Description
It covers concepts from retail management like Characteristics of Organised and Unorganised Retailing, Marketing Concepts Applied to Retailing, retail strategy, retail formats, contemporary models, Various Consumer Behaviour Dimensions in Retailing, pricing in retail etc.
RETAIL MANAGEMENT
INDUSTRY EVOLUTION
Traditionally retailing in India can be traced to The emergence of the neighborhood „Kirana? stores catering to the convenience of the consumers Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission. Textiles sector with companies like
Bombay Dyeing,
S Kumar's
Raymond's,
Grasim
First saw the emergence of retail chains
• Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches. • The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers.
?
Food World, Subhiksha and Nilgiris in food and FMCG;
?
Planet M and Music World in music;
?
Crossword and Fountainhead in books.
• Post 1995 onwards saw an emergence of shopping centers, mainly in urban areas,
?
Emergence of hyper and super markets trying to provide customer with 3 V’s - Value, Variety and Volume
Expanding target consumer segment: The Sachet revolution
?
INDIAN RETAIL SCENARIO
• $180-billion Indian retail market , just 2 % of entire retailing business carried out by organised sector. • May form 10% of total retailing by 2010 : Crisil. • During 2006 -2010, organized sector will grow at a rate of app. 50 % per annum :Indian Retail Sector Analysis 2006-07 conducted by • Largely fragmented , the retail business in India is one of the largest in the world. • Retail is one of the most attractive sectors for foreign direct investment in India: FDI Confidence Index Survey conducted by AT Kearney.
Retail Market in India
Unorganized
Experimentation with formats
Fragmented Store design
Emergence of discount stores
Unorganized retailing is getting organized
Consumption Boom:
Favorable Demographics,
Rise in income Level,
Double Income Families, Rising Aspirations, Shifting Consumption Patterns
• A successful Indian Retail Format is yet to be developed to strike a balance between customer expectation and economy-of-sale.
•
Retailers are shifting from manual planning system to technology enabled solution.
• Striving to identify factors that motivate customers to visit outlet. • Attempting to build supply- chain productive and customer-centric.
Growth Drivers • Institutional mechanism of Retailing is devised to harness facts :• Sourcing options, within India and Overseas vendors. • Increasing number of nuclear families, • Double income families, • Enlarging space for working women • People in small towns grown in satisfying their physiological, safety and social needs. • Enhancing commuting time; Have put pressure on consumers’ decision-making process. Consumers seek convenience, quality ,services and entertainment also.
Defining Retail • Business activities involved in selling goods and services to consumers for their personal, family and household use.
• Sale of goods / services to the final consumers.
• Last Stage in distribution network whereas intermediaries operate in B 2 B market. • Smaller Average Sale • Impulse Purchases; importance of displays • Popularity of stores • Unique Inventory Management
Functions of retailing
Characteristics of Organised and Unorganised Retailing
Organised Retailing • leveraging technology • adherence to corporate laws
Unorganised Retailing
• Un- managed inventories • low cost of operations • individually owned/managed • less focus on technology usage • minor overheads • low taxes • unskilled manpower
• effective inventory management
• sales forecast • high investment • skilled manpower
• conducive environment
Functions of Retailing
1. Appropriate mix of products and services 2. Converting larger quantities into individual units. 3. Holding inventory 4. Providing display and additional services
Marketing Concepts Applied to Retailing
Customer Orientation
Coordinated Effort
Marketing Concept
Value Driven
Retail
Retail Strategy
Goal Orientation
Retail Strategy
Total Retail Experience
Customer Service
Relationship Retailing
All elements in a retail offering that encourage customers for Repeat visits.
Identifiable but Intangible component of retail mix in conjunction with the basic products or services
Hard to lure new customers; retain old customers Easier to develop a customer data base
Classification Organised Retailing
1. Ownership Based • Franchisee • Independent Retailer • Co-operatives 2. Merchandise on Offer • Food Retailers • General Merchandisers • Combination 3. Store Based • Department Store • Hyper Market • Specialty Stores • Malls 4. Non Store Based • Vending Machines • Web Portals
Unorganised Retailing
Semi organised Retailing
Retail Formats
Store based: Brick and Mortar Stores, Physically Present in Market
Place. • Department Stores; Large retail unit, extensive assortment (width and depth) of products, organised into separate departments. • Supermarket; Departmentalised food based stores, wide range of food and related products, sales of general categories is limited.
Shopper’s Stop – K. Raheja Group Pantaloons – Future Group West Side – Tata Trent Group Globus – R. Raheja Group
Apna Bazar – Subhiksha – Nilgiri’s – Food World – Future Group
• Hyper Markets; Combination store, blending an economy supermarket with a discount department store. • Specialty Stores; Concentration on selling one product line, carry a narrow but deep assortment. • Convenience Stores; Relatively small, located near residential areas, carry a limited range of high-turnover convenience products and are usually open for extended periods.
Big Bazar – Future Group Giant – RPG Group Spencer’s
Mom and Pop stores Reliance Fresh Wills Lifestyle – ITC Group Provogue – Nike’ – Tanishq – Tata Group
Non Store based: use of non store based selling strategy mix,
• Direct • Direct
Marketing; non-personal mediums, order taking on phone, mail
Selling; customers are approached personally by sales executives
• Vending Machines; coins or cards operated dispensing machines
• Web Stores; virtual selling space on world wide web www.ebay.com www.amazon.com www.indiatimes/shopping.com
Contemporary Models
• Moser Baer cycle carts to hawk blockbusters now
• Kolkata City paras will now experience home-video wallas, selling the latest Hindi and Bengali blockbusters priced between Rs 28 and Rs 34 only. • Five carts in July, 2007 and around 100 will be added. • Operational in Kolkata and expanding to Chennai, Mumbai, Delhi and Hyderabad
Project Sukanya (kolkata)
The goods are not sold from huge showrooms, but from 54 roadside mobile kiosks, manned by 141 women who work in shifts.
Spices, gift items, school Tiffin and office lunches are offered,
Positioned “strategically” at eye level of a city on the move.
Wheel of Retailing Theory
Vulnerability Up-market Position High Price Downturn in Sales Niche Segments
GAP at higher end
GAP at higher end
Entry Low level services Shallow assortments Low status position Low rent locations
Trade-Up Higher level of services Quality Catering Masses Innovative Formats Extended Product Line Intense competition
GAP at lower end
Entrants New
As retailers graduates from entry level to vulnerability identifying GAP at each stage;
A larger GAP is created at the lower end of the market.
Accordion Theory
Retailers move from being a general retailer offering Wider and deeper assortments to specialise in a specific product category or customer segment; Reverting back to general diversified approach.
The changes in orientation are related to merchandise mix strategy adopted by retailers.
?Wider Merchandise Assortment
General Retailer I N F
?Current Market unsaturated / untapped. ?Competitors? market share is declining while industry demand is rising. Concentration Strategy
?Broader Market Coverage
?Specialty Merchandise Offer. ?Concentrated Market Coverage
Specialty Retailer
L U E N C
?Constraints of Store Size ?Increased Disposable Income of customers ?Demanding Customers ?Competitive Advantage ?Advantage of Brand Equity Diversification Strategy ?Expansion of complementary Product lines for ?Market / Product Line Skimming ?Growth of large shopping centers ?Need to increase sales volume
?Wider Merchandise Assortment
General Retailer
E R S
?Broader Market Coverage
Retail Lifecycle Theory
The duration of the retail life cycle is indefinite Each stage in the Retail Lifecycle reflects certain differentiating characteristics featured in market factors and Retail Mix Strategy
Innovation
Accelerated Development
Maturity
Decline
Merchandise Mix
Pre-planned variety &
narrow assortments
Broader Assortments
suiting to market demand
Stable merchandise assortments,
Retrenchment
of certain product categories
introduction of private labels.
Pricing may be lower because of the new competition
Pricing Strategy Discount
/
Penetration pricing to build market share rapidly. Skim pricing to recover development costs. Prototype Entrepreneurial
Pricing is maintained as the firm enjoys increasing demand with little competition. Innovative formats inclusion services
Low prices
Store Formats
Professional and of Emphasis on differentiation
Caretaker
Promotions Advertising
/
Aimed at innovators and early adopters.
Aimed at a broader audience.
Emphasis on Price Points extensive sales and discounts Low Steadily decrease wide-ranging
Sales Growth Store Traffic Competition
Low but increasing trend Increase rapidly No / Less
Rapid Steadily increase Moderate
Low observing downtrend Stable amount Intense
Conflict Theory competitors adapt to each other?s tactics resulting in new retail strategies. The central premise of the process is
when challenged by a competitive advantage, The retailers will try to
Negate the strengths of the competitors
Consumers Behaviour
Need Recognition Information Search Evaluation of Alternatives Purchase Decisions Post Purchase Behaviour
Adoption Process
Awareness Interest Evaluation Adoption
Consumer Behaviour to Institutional Retailing Purchase Decision Process
Store Choice
Need Recognition
Extraneous Forces and Information Gathering
Evaluation of Alternativ es
Purchase Decision
Brand Choice
Repeat purchases Re-evaluation
Post purchase
Parameters of customer’s choice of different retail formats
Value driven Customers
¨ Low frills ¨ Every day Low pricing ¨ Private Labels
Time starved Customers
Technology
¨ Convenience ¨ One Stop Shopping ¨ Expanded Categories
¨ E-retailing ¨ Point of Purchase technology ¨ Smart Carts ¨ Assortments ¨ Concepts ¨ Targeted Marketing ¨ Product Mix ¨ Information and control
Savvy customers
Lifestyle focused customers
Health driven customers
Factors Influencing the Customer?s Decision Making Process
Range of Merchandise Instrumental in retaining customers Convenience of Shopping Expected Facilities / Services Ambience
Retailers’ Performance and Post Purchase Behaviour
Customers’ Experience Post Purchase Behaviour
Low satisfaction
Switch to other Retailer
Fairly Satisfied Retailer’s Performance Satisfied Switch to other Retailer Offering better products and services
Delighted
Repurchase and loyalty towards the store
Indian Demography
• Changing Age Profile
Ageing Population 0-14 years (%) 15-59 years (%) 60 and above (%) 2001 (projected) 35.6 2006 (projected) 32.5 2011 (projected) 29.7 2016 (projected) 27.1
58.2
6.3
60.4
7
62.5
7.9
64.0
8.9
Source: Statistical Outline of India 2003-2004
• Favourable demographics are expected to devise the consumption pattern across the categories
Indian Income Classes Households Million (% of Population) Classification (Annual household Income) Very Rich (Above INR 215,000) Consuming Class (INR 45,000-2,15,000) Climbers (INR 22,00045,000) Aspirants (INR 16,00022,000) Destitute (INR less than INR 16,000)
Source: The Marketing Whitebook 2003-2004
1994-95 1 29 48 48
1999-00 3 55 66 32
2005-06 6 75 78 33
35
24
17
•
Middle-income group of consuming class segment is growing.
Consumer Spending in India
Consumer Spendings
Personal Care Grocery 11% 3% 9% Savings Clothing & Lifestyle Durables 40% 9% 10% Entertainment Eating out 5% Vacations
Source: The Marketing Whitebook 2003-2004
13%
• A review of urban consumer spending reflects that Grocery is the single largest expense followed by Entertainment and Eating out.
Various Consumer Behaviour Dimensions in Retailing Does the retail outlet have psychological implications on the target segment?
When Titan and Timex watches were retailed through exclusive shops, consumers wanting lower-end watches probably felt that a typical Titan showroom was too elitist, which could have had a negative impact.
Does selection of outlets vary in accordance with types of product categories? While buying a TV or a washing machine, would consumers visit an exclusive showroom of BPL, Onida or Sony,
or would they visit a multi-brand outlet?
What is the impact of the image developed by a retail outlet? Is FoodWorld different from a neighbourhood grocery shop in the minds of consumers? What kind of perception are consumers likely to have with regard to shopping from an online outlet such as Fabmart vis-à-vis a brick-and-mortar outlet like Fountainhead or Landmark? Would there be differences in the psychographic (and demographic) profiles of consumers choosing outlets?
Customer Loyalty Programs
Loyalty programs are a mechanism for identifying and rewarding loyal customers.
1. Staying with the company for longest.
2. Purchasing most frequently and
3. Spending on average in most visits.
IT based technology and equipments have enabled retailers to acquire customer retention through database marketing programs. Establishing a detailed client database may help retailers to keep track of personal information and individual preferences of their customers and to offer better service
Implementation of Customer Loyalty Programs Identifying Objectives
Offering Value
Offering Value Research & Analysis Harnessing Technology
Continuous communication
Organisational Commitment
Many of the prominent players issue loyalty cards.
A consumer can use it as a form of
• Identification when visiting the retailer to avail the benefits of a discount on purchases,
• Earn points, that could be redeemed in future. They are also providing benefits like • Exclusive hours for shopping, • Special events organized for members, • Dedicated counters for billing etc.
Loyalty membership cards are issued on fulfilling criteria such as, • Minimum purchase of an amount • On payment of a fee
Pantaloons
Shopper’s Stop Globus
Green Card 2500/- of Purchases
First Citizen 1500/150/Privilage Club Inner Circle 2000/-
•Exclusive shopping days •Billing Counters •Redeemable Points •Out-store offers •Redeemable Points •Reserved Parking
Lifestyle
2500/-
Westside
Club West
2000/150/-
Co-branded Cards Co-branding can be defined as two major brands converging to enhance the usefulness and image of the product or services
On account of low proportion of customers redeeming the points, loyalty program become negligible
The retailers are adopting to co-branded loyalty cards to move from being single brand centric to more widespread so that members get concrete benefits
Banks
Retail Strategy and Planning
Establish Mission Analyse Environment
Identify Competitive Advantage / Strategic Alternatives
Obtain and Allocate Resources
Develop Implementation Plan
Monitor Progress and Control
Certain Retail Mission Statements McDonald’s: (QSCV) Quality, Service, Convenience and Value Shopper’s Stop: To be a global retailer in India, and to maintain the no. 1 position in the Indian market in the department store Category.
Pantaloons: We share the vision and belief that by improving our Performance through innovative spirit and dedication, we shall Serve our customers and stakeholders satisfactorily.
Technology Environment Analysis Government Culture Customer Analysis Market Segmentation
Customer Motivation
Strategy
Competitor Analysis
Target Markets
Vendor Relationships Location
Competitive Advantage
Competitive Advantage Selection
Competitive advantage Merchandise Assortment Affordability Retailer Competitor Importance of Improving High
7
9
9
7
Medium
Quality
8
8
Medium
Services
9
7
Low
Facilities
6
6
High
Mix of entertainment & comfort
5
7
High
Alternative Strategies
Market Penetration: Focus could be on Increasing the number of customers Increasing the quantity purchased by customers (Basket Size)
Increasing the frequency of purchase
Market Expansion / Development: Focus on
Tapping new geographical market
Adding products to the existing range
Differentiate by New Retail Format Development : Focus on
Catering to newer customer segments
Catering to existing customers
Diversification: in related or unrelated fields Allocation of Resources Financial Resources: Rentals, Salaries, Payments for Merchandise Human Resource: Recruitment, Selection, Training, Compensation, Motivation
Implementation
Reflect the desired positioning through
Store Layout, Design, Display
Merchandise plans, selection
Store Personnel and customer services
Monitor Progress and Control Key Performance Indicators Quality / Range Footfalls Loyalty Base Basket Size
Bill Size
Location
Three most important things in retailing:
Location, Location, Location
Critical Factor in customer’s selection process
Good location gives a retailer sustainable advantage over His competitors
A poor choice of location for a store would mean Disastrous results.
Factors to be considered 1. Type of Region
Overall Size of the market place
Understanding the geographic area
Population Growth
Income Distribution Competition Level
Type of Site
Proximity to target market Match between type of site and store format Age and Condition of the site What is the Trade Area
Geographic area that generates the majority of the customers For the store
Accessibility
Road Patterns and conditions in surrounding areas
Any natural or artificial barriers
Visibility of the site
Parking Place
Traffic flow
Types of Retail Location Formats
Freestanding / Stand Alone Store Store located along a major traffic artery There is no or little competition Rents are usually low Advertising costs are high
Part of Business District
A place of commerce in the city, developed historically as A centre of trade and commerce in the city It does not have a pre-set format or structure
Characterised by peak rentals, intense developments cumbersome parking
Good accessibility in terms of transportation from all parts of the city Secondary Business District
Part of Shopping Centre
A group of retail and other commercial establishment that is planned, developed, owned and managed as a single property Retailer has no involvement in maintenance of Common area like; restrooms, waiting area, parking, Escalators etc. Retailer does not have a major say in retailer mix in the mall Anchor stores play key role in the success of a shopping center
Developing overall Strategy
It involves two components: Controllable Variables and uncontrollable Variables Controllable Variables: are those aspects of the firm that directly affect the organisation. Uncontrollable Variables: are those to which a retailer must adapt. A good strategy integrates these areas so that a unified plan or strategy is developed.
Controllable Variables Store Location Managing the Business Merchandise Management Pricing Policies
Communicating with customers
Managing a Business Two Major Elements are involved: Human Resource Management Recruiting, Training, Compensation, Supervision, Authority and responsibility and chain command. Operations Management Efficiently and effectively performing the tasks to satisfy customers, employees and management goals Store Formats, design and size, personnel use, Store security and maintenance,
Merchandise Management
Decisions regarding product mix to be offered Width and depth of the merchandise is considered based On : The number of product lines a retailer wants to offer Service levels provided Store formats
Criteria for purchase decisions are formulated in terms of :
Frequency of Purchase of Replenishment Cycles Vendor Selection Terms and conditions with the vendors Forecasting and Budgeting
Pricing Policies Choosing amongst the several pricing techniques like: Leading or Following Cost plus or Demand Oriented Decisions regarding: what range of price set to offer Should be Consistent with the retailer’s image and the quality of products Number of prices within each price range is determined
Communication A distinctive and desirable image must be sought
Image is reflected in:
Store Atmosphere
Store front
Layouts and displays
Colours, Lighting, Music
Sales Persons and customer services
Uncontrollable Variable Consumers
Competition
Technology Economic Seasonality Legal Restrictions
Consumers Demographic trends lifestyle patterns can not be altered
Tastes and Preferences can not be forced upon
Selecting a target market is within the control of a retailer but: Retailer can not sell goods or services that are beyond the Range of its customers or…….
Not wanted , displayed or advertised properly
Competition A retailer can not control the entry of competitors In fact, a retailer’s success may instigate new players to enter Or existing players to modify there strategies or formats Intense competition calls for re-examining overall strategy
Technology
Technological infusion is advancing rapidly
Checkout operations
Electronic Surveillance Displays
Inventory Management
Warehousing
Economic Conditions
Unemployment
Interest Rates
Inflation
Tax levels
GDP
Seasonality Different seasons call for different merchandise on offer.
Retailers offering diversified merchandise need to be more vigilant
Legal Restrictions Some Controllable variables are affected by legal restrictions
Store Location: Lease and mortgage, local ordinances
Managing Business: Labour laws, Business Taxes, Franchising or Licensing Provisions Merchandise Management and Pricing: Product Safety Laws Warranties, guarantees, Merchandise Restrictions; Price marking laws Communication :
Strategic Planning in Global Retailing
Assess your International Potential:
Trends in the industry in Host Country
Domestic Position Effects that international activity may have on the current operations
Status of resources
Know about Existing Channels of Distribution Know the competition Level of transportation facilities
Level of Technology
Gvt. Restrictions Retailing Preferences Level of Technology Lifestyle Patterns
Availability and caliber of personnel
Expected pilferages rate
Operations Management
• Effectively and efficiently implementing the retail policies. • To ensure success operational areas need to be maintained as well as possible. • Aspects of operating a retail business are: – Operations Blue Print – Store Format, Size and Space Allocation
– Personnel Allocation
- Store Maintenance
- Energy Management
- Renovations -Inventory Management - Store Security - Computerization - Outsourcing - Crisis Management
Operations Blue print
Systematic List of all the operating functions to be performed their characteristics and timing. Start of the Day Who opens the store?
When the store opens?
What are the steps involved? End of the Day Who Closes the Store? Cash, Alarms, Lights ………..
Performance of these tasks must not be left at chance There could be multiple operations blueprints used separately for separate operational areas. Whenever there is a modification the operations blue print must be adjusted accordingly.
Store Formats and Size Should be considered in context of productivity and profitability
Space Allocation
Determine the amount of space and its placement for each Product category. Consider space allocation keeping in mind store space and product sale and profits. Top-Down Space Management Approach Bottom-Up Space Management Approach
Top-Down Approach: 1. A retailer starts with its total available Store Space. 2. Divides the space into categories 3. Works on in-store product layout. Bottom-up Approach: 1. Planning starts at the individual product level 2. Proceeds to product categories 3. Total store space
Some Tactics that are used by retailers: Vertical Displays
Hanging Displays on Store Walls
Free Space allocated to small point of sale displays
Vending Machines
Scramble Merchandise (high profit and high turnover) is Allocated more space. Stay open longer to use space longer
Personnel Allocation
From Retail operations perspective efficient utilisation of Personnel is vital:
Manpower Costs are high; they account for a high ratio in operating costs
High Employee turnover leads to increased recruitment, training and supervision costs. Poor Personnel may have bad selling skills, mistreat customers Manpower deployment is subject to unanticipated demand Retailers must avoid being over staffed or under staffed
What a Retailer should do
Hiring process Workload forecast (Staffing) Job Standardisation: task of similar positions in different departments are kept uniform. Cross Training: train personnel for more than one job. Retailer can increase personnel flexibility and reduce total number of employees at any given period of time. Using Self-service:
Manpower Costs as a percentage of sales can be reduced significantly is self service is used. Points that should be taken into account: It requires better in-store display Ample assortments should be there on the selling floor Place goods and services with clear features Right mix of self-service and use of personnel Negatives: Shoppers may feel that they are getting inadequate services
Cross Selling is not possible
Store Maintenance
Encompasses all the activities in managing physical facilities
Exteriors: Parking lot, points of entry and exit, outside signs Display windows and common area adjacent to the store
Interiors: Windows, walls, flooring, climate control and energy use, lighting, displays and signs, fixtures and ceilings Quality of store maintenance affects:
Customers’ Perception of the store
Life span of facilities Operating Costs
Inventory Management
To maintain a proper merchandise assortment while ensuring Smooth operations. How merchandise is received from different suppliers Ratio of merchandise in store, ware house and back store Replenishments from warehouse to the store How breakage is acceptable Support from suppliers in storing merchandise or setting up displays
Store Security
Two basic issues: Personal Security: Security Guards, Limited access to store Facilities, frequent Bank Deposits, safety vaults.
Merchandise Security: Product tags, CCTV, employee Surveillance, burglar alarms.
Detailed background check of every employee. Employee Training programs on ethical behaviour. Mystery shoppers.
Insurance
Losses due to fire, major thefts, on premise accidents
Vital Decision regarding Insurance:
Premiums have risen Insurers have reduced the scope of their coverage
Credit and Payment
Payment modes, Honoring Credit Cards, Store Credit Plans Eligibility requirements for customers.
Computerization / Technology Infusion
Improve logistics and reduce delivery lead-time resulting in reduction in inventory holdings; Obtain information about customer preferences, sales history and movement of merchandise to formulate customer centric strategies; Increase accuracy of sales transactions; Improve trading partner relationships; Incorporate faster responses to changing market conditions, and Build loyalty schemes and database.
Possible Areas: Inventory Management / Warehouses Point of sales
Communication within organisation
Checkouts Things to Consider: Hardware and Software solutions
Costs
Training of Employees
Crisis Management
Fire, Broken Water Pipe, Natural Calamities (floods), Accidents, illness, Power cuts, Excess footfall There should be Contingency Plans for as many different types of crisis situations as possible
Developing Merchandise Plan
It is the key phase in retail strategy
A retailer must have:
Proper assortment of goods and services when They are in demand Sell them in a consistent manner with the overall Strategy.
Merchandising: All activities involved in acquiring goods / services and making them available at the place, time and price and in the quantity That enables a retailer to achieve his goals. Merchandising Plan / Philosophy Must reflect: Expectations of Target group Retail Format Market place positioning Value chain Suppliers’ capabilities Costs competitors Product Trends
Merchandising Plan drives every product decision like:
Product line to carry Shelf Space to be allotted Products to inventory turnover Pricing decisions Breadth and assortment across the store (narrow / wide) Depth within each category ( deep / shallow) Quality National Brands / Store Brands and its ratio
Micro Merchandising
Retailer adjusts its shelf-space allocations to respond to customers And other differences among local markets. Cross Merchandising A retailer carries complementary goods and services so that The shoppers are encouraged to buy more.
Devising Merchandise Plan
Gathering Information: Various Information Sources: Consumers Sales Associates Suppliers Trade Shows Competitors
Interacting with Vendors
Short listing the vendors 1. Manufacturer, physically produces goods, may provide credit and transportation.
2. Wholesaler buys merchandise from the manufacturers and provides services also to the retailers like shipping, storing excess inventory and credit. 3. General merchandiser carries a wide assortment of products.
4. Specialty merchandiser carries a deep assortment of the same product category.
5. Rack Jobbers display their own products in the outlets and payments are made on sales.
6. Cash & Carry stores sell merchandise on wholesale price to small retailers.
Forecasts
Projections of expected retail sales for given period Retail purchases are made on forecasts thus are the foundation of merchandise plans. * Overall company projections * Product Category projections * Item-by-item projections * Store-by store projections
Evaluating Merchandise Innovativeness: Factors to be kept in mind, Target Market, Growth Potential, Fashion Trends, Retailer?s Image, Competition, Responsiveness, Investment Costs, Profitability, Risk.
Brands: A retailer must choose a proper mix of manufacturer?s and private brands to carry. It is even more complex in today?s scenario as there is Proliferation of brands in each group.
Manufacturer?s Brands Produced and controlled by manufacturers, well known and Supported by manufacturers in promotions.
Require no or limited retailer investment in marketing.
Such brands dominate sales in many product categories Accounting for almost 85 % of total retail sale. Private Brands Developed and controlled by retailers themselves
More profitable for retailers
No competition or lesser competition in the category Lead to customer loyalty
Factors to be considered while launching a private labels Line up suppliers Arrange for distribution and warehousing Marketing: Advertising, Displays, Promotions Absorb losses from unsold items Pricing
Timing of Merchandise Re-order cycles, Replenishments Lead Times Allocations Budgets and Space
Category Management
„Category? is a group of products or brands that are closely related to each other. There is a combination of several such categories in an organised retail outlet. A set of categories are treated as independent SBUs with focused attention to deliver enhanced consumer value Focus is on a product category rather than the performance of an individual brand
Category Management in Retail
General Manager (Merchandise)
Category Manager (Jewellery)
Category Manager (Ladies apparels)
Category Manager (Ladies footwear)
Buyer 1 (Gold jewellery)
Buyer 2 (Silver jewellery)
Buyer 3 (Costume jewellery)
It is convenient to take decisions relating to Inventory,
Promotion,
Display,
Stocking space,
Reorder,
Performance evaluation and
Profit & loss accountability
To analyze the performance of a category, Boston Consulting Groups Growth Matrix (B C G model) could be followed
Low High
Product Profitability
High
Question Marks
Stars Winners
Sleepers
Low
Dogs Under Achievers
Cash Cows Traffic Builder
Unit Sales
Stars: These are fast moving products, with high profitability and high unit sales. Large amount of investment could be done on these products in terms of inventory holding and promotions. They should be displayed effectively. Question Marks: Such products are high on profitability but have low unit sales. Their future may be uncertain, as not many customers buy these products.
Retailer can track the sales history, inform customers about such products, new arrivals and incentives being offered and could be displayed more effectively.
Reversed inventory planning could also be done on the basis of sales history. Cash Cows: This category is low on profits but is highest in sales volume.
There is less investment required for such categories and profit margins are high.
It is necessary for a retailer to maintain variety and inventory of such categories. Such products are bought by the customer on an impulse and are displayed near cash counters or at the places more frequented by customers.
Dogs: A weak category with low profitability and their sales are also low. They could become a cash trap for a retailer. He should consider marking down the prices for such categories to liquidate the funds and later decide not to keep them.
Benefits of Category Management
Increased Sales Improved Decision-making Efficient Inventory Management
Lower Investment Required
Better Space Management Improved Service Level Better Coordination with Vendors
Logistics
It is total process of planning, implementing and coordinating the Physical movement of goods from manufacturer to retailer to Customer, in most timely, effective and cost-efficient manner Logistics involves: Order Processing Transportation Warehousing Inventory Management
Major Logistics Goals to be achieved are
• Economically managing logistics activities • Place and receive orders smoothly and accurately • Minimise time between ordering and receiving merchandise
• Coordinate shipments from various suppliers
• Keeping enough buffer stock, without having inventory pile up • Replenishments at sales floor • Handling returns effectively and minimise damages
Transportation
Important component of logistics and costs Transportation network is fixing up mode, schedule and route of transportation A well-designed transportation network helps in achieving desired degree of responsiveness of supply chain at a low cost.
Type of Merchandise plays an important role in selecting the Transportation mode and network
Different Types of Transportation Network Designs
Direct Shipping Network: Structured to have all shipments coming
directly from suppliers to retail store
The network eliminates intermediary warehouse and other related cost Speedy delivery ensures high product availability.
Direct Shipping with Milk Runs: This is route in which a truck either
delivers products from multiple suppliers to a single retailer or from single supplier to multiple retailers.
Transportation costs are lowered by consolidating shipment to multiple stores on a single truck, resulting in better utilsation of the truck
Reverse Logistics Growing emphasis on new products, variety and freshness of products has made it necessary for retailers to CLEAR their distribution network in term of revenue and storage space. The process of planning. Cost-effective flow of excess or unsold inventories and related information from the point of consumption to the point of origin It involves > Collection of merchandise from the store at warehouse;
> Sorting of the merchandise according to the quality state ?Taking decision regarding price reductions or return to vendor;
Inventory Plan
Inventory Plan is affected by the nature of the product; these Products can be divided into different categories Seasonal: Products which are in demand over a particular season;
Demand is fluctuating, May be left with unsold inventory;
Frequent replenishments required, Shorter lead times should be negotiated, smaller buffer stocks are desirable Staples: continue to remain over a long period, though their variety or
brands may only have a short-term demand
Larger buffer stocks are desirable
Derived: Demand for certain products arise because of the demand of few basic goods. The demand for a derived product can be forecasted in consideration with the demand for basic product. Irregular: These are mainly fad related products which are not seasonal but are in demand for a very short period of time; their repeated demand is not confirmed A retailer needs to maintain a balance of stock to replenish of merchandise at any given period of time. It is the minimum amount of inventory a retailer would wish to maintain even during lean period.
The basic stock could be calculated as; Basic Stock = Average Monthly Stock- Average Monthly Sale Beginning of the Month = Planned Monthly Sales + Basic Stock. Percentage Variation Method: This method could be used for the merchandise, which has high stock turnover or relatively stable sale The inventory level for staple merchandise like shirts or trousers could be determined by this method. This method is based on the assertion that at the beginning of the month, inventory stock could increase or decrease by 50% due to sale variation.
Week?s Supply Method: Food and Grocery retailers may use this method of inventory plan The sale forecast is done on a weekly basis under the assumption that the inventories are in direct proportion to sales. Stock-sale ratio method: The inventory levels are maintained at a specific Sale to stock ratio predetermined by the retailer Replenishment Cycles would differ with the type of merchandise and their turnover
Low Turnover
High Turnover
--------------
Common Buying Errors
• Buying merchandise that is either priced too high or
too low for the store?s target market.
• Buying the wrong type of merchandise (i.e., too
many tops and no skirts) or buying merchandise that is too trendy.
• Having too much or too little basic stock on hand.
• Buying from too many vendors.
• Failing to identify the season?s popular items early
enough in the season.
•Failing to let the vendor assist the buyer by adding new
items and/or new colors to the mix. (Quite often, the original order is merely repeated, resulting in a limited selection.)
Inventory Planning
• Optimal Merchandise Mix • Constraining Factors • Managing the Inventory
• Conflicts in Unit Stock Planning
Optimal Merchandise Mix
• Merchandise Line group of products that are closely related. • They are intended for the same end use (all televisions); are sold to the same customer group • Category Management management of merchandise categories, or lines, rather than individual products, as strategic business unit.
• Variety number of different merchandise lines
that the retail stocks in the store.
• Breadth (or assortment) number of
merchandise brands that are found in a merchandise line.
• Battle of the Brands occurs when retailers
have their own products competing with the manufacturer?s products for shelf space and control over display location.
• Depth average number of stock-keeping units
within each brand of the merchandise line.
Constraining Factors
Dollar Merchandise Constraints
Space Constraints Merchandise Turnover Constrains
Market Constraints
• Dollar Merchandise Constraints
• Consignment is when the vendor retains the ownership of the goods, is paid only when the goods are sold by the retailer. • Extra Dating is when the vendor allows the retailer extra time before payment is due for goods.
Managing the Inventory
• Model Stock Plan is a unit stock plan that
shows the precise items and quantities that should be on hand for each merchandise line.
• Identify attributes of each merchandise • Identify inventory levels
• Allocate Dollars or Units
Successful retailers, may realize that customers have stopped Purchasing a certain size, style or design As a result they may disregard past sales records and offer large selections of popular size, style or design
Predicting future sales for fashion or fad products is difficult.
Inventory Management for a Retailer Selling a Basic Stock Item
Inventory Management for a Retailer Selling a Seasonal Item
Conflicts in Stock Planning
• Maintain a strong in-stock position on genuinely new
items while trying to avoid the 90 percent of new products that fail in the introductory stage.
• Maintain an adequate stock of the basic popular items
while having sufficient inventory budget to capitalize on unforeseen opportunities. high margin goals.
• Maintain high merchandise turnover while maintaining • Maintain adequate selection for customers while not
confusing them.
• Maintain space productivity and utilization while not
congesting the store.
Vendor Negotiations
• Trade Discount: functional discount it is a form of
compensation that the buyer may receive for performing certain wholesaling or retailing services for the manufacturer.
• Quantity Discount: price reduction offered as an
inducement to purchase large quantities of merchandise.
• Promotional Discount: discount provided for the retailer
performing an advertising or promotional service for the manufacturer.
• Seasonal Discount: discount provided to retailers if they
purchase and take delivery of merchandise in the off season.
Cash Discount: discount offered to the retailer for the prompt
payment of bills.
In-Store Merchandise Handling
• Shrinkage is the loss of merchandise due to theft, loss,
damage, or bookkeeping errors.
• Vendor collusion occurs when an employee of one of
the retailer?s vendors steals merchandise as it is delivered to the retailer.
• Employee theft occurs when employees of the retailer
steal merchandise where they work.
• Customer theft is also know as shoplifting and occurs
when customers or individuals disguised as customers steal merchandise from the retailer?s store.
PRICING
What is Price?
• Basis for exchange. What the retailer is willing to sell product/service for; what the consumer is willing to pay to obtain product/service • The customer should be willing to pay the price, that is product’s “worth.”
Pricing Challenges for Retailers
1. All the sales in past decade have conditioned consumers to never pay full price
2. Economic recession –makes price more important – raises the “value” issue 3. Stores with “everyday low prices” are increasingly important
Price Elasticity of Demand
Small Percentage change in Price leads to substantial change in Demand, price is elastic This occurs when the urgency to purchase is low or Substitutes are available Large percentage change in Price leads to small percentage Change in demand, price is inelastic
This occurs when the urgency to purchase is high or no substitutes are available
Computing Price Elasticity of Demand is difficult for retailers as the number of products is large Retailers rely on average markup pricing, competition, Tradition and industry wide data.
Price sensitivity varies by market segment based on shopping orientation Economic Consumers: shop around for lowest possible prices Largest Segment in India. Status Oriented Consumers: Interested in prestigious brands And strong customer services.
Assortment-Oriented Customers: seek retailers with strong selection in the product categories. Personalizing Consumers: shop where they are recognized and are loyal towards them. Market Pricing large choice of retailers, they fix price similar to each other. Less control over price because consumers may switch to competitors Administered Pricing Retailers have distinctive retail mix, advantage to charge Premium price
Pricing Strategies are quickly copied, reaction of competitors are predictable Price Strategy should be viewed from both short run and long term perspective. May lead to Price War and may lead to low profits or losses
Pricing Strategy
1. Cost oriented: retailer sets a price base, Minimum Price acceptable to the firm so it can reach a specified profit goal. Merchandise Cost + Operating Cost + Profit Margins
2. Demand oriented: what customer will pay? Determine the range of prices acceptable to the target market. Top of this range is called demand ceiling
3. Competition Oriented: setting prices in accordance to competitors.
Demand Oriented Pricing
Retailers estimate the quantities that customers would buy at various price ranges. This approach studies psychological implications of pricing Types of Psychological Pricing: Price-Quality Association: High Price High Quality
True in cases of brands that are offering similar product features, quality, design or style Consumers having little experience in judging the quality
Prestige Pricing: Customers will not buy goods that are Priced too low
Cost Oriented Pricing
Mark up Pricing: Most widely used technique
Merchandise Cost + Operating Expenses + Desired Profit = Selling Price Selling Price – Merchandise Cost = Mark Up
Normally Markups are calculated in percentages on retail pricing
Markup percentage = ?(Retail Selling Price – Merchandise Cost) / Retail Selling Price} X 100
The level of mark up depends upon, Supplier?s suggested Price, Inventory turnover, Competition, Rent and other Overheads, Extent to which the product must be serviced and
The selling efforts required.
Some important definitions
• Initial markup – amount product is initially marked up • Original selling price = cost + initial markup • Maintained markup – amount the retailer expects to make on the sale of a particular item • Maintained markup=Net sales – COGS • Maintained markup% = Maintained MU/Net Sales Ex: $62,000/120,000 = 51.67% • Maintained Selling Price = Initial Selling PriceReductions (you build reductions into original selling price)
Establishing Marketing Strategy
? Market Segmentation
? Brand Positioning
? Product and Service Mix ? Pricing Strategy ? Location ? Promotion
? Staff
Concept of Services Marketing
A service is any activity or benefit that one party can offer to Another that is essentially intangible It does not result into ownership of anything
Services are separately identifiable intangible activities which provide want satisfaction and not necessarily tied to the sale of a product or another service
doc_396212872.pptx
It covers concepts from retail management like Characteristics of Organised and Unorganised Retailing, Marketing Concepts Applied to Retailing, retail strategy, retail formats, contemporary models, Various Consumer Behaviour Dimensions in Retailing, pricing in retail etc.
RETAIL MANAGEMENT
INDUSTRY EVOLUTION
Traditionally retailing in India can be traced to The emergence of the neighborhood „Kirana? stores catering to the convenience of the consumers Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission. Textiles sector with companies like
Bombay Dyeing,
S Kumar's
Raymond's,
Grasim
First saw the emergence of retail chains
• Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches. • The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers.
?
Food World, Subhiksha and Nilgiris in food and FMCG;
?
Planet M and Music World in music;
?
Crossword and Fountainhead in books.
• Post 1995 onwards saw an emergence of shopping centers, mainly in urban areas,
?
Emergence of hyper and super markets trying to provide customer with 3 V’s - Value, Variety and Volume
Expanding target consumer segment: The Sachet revolution
?
INDIAN RETAIL SCENARIO
• $180-billion Indian retail market , just 2 % of entire retailing business carried out by organised sector. • May form 10% of total retailing by 2010 : Crisil. • During 2006 -2010, organized sector will grow at a rate of app. 50 % per annum :Indian Retail Sector Analysis 2006-07 conducted by • Largely fragmented , the retail business in India is one of the largest in the world. • Retail is one of the most attractive sectors for foreign direct investment in India: FDI Confidence Index Survey conducted by AT Kearney.
Retail Market in India
Unorganized
Experimentation with formats
Fragmented Store design
Emergence of discount stores
Unorganized retailing is getting organized
Consumption Boom:
Favorable Demographics,
Rise in income Level,
Double Income Families, Rising Aspirations, Shifting Consumption Patterns
• A successful Indian Retail Format is yet to be developed to strike a balance between customer expectation and economy-of-sale.
•
Retailers are shifting from manual planning system to technology enabled solution.
• Striving to identify factors that motivate customers to visit outlet. • Attempting to build supply- chain productive and customer-centric.
Growth Drivers • Institutional mechanism of Retailing is devised to harness facts :• Sourcing options, within India and Overseas vendors. • Increasing number of nuclear families, • Double income families, • Enlarging space for working women • People in small towns grown in satisfying their physiological, safety and social needs. • Enhancing commuting time; Have put pressure on consumers’ decision-making process. Consumers seek convenience, quality ,services and entertainment also.
Defining Retail • Business activities involved in selling goods and services to consumers for their personal, family and household use.
• Sale of goods / services to the final consumers.
• Last Stage in distribution network whereas intermediaries operate in B 2 B market. • Smaller Average Sale • Impulse Purchases; importance of displays • Popularity of stores • Unique Inventory Management
Functions of retailing
Characteristics of Organised and Unorganised Retailing
Organised Retailing • leveraging technology • adherence to corporate laws
Unorganised Retailing
• Un- managed inventories • low cost of operations • individually owned/managed • less focus on technology usage • minor overheads • low taxes • unskilled manpower
• effective inventory management
• sales forecast • high investment • skilled manpower
• conducive environment
Functions of Retailing
1. Appropriate mix of products and services 2. Converting larger quantities into individual units. 3. Holding inventory 4. Providing display and additional services
Marketing Concepts Applied to Retailing
Customer Orientation
Coordinated Effort
Marketing Concept
Value Driven
Retail
Retail Strategy
Goal Orientation
Retail Strategy
Total Retail Experience
Customer Service
Relationship Retailing
All elements in a retail offering that encourage customers for Repeat visits.
Identifiable but Intangible component of retail mix in conjunction with the basic products or services
Hard to lure new customers; retain old customers Easier to develop a customer data base
Classification Organised Retailing
1. Ownership Based • Franchisee • Independent Retailer • Co-operatives 2. Merchandise on Offer • Food Retailers • General Merchandisers • Combination 3. Store Based • Department Store • Hyper Market • Specialty Stores • Malls 4. Non Store Based • Vending Machines • Web Portals
Unorganised Retailing
Semi organised Retailing
Retail Formats
Store based: Brick and Mortar Stores, Physically Present in Market
Place. • Department Stores; Large retail unit, extensive assortment (width and depth) of products, organised into separate departments. • Supermarket; Departmentalised food based stores, wide range of food and related products, sales of general categories is limited.
Shopper’s Stop – K. Raheja Group Pantaloons – Future Group West Side – Tata Trent Group Globus – R. Raheja Group
Apna Bazar – Subhiksha – Nilgiri’s – Food World – Future Group
• Hyper Markets; Combination store, blending an economy supermarket with a discount department store. • Specialty Stores; Concentration on selling one product line, carry a narrow but deep assortment. • Convenience Stores; Relatively small, located near residential areas, carry a limited range of high-turnover convenience products and are usually open for extended periods.
Big Bazar – Future Group Giant – RPG Group Spencer’s
Mom and Pop stores Reliance Fresh Wills Lifestyle – ITC Group Provogue – Nike’ – Tanishq – Tata Group
Non Store based: use of non store based selling strategy mix,
• Direct • Direct
Marketing; non-personal mediums, order taking on phone, mail
Selling; customers are approached personally by sales executives
• Vending Machines; coins or cards operated dispensing machines
• Web Stores; virtual selling space on world wide web www.ebay.com www.amazon.com www.indiatimes/shopping.com
Contemporary Models
• Moser Baer cycle carts to hawk blockbusters now
• Kolkata City paras will now experience home-video wallas, selling the latest Hindi and Bengali blockbusters priced between Rs 28 and Rs 34 only. • Five carts in July, 2007 and around 100 will be added. • Operational in Kolkata and expanding to Chennai, Mumbai, Delhi and Hyderabad
Project Sukanya (kolkata)
The goods are not sold from huge showrooms, but from 54 roadside mobile kiosks, manned by 141 women who work in shifts.
Spices, gift items, school Tiffin and office lunches are offered,
Positioned “strategically” at eye level of a city on the move.
Wheel of Retailing Theory
Vulnerability Up-market Position High Price Downturn in Sales Niche Segments
GAP at higher end
GAP at higher end
Entry Low level services Shallow assortments Low status position Low rent locations
Trade-Up Higher level of services Quality Catering Masses Innovative Formats Extended Product Line Intense competition
GAP at lower end
Entrants New
As retailers graduates from entry level to vulnerability identifying GAP at each stage;
A larger GAP is created at the lower end of the market.
Accordion Theory
Retailers move from being a general retailer offering Wider and deeper assortments to specialise in a specific product category or customer segment; Reverting back to general diversified approach.
The changes in orientation are related to merchandise mix strategy adopted by retailers.
?Wider Merchandise Assortment
General Retailer I N F
?Current Market unsaturated / untapped. ?Competitors? market share is declining while industry demand is rising. Concentration Strategy
?Broader Market Coverage
?Specialty Merchandise Offer. ?Concentrated Market Coverage
Specialty Retailer
L U E N C
?Constraints of Store Size ?Increased Disposable Income of customers ?Demanding Customers ?Competitive Advantage ?Advantage of Brand Equity Diversification Strategy ?Expansion of complementary Product lines for ?Market / Product Line Skimming ?Growth of large shopping centers ?Need to increase sales volume
?Wider Merchandise Assortment
General Retailer
E R S
?Broader Market Coverage
Retail Lifecycle Theory
The duration of the retail life cycle is indefinite Each stage in the Retail Lifecycle reflects certain differentiating characteristics featured in market factors and Retail Mix Strategy
Innovation
Accelerated Development
Maturity
Decline
Merchandise Mix
Pre-planned variety &
narrow assortments
Broader Assortments
suiting to market demand
Stable merchandise assortments,
Retrenchment
of certain product categories
introduction of private labels.
Pricing may be lower because of the new competition
Pricing Strategy Discount
/
Penetration pricing to build market share rapidly. Skim pricing to recover development costs. Prototype Entrepreneurial
Pricing is maintained as the firm enjoys increasing demand with little competition. Innovative formats inclusion services
Low prices
Store Formats
Professional and of Emphasis on differentiation
Caretaker
Promotions Advertising
/
Aimed at innovators and early adopters.
Aimed at a broader audience.
Emphasis on Price Points extensive sales and discounts Low Steadily decrease wide-ranging
Sales Growth Store Traffic Competition
Low but increasing trend Increase rapidly No / Less
Rapid Steadily increase Moderate
Low observing downtrend Stable amount Intense
Conflict Theory competitors adapt to each other?s tactics resulting in new retail strategies. The central premise of the process is
when challenged by a competitive advantage, The retailers will try to
Negate the strengths of the competitors
Consumers Behaviour
Need Recognition Information Search Evaluation of Alternatives Purchase Decisions Post Purchase Behaviour
Adoption Process
Awareness Interest Evaluation Adoption
Consumer Behaviour to Institutional Retailing Purchase Decision Process
Store Choice
Need Recognition
Extraneous Forces and Information Gathering
Evaluation of Alternativ es
Purchase Decision
Brand Choice
Repeat purchases Re-evaluation
Post purchase
Parameters of customer’s choice of different retail formats
Value driven Customers
¨ Low frills ¨ Every day Low pricing ¨ Private Labels
Time starved Customers
Technology
¨ Convenience ¨ One Stop Shopping ¨ Expanded Categories
¨ E-retailing ¨ Point of Purchase technology ¨ Smart Carts ¨ Assortments ¨ Concepts ¨ Targeted Marketing ¨ Product Mix ¨ Information and control
Savvy customers
Lifestyle focused customers
Health driven customers
Factors Influencing the Customer?s Decision Making Process
Range of Merchandise Instrumental in retaining customers Convenience of Shopping Expected Facilities / Services Ambience
Retailers’ Performance and Post Purchase Behaviour
Customers’ Experience Post Purchase Behaviour
Low satisfaction
Switch to other Retailer
Fairly Satisfied Retailer’s Performance Satisfied Switch to other Retailer Offering better products and services
Delighted
Repurchase and loyalty towards the store
Indian Demography
• Changing Age Profile
Ageing Population 0-14 years (%) 15-59 years (%) 60 and above (%) 2001 (projected) 35.6 2006 (projected) 32.5 2011 (projected) 29.7 2016 (projected) 27.1
58.2
6.3
60.4
7
62.5
7.9
64.0
8.9
Source: Statistical Outline of India 2003-2004
• Favourable demographics are expected to devise the consumption pattern across the categories
Indian Income Classes Households Million (% of Population) Classification (Annual household Income) Very Rich (Above INR 215,000) Consuming Class (INR 45,000-2,15,000) Climbers (INR 22,00045,000) Aspirants (INR 16,00022,000) Destitute (INR less than INR 16,000)
Source: The Marketing Whitebook 2003-2004
1994-95 1 29 48 48
1999-00 3 55 66 32
2005-06 6 75 78 33
35
24
17
•
Middle-income group of consuming class segment is growing.
Consumer Spending in India
Consumer Spendings
Personal Care Grocery 11% 3% 9% Savings Clothing & Lifestyle Durables 40% 9% 10% Entertainment Eating out 5% Vacations
Source: The Marketing Whitebook 2003-2004
13%
• A review of urban consumer spending reflects that Grocery is the single largest expense followed by Entertainment and Eating out.
Various Consumer Behaviour Dimensions in Retailing Does the retail outlet have psychological implications on the target segment?
When Titan and Timex watches were retailed through exclusive shops, consumers wanting lower-end watches probably felt that a typical Titan showroom was too elitist, which could have had a negative impact.
Does selection of outlets vary in accordance with types of product categories? While buying a TV or a washing machine, would consumers visit an exclusive showroom of BPL, Onida or Sony,
or would they visit a multi-brand outlet?
What is the impact of the image developed by a retail outlet? Is FoodWorld different from a neighbourhood grocery shop in the minds of consumers? What kind of perception are consumers likely to have with regard to shopping from an online outlet such as Fabmart vis-à-vis a brick-and-mortar outlet like Fountainhead or Landmark? Would there be differences in the psychographic (and demographic) profiles of consumers choosing outlets?
Customer Loyalty Programs
Loyalty programs are a mechanism for identifying and rewarding loyal customers.
1. Staying with the company for longest.
2. Purchasing most frequently and
3. Spending on average in most visits.
IT based technology and equipments have enabled retailers to acquire customer retention through database marketing programs. Establishing a detailed client database may help retailers to keep track of personal information and individual preferences of their customers and to offer better service
Implementation of Customer Loyalty Programs Identifying Objectives
Offering Value
Offering Value Research & Analysis Harnessing Technology
Continuous communication
Organisational Commitment
Many of the prominent players issue loyalty cards.
A consumer can use it as a form of
• Identification when visiting the retailer to avail the benefits of a discount on purchases,
• Earn points, that could be redeemed in future. They are also providing benefits like • Exclusive hours for shopping, • Special events organized for members, • Dedicated counters for billing etc.
Loyalty membership cards are issued on fulfilling criteria such as, • Minimum purchase of an amount • On payment of a fee
Pantaloons
Shopper’s Stop Globus
Green Card 2500/- of Purchases
First Citizen 1500/150/Privilage Club Inner Circle 2000/-
•Exclusive shopping days •Billing Counters •Redeemable Points •Out-store offers •Redeemable Points •Reserved Parking
Lifestyle
2500/-
Westside
Club West
2000/150/-
Co-branded Cards Co-branding can be defined as two major brands converging to enhance the usefulness and image of the product or services
On account of low proportion of customers redeeming the points, loyalty program become negligible
The retailers are adopting to co-branded loyalty cards to move from being single brand centric to more widespread so that members get concrete benefits
Banks
Retail Strategy and Planning
Establish Mission Analyse Environment
Identify Competitive Advantage / Strategic Alternatives
Obtain and Allocate Resources
Develop Implementation Plan
Monitor Progress and Control
Certain Retail Mission Statements McDonald’s: (QSCV) Quality, Service, Convenience and Value Shopper’s Stop: To be a global retailer in India, and to maintain the no. 1 position in the Indian market in the department store Category.
Pantaloons: We share the vision and belief that by improving our Performance through innovative spirit and dedication, we shall Serve our customers and stakeholders satisfactorily.
Technology Environment Analysis Government Culture Customer Analysis Market Segmentation
Customer Motivation
Strategy
Competitor Analysis
Target Markets
Vendor Relationships Location
Competitive Advantage
Competitive Advantage Selection
Competitive advantage Merchandise Assortment Affordability Retailer Competitor Importance of Improving High
7
9
9
7
Medium
Quality
8
8
Medium
Services
9
7
Low
Facilities
6
6
High
Mix of entertainment & comfort
5
7
High
Alternative Strategies
Market Penetration: Focus could be on Increasing the number of customers Increasing the quantity purchased by customers (Basket Size)
Increasing the frequency of purchase
Market Expansion / Development: Focus on
Tapping new geographical market
Adding products to the existing range
Differentiate by New Retail Format Development : Focus on
Catering to newer customer segments
Catering to existing customers
Diversification: in related or unrelated fields Allocation of Resources Financial Resources: Rentals, Salaries, Payments for Merchandise Human Resource: Recruitment, Selection, Training, Compensation, Motivation
Implementation
Reflect the desired positioning through
Store Layout, Design, Display
Merchandise plans, selection
Store Personnel and customer services
Monitor Progress and Control Key Performance Indicators Quality / Range Footfalls Loyalty Base Basket Size
Bill Size
Location
Three most important things in retailing:
Location, Location, Location
Critical Factor in customer’s selection process
Good location gives a retailer sustainable advantage over His competitors
A poor choice of location for a store would mean Disastrous results.
Factors to be considered 1. Type of Region
Overall Size of the market place
Understanding the geographic area
Population Growth
Income Distribution Competition Level
Type of Site
Proximity to target market Match between type of site and store format Age and Condition of the site What is the Trade Area
Geographic area that generates the majority of the customers For the store
Accessibility
Road Patterns and conditions in surrounding areas
Any natural or artificial barriers
Visibility of the site
Parking Place
Traffic flow
Types of Retail Location Formats
Freestanding / Stand Alone Store Store located along a major traffic artery There is no or little competition Rents are usually low Advertising costs are high
Part of Business District
A place of commerce in the city, developed historically as A centre of trade and commerce in the city It does not have a pre-set format or structure
Characterised by peak rentals, intense developments cumbersome parking
Good accessibility in terms of transportation from all parts of the city Secondary Business District
Part of Shopping Centre
A group of retail and other commercial establishment that is planned, developed, owned and managed as a single property Retailer has no involvement in maintenance of Common area like; restrooms, waiting area, parking, Escalators etc. Retailer does not have a major say in retailer mix in the mall Anchor stores play key role in the success of a shopping center
Developing overall Strategy
It involves two components: Controllable Variables and uncontrollable Variables Controllable Variables: are those aspects of the firm that directly affect the organisation. Uncontrollable Variables: are those to which a retailer must adapt. A good strategy integrates these areas so that a unified plan or strategy is developed.
Controllable Variables Store Location Managing the Business Merchandise Management Pricing Policies
Communicating with customers
Managing a Business Two Major Elements are involved: Human Resource Management Recruiting, Training, Compensation, Supervision, Authority and responsibility and chain command. Operations Management Efficiently and effectively performing the tasks to satisfy customers, employees and management goals Store Formats, design and size, personnel use, Store security and maintenance,
Merchandise Management
Decisions regarding product mix to be offered Width and depth of the merchandise is considered based On : The number of product lines a retailer wants to offer Service levels provided Store formats
Criteria for purchase decisions are formulated in terms of :
Frequency of Purchase of Replenishment Cycles Vendor Selection Terms and conditions with the vendors Forecasting and Budgeting
Pricing Policies Choosing amongst the several pricing techniques like: Leading or Following Cost plus or Demand Oriented Decisions regarding: what range of price set to offer Should be Consistent with the retailer’s image and the quality of products Number of prices within each price range is determined
Communication A distinctive and desirable image must be sought
Image is reflected in:
Store Atmosphere
Store front
Layouts and displays
Colours, Lighting, Music
Sales Persons and customer services
Uncontrollable Variable Consumers
Competition
Technology Economic Seasonality Legal Restrictions
Consumers Demographic trends lifestyle patterns can not be altered
Tastes and Preferences can not be forced upon
Selecting a target market is within the control of a retailer but: Retailer can not sell goods or services that are beyond the Range of its customers or…….
Not wanted , displayed or advertised properly
Competition A retailer can not control the entry of competitors In fact, a retailer’s success may instigate new players to enter Or existing players to modify there strategies or formats Intense competition calls for re-examining overall strategy
Technology
Technological infusion is advancing rapidly
Checkout operations
Electronic Surveillance Displays
Inventory Management
Warehousing
Economic Conditions
Unemployment
Interest Rates
Inflation
Tax levels
GDP
Seasonality Different seasons call for different merchandise on offer.
Retailers offering diversified merchandise need to be more vigilant
Legal Restrictions Some Controllable variables are affected by legal restrictions
Store Location: Lease and mortgage, local ordinances
Managing Business: Labour laws, Business Taxes, Franchising or Licensing Provisions Merchandise Management and Pricing: Product Safety Laws Warranties, guarantees, Merchandise Restrictions; Price marking laws Communication :
Strategic Planning in Global Retailing
Assess your International Potential:
Trends in the industry in Host Country
Domestic Position Effects that international activity may have on the current operations
Status of resources
Know about Existing Channels of Distribution Know the competition Level of transportation facilities
Level of Technology
Gvt. Restrictions Retailing Preferences Level of Technology Lifestyle Patterns
Availability and caliber of personnel
Expected pilferages rate
Operations Management
• Effectively and efficiently implementing the retail policies. • To ensure success operational areas need to be maintained as well as possible. • Aspects of operating a retail business are: – Operations Blue Print – Store Format, Size and Space Allocation
– Personnel Allocation
- Store Maintenance
- Energy Management
- Renovations -Inventory Management - Store Security - Computerization - Outsourcing - Crisis Management
Operations Blue print
Systematic List of all the operating functions to be performed their characteristics and timing. Start of the Day Who opens the store?
When the store opens?
What are the steps involved? End of the Day Who Closes the Store? Cash, Alarms, Lights ………..
Performance of these tasks must not be left at chance There could be multiple operations blueprints used separately for separate operational areas. Whenever there is a modification the operations blue print must be adjusted accordingly.
Store Formats and Size Should be considered in context of productivity and profitability
Space Allocation
Determine the amount of space and its placement for each Product category. Consider space allocation keeping in mind store space and product sale and profits. Top-Down Space Management Approach Bottom-Up Space Management Approach
Top-Down Approach: 1. A retailer starts with its total available Store Space. 2. Divides the space into categories 3. Works on in-store product layout. Bottom-up Approach: 1. Planning starts at the individual product level 2. Proceeds to product categories 3. Total store space
Some Tactics that are used by retailers: Vertical Displays
Hanging Displays on Store Walls
Free Space allocated to small point of sale displays
Vending Machines
Scramble Merchandise (high profit and high turnover) is Allocated more space. Stay open longer to use space longer
Personnel Allocation
From Retail operations perspective efficient utilisation of Personnel is vital:
Manpower Costs are high; they account for a high ratio in operating costs
High Employee turnover leads to increased recruitment, training and supervision costs. Poor Personnel may have bad selling skills, mistreat customers Manpower deployment is subject to unanticipated demand Retailers must avoid being over staffed or under staffed
What a Retailer should do
Hiring process Workload forecast (Staffing) Job Standardisation: task of similar positions in different departments are kept uniform. Cross Training: train personnel for more than one job. Retailer can increase personnel flexibility and reduce total number of employees at any given period of time. Using Self-service:
Manpower Costs as a percentage of sales can be reduced significantly is self service is used. Points that should be taken into account: It requires better in-store display Ample assortments should be there on the selling floor Place goods and services with clear features Right mix of self-service and use of personnel Negatives: Shoppers may feel that they are getting inadequate services
Cross Selling is not possible
Store Maintenance
Encompasses all the activities in managing physical facilities
Exteriors: Parking lot, points of entry and exit, outside signs Display windows and common area adjacent to the store
Interiors: Windows, walls, flooring, climate control and energy use, lighting, displays and signs, fixtures and ceilings Quality of store maintenance affects:
Customers’ Perception of the store
Life span of facilities Operating Costs
Inventory Management
To maintain a proper merchandise assortment while ensuring Smooth operations. How merchandise is received from different suppliers Ratio of merchandise in store, ware house and back store Replenishments from warehouse to the store How breakage is acceptable Support from suppliers in storing merchandise or setting up displays
Store Security
Two basic issues: Personal Security: Security Guards, Limited access to store Facilities, frequent Bank Deposits, safety vaults.
Merchandise Security: Product tags, CCTV, employee Surveillance, burglar alarms.
Detailed background check of every employee. Employee Training programs on ethical behaviour. Mystery shoppers.
Insurance
Losses due to fire, major thefts, on premise accidents
Vital Decision regarding Insurance:
Premiums have risen Insurers have reduced the scope of their coverage
Credit and Payment
Payment modes, Honoring Credit Cards, Store Credit Plans Eligibility requirements for customers.
Computerization / Technology Infusion
Improve logistics and reduce delivery lead-time resulting in reduction in inventory holdings; Obtain information about customer preferences, sales history and movement of merchandise to formulate customer centric strategies; Increase accuracy of sales transactions; Improve trading partner relationships; Incorporate faster responses to changing market conditions, and Build loyalty schemes and database.
Possible Areas: Inventory Management / Warehouses Point of sales
Communication within organisation
Checkouts Things to Consider: Hardware and Software solutions
Costs
Training of Employees
Crisis Management
Fire, Broken Water Pipe, Natural Calamities (floods), Accidents, illness, Power cuts, Excess footfall There should be Contingency Plans for as many different types of crisis situations as possible
Developing Merchandise Plan
It is the key phase in retail strategy
A retailer must have:
Proper assortment of goods and services when They are in demand Sell them in a consistent manner with the overall Strategy.
Merchandising: All activities involved in acquiring goods / services and making them available at the place, time and price and in the quantity That enables a retailer to achieve his goals. Merchandising Plan / Philosophy Must reflect: Expectations of Target group Retail Format Market place positioning Value chain Suppliers’ capabilities Costs competitors Product Trends
Merchandising Plan drives every product decision like:
Product line to carry Shelf Space to be allotted Products to inventory turnover Pricing decisions Breadth and assortment across the store (narrow / wide) Depth within each category ( deep / shallow) Quality National Brands / Store Brands and its ratio
Micro Merchandising
Retailer adjusts its shelf-space allocations to respond to customers And other differences among local markets. Cross Merchandising A retailer carries complementary goods and services so that The shoppers are encouraged to buy more.
Devising Merchandise Plan
Gathering Information: Various Information Sources: Consumers Sales Associates Suppliers Trade Shows Competitors
Interacting with Vendors
Short listing the vendors 1. Manufacturer, physically produces goods, may provide credit and transportation.
2. Wholesaler buys merchandise from the manufacturers and provides services also to the retailers like shipping, storing excess inventory and credit. 3. General merchandiser carries a wide assortment of products.
4. Specialty merchandiser carries a deep assortment of the same product category.
5. Rack Jobbers display their own products in the outlets and payments are made on sales.
6. Cash & Carry stores sell merchandise on wholesale price to small retailers.
Forecasts
Projections of expected retail sales for given period Retail purchases are made on forecasts thus are the foundation of merchandise plans. * Overall company projections * Product Category projections * Item-by-item projections * Store-by store projections
Evaluating Merchandise Innovativeness: Factors to be kept in mind, Target Market, Growth Potential, Fashion Trends, Retailer?s Image, Competition, Responsiveness, Investment Costs, Profitability, Risk.
Brands: A retailer must choose a proper mix of manufacturer?s and private brands to carry. It is even more complex in today?s scenario as there is Proliferation of brands in each group.
Manufacturer?s Brands Produced and controlled by manufacturers, well known and Supported by manufacturers in promotions.
Require no or limited retailer investment in marketing.
Such brands dominate sales in many product categories Accounting for almost 85 % of total retail sale. Private Brands Developed and controlled by retailers themselves
More profitable for retailers
No competition or lesser competition in the category Lead to customer loyalty
Factors to be considered while launching a private labels Line up suppliers Arrange for distribution and warehousing Marketing: Advertising, Displays, Promotions Absorb losses from unsold items Pricing
Timing of Merchandise Re-order cycles, Replenishments Lead Times Allocations Budgets and Space
Category Management
„Category? is a group of products or brands that are closely related to each other. There is a combination of several such categories in an organised retail outlet. A set of categories are treated as independent SBUs with focused attention to deliver enhanced consumer value Focus is on a product category rather than the performance of an individual brand
Category Management in Retail
General Manager (Merchandise)
Category Manager (Jewellery)
Category Manager (Ladies apparels)
Category Manager (Ladies footwear)
Buyer 1 (Gold jewellery)
Buyer 2 (Silver jewellery)
Buyer 3 (Costume jewellery)
It is convenient to take decisions relating to Inventory,
Promotion,
Display,
Stocking space,
Reorder,
Performance evaluation and
Profit & loss accountability
To analyze the performance of a category, Boston Consulting Groups Growth Matrix (B C G model) could be followed
Low High
Product Profitability
High
Question Marks
Stars Winners
Sleepers
Low
Dogs Under Achievers
Cash Cows Traffic Builder
Unit Sales
Stars: These are fast moving products, with high profitability and high unit sales. Large amount of investment could be done on these products in terms of inventory holding and promotions. They should be displayed effectively. Question Marks: Such products are high on profitability but have low unit sales. Their future may be uncertain, as not many customers buy these products.
Retailer can track the sales history, inform customers about such products, new arrivals and incentives being offered and could be displayed more effectively.
Reversed inventory planning could also be done on the basis of sales history. Cash Cows: This category is low on profits but is highest in sales volume.
There is less investment required for such categories and profit margins are high.
It is necessary for a retailer to maintain variety and inventory of such categories. Such products are bought by the customer on an impulse and are displayed near cash counters or at the places more frequented by customers.
Dogs: A weak category with low profitability and their sales are also low. They could become a cash trap for a retailer. He should consider marking down the prices for such categories to liquidate the funds and later decide not to keep them.
Benefits of Category Management
Increased Sales Improved Decision-making Efficient Inventory Management
Lower Investment Required
Better Space Management Improved Service Level Better Coordination with Vendors
Logistics
It is total process of planning, implementing and coordinating the Physical movement of goods from manufacturer to retailer to Customer, in most timely, effective and cost-efficient manner Logistics involves: Order Processing Transportation Warehousing Inventory Management
Major Logistics Goals to be achieved are
• Economically managing logistics activities • Place and receive orders smoothly and accurately • Minimise time between ordering and receiving merchandise
• Coordinate shipments from various suppliers
• Keeping enough buffer stock, without having inventory pile up • Replenishments at sales floor • Handling returns effectively and minimise damages
Transportation
Important component of logistics and costs Transportation network is fixing up mode, schedule and route of transportation A well-designed transportation network helps in achieving desired degree of responsiveness of supply chain at a low cost.
Type of Merchandise plays an important role in selecting the Transportation mode and network
Different Types of Transportation Network Designs
Direct Shipping Network: Structured to have all shipments coming
directly from suppliers to retail store
The network eliminates intermediary warehouse and other related cost Speedy delivery ensures high product availability.
Direct Shipping with Milk Runs: This is route in which a truck either
delivers products from multiple suppliers to a single retailer or from single supplier to multiple retailers.
Transportation costs are lowered by consolidating shipment to multiple stores on a single truck, resulting in better utilsation of the truck
Reverse Logistics Growing emphasis on new products, variety and freshness of products has made it necessary for retailers to CLEAR their distribution network in term of revenue and storage space. The process of planning. Cost-effective flow of excess or unsold inventories and related information from the point of consumption to the point of origin It involves > Collection of merchandise from the store at warehouse;
> Sorting of the merchandise according to the quality state ?Taking decision regarding price reductions or return to vendor;
Inventory Plan
Inventory Plan is affected by the nature of the product; these Products can be divided into different categories Seasonal: Products which are in demand over a particular season;
Demand is fluctuating, May be left with unsold inventory;
Frequent replenishments required, Shorter lead times should be negotiated, smaller buffer stocks are desirable Staples: continue to remain over a long period, though their variety or
brands may only have a short-term demand
Larger buffer stocks are desirable
Derived: Demand for certain products arise because of the demand of few basic goods. The demand for a derived product can be forecasted in consideration with the demand for basic product. Irregular: These are mainly fad related products which are not seasonal but are in demand for a very short period of time; their repeated demand is not confirmed A retailer needs to maintain a balance of stock to replenish of merchandise at any given period of time. It is the minimum amount of inventory a retailer would wish to maintain even during lean period.
The basic stock could be calculated as; Basic Stock = Average Monthly Stock- Average Monthly Sale Beginning of the Month = Planned Monthly Sales + Basic Stock. Percentage Variation Method: This method could be used for the merchandise, which has high stock turnover or relatively stable sale The inventory level for staple merchandise like shirts or trousers could be determined by this method. This method is based on the assertion that at the beginning of the month, inventory stock could increase or decrease by 50% due to sale variation.
Week?s Supply Method: Food and Grocery retailers may use this method of inventory plan The sale forecast is done on a weekly basis under the assumption that the inventories are in direct proportion to sales. Stock-sale ratio method: The inventory levels are maintained at a specific Sale to stock ratio predetermined by the retailer Replenishment Cycles would differ with the type of merchandise and their turnover
Low Turnover
High Turnover
--------------
Common Buying Errors
• Buying merchandise that is either priced too high or
too low for the store?s target market.
• Buying the wrong type of merchandise (i.e., too
many tops and no skirts) or buying merchandise that is too trendy.
• Having too much or too little basic stock on hand.
• Buying from too many vendors.
• Failing to identify the season?s popular items early
enough in the season.
•Failing to let the vendor assist the buyer by adding new
items and/or new colors to the mix. (Quite often, the original order is merely repeated, resulting in a limited selection.)
Inventory Planning
• Optimal Merchandise Mix • Constraining Factors • Managing the Inventory
• Conflicts in Unit Stock Planning
Optimal Merchandise Mix
• Merchandise Line group of products that are closely related. • They are intended for the same end use (all televisions); are sold to the same customer group • Category Management management of merchandise categories, or lines, rather than individual products, as strategic business unit.
• Variety number of different merchandise lines
that the retail stocks in the store.
• Breadth (or assortment) number of
merchandise brands that are found in a merchandise line.
• Battle of the Brands occurs when retailers
have their own products competing with the manufacturer?s products for shelf space and control over display location.
• Depth average number of stock-keeping units
within each brand of the merchandise line.
Constraining Factors
Dollar Merchandise Constraints
Space Constraints Merchandise Turnover Constrains
Market Constraints
• Dollar Merchandise Constraints
• Consignment is when the vendor retains the ownership of the goods, is paid only when the goods are sold by the retailer. • Extra Dating is when the vendor allows the retailer extra time before payment is due for goods.
Managing the Inventory
• Model Stock Plan is a unit stock plan that
shows the precise items and quantities that should be on hand for each merchandise line.
• Identify attributes of each merchandise • Identify inventory levels
• Allocate Dollars or Units
Successful retailers, may realize that customers have stopped Purchasing a certain size, style or design As a result they may disregard past sales records and offer large selections of popular size, style or design
Predicting future sales for fashion or fad products is difficult.
Inventory Management for a Retailer Selling a Basic Stock Item
Inventory Management for a Retailer Selling a Seasonal Item
Conflicts in Stock Planning
• Maintain a strong in-stock position on genuinely new
items while trying to avoid the 90 percent of new products that fail in the introductory stage.
• Maintain an adequate stock of the basic popular items
while having sufficient inventory budget to capitalize on unforeseen opportunities. high margin goals.
• Maintain high merchandise turnover while maintaining • Maintain adequate selection for customers while not
confusing them.
• Maintain space productivity and utilization while not
congesting the store.
Vendor Negotiations
• Trade Discount: functional discount it is a form of
compensation that the buyer may receive for performing certain wholesaling or retailing services for the manufacturer.
• Quantity Discount: price reduction offered as an
inducement to purchase large quantities of merchandise.
• Promotional Discount: discount provided for the retailer
performing an advertising or promotional service for the manufacturer.
• Seasonal Discount: discount provided to retailers if they
purchase and take delivery of merchandise in the off season.
Cash Discount: discount offered to the retailer for the prompt
payment of bills.
In-Store Merchandise Handling
• Shrinkage is the loss of merchandise due to theft, loss,
damage, or bookkeeping errors.
• Vendor collusion occurs when an employee of one of
the retailer?s vendors steals merchandise as it is delivered to the retailer.
• Employee theft occurs when employees of the retailer
steal merchandise where they work.
• Customer theft is also know as shoplifting and occurs
when customers or individuals disguised as customers steal merchandise from the retailer?s store.
PRICING
What is Price?
• Basis for exchange. What the retailer is willing to sell product/service for; what the consumer is willing to pay to obtain product/service • The customer should be willing to pay the price, that is product’s “worth.”
Pricing Challenges for Retailers
1. All the sales in past decade have conditioned consumers to never pay full price
2. Economic recession –makes price more important – raises the “value” issue 3. Stores with “everyday low prices” are increasingly important
Price Elasticity of Demand
Small Percentage change in Price leads to substantial change in Demand, price is elastic This occurs when the urgency to purchase is low or Substitutes are available Large percentage change in Price leads to small percentage Change in demand, price is inelastic
This occurs when the urgency to purchase is high or no substitutes are available
Computing Price Elasticity of Demand is difficult for retailers as the number of products is large Retailers rely on average markup pricing, competition, Tradition and industry wide data.
Price sensitivity varies by market segment based on shopping orientation Economic Consumers: shop around for lowest possible prices Largest Segment in India. Status Oriented Consumers: Interested in prestigious brands And strong customer services.
Assortment-Oriented Customers: seek retailers with strong selection in the product categories. Personalizing Consumers: shop where they are recognized and are loyal towards them. Market Pricing large choice of retailers, they fix price similar to each other. Less control over price because consumers may switch to competitors Administered Pricing Retailers have distinctive retail mix, advantage to charge Premium price
Pricing Strategies are quickly copied, reaction of competitors are predictable Price Strategy should be viewed from both short run and long term perspective. May lead to Price War and may lead to low profits or losses
Pricing Strategy
1. Cost oriented: retailer sets a price base, Minimum Price acceptable to the firm so it can reach a specified profit goal. Merchandise Cost + Operating Cost + Profit Margins
2. Demand oriented: what customer will pay? Determine the range of prices acceptable to the target market. Top of this range is called demand ceiling
3. Competition Oriented: setting prices in accordance to competitors.
Demand Oriented Pricing
Retailers estimate the quantities that customers would buy at various price ranges. This approach studies psychological implications of pricing Types of Psychological Pricing: Price-Quality Association: High Price High Quality
True in cases of brands that are offering similar product features, quality, design or style Consumers having little experience in judging the quality
Prestige Pricing: Customers will not buy goods that are Priced too low
Cost Oriented Pricing
Mark up Pricing: Most widely used technique
Merchandise Cost + Operating Expenses + Desired Profit = Selling Price Selling Price – Merchandise Cost = Mark Up
Normally Markups are calculated in percentages on retail pricing
Markup percentage = ?(Retail Selling Price – Merchandise Cost) / Retail Selling Price} X 100
The level of mark up depends upon, Supplier?s suggested Price, Inventory turnover, Competition, Rent and other Overheads, Extent to which the product must be serviced and
The selling efforts required.
Some important definitions
• Initial markup – amount product is initially marked up • Original selling price = cost + initial markup • Maintained markup – amount the retailer expects to make on the sale of a particular item • Maintained markup=Net sales – COGS • Maintained markup% = Maintained MU/Net Sales Ex: $62,000/120,000 = 51.67% • Maintained Selling Price = Initial Selling PriceReductions (you build reductions into original selling price)
Establishing Marketing Strategy
? Market Segmentation
? Brand Positioning
? Product and Service Mix ? Pricing Strategy ? Location ? Promotion
? Staff
Concept of Services Marketing
A service is any activity or benefit that one party can offer to Another that is essentially intangible It does not result into ownership of anything
Services are separately identifiable intangible activities which provide want satisfaction and not necessarily tied to the sale of a product or another service
doc_396212872.pptx