5.

3
TARGET MARKET
and
RETAIL FORMATS
THE RETAILING CONCEPT
 Emphasizes that retailers must consider both
their customers and their competitors when
developing a retail strategy.
 Successful retailers satisfy the needs of
customers in their target market segment
better than the competition does.
 The selection of a target focuses the retailer
on a group of consumers who needs it will
attempt to satisfy.
 The selection of a retail format outlines the
retail mix to be used to satisfy needs of
customers in the target market.
 The retail strategy determines the market in
which a retailers will compete.
 Transaction markets, like farmers’ market, are
place where buyers and sellers meet and make
transactions.
 Modern markets, potential buyers and sellers
aren’t located in one place.
 Transactions can occur without face-to-face
interactions.
 Vie define retail market, not a specific place
where buyers and sellers meet, but as a group
of consumers with similar needs(market
segment) and a group of retailers using similar
retail format to satisfy those consumers needs.
 Different sorts of Retail Formats:
Mom-and-Pop or Kirana Stores
Specialty Stores
Department Stores
Discounts Stores
Convenience Stores
Hypermarkets
Supermarkets
Malls
Category Killers or Category Specialist
E-tailers
Vending machines
 5.4 International Retailing:
Isessential ingredients for the global
economy.
Satisfies the increasingly complex and
demanding needs of global consumers
 Global Retailers:
Forefronts of technology change to manage
their operations and consumer interface.
 Steps in International Retailing:
 Financial Investment/Cross Border shopping
 Transfer of Know-How
 Internationalisation of Sourcing
 Internationalisation of Retailo Operations
 Issues to be considered while going
international in retail business:
Logistic and supply Chain Management
Service Quality across international
boundaries
Electronic Commerce and E-retailing/E-
tailing
Design
Ethical aspects of retail business
Luxury brands
Young potential consumers
Global Trends
 5.5 The Retail Value:
 Toget a bird’s eye view od an organization’s
operations.
 Competitive advantage (Porter):
 arises
out of the way in which firms organize and
perform activities.

 Retail Business Activities vs. Function:

 Functions are the familiar departments of a retail
business and reflect the formal organization
structure and distribution of labor.
 Activities are what actually goes on, and the work
that is done. A single activity can be performed by
a number of functions in sequence.
 Activities are the means by which a firm
creates value in its products.
 Activities
incur costs, and in combination with
other activities, provide a product or service,
which earns revenue.
 Firms create value for their buyers by
performing these activities. 
 The ultimate value a firm creates is measured by
the amount customers are willing to pay for its
products or services above the cost of carrying out
value activities.
 A firm is profitable if the realized value to
customers exceeds the collective cost of
performing the activities.
 There are two points to note here:
 Customer's purchase value, which they measure
by comparing a firm's products and services with
similar offerings by competitors.
 The retail business creates value by carrying its
activities either more efficiently than other
retail businesses, or combined in such a way as
to provide a unique product or service. Porter
analyzed the various activities of an organization
into a value chain
Figure 5.1: Porter’s Value
Chain
 This is a model of value activities and the relationships
between them:
Primary Activities are those directly related with
production, sales, marketing, delivery and services. The
diagram shows five primary activities.
Inbound logistics are those activities involved with
receiving, handling and storing inputs to the production
system.
Operations are those activities which convert resource
inputs into a final product.
Outbound logistics are those activities relating to
storing the product and its distribution to customers.
Marketing and sales are those activities that relate to
informing customers about the product, persuading
them to buy it, and enabling them to do so.
After sales services: For many companies, there are
activities such as installing, repairing products,
providing spares etc.
 Supporting Activities:
1. Procurement refers to those activities which acquire
the resource inputs to the primary activities.

2. Technology development: These activities are related

to both product design and to improving process and/or
resource utilization.

3. Human resource management is the activities of

recruiting training and rewarding people.

4. Firm infrastructure: The systems of planning, finance

etc. are activities which Porter believes are crucially
important to an organisation's strategic capability in all
primary activities.
 Furthermore, in addition to the categories,
described above, Porter identifies three
other ways of categorizing activities.

1. Direct activities are concerned with the

adding value to inputs. Indirect activities
enable direct activities to be performed e.g.
maintenance.
2. Indirect activities enable direct activities
to be performed e.g. maintenance.
3. Quality assurance: This type of activity
monitors the quality of other activities and
includes inspection review and audit.
 Linkages connect the interdependent elements of
the value chain together. They occur when one
element of the value chain affects the cost or
effectiveness of another.
 The value chain contains an element of marging.
 Thisis the excess of the amount that the customer is
prepared to pay over the costs of the resource inputs and
value activities.
 Firms can gain competitive advantage by conceiving of new
ways to conduct activities, employing new procedures,
implementing new technologies, or using different inputs
and by exploiting linkage effectively.
 The value chain is also a useful model for analyzing a
firm's competitive and also further on in the planning
process for designing strategies.
 A firm's value chain is not always easy to identify nor
are the linkages between the different elements.
 However, it is an important analytical
tool because it helps people:
To see the retail business as a whole.
To identify potential sources of
competitive advantage.