3. Devoted customers, loyal clientele, love the store, buy often, and refer their friends to you. Marketing Decisions In the past retailers held customers by offering convenient location, special or unique assortments of goods, greater or better services than competitors, and store credit cards. Today, national brands are found in department stores, in their own shops, in merchandise outlets, and in off-price discount stores. In their drive for volume, national brand manufacturers have placed their branded goods everywhere. The result is that retail store assortments have grown more alike. Customers have become smarter shoppers. They do not want to pay more for identical brands, especially when service differences have diminished; nor do they need credit from a particular store, because bank credit cards are almost universally accepted. Retailers marketing decisions can be examined through target market, product assortment and procurement, services and store atmosphere, price, promotion, and place. Target market A retailers most important decision concerns the target market. Until the target market is defined and profiled, the retailer cannot make consistent decision on product assortment, store dcor, advertising messages and media, price, and service levels. Product assortment and Procurement The retailers product assortment must match the target markets shopping expectations. The retailer has to decide on product assortment breadth and depth. Thus a restaurant can offer a narrow and shallow assortment (small launch counters), a narrow and

4 deep assortment (delicatessen), a broad and shallow assortment (cafeteria) or a broad and deep assortment (large restaurant). The real challenge begins after defining the stores product assortment, and that is to develop a product differentiation strategy. After deciding on the product-assortment strategy, the retailer must establish procurement sources, policies, and practices. Retailers are rapidly improving their skills in demand forecasting, merchandise selection, stock control, space allocation, and display. Stores are using direct product profitability (DPP) to measure a products handling costs (receiving, moving to storage, paperwork, selecting, checking, loading, and space cost) from the time it reaches their warehouse until a customer buys it in their retail store. Services and store atmosphere Retailers must also decide on the services mix to offer customers: Prepurchase services include accepting telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours, fashion shows, trade ins. Postpurchase services include shipping and delivery, gift-wrapping, adjustments and returns, alterations and tailoring, installations, engraving. Ancillary services include general information, check cashing, parking, restaurants, repairs, interior decorating, credit, rest rooms, and baby-attendant service. The services mix is a key tool for differentiating one store from another, so is atmosphere. Atmosphere is another element in the store arsenal. Every store has a physical lay out that makes it hard or easy to move around. Every store has a look. The store must embody a planned atmosphere that suits the target market and draws consumers towards purchase. Price decision Prices are a key positioning factor and must be decided in relation to the target market, the product-and-service assortment mix, and competition. All retailers would like to achieve high volumes and high gross margins, but the two usually do not go together. Most retailers fall into the high-mark up, lower volume group (fine specialty stores) or the low-mark up, higher volume group (mass-merchandisers and discount stores). Retailers must also pay attention to pricing tactics. Most retailers will put low prices on some items to serve as traffic builders or loss dealers. They will run storewide sales. They will plan markdowns on slower-moving merchandise. Promotion decision Retailers use a wide range of promotion tools to generate traffic and purchases. They place ads, run special sales, issue money saving coupons, and run frequent shopper-reward programmes, in-store food sampling, and coupons on shelves or at checkout points. Each retailer must use promotion tools that support and reinforce its image positioning. Place decision Retailers are accustomed to saying that the three keys to success are location, location, and location. Customers generally choose the nearest bank and gas station. Department-store chains, oil companies, and fast food franchisers exercise great case in selecting locations. The problem breaks down into selecting regions of the country in which to open outlets, then particular cities, and then particular sites. Retailers can locate their stores in the central business district, a regional shopping center, a community shopping center, a shopping strip, or within a large store. In view of the relationship between high profits and high rents,, retailers must decide on the most advantageous locations for their outlets. They

5 can use a variety of methods to assess location, including traffic counts, surveys of consumer shopping habits, analyses of competitive locations. Retailers can assess a particulars stores sales effectiveness by looking at 4 indicators. 1. Number of people passing by on an average day. 2. Percentage who entered the store. 3. Percentage of those entering who buy. 4. average amount spent per sale. Trends in retailing Following are the main development; the retailers and manufacturers need to take into account, in planning competitive strategies. 1. New retail forms and combinations. 2. Growth of intertype competition. 3. Growth of giant retailers. 4. Growing investment in technology. 5. Global presence of major retailers. 6. Selling an experience, not just goods. 7. Competition between store based and non-store based retailing. How to run a marketing campaign for retail business ? There are five major steps. These are : 1. Gather customer information. 2. Target the Right customers. 3. Create effective communication. 4. Host an event. 5. Follow up with guest. Retail Marketing in India Number of retailers India has sometimes been called a nation of shopkeepers. This epithet has its roots in the huge number of retail enterprises in India, which totaled over 12 million n 2003. About 78% of these are small family businesses utilizing only household labour. Even among retail enterprises that employ hired workers, the bulk of them use less than three workers. Indias retail sector appears backward not only by the standards of industrialized countries but also in comparison with several other emerging markets in Asia and elsewhere. There are only 14 companies that run department stores and two with hypermarkets. While the number of businesses operating supermarkets is higher (385 in 2003), most of these had only one outlet. The number of companies with supermarket chains was less than 10. Retail sales Retail sales, which amounted to about Rs.7, 400 billion in 2002, expanded at an average annual rate of 7% during 1999-2002. With the upturn in economic growth during 2003, retail sales are also expected to expand at a higher pace of nearly 10%. In a developing country like India, a large chunk of consumer expenditure is on basic necessities, especially food related items. Hence, it is not surprising that food, beverages and tobacco accounted for as much as 71% of retail sales in 2002. The remaining 29% of retail sales are non-food items. The share of food related items fell over the review period, down from 73% in 1999. This is to be expected as, with income growth, Indians, like consumers elsewhere, spent more on non-food items compared with food products. Sales through supermarkets and department stores are small compared with overall retail sales. However, their sales grew much more rapidly (about 30% per year during the review period). As a result, their

6 sales almost tripled during this time. This high acceleration in sales through modern retail formats is expected to continue during the next few years with the rapid growth in numbers of such outlets in response to consumer demand and business potential. Government policy There has been vigorous opposition to foreign direct investment (FDI) in retailing from small traders who fear that foreign retailing companies would take away their business, lead to the closure of many small trading businesses and result in considerable unemployment. Given the political clout of the small trading community, because of their enormous numbers, the government has barred FDI in retailing since 1997. Hence, at present, foreign retailers can only enter the retailing sector through franchising agreements. Organizational characteristics Given the traditional and underdeveloped state of the Indian retail sector, the organizational characteristics of retail enterprises are rudimentary. Most of them belong to independent enterprises in the form of small family businesses. Cooperatives have been present in India for several decades, spurred by the encouragement given by the Indian Government, which viewed the cooperative movement as an integral component of its erstwhile socialist policies. However, since the 1990s, there has ben a reduction in government support for cooperatives. In 2002, there were about 35,000 outlets run by cooperatives. Economic liberalization, competition and foreign investment since the 1990s led to a proliferation of brands with both foreign and Indian companies acquiring a strong brand equity for their products. Hence, franchising emerged as a popular mode of retailing. Sales of franchises grew at a rapid pace of 14% per annum over the review period. In 2002, there were over 5,000 franchised outlets. The other major retailing organization format is multiples, better known as chain stores in India. In 2002, there were about 1,800 chain stores. Among the various organizational formats, sales of chain stores grew at the fastest pace, with sales growth during the review period averaging 24% per year. Alternative selling channels Sales through most alternative selling channels are tiny or non-existent. The only exception was direct selling, which grew rapidly over the review period. The main reason for this was that direct selling companies could easily attract a huge number of distributors, who constitute the key element for the success of any direct selling company. Many of these are unemployed Indian housewives who welcomed this opportunity to earn additional income for their households. The low start-up costs meant that they could easily start this business.

Positioning
In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Re-positioning involves changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market. De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market. The original work on Positioning was consumer marketing oriented, and was not as much focused on the question relative to competitive products as much as it was focused on cutting through the ambient "noise" and establishing a moment of real contact with the intended recipient. In the classic example of Avis claiming "No.2, We Try Harder", the point was to say something so shocking (it was by the standards of the day) that it cleared space in your brain and made you forget all about who was #1, and not to make some philosophical point about being "hungry" for business. The growth of high-tech marketing may have had much to do with the shift in definition towards competitive positioning. An important component of hi-tech marketing in the age of the world wide web is positioning in major search engines such as Google, Yahoo and Bing, which can be accomplished through Search Engine Optimization , also known as SEO. This is an especially important component when attempting to improve competitive positioning among a younger demographic, which tends to be web oriented in their shopping and purchasing habits as a result of being highly connected and involved in social media in general. Definitions Although there are different definitions of Brand Positioning, probably the most common is: identifying a market niche for a brand, product or service utilizing traditional marketing placement strategies (i.e. price, promotion, distribution, packaging,and competition). Also positioning is defined as the way by which the marketers creates impression in the customers mind. Positioning is a concept in marketing which was first introduced by Jack Trout ( "Industrial Marketing" Magazine- June/1969) and then popularized by Al Ries and Jack Trout in their bestseller book "Positioning - The Battle for Your Mind." (McGraw-Hill 1981) This differs slightly from the context in which the term was first published in 1969 by Jack Trout in the paper "Positioning" is a game people play in todays me-too market place" in the publication Industrial Marketing, in which the case is made that the typical consumer is overwhelmed with unwanted advertising, and has a natural tendency to discard all information that does not immediately find a comfortable (and empty) slot in the consumers mind. It was then expanded into their ground-breaking first book, "Positioning: The Battle for Your Mind," in which they define Positioning as "an organized

8 system for finding a window in the mind. It is based on the concept that communication can only take place at the right time and under the right circumstances" (p. 19 of 2001 paperback edition). What most will agree on is that Positioning is something (perception) that happens in the minds of the target market. It is the aggregate perception the market has of a particular company, product or service in relation to their perceptions of the competitors in the same category. It will happen whether or not a company's management is proactive, reactive or passive about the on-going process of evolving a position. But a company can positively influence the perceptions through enlightened strategic actions. A company, a brand or a brand must have positioning concept in order to survive in the competitive marketplace. If you don't position your business, you competitor will which is likely not what you desire. (According to the book "Marketing Concepts that Win! Copyright 2011 by Martha Guidry, Live Oak Book Company) Many individuals confuse a core idea concept with a positioning concept. A Core Idea Concept simply describes the product or service. Its purpose is merely to determine whether the idea has any interest to the end buyer. In contrast, a Positioning Concept attempts to sell the benefits of the product or service to a potential buyer. The positioning concepts focus on the rational or emotional benefits that buyer will receive or feel by using the product/service. A successful positioning concept must be developed and qualified before a "positioning statement" can be created. The positioning concept is shared with the target audience for feedback and optimization; the Positioning Statement (as defined below) is a business person's articulation of the target audience qualified idea that would be used to develop a creative brief for an agency to develop advertising or a communications strategy. Positioning Statement (As written in the highly revered book Crossing the Chasm. Copyright 1991, by Geoffrey Moore, HarperCollins Publishers) For (target customer) Who (statement of the need or opportunity) The (product name) is a (product category) That (statement of key benefit that is, compelling reason to buy) Unlike (primary competitive alternative) Our product (statement of primary differentiation) Differentiation in the context of business is what a company can hang its hat on that no other business can. For example, for some companies this is being the least expensive. Other companies credit themselves with being the first or the fastest. Whatever it is a business can use to stand out from the rest is called differentiation. Differentiation in todays over-crowded marketplace is a business imperative, not only in terms of a companys success, but also for its continuing survival.* [edit]Brand positioning process Effective Brand Positioning is contingent upon identifying and communicating a brand's uniqueness, differentiation and verifiable value. It is important to note that "me too" brand positioning contradicts the notion of differentiation and should be avoided at all costs. This type of copycat brand positioning only works if the business offers its solutions at a significant discount over the other competitor(s). Generally, the brand positioning process involves:

9 1. Identifying the business's direct competition (could include players that offer your product/service amongst a larger portfolio of solutions) 2. Understanding how each competitor is positioning their business today (e.g. claiming to be the fastest, cheapest, largest, the #1 provider, etc.) 3. Documenting the provider's own positioning as it exists today (may not exist if startup business) 4. Comparing the company's positioning to its competitors' to identify viable areas for differentiation 5. Developing a distinctive, differentiating and value-based positioning concept 6. Creating a positioning statement with key messages and customer value propositions to be used for communications development across the variety of target audience touch points (advertising, media, PR, website, etc.) [edit]Product positioning process Generally, the product positioning process involves: 1. Defining the market in which the product or brand will compete (who the relevant buyers are) 2. Identifying the attributes (also called dimensions) that define the product 'space' 3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes 4. Determine each product's share of mind 5. Determine each product's current location in the product space 6. Determine the target market's preferred combination of attributes (referred to as an ideal vector) 7. Examine the fit between:

The position of your product The position of the ideal vector

[edit]Positioning concepts More generally, there are three types of positioning concepts: 1. Functional positions

Solve problems

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Provide benefits to customers Get favorable perception by investors (stock profile) and lenders

2. Symbolic positions

Self-image enhancement Ego identification Belongingness and social meaningfulness Affective fulfillment

3. Experiential positions

Provide sensory stimulation Provide cognitive stimulation

[edit]Measuring the positioning Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques, and statistical techniques like multi dimensional scaling, factor analysis,conjoint analysis, and logit analysis. POSE Analysis[1] offers a somewhat more sophisticated approach than perceptual mapping and allows one to not only determine the positioning of a brand but also the overal strength of a brand's proposition. [edit]Repositioning a company In volatile markets, it can be necessary - even urgent - to reposition an entire company, rather than just a product line or brand. When Goldman Sachs and Morgan Stanley suddenly shifted from investment to commercial banks, for example, the expectations of investors, employees, clients and regulators all needed to shift, and each company needed to influence how these perceptions changed. Doing so involves repositioning the entire firm. This is especially true of small and medium-sized firms, many of which often lack strong brands for individual product lines. In a prolonged recession, business approaches that were effective during healthy economies often become ineffective and it becomes necessary to change a firm's positioning. Upscale restaurants, for example, which previously flourished on expense account dinners and corporate events, may for the first time need to stress value as a sale tool. Repositioning a company involves more than a marketing challenge. It involves making hard decisions about how a market is shifting and how a firm's competitors will react. Often these decisions must be made without the benefit of sufficient information, simply because the definition of "volatility" is that change becomes difficult or impossible to predict.

11 Positioning is however difficult to measure, in the sense that customer perception on a product may not tested on quantitative measures.

Positioning Strategy
Positioning strategies can be conceived and developed in a variety of ways. It can be derived from the object attributes, competition, application, the types of consumers involved, or the characteristics of the product class. All these attributes represent a different approach in developing positioning strategies, even though all of them have the common objective of projecting a favorable image in the minds of the consumers or audience. There are seven approaches to positioning strategies: (1) Using Product characteristics or Customer Benefits as a positioningstrategy This strategy basically focuses upon the characteristics of the product or customer benefits. For example if I say Imported items it basically tell or illustrate a variety of product characteristics such as durability, economy or reliability etc. Lets take an example of motorbikes some are emphasizing on fuel economy, some on power, looks and others stress on their durability. Hero Cycles Ltd. positions first, emphasizing durability and style for its cycle. At time even you would have noticed that a product is positioned along two or more product characteristics at the same time. You would have seen this in the case of toothpaste market, most toothpaste insists on freshness and cavity fighter as the product characteristics. It is always tempting to try to position along several product characteristics, as it is frustrating to have some good characteristics that are not communicated. (2) Pricing as a positioning strategy - Quality Approach or Positioning by Price-Quality Lets take an example and understand this approach just suppose you have to go and buy a pair ofjeans, as soon as you enter in the shop you will find different price rage jeans in the showroom say price ranging from 350 rupees to 2000 rupees. As soon as look at the jeans of 350 Rupees you say that it is not good in quality. Why? Basically because of perception, as most of us perceive that if a product is expensive will be a quality product where as product that is cheap is lower in quality. If we look at this Price quality approach it is important and is largely used in product positioning. In many product categories, there are brands that deliberately attempt to offer more in terms of service, features or performance. They charge more, partly to cover higher costs and partly to let the consumers believe that the product is, certainly of higher quality. (3) Positioning strategy based on Use or Application Lets understand this with the help of an example like Nescafe Coffee for many years positioned it self as a winter product and advertised mainly in winter but the introduction of cold coffee has developed a positioning strategy for the summer months also. Basically this type of positioning-by-use represents a second or third position for the brand, such type of positioning is done deliberately to expand the brands market. If you are introducing new uses of the product that will automatically expand the brands market.

12 (4) Positioning strategy based on Product Process Another positioning approach is to associate the product with its users or a class of users. Makes of casual clothing like jeans have introduced designer labels to develop a fashion image. In this case the expectation is that the model or personality will influence the products image by reflecting the characteristics and image of the model or personality communicated as a product user. Lets not forget that Johnson and Johnson repositioned its shampoo from one used for babies to one used by people who wash their hair frequently and therefore need a mild people who wash their hair frequently and therefore need a mild shampoo. This repositioning resulted in a market share. (5) Positioning strategy based on Product Class - In some product class we have to make sure critical positioning decisions For example, freeze dried coffee needed to positions itself with respect to regular and instant coffee and similarly in case of dried milk makers came out with instant breakfast positioned as a breakfast substitute and virtually identical product positioned as a dietary meal substitute. (6) Positioning strategy based on Cultural Symbols - In todays world many advertisers are using deeply entrenched cultural symbols to differentiate their brands from that of competitors. The essential task is to identify something that is very meaningful to people that other competitors are not using and associate this brand with that symbol. Air India uses maharaja as its logo, by this they are trying to show that we welcome guest and give them royal treatment with lot of respect and it also highlights Indian tradition. Using and popularizing trademarks generally follow this type of positioning. (7) Positioning strategy based on Competitors - In this type of positioning strategies, an implicit or explicit frame of reference is one or more competitors. In some cases, reference competitor(s) can be the dominant aspect of the positioning strategies of the firm, the firm either uses the same of similar positioning strategies as used by the competitors or the advertiser uses a new strategy taking the competitors strategy as the base. A good example of this would be Colgate and Pepsodent. Colgate when entered into the market focused on to family protection but when Pepsodent entered into the market with focus on 24 hour protection and basically for kids, Colgate changed its focus from family protection to kids teeth protection which was a positioning strategy adopted because of competition.