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Wal-Mart
Topmost global Fortune 500 company(3 Consecutive
Years)
Annual Sales of over US$ 250 bn
India’s two largest retail player turnover around US$
158 mn (Bata) and US$ 102 mn (Shoppers Stop)
Fortune 100
9 Retailers
Carrefour, Ahold, Home Depot, Kroger, Metro,
Kmart-Sears, Target, Albertsons’
Why Study Retailing?
Indian retailing
Largest employer after agriculture - 8%* of population
Highest outlet density in world
Around 12 mn outlets
Still evolving as an industry
Long way to go
Impacts the economy
What is Retailing?
Complex Relationships
Areas of Conflict
– Control
– Profit Allocation
– No. of retailers selling the product in a market
– Display
– Promotion Support
– Payment Terms and other flexibility
Retailers and Suppliers
Types of arrangements
– Exclusive Distribution
Smooth arrangement
Selected/Exclusive Retailers in a geography.
Both work together-Image, shelf space, profits etc.
Retailer limits variety, hence sales.
Manufacturer limits long run total sales.
Retailers and Suppliers
Types of arrangements
– Intensive Distribution
VolatileRelationship
Suppliers sell thru as many retailers
Retailers offer as many brands
Maximises suppliers’ sales
Retailers- low shelf space, profits
Retailers and Suppliers
Selective Distribution
– Combines aspects of exclusive & intensive dist.
– Suppliers sell through a moderate no of retailers
– Retailers likely to get marketing support
– Suppliers likely to get more shelf space and
Involvement
Class Exercise
Types of Distribution
Retailer Strategy & Performance ?
Pdt/Service Mix
Geography
Channel Mix
Consumer Segment
The Retailing Concept
– Coordinated effort
Integrates all plans & activities to optimize efficiency
– Value Driven
Offers value to its customers
The Retailing Concept
– Goal Orientation
Decides on its goals
Formulates strategy
Work towards achieving them
Total Retail Experience
Why ?
– Pareto Principle
– Important for the overall goal.
– Strong feedback mechanism
– Scientific planning
Home Assignment
Advertising –
– Many retailers find traditional mass promotional methods of advertising, such as through
newspapers or television, continue to be their best means for creating customer interest
– Retailers selling online rely mostly on Internet advertising as their promotional method of choice.
Direct Mail –
– A particular form of advertising that many retailers use for the bulk of their promotion is direct mail
– advertising through postal mail.
– Using direct mail for promotion is the primary way catalog retailers distribute their materials and is
often utilized by smaller local companies who promote using postcard mailings.
Personal Selling –
– Retailers selling expensive or high-end products find a considerable amount of their promotional
effort is spent in person-to-person contact with customers.
– Consumer-salesperson relationship is key to persuading consumers to make purchase decisions.
Distribution Method
Store-Based Sellers –
– By far the predominant method consumers use to obtain products is to
acquire these by physically visiting retail outlets (aka brick-and-mortar).
Stand-Alone – These are retail outlets that do not have other retail
outlets connected.
Strip-Shopping Center – A retail arrangement with two or more outlets
physically connected or that share physical resources (e.g., share
parking lot).
Shopping Area – A local center of retail operations containing many
retail outlets that may or may not be physically connected but are in
close proximity to each other such as a city shopping district.
Regional Shopping Mall – Consists of a large self-contained shopping
area with many connected outlets.
Distribution Method-2
Non-Store Sellers –
– No physical outlet
– Customers make their purchase from within their own homes.
Online Sellers – The fastest growing retail distribution method allows
consumer to purchase products via the Internet. In most cases delivery is
then handled by a third-party shipping service.
Direct Marketers – Retailers that are principally selling via direct methods
may have a primary location that receives orders but does not host
shopping visits. Rather, orders are received via mail or phone.
Vending – While purchasing through vending machines does require the
consumer to physically visit a location, this type of retailing is considered as
non-store retailing as the vending operations are not located at the vending
company’s place of business.
Service Level
There are at least three levels of retail service:
Self-Service – This service level allows consumers to perform most or all of the
services associated with retail purchasing.
– 1) self-selection services, such as online purchasing and vending machine purchases
– 2) self-checkout services where the consumer may get help selecting the product but they
use self-checkout stations to process the purchase including scanning and payment.
Assorted-Service – The majority of retailers offer some level of service to consumers.
Service includes handling the point-of-purchase transaction; product selection
assistance; arrange payment plans; offer delivery; and many more.
Full-Service – The full-service retailer attempts to handle nearly all aspects of the
purchase to the point where all the consumer does is select the item they wish to
purchase. Retailers that follow a full-price strategy often follow the full-service
approach as a way of adding value to a customer’s purchase.
Ownership Structure
Individually
Owned and Operated
Corporate Chain
Franchise
Cooperative
Ownership Structure-Independent
Independent
– Owns one retail unit or so.
– Low entry barriers
– Advantages
Flexibility in choosing retail formats & strategy
Have “Independence”, entrepreneurial drive
– Disadvantages
Can’t gain economies of scale
Labor intensive, low spends
Mostly unprofessional setups
Ownership Structure-Chain
Chain Retailer
– Operates multiple outlets
– Most establishments are chains today
– Advantages
Bargaining capable, Cost efficiencies exist
Structured policies and methods
– Disadvantages
Low flexibility, independence in style
Higher investments (Merchandise)
Ownership Structure-Franchising
Franchising
– Contractual agreement –franchisor to franchisee
– Typically pays an initial fee and royalty on sales
– Product/Trademark Franchising
Acquires identity of Franchisor
Auto dealers/ Petrol stations
Independent System
Manufacturing
Wholesaling
Retailing
Partially Integrated System
Customer Satisfaction
Ability to Acquire the Right Products
Product Presentation
Traffic Building
Layout
Location
Keeping Pace With Technology
Retail Formats/Business Models-1
Mom-and-Pop – Represent the small, individually owned and operated retail outlet. In many cases these are family-run
businesses catering to the local community.
Mass Discounters - These retailers can be either general or specialty merchandisers but either way their main focus is on
offering discount pricing. Compared to department stores, mass discounters offer fewer services and lower quality products.
Warehouse Stores – This is a form of mass discounter that often provides even lower prices than traditional mass
discounters. In addition, they often require buyers to make purchases in quantities that are greater than what can be
purchased at mass discount stores. These retail outlets provide few services and product selection can be limited.
Furthermore, the retail design and layout is as the name suggests, warehouse style, with consumers often selecting products
off the ground from the shipping package. Some forms of warehouse stores, called warehouse clubs, require customers
purchase memberships in order to gain access to the outlet.
Category Killers – Many major retail chains have taken what were previously narrowly focused, small specialty store
concepts and have expanded them to create large specialty stores. These so-called “category killers” have been found in
such specialty areas as electronic (e.g., Best Buy), office supplies (e.g., Staples) and sporting goods (e.g., Sport Authority).
Department Stores – These retailers are general merchandisers offering mid-to-high quality products and strong level of
services, though in most cases these retailers would not fall into the full-service category. While department stores are
classified as general merchandisers some carry a more selective product line. For instance, while Sears carries a wide range
of products from hardware to cosmetics, Nordstroms focuses their products on clothing and personal care products.
Boutique – This retail format is best represented by a small store carrying very specialized and often high-end merchandise.
In many cases a boutique is a full-service retailer following a full-pricing strategy.
Retail Formats/Models-2
Catalog Retailers
– Orders are then delivered by a third-party shipper.
e-tailers
– Electronic retailers or e-tailers also have the ability to offer a
wide selection of product since all they really need in order
to attract orders is a picture and description of the product..
Franchise
Convenience
Vending – Within this category are automated
methods for allowing consumers to make purchases
and quickly acquire products.
Retail Summary Chart
Session 3
Understanding Customers
Understanding Consumers
Identifying Consumers
– Characteristics, needs and attitudes
Recognizing how people make decisions
Devising proper target market plan
Demographics
Environmental
Lifestyles
factors
Retail Shoppers
Retailer Needs
actions & desires
Attitudes &
Behaviour
Demographics
Market Size
Gender
Age
Household Size
Marital status
Income
Retail sales
Employment Status
Consumer Life-styles
Based on social and psychological factors
Social factors
– Culture
– Social Class
– Reference Groups
– Family life cycles
Psychological Factors
– Personality
– Class consciousness
– Attitudes
– Perceived risks
Consumer Life-Styles Profiles
Grocery Shoppers
– Shopping avoiders- Dislike
– Time starved- Convenience
– Responsible- Key task
– Traditional Shoppers- Who plan carefully.
Web Consumers
– Comfort with Technology
– Online Security
Attitudes Toward Shopping
Purchase
Impulse Purchases
– Completely Unplanned
NO decision prior to visiting the outlet
– Partially Planned
Intendsto purchase the good or service
Brand not predecided
– Unplanned Substitution
Intends
to buy a specific brand/service
Changes mind after retailers’ influence
Customer Loyalty
Time conscious
Customer satisfaction leads to shopper
loyalty
Price has little bearing
Retailer Actions
Demographics
Environmental
Lifestyles
factors
Retail Shoppers
Retailer Needs
actions & desires
Attitudes &
Behaviour
Home Assignment
Data Warehouse
Executives Channel
Partners Customers
Data Micromarketing
Mining
Data Warehousing
Data Warehouse
– Data is physically stored
Software
– To copy original databases and transfer them to warehouse
Interactive Software
– To allow inquiries to be processed
Directory
– For the categories of information
Advantages
Data Mining
– Indepth Analysis of Information to gain specific insights on
customers, pdt categories and vendors etc.
– Objective is to derive opportunities to talor marketing efforts
to improve retailer performance
Micromarketing
– Using data for differentiated marketing
– Develop focused retail strategy mixes for specific segments
– Or individual shopper
Data Mining and Micromarketing
Data Mining
– Relies on special software to sift thru data
warehouse to uncover patterns and relationships
among different factors
– Allows vast amounts of data to be quickly
searched and sorted.
– Success mantra- Ability to identify and segment
customers
Gathering information- UPC & EDI
Universal product code
– Products are marked with a series of thin and thick vertical lines –
represents item code
– UPC A Labeling-
Includes numbers and lines
Read by Scanners
Does not include price
– Advantages
Retailers can record data instantly on items’ model no. etc
Sends to data to central server monitoring unit sales, inventory levels
etc.
Helps in better merchandising data, improve inventory mgmt., speed
transaction time, raise productivity, reduce errors, coordinate
information.
Gathering information- UPC & EDI
EDI
– Retailers and suppliers regularly exchange
information thru systems on inventory levels,
delivery times, unit sales, etc.
– Advantages
Both parties enhance decision making capabilities
Better coordination
Better inventory control
More service oriented
More responsive to demand.
Marketing Research Process
Define Examine
Generate Analyze Data
Problem Secondary
Primary
data
Data
Make
recomtions
Implement
Findings
Infosys-Case Study
The Client
A large retail chain based in US.
The Challenge
The client was facing issues with inventory management and service level. Hence, they wanted to reduce inventory and improve
service levels throughout their supply chain network by improving forecast accuracy and enhancing supply chain planning.
The Solution
Infosys evaluated and improved the clients’ supply chain metrics and systems and developed a solution strategy to achieve the
clients’ supply chain vision. Infosys conducted a supply chain assessment exercise and helped the client define future state
supply chain processes. Infosys also helped the client, as part of this exercise, in selecting the right set of planning and
execution tools to enable the defined processes. Infosys helped the client define an implementation road map for deployment of
various business and IT initiatives to enable the vision. The process vision was based on a time-phased planning process
construct. As a part of the solution selection exercise, Infosys helped the client with a detailed application vendor evaluation
exercise where leading supply chain planning and execution vendors were evaluated for fitment. Infosys was also involved in
the implementation of a SCM planning solution and some custom developed applications in a phased manner to enable the
defined process vision at the client warehouse and at the stores to achieve optimum supply chain benefits. The first phase was
to implement the tool at the warehouse for a limited scope of items. Subsequent phases then rolled out the tool to additional
scope of items and warehouse locations. After realizing the early benefits like improved forecasting accuracy and dropped
inventory levels, the client has planned to roll out the solution to all stores and all SKUs in phased manner.
Key features of the implementation were:
1.Achieving high forecast accuracy for majority of the SKUs, especially during promotional periods by applying a high level of
mathematical rigor, configuration of user interfaces and development of utility applications to capture promotions.2.Application of
statistical safety stock principles to control inventory.3.Practical application of time-phased planning principles in a retail context.
Business benefits 1.Reduction in inventory at the warehouse due to time-phased planning2.Improvement in service
level3.Improvement in forecast accuracy4.Qualitative benefits like ease of use of the system for planners and focus on other
value-added activities
Supply Chain Efficiency
Producer Push
– Follows Contemporary Supply chain model
– Based on production source
– Production efficiency is the key
– Production determines availablility and equals
sales
Supply Chain-Producer Push
Data Synchronization
– Common framework for pdt and party data
Visibility
– Level of retail sales drives consumer pull supply
chain and hence
– All entities should have access
Supply Chain-Consumer Pull
Store locations
Trading Area
Types of locations
Choosing a Store Location
Short Run
– Impact on the specific elements of the strategy
mix
– Product Mix
Store Location- Steps
Destination Store
– Store with better assortment, promotes more and
creates stronger image (It’s worth the trip)
Parasite Store
– Doesnot create own traffic
– No trading area of own
– Store depends on people who are drawn on a/c of
other reasons
Delineating the Trading Area
Existing Store
– Secondary Data (Store records)
– Primary Data (Survey)
– Some methods
Frequency with which people shop from a locality
Avg. dollar purchases from the given locality
Concentration of shop card holders’ from a given locality
Delineating the Trading Area
New Store
– Trend Analysis (Past data, census)
– Consumer Surveys (Time, distance, factors attracting)
– Three Computerized Trading area models
Analog Model
– Potential Sales on basis of existing sales of existing st.
Regression Model
– Potential store sales with location, pop size
Gravity Model
– Premise People are drawn to stores that are closer & more attractive than
competition
Trading Area Delineation
Census
Survey of buying power
Competition and Level of Saturation
Isolated
Store
Unplanned Business District
Planned Shopping Centre
Isolated Store
Disadvantages
– Initial Customers difficult
– Travelling this far might be unviable
– High Ad expenses
– Variety missing for the shopper
– Costs: outside lighting etc not shared, high
– Store has to be built not rented
Business District
Weaknesses
– Travel time for suburbs
– Inadequate parking
– High rents and taxes
– Cost of setting the store
SBD
Unplanned shopping area in a city/town usually bounded by two
streets
SBD offers similar products like CBD
Smaller trading area, less stores, mostly convenience oriented items
Strengths
– Robust product selection
– Access to thoroughfares and public transport
– Placement near to residential areas than CBD
Weaknesses
– Parking
– Fewer chain outlets
NBD
Advantages
– Well rounded assortment of goods/services
– Strong suburban population
– One stop family shopping
– Cooperative planning and sharing of costs
– Distinctive and unified image.
– Popularity of malls
– Maximization of foot falls
– Common ad costs
Disadvantages
– Landlord regulations
– Higher rent and infra costs
– Highly competitive environment
– Domination by larger anchor stores
Planned Shopping centers
Regional
Community
Neighbourhood
Regional Shopping Centre
Retail organization
– Ways by which a firm structures and assigns
tasks, policies, resources, responsibilities etc
– To efficiently & effectively satisfy the needs of
– Target market, employees and management
Organizing a Retail Firm
Grouping tasks
Classifying Jobs
into jobs
Integrating positions
in an organization chart
Specific Tasks in the channel
coordinating tasks
Classifying Jobs
Functional-Jobs by Task
Product- Jobs on goods/services based.
Geographic- Operations in different areas
Combination- Mixed use (Sales people
locally hired but sourcing, HR central)
Organization Chart
Arrangements used by
Small Retailers
Departmental Stores
Chain Retailers
Diversified Retailers
Small Retailers
Issues
– LONG HOURS
– Inexperienced Workers
– Many part time workers
– Variable customer demand
– High turnover of employees
– Low wages
– Diverse labor force (young to old)
HRM Process
Recruitment
Selection
Training
Compensation
Supervision
Follow local labor laws
JD of a Management Trainee
Attributes required
Analytical skills
Creativity
Decisiveness
Flexibility
Initiative
Leadership
Organization
Risk Taking
Stress Tolerance
Session 7
Operations Management-1
Operations Management
Profit
Planning
Asset Management
Budgeting
Resource Allocation
Profit Planning
P&L Statement
Asset Management
Assets
Liabilities
Net Worth
Use of assets in optimal manner
– Net Profit Margin=Net Profit after taxes/Net Sales
– Asset Turnover= Net Sales/Total Assets
ROA=NET Profit Margin X Asset Turnover
– Financial Leverage-Retailer’s total assets/net worth
Strategic Profit Model
Productivity
Costsas % of sales
Ways to enhance productivity
– A firm can improve employee performance
– Reduce costs by automating etc.
– General strategies adapted
Space Productivity
Labor expenses
Session 8
Productivity
– Vertical displays
– Hang from ceilings
– Point of sale displays, vending machines
– Open doorways, mirrored walls give small stores a
larger appearance
– Generally 75 % of space is used for selling, rest is for
storage, rest rooms etc.
– Open longer hours
Personnel Utilization
When ?
How frequently ?
What areas ?
Why ? Better revenues, lower operating
costs or both
Inventory Management
Maintain proper merchandise assortment and ensure
efficient and effective ops.
How much inventory on sales floors vs warehouse or
store room?
How often inventory be moved from nonselling to
selling area ?
Tradeoffs between faster supplier delivery, higher
shipping costs?
What is the level of reorder point ?
Store Security
Two aspects
– Personal and Merchandise Security
Personal Security
– Uniformed security guards- visible presence assures
customers, employees- a warning to thieves and shop lifters
– Undercover personnel are also used
– TV cameras and other devices scan the areas
– Brighter lighting & manned parking lots
– Bank deposits are done frequently
– Access to stores’ own areas is restricted
Insurance
Workers’ compensation
Product liability
Fire, accident, property and officers’ liability
Health insurance for full time employees
Credit Management
What form of payment is acceptable?
Who administers the credit plan? Own cards vs others
Who is eligible ?
What credit terms are used ?
How do we handle non payments and late payments ?
Options one must weigh
– Credit vs sales growth
– Credit costs vs returns (Financial and competitive advantages)
– Debit cards and Fund management
– Discount coupons
– Gift cards
Computerization
Theftprevention
Energy control- Based on traffic
Others
Outsourcing
Expert Services
Security
Billing
Inventory Management
Store layout, design etc.
Crisis Management
Level of formality
– Formal
Separate department is set up
Involves acquiring merchandise and making it available for sale
Big stores use this format
Specialist merchandisers are hired
– Informal
No separate role
Small retailers use this format
Less defined responsibility and hence less emphasis on merchandise planning
Degree of Centralization
– Centralized
Centralized decision making
Integration of effort, strict controls, consistent image, discounts
Inflexibility
– Decentralized
Purchase decisions are made locally
Disjointed effort
Organization Breadth
– General & specialized approach based on size
Personnel Resources
– Inside buying organization
– Usually used by very large and small
organizations
– Outside Buying organization
– Used by small and medium sized retailers
Functions Performed
– Merchandising
Merchandise personnel oversee all buying and selling
functions
Including assortments, advertising etc.
– Buying
Merchandise personnel oversee buying of products,
advertising etc. while in store personnel oversee
assortments, displays etc.
Staffing
– Buyer
Responsible for selecting merchandise to be carried by the
retailer
Sets a strategy to market the merchandise
Devises, controls sales and profit projection for a pdt category
Plans assortments, styles, sizes etc.
– Sales Manager
Supervises on floor selling & operational activities for a
department
Must be a good organizer, administrator and motivator
Devising Merchandise Plans
Innovative
ness
Forecasts Assortment
Merchandise
Plan
Allocation Brands
Timing
Forecasts
Projection of expected retail sales in a period
Staple Merchandise- Regular pdts carried by the retailer e.g.
supermarket- milk, bread etc.
– Basic stock list is kept ready
Assortment Merchandise- Consists of apparel, furniture etc.
for which a wide variety is required.
This is harder to forecast – style changes, demand variations
etc.
Decision is two pronged- Pdt lines, styles, sizes are forecasted
Model stock plan is used to project specific items and includes
then other items to offer good assortment.
Forecasts
Pricing in Retailing
– Role of pricing in retail strategy
– Examine impact of market forces on pricing
decisions
– Developing a retail price strategy
Pricing options for a Retailer
Discount Orientation
– Uses low prices as the comp. advantage
– Low price image, fewer shopping frills, low per unit margins, low
operating costs, high inventory turnover
At the Market Orientation
– Retailer has average prices
– Offers great service & nice ambience to middle class customers
– Margins are moderate to good & avg. to above average pdts are
stocked.
– Traditional departmental stores are part of this category
Pricing Options for a Retailer
Upscale Orientation
– A prestigious image is the retailers’ competitive
advantage
– Smaller target market, higher expenses, lower
turnover mean customer loyalty, distinctive
services
– High per unit profits
– Upscale department stores/ speciality stores
Price Vs Value
External Factors Affecting Pricing
Store atmosphere
Entertainment for shoppers
– Cooking lessons
– Makeup
– Looking at an emotional connection
Shopper must be able to determine the following
from a retailer in 3 sec- name, line of trade, claim to
fame, price position, personality.
Atmosphere
POP
Provides shoppers with information, adds to
store atmosphere, serves a substantial
promotional role.
Is persuasive
Silent salesperson
Flexible
Enhances shopping experience
Types of displays
Assortment display- exhibits wide range of merchandise.
– Open assortment-Customer encouraged to feel/look/try pdts
– Closed- look but don’t touch/try
– Theme Setting display-depicts pdt. Offering in a thematic
manner & sets specific mood.
– Ensemble Display- complete pdt bundle is displayed.
– Rack Display- functional use-neatly hang or present products.
– Case display- heavier items,.
– Cut Case- An inexpensive display
– Dump bin.
Non Store Based Retailing Perspective
Promotional Strategy
Advertising
PR
Personal Selling
Sales promotion
Advertising
Paid
Non personal
Uses out of store mass media
Identified Sponsor
Objectives for the retailer