Research Project

Marketing - 201

GROUP 11

NAIRA RAHMAN - 16020447

FATIMA JAVAID AHMED - 17090092
MUHAMMAD HASSAN SHEIKH - 16020002
SAMEY NOOR - 16020400
MUHAMMADU USMAN SARWAR - 16020094

30th November, 2014

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EMERGING
ISSUES IN
RETAILING

INNOVATIONS EFFECTS ON GLOBALIZATION

IN RETAILING CONSUMERS

1. Innovations in Retailing

Innovation in retailing has largely come from research, which has led to several changes in the
models and practices within retailing. Globalization has accelerated the pace with which these
changes have been adopted. These changes over recent years have drastically affected both
retailers and consumers. Also, current innovations in retailing that range from changes in
business models, store formats and technologies to pursuing new growth opportunities in the
global markets. However, not all of these innovations are paying off and therefore need to be
evaluated in the light of their current and future scopes and the implication of these innovations
for the retailers and consumers. The need to innovate stems from intense global competition,
rising expectations of customers and the constantly changing global trends. As a result of these
pressures there has been a change in retailing models in terms of the organization of its activities
and their execution, and participation levels and incentives. (Innovations in Retailing)
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Research based innovations have also been a key focus in recent years[ CITATION Dhr09 \l
1033 ].The major themes researched upon in the last decade were: growth of the internet and e-
commerce, branding and customer loyalty, service success strategies and behavioral issues in
pricing and patronage. Developing on these themes one-by-one, one gets to know how the
internet revolution has enabled the retailers to successfully incorporate internet retailing
strategies to maximize customer satisfaction by providing online customization, publishing
online flyers and promotions. Furthermore, enablers such as standardized and branded products,
access to different products price information, novelty experience, accessibility and convenience
can not only promote but also provide unique retailing opportunities for the entrepreneurs.
However, compelling factors like lack of trial, lack of interpersonal trust, lack of instant
gratification, high shipping and handling costs, lower customer service, loss of privacy and
security, low economies of scale, unstable customer base, poor logistics and inexperience can
limit the success of internet retailing. So, in-order to adapt to the enablers and limiters, e-retailers
have adopted different business models and positioning strategies which include virtual malls,
use of auction, advanced search systems and catalogue[ CITATION Dhr04 \l 1033 ]

Retailers have adopted shopper marketing strategies which involve the execution of all
marketing activities in which retailers may indulge to influence the shoppers purchases ranging
from the stage of motivation to buy, purchase and post purchase. Shopper marketing strategies
are only successful when there is a win-win situation for the trio of retailers, manufacturers and
shoppers.[ CITATION Car09 \l 1033 ] Similarly, research on how retailers’ build a brand image and
how the retailer’s image is influenced by the brands they sell; manufacturer brands or their own
private labels, shows that a retailer’s image is influenced by factors such as location,
merchandise, service and store related dimensions and the price perceptions. The location of is of
prime importance to retailers who aim to tap a substantial share from the small basket fill in
shoppers. However with online retailing location is becoming less important and is linked more
with how customers optimize their shopping costs with effort to access the store. Also, it’s hard
to say which pricing format dominates the other because while small basket shoppers seem to
have a preference for HILO format and the large basket shoppers tend to stick to the EDLP.
Moreover greater the cross category assortment the more the retailer is remembered, wider range
of products under one roof adds to convenience. [ CITATION Kus04 \l 1033 ]
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Given the central role of customers in marketing, marketers need to pay particular attention to
consumer views on Corporate Social Responsibility. Corporate Social Responsibility is
something that is integral in working towards understanding consumer behavior because in this
fast changing environment customers select brands that are more responsible and less harmful to
the environment. The focuses on how companies, if they integrate social and environmental
concerns in their business, leave a greater impression of the brand on the customers. Therefore,
there is greater likelihood of the customer giving preference to such brand.[ CITATION Mag12 \l
1033 ]

2. Effects on consumers

Innovations in retailing during the recent years have had very far reaching effects on the
consumers as well. Grocery store best portrays this effect; the grocery store is a stimuli for a
consumer which registers within a consumer a need for a certain product category which leads to
a consumer making an unplanned purchase. What further exacerbates this need for unplanned
purchases can be divided between category and customer characteristics. If we were to take into
consideration the category characteristic, four categories come forth: Coupon usage, in store
display, Category purchase frequency and hedonic nature of category. Out of these four it is the
in store display category and the hedonic nature of category that increase the frequency of
unplanned decisions. Moving to customer characteristics we have gender, household size, store
familiarity and shopping with others that factor towards making unplanned decisions.[ CITATION
JJe09 \l 1033 ]

A good relationship between a store and customers will have a positive result and will increase
the purchases; a good store-customer relationship will increase customer satisfaction and is also
likely to increase customer loyalty. The linkages between trust in a salesperson, trust in the store,
and repeat purchase intention. A model of store loyalty which includes relationships at both the
person-to-store as well as person-to-person level is tested. The key features determining store
loyalty are store loyalty, satisfaction, trust and commitments and interpersonal relationships.
The findings of recent study suggest that those with interpersonal relationships, trust and
commitment had increased purchase intentions as compared to those who did not have such
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relationships with the retailers. The model suggests that commitment is related to store loyalty
both in terms of more positive attitudes toward the store and directly to repurchase intention. The
results supported this contention, suggesting in fact that positive interpersonal relationships
function as a 'bonus' in terms of purchase behavior. It can be concluded that positive feelings
about a store are in a way dependent on the interpersonal relationships between customers and
salespeople.[ CITATION Ger97 \l 1033 ] Moreover, recent studies show pleasant in-store atmosphere
may ignite unplanned purchases as it encourages customers to stay longer in the store, visit more
and buy more. The need for retailers to provide excellent customer service – which could come
in the form on one to one assistance or a good in store experience due to innovative technologies
such as interactive kisosjks, virtual models, online chats and service representatives. [ CITATION
Dhr07 \l 1033 ]So, shoppers, nowadays, form a favorable image of the firm when the feel the
retailer gives them more attention by treating them with respect and care. Hence, it is likely that
a customer who gets such attention from the retailers is likely to return to them for future
purchases. [ CITATION Kus04 \l 1033 ]

Nowadays, customer satisfaction is no longer an acceptable goal for the retailers. Customers
expect to be satisfied, and they do not refer their friends to a store just because their expectations
have been met. It takes excitement for customers to enthusiastically recommend a store. To make
this happen, new dimension to not only retailing, but also to the emerging issues of retail
patronage have been researched upon. Research on how the customers’ satisfaction is made of
their experiences pertaining to shopping, buying, delivering, using, service and disposal. If these
factors fulfill the customers’ expectations, satisfaction is achieved. However, satisfaction does
not guarantee patronage which is crucial to the profitability and image of the retail stores. To
achieve this, the store should continuously find new ways to ‘surprise’ its clients and delight
them with augmentations that make their experiences less stressful, more convenient, and/or
more fun. Ultimately, these delights evolve in the long-run into a state of affection, which
translates into customer loyalty, positive word of mouth and competitive advantage. Also, to
facilitate this augmentation process, learning relationships with customers should be formed to
develop patterns of understanding about the customer which will, eventually, provide the basis
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for collaborating with the customers to anticipate and improvise personalized solutions to
recurring customer problems or needs.[ CITATION Ahm99 \l 1033 ]

Increased customer satisfaction leads to positive loyalty effects. A positive relationship between
customer satisfaction and measures of repurchase intentions due to the logic that people who are
satisfied with their primary stores would concentrate a larger amount of their purchases at these
stores. But contrary to the explanation the studies show that this relationship is rather fairly
modest , the reason being that satisfaction is something difficult to measure because different
people have different meanings of satisfaction and thus people don’t respond in the same way to
feeling satisfied. Also satisfaction was only important for the customers with low economic
orientation since highly economic customers hardly increased their share in their primary store.
Similarly more heavy shoppers responded more strongly to the satisfaction. It is also the case
that being highly satisfied with a particular provider does not preclude high satisfaction with the
competitors’ alternatives, in this case other stores. A consumer who sees benefits in regularly
using different stores would be more inclined to do so if several alternatives were equally
satisfying, than if competing stores were seen as clearly inferior to the primary store. Thus it
might be informative to use relative measures of satisfaction when predicting customer share.
Loyalty cards and memberships according to study, have a mixed effect on customer share since
it is very hard to change already established behavioral patterns of the customers by introducing
such rewards. Another important issue for loyalty-card programs is the causal direction of
effects. Since this study is based on cross-sectional data, it does not directly address this
question. However, although it is possible that the findings are a result of consumers having
changed their shopping behavior towards the chain after joining a program, at least part of the
effect could be attributed to the opposite interpretation, that is, consumers join clubs that reward
their established pattern of shopping. This could in fact be one explanation for the large number
of multiple-card holders; shoppers who already use several chains on a regular basis might join
all available clubs to take advantage of the benefits of each club. [ CITATION Ann03 \l 1033 ]
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3. Globalization

Globalization has accelerated the pace with which retailing has evolved over the years. These
changes over recent years have drastically affected both retailers and consumers. Due to the
seeping effects of globalization there has been an increase in awareness amongst consumers and
the need for increased variety calls upon retailers to offer wider category assortments under one
roof hence the shift of retailers from single format to multi format retailing strategies. A lot of
these changes are as a consequence of globalization in retailing. More specifically, as firms
globalize they pose challenges for retailers such as vertical integration of the products,
globalization has resulted in emergence of hyper stores and large super markets where small
retailers are at loss both in more developed and less developed countries. [ CITATION Wer11 \l
1033 ]

Due to globalization, innovations in retailing are necessary if these challenges are to be

converted into opportunities. To understand the effects that globalization has on retailing, a study
explores, industry based, consumer based and legal/regulatory based challenges that the retailers
in developed, emerging and less developed market face. The study mentions the market
difference between East and West by using the examples of Estonia and Canada. Canada,
Western nation, is a market economy with discount stores like Wal-Mart and Zellers where the
retail service personnel are now knowledgeable and there is more personal interaction, price is a
greater influencer and there is a greater favorable brand attitude because there is a lot of
customer loyalty. Whereas Estonia is still a transitioning economy and will take time to develop
their retail systems to those found in the West. The study also dwells on how in Canada there is
greater personal interaction between the sales personnel and the customers which leads to greater
sales in Canadian stores. Also, it talks about the market difference between East and West by
using the examples of Estonia and Canada. Canada, Western nation, is a market economy with
discount stores like Wal-Mart and Zellers where the retail service personnel are now
knowledgeable and there is more personal interaction, price is a greater influencer and there is a
greater favorable brand attitude because there is a lot of customer loyalty. Whereas Estonia is
still a transitioning economy and will take time to develop their retail systems to those found in
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the West. In addition to that, it also dwells on how in Canada there is greater personal interaction
between the sales personnel and the customers which leads to greater sales in Canadian stores.
[ CITATION Bil07 \l 1033 ]

4. Issues in retailing

The pace with which innovations in retailing have occurred, some issues in retailing have also
emerged. Compelling factors like lack of trial, lack of interpersonal trust, lack of instant
gratification, high shipping and handling costs, lower customer service, loss of privacy and
security, low economies of scale, unstable customer base, poor logistics and inexperience can
limit the success of internet retailing. Likewise, internet also poses threats to the privacy of
consumers .Which is why the hyped 'internet revolution' has failed to meet expectations, and
how pure e-retailers are finding it hard to maintain a sustainable advantage over the traditional
retailers.[ CITATION Dhr04 \l 1033 ] Hence, to assess the effectiveness of online retailing, the
Stimulus-Organism-Response model has been suggested.[ CITATION APa85 \l 1033 ] It explains
how certain atmospheric elements (high or low task relevant) of the online “store” influence the
affective and cognitive internal states (perception of the online store), which intervene the
approach responses to the online shopping experience. If the stimuli successfully appeals to the
cognitive states of the online shoppers, it will translate into buying behavior.

Another emerging issue in retailing takes into account the effects of satisfaction on patronage.
Satisfaction doesn’t guarantee patronage which is crucial to the profitability and image of the
retail stores. To achieve this, the store should continuously find new ways to ‘surprise’ its clients
and delight them with augmentations that make their experiences less stressful, more convenient,
and/or more fun. [ CITATION Ahm99 \l 1033 ]
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5. Real life Application

Retailing has over the years grown ten folds from what it used to be in the earlier times.
However, there is still room for improvements and innovations to facilitate and aid the
consumers further. If we were to draw parallels between local stores, super stores and
departmental stores we see how the three are at different growth levels in terms of the products
that they carry and how customers are to be drawn towards them. We also see that the effect of
these innovations in retailing have positively affected the customers because they can access
items from various product categories whether local or imported with ease.

Local stores have now been morphed into “Convenience stores” As the name suggests that each
locality would have such a store to aid the residents. The Local store doesn’t carry a vast variety
of products but basic day to day grocery products.

Superstores are at a larger level and they aim to provide household products, especially grocery
items, therefore, to cater to the modern and informed consumer, they not only maintain a wide
range of goods but also provide a lot of variety to the customers as well. The assortment of the
shelves is based on the types of goods. For instance, if one shelf or part of a shelf contains
biscuits, then it will have different brands and types of biscuits from which the consumer can
choose from. An example could be the LUMS super store.

Departmental stores carry a variety of local and imported brands available at Departmental stores
for an array of product categories to appeal to consumers from different tastes and pockets. An
example of such a store would be Alfatah and its products vary between electronics, crockery,
clothing and groceries.

With Globalization we see that within these three categories there has been vast innovations. In
terms of Local stores we see how with globalization there has been a monumental increase in the
number of local stores. In past there used to be one or two general stores which used to carry a
general line of merchandise and would cater to the needs of the entire community but
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globalization, urbanization and development of new communities have resulted in establishment

of many such local stores within a same block of a residential area thus replacing general stores
with localized convenience stores. In the superstores category we have seen that superstores have
started providing consumers with cash discounts when the list price exceeds a certain amount.
This strategy effectively targets all those consumers who buy their weekly or monthly grocery
from these stores. Perhaps the most recent and interesting innovation incorporated by the
superstores is the provision of home delivery service. This has enabled the superstores to cater
to a wide consumer base, and has provided them with the opportunity to retain customer loyalty
through this service as well. In the departmental stores category innovation in customer service
in retailing is that a few stores in Pakistan have now introduced the concept of different counters
for items less than ten for convenience sake so that customers quickly get billed. Initially
department stores in Pakistan were limited to just offering a particular line of items, for instance
HKB was known for its Fabrics and Alfatah was just known for groceries. But now these stores
Offer not only just household products but a range of different products from groceries, to
clothes, usually have different floors for different product categories. Another important factor
that departmental stores have now started to incorporate in their practices is the idea of Corporate
Social Responsibility. Stores like Alfatah use energy saver light bulbs to conserve energy or the
fact that Hyperstar now uses recyclable bags and those too have to be purchased therefore
controlling the use of plastic. Such practices now appeal to the modern consumer as it depicts a
positive image of the departmental store.

However, as aforementioned there is still room for improvement for all these three categories to
work on. For instance the idea of corporate social responsibility has not at all been incorporated
at local and super store level and even in department stores very few are making an effort. It’s
become a requirement for the modern users for their retailing stores be ethically responsible. If
all the stores make a conscious efforts with respect to the lights they use and the types of bags
they give on purchase it would go a long way. Another recommendation can be the idea of ‘Self-
checkout’ we see the practice being adopted in the West in departmental giants like Walmart or
Kroger. A consumer can check out their products by themselves instead of waiting in long
queues for an attendant to tend to you. Even in Alfatah we see people waiting in lines which
irritates the consumer. We also see that in these stores the idea of home delivery of grocery items
is only limited to the loyal customers, however, in the west we see how super stores like
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Sainsbury and Marks and Spencer foods allows buying groceries online which then the store
delivers within a period of twelve hours. This innovation in retailing in Pakistan would go a long
way because we see how it would aid working men and women. There is also a dire need for a
linked billing system. We see in Alfatah or Hyperstar how the billing for products on one floor
are done separately. For instance if you buy something in the electronics section at Alfatah you
will be billed on that specific floor and then if you move on to the grocery floor you’ll be billed
separately there too. There is no system of amalgamating the two which means that the consumer
would get annoyed with the inefficiency. There is a need for a compact billing system where a
consumer can pay at whichever floor they last shop at instead of being billed separately.
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