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- “Retailing”- the word derived from French word “ retaillier ” meaning to “ cut a piece off or to
break bulk
- Retailing is not only the sale of product in stores but also involves the sale of services;
videotape rental, haircut, home delivered pizza
- Retailer perform specific acitivities – anticipating customer wants, developing assortments of
products, acquiring market information and financing.Retailing encompasses selling through
mail, the internet, door to door visits, any channel that could be used for approaching consumer.
- To enter retailing is easy and fail is even more easy. Retail profit is usually a small fraction of
sales and generally about 9-10%.
- The subject of retailing has gained momentum as the impact of retailing on the economy is
high.Retailing is a major part of US and world commerce.
Retail Management: is the process of understanding the environment especially customer and
competition, developing and implementing effective strategies.Retail management mainly
involoves merchandise management and store management.
Characteristics of Retailing:
Ø Average amount of sales transaction is much less than manufacturer, so there is need for
tightly controlling the costs, maximizing the no. of customers, emphasizing more on special
promotion etc.
Ø Survey shows that large number of buyers make impulse purchasing, this behaviour indicates
the value of instore displays- the ability to forecast is difficult.
Ø All retailiers offer assortment of products, but they also specialize in the assortment they offer
Ø The bulk items shipped by manufacturer is offered in smaller quantities tailored to individual
customers.
Ø Holding inventory – products are available at the disposal of consumers so they can keep small
inventory at home
Ø There is direct end user interaction and retailing increases the value of products and services.
Ø Location is critical factor in retailing.
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Unorganised retailing is by far the prevalent form of trade in India constituting 98% of trade
while organised trade accounts for 2%. It was estimated that the corporate owned retail business
was poised to grow to 35500 by 2005 from 15000 in 1999. Organised Trade employs 51lac
people wheras unorganized retail trade employs 3.95 crores.
Trends in Retailing:
The Retail Industry is changind rapidly due to various reasons
1. Spatial convenience: Number of working women have fueled an intense demand for
convenience. The quest for convenience on the part of consumers is shown by
v frantic growth of convenience store fueled by the entry of Petroleum marketers AM/PM store
v Exploding Popularity of online shopping operators
v Diversification of vending machine into food /clothing and videotapes
2. Increased power of retailer : At one time, colgate dominated retailers. Now the retailers tend to
dominate them.The reasons for this reversal are many. Retailers have many new products from
which to choose when deciding what to stock on their sheleves. Further the IT has diffused
throughout retailing to such an extent that virtually all major retailer can capture item-by-item
data via scanning devices at that electronic point of sale terminal. This knowledge of information
has permitted retailers to calculate the (DPP) Direct Portfolio of Individual Items, track what
moves and what does not move well in their stores. So the Manufacturers struggled to get space
in the shelves of retailers. They offer Pricing concession, slotting allowance etc., to promote
products.
3. Growing Diversity of Retail formats:
Consumers can now purchase same merchandise from wide variety of retailers. they are Dept.
store, specality store, convenience store, category killer, Mass merchandiser, Hypermarket.
v Mom and Pop Stores and Traditional Kirana stores: small independent stores across product
categories is very common retail format in India. Partiucularly in small townships
v E- commerce: The amount of retail business conducted on the Internet is growing everyyear.
Companies like Amazon. com and First and second.com which helped pioneer th retail e-
commerce. Fabmart.com
v Department store with varied merchandising operations.
v Franchise : Territory rights are also sold to franchisees. Various distribution and other services
are provided by contract to franchisees for fee. Ex. McDonalds, Blockbuster Video
v Warehouse club- wholesale club: Appeal is to price conscious shopper. size is 60000 sq. ft. or
more. Product selection is limited and products are usually sole in bulk size.
v Mail order catalog: Non-store selling through the use of literature sent to potential customer.
Usually has a central distribution centre for receving and shipping direct to the customer.
v Specality Discounter –Category killer:
Offers merchandise in one line ( eg. sporting goods, office supplies; children merchandise ) with
great depth of product selection at discounted prices. Stores usually range in size from 50,000 to
75000 square feet.
( refer article Xerox material for other Popular formats)
Emergence of region specific formats: In deptl store format, while most A class ciites and metros
have larger stores of 50000 sq ft sizes, stores in B Class towns have stabilized in the 25000-
35,000 sq. feet range. Most players have started operating these 2 formats across various cities,
which has helped them to standadise the merchandise offering across the chain.
Entry of International Players: A large no. of international players have evinced interest in India
despite the absence of favourable government policies.
Mall Devlopment: Modern malls made their entry into India in the late 1990s with the
establishment of cross roads in Mumbai and Ansal Plaza in Delhi. According to a market
estimates,close to 10mn sq. feet of mall space is being developed across several cities in the
country.
Chennai has experienced the organized retail boom. This is despite its perception of being a
traditional, conservative and cost conscious market. Food world, Music world, Health and Glow,
subhiksha a nd the like are a fe of the successful names in the retail business that started their
chin of stores from chennnai. Factors such as reasonable retail prices, strong presence of MNC,
healthy industrial growth, increase in the number of double-income households, growth of
middle class have all led to the growth ans sustenance of this Industry in Chennai
Retail Industry is also facing problems on account of labour laws, which do not facilitate part-
time employment in the organized sector.
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Retail Location:
Location is the most important ingredient for any business that relies on customers. It is also one
of the most difficult to plan for completely. Location decisions can be complex, costs can be
quite high, there is often little flexibility once a location has been chosen and the attribute of
location have a strong impance on retailers overall strategy.
1. Selection of a city:
Factors to be considered for selection of a city:
- Size of the city’s trading area: A city’s trading are is the geographic region from which
customers come to the city for shopping. A city’s trading area would comprise it suburbs as well
as neighbouring cities and towns. Cities like Mumbai and Delhi have a large trading are as they
draw customers from far off cities and towns.
- Population or population growth in the trding are: A high growth in population in the trading
area can also increase the retail potential.
- Total purchasing power and its distribution: Cities with a large population of affluent and upper
middle class customers can be a attractive location for stores selling high priced purchasing
power and its distribution among a large base of middle class is contribution to a retailing boom
around major cities in India.
- Total retail trade potential for different lines of trade: A city may become specalise in certain
lines of trade. Moradabad has become important location for brassware products, mysore-silks.
- The retailer also consider, number, size, quality of competition before selecting a city.
- Development cost
Margin Free Market, the kerala based retail chain(grocery and toilertry product targeted middle
and lower class) located 250 stores in small towns in kerala.
II. Selection of an Area or Type of Location within a city.
Evaluation of the following factors required:
- Customer attraction power of a shopping district or a particular store(commercial street-
Bangalore, Chandni Chowk in Delhi)
- Product lines carried by other stores, number of stores in the area.
- Avaiablity of access routes- There should not be traffic jam and congestion
- Nature of zoning regulations: Retailers should examing the plans of zoning commissions and
municipal corporations regarding the development of shopping centres, residential areas,
flyovers.
- Direction of the spread of the city. For ex. Mumbai’s suburabs and Navi Mumbai are growing
at a fast rate
PLANNED SHOPPING
A planned shopping centre consists of a group of architecturally owned or managed stores,
designed and operated as a unit, based on balanced tenancy and surrounded by parking facilities.
Regional shopping centre malls:
Regional shopping centres or malls are the largest planned shopping centered; often they are
anchored by two or more major department stores, have enclosed malls, serve a large trading
area and have high rents.( cross roads in Mumbai, Ansal Plaza in Delhi, Spencer Plaza in
Chennai, Metropolitan Mall in Gurgaon.
Neighbourhood/community Shopping centre:
-usally have a balanced mix of stores including a few grocery stores a chemist, a variety store,
and a few other stores.
Specialized Markets: In India most of the cities have specialized market famous for a particular
product category. For ex: Chennai-Godown street is famous for clothes, Usman street for
jewellery, T. Nagar for ready made garments.
Periodic Markets: Another peculiar type of market found in India is the periodic market, which is
established at particular places on a particular day in a week. Most of these markets operate in
evening hours. These market are mostly associated with the name of the day it is held on.
Trading Area:
A trade area is a contiguous geographic area from whicha retailer draws customers that account
fro the majority of a stores sales. A trade are a may a part of a city, or it can extend beyond the
city’s boundaries. A trade area can be divided into 2 or 3 zones.
Trade Area Analysis: It is necessary to estimate market potential, understand consumer profile,
competition etc. GIS ( Geographical Information System – combine digitized mapping with key
locational data )used for this purpose. A saturated trade area offers customers a wide variety of
merchandise, which also ensures impressive profits for retailers in the market.
Site Selection Analysis: A retailer has to consider the following factors while selecting a site.
1. kind of products sold:
*conveinece goods – quality of traffic most important – large window display area is usually a
better site.
* Shopping Goods – quality of traffic most important-The emergence of several apparel factory
outlet within a short stretch on the on the Delhi jaipur highway is driven by this factor
* Specality Goods- may desire to locate close to the shopping goods store.
2. Cost Factor in Location Decision: Traditionally retail community own the place. Space cost
(comibination of rent, utilities, leasehold improvements, general decoration, security, insurance,
and all the related cost of having a place to conduct business operation) is important factor.
3. Competitor location: Intense competition in the area shows that new businesses will have to
divide the market with existing business.
4. Ease of traffic flow and accessibility ( studying flow of traffice,noting one way street, street
widths, parking lots)
5. parking and Major Thoroughfares : the way parking lot is laid out, the direction of the travel
lanes and spaces,landscaping. The ideal ratio for food stroes is in the magnitude of 7-8 cars per
1000 sqare feet of food store.
6. Market Trends: Discussions with the business owners and officials are a good source of
information. Make use of information available through the chamber of commerece.
7. Visibility: It is important when a shopper is trying to find the store for the first or second time.
The questions relevant to this factor is : who will be the store’s neighbour, what will be their
effect on store sales, how much space is needed.
LAYOUT
o Layout – the logical arrangement of the physical facilities of a business that contributes to
efficient operations, increased productivity, and higher sales.
l Study: Look and feel of employees’ work spaces is third most important consideration (after
salary and benefits) when deciding whether or not to accept or to quit a job.
l Tells potential customers who you are and what you’re selling.
l Must comply with local sign ordinances.
l Should be visible, simple, and clear.
l Should be changed periodically to avoid becoming part of the background.
l Should be legible both day and night.
l Must be maintained properly.
BUILDING INTERIORS
l Grid
l Rectangular with parallel aisles; formal; controls traffic flow; uses selling space efficiently.
l Supermarkets and self-service discount stores.
l Free-Form
l Free-flowing; informal; creates “friendly” environment; flexible.
l Small specialty shops.
l Boutique
l Divides store into a series of individual shopping areas, each with its own theme; unique
shopping environment.
l Small department stores.
LAYOUT GUIDELINES
l Know your customers’ buying habits and plan your layout accordingly.
l Display merchandise as attractively as your budget will allow.
l Display complementary items together.
l Recognize the value of floor space; never waste valuable selling space with non-selling
functions.
Module- 6-RETAIL MARKET SEGMENTATION:
DIMENSIONS OF SEGMENATION:
In segmenting the total market, the retailer must first decide which combination of segmenting
dimension to use. A few dimensions are demographic; others are geographic, psychographical
and behvaioural.
1. Geographic Segmentaion:
-market is divided into geographical units such as nations, regions countries, cities or
neighbourhoods.
- Retailers in India have often segmented markets by cities and focused on metro and large cities.
West
North
South
East
Grocery
Eating out
Books and Music
Personal care
savings
Grocery
Personal care
Eating out
Books and music
Savings
Grocery
Eating out
Apparel
Books and Music
Savings
Grocery
Apparel
Savings
Personal Care
Eating out
2.Demographic Segmentaion:
- market is divided into groups based on demographic variables such as age, religion, gender,
income, social class, family size, occupation, educational level and marital status.
- retailer segment the market on variables which relflect interest, need and abilty of the customer
- In India, ,most markete Research agencies prefer to segment on the basis of socio-ecnomic
class(SEC A , SEC B, SEC C) rather than incomer per se.
a) age: The KSA Technopack study states that youth 15-24 years in India is emerging as a core
target customers for lifestyle products (personal care, music, book and magazines)
b) Occupation: Employed women has more spending habits than housewives.
c)Family income: McDonalds, shoppers stop, Reebok , marks and specer etc sell an extensive
range of premium brands can segment market on demographic basis focusing on family income.
They can target professionals, married aged between 30-45 years old with young children, and
with incomes more than Rs. 4,00,000.
d)Retailers can target bachelors or families. McDonald’s has positioned itself as a family joint
which provides a relaibale and safe dining experience while Nirula’s position itself as providing
pleasant experience and fun.
Social class and preferences
Psychographic Segmentation:
Values: Values are determinants of attitudes and behaviour, and provide a stable and inner
oriented understanding of consumers. For example, an individual may value ambition and
honesty, which in turn determines his attitude and lifestyle.
eg1: Benetton, the apparel retailer, has targeted customers who value protection of
environment.It encourages recyclable packaging and re-fill services. Benetton also contributes a
fraction of its profits to environment related issues
eg2: Retailers like Plane M encourage their staff to greet the customers and suggest support in
product selection.
Behavioural segmentation:
customers are divided into groups based on the way they respond to, use or know a product.
Products and services are purchased for a variety of reasons. Marketers can compile information
on behavioural variables such as occasions, benefits, user status, usage rate etc.
CUSTOMER PROFILE:
After deciding on target segments, a retailer must develop detailed profiles of customers in the
identified target segments. Market research may be necessary to develop profile.
Customer Demographics:
Data about the target segment may be collected on demographic characteristics such as age, sex,
income levels, educational background and professional background.
Family Decision making:
In such situations, different family members can play different roles as initiators, influencers,
deciders, buyers, consumers and evaluators.
Pshychographics:
The retailer has to profile consumers’ lifestyle and values. The various activities pursued by
target segments such as sports, adventure, worship etc., as well as their interest, hobbies,opinions
and values may be profiled to get a better understanding of the target segment.
The customers of café coffee Day are youngsters who like to move around in groups, live a fast
active life, and entertain friends
Purchasing Behaviour of the Target Population:
The retailer should also develop a detailed understanding of the purchasing behaviour of the
selected target segment. It should compile information regarding purchase motivation,the
cultural influences on purchasing beahviour.
Purchase Motivation:
The decision to buy or not to buy often comes from what one anticipates as the consequences of
one’s decision. The retailer should understand the purchase motivation of the target segment. For
example, a young man may buy a fashionable brand of shirt from shoppers’stop to announce to
his collegeues and friends that has come of age.
Purchasing Process:
-many people buy grocery items from shops located near their house on a rotating credit facility.
- consumer durabales and jewellery many consumers depend on retailers with whom their family
may be dealing for generation.
source of purchase:
Customers’ choice of shopping locations depends on time utility and place utility. Time utility
refers to availability of products and services at convenient hours or in case of urgent
requirements. Place utility refers to the benefits of shopping at particular shopping locations due
to availability of a wide range of products, low prices, shopping ambience or entertainment
option(variety, price range, parking, quality, entertainment options,services provided)
Such a research will help the retail organisation understand whether its target segment is price
sensitive, it is looking for good quality or location of store is most important. It will help identify
primary segments that offer the most promising opportunities in accordance with the retatiler’s
strengths and situational constraints.
MARKET SEGMENTATION IN INDIA:
Today most marketers in India use segmentation models based on demographics, geo
demographics, SEC data, and benefits and usage.
eg:1McDonalds focuses on middle and upper class families in the uraban market. McDonalds
also introduced the vegetarian product to target the large population of vegetarian in India who
avoid non vegetarian diet on account of religious and health beliefs.
eg2: Nescafe launched its own retail outlets offering various variants of coffee in the North
Indian market to develop the taste of the consumers who are habitual tea consumers . By
providing coffee at low price in an attractive setting, it attempted to convert them into consumers
of coffee.
Malls like city centre and Metropolitan mall in Gurgaon have introduced the cineplexes to attract
customer segments which view shopping as an entertainment. The growth of concept stores is
highly seen in foreing countries. eg. Marks and spencer operates food-only stores in UK.
However in India, there is a reverse trend of brands moving out of their concept store to large
formats. (In the year 2002, DCM Benneton India repositioned itself from a casual wear brand to
wardrope option. Also launched ‘Baby- on-Board’store, which targets mothers-to be and kids.)
The launch of concept stores did raise questions of feasibility consider the nascent stage of retail
industry in India. Madura Garment’s brands Van Heusen, Louis Philippe and Allen solly which
have had their conept stores for sometime, are now coming together under the planet Fashion
Umbrella.
The growth and development of multiplex theatres in India represent an interesting experience in
segmentation. Multiplexes in India have capitalized on an inclusive tendency to motivate and
assemble diverse audiences in terms of their motive and assemble diverse audiences in terms of
their movie preferences.
Segmentation has also caught the fancy of cyber café owners in India. A study by KSA
Technopak states that the players in India have started segmenting the cyber cafes primarily into
two categories: one for utility oriented customers- the middle and junior level business
executives and the other the experiential kind which will offer allied service for non-business
users.
An extremely effective segmentation and targeting experience in India has occurred in case of
the petrol retail sector. The product offering has widened to include blended fuels, branded fuels,
lubes, groceries and more. The outlet itself is expanding to include grocery stores, cafes, bank,
ATM and internet kiosks. These changes gave the customer reasons to build preferences among
the three companies (IOCL, BPCL, and HPCL)
MODULE-7
PRODUCT AND MERCHANDISE MANAGEMENT
Introduction:
Product and merchandise management is the key activity in the management of retail business. It
has immense cost and profit implications. A related issue is the management of retail brands and
the decision to offer retailers private labels along with or instead of national and local brands.
While product management deals with issues related to the kind of products sold by the retailer,
merchandise management concerns itself with the selection of the right quantity of the product
and ensuring its availability at the right place and time. Merchandise plan is drawn in keep in
mind that influence shopping behaviour and the strategic and cost concern of the retailer.
Own Branding:
Own branding occurs when a retailer sells products under the retail organisations house brand
name. Own branding can be of two types, integranted own branding(occurs when the retailer also
manufactures the branded retail products eg.Raymonds, Bose, sony retai outlets) and
Independent Brand(occurs when the retailer procures the products from other suppliers though,
they are sold under the label of the retail house eg. grocery, garments, shoes ).
Significance of Own Branding:
Private labels have showed an increase interm of both value and volume across countries. Private
label share of the product categories such as ffod, drink, personal care ranged between 5% and
20% in value terms in most countries. A well run private label brand enhances store profitability
by increasing pressure on branded manufactures.
MERCHANDISE MANAGEMENT:
The primary function of retailing is to sell merchandise. One of the most strategic aspects of the
retail business is to decide the merchandise mix and quantity to dbe purchases.
Merchandise management is the process by which a retailer attempts to offer the right quantity of
the right product at the right place and time while meeting the retail firms financial goals.
Merchandise management is the analysis, planning, procurement, handling and control of the
merchandise investment of a retail operation
Merchandise planning: consist of establishing objectives and devising plans for obtaining
merchandise well in advance of the selling season.
Merchandise Control involves designing the policies and procedure in order to determine
whether the stated objectives or goals have been achieved.
The merchandise Mix represents the full range of mixture of products a retailer offer to its target
customers. Merchandise mix management covers a host of variety of aspects;
Merchandise variety –number of different of product lines that a retailer stocks in the store.
Merchandise assortment refers to the number of different product items the retailers stocks
within a particular prouduct line.
Merchandise support deals with the planning and control of the number of units the retailer
should have on hand to meet the expected sales for a particular period.
Merchndise Budget is a financial tool for planning and controlling a retailers merchandise
inventory investment.
Planned monthly sales +planned monthly reductions+Desired end of the month stock
=Total stock needs for the month-planned BOM stock
Planned monthly purchase
Constraining Factores;
While introducing new offering, manufacturers, undertake greater risk, and reatailers also
develop merchandise mix under limitation on account of space,resources etc. There are four
constraining factors that influence the design of the optimal merchandise mix:
1. Budgetory constraint : Retail format guide the adjustments to be made on account of budget.
The retailer has to work out the optimal merchandise mix for his customer on the basis of the
resourcse available.
2. Space constrain: Space available to a retailer is relatively fixed and must return a profit. If a
retailer goes for a depth or bredth, space requirement will increase. If variety is to be stressed,
enough space requirement is needed to separte the distinct merchandise line.
3. Turnover Constraint: Turnover is an extremeldy important factor in buying and selling
merchandise profitably. Pantaloon pushes for a stock turn of 40-50 times a year for its food and
once a month for ready-to-wear. Retailers are required to understand the sensitivity of their sales
turnover to merchandise mix they are developing. For instance, its private labels such as top,
kashish, Life and carrot cotributre 20% to the turnover of shopper’s stop.
4. Market Environment Costraint:
It refers to the limitation on account of the target market residing in the area within walking 0or
short itme distance to the store. Retailers have to consider the competitive environment and
competitive dimension prevailing in the trading areas. For ex: Fab India, the ethnic cotton
garment store, maintain extensive merchandise lines along with depth and breadth for both males
and females. However, the W store deal in working women fashion based on cotton with
extensive depth and bredth.This has provided distinguished position to the 2 stores selling the
same material.
RETAILING CHANNEL:
A retailer can depend on one supplier or a combination of suppliers. There are number of
alternatives that a retailer might consider as a suitable source of supply:
1. Manufacturers and Prmary producers:
This category sells cars, two wheelers, gasoline and other products and consumer duarable from
company owned stores. Large retailers regulary deal directly with a product manufacturer.
Manufacturers will normallyhava sales office or a showroom either atatached to a production
unit or in a location convenient for retail custmers.
Lifestyle has focused on building direct relationship with manufacturers rather than buying
products from middlemen.This reduces margins and enables the store to quickly pick up the
products that it wants. Again it enables it to have lower inventories.
2.Wholsalers:
Wholesalers accept small orders form retailers. They actually take ownership of the goods
between the prouducers and the retailer. They supply the retailers from their own stocks rather
than from the producers stock, acting as agents. They usually make attractive profits from the
merchandise they selld to the retailers.
3. Agents: Provide purchasing and delivering facility to the retailers against a negotiated
commissions on the percentage to the total value of the goods purchased. This is a very common
source to retailers in the semi-urban areas or in and around major trading centers. Retailers
depend on agents for weekly or fortnightly purchases form the major trading centres.
4. Other Retailers: This category comprises who operate on a larger scale.They cater to the needs
of the immediate consumers along with the small retaiers form contiguous areas, running their
stores in interior locatlities of urban areas or in the rural areas.
5. Government and semi-government source:
Public distribution system acquires its entire stock of goods from the central government of India
through various official state bodies such as the Food Corporation of India, Mother dairy and
safal.
CATEGORY MANAGEMENT:
Category management is the process of managing a retail business with the objective of
maximizsing the sales and profits of a category rather than the performance of individual brands
or models.
A category is an assortment of items that the customer sees as reasonable substitutes for each
other. For example, retailers in ready to wear segment consider female and male clothing as one
category.
It systemizes grouping of products into strategic units or category so as to better meet consumer
needs and achieve sales and profit goals.Today, the relevance of category management is driven
by the emergence of multiple number of brands in each product category. For the success of any
category management, retail business requires changes in the merchandising system and
organizational commitement.
Advantages of Category Mangement:
1. Increased sales
2. Reduced Inventory management
3. Improved route and warehouse efficiency.
Merchandise Flows(Movement)
When we talk of the physical flow of merchandise it could flow form vendor to distribution
centre(DC) to stores or alternatively the merchandise flows from vendor directly to stores.
Flow: 1 Vendor to DC-function:
1. Management of Transportation to facilitate flow from vendor to DC
2. Recording receipt of merchandise at the DC & Checking to ensure its order
3. storing 4. Getting merchandise floor ready, ie, ticketing, marking, labeling showing price and
Identification Marks etca)
The retailer can use push(Merchandise is allocated to stores on the basis of historical demand)
strategy or Pull strategy( on the basis of demand information obtained at the point of sale)
Flow2:
The merchandise is transported from distribution centres to the stores . If the reatailer has a chain
of stores, management of such outbound transportaion may become complex . DC may have to
use sophisticated routing and scheduling computer system.
In order to streamline the operations of the movement of flow and make more productive ,
retailers sometimes prefer to outsource logistical function:
These outsourcing could be carried out in the following way:
Ø Third party logistic companies
Ø Transportaion companies
Ø Third party warehousing
Ø Integrated third party logistic services
Ø Freigth Forwards.
RETAIL PRICING:
Setting the right price will result in increased revnue to the retail firm.The prime objective of
retail pricing is to achive profitability which is influnecd by two factors. They are Profit margin
of the offering and cost of merchandising.
Factors Influencing Pricing:
The porters model can help to understand the influences of retail pricing.
1. customer:
Customer’s price sensitivity is influenced by many factors. For ex: Café coffee day offer the
coffee at the same price of Rs.35(minimum) in all its branches of urban and semi urban areas,
though it is a general assumption that semi urban customers wont go for highest prices. But
inorder to maintain, its positioning strategy, coffee day maintained the same price and attracting
its target customers through its ambience.
Segmentsation of the customers can also be useful for fixing the appropriate price. There are
some customers look for the benefit of owning the brand rather than the price. Situations also
affect the pricing policy of the firm. A store located in hill station may fix high price and the
same may be accepted by customers.
2. Suppliers:
In order to maintain image of the brand and to achieve the goal of the firm, sometimes the
manufactures direct the pricing policy of the retail firm. The conflict between the retailer and
manufacturer may arise when the manufactuers decides to introduce a new model and that
hampers the movement of retailers old stock. Reputed Retailers have more bargaining power
when they buy bulk items from the manufacturer. Also sometimes retailers seek, for price
guaranteed ie if the prices of sold items to retailer goes down.
3. Competitor: It affects the freedom to fix price.The range varies from being perfect to
monopoly. Retailers generally avoid price based strategy because it may end up in price war.
4. Government: There are legal issues relating to price discrimination. The retailer can charge
different price to different customer only when the distance is the justifying factor.
Vertical Price Fixing: The retailer to set price at manufacturer suggested price.
Horizontal agreement: - agreement between retailer competitiors
Predatory pricing- This pricing is considerd as illegal as it intends to drive away the competiton.
3. Loss Leader Pricing: Fast moving products offered at low price as to attract buyers and to
persuade them to buy other products also
4. skimming: sets relatively high price for a product or service at first and then lower price over
time. Effective only when the firm is facing inelastic demand.
5. Penetration Pricing: setting a relatively low initial entry price so as to increase market share.
The retailer has to be very careful with this strategy as it may establish long term price
expectation and that makes it difficult to eventually raise prices. The solution is to set the initial
price at the long term price but include an initial discount coupon
6. Price Lining: refers to the offering of merchandise at a no. of specific but pre-determined
prices. prices may be held constant over a period of time eg. 79.50, 109.50,149.50
7. Psychological pricing: intended to have special appeal to customers.
a) prestige pricing: high prices to convey distinct and exclusive image for the product. Charging
high price for a product where it is judged this in itself give it prestige. For eg: TAJ
b) Reference Pricing: uses consumers frame of refernce that is established through previous
experience of purchasing eg: sports items.
c) Traditional Pricing: uses historical /long standing prices ( sports products)
d) Odd-Even Pricing: eg: $ 9.95 to denote lower price or a “good deal” $ 10.00 –imply high
quality.
e) Multiple Unit pricing –encourage additional sales and increase profits. Gross margin that is
sacrificed in a multiple unit sales is more than offset by the savings that occur from reduced
selling and handling expenses.
f) Bundles Pricing: Practice of offering two or more different products at one price. Used to
increase both unit and rupee sales by brining traffic in to the shop.
g) Pre-emptive Pricing: setting low prices in order to discourage or deter potential new entrants
h) Extinction pricing: Has overall objective of eliminating competition and involves setting very
low prices in the short term in order to undercut competition.
Tactics for fine tuning the Base Price:
-use coupon
- Rebate – is basically money returned to the buyer on the basis of some portion of the purchase
price.The buyer is required to return the empty packaging as a proof of purchase.
RETAIL PROMOTION:
Retail promotion is broadly defined as all communication that informs persuades, and or reminds
the target market or other prospective segment about marketing mix of the retail firm. The
retailer seek to communicate with customers to achieve a number of objectives.
a)increasing store traffic by encouraging new shoppers to visit store
b) increasing the share of wallet for all shoppers
c) increasing the sale of a given product category
The promotional elements include:
Advertising, sales promotion, Publicity, personal selling, Direct marketing, Public relations.
Selection of Promotion Mix:
Retailers usually employ a combination of the above. The degree and nature of usuage of each
promotion method depends on the objectives of the retail firm. For ex. McDonald’s extensively
relies on advertising in national and local newspaper. Haldiram , the Delhi centric food chain,
primarily relies on point of purchase (POP) material. Retail banking Industry makes extensive
use of all promotional methods including television, print media. Various retail promotion
methods can be compared on the basis of the degree of control, flexibility, credibility and cost
associated with them.
Retail Advertising:
The American Marketing Association defines Advertising as any paid form of, non personal
presentation of ideas, goods, services by an identified sponsor” Advertising is recognized as an
indispensable tool of promotion. Based on the conceptualization, advertising can be understood
as follows:
1. paid form of communication
2. Non personal presentation of message (face to face direct contact with customer)
3. issued by an identified sponsor.
OBJECTIVES OF ADVERTISING:
To prmote new product, to support personal selling programme
To reach out to people not accessible to salesperson
To enter new market, to manage competiton
To enhance goodwill of the retail firm and to improve dealer relation
to warn the public against imitation of the retailers products.
SIGNIFICANCE OF ADVERTISING IN RETAIL SECTOR:
Its imperativeness has increased in this era of globalization and liberalization around the worlds.
Raymonds, the apparel retail chain, primarily used television and print ad to promote
expereiential aspect associated with shopping at its stores.
TYPES OF ADVERTISING:
a) consumer oriented or persuasive Advertising: The major objective of consumer oriented
advertising is to inform consumers about the new products,holding consumer patronage against
intensified campaign by rivals, promoting a contest or a premium offer. It helps in maintaining a
regular demand and attracts a lot of attention and preferences of the customers. eg: Wills
Lifestyle, the ITC owned apparel retail chain
b) Informative Advertising: Purchase of durable products are often too expensive to buy, so the
buyer requires elaborate information about them. Hence the retailer and manufacturer spend a
huge amount of informative advertising.
c) Institutional or corporate Advertising: Its main motive is to build corporate image. An attempt
is made to highlight the achievements and objectives of retail organisation. eg: HDFC bank has
tied up with Business Today the leading business magazine to sponsor 10000 copies of the
Magazine in each metro. The cover of the sponsored copies of December 2003 rated HDFC bank
as the best bank in the country.Financial Advertising: advertisement by various financial
institutions like standard chartered Bank, ICICI etc. Recently HDFC bank has evoloved a mix of
sales promotion and advertising to attract new customers.
d) Classified Ad: which are placed under specific headings and columns in various magazines.
ADVERTISING CAMPAIGN:
An advertising campaign comprises of series of advertisements, with the same theme over a
period of time and across ads. There are different ad copies of campaigns. They are self
contained, and independent but thematically related.
Vertical co-operative Advertising: This type is planned when the retailers and other channel
members share the advertising budget. Manufacturer may pay upto 40% of the ad expenses.
Manufacturers support most mom- and –pop stores and independent retailers since the latter lack
the professional expertise and financial resources. eg: Cadbury India limited has rolled out a
portfolio of customized marketing and communication intiative at the retail end. Huge retail
exercise is being undertaken especially near schools as to pentrate into the markets.
Horizontal Cooperative Advertising: This type is launched when two or more retailers come
together to share the cost of advertising leading to a joint promoition of evens or sales that
benefit both parties.
Designing Ad message
Running an AD campaign
Measuring AD effectiveness
Selecting Advertisement Objective: It should be compliance with the retailers objectives. It could
focus on age of the store, location, type of goods sold, level of competition,market size.
Advertising Budget: A well designed retail ad campaign requies proper budgetary allocation
advertising. There are four methods: Affordable, percentage of sales, objective or task method
and competitive parity method.
Designing Ad Message: The Ad must be appeal to target audience and is conveyed through the
advertisement copy. Certain factors should be considered while designing ad copy;(Attention
value, Memorising recall value, suggestion value and conviction value) eg: McDonalds initially
tried to position its stores as a special place to visit, whth the baseline “ McDonald’s mein hain
Kuch baat’ in their ad. The objective of the ad was to attract the customers to try the McDonald’s
Experinece. However over the years, with the increased acceptance of McDonalds by customers,
the company realized there was a need to evolove comprehensive communication strategy- to
make customers a regular experience.
Selecting Media:
Media selection involoves finding the most cost-effective media to deliver the desired number of
exposure to the target audience. The effect of exposure on audience depends on reach, frequency,
and impact.
Reach: (R): It includes the different persons that are exposed to a particular media schedule.
Frequency(F) : The no. of times within the specified time period that an avg. person is exposed
to the message
Impact(I): The qualitative value of an exposure through a given medium.
Total number of Exposure(E) : It is the reach times the average frequency ie E=R*F. This
measuere is referred as gross rating point.
Weighted number of Exposures(WE): It is the reach times frequency times average impact ie
:WE=R*F*I.
The Media planner has to figure out, with a given budget, the most cost-effectie combination or
reach, frequency, and impact.
They usually make a choice from alternative media categories by taking into account factors like
target audience, media habits, product profile, message compatibilyt and costs. Retailers or
marketers need to review periodically the impact and cost of various media type available. In
recent years, retailers in India started using different media channels.
Popular Media Vehicles used in the Indian Retail sector:
Leaflets or flyers: They have short shelf life; so they are most useful for marketing specific
activities such as opening a new outlet.
posters and calendars:
Booklets: It is effective incase of products or services which are intense on information, such as
banking , real estate.
Direct Mail: Retailers can opt to send out regular, targeted letters as part of their communications
strategy.
Magazines: Retailers selling baby products, home fashion products can use this medium.
Local cable channels;
Billboards: Most of the leading retailers of the city place their billboards at railway stations or
bus stands at the entrance of the city road. Eg: Banagloare central shopping Mall bill board at the
cantonment railway station road.
Wall Paintings: It is the most traditional medial by small retailers in the villages and townships in
India.
Banners: Retailers use this for immediate benefits such as to make the customers aware about the
new arrivals, promotional schemes.
Deciding on Media Time: Advertisers face macro schedule problem and micro schedule
problem. Macro schedule problem involves scheduling the ad in relation to seasons and business
cycle whereas micro scheduling problem deals twith allocation of ad expenditure within a short
period to obtain maximum impact.
Deciding on Geographic Allocation: The company can make a ‘National buy’when the ad is
placed in nationally circulated magazine. “local buy’ refers to radio, newspaper or outdoor sites.
Running an Ad campaign: It involves the execution of advertising progamme which should be in
accordance with the ad goals and the budget. It is advisable to run pre-test.
Measuring Ad Effectiveness: The retailers are interested to know the result of advertising due to
the considerable amount of money, time and resource spend on them in order to know whether
the advertisement has been successful in meeting the objectives. The test can be of two types: pre
test and post test. The following methods can be adopted: Readabilty studies; Eye movement
analysis; Recall test, Concurrent test, Response test, Attitude change test.
SALES PROMOTION:
Sales promotion refers to communication strategies designed to act as a direct inducement, an
added value or incentive for the product to customers.
Salespromotion provides extensive tactical measures to mareketors to manage internal or
external impediments to sales or profits. Internal impediment(unsold stock); External
impediment( competition)
PUBLICITY:
Publicity entails any communication that fosters a favourable image for the retailer among its
public. It can be personal or non personal, paid or non-paid and sponsor controlled or non-
sponsor controlled. Publicity is a non personal form of promotion where messages are
transmitted through mass media, the time or spance provided by the media is not paid for, and
there is no identified commercial sponsor.
TYPES OF PUBLICITY:
1) PLANNED PUBLICITY: A retailer outlines its activities in advance, strives to have media
report on them, and anticipated that certain events will result in media coverage. Community
services like donations, and social sales, and introduction of new goods or services of the
activities which lead to media coverage.
2) Unepected Publicity: It takes place when the media reports on a firm without any advance
notice about the media coverage. TV and newspaper reporter may anonymously visit stores and
rate their performance for their coverage.
3) Complementary publicity: Sometimes media reports about a firm in a complimentary manner
with regard to the excellence of its retailing practices. eg: HDFC
Retail promotion needs to be organised with due understanding of the retail business and its
positioning.
MODULE-8
RELATIONSHIP MARKETING IN RETAILING
eg1. Club HP programme of HPCL ( besides reward points) HP believes consumers will
eventually associate ClubHP with the assurance of quick fills, expectations, personal service,
total vechile management, customer conveience. ClubHP outlets are catagorised as “
Standard”,Mega, and Max – depending on the levels of service and amenities available.
eg2:Bharat Pertroleum –implemented quality and quantity (Q&Q) programme, which focuses on
customer service to each customer. It feels that customers needs to be recognized and
acknowledged, greeted with a smile, made to feel special and cared for
Loyalty Programme:
The use of loyalty proramme is evident from the fact that the corporate expenditure on loyalty
programme are booming The following are the bases for loyalty programme.
1. Loyal customers are cheaper to serve: Retailers may not be required to invest , maintain and
communicate with customer(loyals) as they are already predisposed to search for information
( new arrivals and services)
2. Loyal customers are willing to pay more for a given bundle of offering: Customers normally
stick into one business entity because of high switching cost and psychological stress. They
therefore willing to pay higher prices.
3. They act as Effective marketer for the service offering: The word of mouth marketing is very
effective, and many stores justify their investment in loyalty programme by seeking profits not
so much from the loyal customer but from the new customer the loyal one brings.
Use of Loyalty Card Data:- greater help to gather data about customer
- provides extensive understanding about the customer( cost insights, customer retention rate at
different spending levels.
- Used on a very selective basis in a category management
- gives information about the customer base and card holder behvaiour in a store.
Relationship reward as part of Loyalty programme:
- Reward drives behaviour, reward that behaiour you want. So warning is clear: Never let your
best customer feel that you are withdrawing privilege from them . Hence the reward should be
desirable and affordable.
eg: Northwest and Delta are offering bonus points if you check in for you flight before you get to
the airport. The process is simple: You log on, plug in your flight information & reward
programme PIN, and print out a boarding pass. The bonus is 1000 points.
A prorgamme needs to have visibility, simplicity, value , trust and communicative.
RETAIL AUDIT:
It helps to ascertain the sales personnel’s efficiency at the point of sale or to find out the average
time taken on a normal day or duing the weekend.
Retail Process Audit: Such retail process audit helps to examine a store’ efficiencs in terms of
operating processes or reduce the cycle time. For instance with the help of retail process audit,
the retailer can work out ways to improve customer service delivery and to improve
performance.
Retail Store Aduit: While visiting the store , the retail auditor will collect observable information
such as the shelf prices, display space, the presence of special display and instore promotion
activities.The retailers can use retail store audit results to project and arrive at nationwide and
regional estimate of total sales, inventories etc.,.
Indian Retail Prognosis- ICICI Bank Research study compilation: ICICI based on retail banking
experience gives data on the Indian consumer behaviour towards retail banking
Retailing includes all the activities involved in selling goods or services directly to final
consumer for their personal, non business ose. It does not matter how the goods or services
are sold (by person, mail, telephone) or where they are sold( in a store, on the street, or in the
consumer’s home).
1. Store retailer
2. Non store retailers
a)Store retailer:- Store retailers includes:-
a) Specialty store:- A specialty store carries a narrow product line with a deep assortment within
that line examples of specialty retailers are apparel stores, sporting goods stores.
b) Department store:- A department store carries several products lines, typically clothing,
home furniture and household goods.
c)Super market:-A supermarket is a relatively large, low cost, low margin high volume self
service operation designed to serve the consumer’s total need for food and household-maintains
product.
d) Convenience store:- Convenience stores are relatively small stores that are located near
residential areas; are open long house and seven days limited line of high turnover convenience
products.
a) Direct Selling:- It involves oral presentation in a conversation with one or more prospective
purchases for the purpose of making sales.
b) Automatic vending:- Automatic vending through coined operated machines has been a major
port would war-II growth area. Automatic vending has been applied to a considerable variety of
merchandise including impulse goods with high convenience value (soft drinks, candy). Vending
machines offer customers the advantages of twenty four hour selling, self service and unhanding
merchandise.
1. Target market decision::- A retailer’s most important decision concerns the target.
Should the store focus on upscale, mid- scale or downscale shoppers? Do the target
shoppers want variety, assortment depth or convenience?
2. Product assortment and service decision:- Retailers have to decide on three major
product variable that help position their store to their target market, namely product
assortment, service mix and store atmosphere.
The retailers product assortment must match the shopping expectations of the
target market. The retailer has to decide on product assortment breadth and depth.
Retailers must also decide on the service mix to offer customers. The old “mom
and pop” grocery stores offered home delivery, credit, services that today’s
supermarket have corpulently eliminated.
The store’s atmosphere is a third element in its product arsenal. Every store has a
physical layout that makes it hard or easy to move around. Every store has a
“look”; one store is dirty, another is charming, a third is palatial, a fourth is
somber. T store must embody a planned atmosphere that suits the target market
and draws them towards purchase.
Price decision:- The retailer’s price are key positioning far for and must be decided in relation to
the target market, the product and service assortment mix and competition. All retailers would
like to charge high mark ups and achieve high volumes; but usually the two do not go
together .most retailers fall into the high markup highs volume group (mass merchandisers and
discount stores)
Promotion Decision:- the retailer must use promotion today that support and reinforce its image
positioning. Fine stores will place full page tasteful ads in magazines and train their safes people
to greet customers. Discounter will use less trained people to and use tow cost promotional tools
to generate traffic.
Place Decisions :- retailers are ;accustomed to saying that the key to success in retailing is
“location”. For example customers primarily choose the bank that is nearest to them Department
– store chains, oil companies and last food franchisers exercise great case in selecting location.