RETAIL MANAGEMENT

CHAPTER-1 RETAIL PRICING

A. Introduction
B. Retail Management System
C. Retail Management Improves productivity and business performance
D. Designed for growing retailers
E. Improves productivity and business performance
F. Affordable out of the box, with functionality to help provide a quick return on your
investment
G. Grows with your business
H. Capable and Confident Consumers

CHAPTER-2 RISK-BASED REGULATION

A. Introduction
B. Identifying thematic risks
C. How we select firms for thematic risks
D. Financial inclusion
E. MIFID
F. Retail Loyalty Programs: seven points to ponder
G. Client Relationship Management

CHAPTER-3 RETAIL MARKETING STRATEGY

CHAPTER-4 INTERNATIONAL RETAILING
A. Introduction
B. General Merchandise Retailing
C. Food Retailers

D. Non-Store Retailing
E. Issues in International Retailing

CHAPTER-5 IMPACT OF RETAIL MANAGEMENT IN THE GROWTH OF INDIA

ECONOMY
A. Definition and Scope of Retailing
B. Types of Retail Operations
C. The Emerging Sectors in Retailing
D. Retailing Scenario- Global View
E. Retail Shopkeepers
F. Retail Sales

CHAPTER-6 INTERNATIONAL MARKETING

A. International Marketing Environment
B. Retail Management Tips
C. Winning at Store Management
D. Retail Analytics
E. Viewpoint on Retail - Retail Articles
F. Retail Sales Management

CHAPTER-7 RETAIL BUSINESS PLAN

A. Introduction
B. Retail Market Segmentation
C. Relationship Marketing
D. Integrated Relationship Management

Chapter-8 PRICING
A. Questions involved in pricing
B. Definitions
C. Retail Location Strategies
D. New Development Drivers

E. Current Trends
F. Under All Is the Land

CHAPTER-1
RETAIL PRICING
Introduction
Retail Management consists of Managing the sale of goods or merchandise from a fixed location, such as a
department store or kiosk, or by post, in small or individual lots for direct consumption by the purchaser.
Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses.
In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either
directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are
often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the
process of retailing as a necessary part of their overall distribution strategy.
Shops may be on residential streets, shopping streets with few or no houses, or in a shopping center or mall.
Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect
customers from precipitation. Online retailing also referred to as B2C type of e-commerce, and mail order are
forms of non-shop retailing.
Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities such as
food and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves window
shopping (just looking, not buying) and browsing and does not always result in a purchase.
The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or
percentage) to the retailers cost. Another common technique is suggested retail pricing. This simply involves
charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer.
In Western countries, retail prices are often called psychological prices or odd prices.
Often prices are fixed and displayed on signs or labels. Alternatively, there can be price discrimination for a
variety of reasons, where the retailer charges higher prices to some customers and lower prices to others. For
example, a customer may have to pay more if the seller determines that he or she is willing to. The retailer may
conclude this due to the customer's wealth, carelessness, lack of knowledge, or eagerness to buy. Another
example is the practice of discounting for youths or students.

Retail Management System Store Operations allows you to better track and
expedite point-of-sale and business processes:
i.

Streamline business operations, including inventory, supplier management, and point-ofsale processes.

ii.

Make informed decisions with accurate data and powerful reporting tools.

iii.

Market, promote, and sell across multiple channels.

iv.

Expand easily to multi-store operations and e-commerce.

v.

Reduce POS system and operating costs.

Retail Management Improves productivity and business performance

i.

Increase knowledge of operations.

ii.

Make fast, informed decisions.

iii.

Offer superior customer service.

iv.

Improve inventory and supplier management.

v.

Maximize cash-in per customer.

vi.

Minimize labor costs.

vii.

Reduce inventory costs and out-of-stocks.

viii.

Integrate credit card processing.

Designed for growing retailers

i.

Set up and use easily. Retail Management System can be set up quickly, tailored to meet
specific retail needs, and provides access to expert support and assistance from certified
Microsoft Business Solutions partners. Built-in wizards and an intuitive user interface help
managers and associates to learn point-of-sale procedures in minutes.

ii.

Track and manage inventory efficiently. Retail Management System eliminates the need
to conduct inefficient, manual stock counts, saving time and reducing employee overhead.
You can track and manage items across your business using any inventory method,
including services, layaways, work orders, and back orders. Compatible inventory types
include standard, serialized, kit, assembly, matrix, lot matrix, voucher, non-inventory, and
weighed.

iii.

Streamline point-of-sale processes. With Retail Management System, associates can

work with a customizable point-of-sale screen that lets them check prices, availability, and
stock location instantly. They'll be able to access complete customer information; handle
multiple tenders and partial payments at checkout; and quickly create and process returns,
backorders, sales quotes, work orders and layaways. Automated processes make it easy to
balance multiple tenders efficiently and accurately, helping employees save valuable time.

iv.

Integrate and operate with your existing systems. Retail Management System is
compatible with Microsoft Windows 98 and later operating systems, and supports popular
point of sale peripherals including printers, magnetic strip readers, bar code readers, and
more.

Improves productivity and business performance

i.

Increase knowledge of operations. Gain full visibility into store operations with daily sales
graphs and journals that can be viewed and printed from any register. With Retail
Management System, you can preview, search, and print journals by register, batch, and
receipt number, as well as close out data accurately. Data can also be shared across
multiple store locations to give you different views of your business.

ii.

Make fast, informed decisions. Access and analyze data across your entire business
using powerful reporting and communications functionality. Drawing from detailed, current
information, you can identify sales trends in every department, category, and season;
evaluate operations and financials; track the return on investment of advertising and sales
campaigns; set and monitor business policies across stores; and much more.

iii.

Offer superior customer service. Retail Management System equips your staff to
respond quickly to customer needs, making it easier for you to turn a single purchase into a
lasting and profitable customer relationship. Associates can expedite checkouts quickly,
target customer preferences to offer up-sells and cross-sells, and implement automatic
discounts for frequent shoppers. Customers receive the efficient, personalized service that
builds their loyalty and boosts your revenues.

iv.

Improve inventory and supplier management. Replenish top-selling items efficiently and
negotiate consistently lower purchasing costs by tracking item movement and vendor
histories. You can also extend purchasing and fulfillment processes to the Web through efulfillment services.

Affordable out of the box, with functionality to help provide a quick return on
your investment
i.

Maximize cash-in per customer. Use Retail Management System to make the most of
every transaction: target customer preferences to suggest up-sells and cross-sells, and
advertise other products at point of sale with onscreen graphical displays. Expand your
customer reach and increase revenues with multi-channel marketing, catalog sales, and
phone orders.

ii.

Minimize labor costs. Easy to learn and use, Retail Management System helps ensure
managers and associates get up to speed quickly. Comprehensive functionality and shared
data systems reduce the need to re-enter information, freeing your staff to focus on

managing and selling more effectively. And with full visibility into business information,
you'll know when to staff up or cut back, and which associates bring in the highest
revenues.
iii.

Reduce inventory costs and out-of-stocks. Maintain tight control over inventory with
automatically generated purchase orders and stock levels. Centralized purchasing and instore transfers enable you to replenish items efficiently and cost-effectively. Visibility into
supplier histories makes it easy to select vendors who offer the best service and the lowest
prices.

iv.

Simplify card processing and reduce transaction costs. Retail Management System
helps provide quick access to authorizations and makes it easier to capture electronic
signatures. Electronic Data Capture can accelerate card transactions by up to 600 percent.
And, utilizing POSitive Technologies sister company POSitive Payment Solutions, Retail
Management System also offers integrated card processing that includes substantial
discounts on services and eliminates the need for additional card terminals. There are no
charges for application or setup. Read more about Positive Payment Solutions.

Grows with your business

i.

Expand easily. Ready to open a new store? With Retail Management System, you can
protect your investment and keep the same software and systems as your business grows
into multiple stores and retail channels. As you add customers and products to your
system, flexible Microsoft SQL Server technologies let you store and manage virtually
unlimited amounts of information.

ii.

Integrate with other solutions. Retail Management System integrates easily with a
number of popular business applications, including Microsoft Business Solutions
Financials, Microsoft Small Business Manager, third-party applications, and others. You
also can integrate Retail Management System with PDA, mobile, and wireless solutions.

iii.

Invest in your business, not in IT support. Retail Management System does not require
an extensive IT staff to set up and maintain, and adapts easily to meet specific retail needs.
As your business changes and grows, your Microsoft Business Solutions partners can
provide support and assistance with customizing, integrating, and scaling your solution.

iv.

Count on Microsoft. With Retail Management System, you can begin a long-lasting
relationship backed by one of the world's leading technology providers. Microsoft Business
Solutions is a family of connected applications and services for small and mid-sized

businesses, with years of experience delivering business applications and services known
worldwide for top quality.
To promote efficient, orderly and fair markets, both retail and wholesale; to help retail
consumers achieve a fair deal; and to improve our own business capability and effectiveness. Under
this umbrella, we believe there to be four pillars essential to delivering a more effective and efficient
retail market through which a fair deal for consumers can be delivered:
Capable and confident consumers.
i.

Clear, simple and understandable information available for, and used by, consumers.

ii.

Soundly managed and well capitalized firms who treat their customers fairly.

iii.

Risk-based regulation.
I'm conscious that there are significant prudential issues around too, the main issues which

bear on the retail markets.

Initiatives such as treating customers fairly and financial capability are part of the broader
picture designed to deliver these outcomes. And in all of this our emphasis is on outcomes and thus
on changing the behaviors of firms and consumers in the real world. So, ultimately, we want to
measure the success of this strategy by looking at the difference it makes to your customers, the
consumers of financial services and products. In terms of overall regulatory approach, I should
emphasize that our clear preference is to encourage efficient markets as the best means of providing
quality goods and services to consumers. Only after market solutions have been exhausted should
regulatory initiatives be contemplated.
So how will we know that these outcomes have been achieved? Here are four general propositions.
First, more engaged consumers will be actively thinking about their financial needs and doing
something to address them - managing their money well and planning ahead for the longer-term.
Consumers will be active in educating themselves about financial products and in seeking out
information from a range of sources.
Second, consumers collectively will exert greater competitive pressure in the market by
shopping around for the best deal, regularly reviewing their financial position and moving from one
firm to another when it makes sense to do so. Consumers will judge firms on the quality of the
products and services provided, including how firms behave when things go wrong the way in which
firms deal with complaints, for example.

Third, and following closely from my last point, consumers will feel much more positive about
their engagement with the industry; they will take well informed decisions based on clear and
understandable information and will be clear about their own responsibilities in taking those decisions.
Fourth, more consumers will be included in the financial services world. This is partly about
capability but it is also about access. We recognize absolutely the central importance of financial
inclusion as part of this equation.

Capable and Confident Consumers

First, the issue of consumer capability.
There is no controversy about the nature of the problem. Increasing the level of consumer
capability is more critical now than it has ever been. We live in an age where responsibility is passing
from state to individual. Individuals are being asked to make more and more financial decisions, many
of which were previously taken for us in relation to health, or education, or pensions. But against this
increasing requirement, the actual capability of those who need to make financial decisions is too
often inadequate, in terms of basic literacy and numeracy, as well as in respect of specific financial
knowledge.
We can all cite examples of this, so I will limit myself to just one. A study by the Institute of
Financial Services showed that eight from ten people did not correctly identify the term APR as
describing the interest rate and other costs of a loan. I suspect that our baseline survey of financial
capability more on which in a moment will provide a decent further supply of such examples.
So the problem of financial capability is immense, in terms of both the basic requirements of
literacy and numeracy which underpin financial capability; and in terms of specific financial
knowledge.
So how can we respond to this magnitude of challenge?
As you know, FSA has been leading and co-ordinating the National Strategy for Financial
Capability. When the work began in 2003, we listened to those who cautioned against trying to
address all parts of the problem at once. We and our partners - Government, industry, the media, the
voluntary sector, and others - therefore examined seven areas: schools, young adults, the workplace,
families, retirement, borrowing and generic advice. Having undertaken a huge amount of pilot work to
determine what practical initiatives will put us in a position to achieve the step change in capability
that is required, we have started to move on to the next stage towards national delivery.

The Financial Capability Steering Group met last month to take stock of the National Strategy
and to consider options for the future. The Steering Group agreed to a set of specific priority projects
on which to focus covering:
i.

schools

ii.

higher education

iii.

the workplace

iv.

maternity/paternity leaver resources

v.

FSA information campaigns

vi.

development and roll-out of the Debt Test - which is designed to provide guidance to
individuals on whether they are at risk of becoming over-indebted

vii.

And further work on whether there is a commercial case for the delivery of generic advice.
In addition, the Steering Group left open the possibility of wider rollout of initiatives to Young

Adults not in education, employment or training, subject to the findings of ongoing pilots and an
examination of the associated business case. Supported by a team of specialist advisers, we are now
preparing business cases which will examine the public policy and potential commercial benefits of
taking these specific projects to national roll-out. The business cases will provide the basis for
meaningful discussions with public and private sector partners on sustainable funding and the other
commitments fundamental to making them happen this includes, for example, access to both public
and private sector workplaces for the provision of financial capability seminars to the workforce.
On timings, we want to be in a position by the end of the first quarter next year to have clear
delivery and funding plans in place to move to national roll-out. At the same time, we will also publish
another central part of our work on financial capability, the results of our baseline survey. This will
describe and measure the state of financial capability in the UK, looking at people's ability to manage
money, make financial choices, plan ahead and get help. We will repeat the survey periodically to
measure success in raising levels of financial capability and we will, of course, be developing further
success measures for the other specific priorities I mentioned.
This aims to support new and innovative projects dedicated to financial capability led by
voluntary and community organisations. We have made available a minimum of 200K for projects
running up until March 2007 with the majority of awards likely to be between 5,000-20,000. We were
delighted to receive over 300 applications to the Fund from which a shortlist of applicants has been
drawn up. We hope to announce the award winners before the end of year.

We are extremely grateful for the support of BBA members in taking forward work on financial
capability, including many contributions to the working groups. We have had particular support from
Lloyds-TSB, with Eric Stobart chairing the Workplace Group and Jim Dredge energetically directing
the programme of pilots, with full-time support from Alastair Hogg of the Prudential.
So we are now in a critical new phase as we work up the business cases. We are reaching the point
when the rubber really hits the road on the funding and other support required to make it all happen.
As was ever the case with this initiative, that requires the proactive involvement of government and
the industry.
Clear, Simple, Understandable Information
Alongside the common desire for more capable and confident consumers, we must ensure that
those consumers are given the information and advice that is both necessary and relevant when
making a financial decision. Just as you will be familiar with Principle 6 of our Principles for Business
essentially that firms should treat their customers fairly - Principle 7 explicitly states what we expect
from firms when it comes to providing information: "Firms must pay due regard to the information
needs of their clients and communicate information to them in a way which is clear, fair and not
misleading." This ranges from financial promotions in all guises, to product literature and covers all
institutions, from small one man advisors to major retail banks.
Good quality financial advice also plays an important role in ensuring that consumers have
expert help in making a complex range of important financial decisions. The provision of financial
advice is a large industry, and with rising incomes and wealth, and evidence that many individuals are
not investing enough for their retirement, there is significant scope for the advice market to expand
significantly. The challenge here for providers of advice is to demonstrate to more consumers that
there is value to them in paying for these services.
At the simplest level, this means a retail financial advice market that is providing good quality,
suitable advice to consumers. And that those consumers should be able to recognize when this is
happening, and when it is not, and to respond accordingly.
We are clear that the retail financial services market is not yet operating in a consistently
effective and efficient way. On the mortgages side, for example, our early findings report a mixed
picture in terms of standards. On the investments side, the market is still changing. Both product
providers and distributors face a range of challenges. They need to adapt their business strategies to
reflect a depolarized world. Some need to rebuild capital and balance sheets. All this is challenging

enough but comes at a time when the industry overall is still coping with sluggish demand for
investment products in weak markets and is trying to engage with consumers who still have low levels
of confidence in the sector.
As regulator, we do not want to prescribe how the advice market should be structured. Rather,
we want to allow firms to choose what advice they provide, and to allow consumers to choose what
advice they want to take and how they pay for it. And we want consumers to be able to understand
the different types of advice that are available to them.
That is why depolarization is largely a permissive regime and firms are free to develop their
business models in a more tailored way for their customer base, or they can continue trading pretty
much as they were before albeit with improved disclosure and other adjustments such as the
requirement for 'independent' firms to offer a fee option.
As you would expect, we are going to conduct a review of how depolarization is working in
practice. The first stage is to check compliance with the new rules. Thereafter, and over longer time
periods, we will review the extent to which firm and consumer behavior has altered.
We know that those who use our fact sheets, calculators and other web-based material find
them to be helpful. But we also know that we need to do more to make that material more accessible
and to promote its availability, including in partnership with others such as the BBC. The current
mortgageslaidbare campaign is a hint of our new approach in this area. We are part-way through the
campaign, but we have already seen a very significant increase in traffic to our mortgage resources
and we will feedback on the overall success of the campaign in due course. We are planning two
further campaigns early in the New Year to cover issues around pensions and A-day and to promote
the various resources available to help consumers plan their finances effectively. Again, we will
ensure that we measure the effectives of these campaigns in influencing consumer behavior
Treating Customers Fairly
As I have set out, the fair treatment of customers by firms is a key part of the broader picture.
As you know, our approach has been not to define precisely what constitutes "treating customers
fairly", but rather to challenge the senior management of firms to work this out for themselves, taking
into account the particular types of business that they undertake. We recognized that many of you
have already done or are in the process of carrying out a "gap analysis", to identify areas of business
where more needs to be done.

Treating Customers Fairly needs to be embedded into the culture of a firm at all levels, so that
over time it becomes business as usual. This is all very much a responsibility of senior management,
not just a compliance issue.
To help, we have produced a number of statements of good practice and case studies to
illustrate some of the considerations that senior management should take into account. We have
published many of these on our website and further case studies on management information,
remuneration, complaint-handling and others were published last month.
These examples reflect real life scenarios and provide material which firms may find useful as
background when considering how best to ensure that they treat their customers fairly. In particular,
they are intended to illustrate the kinds of questions that firms should consider in particular sets of
circumstances. Inevitably, the issues raised are not exhaustive and the practices observed are not
prescriptive treating customers fairly is not something that lends itself to box-ticking.
We have also suggested that a useful starting point is to think of treating customers fairly in terms of
the product life cycle. So depending on the precise nature of a firm's business this could mean
addressing the fair treatment of customers at any of the following stages: product design and
governance; identifying target markets; marketing and promoting the product; sales and advice
processes; the remuneration of sales forces and advisers; after sales information; and complaints
handling.
As part of the next stage, we will also be looking at quality of advice. The aim will be to
consider how we can measure and improve the overall quality of advice, rather than looking at
specific products or examples where the advice process goes wrong. We will test current practices,
looking at a range of areas including training and competence; the systems and controls that support
good advice; and entry standards for advisers and firms.

CHAPTER- 2
RISK-BASED REGULATION
Introduction
Which brings us to the final Pillar of our retail strategy? Lets hark back to the earlier remarks
about our preference for market-based solutions over regulatory intervention. Proportionate, riskbased regulation is what brings this to life helping us determine where our resources are best
deployed to address the biggest risks that carry the highest impact were they to crystallize.
For example, we acknowledge that the mortgage and general insurance intermediaries market has
undergone significant changes and we have been keen to stress that we have taken a graduated
approach to supervision in the first year of the regimes. That is, in the main we are telling firms what
they need to do to improve compliance levels which we'll come back and check and it is only in the
more serious cases that we'll do further investigation. As these changes become more familiar to the
market our approach will become firmer.
We deal with emerging retail risks in two ways. First, where supervisors identify risks within the
individual firms they supervise, they may take steps to mitigate them with the firm concerned.
Second, we seek to identify risks arising across different types of firms and market sectors and carry
out work to mitigate them where our risk-based approach justifies doing so so called thematic work.
Id like to spend a few minutes describing our approach to this.

Identifying thematic risks

Risks in the retail market take many forms; risks to consumers, firms, sectors, or the market as
a whole. We identify emerging retail risks in a number of ways, including:
i.

market data;

ii.

current trends and developments in the markets;

iii.

financial promotions;

iv.

issues identified through our discussions with firms; and

v.

Risks identified by our sector teams, supervisors, contact centers, and other stakeholders.
We look for flags like new or unexpected developments. For example, an unusual surge in

retail sales of a product given market conditions might prompt us to make further enquiries about how

this produce is being sold. Our monitoring of financial promotions is also an important source of
intelligence.
We priorities our workload to focus on the most significant risks. Where a development could
indicate a new risk, we will often do a small amount of work to find out more and help us identify
whether action is warranted. In around 60% of the issues we investigate no further action is taken.
If we do decide regulatory action is justified, we consider what tools to use in light of the
circumstances of each risk. Some of the key risks we have identified and on which we decided to do
further work include:
i.

Payment Protection Insurance

ii.

Mortgage Disclosure Documents

iii.

Lifetime mortgages

iv.

Contracting out of the state second pension

v.

Premium reviews and variable interest rates; and

vi.

Income Withdrawal

How we select firms for thematic risks

Thematic work involves looking at a particular issue or set of issues across sample of firms.
When we contact firms they sometimes assume that, because they have been selected, this implies
that we have already decided that there is a problem in that firm. This is not the case. The decision
takes into account a number of factors, including:
i.

How many and what type of firms are active in the market or product that we are
interested in.

ii.

The desire to find a sample of firms that is representative of the various sizes or structures
in the market.

iii.

The desire to create a representative sample. This will include some firms which we think
are likely to set the highest standards in terms of systems and controls and practices more
generally in that area.

iv.

Whether any of the firms are or have recently been involved in any other areas of our
work, so that where possible thematic work is spread across firms. Achieving this spread
can be a particular challenge when it comes to the largest groups. Where firms have

dedicated supervisors, the supervisor will be involved in decisions about which thematic
projects the firm takes part in.
We realize that this "air traffic control" of thematic work and the burden it can impose is of
concern to firms and we are committed to holding regular dialogue with the industry to set out an
indicative timetable for our future thematic work. Our Business Plan, which will be published in
January, provides an ideal peg for such a discussion. We are also examining whether the process for
communicating the outcome of thematic work to individual firms and industry trade associations can
be improved. As you will have gathered from my description, thematic work will remain a key
supervisory tool, allowing us to respond quickly to emerging risks.

Financial inclusion
I said at the start that financial inclusion is an important consideration in our work.
The FSA's position on this is very clear. Under the 'public awareness' objective, the FSA has a
statutory responsibility for promoting public understanding of the financial system. This objective is
intended to be interpreted quite generally.So while the FSA has no statutory responsibility for financial
inclusion, we are absolutely mindful of the impact of our work on all groups.
We see our role in this as twofold.
First, in our regulation of the industry we want to avoid creating barriers to inclusion, including
providing assistance to those taking innovative approaches to understand the relevant regulatory
issues and possible solutions. When authorizing the first purely Islamic bank in Europe we worked
constructively with the senior management of the Islamic Bank of Britain on such issues.
We have been very active in working with third sector lenders, for example in delivering a
proportionate, lighter touch regulatory regime for credit unions and in working with the Community
Development Finance Association to see if a code of practice for Community Development Finance
Institutions is the best way forward for these organisations. And we have, over the last eighteen
months, been leading a multi-agency initiative to 'defuse the identification issue. We welcome the
BBA's contribution to the work of the Joint Money Laundering Steering Group, whose new Guidance
is published next year. This is expected to include a wider range of options for people to prove their
ID so that, by the end of next year, ID should be a significantly reduced barrier to financial inclusion.

Second, in our consumer awareness remit we aim to help consumers become more confident
and capable through the National Strategy for Financial Capability and our wider education and
information work about which I spoke earlier.
So the FSA is just one partner in the work being done here. The Banking industry, led by its
trade association, is of course very active, in particular in addressing the challenge laid down by
Government to make significant progress towards halving the number of unbanked households in the
UK within 2 years. In partnership with the BBA, we have recently revised our guide to Basic Bank
accounts. There are many further examples of industry activity in this area. We look forward to
continuing to work with banks, the BBA and other parties to ensure the difficulties and barriers faced
by those who are excluded from financial services can be overcome.
Finally, a very brief word about two other significant challenges in the retail markets area, not
least in respect of the impact of European legislation.
MIFID
It is hard to exaggerate the pervasive effect which MiFID will exert over financial markets and
financial institutions and it is important to recognize that this is not a wholesale business issue.
We will do all we can to make the timetable pressures more manageable. To help give focus to
firms' preparatory efforts, pending publication of the Commission's recommendations and then of our
CPs on implementation, we plan to publish in the next week or so a "Planning for MiFID document
designed to help firms get to grips with their planning for implementation despite the continuing
debate over Level 2 measures. I urge you to study it.
Strategy challenges of A-Day
Another major challenge facing the industry is A-Day, in other words 6 April 2006, when the
new pension tax simplification rules take effect. Last September my colleague Sarah Wilson warned
firms to make sure they review the business and strategic impact of A-day.
A-Day is very significant for those of you who deal with the complexities and intricacies of
pensions on a regular basis, and who advise consumers on a product which they find particularly
complex. It is clear that much work is going on in many firms but, with just over four months to go,
both firms and advisers now urgently need to start planning for the changes if they have not already
done so.

And a further dimension, of course, is that the government is expected to consult on proposals
to introduce a new regulated activity for personal pensions, meaning that the FSA could be regulating
the sale of Self Invested Personal Pensions from April 2007.

Retail Loyalty Programs: seven points to ponder

The shape shifter: Customer knowledge is the single most powerful pay-off of a Loyalty
program. There's a load of analytical approaches beyond RFM for retailers wishing to leverage
customer knowledge. Not all of these appear to be easy to adopt and marketers shun analytics more
out of a lack of understanding of what it can do for them. Get the experts in, listen to them you'll find
that there's ROI in it for you.
The Painter: Building a loyalty program concept requires not just sound strategic thinking, but
loads of rigor. The success lies in being able to detail out solutions to over 100 decision points that a
loyalty program concept needs to cover. You cannot be reacting to situations as they happen!
The Magician: The loyalty card is the most familiar face of a loyalty program. There are many
options here from Mag Stripe to RFID, stand alone to coalition, but the key point is that launching a
card does not a loyalty program make. This space is littered with failed programs that were launched
as a card and little else.
The Neuromancer: The software on which your program depends needs to be designed
carefully, and should handle all aspects of your program. Retail POS solutions often offer a basic
loyalty module these are usually inadequate! The point: Don't design your program to fit the
software.
The Band: The team that drives the program internally needs to be composed of skills that
are difficult to find in any market. Direct marketing, CRM and Loyalty skills need to be nurtured and
the team needs top management support. Importantly, you will need to rely on the right partners to
come in with specific skills.
The Campaigner: Campaign management practices are better established amongst the
banks than retailers, but here is where the real pay-off is. Leverage campaign management tools as
they will allow you to run hundreds of targeted campaigns which really do pay off, as compared to a
few festival offers and generic promotions.

The Timekeeper: Set expectations right. To launch a program AND expect a jump in sales
within 6 months is pushing it. Building up a quality member base (no mass enrolments), setting up the
back end, campaign management these all take time and effort, and the metrics to measure
success take time to show the returns.
Business Skills
Good business management is the key to success of any business house. It is a creative force
which helps in the optimum utilization of resources of an organisation. The process of managing a
business comprises several intertwined elements by which the goals and objectives of the
organisation are achieved. These elements or functions include, promoting and marketing the product
produced by the firm; making the product available to prospective consumers through proper
distribution channels; managing the accounts and finances of the firm; protecting its intellectual
property, etc. It also involves creating harmony among the working of various departments and
divisions of the firm. Managing human resources and managing relationship with the customer's are
the most important elements in the whole process of business management.
An entrepreneur with good managerial skills can convert the disorganized resources of men,
money, material and machinery into a productive business enterprise. In a modern business, different
types of skills are required in order to effectively manage an organisation in a dynamic environment.
These skills include
Technical skills
Refer to the ability and knowledge in using equipment, techniques and procedures involved in
performing specific tasks. An entrepreneur must know the skills which should be employed in his
enterprise and must understand both the role of each skill employed and the inter-relationship
between skills.
Human skills
Consist of the ability to work effectively with other people both as individuals and as members
of a group. Such skills are required by an entrepreneur in order to win co-operation of others and to
build a base for a successful work team.

Conceptual skills
Comprise the ability to see the whole organisation and the inter-relations between its parts.
Such skills help the entrepreneur to conceptualize the environment and to take a broad and
farsighted view of the organisation. These skills include the competence to understand a problem
facing the organisation in all its aspects and solving the problem. It is necessary for rational decision
making
Managing is a dynamic and an on-going process which continues to operate so long as there
is an organized action for the achievement of group goals.

Client Relationship Management

Client Relationship Management (CRM) means managing your client. It is a business strategy
which is used to create and sustain long-term, profitable client relationships. It means understanding
customers using quantitative and qualitative research, segmenting them and articulating positioning
statements for each of the segments based on their expectations and contribution to profits. It is
necessary in order to retain old customers, acquire new customers and improve profitability from the
existing client base. The Concept of CRM makes its origin from the changed approach to business
management and profitability. In other words, the traditional approach of making one-time sales is
being replaced with making long-term commitments to customers. The new approach puts forward
the need to have a proper customer/client relationship management (CRM) strategy in the
organisation. It revolves around the customers. It is a set of processes of creating, communicating
and delivering value to customers and for managing customer relationships in ways that benefit the
organization and its stakeholders. It is a comprehensive strategy of acquiring, retaining and
partnering with carefully targeted customers to enhance long-term relationships with them. This
management approach seeks to create superior value for the company and the customers.
Client relationship and satisfaction is a critical dimension of every business initiative.
Foundation of a successful business lay in its successful client relationship management. Client's
satisfaction with the performance of the company depends on how well their professional and
personal needs are addressed to by the company. Client's pay attention not only on what the
company does but also on how well it does it. Hence, client's perception of service quality needs to be
properly managed.

An efficient and effective CRM strategy is beneficial to an organisation in several ways:i.

Most importantly, it helps the company to build and maintain a loyal customer
base.

ii.

It can have more volume of sales by selling more to the group of those
customers with whom it has maintained a good relationship and are satisfied
with the firm and its quality of services.

iii.

It overtime incurs lower costs in serving those customers because of their

Increasing confidence and lesser doubts or questions about the product.

iv.

It can resort to lesser promotional campaigns in order to attract those

customers.

It also enjoys the benefit of retaining its employees if it has a stable base of satisfied customers.
Besides, customers also want to remain loyal to a firm because they also enjoy benefits from such
long-term association. It gives them a feeling of trust and confidence in the firm's services along
with a sense of a reduced anxiety about the product. Overtime, in a long-term customer-firm
relationship, a service provider may actually become a part of the customer's social support
system. Such customers may even receive special treatment from the organisation in the form of:
- getting the benefit of doubt; being given a special deal or price; getting preferential treatment etc.
A successful CRM initiatives start with a business philosophy that aligns company activities
around customer needs. The level of professionalism, listening skills, availability, responsiveness,
reliability, etc form an important part of the client relationship management. CRM covers all the
methods and technologies used by the companies to manage their relationship with their clients.
The process of CRM includes:i.

Identifying the factors important to clients

ii.

Promoting a client-oriented philosophy

iii.

Adopting client based measures

iv.

Developing end-to-end processes to serve the clients

v.

Providing successful client support

vi.

Handling client complaints

CRM virtually had its beginnings in Sales Force Automation (SFA) which is a process of
providing the sales force of a company with technology support in order to improve the efficiency of
the selling process. The main benefits of SFA are:-the improvement in customer service by helping

the sales force responds quickly & accurately; improvement in sales force productivity; and better
management control and visibility of the sales process.
Generally, CRM works at two levels
Operational CRM, also known as front office CRM, provides support to basic business
processes such as sales, marketing, services, etc. It involves areas where the customer is
i.

Directly in contact with the company, these contacts are classified into two: - (i)
Inbound contact are the ones in which a customer accesses the company support
center or website or meets the company employees. (ii) Outbound contact are the ones
in which a sales representative of the firm makes direct sales to the customers or
makes a sales call or e-mails a marketing message. These direct interactions are
referred to as customer's 'touch points'. Each interaction with a customer is generally
added to a customer's history and company can retrieve such information from the
database as and when needed.

ii.

Analytical CRM,

also known as back-office or strategic CRM,

involves

understanding the customer activities that occurred in the front office. It involves
retaining existing customers and providing timely and regular information to them. It
uses the technology to compile customer data to facilitate analysis and develop new
business processes to refine business decisions.
Product-Centricity is the key challenge that an organisation needs to overcome, in order to have a
successful client relationship management. In other words, an organisation needs to become clientcentric, because it will allow for a consistent interaction with its most important constituency, The
Clients'.

CHAPTER-3
RETAIL MARKETING STRATEGY
To develop a finely honed retail strategy, you often need to undertake primary or secondary
market research. You need to analyze your competition, their products or services and their approach
to the market. You need to use this information to shape your retail market strategy and then develop
go to market messaging and retail marketing campaigns. Sometimes you need to recruit the right
partners. Your sales force needs to develop key account plans and execute them efficiently. Often
they need retail specific tools to help them do this. Finally, they need the industry training so that they
can talk the talk and walk the walk.
Faced with these needs, many of the worlds leading technology vendors turn to Martec
International for assistance. Companies like Microsoft, SAP, NCR, Hewlett Packard and many others
use Martecs expertise and tools to enhance their go to market activities. They come to Martec
because we blend many years of retail expertise with a deep knowledge of what a sales person
needs to do to be successful. We show them how to use their retail knowledge and tools to close
business.
Martec provides primary and secondary market research services, as well as publishing
studies of the retailers such as our UK Top 100 Retailers IT in Retail Report. We supply a
comprehensive database of UK and North American retailers to support marketing activities and
provide a wide range of tools to help sales people develop account plans and execute sales
campaigns more effectively.
Most marketing strategies are geared to ensuring you beat your competitors. But you don't
usually expect to eliminate competition entirely.
That's what broadband DSL provider New Edge Networks has apparently done with its unique
small-market approach - although the company has had to revise its strategies in recent months, like
everyone else, and diversify to adapt to tough market conditions.
Based in Vancouver WA, New Edge started by offering DSL access services in small cities
and towns and semi-rural areas across the U.S., mainly to business customers. It's co-located in just
under 600 Telco central offices (COs) in 350 cities and towns in 29 states. The footprint takes in a
population of about 30.6 million.

Most of the focus is on small cities. Nearly half of New Edge's markets have a population of
less than 50,000, many of them one-CO towns.
In many of those COs, not even the local ILEC has competitive DSL offerings, and where the
ILEC does offer service, it is typically more focused on the residential market.
Clearly there are reasons why the New Edge approach has not attracted a host of copycats,
the most obvious being that prospective customers are simply thinner on the ground in small
communities than they are in big cities. To pursue such a strategy nationally as New Edge has done
also means the company had to install more central office infrastructure and spend more on
connectivity than most CLECs to reach the same size customer base.
But there is another side to the equation, says New Edge president, CEO and co-founder Dan Moffat.
"We wanted to go into markets where others weren't," Moffat explains. "In metro markets,
you'd typically find Covad, North Point and Rhythms, probably others too, plus the ILEC all in the
same CO. In most of our markets, it's just us and the ILEC."It's clear now, with the demise of North
Point and with Rhythms' recent troubles, just how cut-throat competition has been in those larger
markets. Not that it hasn't been tough in smaller markets too. While New Edge did not have to
contend with deep-pocketed national competitors like North point and Covad - well, formerly deeppocketed - it did meet smaller rivals.
Moffat characterizes them as regional players. They included Jato Communications, Vectris
Communications and Connect South Communications. But all three have now retired from the field of
battle. The mistake too many DSL providers made, Moffat says, was blowing all their capital on rollouts, leaving nothing for marketing through the tough times.
The other reason New Edge adopted its small-market strategy is that Moffat, who had worked
extensively with independent telcos as a consultant, knew that contrary to expectations, demand for
broadband services was high in small communities. People in these markets want the services just
as badly as people in metro markets," Moffat says. "Maybe more so." For many people in small
markets, he notes, living there is a work- and life-style choice. But to get those benefits, they sacrifice
easy access to goods and services, entertainment - and customers. So many see availability of
broadband services as even more vital as people do in larger markets. "For those," Moffat says,
"[broadband] opens up a whole new window on the world."

Finally, despite the obvious concentration of big company headquarters in a relatively few
major markets that New Edge avoids, Moffat notes that 15 per cent of major national companies have
bases of operation within his footprint. New Edge had a pretty good idea how to market services in
small communities because of Moffat's experience with small telcos. He isn't prepared to spill the
beans on all his secrets, but he does mention a few.
First, New Edge adopted a pragmatic wholesale-retail business model. The preference is
always to go into a new market with a good, strong local ISP partner. "You want the people who go
for coffee [with prospective customers] or sit with them on local Chambers of Commerce," Moffat
explains. "People well entrenched in the community." But where it can't find a strong and willing
partner - some communities didn't even have local dial-up service when New Edge came to town - it
has for the last three months been able to offer ISP services itself.
Moffat also talks about the need for "guerilla tactics" as opposed to "carpet bombing" when
marketing in smaller communities. "In a metro market," he says, "you do the roll-through at about
50,000 feet - usually with a big media blitz. But with our markets, we're more specific and targeted."
"There is much less reliance on mass media. The marketing is usually done more through lists and
direct mail and inside (telephone) sales. And it relies heavily on local knowledge which we mainly get
from our partners."
Local partners always help design the campaigns, though New Edge does have its own
templates for small-town marketing drives. Local partners also share marketing costs, usually splitting
it 50-50 with New Edge. "They've got to have some skin in the game," Moffat says. But as relatively
successful as New Edge has been with this fairly unique strategy on the broadband DSL side, it likely
would not have survived if it had relied entirely on that business.
Luckily, one of the requirements of a national small-market strategy is that you need a fiber
ring network to backhaul traffic from all those little markets to the Internet - or wherever. New Edge's
backbone includes 18 regional access points.
The company had been using it all along to offer virtual private network (VPN), LAN
interconnection and related services to regional and national enterprise customers. Recently it
realized these services were actually growing faster than broadband DSL. In fact, they now account
for more than 50 per cent of New Edge's revenues. So a month and a half ago, the company
announced it was scaling back its aggressive plan for rolling out new markets - at one time it had
intended to be in 1,200 COs by the end of 2000. It also laid off 55 employees and refocused

operations to help it take advantage of the wide area services market. Does this mean New Edge's
small-market DSL strategy really failed. Moffat doesn't see it that way. There's no question, he says,
that demand is still there and will continue to grow.
The drying up of capital markets has had two important impacts, though. It means a wider rollout by New Edge is out of the question right now. But it also makes it difficult or impossible for any
new competitor to enter its markets. And that means New Edge in effect has a competition-free zone.
When capital markets do loosen up again, its position may be virtually unassailable.

CHAPTER-4
INTERNATIONAL RETAILING
Introduction
International Expansion of Retailers
In order to gain competitive advantage and to increase sales and profits, retailers are rapidly
expanding internationally. Among leading retailers conquering international markets are Wal-Mart
(U.S.), Metro AG (Germany), Sears Roebuck (U.S.), followed by a number of German groups
Rewe, Edeka, and Aldi.
International Retailing Defined
All activities involved in selling products and services to final international consumers for their
personal consumption. It involves operations of international retailers beyond home-country borders,
along with operations of local retailers in different countries worldwide.
Retail Formats
Variations in Different Markets: There are three main retail formats: general merchandise
retailing, food retailing, and non-store retailing.

General Merchandise Retailing

i.

Specialty Stores, stores that offer a narrow product line and wide assortment, category
include clothing stores, bookstores, toy stores, etc. Represent the main retail format in
developing countries, but are popular in developed countries as well

ii.

Specialized Markets, large markets that contain specialty stores specializing in a

particular product category; exist in both developed and developing countries.

iii.

Department Stores, large stores that offer a broad variety of products, as well as a
wide assortment. Although department stores have suffered losses lately in North
America and many appear to be retrenching, they abound both in Western and Eastern
Europe, and are very popular in Asia.

iv.

General Merchandise Discount Stores, stores that sell high volumes of merchandise,
offer limited service, and charge lower prices. All-purpose discount stores like Wal-Mart
offer a wide variety of merchandise and limited depth. Category specialists (category

killers) like Staples' and Toys R Us carry a narrow variety of merchandise and offer a
wide assortment.
v.

Off-Price Retailers, retailers that sell brand name and designer merchandise below
regular retail price; they usually sell overruns, irregular products and products from
earlier seasons. Off-price retailers are very popular in the United States and Canada
and are rapidly catching on in the rest of the world.

vi.

Catalog Showrooms, retailers that offer high-turnover, brand name products at

discount prices. Customers usually order from a catalog in the showroom where the
product is only displayed, then pick up the goods at a designated location. Ikea has
pioneered the catalog showroom concept around the world.

Food Retailers
i. Conventional Supermarkets, self-service retailers with high annual sales; abound
worldwide.
ii. Superstores, large food retailers that sell food, drugs, and other products.

In this

category are: combination stores that sell foods and drugs, which are popular in the
U.S., and hypermarkets, which combine supermarket, discount, and warehouse retailing
principles, which are popular in the rest of the world, especially in Europe and Latin
America.
iii. Warehouse Clubs or Wholesale Clubs, stores that require members to pay an annual
fee and operate in low-overhead, warehouse-type facilities, offering limited lines of
brand name and dealer-brand groceries, apparel and other goods at a discount.
iv. Convenience Stores, small retailers located in residential areas; carry limited lines of
higher-turnover necessities. While the formats differ, convenience stores abound in both
developing and developed countries.

Non-Store Retailing
i.

Internet Retailing,(also known as interactive home shopping or electronic retailing): a

venue for selling merchandise through the Internet; includes both the new dot-com
companies along with traditional retailers attempting additional market penetration using
the Internet.

ii.

Vending Machines, retailing format that has become very popular, with extent of use
varying from country to countrythey are particularly popular and omnipresent in
Japan.

iii.

Television Home Shopping, a venue for selling merchandise to consumers in their

homes using cable channels. Examples of television home shopping are infomercials
and direct response advertising, popular in North America and Europe, and becoming
increasingly popular in Asian markets.

iv.

Catalog Retailing and Direct Mail Retailing, a venue for selling merchandise to
consumers using catalogs and other types of direct mail. It allows for the international
expansion of retailers, but must be adapted to local market needs and practices. There
are many obstacles to catalog retailing in developing countries: deficient telephone
service, unreliable mail service, and low income, among others.

v.

Direct Selling, a retailing venue whereby a salesperson, typically an independent

distributor, contacts a consumer, demonstrates product use and benefits, takes orders
and delivers the merchandise. Direct selling firms are most active in the growth markets
of Southeast Asia, Central and Eastern Europe, and Latin America. Recently, due to
the negative publicity surrounding direct selling practices, China has banned all direct
selling operations.

vi.

Network

Marketing,

variation

on

direct

selling,

involves

signing

up

sales

representatives to go into business for themselves with minimal start-up capital. Their
primary task is to sell more "distributorships" and merchandise. Network marketing is
growing rapidly, especially in emerging markets.

Issues in International Retailing

i.

Legislation and Regulation local governmental regulations differ from one market to
another. Legislation has a profound impact on a firm's operations through regulations
that restrict the firms' marketing strategies in the target market.

ii.

Taxation and Cross-Border Shopping in countries where consumers are not charged
duties for products they purchase from a neighboring country, consumers' purchase
decisions become driven by tax differences, rather than by differences in producer
prices. This may cause reduced profits for domestic retailers.

iii.

Variation in Retail Practices Consumer Perspective, retail practices vary from one
market to another depending on consumer practices and preferences in the market. In
the United States, for example, consumers purchase products in bulk and less
frequently. In Japan and in most European countries, consumers purchase products in
smaller quantities and on a daily basis.

iv.

Variation in Retail Practices Sales people and Management sales service differs
from market to market, ranging from extremely friendly to curt and even rude
salespeople. Some stores can charge an entrance fee for people shopping there, while
other stores require a particular dress code of their customers.

CHAPTER-5
IMPACT OF RETAIL MANAGEMENT IN THE GROWTH OF INDIA ECONOMY

Definition and Scope of Retailing

The word retail is derived from the French word retailer, meaning to cut a piece off or to break
bulk. In simple terms, it implies a first-hand transaction with the customer. Retailing can be defined
as the buying and selling of goods and services. It can also be defined as the timely delivery of
goods and services demanded by consumers at prices that are competitive and affordable.
Retailing involves a direct interface with the customer and the coordination of business
activities from end to end- right from the concept or design stage of a product or offering, to its
delivery and post-delivery service to the customer. The industry has contributed to the economic
growth of many countries and is undoubtedly one of the fastest changing and dynamic industries in
the world today.

Types of Retail Operations

Retail operations enable a store to function smoothly without any hindrances. The significant
types of retail operations consist of:
i.

Department store

ii.

Specialty store

iii.

Discount/Mass Merchandisers

iv.

Warehouse/Wholesale clubs

v.

Factory outlet

Retail Management System targets small and midsize retailers seeking to automate their
stores. The package runs on personal computers to manage a range of store operations and
customer marketing tasks, including point of sale; operations; inventory control and tracking;
pricing; sales and promotions; customer management and marketing; employee management;
customized reports; and information security.

The Emerging Sectors in Retailing

Retailing, one of the largest sectors in the global economy, is going through a transition
phase not only in India but the world over. For a long time, the corner grocery store was the only
choice available to the consumer, especially in the urban areas. This is slowly giving way to
international formats of retailing. The traditional food and grocery segment has seen the
emergence of supermarkets/grocery chains (Food World, Nilgiris, and Apna Bazaar), convenience
stores (Convenio, HP Speed mart) and fast-food chains.
It is the non-food segment; however that foray has been made into a variety of new sectors.
These

include

lifestyle/fashion

segments

(Shoppers'

Stop,

Globus,

Lifestyle,

Westside),

apparel/accessories (Pantaloon, Levis, Reebok), books/music/gifts (Archies, Music World, rosswords,

Landmark), appliances and consumer durables (Viveks, Jainsons, Vasant & Co.), drugs and harmacy
(Health and Glow, Apollo).
The emergence of new sectors has been accompanied by changes in existing formats as well
as the beginning of new formats:
i.

Hyper marts

ii.

Large supermarkets, typically 3,500-5,000 sq. ft

iii.

Mini supermarkets, typically 1,000-2,000 sq. ft

iv.

Convenience stores, typically 750-1,000sq. ft

v.

Discount/shopping list grocer

The traditional grocers, by introducing self-service formats as well as value-added services

such as credit and home delivery, have tried to redefine themselves. However, the boom in retailing
has been confined primarily to the urban markets in the country. Even there, large chunks are yet to
feel the impact of organized retailing. There are two primary reasons for this. First, the modern retailer
is yet to feel the saturation' effect in the urban market and has, therefore, probably not looked at the
other markets as seriously. Second, the modern retailing trend, despite its cost-effectiveness, has
come to be identified with lifestyles.
In order to appeal to all classes of the society, retail stores would have to identify with different
lifestyles. In a sense, this trend is already visible with the emergence of stores with an essentially
`value for money' image. The attractiveness of the other stores actually appeals to the existing

affluent class as well as those who aspire for to be part of this class. Hence, one can assume that the
retailing revolution is emerging along the lines of the economic evolution of society.

Retailing Scenario- Global View

Retailing in more developed countries is a big business and better organized than what in
India. According to a report published by McKinsey & Co. along with the Confederation of the Indian
Industry the global retail business is a worth a staggering US$ 6.6 trillion. In the developed world,
most of it is accounted for by the organized retail sector.
The service sector accounts for a large share of GDP in most developed economies. And the
retail sector forms a very strong component of the service sector. In short, as long as people need to
buy, retail will generate employment. Globally, retailing is a customer-centric with a emphasis on
innovation in products, processes and services.
With total sales of US$ 6.6 trillion, retailing is the worlds largest private industry, ahead of
finance and engineering. Some of the worlds largest companies are in this sector: over 50 Fortune,
500 companies and around 25 of the Asian Top 200 firms and retailers. Wal-Mart, the world second
largest retailer, has a turnover of US$ 260 billion, almost one-third of India GDP.
Retailing in India is gradually inching its way to becoming the next boom industry. The whole
concept of shopping has altered in terms of format and consumer buying behavior, ushering in a
revolution in shopping. Modern retail has entered India as seen in sprawling shopping centres,
multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one
roof.
The Indian retailing sector is at an inflexion point where the growth of organized retail and
growth in the consumption by Indians is going to adopt a higher growth trajectory. The Indian
population is witnessing a significant change in its demographics. A large young working
population with median age of 24 years, nuclear families in urban areas, along with increasing
working-women population and emerging opportunities in the services sector are going to be the
key growth drivers of the organized retail sector.
Big in size and turnover, Indian retailing industry is characterized by certain attributes.
The network of retailers reaches every nook and corner of the country. So any product
produced anywhere in the country can be easily accessed by the buyers from any location. Thus
the spatial convenience of Indian retailers is vary high.

Secondly, in India the retailing industry is an unorganized lot consisting of, in most of the
cases, small entrepreneurs. And the virtual omnipresence of the Indian retailer can be attributed to
these small entrepreneurs only.
The second attribute gives rise to the following characteristics: Power of the retailers, as
such is very less, and in many cases it is negligible. This weakness has been exploited by the
manufacturers and the stronger partners of the marketing channel. The retailers, in general, abide
by the terms and conditions set by the manufacturers and other "big brothers" of the channel.
The manufacturers cannot directly reach all retailers in a particular geographical area.
Therefore, the manufacturers cannot maintain the desired relationship with the retailers, which in
turn, make management of the channel complicated. This also makes the possibility of a direct
feedback loop from the retailers almost remote.
Therefore, the member operating between the manufacturers and retailers become more
powerful as they can block the channel of communication between the two. So the dependence of
retailers on other channel members increases to a high extent. Thus the participation of retailers in
the flows of marketing mix becomes lower than desired. The financial strength of the Indian
retailers, in general, is very low and hence the investment capabilities. This makes the retailers
more dependent on the other channel members. However, these characteristics are peculiar to
the small retail outlets and may not be present at every kind of retail level.

Retail Shopkeepers
India has sometimes been called a nation of shopkeepers. This epithet has its roots in the
huge number of retail enterprises in India, which totaled over 12 million in 2003. About 78% of
these are small family businesses utilizing only household labour. Even among retail enterprises
that employ hired workers, the bulk of them use less than three workers.
India's retail sector appears underdeveloped not only by the standards of industrialized
countries but also in comparison with several other emerging markets in Asia and elsewhere.
There are only 14 companies that run department stores and two with hypermarkets. While the
number of businesses operating supermarkets is higher (385 in 2003), most of these had only one
outlet. The number of companies with supermarket chains was less than 10.

Retail Sales
Retail sales, which amounted to about Rs7, 400 billion in 2002, expanded at an average
annual rate of 7% during 1999-2002. With the upturn in economic growth during 2003, retail sales
are also expected to expand at a higher pace of nearly 10%.
In a developing country like India, a large chunk of consumer expenditure is on basic
necessities, especially food related items. Hence, it is not surprising that food, beverages and
tobacco accounted for as much as 71% of retail sales in 2002. The remaining 29% of retail sales
are non-food items. The share of food related items fell over the review period, down from 73% in
1999. This is to be expected as, with income growth, Indians, like consumers elsewhere, spent
more on non-food items compared with food products.
Sales through supermarkets and department stores are small compared with overall retail
sales. However, their sales grew much more rapidly (about 30% per year). As a result, their sales
almost tripled during this time. This high acceleration in sales through modern retail formats is
expected to continue during the next few years with the rapid growth in numbers of such outlets in
response to consumer demand and business potential.
Government Policy
There has been vigorous opposition to foreign direct investment (FDI) in retailing from small
traders who fear that foreign retailing companies would take away their business, lead to the
closure of many small trading businesses and result in considerable unemployment. Given the
political clout of the small trading community, because of their enormous numbers, the government
has barred FDI in retailing since 1997. Hence, at present, foreign retailers can only enter the
retailing sector through franchising agreements.
Growth of Retailing in India
Indian retailing industry has seen phenomenal growth in the last five years (2001-2006).
Organized retailing has finally emerged from the shadows of unorganized retailing and is
contributing significantly to the growth of Indian retail sector.
RNCOS India Retail Sector Analysis (2006-2007) report helps clients to analyze the
opportunities and factors critical to the success of retail industry in India. Organized retail will form
10% of total retailing by the end of this decade (2010).

From 2006 to 2010, the organized sector will grow at the CAGR of around 49.53% per annum.
Cultural and regional differences in India are the biggest challenges in front of retailers. This factor
deters the retailers in India from adopting a single retail format. Hypermarket is emerging as the
most favorable format for the time being in India. The arrival of multinationals will further push the
growth of hypermarket format, as it is the best way to compete with unorganized retailing in India.

Technology Impact:
The other important aspect of retailing relates to technology. It is widely felt that the key
differentiator between the successful and not so successful retailers is primarily in the area of
technology. Simultaneously, it will be technology that will help the organized retailer score over the
unorganized players, giving both cost and service advantages.
Retailing is a `technology-intensive' industry. It is quoted that everyday at least 500 gigabytes
of data are transmitted via satellite from the 1,200 point-of-sales counters of JC Penney to its
corporate headquarters. Successful retailers today work closely with their vendors to predict
consumer demand, shorten lead times, reduce inventory holding and thereby, save cost. Wal-Mart
pioneered the concept of building a competitive advantage through distribution and information
systems in the retailing industry. They introduced two innovative logistics techniques - crossdocking and electronic data interchange.
Today, online systems link point-of-sales terminals to the main office where detailed analyses
on sales by item, classification, stores or vendor are carried out online. Besides vendors, the focus
of the retailing sector is to develop the link with the consumer. `Data Warehousing' is an
established concept in the advanced nations. With the help of `database retailing', information on
existing and potential customers is tracked. Besides knowing what was purchased and by whom,
information on softer issues such as demographics and psychographics is captured.
Retailing, as discussed before, is at a nascent stage in our country. Most organized players
have managed to put the front ends in place, but these are relatively easy to copy. The relatively
complicated information systems and underlying technologies are in the process of being
established. Most grocery retailers such as Food World have started tracking consumer purchases
through CRM. The lifestyle retailers through their `affinity clubs' and `reward clubs' are establishing
their processes. The traditional retailers will always continue to exist but organized retailers are
working towards revamping their business to obtain strategic advantages at various levels market, cost, knowledge and customer.

With differentiating strategies - value for money, shopping experience, variety, quality,
discounts and advanced systems and technology in the back-end, change in the equilibrium with
manufacturers and a thorough understanding of the consumer behavior, the ground is all set for
the organized retailers.
It would be important to note, however, that the retailing industry in India is still a `protected
industry'. It is one of the few sectors which still has restrictions on FDI. Given the current trend in
liberalization, it will not be long before the retailing sector is also thrown open to international
competition. This will see a further segregation of the international retailing brands and the
domestic retailers, thereby injecting much greater dynamism into the market. That will be when the
real action will begin.
Major retailers in India
Indias top retailers are largely life style; clothing and apparel stores.This is followed by
grocery stores. Following the past trends and business models in the west retail giants such as
Pantaloon, Shoppers Stop and Lifestyle are likely to target metros and small cities almost doubling
their current number of stores. These Wal-Mart wannabes have the economy of scale to be low
medium cost retailers pocketing narrow margin.
Retailing Scenario-India
The retail scenario in India is unique. Much of it is in the unorganized sector, with over 12
million retail outlets of various sizes and formats. Almost 96% of these retail outlets are less than
500 sq.ft. In size, the per capita retail space in India being 2 sq.ft. Compared to the US figure of 16
sq.ft. Indias per capita retailing space is thus the lowest in the world. With more than 9 outlets
per1, 000 people, India has the largest number in the world. Most of them are independent and
contribute as much as 96% to total retail sales.

CHAPTER-6
INTERNATIONAL MARKETING
International marketing refers to marketing carried out by companies overseas or across national
borderlines. This strategy uses an extension of the techniques used in the home country of a firm.
Introduction to International Marketing. International marketing is simply the application of marketing
principles to more than one country. However, there is a crossover between what is commonly
expressed as international marketing and global marketing, which is a similar term.

International Marketing Environment

One of the fundamental steps that need to be taken prior to beginning international marketing
is the environmental analysis. Of course there are many tools on Marketing Teacher that would prove
useful at this stage such as lessons on the marketing environment, PEST Analysis, SWOT Analysis,
POWER SWOT and Five Forces Analysis. However, the very specific and unique nature of each
individual nation needs to be looked into. Below we consider the nature of an international PEST
Analysis, and the influence of tariff and non-tariff barriers.
An International PEST Analysis
PEST is a well-known and widely applied tool when considering the external nature of the
domestic market. However, it is equally as useful when applied to the nature of the international
marketing environment.
International PEST Analysis would consider
i.

How easy will it be to move from purely domestic to international marketing?

ii.

Would your business benefit from inward foreign investment?

iii.

What is the nature of competition within each individual market, and how will companies
from other nations compete when you meet with them head-to-head in unfamiliar
countries?

iv.

Many other factors those are specific to your organization or industry.

v.

Political

vi.

Is there any historical relationship between countries that would benefit or hinder
international marketing?

vii.

What is the influence of communities or unions for trading? E.g. The European Union
and its authority over European laws and regulation.

viii.
ix.

What kind of international and domestic laws will your business encounter?
What is the nature of politics in the country that you are targeting, and what is their view
on encouraging foreign competition from overseas?

Economic
What is the level of new industrial growth? E.g. China is experiencing terrific industrial growth.
What is the impact of currency fluctuations on exchange rates, and do your home market and your
new international market - share a common currency? E.g. Polish companies trading in Eire will use
Euros.
There are of course the usual economic indicators that one needs to be aware of such as
inflation, Gross Domestic Product (GDP), levels of employment, national income, the predisposition of
consumers to spend savings or to use credit, as well as many others.
Socio-cultural
Culture, religion and society are of huge importance. What are the cultural norms for doing
business? E.g. is there a form of barter? Will cultural norms impact upon your ability to trade
overseas? E.g. Putonghua is very difficult for many Western people to learn.
Technology
Do copyright, intellectual property laws or patents protect technology in other countries? E.g.
China and Jordan do not always respect international patents. Does your technology conform to local
laws? E.g. electrical items that run on non-domestic currents could be dangerous. Are technologies at
different stages in the Product Life Cycle (PLC) in various countries? E.g. versions/releases of
software.
Tariff and Non-Tariff Barriers
There are a number of fences that companies need to plan for when initialising international
marketing. Tariff and non-tariff barriers are still very common, even today.
Tariff barriers are charges imposed upon imports - so they are a form of import taxation. This
could mean that your margins are reduced so much that trading overseas becomes too unprofitable.
However they are normally transparent and you can plan to take them into account.

Non-tariff barriers are trickier to spot. Governments sometimes act in favour of their own
domestic industries rather than allow competition from overseas. Bureaucracy is a hurdle often
encountered by exporting companies - it takes many forms and includes unnecessary hold-ups and
red tape. Quotas are another form of non-tariff barrier i.e. restricting the quantity of a product that can
be imported into a particular country.

Retail Management Tips

It's The Customer Stupid - To paraphrase that popular, and successful, quote from Bill
Clinton's 1992 campaign: The single most important aspect of your business is your customers. Make
sure your entire team understands that - and acts like they understand it.
"Doctor" Your Customers - Everyone wants to think they are special. You can make your
customers feel special if you treat them like your family doctor treats you. For the time you are with
them, concentrate on them and what they are telling you. Exclude everything else for that period of
time.
Delight the Customer - It is heard a lot, but seldom practiced. Today I saw a production
supervisor straighten out a mess and, in the process, calm an irate customer. When I heard her tell
them to put two mugs with the company's logo into the package being sent to the customer, I knew
she understood what "Delight the Customer" means.
You never have to make up for a good start - If a project or a job gets off to a bad start it
can be difficult to catch up. Do your planning up front so you get a good start and you won't regret it.
Train Your Supervisors - The key to your business success is the productivity of your
employees. The key to employee productivity is their perception of their immediate supervisor. Invest
in training your supervisors and managers. It will pay off.
Under-promise and over-deliver - This goes beyond the old adage 'don't promise what you
can't deliver'. Instead, deliver more than what you promised. It's a good way to build customer rapport
- both outside and inside the company.
Your first obligation is to the customer - Without customers you don't have a business.
Treat them with the same respect you expect when you are a customer. Make sure everyone in your
organization understands the importance of customer service.

You have to make a difference - The group you manage has to be more effective, more
productive with you there than they would be if you were not. If they are as productive without you,
there is no business sense in keeping you on the payroll.
Your biggest business challenge is your competition - They have to take away your
customers to survive or grow. How are they going to do that? How can you stop them? How can you
steal their customers? Don't wait for it to happen. Start preparing NOW.
Follow Through On Sales Promises - Don't let your sales people make promises the
company can't meet. If they tell a customer they can have 100 gross of widgets "tomorrow before 10",
they better be sure that many are already in the warehouse. Nothing loses customers faster than
broken promises.
Doing it right costs less than doing it over - Have you ever been asked "Why is there never
enough time to do it right, but always enough time to do it over"? Save the costs, including customer
dissatisfaction and lower worker morale, by concentrating on doing the job right the first time.
Doesnt Be A Demotivator - Your job as a leader is to get and keep your people motivated
and working toward the common goal. Demeaning them, to their face or to others, erodes their
motivation. So does dismissively telling them that their ideas "are stupid". Watch your own actions to
be sure you aren't defeating your own efforts by demotivating your people.
Keep the flame alive - When people join your organization they are all fired up and ready to
do great things. Over time we all too often wear down that enthusiasm. Instead, do what you can to
fan the flames of their enthusiasm and you will be amazed at their output.
You Can't Listen With Your Mouth Open - Youre associates, your employees, your
suppliers, your customers all have something of value in what they have to say. Listen to the people
around you. You will never learn what it is if you drown them out by talking all the time. Remember,
the only thing that can come out of your mouth is something you already know. Shut up and learn.
Anyone can steer the ship in calm waters - What will set you apart in your career is how you
perform during the tough times. Don't become complacent and relax just because things are going
well. Plan ahead for the downturn.
It is easier to save a dollar than to earn a dollar - Every dollar you don't spend is a dollar
you don't have to earn to achieve the same profit level. Invest as needed to grow the business, buy
what you need, but don't spend without forethought and a good reason.

Appearance Does Matter - It may be a sad commentary on our superficial society, but
appearance does matter. Whether it's the packaging on your product, the first impression you make
when calling on a new client, or your company's web site people notice how things look. They care
about how things look and make judgments about you and/or your product based on appearance.
Get your people involved - It's a lot easier to get employees to stand behind a company
decision if they have the opportunity to participate in the discussion. Management still has to make
the decision. but if they have had the opportunity to make their point of view known employees are
more apt to stand behind the ultimate decision, even if they don't agree with it.
Fix The Problem, Not The Blame - It is far more productive, and less expensive, to figure out
what to do to fix a problem that has come up than it is to waste time trying to decide who's fault it was.
Actively Listen - Listen to your customers, your employees, your suppliers, and anyone else
who comes in contact with your business. Honestly evaluate what they have to say, without letting
your ego get in the way, and you will probably learn something that benefits your business

Winning at Store Management

Winning at Store Management includes a step-by-step approach to hiring top performers.
But hiring and motivating great people is only part of your success. You want to train them and make
sure they know what is expected of them so that you have the comfort of knowing that all of your
people are moving in the same direction; the comfort of knowing that your store is always in safe
hands.
This guide will teach you how to ensure that happens. With DMSRetails training plan, you
wont have to worry about fitting in the training time. The program is made to work with your time
constraints and your hour control or wage cost plan. The time and money you save on training is a
bonus. This is a training program that fits your budget. Lets face it, you have a limited number of
staff hours available to use. Its up to you to use those hours in the most productive way possible.
With this guide youll receive tools to make training fit into your schedule effortlessly. You wont
believe how easy it is! Your new people will learn how to do their job, how to conduct themselves in
an exemplary fashion and how to succeed. That's an achievement to be proud of.
Imagine that you have the best people and they are fully trained and ready to succeed
In addition to hiring top performers, training them well and preparing them for success, the task
of managing your hours and the many changing priorities you have every day is incredibly important.

Youll easily rise to the challenge with the skills youll develop by reading and applying Winning at
Store Management. Youll effectively manage every hour, every day, every week and so on.
Planning and managing your time will make a huge difference to the level of success you will achieve.
With this guide, youll become highly effective at managing every day and will even start to do some
long range planning. Thats a skill that will earn you a lot of respect from your executive. Top
management wants people who can look ahead with concrete plans for increasing their business.
People who do this move up in the organization!
DMSRetails Winning at Store Management was designed by retail experts. Their experience
on the sales floor, at store and district management levels and as members of the executive teams
for a number of successful, prominent retail companiesfrom apparel to electronics to confections
and computer hardware/softwarehas provided them with an immense amount of knowledge in the
retail management field.
Retail Planograms
Planograms are diagrams that show where products or merchandise should be placed on a
shelf or other sort of display. The idea is to maximize the amount of merchandise on the shelf and the
amount of sales by arranging in such a way that makes it appealing to the consumer while minimizing
wasted space.
Planograms differ significantly by retail sector. Fast-moving consumer goods organizations and
supermarkets largely use text and box based planograms that optimize shelf space, inventory turns,
and profit margins. Apparel brands and retailers are more focused on presentation and use pictorial
planograms that illustrate "the look" and also identify each product
Often retailers use planograms to decide how best to get as much on their shelves as possible
or increase sales. Even more often, however, the suppliers will send a planogram before sending
their product as a suggestion to help in displaying their good s so they can be easily seen and will be
placed alongside like objects.

Retail Analytics
Better Retail Decisions through Consumer and Store Data
In an industry notorious for expensive real estate, slim margins and tenuous customer loyalty,
retailers in every category need as much support as they can get when deciding where to operate,
what they should stock, which customers they should fight to retain, and how to communicate with
them."Retail Analytics leverage data in retail processes to enable context-specific insight that is
actionable."
Customer Profiles
Who are my best customers and where do they live?
Adding demographic and behavioral data to the transaction record completes the picture; not
only will the retailer know what customers are buying from them, but they will understand their
lifestyles, particular life stage, their needs and wants, and what they are buying from competitors.
Targeting
How can I connect with prospects if I don't know where they live?
Micromarketing data bases are produced each year, and are available at several layers of
geography-including Zip+4, postal code and postal walk. Gathered into refined segments, these micro
targets provide a wealth of actionable information about the households in each location-and can be
quickly mailed to.
Creative
How do I communicate with customers and prospects I don't know?
Quantitative information will help retailers understand their customer potential and qualitative
intelligence will improve marketing, messaging and targeting strategies. Combined, this intelligence
offers retailers a data-driven strategy to increase profitability.
Sales Forecasting
How do I predict what my customers will be looking for in the future?

Demographic and expenditure variables are ideal anchors for trend analysis. Trend analysis
uses historical data to make accurate predictions about future spending-in terms of amounts,
categories, even brands.
Loyalty
My rewards program shows me what my customers are buying from me, but what else are
they buying, and from where?
Customer profile database will show retailers what their customers are spending across a
variety of product, service and brand categories.
ROI
Is my marketing budget channeled for maximum return?
Beyond demographics and expenditures retailers can add lifestyle, life stage and media
preference information at the Zip+4 and the postal code level to build a complete view of their best
customer.
Increased Opportunity
The average number of items my customers purchase seems to be declining. What can I do
about it?
Market Basket Analysis tells retailers what products and services are most likely to be bought
together. A retailer can then apply this information against customer profiles and generate Zip+4 and
the postal code level pictures of consumer types who buy bundled products.
Profitability
What is the value of Trade Area Analysis?
Formal trade area analysis calculates sales potential, market propensity and the probability of
success of a variety of marketing and promotional activities. Combined these three layers of
information are a powerful set of analytical tools that winning retailers use to make more profitable
business, real estate and marketing decisions.

Response Rates
How can I put a lift in my Direct Marketing response rates?
Target different types of customers with different offers at Zip+4 and the postal code level. A
geographically refined profile provides a wealth of expenditure, demographic, product and lifestyle
information about a retailer's best customers and which Zip+4 or the postal codes they are
concentrated in.
Retail Marketing
In today's CRM landscape the old analogy comparing the rifle and shotgun approaches to
message and / or offer delivery is perhaps more appropriate than ever, as more retail organizations
struggle to achieve one-to-one marketing-communications with customers and prospects.
Targeting allows a retail enterprise to channel its marketing budget where there is the greatest
(and fastest) possibility of Return on Investment (ROI). In terms of overall business strategy, your
ability to identify and understand consumers helps you make accurate estimates about the potential
for your products and services in a given market, as well as support and direct merchandise
development strategies to both new and existing customers. Whether your target is current customers
or new prospects, in markets known or unknown, an effective targeting model reduces the risk of any
new venture. Blending Demographic, Behavioral, Expenditure and Media Preference data with
retailer-specific data and applying data mining technologies produces Zip+4 and postal code level
data assets that consistently outperform all other direct marketing techniques.
In addition, methodology that should be used must be dynamic to allow the sights to be reset
frequently to keep targets in focus consistently.
Today's retail marketing managers must
Understand the connections between the lifestyle and expenditure characteristics of customers, their
propensity to purchase one product or brand over another, and leverage this understanding for
competitive advantage. Improve direct marketing response by ensuring they are targeting the right
households at the right time, using the right media with the right message.
Leverage current consumer data to make better strategic decisions about products, marketing and
locations.

Increase customer loyalty and retention with a scientific, data driven approach to analytical CRM.
Applying advanced analytics to current demographic, expenditure and lifestyle data produces the
most accurate customer segments and profiles. With a clear picture of your different customer
segments, you are in a position to develop merchandise and offers that meet the needs of existing
customers and answer (or anticipate) the needs of targeted prospects.
Retail marketing managers can implement the following projects to understand their customer, market
and store locations better; achieving a very strong ROI for their retail marketing efforts in the process.
Customer and Market potential Estimates
i.

Estimate the revenue potential of your customers to determine their current , potential
and life-time value

ii.

Estimate your market potential for more effective acquisition initiatives

iii.

Quantify and qualify your market opportunities

Customer and Market Profiles

i.

Develop more effective communication strategies through a better understanding of

who your customers are

ii.

Learn more about your customers (their age, income, family structure, media usage,
life-styles, and more) and use this information in your branding, advertising and direct
marketing strategies

iii.

Identify your market potential through a better understanding of your targets

Customer and Market Segmentation

i.

Develop more effective communication strategies through a better understanding of

different customer groups and your market segments

ii.

Customize your product offers by different customer and market segments

iii.

Identify your target segments and optimize your marketing spend

Product and Service Potential

i.

Identify products/services that best suit your customers needs and market your
offerings more effectively

ii.

Be relevant and improve your up-sell and cross-sell initiatives

iii.

Manage your products and services through a better understanding of market needs

Trade Area Analysis

i.

Use

the

information on

the

store

performance

and

the socio-demographic

characteristics of the trading area to estimate market potential by individual stores

ii.

Use trade area characteristics to customize your product offerings, store displays, store
size, etc. to be more relevant to your customers and to better penetrate your market

iii.

Evaluate performance of your stores based on their trade area characteristics

Store Network Optimization

i.

Determine the optimum number of stores to support market needs

ii.

Customize and optimize your stores to attract more customers

Viewpoint on Retail - Retail Articles

The Retail Training Equation
Economic times are cyclical. At present, the cycle is in a down phase and needs to recover as
quickly as possible. During such times, it is people who will make the difference in your business. It is
most often the people who have been trained appropriately that rise to meet and overcome these
challenges.
Insane Retailing
It has been said by many that an appropriate definition of insanity be repeating the same
actions time and time again, expecting different results.
Cutting Edge in Retail Sales and Training
Cutting Edge Sales is in and of itself a buzz phrase describing a competitive sales advantage
that every retail sales associate is looking for, a bit like the fountain of youth. Like the fountain,
though, Cutting Edge Sales is something that is more inside of oneself than something concrete to
be found.

Know how to interpret your Retail KPIs?

Gaining an understanding of retail math lets the Store Manager put everything in perspective.
Once competent in making all of the calculations for KPIs pertinent to his/her store, the Store
Manager gains new insight into exactly what is going on in their store. Its like having the blindfold
removed. Suddenly, everything makes sense.
How to Lift Your Retail Spirits during Slow Times
All we hear these days is how bad the last few months of 2008 are going to be. The National
Retail Federation, in the United States, is predicting an increase of approximately 4% over last year,
and they generally predict a bit on the bright side so the reality, in North America at least, is probably
somewhat less than that.
The Value of Professional Training
Industry specific training provides a myriad of advantages to an individual within that field.
They will gain confidence in dealing with day to day challenges. Having the knowledge that
professional development training provides can enable the individual to approach, assess, evaluate
and resolve problems with less stress and expedite an appropriate solution much more quickly.
External Conditions
Most retailers generally plan their targets, or budgets, based on the actual sales of the
previous year. As the saying goes past performance is a great indicator of future performance. But
every wise retailer will also carefully look at external conditions before committing a target or budget
to paper; before using the numbers as a basis for buying merchandise and setting expense budgets.
Introducing the 6th Pillar of Retail
It started out with 4 pillars (or 4Ps): Product, Promotion, Price and Place. People did not count
for much back then. In early 1980s with the revolution in management fueled by such publications as
In Search of Excellence, Re-inventing the Corporation and many others, suddenly people woke up
to the importance of people and added that to the retail arsenal. Were now able to talk about the 5 th
pillar of Retail; People

The Effect of Incompetent Middle Managers

Retail employees can rise up through the ranks fairly quickly compared to a lot of other
industries. It makes a great career in that respect. Entry into retail is easy and promotions come
quickly provided the individual can operate a retail store, make the sales happen, follow the Policy
and Procedures manual to the letter and always say the right things to visiting Head Office executive.
How Important Retail Associates are to Your Retail Business
A study recently published by Wharton, University of Pennsylvania and Verde Group discusses
the findings of a survey of 1000 randomly selected consumers. The objective of the survey was to
discover what problems shoppers were encountering during their shopping experiences at retail
stores and which of those problems were most likely to be discussed with others and which actually
put customer loyalty at risk.
First Response - Cut Hours/Wages at Store Level
Retailers often respond to a financial problem by cutting hours and wages being used at store
level.
Sustained Motivation through Performance Discussions
We know that many Retail Business Owners and Store Managers look for ways to motivate
their employees. Rightfully, they believe that motivating their sales associates will increase business.
Creating a motivational environment and culture, and maintaining the positive effects are not easy;
but not impossible either.
How to Hire Right and Keep Them
Recruitment isnt just about hiring, its about retention, and that means hiring the right person in
the first place rather than someone who merely appears to be the right person. It costs far more to
hire and train a new employee on any level, in any industry - than it does to retain them.
Pay More, Expect more, and Get more
Its time for more retailers to test the 'pay more expect more, get more' theory. It seems that
retailers have always argued against higher wages, benefits and full-time positions citing exorbitant

wage costs as the reason. While it is true that the expense, in dollars would increase it certainly does
not follow that the actual wage percent would increase. And it is the percentage that is key
Get Out of Town - Really
It is impossible to direct an operation without knowing how it works. How it really works, not
how it is supposed to work. If you are in charge of a retail operation and dont have your next out of
town store visit trip booked do it now. Its more important to visit out of town stores more often than
you visit stores in close proximity to Head Office.
Culture: What a difference it makes!
Have you ever wondered about the impact a true leader can have on the culture of a
company? Having worked for several prominent retail organizations I have seen the impact of both
positive and negative cultures on the workforce, the customers and, of course, the success of the
business. Have no doubt whatsoever, the head of the organization dictates, through words and
actions, what the culture will be...
Retail Employees vs. Customers
Customers are NOT the retail employees enemy. After viewing a down with retail website
today, I find myself very disturbed at the distance that has developed in the understanding between
some retail employees and customers. Wild generalizations are being made such as customers have
no respect for retail employees and retail employees dont care about their customers...
Communicating for Profits and Customer Satisfaction
The real reason retail personnel appear to be indifferent to their customers.The President of a
200+ store division of a major retailer learned of a serious communication problem and commented
that this was to be expected in large organizations. Well, that clears everything up. Many retail
executives dont believe that communication is important enough to get it right by coming up with a
methodology that will ensure accurate and timely communication to field personnel.
The House Account A case for using it
Retailers use different methods to record and monitor sales and to compensate their
associates. Some allow, and in fact insist on, the use of a House Account and others forbid it.

Manager Unfairly Perceived as Negative

To really learn about field operations, retail executives need to nurture their relationships with
Store Managers. Many Store Managers have a lot of valuable information to offer the organization.
They are rarely asked to contribute but often offer it anyway. And that is where the problem starts.
Sales vs. Task Orientation
It is reasonable to expect people to do well in activities they enjoy, or at least, do not find
difficult and unappealing, then it would be reasonable for sales associates who enjoy selling to be
more successful, and to make a bigger contribution than those who do not. For the individual who
does not enjoy selling-either because s/he does not have the skills or simply does not want to do it
a position in a retail store may still attract them due to ease of entry. Store Managers should be very
wary of this individual.
The Store Manager is a Lighthouse
Throughout history the lighthouse has played an important role in navigation and pilotage at
sea; its purpose is to guide, to show the way, to warn of danger and generally provide safe entry into
harbors. The Store Manager is the lighthouse for the employees of a retail store and the Head Office
is the lighthouse for all of their retail employees nationwide.
Unreachable?
What? The executive team is unreachable? Impossible, you say? Retail executive, like any
others, need to be accessible. Imagine a situation where employees and management cannot have
any access to the President. Far, far from the open door policy, there are some retailers who allow
absolutely no access to the top executive in the company.
Customer Service Fanatics
Be a Customer Service Fanatic and be proud of it! If more retail managers were Customer
Service Fanatics we would see a much different picture in the service industry. All customers, not just
a fortunate few, would be properly treated as they part with their hard-earned and over-taxed dollars.
Isnt that the way it should be?

Multi-Channel Retail - One Critical Key to Success

More and more retailers are realizing the benefits of multi-channel retailing. Leveraging brand
equity in multiple touchpoints has been proven to drive loyalty and interaction among consumers.
With trends clearly showing the Internet as the core component to pre-purchase research, brick and
mortar brands can ill-afford to take a wait and see approach as it relates to core multi-channel
offerings...
Improving the Morale of Your Employees: One Step at a Time
If your customers are to enjoy a positive shopping experience and be inspired to purchase
whatever it is you have to offer it really makes sense that your store employees feel like valued
members of your team.
Pushing for Performance
The fiscal month is coming to a close. The stores sales performance has been lackluster for
several months but, this month, they are doing much better. This coming Saturday is the last day of
the month. The Store Manager wants to take the day off to do something with family members. The
District Manager says no...
Change your conversation, change your life
The danger we face while taking in all of this bad news is that we may actually begin to focus
on nothing but the bad news. We may start to believe it completely. When we believe completely,
there is a much higher chance of it being so.

Retail Sales Management

i.

People are your most important strategic advantage. If you look at other stores, for
example, in a chain store environment all stores have similar if not the same layout,
merchandise, tools, procedures, etc. The difference is the people.

ii.

Capitalize on the activities you can measure; remember the adage if it can not be
measured, it can not be managed.

iii.

Every day put some time aside (commuting time would be ideal) to think about ways
and means regarding how to make your people more productive.

iv.

Take the best practices of the top sales associates and put them in place for everybody;
the best demo, the best objection-handler, the best closer, and transfer those best

practices to the whole sales team. Have the owners of these best practices train the
others to do the same. Youll find your 10% + sales increase just from this.
v.

Sales performance is a function of sales skills + people skills + product knowledge +

knowledge of the store environment (like knowing the inventory, being able to process
customer inquiries and questions with speed and efficiency, etc.).

vi.

Your market and customers are constantly changing. Change is the only constant. What
made you successful last year, may not work this year you must constantly reevaluate
your effectiveness. Stay ahead of the curve in terms of whats happening in the retail
world, particularly in your niche.

vii.

Retail Sales is a marathon, not a sprint but you still have to keep your eyes on the
first position and want to get up every morning on the run.

viii.

Dont procrastinate if there is a decision to be made make it. Get the facts and then
make the decision. Ultimately a quick decision-maker will be ten decisions ahead of a
slow decision-maker and thats a competitive advantage.

ix.

Remember people pay attention to what the boss/head office pays attention to. Make
sure you are in tune with business objectives/tactics and that you clearly understand
them. If in doubt, this is a great conversation to have with your supervisor.

x.

Listen to customers; learn to read between the lines. Do not assume you know what
they are talking about, or complaining about. Look for quick solutions to customer
issues. Make this a culture in the store(s).

xi.

Look at and examine your whole sales process. What is not working or can be improved
drastically? Where can you increase the productivity/efficiency/effectiveness?

xii.

Whenever you are inundated with too many things to do (which is almost always)
prioritize. What are the three things that provide the most leverage (most important for
your sales performance), then forget to-dos 4-10 because youll never get to them and
they are not worth it.

xiii.

Dont be afraid to ask the tough questions to customers or associates because you may
not like the answer. Develop an inquisitive mind. You want to know why customers are
or are not buying, why a certain process or promotion in the store is not working.
Remember that retail business is not a popularity contest. Get to the bottom of all issues
affecting your sales performance.

CHAPTER-7
RETAIL BUSINESS PLAN
Introduction
The best way to show bankers, venture capitalists, and angel investors that you are worthy of
financial support is to show them a great business plan. Make sure that your plan is clear, focused
and realistic. Then show them that you have the tools, talent and team to make it happen. Your
business plan is like your calling card, it will get you in the door where you'll have to convince
investors and loan officers that you can put your retail business plan into action.
Once you have raised the money to start or expand your retail business, your plan will serve
as a road map for your success. It is not a static document that you write once and put away. You will
reference it often, making sure you stay focused and on track, and meet milestones. It will change
and develop as your retail business evolves.
Do I need a retail business plan?
Not everyone who starts and runs a business begins with a business plan, but it certainly helps
to have one. If you are seeking funding from a venture capitalist, you will certainly need a
comprehensive business plan that is well thought out and contains sound business reasoning.
If you are approaching a banker for a loan for a start-up business, your loan officer may
suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have
an existing business and are approaching a bank for capital to expand the business, they often will
not require a business plan, but they may look more favorably on your application if you have one.
Reasons for writing a retail business plan include:
i.

Support a loan application

ii.

Rise equity funding

iii.

Define and fix objectives and programs to achieve those objectives

iv.

Create regular business review and course correction

v.

Define a new business

vi.

Define agreements between partners

vii.

Set a value on a business for sale or legal purposes

viii.

Evaluate a new product line, promotion, or expansion

What's in a business plan?

i.

A business plan should prove that your business will generate enough revenue to cover
your expenses and make a satisfactory return for bankers or investors

ii.

Executive Summary--features the highlights of your plan and sells your idea in two
pages or less

iii.

Company Summary--a factual description of your company, ownership, and history

iv.

Products (or Services or both)--describes your products and/or services and how they
stand out from competitive products and services

v.

Market Analysis-provides a summary of your typical customers, competitive landscape,

market size, and expected market growth

vi.

Strategy and Implementation-describes how you will sell your product, how you will put
your plan into action, and establishes milestones

vii.

Management Summary-provides background on the management team, their

experiences, and key accomplishments

viii.

Financial Plan-contains key financials including sales, cash flow, and profits

What makes a successful business plan?

i.

A well thought out idea

ii.

Clear and concise writing

iii.

A clear and logical structure

iv.

Illustrates management's ability to make the business a success

v.

Shows profitability

Retail Market Segmentation

The market segmentation concept is crucial to market assessment and market strategy. Divide
the market into workable market segments -- age, income, product type, geography, buying patterns,
customer needs, or other classifications. Define your terms, and define your market.
Segmentation can make a huge difference in understanding your market. For example, when a
local computer store business defines its customer segments as "high-end home office" and "hightechnology small business," its segmentation says a lot about its customers. The segmentation helps
the company plan focus on the different types of potential customers. When I was consulting for

Apple Computer in the mid-1980s, we divided the markets into workable categories, including home,
education, small business, large business, and all others. Some other groups in Apple also focused
on government as a specific market segment. As you define the segment, you point toward an
understanding of the market. In the 1970s, I knew a company that was selling candy bars through
retail channels. They segmented the market in a way that defined a range of products as "oral
satisfactory" (their term, not mine). That included candy, cookies, soft drinks, and bagged chips. The
segmentation helped the marketers understand their real competition, which wasn't just other candy
bars, but also other products targeting the same customer money. That understanding of competition
improved the marketing and sales programs.
In today's business it's easy to see segmentation in action. Consider the different tone,
content, and media for ads that sell products to kids, compared with those that sell the same product
to parents. Car companies change their advertising substantially from one type of program to another.
Stand-up comedian Richard Klein used to joke about the beer company ads that changed the style of
the music to match the audience. He complained that he kept getting the country music version, but
he liked the blues version better. The company that did those ads used the styles of music to address
different target customer groups.
In developing segmentation, consider what factors make a difference in the purchasing, media,
and value patterns of your target groups. Does age matter in choice of restaurants, or are style and
food preference more important? Is income level a key factor? Education? I suspect that some
restaurants will sell more meals to college graduates than others. Is this because of education, age,
or income levels? That depends on your business.
In your initial assessment you may have already developed your first basic market analysis
worksheet for analyzing potential customers. It will help you define your market and understand your
key market segments. As you complete your market analysis, look at your segmentation critically and
strategically. Is this the best segmentation? Be sure to revise and polish your numbers
Social Marketing in Retail Management
Social marketing is the systematic application of marketing along with other concepts and
techniques to achieve specific behavioral goals for a social good. Social marketing can be applied to
promote, for example, merit goods, make the society avoid demerit goods and thus to promote that
considers society's well being as a whole. This may include asking people not to smoke in public
areas, for example, ask them to use seat belts, prompting to make them follow speed limits.

Although 'social marketing' is sometimes seen only as using standard commercial marketing
practices to achieve non-commercial goals, this is an over-simplification.
The primary aims of 'social marketing' is 'social good', while in 'commercial marketing' the aim
is primarily 'financial'. This does not mean that commercial marketers can not contribute to
achievement of social good.
Increasingly, social marketing is being described as having 'two parents' - a 'social parent' =
social sciences and social policy, and a 'marketing parent' = commercial and public sector marketing
approaches.
Beginning in the 1970s, it has in the last decade matured into a much more integrative and
inclusive discipline that draws on the full range of social sciences and social policy approaches as
well as marketing.
Applications of social marketing
Health promotion campaigns in the late 1980s began applying social marketing in practice.
Notable early developments took place in Australia. These included the Victoria Cancer Council
developing its anti-tobacco campaign "Quit" (1988), and "Sun Smart" (1988), its campaign against
skin cancer which had the slogan Slip! Slop! Slap!.
Work Safe Victoria, a state-run Occupational Health and Safety organization in Australia has
used social marketing as a driver in its attempts to reduce the social and human impact of workplace
safety failings. In 2006, it ran 'Homecomings', a popular campaign that was later adopted in New
South Wales, Queensland and Western Australia, and named the 2007 Australian Marketing Institute
Marketing Program of the Year
Dance Safe followed the ideas of social marketing in its communication practices.
On a wider front, by 2007, Government in the United Kingdom announced the development of
its first social marketing strategy for all aspects of health.
Two other public health applications include the CDC's CDCynergy training and software
application, and SMART (Social Marketing and Assessment Response Tool).
Social marketing theory and practice has been progressed in several countries such as the
U.S, Canada, Australia, New Zealand and the UK, and in the latter a number of key Government

policy papers have adopted a strategic social marketing approach. Publications such as 'Choosing
Health' in 2004, 'It's our health!' in 2006; and 'Health Challenge England' in 2006, all represent steps
to achieve both a strategic and operational use of social marketing. In India, especially in Kerala,
AIDS controlling programmes are largely using social marketing and social workers are largely
working for it. Most of the social workers are professionally trained for this particular task.[citation needed]
Types of social marketing
Using the benefits and of doing 'social good' to secure and maintain customer engagement. In
'social marketing' the distinguishing feature is therefore its 'primary' focus on 'social good', and it is
not a secondary outcome. Not all public sector and not-for-profit marketing is social marketing.
Public sector bodies can use standard marketing approaches to improve the promotion of their
relevant services and organizational aims, this can be very important, but should not be confused with
'social marketing' where the focus in on achieving specific behavioural goals with specific audiences
in relation to different topics relevant to social good (eg: health, sustainability, recycling, etc).
As the dividing lines are rarely clear it is important not to confuse social marketing with
commercial marketing. A commercial marketer selling a product may only seek to influence a buyer to
make a product purchase. Social marketers, dealing with goals such as reducing cigarette smoking or
encouraging condom use, have more difficult goals: to make potentially difficult and long-term
behavioral change in target populations. It is sometimes felt that social marketing is restricted to a
particular spectrum of client -- the non-profit organization, the health services group, the government
agency.
These often are the clients of social marketing agencies, but the goal of inducing social change
is not restricted to governmental or non-profit charitable organizations; it may be argued that
corporate public relations efforts such as funding for the arts are an example of social marketing.
Social marketing should not be confused with the Societal Marketing Concept which was a forerunner
of sustainable marketing in integrating issues of social responsibility into commercial marketing
strategies. In contrast to that, social marketing uses commercial marketing theories, tools and
techniques to social issues. Social marketing applies a customer oriented approach and uses the
concepts and tools used by commercial marketers in pursuit of social goals like Anti-SmokingCampaigns or fund raising for NGOs.

Social marketing confusion

In 2006, Jupiter media announced its "Social Marketing" service, with which it aims to enable
website owners to profit from social media. Despite protests from the social marketing communities
over the hijacking of the term, Jupiter decided to stick with the name. However, Jupiter's approach is
more correctly (and commonly) referred to as social media optimization.
History of social marketing
Social marketing began as a formal discipline in 1971, with the publication of "Social Marketing:
An Approach to Planned Social Change" in the Journal of Marketing by marketing experts Philip
Kotler and Gerald Zaltman.
Craig Lefebvre and June Flora introduced social marketing to the public health community in 1988
where it has been most widely used and explored. They noted that there was a need for 'large scale,
broad-based, behavior change focused programs' to improve public health (the community wide
prevention of cardiovascular diseases in their respective projects), and outlined eight essential
components of social marketing that still hold today. They are:
i.

A consumer orientation to realize organizational (social) goals

ii.

An emphasis on the voluntary exchanges of goods and services between providers and
consumers

iii.

Research in audience analysis and segmentation strategies

iv.

The use of formative research in product and message design and the pretesting of
these materials

v.

An analysis of distribution (or communication) channels

vi.

Use of the marketing mix - utilizing and blending product, price, place and promotion
characteristics in intervention planning and implementation

vii.

A process tracking system with both integrative and control functions

viii.

A management process that involves problem analysis, planning, implementation and

feedback functions

Speaking of what they termed "social change campaigns," Kotler and Roberto introduced the
subject by writing, A social change campaign is an organized effort conducted by one group (the
change agent) which attempts to persuade others (the target adopters) to accept, modify, or abandon
certain ideas, attitudes, practices or behavior." Their 1989 text was updated in 2002 by Philip Kotler,
Ned Roberto and Nancy Lee.

In recent years there as has been an important development to distinguish between 'strategic
social marketing' and 'operational social marketing'. Much of the literature and case examples focus
on 'operational social marketing', using it to achieve specific behavioral goals in relation to different
audiences and topics. However there has been increasing efforts to ensure social marketing goes
'upstream' and is used much more strategically to inform both 'policy formulation' and 'strategy
development'. Here the focus is less on specific audience and topic work but uses strong customer
understanding and insight to inform and guide effective policy and strategy development.

Relationship Marketing
Relationship marketing is not about having a "buddy-buddy" relationship with your customers.
Customers do not want that. Relationship Marketing uses the event-driven tactics of customer
retention marketing, but treats marketing as a process over time rather than single unconnected
events. By molding the marketing message and tactics to the Lifecycle of the customer, the
Relationship Marketing approach achieves very high customer satisfaction and is highly profitable.
The relationship marketing process is usually defined as a series of stages, and there are
many different names given to these stages, depending on the marketing perspective and the type of
business. For example, working from the relationship beginning to the end:
Interaction > Communication > Valuation > Termination
Awareness > Comparison > Transaction > Reinforcement > Advocacy
Suspect > Prospect > Customer > Partner > Advocate > Former Customer
Using the relationship marketing approach, you customize programs for individual consumer
groups and the stage of the process they are going through as opposed to some forms of database
marketing where everybody would get virtually the same promotions, with perhaps a change in
offer. The stage in the customer Lifecycle determines the marketing approach used with the
customer.
A simple example of this would be sending new customers a "Welcome Kit," which might have
an incentive to make a second purchase. If 60 days pass and the customer has not made a second
purchase, you would follow up with an e-mailed discount. You are using customer behavior over time
(the customer Lifecycle) to trigger the marketing approach.

Let's say a customer visits your site every day and then just stops. Something has happened.
They are unhappy with the content, or they have found an alternative source. Or perhaps theyre just
plain not interested in the subject anymore. This inaction on their part is a trigger telling you
something has happened to change the way this customer thinks about your site and perhaps your
service.
You should react to this and then look for feedback from the customer. If you improve the
content, e-mail them a notice, and if the customer starts visiting again, the feedback has been given.
The cycle is complete until the next time the data indicates a change in behavior, and you need to
react to the change with communication.
Lets say this same customer then makes a first purchase. This is an enormously important
piece of data, because it indicates a very significant change in behavior. You have a new relationship
now, a deeper one. You should react and look for feedback.
You send a welcome message, thank the customer for the trust they have displayed in your
site, and provide a second purchase discount. Then you await feedback from the customer, in the
form of a second purchase, or increased visits. Perhaps you get negative feedback, a return of the
first purchase. React to this new feedback and repeat the process.
All of the marketing decisions in the examples above were triggered by customer behavior, the
actions of the customer as tracked by their activity (or lack of activity). This activity tracked over time
is the customer Lifecycle.
If you can track customer Lifecycles, you can begin to predict them, and if you can predict
them, you can target your marketing efforts at the most critical trigger points in the customer
Lifecycle. This approach eliminates a lot of wasted marketing spending, and creates very high ROI
marketing campaigns. You spend less money overall, and the money you spend is much more
effective.
All of the above is accomplished by using the data customers create through their interactions
with you to build simple Lifecycle models or rules to follow. The relationship marketing approach then
uses this Lifecycle model as a "timing blueprint" to follow, targeting the right customers at the right
time, with the most profitable offer.

Integrate Marketing to Strengthen Consumer Relationships and Drive In-Store Sales

According to Forrester Research, 65% of customers have researched a product online before
purchasing it offline. This buying behavior has created exciting new opportunities for brick and mortar
retailers. When properly managed, a multi-channel customer relationship can significantly increase instore sales and strengthen customer loyalty.
Interactive marketing provides retailers with unprecedented insight into the purchasing
behaviors and preferences of individual customers, resulting in better-targeted and more costeffective promotional offers, more relevant customer communications, and more in-store sales.
You should coordinate integrated marketing efforts, collect and unify data across multiple
customer touch points, target offers that can be tracked to individual in-store purchases, and increase
customer knowledge. Our solutions combine a full range of on-demand marketing technologies, datadriven insights and expert services to effectively build more profitable consumer relationships.
Consider the potential:
i.

Identify customers; understand and influence their buying preferences and behaviors in order
to execute better-targeted and more cost-effective marketing promotional offers, more relevant
customer communications.

ii.

Measure how many of your customers research products online but ultimately purchase instore.

iii.

Automatically trigger promotions offers tailored to individual interests, buying patterns,

customer value and loyalty levels.

iv.

Decrease costs of traditional direct mail and conventional marketing by leveraging interactive
efficiencies.

Integrated Relationship Management

Objective
A global consumer packaged goods manufacturer wanted to increase market share in several
product categories by generating trial, increasing usage frequency, and improving consumer retention
across multiple brands. The company also wanted to qualify new, cost-efficient direct-to-consumer
marketing methods in a period of media fragmentation. More specifically, they sought to determine

which interactive marketing tacticsweb sites, online advertising, e-mails, Internet coupons, etc
delivered the highest returns on their investment.
Challenges
In order to rival well-established competitors whose direct-to-consumer marketing programs
surpassed their own, this client needed to transition from limited direct-to-consumer relationship
marketing ("CRM") to advanced CRM quickly. The company also hoped to avoid the common
mistake of over-spending on technology and infrastructure. They soon realized that their traditional
agency partners could not capably take them there.
Solutions
Collabrys a company which developed a comprehensive integrated marketing program built
around several of their client's brands and designed to build valuable consumer relationships. The
program included brand web sites as the primary relationship gateway a dynamically-generated,
segmented and customized e-mail newsletter, Internet coupons targeted according to consumer
attributes (e.g. product usage and category interest), ongoing online surveys, interactive games, and
online sweepstakes. Collabrys crafted the program strategy and tactical execution, which involved
competitive analysis, content and creative services, co-marketing and strategic partnership
development, data collection and management, and ongoing program analysis.
Results
In-store purchases, survey results and reporting revealed that consumers exposed to the
integrated marketing program were more aware of the company's various brands and preferred them
to competitor brands, particularly among the e-mail newsletter subscribers. In addition, based on
coupon redemption tracking, the program significantly impacted purchase intent and actual purchases
and there was measurable cross-sell activity.
The multi-brand program also allowed the company's different brands to share program costs,
thus reducing each individual brand's total cost. Most importantly, the program enabled the creation of
a large consumer database for our client, an asset that can now be used for market research, new
product introductions, message testing and other marketing initiatives.

CHAPTER-8
PRICING
Pricing is one of the four Ps of the marketing mix. The other three aspects are product,
promotion, and place. It is also a key variable in microeconomic price allocation theory. Price is the
only revenue generating element amongst the 4ps, the rest being cost centers. Pricing is the manual
or automatic process of applying prices to purchase and sales orders, based on factors such as: a
fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on
entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated
systems require more setup and maintenance but may prevent pricing errors.

Questions involved in pricing

Pricing involves asking questions like:
i.

How much to charge for a product or service? This question is that a typical starting
point for discussions about pricing, however, a better question for a vendor to ask is How much do customers value the products, services, and other intangibles that the
vendor provides.

ii.

What are the pricing objectives?

iii.

Do we use profit maximization pricing?

iv.

How to set the price?: (cost-plus pricing, demand based or value-based pricing, rate of
return pricing, or competitor indexing)

v.

Should there be a single price or multiple pricing?

vi.

Should prices change in various geographical areas, referred to as zone pricing?

vii.

Should there be quantity discounts?

viii.

What prices are competitors charging?

ix.

Do you use a price skimming strategy or a penetration pricing strategy?

x.

What image do you want the price to convey?

xi.

Do you use psychological pricing?

xii.

How important are customer price sensitivity (e.g. "sticker shock") and elasticity issues?

xiii.

Can real-time pricing be used?

xiv.

Is price discrimination or yield management appropriate?

xv.

Are there legal restrictions on retail price maintenance, price collusion, or price
discrimination?

xvi.

Do price points already exist for the product category?

xvii.

How flexible can we be in pricing? : The more competitive the industry, the less
flexibility we have.

xviii.

Are there transfer pricing considerations?

xix.

What is the chance of getting involved in a price war?

xx.

How visible should the price be? - Should the price be neutral? (ie.: not an important
differentiating factor), should it be highly visible? (to help promote a low priced economy
product, or to reinforce the prestige image of a quality product), or should it be hidden?
(so as to allow marketers to generate interest in the product unhindered by price
considerations).

xxi.

Are there joint product pricing considerations?

xxii.

What are the non-price costs of purchasing the product? (eg.: travel time to the store,
wait time in the store, disagreeable elements associated with the product purchase dentist -> pain, fish market -> smells)

xxiii.

What sort of payments should be accepted? (cash, check, credit card, barter) Pricing

Pricing factors are manufacturing cost, market place, competition,market condition,Quality of

product.
What a price should do
A well chosen price should do three things:
i.

achieve the financial goals of the company (e.g., profitability)

ii.

Fit the realities of the marketplace (Will customers buy at that price?)

iii.

Support a product's positioning and be consistent with the other variables in the
marketing mix .

iv.

Price is influenced by the type of distribution channel used, the type of promotions used,
and the quality of the product.

v.

Price will usually need to be relatively high if manufacturing is expensive, distribution is

exclusive, and the product is supported by extensive advertising and promotional
campaigns.

vi.

A low price can be a viable substitute for product quality, effective promotions, or an
energetic selling effort by distributors.

From the marketers point of view, an efficient price is a price that is very close to the maximum
that customers are prepared to pay. In economic terms, it is a price that shifts most of the consumer
surplus to the producer. A good pricing strategy would be the one which could balance between the
price floor (the price below which the organization ends up in losses) and the price ceiling(the price
beyond which the organization experiences a no demand situation).

Definitions
The effective price is the price the company receives after accounting for discounts,
promotions, and other incentives. Price lining is the use of a limited number of prices for all your
product offerings. This is a tradition started in the old five and dime stores in which everything cost
either 5 or 10 cents. Its underlying rationale is that these amounts are seen as suitable price points
for a whole range of products by prospective customers. It has the advantage of ease of
administering, but the disadvantage of inflexibility, particularly in times of inflation or unstable prices.
A loss leader is a product that has a price set below the operating margin. This results in a loss
to the enterprise on that particular item, but this is done in the hope that it will draw customers into the
store and that some of those customers will buy other, higher margin items.
Promotional pricing refers to an instance where pricing is the key element of the marketing mix.
T

he price/quality relationship refers to the perception by most consumers that a relatively high

price is a sign of good quality. The belief in this relationship is most important with complex products
that are hard to test, and experiential products that cannot be tested until used (such as most
services). The greater the uncertainty surrounding a product, the more consumers depend on the
price/quality hypothesis and the more of a premium they are prepared to pay. The classic example of
this is the pricing of the snack cake Twinkies, which were perceived as low quality when the price was
lowered. Note, however, that excessive reliance on the price/quantity relationship by consumers may
lead to the raising of prices on all products and services, even those of low quality, which in turn
causes the price/quality relationship to no longer apply.
Premium pricing (also called prestige pricing) is the strategy of consistently pricing at, or near,
the high end of the possible price range to help attract status-conscious consumers. A few examples
of companies which partake in premium pricing in the marketplace include Rolex and Bentley. People
will buy a premium priced product because:

They believe the high price is an indication of good quality; They believe it to be a sign of self
worth - "They are worth it" - It authenticates their success and status - It is a signal to others that they
are a member of an exclusive group; They require flawless performance in this application - The cost
of product malfunction is too high to buy anything but the best - example: heart pacemaker.
The term Goldilocks pricing is commonly used to describe the practice of providing a "goldplated" version of a product at a premium price in order to make the next-lower priced option look
more reasonably priced; for example, encouraging customers to see business-class airline seats as
good value for money by offering an even higher priced first-class option. Similarly, third-class railway
carriages in Victorian England are said to have been built without windows, not so much to punish
third-class customers (for which there was no economic incentive), as to motivate those who could
afford second-class seats to pay for them instead of taking the cheaper option. This is also known as
a potential result of price discrimination.
The name derives from the Goldilocks story, in which Goldilocks chose neither the hottest nor
the coldest porridge, but instead the one that was "just right". More technically, this form of pricing
exploits the general cognitive bias of aversion to extremes. This practice is known academically as
"framing". By providing three options (i.e. small, medium, and large; first, business, and coach
classes) you can manipulate the consumer into choosing the middle choice and thus, the middle
choice should yield the most profit to the seller, since it is the most chosen option.
Demand-based pricing
Is any pricing method that uses consumer demand - based on perceived value - as the central
element. These include : price skimming, price discrimination and yield management, price points,
psychological pricing, bundle pricing, penetration pricing, price lining, value-based pricing, geo and
premium pricing. Pricing factors are manufacturing cost, market place, competition, market condition,
quality of product.
Multidimensional pricing
Is the pricing of a product or service using multiple numbers. In this practice, price no longer
consists of a single monetary amount (e.g., sticker price of a car), but rather consists of various
dimensions (e.g., monthly payments, number of payments, and a down payment). Research has
shown that this practice can significantly influence consumers' ability to understand and process price
information

Approaches
Pricing as the most effective profit lever. Pricing can be approached at three levels. The
industry, market, and transaction level. Pricing at the industry level focuses on the overall economics
of the industry, including supplier price changes and customer demand changes. Pricing at the
market level focuses on the competitive position of the price in comparison to the value differential of
the product to that of comparative competing products.
Pricing at the transaction level focuses on managing the implementation of discounts away
from the reference, or list price, which occur both on and off the invoice or receipt.
Suggested retail price
The (manufacturer's) suggested retail price (MSRP or SRP), list price or recommended retail
price (RRP) (originally, Monroney suggested retail price) of a product is the price the manufacturer
recommends that the retailer sell it for. The intention was to help to standardize prices among
locations. While some stores always sell at, or below, the suggested retail price, others do so only
when items are on sale or closeout.
Suggested pricing methods may conflict with competition theory, as it allows prices to be set
higher than would otherwise be the case, potentially negatively impacting consumers. However,
resale price maintenance goes further than this and is illegal in many regions.
Much of the time, stores charge less than the suggested retail price, depending upon the
actual wholesale cost of each item, usually purchased in bulk from the manufacturer, or in smaller
quantities through a distributor.
Suggested prices can also be manipulated to be unreasonably high, allowing retailers to use
deceptive advertising by showing the excessive price and then their actual selling price, implying to
customers that they are getting a bargain.
Game shows have long made use of suggested retail prices both as a game element, in which
the contestant must determine the retail price of an item, or in valuing their prizes.

Retail Location Strategies

Nationwide, the retail sector enjoyed robust growth during the first half of the decade, due in
great part to the continued expansion of big boxes. The excitement, however, is dying down, as

several category-killer retailers experience slowing sales. The once-zealous players are becoming
more cautious, and once again the rules of the game are changing for developers and commercial
brokers.

New Development Drivers

Traditionally, retail centers have been defined as either regional, community, or neighborhood,
with standard tenants for each of these categories. Recently, though, the lines have blurred, as
discount department stores anchor regional malls and traditional mall tenants move in-line at strip
centers or into freestanding locations.
The three familiar categories have now polarized into either regional or neighborhood
locations. Lackluster performance has caused the retreat or merger of a number of retail chains, both
large and small. The theater and entertainment group, once shunned by many developers and anchor
retailers, is fast becoming the darling of the industry. And in the wake of continuing retail bankruptcies
and mergers, capital markets are taking a closer look at new development. In fact, many financial
institutions have reallocated funds for property types, dropping retail from the most-favored status.
With fewer dollars focused on this overbuilt market-and cautious tenants becoming more
selective in choosing new locations-developers and retailers must be more creative. As a result, new
deals will rely less on the credit of the tenant and more on the developer's use and positioning of a
site as it relates to the market.
Location, Location, Location?
What does all of this mean if you have a site looking for a use or a use looking for a site?
Throw out those preconceived ideas about location, as the old adage is in a state of evolution.
Market, market, market is a more-appropriate concept for the future as retailers and developers alike
ask not "Is this a good location," but rather "Is this the best location in the market, given the
competition?"
Historically, the criteria for many retailers has included a location on Main and Main, with a
minimum population within a specific radius, generally concentric rings of 1, 3, 5, or 10 miles. But
providing demographics based on concentric rings and identifying the competition are no longer
enough to sell a buyer on a location. Road systems, buyer preferences, and new venues of
competition must now be considered, making use of the new technologically advanced systems that
overlay mapping, demographics, and other data.

Consistency in consumer behavior also plays a part in the decision-making process, as cluster
analysis, which identifies similar behavior patterns within similar demographic tracts, becomes
prevalent. Psychographics-adding psychology, behavior, and lifestyles to demographic data-is also
being utilized. For example, the shopping patterns in the Midwest are not the same as those in the
New York City metropolitan area when parking, road access, and visibility are considered.
Providing information on the existing, proposed, and potential competition surrounding each
site is critical when reviewing any location. Geodemographic systems have quickly become the
choice among savvy market researchers, as the use of one or more of these systems has proved
successful in selecting new store locations. Doing research and providing this information are now
key to satisfying retailers and capital markets.
Retailers, developers, and brokers must push the envelope and look beyond the obvious to
find creative options. For example, Tandy's Incredible Universe, the cutting edge of electronics
retailing, includes in-store McDonald's in its 185,000-square-foot stores. Brand recognition has made
Starbucks a household word, with locations in malls, airports, stadiums, and most recently, flying the
friendly skies with United Airlines.

Current Trends
With many retailers opting for locations in more densely populated areas, sites currently
occupied for other uses are finding new life as adaptive reuse becomes the standard in urban
economic development. Many of the nation's retailers are discovering the substantial dollar volumes
that are largely untapped in the major urban markets. Obsolescent industrial buildings in A locations
are making way for new supermarkets, Wal-Marts, and Home Depots across the country. In fact, WalMart is considering obsolescence in its new prototype by designing stores that can be converted into
multifamily housing in the future. Communities with enterprise zones and other economic incentives
are getting a second chance as retailers rediscover downtown in more-affluent markets. A shining
example is the Circle Centre redevelopment in Indianapolis.
B locations, or those neighborhood centers once anchored by supermarkets, are getting a
breath of new life from Rite Aid, Walgreens, and CVS as consumers yearn for service and
convenience.
In addition, the surviving supermarkets and large discount department stores are anchoring
regional malls. K mart now focuses on its superstore concept in metropolitan locations, with Wal-Mart

continuing to identify gaps in suburban markets. There are fewer active big-box players; therefore,
opportunities for regional mall locations, as they become repositioned, will become more prevalent.
The Challenge of Cyber Retailing
Technology is making a dramatic impact on the retail industry as a whole. A recent Gallup Poll
study concluded that 40 percent of all shoppers are now using nonstore venues to make some of
their purchases. Another recent study concluded that electronic shopping could shift 10 percent to 20
percent of sales away from retail stores.
In addition to catalog and TV shopping, cyber retailing has entered the scene, and continuing
advances in infotechnology will make home shopping more desirable. Many retailers now have World
Wide Web pages on the Internet to market their goods, making cyberspace the great equalizer as
retailers of all sizes compete on an even electronic playing field.
At a recent panel discussion regarding retail strategies, a panelist and counsel for a major
supermarket company in the Northeast stated that his company is "rethinking" the concept of the 25year lease, as the speed of technology is changing the way retailing will be done in the future. The
Catalina Marketing Corporation is currently beta testing a new Web site that will allow consumers to
comparison shop at local supermarkets. The site also provides on-line advertising from
manufacturers and coupons that consumers can print from their home computers.
Ultimately these technological changes will result in a reduced need for physical space as
retailers expand electronically. Tenants that may disappear from shopping centers include camera
and photo-processing stores (as digital cameras, without film, become more popular), travel offices,
music stores, and bank branches (that are meeting and serving customers on-line, greatly reducing
costs).
All of these factors will diminish the value of location. Eventually consumers will come to value
the convenience of shopping on-line over the need to personally pick out products, just as they have
with catalog shopping. For example, if a retailer were to offer its products on-line, the customer who
wants to touch and try on the products at a regional location could do so; others could stay at home,
make a selection, place an order, and await delivery. The retailer would eliminate the need for a
location in every market.
As an example, consider L.L. Bean, the leader in catalog retailing; most consumers know
where they can visit its stores. Becoming a destination retailer, less emphasis is placed on location.

With fewer retailers needing fewer locations, there will be an abundance of good locations. We see
this trend already as the vacancies for traditional strip centers increase and their lease rates
decrease.
The Next Trend
Will all of this technology eliminate the need for us to leave our homes? Human beings are by
nature social creatures. Therefore, shopping will evolve into places for entertainment and
socialization. In many areas of the country, particularly the waterfronts, we have already seen this
new breed of retailers clustering around entertainment venues and tourist destinations. Now that
value pricing has left its mark, customer service and entertainment will again become the hallmarks of
retailing.
For example, theater chains and other entertainment venues are taking center stage as the
anchors of new retail centers. The newest entertainment concept is Sega Game Works, a 5,000-to30,000-square-foot venture between Steven Spielberg's DreamWorks, MCA/Universal, and Sega.
Approximately 20 freestanding and/or mall locations across the country are planned, with the first to
open in late 1996 in downtown Seattle. National and regional restaurant groups are complementing
the mix of this new environment.

Under All Is the Land

In many areas, few choice undeveloped sites-level and visible from the highway or easily
accessible-are still available. Those remaining may have any number of challenges associated with
them. Determining and providing the following information to the developer or user will undoubtedly
expedite the process, and surprisingly, is often overlooked.
Physical constraints
Does the site have difficult topography? Are the soil conditions such that blasting will be
required? A review by a geologist will quickly assist in determining whether the soil conditions will result
in any unusual site costs. Are there any easements or rights of way that will affect access or use of the
site? Do a title search earlier rather than later to identify any potential negotiations with additional third
parties.

Conservation issues
Are wetlands on the site? Are they regulated by the state or federal government? Is the site in
an established flood plain area? Reviewing local or county soils and flood plain maps will reveal these
facts. Additionally, if you suspect that the site may be home to some rare species of plant or animal
life, consult with a qualified botanist or biologist to avoid any surprises.
Environmental dilemmas
Phase I and II audits may be warranted on the site-certainly any financial institution will require
a preliminary study. Understanding state and federal environmental protection laws is important;
however, be sure to include the reporting criteria from your lender in any requests for proposals to
environmental review companies, because many of their guidelines now go beyond state or federal
regulations.
Assembling a qualified and experienced team of professional consultants is critical to the
success of any project. Site selection and development focus on managing the process versus
monitoring the transaction.
The Players
In addition to the developers, professional consultants, brokers, and tenants, today
communities themselves are very much a part of the success or failure of proposed retail projects.
Citizens are more educated, sophisticated, and involved in the development of their communities.
Organized grass-roots efforts opposing retail projects are no longer the exception but the norm.
Community public relations are an important early step to identify opposition groups and potential
objections so that issues can be negotiated and projects are presented in a manner that will win all
necessary approvals. Satisfying the concerns of the municipal planning and zoning boards is critical;
however, the potential always exists for a "change of heart" by one board member as a result of
pressures from organized, vocal opposition-which could prove fatal to a project. In a few areas, the
competition among tenants has created direct or indirect opposition for projects-an expensive lesson
to learn and too often overlooked by developers.
Increased site costs, costs to development of community opposition, high land prices, and
changing tax laws. As a result, many retailers have found themselves in the development business to
maintain already thin profit margins and meet their objectives for new locations. Other new players in

the site development arena include real estate investment trusts, which will continue to see mergers
as shareholders demand favorable returns.
The changing rules of retail raise as many questions about site selection as they answer. For
instance, what will happen when category-killer retailers finally "kill" off each other? Will we see a vast
landscape of big boxes waiting for redevelopment? Will cyber retailing live up to its hype and actually
decrease the need for retail space? Consider the coming decrease in disposable income-expected to
drop off after 1996-as well as the compression of the retail cycle (concepts that once took 10 years to
mature now fade after five or six years).
These are the factors that will continue to influence retailers in their search for perfect
locations. Flexibility and preparedness will aid savvy developers and brokers in staying one step
ahead of the game.