Retail Environment

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RETAIL ENVIRONMENT
-Reference Handout-

Course Instructor: Birat Pd. Shrestha IB&MS (Bharathiar University) - BBA/BBM September 16, 2013 January 17, 2014
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Course of Study
Skill Based Subject-1 : RETAIL ENVIRONMENT
Subject Description : This course presents the basics of retailing, trends in retailing, evolution of retailing and global retail markets. Goals: To enable the students to learn the basics in retailing, evolution and trends in retailing. Objectives: On successful completion of the course the students should have: understood the features of retailing learnt the theories of retail development learnt retail development in India and global retail markets Contents:UNIT I Retail: Meaning Functions and special characteristics of a Retailer Reasons for studying. Retailing Marketing-Retailer Equation Marketing concepts applied to retailing Retailing as a career Trends in Retailing. UNIT II Retail Model and Theories of Retail Development Life cycle and phase in growth of retail markets Business models in retail other Retail models. UNIT III Strategic Planning in Retailing: Situation Analysis Objectives Need for identifying consumer needs Overall strategy, feedback and control consumer decision-making process. UNIT IV Retail in India: Evolution and Size of retail in India Drivers of retail change in India Foreign Direct Investment in retail Challenges to retail developments in India. UNIT V Global retail markets: Strategic planning process for global retailing Challenges facing global retailers Challenges and Threats in global retailing Factors affecting the success of a global retailing strategy REFERENCE BOOKS: Swapna Pradhan Retailing Management Text and Cases, Tata McGraw Hill 2nd edition, 2004 Barry Berman and Joel R Evans Retailing Management A Strategic Approach, Prentice Hall of India, 8th Edition, 2002. James R. Ogden, Denise Ogden Integrated, Retail Management Biztantra 2005 Gibson G Vedamani Retail Management Functional Principles and Prectice, Jaico Publishing House, Second edition, 2004.

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UNIT I
Retail: Meaning
Its about linking products to target consumers Encompasses the selling of goods & services to final consumers Includes cars, apparels, FMCGs, meals in restaurants to banking It has started to give a consumer lifestyle experience The key issues that a retailer must resolve How can we best serve our customers with fair profit? How can we stand competition with more consumer choices? How can we grow by retaining loyal consumers?

Retail management is now a strategic management Total retail experience (displays, visuals, interactions, payments) Customer service (wrapping, deliveries to cars, valet parking) Relationship retailing (long-term value, customer respect)

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The Framework of Retailing

Big chains Neighborhood stores Direct retail bases Direct marketing (mail order, catalogue) Companys own sales force Departmental store & supermarkets Discount store Exclusive (apparel, electronics) store Full service retailer

Functions of a Retailer
Last stage of channel of distribution Involved in physical movement & ownerships Collection of assortments from various sources Sorting (buying in large quantities & selling in small quantities) Communicating with customers, wholesalers, & manufacturers Product displays & information Product feedback to manufacturers Transporting, storing, marking, advertising, pre-paying Wrapping, delivery, & installation

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Relationship among Retailers & their Suppliers

Exclusive distribution Agreements with few retails in specified area to carry certain brands Work together to maintain image, advertisements & shelf space Retailers limit the brand selection in specified product lines

Intensive distribution Suppliers sell through as many retailers as possible Lets retailers offer many brands & product versions Competition among retailers selling same products will be high Retailers assign little shelf space, set high prices & nor advertise

Selective distribution Supplier sell through moderate number of retailers Combines exclusive & intensive distribution Higher sales than exclusive distribution carry competing brands Marketing support to retailers with adequate shelf space

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Special Characteristics of a Retailer

The average amount of sales transaction for retailers is much less than for manufacturers Cost associated with each transaction (credit verification, sales personnel, bagging) Maximize the number of customers

Final consumers make many unplanned or impulse purchases In-store displays Store layouts

Retail customers usually visit a store, even though mail, phone, & web sales have increased Like to shop in person Want to have touch & feel experience Wants to try out products

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Marketing-Retailer Equation

Marketing Concepts Applied to Retailing

Identifying, anticipating and satisfying customer requirements profitably Can look at the marketing retail equation from two perspectives one being that of a manufacturer second from the point of view of the retailer

Distance between the manufacturer of a product and the actual consumer has increased (manufactured in one country & sold to a market in another) Use intermediaries to get their product to the final consumer Marketing channel design is largely based on the level of service desired by the target consumer Retailer provides valuable inputs to the manufacturer on the products and the consumers Other perspective of looking at the marketing retail relationship is from that of the retail industry itself Every retailer needs marketing Activities from retail marketer to achieve a profitable exchange with a customer Relationship marketing and interactive marketing Attract customers into the retail environs shop, restaurant, supermarket or the virtual Internet store Persuade those customers to make a purchase from the store

Common Marketing Channels

1. Manufacturer Wholesaler Retailer Consumer 2. Manufacturer Retailer Consumer 3. Manufacturer Consumer

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Trends in Retailing
1. E-commerce (25% of total retail sales) 2. Kids in retail trade (influencers & teens in US have credit card access) 3. Knowing the customers (infos on customer demographics & lifestyles) 4. The American mall in decline (no. of trips to mall declining) 5. Challenging the category killer (competition from themselves) 6. Precision shopping (small store formats for quick shopping-saves time) 7. Entertaining the customers (entertainmentization of retailing) 8. Globalization of retail trade (having international operations) 9. Smart cards (worldwide 2.8 billion cards have been distributed) 10. Decline in retail sales growth (low growing consumer spending) Ref: Oklahoma Cooperative Extension Service Trends in Retail Trade

Reasons for Studying Retailing - Retailing as a Career

One of the fastest growing parts of the world economy Service oriented entrepreneurial profession Store & logistics management, central management Attracting people, promoting & selling brands People oriented business (interactions with customers) Its about selling lifestyle fashion to people Positions ($18,000 - $ 90,000) Plus Department manager Customer service representative Store manager Merchandise manager Operation director Market research analyst Senior Human Resource, Marketing, & Finance Executive

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UNIT II
Retail Model
Needs of the consumers grew and changed Emergence of commodity specialized mass merchandisers in the 1970s Use of technology entering retail sector Introduction of the barcode Specialty chains developed in the 80s Large shopping malls also were coming in the 80s First created for the convenience of suburban populations Now found in many main city thoroughfares Malls house swimming pools, arcades and amusement parks The rise of the Web amazon.com Retail formats influenced by social & economic landscape Consumers now are more demanding and is focused specialized stores Retailers influenced by the availability of real estate and the increase in its prices Retailers faced with the challenge of adding on new services & differentiation This has led to specialization & specialty stores Retailers forced to look at new formats due to margin pressures

Scrambled Merchandising Involves a retailer increasing its width of assortments (product lines) Retailers add goods & services that may be unrelated to each other & to the firms core business Retailers want to increase overall revenues Fast-selling, highly profitable goods & services are the ones added Consumers make more impulse purchases & like one-stop-shopping
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Different target markets may be reached The impact of seasonality & competition is reduced The popularity of a retailers core product line can be overshadowed Exclusive liquor store carrying snack food items Drugstore, cosmetic stores, book stores, florists, video stores are all affected by supermarkets scrambled merchandising

Theories of Retail Development Retail development revolve around the importance of: Competitive pressure The investments in organizational capabilities and The creation of a sustainable competitive advantage This requires the implementation of strategic panning by retail orgns Growth in retail is a result of understanding market signals & responding to the opportunities arising in a dynamic manner Theories of retail of retail development can be classified as: Environmental Theory Cyclical Theory 1. The wheel of retailing 2. The retail accordion 3. The retail life cycle Conflictual Theory 1. Environmental Theory A change in retail is attributed to the change in the environment in which the retailers operate Survival of the fittest Charles Darwins theory of natural selection

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Retailers confront an environment, of customers, competitors and changing technology & needs to adjust to survive Success or decline of different forms of retail enterprise is many a time attributed to the business environment The decline of department stores in the western markets is attributed to the general inability of those retailers to react quickly and positively to environmental change Retailers that successfully adapt technological, economic, demographic & legal changes are the ones that are most likely to grow & prosper The ability to adapt to change, successfully, is at the core of this theory The Major Environmental Factors 1. Changes related to the consumer: Demographic changes increase or decrease in population, age groups, racial groups, socio-economic groups Attitudes & preferences to purchasing, brands & products Changes in lifestyle (fast food as time is more important), e-banking, credit card payments Economic influences based upon real incomes, confidence, numbers of women working 2. Changes in technology: Microwave cookers, food freezers, cars, Internet, computer applications to business, J-I-T systems 3. Changes in competition: Competitive strength, alternative distribution channels, nature & type of retail organization 2. Cyclical Theory Change follows a pattern ad phases can have definite identifiable attributes associated with them Trace common patterns in retail development over time It includes the earliest theories of retail change Three primary cyclical theories:
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1. Wheel of retailing 2. Retail accordion 3. Retail life cycle 1. The Wheel of Retailing Retail innovators often first appear as low-price operators with low costs & low profit margin Over time, the innovators upgrade the products they carry & improve their facilities & customer service with higher prices As innovators mature, they become vulnerable to new discounters with lower costs Stage I: Entry phase (low-end strategy) New innovators enter market No frills, low prices, limited facilities & services, limited product mix Price-sensitive consumers Stage II: Trading up phase (medium strategy) Retailers trade up Moderate prices with improved facilities & higher quality products Expanded product mix in refurbished store Broader base of value-&-service-conscious consumers; more services Stage III: Vulnerability phase (high-end-strategy) Mature retail organization High prices with higher quality products, excellent facilities & services Broad assortment of goods with service emphasis; Upscale consumers

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The Wheel of Retailing Four Principles 1. There are many price sensitive shoppers who will trade customer services, wide selections, & convenient locations for lower prices 2. Price-sensitive shoppers are often not loyal & will switch to retailers with lower prices. However, prestige-sensitive customers like shopping at retailers with highend strategies 3. New institutions are frequently able to have lower operating costs than existing institutions 4. As retailers move up the wheel, they typically do so to increase sales, broaden the target market, & improve their image

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2. Retail Accordion Key observer in retail evolution Hollander At any point of time, one type of retailer would outnumber the other The situation would continually change through in & out of store fashion Retailer initially enter a market as a general retailer With experience they focus down on particular product/sector/ or consumer groups Over time they begin to diversify their offer to grow, but again will revert back to specialization The premise of retail accordion is that the changes in retail operations are related to strategies that alter the width (selection) of merchandise mix Establishment of small-scale specialist food retailers such as grocers or bakers, followed by the takeover of the food retail sector by large-scale superstores with diverse product ranges Re-emergence of the small store in the guise of convenience formats as Tescos Metro, Sainsburys Local, Central with limited ranges for a different market but trading under the same name, brand & reputation Specialization Occurring Reasons Store sizes in some locations being unable to accommodate greater variety in order to compete Greater disposable income & large urban populations allowing for profitable segmentation The importance of the specialist shopping experience & convenience stores Established retailing brands wanting to obtain more specialist coverage of the market Reasons for the Trend to Become More General Expansion of the complementary lines as part of the retail offer A skimming policy (carrying more of the profitable lines & creaming these off from those of the competition) A move to increase density of shoppers in-store by providing a complete range offering (one-stop shopping)
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The growth of large shopping centers with outlets which allow for the expansion of lines & ranges

3. Retail Life Cycle & Phase in Growth of Retail Markets Life Cycle Stage

Introduction

Growth

Maturity

Decline

Sales

Low/growing

Rapid acceleration

High, leveling off

Dropping

Profitability

Negative to BEP

High yield

High/declining

Low to BEP

Positioning

Concept innovation

Special need

Broad market

Niche

Competition

None

Limited

Extensive/ saturation

Intensive/ consolidated

Introduction Stage Significantly alters at least one element of the strategy mix from that of traditional competitors Sales & then profits often rise for the first time in a category There are risks that the new institution will not be accepted by the shoppers
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There may be large initial losses due to heavy investments At this stage, long-run success is not assured Growth Stage Sales & profits exhibit rapid growth Existing firms expand geographically Newer companies of the same type enter Cost pressures (large staff, complex inventory system, & extensive controls) may begin to affect profits The interactive video kiosks is an institution in the growth stage Maturity Stage Characterized by slow sales growth Overall sales may continue to go up, but in a lower rate Profit margins may have to be reduced to stimulate purchase Caused by market saturation from institutional formats retailers, competition, changing social interests, inadequate management skills The goal will be sustainability The liquor store, a form of specialty store went to a maturity stage due to competition from membership clubs, mail-order wine retailers, supermarkets, lifestyles changes, attitude regarding liquor, & drinking age requirements, & limits on non-alcoholic items that liquor store are permitted to sell Decline Stage Industry wide sales & profits for the format fall off Many firms abandon the format The newer formats attract consumers The decline stage can be avoided or postponed by repositioning the institution Conventional supermarkets have slowed their decline by placing new units in suburban shopping centers, redesigning interiors, lengthening store hours, having low prices, expanding the use of scrambled merchandising, closing unprofitable smaller units, & converting to larger units
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3. Conflictual Theory The competition or conflict between two opposite type of retailers leads to a new format being developed The imbalances caused by the innovations leads to the development of new formats Retailing evolves through a dialectic process blending of two opposites to create a new format Thesis: individual retailers as corner shops all across the country Anithesis (challenge to the thesis): a position opposed to the thesis develops over a period of time called department store Synthesis (blending of the theses & antithesis): the result position between the thesis & antithesis Supermarkets & hypermarkets this synthesis becomes the thesis for the next round of evolution

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Types of retailer response to innovation (Brown, 1987) 1. Shock 2. Defensive retreat 3. Acknowledgement & assessment 4. Adaptation Example is self-service supermarkets As supermarkets took market shares from specialist retailers, they formed voluntary groups & buying alliances (Ex:Spar) E-tailers & multichannel operators were formed Growth/Evolution of Retail Institutions Mergers Diversification Downsizing Cost Containment & Value Driven Retailing Standardizing operating procedures, store layouts, size, products Using secondary locations, freestanding units, abandoned sites Placing stores in smaller communities, where building regulations are less strict, labor costs are lower, & construction & operating costs are reduced Using inexpensive construction materials (bare cinder-block walls, concrete floors, false ceiling) Using plainer fixtures & lower-cost displays Buying refurbished equipment Joining cooperative buying & advertising groups Encouraging manufacturers to finance inventories

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Business Model in Retail (Types) Retail Formats Store based retailing Form of Ownership Merchandise offered Non-store retailing Service retailing Store Based Retailing Form of ownership Independent retailer (owns one retail unit) Chain retailer (operates multiple outlets with common brand name) Franchise (licensing the name) Leased departments (rented to an outside party) Consumers co-operatives (owned by customer members)

Store-Based Retail Strategy Mixes Type of retailer Location of the store Neighborhood, community, business district, shopping centers Merchandise carried Width of assortment (number of different product lines) Depth of assortment (selection within the product line) Price List price Discount facilities Atmosphere Services offered
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Promotion involvement Store promotion Private label brands Store Based Retailing Merchandise Offered Food-Based Convenience Store Its a well-located food-oriented retailer in neighborhood The store facility is small with long hours opening Carries medium width & low depth of assortment The prices are average to above average with moderate promotion It has a average atmosphere & services with personalized shopping experience as an appealing factor to shoppers Its usefulness is when customer does not want to travel to or shop at a supermarket Products: Milk, eggs, bread, sandwiches, tobacco, snack foods, soft drinks, newspapers, magazines, beer, wines, video rentals Ex: 7-Eleven, Circle K, Caseys General Store Conventional Supermarket Its a departmentalized self-service food store with wide range of food & related groceries It is located at neighborhood offering greater customer convenience Carries extensive width & depth of assortment with average quality of manufacturer, private, & generic brands It has a competitive price, average atmosphere with heavy use of newspaper, flyers, & coupons promotions Self-service cuts off the stores operating costs of attendants Car & refrigerator contributed to the supermarkets success by lowering traveling costs & adding to the life span of perishables Rely on high inventory turnover (volume sales)

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Ex: Kroger, Safeway, Albertsons, Ahold USA, IGA, SuperValu Food-Based Superstore Its a larger & more diversified than a conventional supermarket It occupies 30,000 to 50,000 sq.ft of space in community shopping center or isolated site 20 % to 25 % of sales are from general merchandise, including garden supplies, flower, small appliances, & film developing It carries full assortment of supermarket items, plus health & beauty aids & general merchandise with competitive prices It caters to consumers complete grocery needs along with fill-in general merchandise and is a self-service store Its efficient, offers one-stop shopping, stimulates impulse purchases, & feature highprofit general merchandise Consumers feel more comfortable shopping in food-based superstores Atmosphere & services are average The promotion includes heavy use of newspapers & flyers Management expertise is better focused Combination Store It unites supermarket & general merchandise in one facility It is located in community shopping center or isolated site They are large from 30,000 up to 100,000 plus sq.ft. leading to operating efficiencies & cost savings It carries full selection of supermarket & drugstore items or supermarket or general merchandise with average quality at a competitive price Consumers like one-stop shopping & will travel to get there With an average atmosphere & service, impulse sales are high Many general merchandise have more margins than food items The promotion is by heavy use of newspapers & flyers with self-service

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A supercenter is a combination store blending an economy supermarket with a discount department store, a US version of the even larger hypermarket Stores usually range from 75,000 to 150,000 sq.ft with 50,000 & more items than carried by a combination stores Ex: Meijers / Wal-Mart, Kmart, Target Box (Limited-Line) Store Its a food-based discounter focusing on a small selection of items, moderate hours of operation, few services & limited manufacturers brands It is located in neighborhood & carries low width & depth of assortments, few perishables, & few national brands with very low prices The atmosphere & services are low, with little or no promotions The box stores cannot fulfill one-stop shopping needs Box stores rely on low-priced private label brands Ex: Save-A-Lot, Aldi Warehouse Store Its a food-based discounter offering a moderate number of food items in a no frills settings & low atmosphere & setting It appeals to one-stop food shoppers, concentrates on special purchases of popular brands, use cut-case displays, offers little service, posts prices on shelves, & locates in secondary sites in industrial areas They have moderate width & low depth, emphasizing on manufacturer brands bought at discounts, with very low prices Shipments are made directly to the store Customers pack their own groceries; Little or no promotions are done Many customers do not like shopping in warehouse setting, as products are usually acquired when special deals are available, & brands may be temporarily or permanently out of stock Ex: Cub Foods

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General Merchandising Specialty Store Specialty stores concentrates on selling goods or service line, such as young womens apparel, mens shirting, kids clothing Its located at business district or shopping center It carries a narrow width but deep assortment from average to good quality, in the chosen category & tailors the strategy to a given market segment. The prices are competitive to above average The store maintains a better selection & sales expertise The popular categories are: apparel, personal care, auto supply, home furnishings, electronics, books, toys, home improvement, pet supplies, jewelry, & sporting goods. The promotion is little or none Customers shop at specialty stores because of the sales personnel expertise, choices within a category, customer service policy, intimate store size, & average to excellent atmosphere Shoppers looking for just one or few basic items & quick checkout Category killer (power retailer): A large specialty store featuring enormous selection in its category with relatively low prices Ex: Gap, Old Navy, The Limited, Toys R Us, Sam Goody, Barnes & Noble, Sephora, Home Depot, Sports Authority, Staples Traditional Department Store It is a large retail unit with extensive width & depth of assortment of goods & services, offering average to good quality It is organized in separate departments of apparel, cosmetics, food, drinks, appliances, furniture, home care etc. The prices are average to above average with good to excellent atmosphere & services. Heavy Ad & catalog, direct mail, & personal selling is involved Its located in business district, shopping center, or isolated store They dont have brand exclusivity & sign licensing agreements with fashion designers to use their names
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Many department store has a weak focus & image on market segments Ex: Macys (targets mid-class shoppers interested in assortments & moderate prices) Bloomingdales (aims more upscale consumers with more trendy merchandise & higher prices), J.C. Penny (dropped consumer electronics), Sears (opened in less developed towns), Belk, Inc (Belk, McRaes, Profitts) Full-Line Discount Store It conveys the image of a high-volume, low-cost outlet selling a broad product assortment for less than conventional prices (competitive) It has extensive width & depth of assortment (average to good quality) The product lines includes electronics, furniture, appliances, auto accessories, gardening tools, & housewares Its located at business district, shopping center, or isolated store. The atmosphere & services are slightly below average to average Shopping carts & centralized service are provided. Customer service is not provided within store departments but at centralized area. Products sold via self-service with minimal assistance Heavy use of newspapers, price-orientation & moderate sales force are used for promotions Nondurable (soft) goods feature private brands, durable (hard) goods emphasize well-known manufacturer brands. Less fashion-sensitive merchandise is carried. Building, equipment, & fixtures are less expensive Variety Store It handles an assortment of inexpensive & popularly priced goods & services like apparels & accessories, costume jewelry, candy, toys, in price range It has a good width & some depth of assortment; below average to average quality at average prices Its located in business district, shopping center, or isolated store The atmosphere & services are below average, & heavily use newspapers & selfservice to promote it There are open displays & few sales people The stores do not carry full product lines, may not be departmentalized, & do not deliver products
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Dollar discount store: sell similar items to those in conventional variety stores but in plainer surroundings & at much lower prices (Dollar General, Family Dollar) Closeout chains: sell similar items to those conventional variety stores but feature closeouts & overruns Off-Price Chain It features brand-name (sometimes designer), apparel, & accessories, footwear (primarily womens & family), linens, fabrics, cosmetics, &/or housewares at everyday low prices in an efficient, limited service environment. Its located at business district, suburban shopping strip, or isolated store It carries moderate width, but poor depth of assortment; average to good quality It has community dressing rooms, centralized checkout counters, no gift wrapping, & extra charges for alterations. The atmosphere & services are below average The chains buy merchandise opportunistically, as special deals occur Off-price chains aim same shopper as traditional department stores, but with 40% to 50% reduced prices. Newspapers & limited sales forces are used to promote The target customer is middle to upper middle income shoppers, who is fashion & value conscious. Shoppers are also lured by the promise of new merchandise on a regular basis & appeals to peoples interest in one-stop shopping Off-price chain establish long-term relations with suppliers through active buying & being less demanding & doing product sampling Ex: TJX (T.J. Maxx, Marshalls) Factory Outlet Factory outlet is a manufacturer-owned store selling closeouts, discontinued merchandise, irregulars, cancelled orders, in-season, first-quality merchandise Its located out-of-the-way site or discount mall It carries moderate width but poor depth of assortment; some irregular merchandise; lower continuity; with very low prices, atmosphere & services Little promotion is done & is a self-service based Manufacturer can control the sales of their discounted merchandise

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Outlets are profitable despite prices up to 60% less due to low operating costs (few services, low rent, limited displays, plain store fixtures) Manufacturer decides on store visibility, sets promotion policies, removes labels, & ensures that discontinued items & irregulars are disposed properly As many specialty stores & department stores are increasing private label sales, manufacturers need revenue from outlet stores to sustain their growth Ex: Bass (footwear), Brooks Brothers (apparel), Harry & David (fruits & gift items), Levis (apparel), Liz Claiborne (apparel), Pepperidge Farm (food), Samsonite (luggage), Totes (rain gear) Membership Club A membership (warehouse) club appeals to price-conscious consumers, who must be members to shop there It straddles between the line of wholesaling & retailing Small business owners & employees pay a membership fee to buy merchandise at a wholesale prices It is located at isolated store or secondary site (industrial park) It carries moderate width but poor depth of assortment; lower continuity The prices are very low, & so are the atmosphere & services To promote little advertising, direct mail & limited sales force are used The store layout will have plain fixtures, wide aisles to give forklift trucks access to shelves. A typical club carries general merchandise, consumer electronics, appliances, computers, housewares, tires, apparel, sundries, health & beauty aids, tobacco, liquor, & candy - Ex: Sams Club (from Wal-Mart) Flea Market At flea market, many retail vendors sell a range of products at discount prices in plain surroundings It is rooted in the centuries-old tradition of street selling shoppers touch & sample & haggle over prices Located in nontraditional sites like racetracks, stadium, arenas, or at sites abandoned by other retailers
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They have extensive but poor depth of assortment with variable quality; lower continuity The merchandise includes antiques, clothing, cosmetics, watches, consumer electronics, housewares & gift items The prices are very low & so are the atmosphere & services The promotion is limited with self-service Some flea market impose entry & parking fee. Can have traffic congestion Ex: Rose Bowl Flea Market (held on second Sunday of month), web based -eBay, amozon.com Non-store retailing Direct selling Mail order Tele marketing Automated vending

Service Retailing Banks Car rentals Service contracts

Service providers

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Retail Business Model

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UNIT III
Strategic Planning in Retailing (Elements of a Retail Strategy)

Situation Analysis It is a candid evaluation of the opportunities & threats Analysis of the firms current status & the direction Spotting trends to satisfy customers & stay ahead Organizational Mission Commitment to a type of business & to a distinctive role in the marketplace Reflected in firms attitude toward consumers, employees, supplie rs, competitors, governments & other stakeholders Lets a firm gain customer following & distinguish itself from competitors

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First decision - business base around the goods & services sold or around customer needs (Its about selling products within certain category or the entire solution) Second decision - place in the market as a leader or a follower Third decision market scope (broad or narrow customer base) Ownership & Management Alternatives Sole proprietorship an unincorporated retail firm owned by one person. All benefits, profits risks, & costs accrue to that individual Partnership an unincorporated retail firm owned by two or more persons, each with a financial interest & all the risks distributed Corporation a retail firm that is formally incorporated under state law. It is a legal entity apart from individual officers (or stockholders). Funds can be raised through the sale of stock. Legal claims against individuals are not allowed due to limited liability. The transfer of ownership & long-term existence is guaranteed. The use of professional managers is encouraged. Franchisee combining independent ownership with franchisor support (strategic planning, name, loyal customer base, global image with maintaining standards) Goods/ Service Category Goods Establishments Durable goods store (automotive, furniture, jewelry, appliance, hardware) Non-durable goods store (apparel, food, eating outlets, drug, liquor, gasoline) Service Establishments Personal services (laundries, dry cleaning, beauty saloon, photographic studios, healthcare services) Amusement services (movie theaters, bowling alleys, dance halls, golf courses, skating rinks, amusement parks, coin-operated game arcades) Repair services (automobile repairs, car washes, consumer electronics & appliances repairs, watch & jewelry repairs) Hotel services (hotels, motels)

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Personal Abilities Practical learning Experience Formal qualification Financial Resources Establishment, renovation, interior Land & building, inventory (products), fixtures (display cases, signs, lighting), equipment (cash resister, marking machine, computers), personnel (salespeople, cashiers, manager) Time Demands Level of involvement of the owner, serving hours & days Delegation of activities Skill based personal service, self-service, or automation Family involvement or hiring professionals Situation Analysis SWOT Analysis Strengths Current Loyal customer base; reputation in certain category Little competition; acceptance by a specified TG; service Long-term Distinctive image; exclusive relationship; low rent location Excellent supplier& community relationship; loyal employees Weaknesses Current Difficulty in employing part-time personnel during seasons Space, assortment, depth limits; lack of technical equipments Long-term
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Bargaining power with suppliers; location No long-term management succession plans Opportunities Current Hiring of professionals Vacant adjacent store; Website development Long-term Larger store would increase the bargaining power with suppliers; On-line sales Threats Current Competition; Opening of similar stores targeted to same customer base; economic recession Long-term Demographical changes; lifestyle changes; changes in shopping behavior Objectives Sales Volume sales Discount strategy Wide product assortment, low margin Profit As a percentage of sales ROI for lager investment stores Cutting costs & maintaining customer service Narrow product assortment, high margin Satisfaction of publics Stockholders, customers, suppliers, employees, govt.
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Customer satisfaction with total retail experience Favorable purchase terms, shipment, return policies Cordial labor relationship for better customer treatment Positioning (Image) The perception among customers to be built Innovative, conservative, specialized, broad-based, discount-oriented, upscale Mass merchandising or niche retailing (focused strategy) Bifurcated retailing (era of mass & niche retailing, where firms that are neither competitively priced nor particularly individualistic may have difficulty competing) Ex: Bebe (the apparel store chain) designs, develops, & produces a distinctive line of contemporary womens apparel & accessories, which it markets under BEBE SPORTS & bebe O brand names.

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Identification of Consumer Characteristics & Needs Choice of target market Mass marketing Location (near large population base) Goods & services mix (wide selection of medium quality items) Promotion efforts (mass advertising) Price orientation (popular prices) Strategy (one general strategy for a large homogeneous group) Concentrated marketing Location (near a small or medium population base) Goods & services mix (selection geared to market segment-high or low-quality items) Promotion efforts (direct mail, E-mail, subscription) Price orientation (high or low) Strategy (one specific strategy directed at a specific limited group of customers) Choice of target market Differentiated marketing Location (near large population base) Goods & services mix (distinctive goods/services aimed at each market segment) Promotion efforts (differentiated media & message for each segment) Price orientation (high, medium, & low-depending on market segment) Strategy (multiple specific strategies, each directed at heterogeneous groups of consumers) A retailer is better able to select a target market & satisfy customer needs if it has a good understanding of consumer behavior

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Overall Strategy (Controllable Variables) Goods/service strategy Quality of goods & services Width & depth of assortment New & regular items Criteria for buying decisions (terms & conditions) Level of inventory Store location strategy Specific sites Business district String (unplanned shopping area with retails groups) Shopping center (regional, neighborhood) Pricing strategy Ranges of prices to be set Consistent with the firms image Quality of goods & services Promotion (communication) strategy Physical attribute, atmosphere, surrounding area Storefront, interior, layouts, displays, webpage Color, lighting, scents, music, personnel Flyers, advertisements, personal selling, sales promotion Managing a business HR & operations (credit management, computerization) Tasks, policies, resources, authority, responsibility, rewards Employee hiring, firing, training, compensation, supervision Store maintenance, energy management, store security
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Consumer environment Demographic trends, lifestyle patterns Competitive environment Entry of a new store in the same area with similar TG Expansion of the existing store (location or assortment) Technological environment Computerized inventory control & checkout systems Bar code reading equipments Economic environment Unemployment, interest rate, inflation, tax rate, GDP Seasonality Stock plan of seasonal products Legal environment Sherman Act & the Clayton Act (deal with monopolies & restraint on trade) Federal Trade Commission (deals with unfair trade practices & consumer complaints) Robinson-Patman Act (prohibits suppliers from giving unjust merchandise discounts to large retailers that could adversely affect small ones) Telemarketing sales rule (protect consumers) Zoning laws (prohibit firms from operating at certain sites & demand that building specification be met) Blue laws (limit the times during which retailers can conduct business) Specific Activities Tactical moves Store location (trading area analysis; level of competition, building or modifying facilities) Managing the business (chain of command design; organizational structure; hiring, training, & supervising personnel; asset management; daily operations)
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Merchandise management & pricing (space allocation & assortments; new merchandise & clearing slow moving merchandise; supplier negotiation; price setting with store image & discount tactics as per competition) Communicating with the customer (storefront, displays, interiors, Ads, flyers, personnel selling) Control & Feedback Control Review Business mission, objectives, target market Retail audit Analyzing the retail performance Revision of strategy Feedback Signals or cues Analysis of positive & negative feedbacks to capitalize on opportunities

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Consumer Decision-Making Process Understanding of consumer behavior (what, when, where, from whom, how often, who decides, why) Consumer behavior influenced by demographics & lifestyles What (features, durability, distinctiveness, value, ease of use) Where (location, assortment, credit, sales help, hours, service) The manufacturer wants the consumers to buy its brand (what) at any location carrying it (where) The retailer wants people to buy the product, not necessarily the manufacturers brand (what), at its store or non-store location (where)

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Stimulus Social cue (friends, employees, relatives, family) Commercial cue (advertisements, sales pitch, store displays) Physical drive (hunger, thirst, cold, heat, pain, fear, joy) Person should be aroused (motivated) for the stimulus to work & take it to the next process of problem awareness Problem Awareness Recognition that a good or a service might solve a problem Recognition of unfulfilled desire People are more hesitant to react on unfulfilled desire Recognition of unfulfilled desire takes place when a person becomes aware of a good or a service that has not been bought before or a retailer that has not been patronized before An item that may improve a persons lifestyle, self-image, or it may offer ne performance features Information Search Determining the alternatives that will solve the problem Asserting the characteristics of each alternative Commercial sources (retail salespeople, Ads, POP displays) Noncommercial sources (Consumer Reports) Social sources (friends, relatives, family) Gathering information about each alternatives attributes External search & internal search Evaluation of Alternatives Selecting out of two or more options that are different & attractive The importance of each criterion is determined The attributes are usually of differing importance to each person (price, quality, design, durability, image, economy)
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Ranking of the alternatives from most favorite to least favorite Purchase Act Place of purchase Store or non-store location (online/website) Store location, store layout, service, sales help, store image, price Purchase terms Price Method of payment (cash vs credit acceptance) Availability Stock on hand Delivery Post-Purchase Behavior Further purchase or re-evaluation Is the performance as promised? Do actual attributes match the expectations? Cognitive dissonance doubt regarding the purchase After-care (after-sales, phone call, service visit, E-mail) Money-back-return, buy-back guarantee

Types of Consumer Decision Making Extended decision making Consumer make use of the full decision process Lot of time is spent gathering information & evaluating alternatives The products are expensive, complex, & a first time product (house, car) Consumer traits impact (age, education, income, class consciousness)
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Limited decision making Consumer uses each stage in the buying process but is quick to move Items include bought ones but not regularly (clothing, vacation, gifts) Consumer attributes affect decision making but the impact lessens as the perceived risk falls & experience rises Income, purchase importance, & motives play strong roles Routine decision making Consumer buys out of habit & skips steps in the purchase process The key step is problem awareness, where re-purchase is automatic Includes items bought regularly (newspaper, groceries)

Impulse Purchase & Customer Loyalty Impulse purchase (enjoys shopping; more discretionary income; POPs) Completely unplanned (no intention of making a purchase unless in contact with a retailer; related to routine or limited decision making; key step is problem awareness) Partially unplanned (has plans to buy a product category, but hasnt decided on the brand unless in contact with the retailer; involved with extended, limited or routine decision making) Unplanned substitution (intends to buy specific brand but changes mind when in contact with the retailer) Customer loyalty Regularly patronizes a particular store that is liked or trusted This helps a customer reduce the decision making process Tend to be time-conscious, & is less price sensitive

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UNIT IV
Retail in India: Evolution and Size of Retail in India
Retailing in India is divided as follows Organized sectors (licensed retailers who pay tax & are backed by corporate hyper markets & retail chains, supermarkets, department stores) Unorganized (traditional formats of low-cost retailing like owner managed kirana shops, mom & pop stores) Most Indian shopping takes place in open markets or millions of small, independent grocery and retail shops Shoppers typically stand outside the retail shop, ask for what they want, and can not pick or examine a product from the shelf Access to the shelf or product storage area is limited Once the shopper requests the food staple or household product they are looking for, the shopkeeper goes to the container or shelf or to the back of the store, brings it out and offers it for sale to the shopper Often the shopkeeper may substitute the product, claiming that it is similar or equivalent to the product the consumer is asking for The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent Retailing in India is one of the pillars of its economy Retailing in India accounts for about 15% of its GDP The Indian retail market is estimated to be US$450 billion It is one of the top five retail markets in the world by economic value In November 2011, Indian central government announced major reforms paving way for giants such as Walmart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple to enter one of the fastest growing retail market of 1.2 billion people Until 2010, intermediaries and middlemen in India have dominated the value chain The 60%+ margins for middlemen and traditional retail shops have limited growth and prevented innovation in Indian retail industry
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The Economist forecasts that Indian retail will nearly double in economic value, expanding by about $400 billion by 2020 In 2011, food accounted for 70% of Indian retail, but was under-represented by organized retail. India's organized retail had a 31% share in clothing and apparel, while the home supplies retail was growing between 20% to 30% per year

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Drivers of Retail Change in India Population Socio-economic factors Increasing middle-class & affluent class Changing consumer profile & demographics Changing Income Profiles Changing consumption patterns Increase in the number of international brands available Increasing urbanization Credit availability Improvement in the infrastructure Increasing investment in technology & real estate building Diminishing difference between Rural and Urban India World class shopping environment for customers

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Foreign Direct Investment in Retail India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale The approval requirement was relaxed, and automatic permission was granted in 2006 Between 2000 to 2010, Indian retail attracted about $1.8 billion in foreign direct investment International retail giants are wanting to enter the Indian market The Indian government restrictions on the FDI are creating ripples among the international players like Wal-Mart, Tesco, etc As of now the Indian government has allowed 51% FDI in the sector to one brand shops like Nike, Rebook, etc. International players are taking alternative routes to enter the Indian retail market via strategic licensing, franchising agreements Challenges to Retail Developments in India The industry is facing a severe shortage of talented professionals, specially at the middle management level Most Indian plays are under serious pressure to make their supply chains more efficient to deliver the quality & service level demanded by consumers Lack of adequate infrastructure in respect to roads, electricity, cold chains, & ports. This has hindered supply chain, which has lead retailers to assort to multiple vendors thus increasing costs & prices Government system is plagued with differential tax rates creating price confusions over different states Stringent labor working hours & minimum wages. This creates complexity in hiring part-time employees The sector does not have industry status that makes them difficult to raise finances from banks & fund their expansion plans Government restrictions on FDI limiting foreign exposure to best retail management practices

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Non- availability of government land & zonal restrictions has made difficult to find a good retail location High rental costs

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Major Retailers in India

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UNIT V
Global Retail Markets: Strategic Planning Process for Global Retailing
1. Asses your international potential Your domestic position in that industry Effect of international activity in current operations The status of your resources Estimate of your sales potential 2. Get expert advice & counseling Trade association Consulting firm Business department of Universities 3. Select your countries Economic strength, political stability Regulatory environment, tax policy Structural development, population, cultural factors Technological stage of the country 4. Develop, implement, & review the international retailing strategy Identifying & managing your objectives Specific tactics, scheduled activities & resource allocation Exploit unique local conditions & circumstances Study the local competition

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International Retailing Strategy: Factors to Consider in Global Retailing Institutional factors Ownership form; Goods/service category; Existing distribution channel Level of competition; Level of technology (media, transportation) Government restrictions; Desirability of a standardized approach Consumer factors Retailing preferences; Population trends; language Level & distribution of income; Level of literacy/education Cultural values & lifestyle patterns Store location factors Availability of desirable areas & sites; Leasing/purchase terms Level of transportation facilities Hours of operation Operations factors Availability & caliber of personnel; Appropriate management style Facilities; Expected pilferage (shoplifting) rates Merchandising factors Width & depth of assortment; Merchandise quality; Inventory control Level of innovativeness; Availability & caliber of suppliers Pricing factors Pricing level; Use of set pricing Vs negotiable pricing Typical purchase terms Image & promotion factors Store atmosphere; Interior layout & displays Advertising & personnel selling

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Challenges Facing Global Retailers Challenges & Threats in Global Retailing Opportunities Foreign markets used to supplement domestic sales Foreign market will offer growth Offerings of goods, services, technologies not yet available in foreign markets Competition may be less in foreign markets Tax or investment advantages in foreign markets Countries are more open to the entry of foreign firms Superior & efficient communication & transportation systems Challenges & threats Cultural differences between domestic & foreign markets Management style may not be easily adaptable Foreign governments may place restrictions on some operations Poorly distributed personnel income in some foreign markets Inadequate distribution system & technology (roads, refrigeration systems) Institutional formats may vary greatly among countries Different currencies involvement Standardization or differentiation of the retail marketing program

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Factors Affecting the Success of a Global Retailing Strategy Timing being first in the market doesnt ensure success, but being there before serious competition does increase ones chances A balanced international program market selection is critical A growing middle class expandable income, translating into sales Matching concept to market In developed markets, where quality & fashion are more appreciated, specialty stores are entering with success In developing markets, discount/combination (food & general merchandise) retailers have been successful Consumers are more interested in price, assortment, value, & convenience Solo or partnering joint venture makes easy to enter Store location & facilities foreign retailers often have to adapt their concepts to different real-estate configurations in other markets Product selection product assortment of developed nations coming to developing nations would be overwhelming Service levels retail service level coming to developing nations from developed nations, will be a real point of distinction

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IB&MS Retail Environment Activity 1: Readings

BBA/BBM

Trends in Retailing (E-document/Internet) Reasons for studying Retail Management Retailing as a career

Activity 2: Article Presentations Search for an article related to Retail Environment Read and analyze the article Bring a copy of the article Present the article in the class

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Assignment 1 (Individual) Retail Environment Report (International) Select a retail store brand (international - the companies to be mutually exclusive) Analyze it on the basis of - its type; major retail emphasis; special characteristics; marketing concept application Keys to success (strategy) growth oriented objectives; appeal to a prime market; distinctive company image; focus; strong customer service for its retail category; multiple points of contact; employee relations; innovation; commitment to technology; community involvement; constantly monitoring performance Report Preparation & Presentation

Retail Companies International (Wal-Mart; Marks & Spencer; Macys; Victorias Secret; Tiffany's; Kroger; Home Depot; Target; Costco; Albertson; Walgreens; Lowes; Sears Roebuck; Safeway; Amazon; Montgomery Ward; Williams-Sonoma; Bloomingdales; 7-Eleven; Banana Republic; GAP; Old Navy; Subikchya, Shoppers Stop; Big Bazaar; Sharper Image; Eddie Bauer; Brookstone; Royal Silk; Spencer Gifts; Lands End; Toys R Us; Nordstrom; JC Penny; Tesco, Sainsbury, Central, IKEA etc.)

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Assignment 2 (Group) - Retail Environment Report (National) Select a retail store brand (national - the companies to be mutually exclusive) Analyze it on the basis of - its type; major retail emphasis; special characteristics; marketing concept application Keys to success (strategy) growth oriented objectives; appeal to a prime market; distinctive company image; focus; strong customer service for its retail category; multiple points of contact; employee relations; innovation; commitment to technology; community involvement; constantly monitoring performance Retail Marketing Strategy Name of your planned retail store (Brand name) Type of that retail store (Supermarket, Departmental Store, Discount Store, Convenience Store, Specialty Store, Variety Store, Full-Line Store etc.) TG (Who will be its core customers) Location strategy (Where its to be located & why?) Competitor analysis (Who will be its major competitors & why?) Why customers should come to it? (Benefits) Supply source (What kind of deal will it have with companies?) What kind of image will it earn? (Positioning) Product assortments (Product lines that it will carry) Marketing program (7 Ps, & making customers loyal)

Report Preparation & PowerPoint Presentation

Retail Companies National (Nameste; Saleways; Bluebird; Home Grocery; Gemini; Bhatbheteni; CG Mart; KK Store; BigMart etc.)

References:

Book, Handouts & Internet

Visit for references:

www.retailtrafficmag.com

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