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MARKETING

Takes a day to learn but a lifetime to master Philp Kotler

Syllabus
Place of Retailing in Marketing Mix Trends in Retailing Retail Economics Retail Merchandising and Shop Displays Retail Advertising and Sales Promotions Managing people at Work-Recruitment and Motivation Communication and Customer Relations Inventory and Financial Management Retail Strategies Retail Marketing Retail Management Information Systems--Use of new technology Super Market/ Department Stores/ Chain Store Management Comparative retailing across the world Role of Personal Selling in Retailing Store Layout Relationship Marketing Supply Chain Management Retail Research On-Line Retailing

Retailing
Any Organization selling to final consumers--whether it is a manufacturer, wholesaler, or retailer--is doing retailing. It doesnt matter how the goods and service are sold (in person, by mail, telephone or on the internet) or where (street, store et al). Retail life cycle

History of Retail in India

Why is retail changing in India


Middle class consumers

Increase in per capita spending


Growth in number of double income households

Increase usage of credit and debit cards


Youth studying and working simultaneously

Exposure to International and National brand through Media

Factors attracting global retailers to India


Between 1999-2003, Indias GDP has increased 40% Retail sales per capita has increased by 33% Rise in spending power, disposable income, brand conscious Population and Size of the Indian market On line retailing New retail formats Growing urban population

Change in social structure and consumer behavior


Aaj ke naari Retailers proximity to consumers Consumer Pull Emerging Rural Market Corporate interest in retailing Evolution of family Owned Establishments

Types of store
Specialty Store

Departmental Store
Supermarket

Convenience Store
Discount Store

Off-price retailer---factory outlets

Levels of service
Self Service Self Selection Full Service

Direct Selling Direct Marketing Automatic Vending

Careers in retail
Store Management People Oriented Lead and Motivate employees Sensitive to customers Sales Planning Setting Goals Overall Store Image Entry Level Position-Department Manager Merchandize presentation, Customer Service, Inventory Control Next Level-Store Manger--> District Manager

Merchandise Management Analytical Capabilities Ability to predict what merchandise will appeal to their target markets Skill of negotiating with vendors/ Store management 2 parallel career paths Buying More like finance portfolio managers Responsible for selecting type Amount of merchandize Wholesale price Initial retail price Monitoring merchandise sales Should posses good financial planning skills Knowledge of customers

Planners More Analytical than buyers Assortment of merchandise to store-how many style, color, sizes, Allocating merchandise to store Closely monitors sales and works closely with buyers

Myths about retailing


Sales Clerk is the Entry-Level job in Retailing College and University Degrees are not needed to succeed in Retailing Retail Jobs are low paying Retailing is a low growth Industry with little opportunity for advancement

Retail strategy
Commonly used term in retail Statement that identifies the retailers Target Market, format the retailer plans to use to satisfy the target markets needs, basis on which retailer would build a competitive advantage Target MarketSegment towards which the retailer wants to focus Retail format---Type of retail mix, nature of merchandize, services offered, pricing policy, advertising and promotion program, store design, format, visual merchandize. Retail Market

Ex-Curves-US, Magazine Luiza, Brazil

Sustainable competitive advantage


Something which cannot be copied easilyex-change in pricing

By Customer LoyaltyUsing database to develop deeper understanding of customers


Unique MerchandisePrivate labels Convenient Locations---McD, Starbucks Human Resource ManagementCommitted, knowledgeable employees Vendor Relation Customer Service

Growth strategies

Market Penetration More stores in the same target market Existing stores open for long hours Cross-selling Ex-Sales associate who has just sold a DVD player will take the customer to the accessories department to sell special cables that would increase the performance

Market Expansion Existing retail format in new market segment Ex-A&F, college students to high schoolers Wal-Mart coming to India

Retail Format Development Retailer develops a new retail format Selling books online

Global growth opportunities


Products which have universal appeal such as distinctive merchandize or low cost Usually brands from the developed world Core Advantage Global Retailer Example Low cost, efficient operations Wal-Mart, Carrefour Strong private brands IKEA, Starbucks Fashion reputation The Gap, Zara Adaptability (Culture, food, clothing) Global Culture (Starbucks in China)

Retail locations
Location, Location, Location !

Retail Space per citizen-US 20 sq.ft, Sweden 3.1 Location preference depends on type of store Location has strategic importance, can be used to develop sustainable competitive advantage Usually retailers sign lease for 7 to 10yrs Variables to be considered Occupancy cost Pedestrian and Vehicle traffic generated Store restrictions Convenience for customers

Types of locations
Freestanding Sites Retail Locations for an individual, isolated store unconnected to other retailers, might be near to other freestanding Advantage Convenient for customers Easy access and Parking High vehicular traffic Visibility to attract customers driving by Modest Occupancy costs Separation from direct competition Fewer restriction of hours, signs, merchandize as in shopping centers Disadvantages Limited trade area Higher occupancy cost other retailers not there to share lighting, trash , maintenance cost

Merchandize Kiosks Typically between 40 to 500 sq.feet Usually short term leases For mall operators, Kiosks are an opportunity to generate rental income in otherwise vacant space

They also generate excitement leading to additional sales for the entire mall
Mall operators are sensitive to their mall tenants needs, when planning kiosks location, they are careful to avoid kiosks that block any store fronts, that compete directly with permanent tenants by selling similar merchandize

Central Business District CBD

Business area in a city or town It draws many people and employees into the area during business hours Large number of residents living in the area Parking is a problem Shoplifting Unlike shopping centers CBDs suffer from lack of planning, one block may contain upscale boutiques, while the next may be populated with low-income housing, which means consumers may not have enough interesting retailers that they can visit on a shopping trip

Shopping Centers
Planned, developed and owned as a single property Combining many stores at one location, more consumers are attracted to the shopping center than if the stores were at separate locations Shopping center management carefully selects a set of retailers that are complementary to provide consumers with a one-stop shopping experience with a well-balanced assortment of merchandise Shopping centre management is responsible for maintenance, such as parking area, security and advertising and special events to attract consumers Most shopping centers have one or two major retailers, referred as anchor tenants----lease for them is less than $2 per square foot for anchors in an enclosed mall but $20 for non anchor retailers

Shopping Malls Main Street


High Street In UK 80% of retail sales are made by small retailers in Main street Low occupancy cost Often cluttered in India

Fashion/ Specialty Centers


Composed of upscale apparel shops, boutiques and gifts shops carrying selected fashions or unique merchandise of high quality and price Need not be anchored Physical design is elegant and rich-dcor Usually found in trade areas of high Income levels, in tourist areas or some CBDs Occupancy cost is high

Airports
High pedestrian area Better to have a coffee or buy a gift rather than just spend time waiting Sales per square feet are often three to four times as high as at a regular mall store Rents are also 20% higher Costs can be higher Locations are inconvenient for staff, so wages have to be higher Best locations tends to be ones who have better connectivity and international flights Best selling products are those that make good gifts, necessities and easy-to-pack items

Hospitals
Restaurants serving healthy food

Store within a store


Small stores within larger other stores Departmental stores lease space to other retailers, such as sellers of fine jewelry, dry cleaners et al Wal-mart has Mc D and coffee shops

Location and retail strategy


Selection of a location type must reinforce its strategy Location type decision must be consistent with the shopping behavior and the size of the target market and its positioning in the target market

Shopping behavior of Consumers in Retailers Target Market Convenience shopping Not concerned about brand or Retailers Image Want to make the purchase as quickly and easily as possible Located closer to where customers live Easy parking Ex of situations Coffee during work break Milk for breakfast

Comparison Shopping Customers have an idea about the product or service they want They do not have a strong preference for a model or Brand Purchase decision is important Typically while buying furniture, apparel, electronics Furniture retailers often locate next to each other to create a Furniture row Department stores and Specialty store in the same mall Many brands in the same store

Specialty Shopping They know what they want Will not accept a substitute Brand or retailer loyal Having a convenient location is not as important for retailers selling unique merchandise

Ex-Buying a designer dress, perfume

Density of target market Affects the choice of location type Good location has many people in the target market that are drawn to it Comparison shopping store next to a Wal-Mart is a good location It is not as important to have a high customer density area near a store that sells specialty merchandise Legal Considerations Environmental Issues

Retail site location


Factors to consider Economic condition Population, employment growth ensures retail environment Look for duration of growth, how it will affect demand Find the reason for growth, is it dependant on a specific industry ? Ex-Automobile Important to find which areas are growing quickly and why ?

Competition
The level of competition affects the retail sales Wal-Marts initial success was based on openings stores in small towns with no retail stores Ex-Bandra, too many restaurants

Strategic fit of the areas population with the retailers target market Population level, growth, and competition alone dont tell the whole story The areas needs to have consumers from the retailers target market Area must have right demographic and lifestyle profile Composition of household in an area can be an important determinant of success -Dual or single earning -Joint or nuclear

Cost of operating stores


Store rental and advertising cost would be higher in Bandra

Cost is also affected by proximity of the area being considered to other areas in which the retailer operates stores, ex- if a store is located near other stores and the retailers distribution centers, the cost of shipping merchandise to the store is lower
Local, state legal and regulatory environment

Number of stores in an area


Economies of Scale from Multiple Stores Promotion and distribution A retailers promotional costs are the same for newspaper advertising that promotes 20 stores in an area or only one store

Many retail chains expand only in areas where they have a distribution center to support the store

Cannibalization One store eating into sales of another store Wal-Mart opens over 200 supercenters a year in US, stores should not be closer to each other However Wal-Mart thinks it would have benefit in the long run, provide convenience for customers, competition might not enter For franchise retail operations, disputes can arise over number of retail locations in an area Franchisors grant an exclusive territory

Evaluating a site for locating a retail store


Characteristics of the site Traffic flow past the site and accessibility to the site Access to major highways Street congestion Pedestrian traffic Availability of public transport Restriction of tenant mix

Location Characteristics Parking spaces Access to store entrance and exit Visibility of the store from the street Size and shape of store Adjacent retailers Rental fee Local tax Common area maintenance cost Length of lease

Trade Area Accounts for the majority of the stores sales and customers Trade areas can be divided in three zones Primary trading area is the geographic area from where the store derives 50-70 % of its customers Secondary trading area is the geographic area from where the store derives 20-30 % of its customers Tertiary trading area or fringe includes the outermost area from where the rest of the customer come

The appropriate should be the driving time, which can be 5min, 15min and more than 15mins drive for primary, secondary and tertiary respectively.

Negotiating a lease
Types of Leases Most retailers lease store sites Retailers dont wish to tie up their capital by owing real estate Also, most of the best locations-such as shopping malls are only available by leasing, there are 2 types Percentage Leases Rent is based on percentage of sales + maintenance cost 5 to 10years lease Minimum (favor of landlord) and maximum lease (favor of retailer) Another type is percentage decreases with increase in sales Ex-4% for upto 100000, 3% above that Fixed-Rate Leases

Terms of the Lease Prohibited use Clause Limits the landlord from leasing to certain kind of tenants Retailers may also wish to restrict the use of space from those establishments that could harm the wholesome image Exclusive use Clause Prohibits the landlord from leasing to retailers selling competing products. Ex-a discount store lease may specify that the landlord cannot lease to other discount store Some retailers are also particular about how the storefront appears. For instance-a womens apparel store may specify that storefront must have floor-to-ceiling glass to maximize window display

Escape Clause Allows retailer to terminate its lease if sales dont reach a certain level after a specified time frame

Human resource management


Gaining competitive advantage through Human Resource Management3 reasons

1st Labor costs account for a significant percentage of a retailers total expenses, thus, effective management of employees can produce a cost advantage
2nd the experience that most customers have with a retailer is determined by the activities of employees who select merchandise, provide information and assistance. Thus, employees can play a major role in differentiating a retailers offering from its competitor 3rd These advantages are difficult to duplicate

Objectives of HRM Align capabilities and behavior with short-term and long-term goals

Performance can be measured by employee productivitythe retailers sales divided by number of employees
Employee satisfaction is directly linked to customer satisfaction

Special HR Conditions Facing Retailers HRM in retailing is very challenging due to Part-Time Employees Most retailers are open long hours and weekends to respond to needs of family shoppers and working people. To deal with peak period and long hours, stores have to employ part timers, who are usually less committed Expense Control Retailers often operate on thin margins and must control their expenses. They are cautious abut paying high wages to hourly employees . Lack of experience and motivation among many retail employees is particularly troublesome

International Human Resource Issues Differences in work values, economic systems and labor laws mean that HR practices that are effective in one country might not be effective in another. For example-U.S retailers rely heavily on individual performance however countries with collectivist culture, such as China and Japan, employees downplay individual desires and focus on the needs of the group. In Singapore it absolutely fine to place an ad which says, only male candidates, between 25-40 of Chinese ethnicity Expats vs Local

Motivating retail employees


Policies and Supervision Most fundamental--Prepare written policies and have supervisors enforce those policies Relying too much on written policy can make the job uninteresting Incentives Types of incentive compensation Percentage Bonus esop

Organization Culture Set of values, customs, traditions of a firm that guides employees behavior These arent written down as a set of policies but are passed from experienced employees to new ones Strong Organization culture gives employees a sense of what they should do on the job or how they should behave on the job, its in line with the firms strategy. Organization culture has a greater impact on employees ExUse your best judgment to do anything to provide service to our customers

Developing and Maintaining a Culture Organization culture developed and maintained through stories and symbols Examples Heroic service undertaken by its salespeople. Salespeople will relate how a fellow salesperson went across the mall and bought a green, extra large Ralph Lauren/Polo shirt for a customer who was upset because the store didnt have the shirt in his size Wear only clothes sold in the store

Park cars in the outskirts of the parking lot so customers can park in more convenient locations

Add-on sales using the man in the desert story. A man crawling through the desert, gasping for water, is offered water by a retailer at the oasis. But if their store was at the oasis, the salesperson would have said Heres some water, but how about some food ? I see youre wearing a wedding ring. Can we call your family to let them know you are here ? Wal-Mart Sam Walton on the wealthiest people before he died lived in a modest house and drove a pickup truck to work

Developing Skills Selective Hiring Singapore Airlines, only 10% of the applicants make it through the initial screening, and only 2% are eventually hired Training More than 60% of retail employees have direct contact with customers, which means they are responsible for helping customers satisfy their needs and resolve the problems

Empowering Employees Reducing Status Difference by working style and lowering wage differences

Promotion from within


Balancing Careers and Families
o Flextime o Job Sharing o Day care for kids et al

Supply chain management

A day in _____________ life !

Strategic advantage through SCM


When family owned businesses managed retail, large manufacturers and distributors dictated terms Now, its the otherwise In Retail SCM is delivery of economic value to the customer through the management of flow of different goods and associated information fro vendors to customers Cannot be copied easily Not just buying software from some company but customizing and continuously making changes

Improved product availability


Reduced Stockouts A stock out occurs when an Stock Keeping Unit that a customer wants is not available Tailored Assortments Right merchandize at the right store National retail chains have long adjusted assortments in their store on the basis of climateStocking more wool sweaters in northern stores and cotton sweaters in southern stores Data can analyze what is sold better in which store

Higher ROI Efficient SCM improves ROI because it increases Sales, net profit margins and assets Net sales increase because customers are offered more attractive assortments than are in stock One can estimate how many how many Air conditioner/ TV et al would be sold during a promotional offer Net profit margin is improved by increasing the gross margin and lowering expenses Information system that coordinates between buying staff and vendors allow retailers to take advantage of special buying opportunities Operating cost can be lower by coordinating deliveries thus reducing transportation expenses

Strategic Advantage Critical factor in Wal-Marts success, even though competitors realize it they cant copy it To minimize stockouts, retailers need to forecast demand accurately, but they also need to make sure the merchandize in the stores stockroom is put on the shelves in the right place ; buyers place orders with vendors at the right time. Data Warehouse Purchase data collected at the POS goes into a huge database known as a data warehouse. The information stores is accessible on various dimensions and levels

Electronic Data Interchange Computer to Computer exchange of business documents in a structured format, which means that the data transmissions use a standard format to communicate the data

Physical Flow of Merchandise-Logistics Merchandize flow from vendor to distribution center Merchandize goes from distribution center to stores Alternatively, merchandize can go from vendor directly to stores More accurate sales forecast are possible when retailers combine forecasts for many stores serviced by one distribution centre rather than forecast for each store Consider set of 50 Vijay sales stores, each store normally stocks 5TVs of a particular brand. By carrying the item at each store the retailer must develop 50 individual forecast, each with the possibility of errors that could result in either too much or too little merchandize
Fact-About half of a video games sales are made within 3 days of the release, and 70% are rung up within the 1st week

Its easier to avoid running out of stock or having too much merchandise in the individual stores Retail store space is typically much more expensive than space at a distribution centre
Distribution centers arent appropriate for all retailers. If a retailer has only a few outlets, expense of a distribution center is probably unwarranted Also, if many outlets are concentrated in metropolitan area, merchandize can be consolidated and delivered directly by the vendor

Finally direct store delivery gets merchandize to the store faster and thus is used for perishable goods, items that create the image of the retailers image of being the 1st to sell the latest product

Customer relationship management

Crm process
Mass media used for Advertising and Sales promotion Retailers looking to provide more value by targeted marketing to increase their share of wallet Research indicates, it costs 3 to 6 times more to sell a product to an customer than an existing customer and small increase in customer retention can lead to dramatic increase in profits Customer retention is more important than customer acquistion

loyalty
Customer loyalty is more than repeat purchases, its about customers being committed to purchasing merchandise and services from the retailer and resisting activities of competitors, they have a bond with the retailer, it goes just beyond convenience. Many neighborhood caf waiter waitress recognize their customers by name and know their preference
Fact-55% of consumers ages 25yrs or older are not truly loyal to the stores at which they shop most frequently

Collecting Customer Data

Learning

Analyze Customer Data and Identifying Target Customers

Developing CRM programs

Action

Implementing CRM Programs

Customer Database TransactionsComplete history of the purchases made by the customer, including the purchase date, price paid, the SKUs purchased and whether the merchandize was purchased in response to a special promotion or marketing activity Customer Contacts---a record of the interactions that the customer has had with the retailer Customer preferences---what the customer likes, favourite colour, brands, fabrics, as well as apparel sizes Descriptive information---Demographic and Psychographic data describing the customer that can be used in developing market segments

Identifying information Shoppers card From a retailer perspectiveshoppers card provide 2 benefits

Customers provide demographic and other information when they sign up for the program and then are motivated to identify themselves at each transaction Customers are motivated by the reward offered to increase the number of visits and the amount purchased on each visit
Fact-In the U.S supermarket industry, frequent shopper cards do not lead to increased loyalty. Other factors, such as a convenient location and fast checkout have a bigger impact on customer loyalty

However, Shopper cards can be inconvenient to carry Some chains have started using fingerprint recognizer Connecting internet purchasing data with stores

For example if a customer uses his credit to shop online at shoppers stop.com and then uses the same credit card to shop at the store, SS can capture the customers name and shipping address and update the purchase record

Analyzing Customer Data and Identifying Target Customers Data mining one approach used to develop this information, identifies pattern in data. Ex-An electronic retailer in London discovered that customers who had bought portable DVD players typically commuted to work by train. Using this information, the retailer experienced a 43 percent increase in portable DVD player sales when it redirected most of its communication budget from daytime TV commercials to newspapers and billboards along the train tracks

Market basket analysis Focuses on the composition of the basket, or bundle, of products purchased by a household during a single shopping occasion. This analysis is often useful for suggesting where to place merchandise in a store Tissues are in the paper good aisle and also mixed in with cold medicine Snack cakes are next to coffee Bananas next to corn flakes

Identifying Market Segments


When an apparel store analyzed its customer database, it discovered two types of shoppers. One group it calls professional shopperspeople who love fashion and value good customer service. The other group it calls too busy to shop peoplepeople who want the shopping experience over as soon as possible. The professional shoppers tend to use the alteration service, call the customer service and seek the same salesperson when they make purchases.

They used this to develop unique programs targeting each of these segments

Identifying Best Customers 80-20 rule, the best and the rest RFMRecency, frequency and monetary analysis commonly used by direct marketers, is a scheme for segmenting customers according to how recently they made a purchase, how frequently they make a purchase and how much have they bought

Converting good customers to best customers Increasing the sales made to good customers is referred to as customer alchemyconverting iron to gold customers into platinum customers. Customer alchemy involves offering and selling more products and services to existing customers and increasing the retailers share of wallet A U.K supermarket chain start a key program Cross selling A retailer in Boston started shopping buddy a wireless computer device attached to shopping carts, it reader your shopping history and alerts accordingly Add-on sales Bank encouraging a savings account member for an investment plan