MODULE-1

Arun Chandran Dhanesh.V.D Sajith Nair Sudeep.K.M Vipin.V.V

INTRODUCTION OF RETAILING Definition and scope of Retailing The word retail is derived from the French word retailer , meaning cut a piece off or to break bulk. In simple terms, it implies a firs t-hand transition with the customer. Retailing involves a direct interface with the customer and the coordinat ion of business activities from end to end, right from the concept or design sta ge of a product or offering, to its delivery and post delivery service to the cu stomer. The industry has contributed to the economic growth of many countries an d is undoubtedly one of the fastest changing and dynamic industries in the world today. Retailer A retailer is any business organization that derives more than half of its sales from retailing. For example, retailing occurs when you purchase gasol ine at a service station, movie tickets at a theater, or clothing at a departmen t store. Your local hairstyling salon, your favorite restaurant, and The Gap and Banana Republic stores at the regional shopping center are retailers. Their suc cess or failure is ultimately determined by how well they serve you and other co nsumer like you. Manufactures Manufactures business whose primary economic role is the production o

f goods. Wholesaler Wholesaler, which acts as market intermediaries between producers a nd end users of products and services, may engage in retailing activities by sel ling directly to consumers. RETAILING AND THE MARKETING MIX Retailing forms an integral part of the marketing mix and includes element like product, place, price, people, presentation and promotion. Place relates to the distribution and availability of products in various locat ions. Customers are first introduced to the product at the retai l store, Organization sell their products and services through these retail outl ets and get feedback on the performance of their products and customers expectat ions about them. Retail stores serve as communication hubs for customers. Commonly known as the point of sale or the point of purchase, retail stores tra nsmit information to the customers though advertisements and displays. The role of retailing in the marketing mix is very significant. THE FUNCTIONS OF A RETAILER The retailer services him by providing the goods, in the r equired assortment and at the required place and time. From an economic standpoi nt, the role of a retailer is to provide real added value or utility to the cust omer. This comes from five different perceptivities. The first utility arises from the need of providing a product in the form that is acceptable to the customer. The retailer does not supply raw ma terials, but rather offers finished goods and services in a form that the custom ers want. The retailer performs the function of storing the goods, and prov iding us with an assortment of products in various categories. The creates time utility by keeping the store open when the consu mers perfect to shop. By being available at convenient location Finally, when the product is sold, ownership utility is created. THEORIES AND CONCEPTS OF MARKETING MANAGEMENT IN RETAILING CONCEPTS OF MARKETING MANAGAEMENT IN RETAILING 1. Customer Orientation

Modern business mangers consider marketing oriented. Thus the major function of marketing is the satisfaction of consumers desire for goods and services. Acc ording to Charles G. Mortiner, Look at the company through the customers EYES. is at the tip of the organization chart. We are not the boss; the consumer is. What the consumer wants the consumer gets. A businessman is rightly observed, We are to produce what the people want a nd not what we can sell. The businessman is always in search of such needs of c ustomers, which are not even known, to them. The need for television, the custom ers never thought of refrigerators etc. The invention of such items is the resul t of customer-oriented attitude of the businessman.

However, for effective customer orientation, the firm has to determine, The basic needs of customers, it can satisfy Market segments, it can serve better taking into account its limited res ources, and Colour, size and design of the p product, pit can choose to satisfy the specific needs of specific customers and introduce its in the market through pro duct differentiation. Figure The figure makes clear about the difference between the traditional organization chart and the customer oriented organization chart.

2. Integrated Marketing When all the departments of the company work together to serve the customers in terest or needs, the result in integrated marketing Examples of Integrated Marketing The marketing Vice President of a major European airline wants to increase the a irlines traffic share. His strategy is to build up customer satisfaction through providing better food, cleaner cabins, better-trained cabin crews and lower far es; yet he has no authority in this matters. The catering department chooses foo d that keeps down food costs; the maintenance department uses cleaning services that keep down cleaning costs, the human resource department hires people withou t regard to whether they are naturally friendly, the finance department sets the fares. In such a way that the Vice President of marketing creates an integrated marketing mix.

3. Profit through customer satisfaction However the ultimate purpose of the marketing concept is to help organizations t o achieve their objectives and at the same time satisfy the customer also. Marke ting concept advocates serving the customer and maximizing profits at the same t ime. These goals need not conflict, but they can be reconciled, the guaranteed r oute to profit is through customer satisfaction. The aim of modern marketing concept is to please the customers. For this purpose , everyone in the firm should try to be more friendly with his customer. THEORIES OF RETAIL DEVELOPMENT Retail development can also be looked at from the theoretical perspective. No si ngle theory can be universally applicable or acceptable. The application of each theory varies from market to market, depending on the level of maturity and the socio-economic conditions in that market. The theories developed to explain the process of retail de development revolve a round the importance of competitive pressure, the investments in organizational capabilities and the creation of a sustainable competitive advantage. This re quires the implementation of strategic planning by retail organisation.Growth in retail is a result of understanding market signals and responding to the opport unities that arise, in a dynamic manner. Theories of retail development can broadly be classified into: 1. Environmental Theory- Where a change in retail is attributed to the chan ge in the environment in which the retails operate.

2. Cyclical Theory Where change follows a pattern and phases can have def inite identifiable attributes associated with them. 3. Conflictual Theory the competition or conflict between two opposite ty pes of retail results in a new being developed. Environmental Theory Darwins theory of natural selection has been popularized by the phrase surviva l of the fittest. Retail institutions are economic entities and retailers confr ont an environment, which is made up of customers, competitors and changing tech nology. This environment can alter the profitability of a single retail store as well as of clusters and centers. The environment that a retailer competes in is sufficiently robust to squash any retail form that does not adjust. Thus, the birth, success or decline of different forms of retail enterprises is many a times attribute to the business environment. For example, the decline of department stores in the western marker attribute to the general inability of those retailers to react quickly and positively to environment change. Those retail institutions which are keenly aware of their operating environment and w hich react without delay, gain from the changes. Thus, following the Darwinian approach of survival of the fittest, those retaile rs that successfully adapt according to the technological, economic, demographic and legal changes are the ones that are most likely to grow and prosper. The ab ility to adapt to changes, successfully, is at the core of this theory. Cyclical Theory Wheal of Retailing: The most well known theory of retail evolution is The Wheel of Retailing theory. This theory, described by Mc Nair, helps us in understandin g retail changes. This theory suggests that retail innovators often first appear as low-priced operators, with a low-cost structure and low profit-margin requir ements, offering some real advances, such as specific merchandise, which enables them to take customers away from more established competitors. As they prosper, they developed their business, offering a wider acquiring more expansive facilities, but this can mean that they lose the focus that was so imp ortant when they entered the market. Such trading up occurs as the retailer be comes established in his own right. This in turn, leaves room for others to ente r and repeat the process. They then become vulnerable to new discounters and lower-cost structures that take their place along. The wheel Scrambled merchandi sing occurs as the retailer adds goods and services that are unrelated to each o ther and the firms original business, to increase the overall sales and profit margins. This is termed as the Wheel of Retailing. This is depicted below.

The theory of the wheel of retailing can be understood by taking the examples of department stores which started as low-cost competitors to the small retailers; they developed and prospered; then they were severely undercut by supermarkets and discount warehouses. This theory does not explain the development of retail in all markets. In less d eveloped markets, introduction may not necessarily occur at a low price, there, introduction may occur at a high price. Accordian Theory Hollander was a key observer of retail evolution and he used the analogy of an o rchestra comprised exclusively of accordion players to describe the dynamically

shifting retail structure. This is so called accordion effect describes how general stores moved to speci alized stores, but then widened their range of merchandise again, as new classes of product were added. Hollander suggested that the players either have open a ccordion, representing general retailers with broad products ranges, or closed accordions thus indicating a narrowing of the range, focusing on specific merc handise. He suggested that at any point in time, one type of retailer would outn umber the other, but that the situation would continually change the arrival and departure of different stores. This analogy illustrates the complexity of the r etail scene, and the way different attitudes to successful retailing will come i n and go out of fashion at different times. The Accordion theory and the Wheel o r Retailing is known as the cyclical theories of retail evolution. Conflict Theory Conflict s will always exists between operators of similar formats or within bro ad retail categories. It is believed that retail innovation does not necessarily reduce the number of formats available to the consumer, but leads to the develo pment of more formats. Retailing thus, evolves through a dialectic process, i.e, the blending of two opposites to create a new format. This can be applied to de velopments in retailing as follows; (a)Thesis: Individual retailers exists as corner shops all across the country (b) Antithesis: A position opposed to the thesis develops over a period of ti me. These are the department stores. The antithesis is a challenge to the thes is. (c) Synthesis: There is a blending of the thesis and the antithesis. The resul t is a Position between the thesis and t he antithesis. Supermarkets and hypermarke ts thrive. This synthesis becomes the thesis for the next round of evolution .

THE RETAIL LIFE CYCLE The concept of a product life cycle, as explained by Philip Kotler, is also appl icable to retail organizations. This is because retail organizations pass throug h identifiable stages of innovation, development, maturity, and decline. This is what commonly termed as the retail life cycle. Attributes and strategies change as institutions mature. The Retail Life Cycle is a theory about the change through time of the retailing outlets. It is claim ed that the retail institutions show an s-shaped development through their eco nomic life. The s-shaped development curves has been classified into four main phases A: Innovation A new organization is born; it improves upon the convenience offered or creates other advantages to the finial customers that differ sharply from those offered by other retailers. This is the stage of innovation, where the organization has a few competitors. Since it is a new concept, the rate of growth is fairly rapid and the management fine-tunes its strategy through experimentation. Levels of p rofitability are moderate and this stage can last up to five years, depending up on the organization. B: Accelerated Growth

The retail organization faces rapid increases in sales. As the organization move s to stage two of its growth, which is the stage of development, a few competito rs emerge. Since the company has been in the market for a while, it is now in a position to pre-empt the market by establishing a position of leadership. Since growth is imperative, the investment level is also high, as is the profitability . Investment is largely in systems and processes. This stage can last from five to eight years. However, towards the end of this phase, cost pressures tend to a ppear. C. Maturity The organization still grows, but competitive pressures are felt acutely, from n ewer forms of retailing that tend to arise. Thus, the growth rate tends to decre ase. Gradually, as markets become more competitive, and direct competition incre ases, the rate of growth slows down and profits also start declining. This is th e time when the retail organization needs to rethink its strategy and reposition itself in the market. A change may occur not only in the format, but also in th e merchandise mix offered. D. Decline The retail organization looses its competitive edge and there is a decline. In t his stage, the organization needs to decide if it is still going to continue in the market. The rate of growth is negative, profitability deciles further and ov erheads are high. The retail business in India has only recently seen the emer gence of organized, corporate activity. Traditionally, most of the retail busine ss in India has been done by small owner-managed business. It is hence, difficul t to pick up a retail organization which has passed thorough all the four stages of the retail life cycle. In the private sector, till a few years ago, most cities in India had a few ind ependent retailers. For examples, Mumbai had stores like Akbarallys, Persons, A marsons and Benzer. Then Shoppers Stop opened its first outlet in Mumbai, in 19 91. The store initially offered apparel, imitation jewellery, cosmetics, perfume s and home fashion. It also had a customer loyalty programme in place, which man y stores at that time did not offer. The store enjoyed an enviable position for a while. However, with the change in customer expectations and increased competi tion in the form of other department stores like Globus, Westside, Lifestyle, et c. and with the rise of specialty stores, the company has been forced to rethink its product offering. It now not only stocks apparel, jewellery, cosmetcs,etc. that it earlier stocked, but has also acquired the bookstore chain Crossword. Crossward counters have been added to many of the existing stores. The store in Andheri also houses Planer M, a music retail chain, and a small coffee shop. Thu s, we see that the organization has passed through definite stages of introducti on and growth and has had modify its strategy in response to the changes in the environment and in the consumer. A GROWING EMPHASIS ON CONTROL OF QUALITY Quality has emerged as a major competitive componenent strategies. There are fo ur main reasons which may account for the increasing rele3vance of quality manag ement. 1. Companies need to find a new ways of creating differential advantages by pro viding better service levels than their competitors. Retail competition has incr eased because services and goods are available from wide range of channels and m anufacturers are creating technically satisfactory goods, which require little a fter-sales service 2. the increased level of consumerism and the greater media attention on qu ality have meant that companies have to be more responsive to quality issues. Co nsumers are far more aware of their rights and are less likely to suffer quietly

from the results of poor quality. 3. There has been a growing sophistication of consumer market with the non price factors of image, retail offer positioning and service delivery processes becoming more important 4. Technology is one of the new applications to quality enhancement. Quali8ty is the totality of relationship between service provides and features o f retailing which are related to the delivery of the satisfaction. It is there f or important to create systems of quality control, which are checks and monitori ng processes to ensure measurement of service delivery is taking place A good service guaranty is identified as unconditional, it is understand and com municate meaningful and easy to invoke and obtain recompense. SERVICES Service categories include the following elements 1. Tangibles What can be experienced from personal, company literature and science, and physi cal environment of retail encounters. These include aspects of the store or the material customer can see, touch, use, etc such as: Physical facilities Appearance of personnel Tools or equipments used to provide the service Physical representation of the service, eg; store credit card, fascia de sign Other customers in the service facility 2. Reliability of staffs to deliver the expected or promise services depend ably and accurately. This involves consistency of performance and dependability. It means the company should perform the service right the first time and the ow ner its promises. This factor also demands that the company is able to trust the employees with the responsibility deliver service which, consistently and accur ately, meets policy standards, including Accuracy in charging Keeping the correct records Performing the service at the designated time 3. Responsiveness staffs to help customers and provide timely service. This concerns the willingness or readiness of employees to provide service to help c ustomers and give time services such as, Mailing a transaction slip immediately Calling a customer quickly after a query Giving prompt service 4. Competence: an assurance of employees ability to convert trust and confi dence through company and product knowledge, as well as by the courtesy of their interpersonal skills; Knowledge and skill of the contract personnel Listening to customer needs and explain the desired product or service Reinforcing the companies reputation Personnel characteristics of the contract personnel Ability to respect confidentiality, and display financial and personnel security 5. Empathy: Having an understanding of what customers as individual human r equire in relation to psychological as well as physical needs. This concern indi vidualized attention to customers a caring individual concern attention for ot hers and emotions: Recognizing regular customers Learning the customer specific requirements and anticipating their needs Being attentive and providing individualized service Ensuring that if there is a problem it is acknowledged, responsibility is taken, and some action is carried out to ensure the service fault is compensated for.

A CLASSIFICATION OF SERVICE AND QUALITY We can classify the different approach to quality management into two categories : first, the product-attribute approach; second, the consumer oriented approach (Gilbert and Joshi, 1992). The product- attribute approach is based upon trying to match the products conformance to standardized requirements which have been set by reference to what company managers think the failure point to be. Product - attribute approaches rely on trying to control the companys output by using a nd internal standard setting perspective. This relies on an inward- looking and trading-led management style, rather than a marketing-led approach. It would seem more appropriate to adopt a consumer- oriented approach which reco gnizes that the holistic process of service delivery has to controlled by taki ng into consideration the expectations and attitudes of retail customers. If the starting point for management is the understanding of how quality is judged by customers then the perception processes of this judgment, as to whether a servic e is good or bad, can be managed. Gronroos is a leading author who has defined t his concept. THE GRONROOS MODEL OF PERCEIVED QUALITY MANAGEMENT Gronroos (1982) developed a model, which is a form of gap analysis to explain wh at he calls the missing service quality concept. The model (Figure) focuses ma inly on the construct of image which represents the point at which a gap may occ ur between expected service and perceived service. Grnroos allows us to be aware of the ways that image is created from the aggregation of different aspects of technical and functional variables. By following his model of different inputs w e are alerted to the fact that we should not reduce quality to a simplistic desc ription of itself but that we should try to understand the full range of inputs. This is because to speak simply of quality gives the manage no indication of w hat aspects of the whole retail experience should be controlled. Gronroos argues the function and range of resources and activities includes what customers are looking for, what they are evaluating, house service quality is perceived, and i n what way service quality is influenced. Gronroos defines perceived quality o f the service as dependent on two variables: experienced service and perceived s ervice, which collectively provide the outcome of the evaluation. Gronroos distinguishes between technical quality and functional quality as the c omponents of the service image delivery: 1. Technical quality refers to what the customer is actually receiving fr om the service. This is capable of objective measurement, as with tangible goods . 2. Functional quality refers to how the technical elements of the service are transferred or perceived. We know that a customer in a restaurant will not only evaluate the quality of the food consumed, but also the way in which it was deli vered (the style, manner and appearance of the staff or the ambience of the plac e itself). Figure shows that he management can influence the attitudes, behavior s and general service mindedness of personal. The Parasuraman, Zeithamal and Berry model Parasuraman et al. (1985) have also developed a model of service quality, which claims that the consumer evaluates the quality of a service experience as the ou tcome of the difference (gap) between expected and perceived service (Fig). The model highlights the main requirement for a service provider delivery the expect ed service quality. From the model five gaps may be identified that could lead t o unsuccessful service delivery. By understanding this model, it is possible to

provide greater management control over retail customer service relationships. T his should lead to an improved realization of the key points at which the market er can influence the satisfaction of the consumer. The marketer is then in a bet ter position to be able to reduce or close the gaps. Gap 1: Ignorance of the customers expectations This is the gap between consumer expectation and management perception. The gap may result from a lack of understanding of what consumers expect from a service. The literature confirms this disparity by revealing that what providers perceiv e as being important to consumers is often different from what consumers themse lves actually expect. The gap may relate to a lack of communication or feedback from customers or an unpreparedness to address important changes, which are requ ired. In the early 1990s, Sears failed to realize that customer buying habits had chan ged and the company retained its traditional catalogue when the customers had em barked upon different modes of shopping. In the modern marketplace there is a ne ed for responsive and adaptive adjustment to the service provision, based upon f eedback from staff at all levels in the company. In addition, good relationship marketing programmes should also help in the reduction of customer and company problems arising from different expectations of what constitutes of what const itutes an appropriate service. Gap 2: Requirement for service design standards This is the gap between management perception and service quality specifications . It results when there is a discrepancy between what management perceives to be consumer expectations and the actual service quality specifications established . Management may not set quality standards; the ones they set may not be very cl ear, or the quality standards set may be clear but unrealistic. Alternatively, a lthough the standards are clear and realistic, management may quite simply not b e committed to enforcing them. The need here is to provide service design standa rds, which are supported by everyone and form the yardstick against which all se rvice standards are judged. These standards will then provide the guidelines aga inst which the overall service and retail staff may be evaluated. Gap 3: Not delivering to service standards This is the gap between service quality specifications and service delivery. Eve n where guidelines exit for performing a service well, service delivery may not be of the appropriate quality owing to poor employee performance. The employee p lays a pivotal role in determining the quality of the service. This is because r etail staff and their actions revisable to the customer, and can be assessed and judged on a constant basis. Companies may have service standards but not facili tate the service with adequate technology, the appropriate human resource polici es or a positive company culture. Gap 4: In consistency between performance and promises This is the gap between service delivery and external communication. Consumer ex pectations are affected by the promise made by the service providers promotiona l message. Marketers must pay close attention to ensure consistency between the quality image portrait in promotional activity and the actual quality offered. T he problem is any discrepancy between those who described and promote the servic e and those who are delivering the service. If a marketing promotion promises a certain offer or service, it has to be available when customer demands it. Marke ting has a key role in ensuring that all promotions are coordinated effectively and monitored closely.

This allows the company to plan and-build competitive advantage by establishing leadership principles of service standards and delivery. Once the standards are established there should be a policy to communicate and reinforce the service pr ovision philosophy at every possible opportunity: meetings, training and interna l marketing programmes, induction programmes and appraisal systems. The human re source function needs to be aware of marketing so as to ensure that the differen t levels in service delivery process (see Fig. 4.4) are always clearly understoo d and reinforced throughout the company - in its culture and in its reward syste ms. Without good internal company procedures and relationships it is unlikely th at even the most well conceived of quality programmes will be successful. . An approach to deconstructing service delivery IMPLEMENTATION OF SERVICE MANAGEMENT For the model in Fig. 4.4 to be successful there is a need foe the implementatio n process to consider the following areas vital to success. 1 Leadership and commitment by senior management, with clear goals and a policy on quality being set and. communicated to others. There is also the need to rele ase the appropriate resources to create changes and achieve the required results . Sam Walton, founder of Wal-Mart, adopted the following philosophy to direct hi s retail staff and gain pre-eminence in the retail marketplace: This is the gap between perceived service and delivered service. This gap result when one or more of the other gaps described occurs. If these shortfalls arise, company staffs have to ensure they reduce or close the gaps where problems have appeared. Further factors in service quality delivery Within the delivery of services consumers will have different levels of toleranc e to what may be judged adequate or expected service. This is known as the zone of tolerance: customers are willing to accept different levels of service, which fall within a zone between the desired and adequate levels of performance. It i s important to realize that there are differences between individual customers perceptions; similarly each customer may have different expectations of one bran d in comparison with another. For example, if Marks & Spencer has delivered more consistent service over time than C&A then the expectations for the M & S brand are higher. If Marks & Spencer service were to decline to the level consistentl y offered by C&A, the customer may be more disappointed by the service received from Marks & Spencer - even though the service standards are similar. The focus on perceptions and expectations provide a guideline [for quality management int ervention strategies. To this end, the model proposed by Parasuram et al, has th e following two main strengths. 1. The model presents an entirely dyadic view to the marketing task of deliverin g service quality. The model alerts the marketer to consider the perceptions of both parties (marketers and consumers) in the exchange process. 2. Addressing the gaps in the model can serve as a logical basis for formulating strategies and tactics to ensure a consistent marketing; approach to the creati on of experiences and expectations. .Providing promotional methods which lead staff to, achieve high levels of custo mer care and service quality is becoming increasingly important. One poster targ eted on staff read, Good enough is not good enough which set the standards and aims of the company personnel above the average. This type of inward marketing is used as a means to change the general attitudes of staff toward quality. A well-positioned service enables the company to: Differentiate its position so as to distinguish itself from competitors; Deliver superior service to that accepted as the norm. Members of the stall should be treated as internal customers will assist the to a total quality management (TQM) systems. It is obvious that organizations ha ve customers from within as well as from outside them. If employees visualize th e relationships between each other based upon supplier and customer links as .a quality chain, then the question is always: am I meeting the full requirements o

f my role ? For example, the secretary is supplier to the boss and needs too pro vide timely, error-free work in order to assist the boss work as supplier to his or her internal customers. Such chains are easily weakened or broken by faulty equipments or people QUALITY AUDITING SYSTEMS There are various methods that may be used to measure and monitor quality. Buttl e 1994 indicated that following research of loyal Jaeger customers a list of 180 service variables was reduced to26 key attributes against which mystery shopper s could assess a store s service performance. It is important to note that the f inal list was based upon customer preferences and did not correlate with what Ja eger s own employees had identified as being important. The key items identified by customers were: external appearance of the branch Merchandise pricing in window display; greeting upon entry Staff approachability; Staff availability to help; Manager availability; whether the manager is recognizable; the number of customers serves simultaneously by one staff member efficiency /promptness of enquiry handling Branch stock levels; Staff awareness of fashion trends; Speed of stock location; staff awareness of advertised lines; Helpfulness of staff advice; honesty of staff advice; standard of fitting rooms; availability of advertised stock; selection within size; colors/size availability; availability of alterations advice; availability of garment reservation; Eye-catching quality of window displays; eye-catching quality of interior displays; speed of till transaction; comparability of service in other Jaeger branches. IS QUALITY A COST OR A LONG-TERM BENEFIT? It is found that smaller firms embarking upon service quality programmes (SQP) p erceive them to be: costly, needing a lot of management time, difficult to measu re the intangible benefits, and finally not easy to implement. Given the nature of retailing (people based with employee performance and interaction being of pa ramount important), it is clear that errors are inevitable, In addition to this element of human error is the nature of human response to it. It is estimated th at there is a ratio of 4:1 where individuals will speak of poor service to goods service and therefore pass on more negative than positive aspects of service de livery. The movement of truth - the impact on THE INTANGIBLE -TANGIBLE PRODUCT CONTINUUM All products fall on a continuum between pure services and goods, with most prod ucts being a combination of the two. A pure service would be consultancy or fina ncial advice, whereas pure good would be more tangible, such as a can of beans o r a bottle of lemonade. Very few products are purely intangible or entirely tang ible; services such as retailing, however, tend to be more intangible than manuf actured goods. Some products will have more of service content than others and i f they are assessed as being placed to the left of the center of the continuum t hey may be termed service products. Retailing falls to the service end of this c ontinuum, despite being associated with the sale of goods. This is due to the na

ture of transactions involving the interpersonal skills of service providers. Th e added service element is a core part of the transaction. Services such as retailing can be characterized as having the following attribut es Intangibility Perishability Inseparability Intangibility This means that some products cannot be easily stored, evaluated or demonstrated in advance of their purchase. For example, a travel agent cannot allow for the testing or sampling of the tourism product; a bank cannot easily demonstrate its service. On the other hand, a car or a computer game can be tested prior to pur chase and clothing may be tried on - but this occurs in a retail environment and not in the home. Mail- order sales or similar methods of selling have to utiliz e printed literature to communicate the benefits of the product. In addition mai l - order sales offer only limited visual clues as to the. benefits of the produ ct. Prior to the arrival of the goods potential customer has to make use of inta ngible clues. However, the clearest example of retailing related to intangibilit y is telephone banking, where transactions can be carried out by voice mail and no personal or tangible interface exists. Moreover, the experience of retail pur chases is not something that can easily be explained or demonstrated away from t he branch, store or mall. The marketers of the more intangible services, which make up retailing, face gre ater difficulty. Because of fixed time and space constraints, they cannot easily demonstrate the benefits of the retail offer or any merchandise they may be sel ling. The challenge for the retail service marketer is to overcome intangibility through the use of selling techniques, the physical layout of the store or a depiction - by graphical, video or display mea ns - of the product in use. In addition, the creation of a positive image surrou nding the service will enable customer to envision the retail experience benefits. . Perishability This means that unlike goods, the service product cannot be stored for sale on a future occasion. For example, if customers do not enter the store when it is fu lly staffed sales may not occur, for which the revenue can never be recouped. Th is perishability factor leads to the high-risk nature of the retail industry. Ma rketers in the retail industry have to devise complex pricing and promotion poli cies in an attempt to create demand in off season periods and create greater synchronization of staffing levels and supply with demand patterns. Weak demand is not the only problem; the industry is also characterized by seasonal demand, such as during the Christmas period, when shoppers are more selective where they shop due to overcrowding and related problems that occur. Stores have a fixed c apacity with a maximum upper level demanding constraint. In peak periods retaile rs often have difficulty in coping with demand; therefore they offer only full p rices or have to resort to queuing systems. In the low periods of demand, howeve r, there is a need for greater marketing activity. The challenge for marketers arising from perishability problems is to try to smo oth out demand curves use of the marketing mix. To achieve this forecast of dema nd must be relatively accurate to ensure a productive use of staff. Inseparability This means retailing delivers a service, which is utilized and produced simultan eously for each customer. Because there is less opportunity to pre- check each s ales activity, it may vary in the standard of its service delivery. Theorists so metimes characterize this as heteroginity, Variance occurs due to the inseparabl e nature of the retailing product s delivery where the customer is part of the s ales process. The simultaneous process of production and consumption may lead to situations where it is difficult to assure the overall satisfaction of consumer

s. For example, peak loads of demand cannot always be forecast and may create di ssatisfaction and secondary problems. There is also a constant, threat of proble ms being caused by one set of customers who may upset another. This provides for the pote ntial for conflict on various levels. Whether it is the young out enjoying thems elves, perhaps congregating by the tapes and CDs or in the electrical department by the computer games and annoying older customers, or restaurant users involve d in a clash of social values, sets of unacceptable behavior may be exhibited by various groups. Manufactured goods, on the other hand, are produced in advance of being sent to the warehouse and there is little or no contact with the end cu stomer. The service aspects of retail are inseparable - service is intrinsic to retailin g. Staff may have personal problems or be feeling ill or tired and this type of problem may affect their level of commitment to giving good service or resolving problems. Because the nature of the retail service product is one of interperso nal relationships, where the performance levels of staff are directly related to the satisfaction experience of the consumer, there is a need for quality assura nce mechanisms. Staffs are emotional and changeable and if a high content of the sales experience is based upon interpersonal relationships between strangers as client and a service provider - it is important to ensure standardized servi ce levels are understood and adhered to by everyone. In order to reduce the prob lems associated with inseparability there is a need to invest in company trainin g programmes. The problems discussed above make it clear that there is a need to ensure qualit y is managed, as a basis of planning to achieve competitive advantage.

MODULE-II

Ajith.P Jayadeva Krishnan Pillai Prajith Ramachandran Ratheesh.R Vimal Dev.

RETAIL PROMOTION

Retailers communicate to their customers on a continuous basis through t he store atmosphere, the products and services, promotional literature, advertis ing and other promotional means. Retail promotion is the descriptive terminator the mix of communication activities which retail companies carry out in order to influence those publics on whom their sales depend. Retailing promotion will have the main objective of influencing consumer perceptions, attitudes and behav iour in order to increase store loyalty, store visits and product purchase. How ever, the important groups which need to be influenced are not simply the target market group of current and potential customers. There is a need to influence trade contracts such as agents and suppliers as well as opinion formers such as journalist and writers. Even local, national and international politicians and important professional groups may need to be influenced. ADVERTISING The term advertising includes any paid form of non-personal communicatio n through the media about a product, that has an identified sponsor. The use of payment differentiates advertising from public relations for which no payment i s made for the time or space to convey a message. The media may include telepho ne directors, guides, newspapers, magazines, radio, television, direct mail, Web pages and billboards. It is normally associated with mass communication, where a broad target market is to be contracted. Advertising is used to achieve a whole range of objectives which may inc lude changing attitudes or building image as well as achieving sales. Advertisi ng is often described as above the line promotion with all other forms of promot ion being termed below the line. The difference between above and below the li ne is simply academic now as the emphasis is on both areas, for example sales pr omotion and advertising, working together to achieve the greatest impact. Moreover, in decisions over communication plans, it is the cost-effectiv eness that matters most. The use of different combinations of what has traditio nally been known as above and below the line has blurred the meaning of the term s and there are may promotional strategies which can be seen to erase the line, or, as it is known, pass through the line; With direct mail being used to bui ld awareness and TV being used to sell products direct to the consumer, there is a great deal more flexibility in the use of different promotional mediums. Communication theorists have proposed several models to explain the way advertising works and each have some similarity. One model known as the DAGMAR model (Defining Advertising Goals for measured Advertising Results) describes th e sequence of stages through which the prospective customer has to move: Unawareness; Awareness; Comprehension of the offer; Conviction; Action Through advertising, the retailer will make the potential customer aware of the store and its range of offer. As part of the advertising communication process, information has to be clearly transmitted so it can be decoded and comprehende d properly. The process is then to make the offer credible so that the potentia l customer can be moved to a favourable attitude to the store or product. The a ct of purchase may then follow. Advertising has the potential to affect a large number of people simul taneously with a single message. The secondary effect of of advertising is pers onal communication among consumers. This is known as the two-step flow of comm unication. The first step in the process is the communications flow from media to opinion leaders- the individuals whose attitudes, opinions, preferences and actions affect others. The second step is word-of-mouth communications from opi nion leaders to others (followers). This communication can occur through person al conversation between friends or with work colleagues based upon communication about the store or its offers. It can also occur through non-verbal communica

tions when someone displays news bought merchandise in their home or by means of the labels on or in their clothes. One implication of the need to achieve as mu ch benefit s possible from the two-step model is the requirement to reach and in fluence opinion leaders. Types of advertising Product advertising Product advertising is aimed at enticing people to the store in order to consider specific merchandise. Product advertising will feature the promotion of merchandise that is new, exclusive, and superior in aspects of quality and de sign as well as creating awareness of complete assortments or special merchandis e events. It is aimed at creating awareness of the product, its availability an d benefits. Markdown event advertising. This is used to create some excitement about a special period of lower c ost offers for products. It is likely to be more successful if the reduction is believed to be part of a genuine sale of products which in the past had been fa irly priced. Institutional advertising This type of advertising is used to sell the store or shopping mall as a pleasing place to shop. With the use of institutional advertising, the store a ttempts to reinforce the image of one or more of the following: a leader in fash ion, fair prices, wide merchandise selection, superior service or quality, a lei sure experience of somewhere to en joy visiting. There is now a trend to a adver tise a shopping center rather than individual outlets. The communication emphas is is on the available range of shops, case of parking or other consumer benefit s. The frequency of this type of advertising increase at peak demand times such as Christmas. Co-operative advertising This is used where manufacturers fund part of a promotion by supplying leaflets or advertising material for use by the store. The store can add its o wn address to ready prepared printed material and carryout mail drops or other m ethods of distribution. Alternatively a manufacturer may agree share equally the costs of an advertiseing campaign. Manufacturers are keen to have their brand s stocked and sold therefore; they often enter into joint advertising schemes w ith retailers. Co-operative advertising may involve a combination promotions ma y well extend to agreements to provide joint branded window display material and point of sale material. Retail promotion in relation to that of manufacturers There are differences between retailer and manufacturer advertising stra tegies. Retail advertising is often based upon short-term objectives with the e mphasis on value or price of the products on offer. This is unlike manufactu rers approaches; they often attempt to build favourable attitudes to improves t he image of the brand or organization over in extended period of time, Where as a manufacturer will need to create awareness of its brand across major market areas, a retailer may have more geographically concentrated target markets. Th erefore, a retailer has to take into account local habits, conditions of the mar ketplace, availability of local media and have a clear idea of the housing areas where potential customers are living. The expense of some forms of advertising is excessive-for example TV adv ertising is extremely expensive due to production as well as transmission costs and therefore only the larger companies or franchisers will use this medium. The alternative use of direct marketing is often a more cost effective form of promotion for smaller more geographically dispersed retailers. Push versus pull strategy The promotional decisions have to consider whether the company chooses a push strategy or a pull strategy or a balance of the two. A push strategy invo lves pushing the consumer through the channel (see fig. 5.9 (a). As retailing

is a channel service this approach is unlike that of more traditional forms of p roduct marketing as it is the channel service which is promoted. Then pull strat egy is where marketing promotion activities are targeted to the consumer to indu ce them to buy the retailers merchandise or service (see Fig. 5.9 (b)) Retailer s may enter third parry agreements for promotion whereby by cost of the promotio n is shared between the retailer and the manufacturer to encourage more sales of the manufacturers product. Promotes the benefits of the store and channel Retailer Customer (a) Push strategy (b) cts Customer (c) Pull strategy

Promotes the benefits of produ

With the growing use of relationship marketing and the compilation of customer d atabases, retailers have been concentrating more on push rather than pull strate gies. Companies are increasing their efforts to select the most appropriate tar get groups to direct offers at. This allows marketing programmes to be more fin ely targeted, with literature for sale periods, special events or offers being t ailored to suit the individual customer group. SALES PROMOTION Sales promotion involves any paid non-personal marketing communication a ctivity; other than advertising, which offers an incentive to induce a desired r esult from potential customers, trade intermediates, or the sales force . This is sometimes referred to by the term sales incentive. Sales promotion campaigns will add value to the product because the incentives will generally not accompa ny the product but will typically be offered as mail drope or as coupons to be c ut from newspapers, etc. It is usual for a sales promotion campaign to be used as a temporary offer to the customer in order to stimulate an immediate response . For example, free samples or money-off vouchers and offers are frequently use d in sales promotion campaigns for brands or companies which need to improve dem and at certain periods. Included in these campaigns are displays, contests, swe epstakes, coupons, frequent user (loyalty) programmes, prizes, samples, demonstr ations, referral gifts and other limited duration selling efforts not included i n the other techniques-see summary of types of sales promotion below. Most inc entives are planned to be offered on a short-term basis only. Sales promotion is often used in combination with other promotional too ls in order to supplement the overall effort. However, it has to be remembered that it is sometimes difficult to terminate or change special promotions withou t causing adverse effects. Loyalty programmes are an example of this (see follo wing section on relationship marketing) A sales promotion for series of promoti ons) also has to take account of the likely effect it may have on the image of t he brand or outlet due to the negative perception change which may occur due to association with banal and frivolous promotions. To evaluate a sales promotion the retailer should consider. the cost of the promotion in employee time, as well as for the cost of a ny merchandise, giveaway items or promotional literature the increase i8n sales and profit, or improvement in awareness, based up on the campaign; whether the campaign had secondary effects of switching demand from othe r retailer products; whether there were any additional sales outside of the promotion, due to customers being attracted to the store. It is not always way to isolate the above effects from other factors, but it is always important to make some assessments of the benefit of different types of p romotion. RELATIONSHIP MARKETING LOYALITY SCHEMES

The retail marketplace is maturing and due to a slow down in growth is becoming more competitive. Against the backdrop, retailers seek different ways of improv ing sales and profits. In order to address these problems retailers are adoptin g relationship marketing (RM) schemes based upon loyalty cards which aim to: build greater customer loyalty and retentions develop methods of creating longer-term relationships Lead ultimately to increased sales and profits RM has been defined by Gronroos (1990, 1991, 1994) who has consistently argued f or the importance of ensuring that relationships with customers should be contin uously developed. Marketing is to establish, maintain and enhance relationships with customers and other partners, at a profit so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises. Gronroos argues that all marketing strategies lie on a continuum ranging from transactional to relational marketing, where relationship marketing can be judged in terms of measures of customer retention rather than market share. Ch ristopher et al. (1996) have developed the ideal of a ladder whereby relationshi ps, develop as part of growing custo9mer loyalty (see Fig. 5.10) The RM process helps to advance relationships to higher levels until adv ocates status is achieved. This is where the customer as advocate is not only loyal but also champions the company the employees and service to others. RM s hould not be confused with band loyalty based upon commitment to the produce RM is a far more complex and wider alliance and association. The rationale for RM is that it makes business sense to focus on long term financial benefits which may accrue once a customer has been won for the fi rst time. This is because it has been estimated it is five to ten times more expensive to recruit a new customer than to retain an existing one. This is bas ed upon the estimated cost of prospecting, advertising and selling, commission, product samples, credit checking administration and database management. The tr ue value of retaining customers is that it enables the costs of conversion of th e prospect to the set against the revenues earned over the longer term. Sales a nd profits improve in direct proportion to the longer a relationship lasts. RM requires the effective acquisition and reaction of customers for the building of a more efficient operation and, ultimately, a stronger competitiv e position. Acquisition is based upon the traditional approach to marketing wit h the identification of customer needs, development of a retail offer to satisfy those needs, and then the targeting of prospects. The movement from acquisitio n through a retention is checked in the following. Acquisition: current methods used to acquire customers from prospects, which then req uire effective retention. (Customers must be given an incentive to part with th eir personal information and be recruited to any scheme. Retention identify more about customer through database analysis; improve and make the retail/offer/service more attractive; inform to build customers knowledge of the company; tempt customers through special targeted offers to purchase more regular ly, try different products, etc. retain the customer by developing and delivering different forms of loya lty schemes and rewards; higher patronage should provide increased customer value to company, wh ich should result in higher profits and the ability to make increased investment in further acquisition of new members to the scheme. The foregoing process can be viewed as an increasing outward spiral which places the company in stronger and stronger position. Incentivesed relationship marketing has become more prominent during the 1990s

following the launch of loyalty card schemes. The customer is rewarded for the ir loyalty through the collection of points which entitle them to money oft prod ucts, free items and other incentives such as Air Miles or charity donations. It would be useful if we were to define loyalty: Loyalty is A state of mind which predisposes an individual toward a particular reta iler and leads to a higher than normal proportion of expenditure to be devoted t o the retailers offers. Relationship marketing or loyalty schemes have a number of benefits for the reta iler. 1. The retailer can accurately track the purchasing habit of large numbers of lo yalty scheme members and this enables the acquisitions of important data which can be utilized for planning and promotional purposes. 2. A good scheme will lead to repeat purchases through targeted incentives and b enefits to visit the retail outer and make purchases. 3. The scheme will act as a promotion for new customers and they in turn, can t ell others about their experience. 4. The customer may be willing to pay higher prices if the scheme enhances the purchase experience. 5. Customers will not take as much notice of alternative offers and promot ions if they are already linked into a worthwhile loyalty scheme. PERSONAL SELLING Personal selling is an attempt to gain benefit through face to face or tel ephone contact between the sellers representative and those people with whom th e seller wants to communicate. This may be based upon sales activity in-store, evening calls to try to sell services or products, or sales calls by paid salesp ersons either to companies or to private individuals. The importance of persona l selling differs among retail businesses on the basis of the type of merchandis e offered. A retailer offering low-risk, low price goods, which are promoted, n eed only employ sales staff who can complete the transaction and deal with minor enquiries. The typical information required will be the current policy non red uctions or special offers, guarantees or possible methods of payment. While the demanour of the staff in this situation is important, there is little sales neg otiation skill required to conclude the transaction. However, it should be no ted the trends is toward retailers reducing the number of sales personnel by off ering greater self-selection of products in order to save on sales staff costs. In a store where there are highly priced or more complex items for sale the con sumer has to cope with not only finding a salesperson to relate to but also one who has expert information. Such retail sales employees are often viewed as o rder takers but they should be viewed as order procurers. This is because for higher risk purchases customer, utilize and seek out expert advice and he lp. Situations where it is important to have trained staff are: where the item hasto be made to fit the customers specific requirements , for example a wedding dress or made-to-measure clothes; where the product is technically complex and the range is wide. For exa mple a computer or a video camers; PUBLIC RELATIONS Public relations is non-personal communication which changes opinion or achieves coverage in a mass medium, which is not paid for by the source. The co verage could include space given to a press release or favourable editorial comm ent. Public relations (PR) is important not only in obtaining editorial coverag e, but also in suppressing potentially bad coverage. A company which has good l inks with the media is more likely to have the opportunity to stop or moderate n ews which could be damaging to the company. Consumer affairs television progra mmes quite often berate retailers for poor service or dangerous products. More recently, the use of cheap child labour in the production of merchandise for Wes tern markets has become a newsworthy subject. This all requires sensible public relations reaction in order to retain a positive image for the retail company a nd industry. The major benefit of PR is that it can promote and enhance a companys i mage. This is very important for service-based companies which are reliant on

a more tangible positive image in order to be successful. RR is highly credi ble form of communication as people like to read news stories and will beli eve them to be less biased than information provided in advertisements. However , editorial decisions over what is communicated will mean control over the messa ge, its timing, placement and coverage is out of a companys hands. PR activity can either be planned or unplanned. Planned activity means the retailer attempts to retain control over the activity and news release. Wi th unplanned activity, the retailer simply reacts in the most beneficial way to the chance of some publicity or to suppress a negative news item. Planned publ icity will involve sending press releases and photographs to the media (trade p apers, local and national press, radio and television), organizing press confere nces for more newsworthy events, sending letters to editors of journals or local newspapers, organizing different creative stunts to acquire the right tone of media coverage, and making speeches 9or writing articles) on informed retail is sues in order to be perceived as a well-informed company. The media are interes ted in their own circulation, listening and viewing figures and therefore, to be successful all PR has to be newsworthy and of benefit to media interests. New and unusual information on new products or technology, expansion and development plans, human interest stories about staff and their achievements all written up and complemented by photographs- may be placed in trade and local press. OTHER IMPORTANT PROMOTIONAL TOOLS Within the field of promotion, there is the important area of visual mer chandising. Advertising may encourage consumers to visit the store but the reta ilers display may make the difference between making a sale or not. The use of visual merchandising includes visual materials and window displays used in reta il outlets to stimulate sales. Visual merchandising is non-personal in-store pr esentation and exhibition of merchandise, along with printed forms of communicat ion. The approach is to : ensure maximum product exposure. Provide displays which enhance product appearance and create interest; Provide sales and product information such as display cards and posters; Allow for storage and security pf stock; Generate additional sales through impulse purchases or by reminding the consumer of what is on offer based upon a message which is directly related to t he product. It retailers rely on self-service of items then a selection display such as th ose found in greetings card or music shops is required. Selection displays are generally open to facilitate easy browsing and inspection. Retailers use selec tion displays to exhibit their everyday assortments of convenience or shopping g oods. Effective use of this approach requires a logical grouping of the merchan dise by its usage. Ease of selection through uncomplicated, well-organised arr angements will increase sales. There are also special displays which are placed in well-exposed locations to bring some interest to the store. These can offer a dramatic impact by the use of display equipment and merchandise. Point-of pu rchase displays are a particular type of special display which will be on the co unter, in the store window or other relevant places. The visual display may inc lude banners, counter, in the store window or other relevant places. The visual display may include banners, counter cards, end-aisle stands, video -screen di splays, floor-stand displays and shelf extenders. There is a growing use of sponsorship and direct marketing which do not comfortably fit into the other four promotion categories (See Fig. 5.12) . spons orship is treated much more seriously today, with sponsors adopting sophisticate d planning, selection and evaluation procedures for their sponsorship programmes . Direct marketing is being used more extensively by a range of direct sel l companies as a means of utilizing a retailers loyalty schemes database addr ess list. The main method is direct mail which a postal communication by an id entified sponsor. This is being expanded into database marketing based upon rel ationship marketing principles and an increasing use of telephone sales campaign

s. Direct methods of contracting prospective customers are used to : encourage store visits from new customers; increase sales when there is a unique or special merchandise offer to b e made; take full advantage of using the information from one department to cros s sell other aspects of the store or its services build loyalty programmes in order to retain customers and increase reven ue; improve the image and competitive position of the store in relation to the competitors; send out special offers for low season or sales periods in order to incr ease in-store traffic and sales. There is often resistance to too much direct mail as it is often associated with ;junk mail Good direct marketing selects th e target carefully and provides the correct offer. CHARACTERISTICS OF PROMOTION Each of the promotional elements discussed above has the capacity to ach ieve a different promotional objective. While personal selling has high potency for achieving communication objectives only a relatively small number of peopl e can be contracted. Therefore, advertising is a better method of reaching a hi gh number of people at low cost. Public relations is more credible than adverti sing but there is more control over what is communicated through advertising mes sages and these messages can be repeated on a regular basis. When it is diffic ult to raise advertising budgets, public relations is a lower cost alternative b ut it is difficult to control the timing and consistency of PR coverage. Sales promotions, such as leaflet drops which offer retail price discounts may produce an initial trial for a product- for instance, the purchase of a product which i s being launched into the market- but this type of promotion is most suitable if used only for a short term period. Each part of the promotions mix has its own strength and weakness. Whil e this may include the factors of cost, ability to target different groups, and control, there are other important considerations. Figure 5.12 indicates the re lative strengths of each of the four form of promotion: advertising, personal se lling, PR and sales promotion. They are compared on the basis of the level of aw areness of the communication and its comprehension, as well as whether it can b uild conviction and succeed in creating action. PLACE SUPPLY CHAIN MANAGEMENT The special characteristics of retail business and the emergence of maj or retailers in the marketplace have led to specific forms of distribution or ch annel service. Prior to consumption, the retail product has to be both available and accessible. This requires a supply chain distribution system. A distribut ion system is the channel used to bring items to the place of sale, or the means by which a retail supplier gains access to the potential buyers of the product. More recently the efficiencies of supply chain management linked to TT have m ade major differences to the effectiveness of retailers and their overall profi tability. (Read chapter 10 in order to understand the way IT has changed the wh ole field of distribution logistics). With the ever- growing size and dispersal of retail operations, controlling merchandise as part of store operations has b een of paramount importance. This goes beyond an administration system ; mode rn supply chain management can achieve competitive advantage through shorter lea d times for restocking, reduced inventory size and costs, improved management i nformation and greater overall control. Retailing cannot be divorced from an understanding of the supply chain a s the following retail definition from Davies (1993) indicates: The management of resources to supply the product and service needs of the end- consumer, encompassing the supply chain of any physical products and th e exchange processes involved. The supply chain includes all the activities and exchanges involved in e

xtracting processing, manufacturing and distributing goods and services from raw materials through to the end consumer. Supply chain management requires a holi stic view of these activities and an innovative approach to their organization, in order to meet customer needs with the greatest efficiency. CHANNELS AND CHANNEL FLOWS There are different supply chain structures based upon extended, limited and direct channels. The discussion of supply chain management here will conce ntrate on the extended channel of retail distribution as this is the most preval ent. An extended channel is where the manufacturer, wholesaler and retailer pro vide a chain of facilitating services in order to sell the right product to the final customer. The limited channel is when a retailer work directly with the pr oducer and, therefore, can eliminate the wholesaler and the extra costs of this part of the chain. The retailers of furniture, white goods, electrical goods, a nd so on quite often deal direct with the supplier and create limited supply cha nnels. The final alternative is the direct channel. In this case the product i s sold direct by either the producer or retailer. By using different direct sa les marketing promotions such as direct mailing, Internet services, telephone s ales techniques etc. The channel is kept direct and the extra charges and commi ssions are thus eliminated. This allows some of the saving to be passed on to the customer who will purchase on the basis of lower price. It is important to realize that whatever part of the chain is eliminated, some of the functions o f that link in the chain have to remain. Even if the retailer were to be dispe nsed with, some of the retail functions have to remain in order to achieve a tra nsaction. Within ay of the different types of channel the flow is not restricted t o physical goods alone. Other types of flow of equal importance in ensuring the channel is successful are as follows: Physical flow: the movement of goods and method of transport, from one part of t he chain to another. Ownership flow: the transfer of title for ownership/usage from one channel membe r to another. This is important for legal aspects of delivery, damage and stora ge by the producer and intermediary as well as for the final customer; Service flow:- if services are rendered as part of the process or the end produc t is a service or mainly service based, it is necessary to ensure all the char acteristics of the services are fully understood; Information flow- there is a need for timely and accurate two-way information b etween all channel members; Payment flow:- there is a necessity for agreed payment transfer terms based upon service rendered or goods delivered. Promotion flow:- a flow of communication material needs to be used to influence both trade partners and consumers. The objectives of the promotion will be to produce a positive attitude and image for the retailer. With the extended channel, the distribution of goods (inventory) by retailers to consumers is achieved through the movement of goods to and from stockholding points (normally warehouses) and then on to points of purchase (stores). In mar keting terminology this part of the marketing mix is referred to as place but the stages involved in this chain may be referred to as distribution and wareh ousing or, more aptly, as logistics and supply chain management. In the mo dern competitive marketplace, retailers need to achieve high levels of customer satisfaction and service but at acceptable costs. This has led to the developme nt of increasingly sophisticated distribution systems to ensure optimum service for the supply of goods to the customer. According to Davison (1995), large hig hly complex and often computerized warehouse facilities may handle several milli on cases per week (or in excess of 10-15 million worth of stock). Computerise d stock management and information system (for example Tescos Dallas, Sainbury s BRS, Safeways SM3, etc) which link retailer communications direct to suppli ers have been developed (for example Tradenet) and transportation is subject to computerized control systems (for example paragon). These comprise sophistic ated logistics systems which have become not only a means of managing the supply ) of goods to the customer but are key strategic tools.

Many retailers benefited from the introduction of new logistics systems in the 1980s through increasing market share or increasing profitability. Compa nies which have benefited from such policies are generally those which no longer consider distribution and warehousing as purely a support function or an operat ions headache. Rather than simply a functional supply line, the use of retail logistics is now a valued management area with its own operational and strategi c objectives. THE SUPPLY CHANNEL The supply channel is the total process by which products reach the end consumer as goods or services., Figure 5.13 indicates the components of the tr aditional supply chain channel. Such a chain is an arrangement between paired links, where the emphasis has to be on controlling and managing the relationshi ps in order to move products through the process effectively. This should be based on a marketing and business need for the chain to achieve. * reduced inventory investment in the chain; * improved customer service through its effectiveness * developing of strong links, and hence a strong chain, in order to build competitive advantage , and * lower unit costs which can be used to price more competitively As the whole chain is dependent on the way any two of these parts of the chain i nteract there is always a question of whether the working relationships will be good and provide the service and economics required. In practice, it is found that the relationships are often ones of rivalry, mistrust and secrecy. None of these is conductive to a retailer being able to provide any added value from t he supply chain.

The traditional supply channel for retail products. The manufacturer The manufacturer or supplier processes raw materials into the finished c onsumable article, Suppliers may specialize in the type of products that they pr ocess (for example Birds Eye) or diversify into a wide product range (for exampl e Unilever). Suppliers of leading brands will use a high level of marketing, in cluding sales representatives and advertising campaign in order to ensure that t heir products are given maximum public exposure. They may even reduce the cost of their products to encourage retailers to have their producers featured in hi gh flow locations within their stores. The intermediary function The intermediary, the wholesaler, is in effect a distributor of goods fr om the manufacturer or supplier to the retailer. Wholesalers have traditionally been responsible for holding large stocks of products, attempting to anticipate demands and seasonal trends etc. Traditionally the wholesaler has also provide d a warehousing function for both the supplier and the retailer. This ensures that the supplier does not end up with stockpiles in the factory and is able to continue or switch production; the retailer has similarly benefited from the use of this intermediary in the supply channel by avoiding the need to hold large quantities of stock. This enables the retailer to free up capital, which would otherwise be tied up in stock, for their purposes. However, modern multiple store groups and supermarket chains have render ed the use of wholesalers unnecessary in the supply chain by assuming the funct ion of the intermediary. This has a cost saving function. At each stage in the chain of distribution the cost price of a product is added to. This build up o

f extra costs may reduce profit margins for the retailer or increase the final selling price to the customer. This is not in harmony with the normal retail ob jective which is to maximize sales and profitability. Additionally, each extra stage in the supply chain makes it more difficult for the retailer to control t he service or the quality of the final product. The more links that are involve d in the distribution chain, the less control there may be. This is allied to t he risk of conflicts over relationships with each partner attempting to maximize profit. The larger retailers have, therefore, sought to extend their control ove r the supply chain and moved away from the use of the intermediary. This has be en particularly so in the grocery sector, where currently four grocery chains, Sainsbury, Tesco, Safeway and ASDA, account for major share of sales in the UK packaged groceries market. The size discount prices and to absorb the role of the former wholesale intermediary, while ensuring the quality and service of pro duct to the customer. For such companies the traditional supply chain no longer exists. Multip le retailers- with their clearly defined strategic objectives, extensive nationa l coverage, centralized organizational structures and highly accurate informatio n systems have created logistics networks which supplant the intermediarys ro le of the supply in filling gaps between production and consumption.

GROWTH OF CANANEL RELATIONSHIPS AND PARTNERSHIPS A number of interrelated power relationship characterize the UK grocery sector. These range from mutual dependence to alliances based upon secondary su ppliers. The relationships are also affected by the concentration of market sha re in that suppliers are constrained in who they can deal with as the market is dominated by a limited number of multiple outlet retailers. The negotiating st rength of retailers has increased, and thus is even more apparent when own labe l products are being offered with gross margins higher than manufacturers bran ds. The power that individual retailers now exert is also compounded by the cen tralization of decision making, with fewer individuals at head office being invo lved in deciding the fate of numerous different suppliers. This has meant that store managers have little input to supplier choice and are freer to concentrate on personnel and service quality functions. Such developments have had the eff ect of fundamentally restructuring the supply chain. This does not apply only t o food retailers as the new methods of working have affected all aspects of reta il. Driven by competitive pressure to improve efficiency and to deliver add ed value for customers, major players in the supply chain have been changing th e way that they do business with each other. Retailers and suppliers have start ed to recognize the degree of mutuality between each of their own objectives. T raditionally supply chain relationships have been adversarial, exhibiting a hi gh degree of conflicts, during the 1990s there has been a recognition that there are benefits in closer working relationships. However ,there is always a poten tial problem for the large suppliers, which utilize logistics contractors, utili zing their power; this may lead to a situation founded on fear rather than mutua l interdependence. Any trading relationship will include a measure of conflict and of co-operation. This can be seen as a continuum extending from a single t ransaction, with a very minimal requirement for trust between the two parties, t o a long- term supply chain partnership with a very high degree of trust, at t he other extreme. Conflict imposes additional costs on the trading arrangements . Therefore, the aim is to move along the continuum, reducing the level of conf lict and increasing the co-operation so that costs are reduced and quality impro ves. In pre-checkout scanning days, the retailer had privileged access to cur rent sales data and would use this as a weapon to counteract suppliers bargaini ng strength. We can contrast this with recent trends of using EFTPOS and EDI te

chnology to delegate the entire replenishment administration activity to supplie rs. Technology hs had a major impact on distribution. Inventory management i s now driven by the scanning of merchandise at the checkout. This allows sales for all outlets to be collated and communicated straight through to the supplier , who will be responsible- within agreed parameters- for ensuring that fresh sup plies arrive at retailer distribution centers to replenish outlets. It is important to recognize that transformation to a partnership arrang ement represents radical change. The previously prevailing adversarial climate, with its relatively low levels of trust, will remain deep-seated. It is not re alistic to expect two organizations previously engaged in a form of opposition to each other suddenly to adopt a spirit of openness, and exhibit faith in each other and the co-operative pursuit of mutual goals. Making such changes require s a fundamental shift in the culture of each organization. This is not achieved overnight and can be a slow process, fraught with difficulties. CORPORATE REPLENISHMENT POLICIES Corporate retail planning often involves formalized logistics policies r elated to distribution networks, warehouse, systems, information systems and rep lenishment systems. These policies allow the head office (HO) of a retail organ ization to be responsive to operational needs, which include general as well as local patterns of demand, and new market opportunities . Companies that have b uilt into their corporate strategies the logistics of distribution have created dramatic improvements in their return on investment whether that investment be f ixed (warehousing, vehicles or other equipmenta0or current (inventory, accounts due and cash). Corporate replenishment (CR) has thus become an integral part of the corporate strategy and is instrumental in enabling the achievement of finan cial and strategic objectives. Corporate replenishment policy is a broad policy based upon the organisa tions replenishment ethos related to a system approach. There are two types of stock control systems: the push strategy, where quantities of stock are pushed into stores in anticipation of demand; and the pull strategy, where mechandise is pulled through the supply chain to replenish sales at stores, and a minimum s tockholding is planned to be retained in the store. Systems have been developed in the 1990s to encompass quick response or just-in-time (JTT) methods, where t he pull strategy becomes the leading method to link inventory to actual customer demand. The channel then becomes a continuous replenishment system triggered b y accurate electronic information from the use of EPOS and EDI, As such, JTT sy stems allow forrestocking to occur in relation to customer demand. JTT is a phi losophy as much as a technique, it is based on the premise that no products shou ld be made or moved until there is a downstream requirement for them based upo n feedback from the supply chain. Within retailing, the fundamental of JTT are often known as quick response (QR). The logic is that demand is captured as c lose to the final customer as possible, allowing a logistics response to be made as a direct result. Quick response will thus include the manufacturer in a ver tically integrated supply chain so that all means of JIT are triggered based upo n changes in consumer demand patterns. Quick response is a series of technologi es which comprise the electronic scanning of product codes, the application of E DI, and the identification and tracking of goods in the supply chain. The main users of QR are the grocery multiples but other companies such as Benetton and A rcadia (formerly the Burtton Group) developed the system at an early stage (Dapi ran 1992). Advantages of corporate replenishment (CR) There are four different beneficiaries of corporate replenishment systems: 1. the customer; 2. Store management 3. the company; 4. suppliers; The advantages for each of these groups are discussed below. Customer The customer is able to receive an improved level of service as the good

s are available at the point of sale, where and when the customer needs them. W hen items are advertised they are in stock and this adds to customer goodwill as stock is assured through the system. Stores can, and do, order promotional line s in some manual ordering systems. However, across a chain of stores it is unli kely has all relevant managers will order sufficient stock levels- or indeed pla ce orders at all-to meet the promotion, product introduction or range change nee ds, at the right time Also, in emergences substitute products and so on can be sourced more effectively in advanced CR systems, Through economies of scale and inventory savings made by being able to c arry less safety stock the retailer can pass on savings to the customer. The retailer is, through feedback from sales systems and the resultant flow of accur ate sales information, able to forecast bulk buying requirements more accurately . This allows the retailer to obtain greater discounts from suppliers, so maki ng sacuings which can be passed on to the customer. Store management Store management, through corporate replenishment, may be relieved of th e time consuming task of stock checking and ordering if the CR is well designed. Under automatic stock replenishment through EPOS and central distribution, sto re management may be completely freed from stock and ordering worries. The mean s they have more time to manage resources and implement company policies. Under highly computerized goods receipt systems other duties, associated with shrinka ge and delivery security, may also change significantly. It is believed that automated system swill means managers will not worry about stock situations. This is possible but it must be realized that a basic function of store managers is to ensure stock counting is accurately recorded, w hether they or a Head Office buyer is responsible for ordering stock. In EPOS r eplenishment, stock outs occur for a variety of reasons: unpredictable shifts in demand; product unavailability; poor data capture control; loss of information or computer failure, etc. In such a situation it is incumbent upon store manage rs to ensure that major stockouts are communicated as soon as possible to the he ad Office buyer or allocator so that remedial action may be taken. EPOS merely remove the task of physically ordering stock; it does not remove the managers responsibility to ensure that maximum customer service, through product availabi lity; is achieved. To achieve this, accurate information input by stores on sto ckholding is vital. Even with EPOS systems information can be corrupted by poor data capture, by incorrect codes being entered at the checkouts, or by staff co ding articles or merchandise incorrectly. Company The company benefits from maximizing service and minimizing costs. The central control of inventory replenishment can be managed to keep the amount of stock to an acceptable level. CR avoids dead stock being built up through disco ntinuity of buying or ordering by store-based management. The main benefit is t hat reduced stockholding figures prevent capital from being tied up; it may be f reed for the expansion and development of the business. Because of the ability to control stockholding., previously used warehou sing and store space is no longer required for that purpose. This enables retai lers to maximize store shop floor selling space. In a self-service environment you cannot sell stock that is in the warehouse. In conjunction with central war ehousing, economics of scale can be made through composite transports systems. Whether it is an agency or own transport network, corporate replenishment enable s improved utilization of the transport fleets and improvements in service. Given the constraints of supplier fed deliveries, marketing may also ben efit from corporate replenishment. It can be assumed that stock will be allocat ed and received into stores to coincide with advertising, other promotional acti vities and videos, coupons, competitions etc. Advertisement products which are not available in stores is a major fault possibility that can occur in any type of replenishment system. CR ensures that it is not left to department managers , some of whom will-due to other pressures- be enable to meet the requirements o

f the promotional activity. Suppliers It is for easier for a supplier to cope with one order for upwards f of 300 stores than for each store independently to place orders. Consequently, the supplier can deliver economically the quantity required in good time. Similarl y, it is much more desirable to organize this through central distribution ware housing (CDW), Phoning, faxing or using traditional forms of placing orders is t ime consuming and often inaccurate. To deal with one electronic system of order ing is desirable to the supplier as well as to the retailer. However, orders ma y also be placed by the buyers-professionals who are specialists in their field, knowing the merchandise and seasonal trends. Therefore, from the suppliers po int of view, it is preferable not to deal with store based management who have n umerous responsibilities to perform and ordering is only one of a list of urgent priorities INTERNET AND DIRECT DISTRIBUTION SYSTEMS In addition to more traditional methods of channel management there has been a change of distribution strategy to increase sales through direct channels . Large retailers now offer many of their products on-line through the Internet . While this is an important trend, retailers long term strategies are still ha rd to discern. In 1995 J Sainsbury the supermarket group, announced it was offe ring wine on the Internet; anyone with a computer, a modem and a subscription to an Internet service provider could choose with one-line, through they had to confirm the order and pay for it by telephone (See chapter 10on IT and retail fo r further discussion of the possibilities of the Internet. Compu serve, the US-owned on-line information system, announced is UK Sh opping Centre in 1995. Subscribers who paid about 7 a month could buy books fro m WH Smith, CDs from Virgin and cameras from Dixons. Because CompuServe is cons idered more secure that the Internet, the results of the early schemes have been commented on as position. WH Smith, Sainsburys and Tesco reported the service to have been effective. The question underlying any change in channel level is why anyone would need a superstore if manufacturers started selling their well known brands on-line. This would mean that large food retailers may treat on-li ne shopping as both a threat as well as an opportunity. Logistical problems will also have to be overcome. These will not be on the hi-tech ordering side as the problems of security for customer and retailer have been largely overcome through sophisticated encryption systems, and device s such as an intelligent agent that will search out the best value on the Inter net have also been developed. Ordering will soon be possible via a number of me dia- the Internet, private on-line services, interactive television and even spe cial in home devices. It is the routine business of delivering goods which coul d prove to be a problem. For example, big retailer are used to shifting pallets of products by lorry, and the packing and delivering of single items quickly is much more difficult and expensive. Therefore, any need for home deliveries ma y lead the retailers to make alliances with parcel companies, the Post Office, o r even local dairies. It may also cause retailers to consider pricing levels . Early adopters may well be prepared to pay a little more for a home deleivery s ervice, recognizing the additional value of the saving in time. THE PRODUCT The effectiveness of planning the marketing mix depends as much on the a bility to select the right target market as on the skill in devising a retail of fer which will great high levels of satisfaction. A product is anything that can be offered to market that may satisfy a need or a want. This means a combinati on of goods and services which includes the store, the staff and the merchandise . IN relating the complete retail offer of location, price levels, merchandise , store layout or method of selling, brand name and service provided playa pivo tal role in a firms existence and long term success or survival. The shopper h as to believe that the merchandise, or outlet, offers added value inn octet fat it to be successful retailing comprises everything an individual at customer res

cuers both favorable and unfavorable as part of the total retail transaction should be noted that Chapter 6 is dedicated to a full explanation of the role a nd functions of merchandise management, which is an important aspect of any disc ussion of the marketing mix. A BREAKDOWN OF RETAILINGS AS A PRODUCT The formulation of a successful retailing operation involves a combinati on of : Service; Quality; Merchandise; Brand name; Features benefits. Service An agreement to service provision is concerned with creating the level o f services to be offered. In a store, how much of the service should the client be expected to perform and how much should be provided by staff? For example, in supermarkets the self-service of food and the customer carrying their owners are now thought of as acceptable and at times less by client: the use of automa tic teller midlines (ATMs) at banks attends the availability of the cash retriev al service (and others) beyond typical bank hours, and also allows customers to estimate roughly how long a transaction will rake. There are also systems for s elf-scanning of goods which cut down on the cost of time. Quality A decision regarding quality deciding on quality standards and implement ing a method of assurance on the performance level of staff and facilities. The management quality becoming an increasingly important management function. It is important to create a good quality reputation for the product and service off ered as this provides a positive image for the company or organization and is a major advantage in countering the perception of risk which, for many retail con sumers. Retail service providers are more likely to be successful. It the can be depended upon to deliver higher quality service levels than their competitor s. Success through quality is often seems as for certain product categories, th e outcome of a relationship between a customers prior expectations of serviced delivery and the perception to the actual service experience. Quality is also u sed statically: as away of differentiating merchandise and of positioning the of fer or retail outlet in an exclusive way. However, an exclusive position does b ring with it the added problems of needing to source more widely to continue to find unique merchandise and having to bear additional overhead costs as a conseq uence of exclusively. Merchandise Retailers need to decide on the merchandise to offer by engaging in the sorting process of assembling a range of goods and services from a variety of su ppliers. The depth and width of this range will be depend on the specific strat egy of each retailer, who must decide how different products will be fir into th e overall range of products they offer to the marketplace. A retailer must also decide on whether to include various brands in the range, and whether the offer of traditional or new products should be included. The range of the offer and how each product marches or complements the chosen positioning of the retailer is an important retail consideration; for example, is the company maintaining an up market, mid-market or economy position? The decision regarding the range of products is also important as it affects the need for space for display at the point-of-sale as well as stockholding. The width and depth decisions over the range of merchandise to offer have to be linked to both expectations and the fin ancial consideration of the consumer target group. Decisions over merchandise h ave to take into account that a consumer may warn to choose to purchase from a range of different types of goods. This could encompass the following categorie s. National brands

These are the brands which are heavily promoted by companies, such as Si msbury, Boors and K wik Fir, to achieve consumer awareness and preference, e.g. Boors No.7. For the retailer the problem in offering such a range is that they h ave no exclusivity and are open to price competition from those discounting nati onal brands. Own-label A retailer can offer the advantage of exclusivity and have more control over the product. They thus need nor enter into heavy advertising, which may gi ve the flexibility of being able to offer lower unit prices. Licensed merchandise The important of TV or film characters has led to the addition of images and symbols on a range of merchandise from everyday items to clothing. Disney characters, Barr Simpson, etc. have applied to the childrens market and led to major opportunities for increasing the desirability of different types o f merchandise. Franchised products via concessions in a store An advantage may be gained through an exclave deal with a manufacturer ( for example, Clinique, Principles, Alexan, ets. ). Brand name A brand name which is well known and associated with high satisfaction l evel imparts an improved image and added value to the product or the store. Thi s can lead to store loyalty or consumers insisting on the product by brand name and being less price sensitive. This brand name may be a nationalization own-la bel brand;/Brand names can be family brand where each of the companys products adopts the same brand name. Umbrella brand which use a corporate brand symbol a re being used to project a consisted image across countries. Nestls brand p olicy, for example uses umbrella and sub-umbrella branding; corporate branding t akes place with Nestle, Carnation, Maggi, C&B, Chambourcy, Buitony, Findus, Fris keys. Herra and Libbys while sub-branding is used for Nescafe, Nestea, Nesrum, Sveltesse and Lean Cuisine. Addirtionally, individual product brand name such as Nido, Crunch and KitKat are used, where each product is brand differently. I t is argued that it is difficult to create marketing success across a wide range of products due to the problem of providing complex brand values to dissimilar products. However, Marks & Spencer are renowned for having built their success on an umbrella own-brand,, St.Michael, which is associated with added value but which may be produced by a range of manufactures in a number of countries. Some companies opt for individual brand names such as those associated w ith the Debenhams orga 111 station the individual brand name approach allows th e retailer to search for the most appropriate brand name; its weakness is that t he promotional budget for each brand has to be subbocientlyy large to support th at brand. With individual branding, a company is able to position brands and pr oducts at the cheaper end of the market without the brand damaging the image of the test of the companys brands. In addition, if there is bad publicity for on e of the companys brands. Then the other company brands do no necessarily suff er..) With umbrella or family brands there is a spin-off effect for each of th e brands from the expenditure on anyone brand. Conversely, if one of the family brands attract poor publicity because of association there will be damage to th e other brands. For family branding, careful anemone has to given to the qualit y control of the product. One of the benefit of family branding is that each pr oduct brand performance (PBP) can be measured against the overall family brand p erformance (FBP). That is to say,- when FBP IS divided by PBP and the ground sh ows an increase over time, without good reason. It may that the product brand n eeds modification, revitalization or a detailed review. Features and benefits -A product includes everything that the customer and this includes the core prod uct which is made up of the delivery of benefits and features. We know that con sumers buy products for the benefits they deliver to them as this is the outcome value! of the purchase. These are also the different features which are the ta

ngible aspects of the product which help to differentiate it from competitors. Adding In the right features increase the probability that a purchase will occu r. Features in a store such as a play area for children, baby change facilities , fast checkouts, free gift wrap service free delivery,.. and so on are all adde d benefits which may planned into the product otter. Retailers: should take the opportunity o consider factors such as rooms, appropriates of in-store music at mid-wheel periods as well as weekends when the market profile of their customer s may change, gift wrapping service, loyalty program benefits etc. STORELAYOUT The store is products in its own rights. The customers product decisions can be enhanced, or ruined, by the type of pant store layout. Stores should be design ed to facilities the moment of customers, to create a planned store experience a nd to allow the optimum presentation of merchandise. This also involves the ful l use of floor area- to utilizing obscure and unproductive areas. The retailer s goal has to be a layout which reflects the branch position of the store and en sures the most effective use of space. It also has to be designed on a proactiv e rather than a passive basis. Proactive planning is based upon a manipulation 6f the in-store experience rath er accepting a passive, totally random experience for customers. Proactive plan ning accept and repose to the data showing that store layout can influence the c onsumer5s sopping behavior and perceptions. It is well known that the use of di fferent layout and aisle design will influence the patterns of traffic flow o pa ss the principal merchandising group. The correct display of merchandise in a h ighly frequented area can dramatically increase sales conversely a poor display will have a negative effect. Customers have to feel happy and comfortably in an environment if they are to re lax and stay for any length of time. Customers are more likely to want to enter and shop in a store then, their senses are satisfied by the way the state envir onment h<IS been planned. The use of space, color, walls, pillars, floor coveri ngs, lighting, music, ascent and so on can be controlled by the retailer. The c ombination of these physical messages which are planned are known as atmosphere. This is reinforced by the type of merchandise offered and the method of its di splay-down to the style and the poss. of mannequins. Atmospherics are created b y the combination of a whole series of cusses and stimulants to produce the desi red ambience and, emotional response from the group of target customers. The em otional state of the shopper will lead to an increase or decrease in the planned level of purchase. It is essential to know what factors stimulated and please consumers as the result will capture individuals for longer periods in a store a nd make them more susceptible to merchandise offers. Therefore the design of stores has to strive to produce an efficient layout with the qualities of ambience that attract members of the target market. The follo wing list of factors is useful but not exhaustive. 1. Space much be used effectively, with territorial areas planned to break up the store into logical sales sections and functional areas as changing rooms, restaurants and pay points-effective use of space. The stores layout should b e planned for optimum circulation around the store, both outside and inside, has to transform the customers attitude and to create a promise of the experience to come. 2. Layout should be planned to encourage customers to circulate in specific patterns so as to visit as many merchandise areas as possible-productive layout . The retail layout logic has to be easily comprehensible so that the potential customer quilt understands And assimilates the route they can negotiate past th e merchandise. This is often achieved by the use of different floor coverings o r textures which act as dues to the customer. It may also be accomplished (thro ugh the use of dear and stylist) sign age. 3. Stimulants to the senses to improve sales must also be planned. Music c an be changed to suit the type of shopper in the store such as playing younger background music just after the school close. Faster or slower music will affe ct the speed at which shopping occurs, national music, such as French or German

tulles, played in a super market will increase the sales of a particular countri es wines. Classical music will need to a sale more expensive wines. Another op tion available is to, are the tempo of the music, a different times of day or in different area to influence the pace of in store traffic movement. For example , when higher turn over of customers is required in the restaurant around lunch time, increasing the tempo of the music will achieve this behavior effect. Frag rance and science of perfumes, latherer, house plans and so on may influence cus tomers o purchase. The aroma of fresh bread, pastrieuecheese, coffee, chocolate , etc can stimulate sales and some stores on restaurant extract the aroma, pumpi ng it outside their believe to attract he passing public. 4. Lightening is an important mood setter and very useful in the production of a desired ambience. Lighting can be soft., bright or produce color washes. Merchandise can be high lightened by directional lighting or with the combinati on create interesting contrasts throughout display area. The use sophisticated lighting system allows the-retailer to adapt the ambience at regular intervals. This can alter perceptions of the size of areas, compliment the merchandise by bringing out its colour and direct the attention of the customers gaze. One ot her important aspect of lightening should be flattering. From a strategic marketing stance it is important than in highly competitive ret ail sectors the layout of the store is planned in order to reflect the desired m arket position The position has to be planned on conjunction with clear ideas as to how the atmospherics will differentiate the store as a brand from its comp etitors. Store layout sort of buying experience they may seek from the store. Aspect of atmospherics and store layout may affect: The speed at which consumers move from from one point to another in the store; The degree of well-being felt by the staff working in the store environm ent; The total sales revenue, sales pattern and type of product sold; The image the consumer has of the store and its merchandise. RETAIL PRICING The pricing policy selected by retailer will usually be di rectly Related to the resultant level of demand over a period of time. With right Margins, to the profitability of the enterprise. For the retailer, pricin g decision Are critical because without adequate margins the business will not survive fo r Long. As a business, the retailer has to seek cash flow, profitability and growth in order to improve their market position. The importance of selecting t he right strategy is growing as battles among retailers to increase market share are fought on the basis of offering quality, selection and availability at comp etitive prices. To be successful, retailers are having to forge partnerships w ith manufactures and introduce technology in order to gain cost advantage withou t compromising quality. Given this situation it is not surprising that cost, ma rgin and price comprise the most important element of the marketing mix for most retailers. This especially the case given the existence of discount store for mats, such as convenience stores, price is important even if it is secondary to the benefits of location and the opening hours for trading. The current situati on is that in the competitive retail market-place, price is a major strategic we apon in the battle with the competition. UNDERSTANDINGPRICE AS A CONCEPT Price may be usefully described as follows: Price is the monetary value assigned by the seller to something purchase d, sold or offered for sale, and on transaction by a buyer, as their willingness to pay for the benefits the products and channel service delivers. This definition clearly separate the way retailer treats pricing-as cash flow or income generating function-from the view of the customer, who sees pric e as more than money. The purchase for the customer includes complexity of emot

ional and functional benefit delivered from the product and the brand. This mea ns that value for the customer us a complex set of perceptions. This is discuss ed in more details later in this chapter. We believed that of all the elements of the marketing mix, good pricing decisions are the hardest to make. This is because prices for detail product a nd channel services have to pay into account the complicity created by seasonabi lity of demand and the inherent perishability of the product due to factors rela ted to fashion or being past the sell-by date. Their has also been major influe nce on the grocery sector due to the abolition of resale price maintenance (R.P. M) which as led to the offer of loss leaders and more complex pricing policies i n order to achieve optima over all profit. In conjunction with this, consumers are now pressurising retailers to change their pricing policies to offer great v alue for money. A retailers pricing must be consistent with, the overall objectives and reputation of the business. This could be in financial terms such as sales, pr ofits, retune on investment, etc or as pricings roll in the growth and expansio n of the business. Their may also be broader objective such as the number sales periods, total number and range of prices to be made available, and positioning of the store and merchandise in relation to prices. These pricing goals are im portant as they provide the consumer with an image of the retail outlet based up on its approach to pricing. In addition, pricing has to integrated with our asp ects of the marketing mix and take account of the target market. APPROACHING TO PRICING THE RETAIL PRODUCT Pricing policy has to consider all the potential influences and factors affecting the market and therefore the scope facing the retailer is remarkably w ide. The choice made will probably be one, or a combination, of the following. The major difference is between he cost-oriented approach to pricing. Cost orinted pricing Cost oriented pricing is related to the costs a retailer incurs when pur chasing a product or service for sale o its customers. Cost oriented pricing re fers to setting prices on the basis of an understanding of costs to the retailer . Cost-plus pricing For the cost-plus methods this will be in relation o either marginal cos ts or total costs including overheads. The approach could be to : Select the target market; Determine the cost of the goods in store-storage, selling costs, s hrinkage estimate, overheads, etc. Determine the ceiling price above which the retailer would be offe ring expensive prices compared with those of competitors. Apply the mark-up, given the possible range has been identified, in order to ach ieve profit objectives. Their may be some discretion for pricing individual ite ms within a department or section as it is the overall profit which is important a percentage mark-up is then normally applied to reach the final selling price. This may be expenses and provide the desired level of profit. For example: if we assume a retailer purchases a dress at 60 and prices it at then the mar kup on cost (30/ 60) expressed as a percentage is 50 percent and mark-up on s elling price(30/90) is 33.3 percent. Some minor adjustment may take place, su ch as bringing the price to 89.95-fine tuning the final price for psychologi cal and other reasons. Knowing the cost breakdown of the product is extremely important and it is essential to have calculated the opening cost of each retail outlet or page in a

catalogue. This allows the marketer to know what the net effect of any tactica l price reduction will be. The weakness of cost-oriented pricing as a method is that it does not give adequate consideration to demand for the product, what prices the market place w ill bear, or the different price levels of the competitors. Rate of return pricing Another cost-oriented method is that of rate of return pricing which provid es the company with an agreed rate of turn on its investment. Whereas the costplus method concentrates on (he costs associated with running of the business,) the rate of return method concentrates on the profits generated in relation to t he capital invested. This approach ignores the need to link the pricing policy to the creation of a sales volume which is large enough to cover overheads or to ensure demand will remain consistent overtime. Cost-plus or rate of return met hods of pricing are not appropriate for those retail product which have to survi ve in a highly competitive marketplace. Demand-oriented pricing Demand-oriented pricing takes into consideration the factors of demand rath er than the level of costs when setting price. In times of shortage of products -from candles at the time of power curs, to vegetables out of season prices ar e usually raised to take advantage of higher demand and scarcity of supply. Discrimination pricing Discrimination pricing, which is sometimes called variable or flexible pric ing, is often used when products are sold at two or more different prices. Quit e often students, the unwaged and older people are charged lower prices than oth er consumer segments at attraction or events. A garage will offer different pri ces for servicing company cars as opposes to private cars. A customer known to a retailer may be given a personal discount as part of a flexible approach to pri cing is often time-related, for example cheaper drinks charges in happy hour p eriods or cheaper meal prices in the early evening prior to the high demand peri ods. For price discrimination to be successful it is necessary to be able to ide ntify those segments which, without the price differentials, would not purchase the product. To obtain a high flow of business, a DIY retailer will often discou nt to those customers who offer significant sales demand. This means that small businesses may benefit form volume discount rates and those individuals customer s building their own extension, for instance, may be offered a special one off discount rate. Discrimination may also be based upon increasing the price of products w hich have higher potential demand. For example, if the product is fad products then it is normally in high demand, usually demand so strong that it outstrips s upply. Therefore, such products as Rubiks cubes or Teletubbies dolls could be priced at a higher price based upon an increasing level of demand. Another exam ple of this is exhibited on special celebration dates, such as Mothers day or V alentines day. When the price of flowers or plants raised. Backward pricing This is a market based method of pricing which focuses on what the consu mer is willing to pay. The price is worked backward, as the name suggests. Fir st an acceptable margin is agreed upon. Next the costs are closely monitored so that the price which is deemed to be acceptable is able to be matched. If nece ssary an adjustment is made to the quality of the product offer or service to me et the cost-led needs of this technique. Retailers selling on a price-led basis often consist that their suppliers meet specified Costs, even if this compromis

es some aspects of the quality. This approach can be associated with price lining is a method of simplif ying the merchandise comparisons for the customer by establishing a number of li nes within price points for each classification. Once the price lines have been determined, the retailers purchase goods which fit into each line. For example, for mens shirts the price lines could be 25, 35 and 45. In order to be a suc cessful trader the monetory difference between the price lines has to be large e nough to reflect a value difference for the consumer. Such steps of change in p rice and value enhance the ability of the saleperson to convince the customer to trade either up or down. The selection of price lines has to be based upon the strength of consumer demand for the bands. The benefit of limiting the number o f price lines is that a retailer on achieve broader assortments, which leads to increase sales and fewer markdowns. For example, a retailer which stocks 180 UI 1 Its of an item and has 6 price lines would have an assortment of only 30 UI1 I ts in each line. On the other hand, if the units were divided among only three price lines there would be 60 units in each line. By utilizing such an approach a retailer may specialize more easily in relation to lines and so create a more defined store image for its merchandise. The advantages of price lining are: Sales volume can be increased by the provision of larger assortments a t each price line; there is greater clarity of price offer for the customers; Sales people can offer stepwise change to the customer in order to enable them to convince the customer to trade up or down; Line concentration allows for improved displays and promotional messages; With buying process is improved, as buyers have to focus on the retail price point and buy backwards; The buying process is improved, as buyers have to focus on the retail price point and buy backwards; Control may be easier with greater price coordination and fewer pricing variab les; Skimming pricing Skimming is utilized when there is a shortage of the product or the brand has be en associated with added value and, there for, demand will not be dampened by ch arging a premium price. Market skimming policies can only occur houses dealing i n haute couture or cosmetics companies with strong branding utilize this approac h. Leader pricing Some retail items may be priced very competitively in order to sacrifice profit on those items but to genera to more overall demand for other items. These are o ften known as loss leaders if they are sold below cost but in reality retailer s seldom make a cash loss on the items even though they are heavily discounted. The leader items are normally sold near to cost rather to achieve extra sales of other Christmas holiday provisions. The purpose behind the use of leader prices is to increase store visits, purchase and the perception of good vale. The items chosen for inclusion as loss leaders should be widely known and brough t on a frequent basis. The objective would be to price the item low enough to at tract numerous buyers. In addition, if information is made available as to the v alue of the offer, the promotion will usually be far more successful The approac h is often employed by supermarkets which feature leader item on a regular ba sis. As with all forms of price promotion there in an obvious need for retail ers to monitor and evaluate their usefulness. In offering lead pricing, the danger is that customer may be selective in what they purchase. If customers are limiting their purchase to the lead item or if that item competes with oth er items in the store, the price promotion may need to be revised. Competitive pricing Competitive pricing is employed to match the market prices, of competitive reta ilers. This is technique which requires knowledge of actual costs as matchin

g the prices of a more efficient retailer may lead to losses on particular items . It is also required an understanding of the importance of the pricing policies of the competition from a consumer perspective. Competitive pricing is reactiv e rather than proactive form of pricing as a retailer with a strong brand image does not necessarily need to march competitors offers. Market penetration Market penetration pricing is similar to competitive pricing but is adopted when a company or brand wants to establish itself quickly in a market. Prices are set below those of the completion in order to create high initial acceptance for the companys retails offers. A company selling fast moving consumer good s FMCGs may use market penetration pricing in the first couple of years and then, when the product becomes established, will slowly increase the prices. In 1996 there was all-out war between the food retailers and major oil companies over the price of petrol, based upon various supermarkets trying to obtain a m ajor market share. It is estimated the petrol price war of 1996 cost Tosco 30 m illion and 2000 in depended companies were forced out of business. According to an article in Super Marketing(1996),at the height of the price war the average gross profits were only 0.03pa litter and these rose to 5.5p a lire when the w ar subsided in July of the same year. The penetration strategy quickly establi shed a 21.5 percent share of the petrol market in the UK for the combined super markets. Psychological pricing This is sometimes referred to odd pricing. Retailers will often price prod ucts below a round figure: changing a price from say 9 to 9.95 or 9.99 to fost er the perception of the price as being that a which the customer is willing to buy. Just as 9.95 may appear to be significantly less than 10, so a price of 48 8 may seem more on a 400 level than a 500 level. However, there is no conclusi ve evidence that such pricing policies make any significant difference of prof its. Everyday low pricing A number of retailers now adopt the strategy of everyday low pricing (EDL P). This strategy stresses the use pricing policy with the continuity of prices at a level between the normal own store price and the price or the deep disco unt competitors. The term low does not mean lowest; it simply refers to a p rice position, which is competitive and therefore, can remain stable. A number of retailers who operate EDLP do not believe in markdown policies and sales but attempt to generate all-year-round demand by setting the prices at the right lev el. One of the most well known retailers to have adopted this strategy is toys 51 Us. EDLP is a strategy, which is open to large operators who have significan t economics of scale and buying power. EDLP can offer a number of benefits, as the following list 1. Perception of fairness. Many customers have become increasingly skeptic al about the mark-up and mark-down strategies of retailers. There has been a tr end by customers to wait for sale periods or to attempt to gent the best bargain s by shopping around for promotions. EDLP allows retailers to withdraw from sal e period pricing wars and to concentrate on creating a market position that impa rts a perceptions of fairness of pricing. 2. Reduced advertising. The stable price policy of EDLPs eliminates the ne ed for communication of sale or special price offer. Instead, the retailer can use the budget to concentrate on improvement of image or the building of relatio nship marketing schemes. 3. Improved customer service management. If the policy IS set to banish, s ale period then the demand created is less seasonal and volatile, and sales staf f are able to spend adequate rime in dealing with customers. This will improve the customers perception of the level of service they receive. The lack of hi gh demand sales period also has the benefit of allowing staff levels to remain r

elatively constant. 4. Reduced stock outs and improved inventory management. With more even de mand for the products it is easier to control the stock situation. EDLP reduces the large variations in demand and, therefore, periods of stock out when custom ers may feel dissatisfaction with the retailers service. Increased profit marg ins. If a retailer can import to the customer an image of fair pricing then, al though the prices may be generally lower, the overall effect can be to increase turnover and consequently profitability. EDLP has come major benefits to recommend it; it could not be appropriate for al l retailers. Some retailers would find it difficult to maintain low prices for a continuous period due to lack of economies of sale in buying or due to the com petitive nature of their business. Also, retailers selling goods which have a s trong fashion content are more likely to want to set initial prices at a high le vel as this is good business practice. Fashion goods are often priced different ly because if a subsequent sale is created for this type of merchandise, if ofte n creates a high level of excitement. The motivation to purchase created from t he sale enables the retailer to move a large amount of merchandise in a short pe riod. Therefore, EDLP is not a sensible strategy for some retailers to adopt. Factors affecting price sensitivity As number of factors will affect the price sensitivity of products. Fro m a marketing viewpoint a deeper understanding of price sensitivity assists with an understanding of the different retail segments and the development of strate gic planning. The main factors when considering retail pricing are listed below . Perceived substitutes effect Buyers are more sensitive the higher the products price is in relation to another product or substitute they could purchase. Therefore, the consumer m ay choose a substitute or forgo the purchase if they believe the overall value i s unacceptable. For example, local residents may avoid an area with higher pric ed shops frequented by tourists who are unaware of the alternatives. Unique value effect Buyers are less sensitive to a products price the more they value any of its attributes that differentiate it from competing products. For example, m ay customers are loyal to Heinz or Nestle products because they perceive them to offer superior benefits. Importance of purchase effect If the risk of the purchase increases then the price will not be the mos t important aspect of the purchase. The occurs when the item is an important p resent or when there is a need to purchase medicines. The greater the importanc e of the product, the less price sensitive (more inelastic) the purchase will be . Difficult comparison effect Buyers are less sensitive to price when they find it more difficult to c ompare alternatives. This may lead to a demand for the more established brands, or greater store loyalty, in order to reduce the perception of risk. Price quality effect A higher price may signal that the product is of superior quality. The result may be less sensitivity to price. This is not a conclusive effect as it applie s to some products, while others may generate different reactions. For example, whisky at a higher price may signal improved quality but very few people would think higher priced petrol offered any quality advantage. Expenditure effect

Buyers become more price sensitive when the expenditure is larger, eithe r in absolute money amounts or as a percentage of their income. This is most pr evalent in low income households in which all expenditure is carefully controlle d. This effect is also stronger and more likely to occur in times of recession. Fairness effect If the buyer believes the price falls outside a band of what would be ju dged reasonable and fair then they becomes more price sensitive. With some type s of products it is relatively easy to judge the offer of alternative brands and products and therefore easy to switch demand to cheaper alternatives. At certa in times alternatives are not easy to find. Consumers will perceive retailers, or the brands they stock, to be ripping off customers if they exploit situatio ns of shortage by being greedy. For example, street vendors are often seen to b e selling drinks or ice creams at highly inflated prices when the temperature is extremely high . CONCEPT OF SUPPLY CHAIN MANAGEMENT A supply chain is a network of facilities and distribution options, the performs the functions of procurement of materials, transformation of these mat erials into intermediate and finished products, and the distribution of these pr oducts to the customers. Supply chain management ensures a smooth and efficient flow, from raw ma terial to finished goods, into the hands of the consumers. It is a concept whic h has increasingly replaced the traditional fragmented management approaches to buying, storing and moving goods. Supply chains exist in both service and manu facturing organizations, although the complexity of the chain may vary greatly f rom industry to industry and from firm to firm. It aims to integrate activitie s across the entire merchandise flow, to achieve quick response in supplying pro ducts and services to customers who need them. By doing this, production time c an be set close to selling period, achieving better prediction of selling target s. Figures 16.1 illustrate the flow of materials right from the stage of procur ement, till they reach the retail store as finished products. This is the flow of goods. On the otherhand, the information on the products purchased by the co nsumer, flows back from the retail store to the various intermediaries, to aid t he creation of the right product. This is the flow of information. It is difficult to put down the value of the supply chain industry. How ever , it is estimated that the global market size of the supply chain and logis tics industry, is U$$3 trillion, which is a significant chunk of the global dom estic gross product. The estimated market size for supply chains globally, includes aspects l ike trucking, warehousing, inventory costs, transaction costs and the administra tion costs for these key elements. The importance of supply chain management in India, can be gauged from fact that logistics cost constitutes 10-12 per cent o f our GDP, It is estimated that over Rs. 1,00, 000 crore of the toal capital, i s tied up in inventories in the industrial sector. This is close to 22 percent of the aggregate industry sales2. Not long ago, retail stores existed to cater to the needs of local markets. When one needed bread and eggs, one visited the local grocery store. To buy garments, on simply, either bought fabric and had it tailored or bought what was available in the market. Buying for the retail o rganization was a much simpler task then. It meant dealing with a few products and a limited number of suppliers. What existed at that time, was simple supply chain, as illustrated in Fig 16.2 Managing this was fairly simple and easy for the retailer. However, as markets expounded and the retailers business grew, the numb er of products offered by the retailer, also increased. While the number of sup pliers increased, there was also an increased pressure on margins. Retailers ne eded to think of ways of cutting costs, In order to be able to cut down on the

costs, it was necessary to integrate the complete supply chain. Supply chain management today, links demand management , resource manag ement, and supply management and hence, plays an important role in retailing. A n extended supply chain is illustrated in Fig. 16.3 Today, retailers operate in a dynamic world. Customers buying habits a re constantly changing and competitors are continually adding and improving thei r product offerings. Demand changes mean a shorter life cycle for the companys products and inventory. The cost of holding inventory may restrict the company from providing a reasonably priced product, as funds are tied up in inventory. The number of suppliers to an organization may vary from a few hundred to thous ands, depending on the range of products offered to the consumer. Sourcing, ven dor management and logistics play a major role in getting the right product to t he right place, at the right time and in the right condition. The second reaso n, partially, is the increased national and international competition. Customer s have multiple source to choose from, to satisfy their demands; locating the pr oduct throughout the distribution channel for maximum customer accessibility, at a minimum cost, becomes crucial. The third reason is the increasing pressure o n the profit margins earned. Companies are becoming aware that they need to loo k at the whole picture and not at the functional excellence of individual depart ments, alone. Lastly, it is a technology driven world today. Advances in technology e nable companies to get sales, inventory and production data, across various loca tions, not only within the country, but also internationally. Information is th e key enabler of supply chain management. EVOLUTION OF SUPPLY CHAIN MANAGEMENT In the 70s and early 80s, as cost pressures started to build up, most or ganizations started to take a hard look at their operations, to see where they c ould cut costs. Initially, the focus was on optimizing the levels of raw materia l, work in progress and finished goods stored. Depending on the industry charac teristics, different organizations started focusing on achieving efficiencies in different areas, such as procurement, logistics, manufacturing, operations, etc . Out of these initiatives emerged various models for production and opera tions control and management, such as the Just-In-Time inventory management mode l, the total quality management (TQM) model, etc. these models focused on vario us components of the supply chain, in isolation. Each one of them was oriented towards the optimization of a sub-part of the system. However, soon, organizati ons realized the need for taking an integrated look at the entire supply chain, to optimize not individual parts, but the entire chain. From this emerged the d iscipline now commonly referred to as Supply chain Management. Early beginnings of the supply chain management initiative can be traced to the apparel industry in USA. The textile industry in the USA faced intense competition in the 1980s. The industry leaders came together and formed the Cr afted with Pride in the USA council, in 1984. They commissioned a study on supp ly chain analysis. This study found that the delivery time for the apparel supp ly chain, from raw material, to the final consumer, was 66 weeks long 40 weeks o f which were spent in warehouses or in transit. The long supply chain had resul ted in major losses to the industry, due to the need for financing the inventory and the lack of the right product in the right place, at the right time. In order to overcome the problem., the strategy of quick Response (QR) w as developed. The basic premise of quick response, is to share information. Re tailers and suppliers work together, to respond more quickly to consumer needs, by sharing information., the installation of the Point of sale (POS) scanning systems and sharing of data through Electronic Data Interchange (EDI), became th e new standard of the industry. The industry also adopted the Universal Product Code (UPC). QR incorporates marketing information on promotions planned, disco unts and forecasts into the manufacturing and distribution plant. It increases the product availability and lowers inventory investments. It also helps in red

ucing logistics expenses. With QR systems,, retailers can negotiate a direct st ore delivery system, in which the vendors supply floor ready merchandise to each store, rather than to the distribution Centre (DC). The cost of the DC and tran sportation can thus be eliminated. The success of the QR initiative prompted a group of grocery industry le aders in the USA, to create a joint industry task force, called the Efficient co nsumer Response (ECR) working group. This group primarily, worked on identifyin g opportunities to make the supply chain more competitive in grocery retailing, worked on identifying opportunities to make the supply chain more competitive i n grocery retailing. Studies commissioned by this group revealed that by expedi ting the quick and accurate flow of information up the supply chain, ECR enabled distributors and suppliers to anticipate future demand far more accurately than the current system. A little change in the technology was required to improve the performance, besides further development of the EDI and POS systems.

LOGISTICS: The word logistics is derived from the French word loger which means to quarter and supply troops. Logistics has developed from the systematic plann ing required when large number of troops and their equipment move, to that of th e moving of large amounts of goods. Christopher (1992) defined logistics as, Logistics is the process of str ategically managing the Inocunement, movement and storage of materials, parts a nd finished inventory through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost effective fulfillment of orders. In the last decade, there have been several well published logistics exe rcises, internationally. The gulf war of 1991 as one of the largest, since Worl d War II. An integral part of supply chain management is logistics management. Th e main objective of logistics management is to reduce inventory-holding costs an d improve profits. DISTRIBUTION LOGISTICS AND STOCK CONTROL: The customers central expectation of retail service delivery is one of availability. No amount of service enhancement or added incentives will effect ively makeup for an empty shelf. As a customer, the ultimate measure of a retail service is whether the g oods or services are available as required. Modern retailing is underpinned by a complex infrastructure that seeks to meet this central customer expectation. All of this has its cost and, therefore, from a management perspective it will be vital to deliver the retail service in an efficient manner. This is becoming increasingly important as profit growth cannot be easi ly achieved when sales growth is not high; such extra profit has to be gained fr om improvements in productivity. The achievement of productivity gains is avail able from a retail logistics system infrastructure which consists of several ele ments. RETAIL LOGISTICS Many international retailers have built their successes on logistical pr ocess. Speedy restocking of goods, elimination of poor settler, and promotion of successes, also contribute to a clear sales advantage. Logistics entails more than the mere traveling and distribution goods. For without good information about sales and insight into customer needs. The fi nest distribution center and transport capabilities are likely to send the wrong products the wrong places at the wrong time. Effective logistics therefore, ne eds an efficient information system, as well as good transport, distribution cen

ter and store handling capabilities. A single recipe for success does not exist. A logistics system has to b e built to suit the needs to the organization, keeping in mind the kind of produ cts that the company retails and the competition prevailing. Fashion retailers may need to focus of speed, discount retailers on cost. The needs of each are d ifferent. ALL OF THIS IS BASED UPON THE ASPECTS OF: transport Storage Inventory The cost structure of each will be considered next, but at this stage it is impo rtant to recognize the interrelationships that exist between the elements. A ho listic perspective is essential management is to identify the optimal organizati on and realize the greatest efficiency for the system as a whole . A ruthless pursuit of cost savings within one element is flawed if the result is simply to push a cost burden onto another. A similarly holistic view is required of the supply chain in a vertical sense, Porters value chain analysis (1985) recognizes that as well as seeking to improve the internal linkages between the activities of the retailer, it will be important to acknowledge the fit with the wider value adding system. Retailer activity should strive to add value for the customer. This wi ll not be realized if in seeking to pursue efficiency in the supply chain elemen t under the direct control of the retailer, costs are simply pushed onto supplie rs. The cost will remain in the system and will ultimately be borne by the cust omer Managing retail logistics requires a vision of the supply chain big pict ure. How could activities be organized or reorganized to take cost out of the supply chain completely and deliver better value for customers at the same time. Such an approach may see retailers taking on an additional cost burden to fac ilitate a saving for suppliers and ultimately a net saving for the customer. Here, there is a congruence in the objectives of retailers and suppliers . The recent shift towards supply chain partnerships is logical as it a driven in part by the need to exploit the potential for taking cost out of the supply c hain completely. This holistic approach to retail logistics can be illustrated by the tre nd in the 1980s and 1990s toward centralized distribution. Depending on volumes , retailers have increasingly created central or regional distribution centers a major investment on property, plant and equipment with associated overheads, Su ppliers making individual direct deliveries to retail outlets may then the repla ced by suppliers delivering to the retailer distribution centers by the truckloa d. The center then breaks the built to create store orders, which are then trans ported on the retailers own vehicle fleet. Lead times are reduced and so are t he levels of stock held at retail outlets. There are major cost savings and im proved supply chain efficiently delivers added value for the customer in the sha pe of the most recent product being available. Centralising retail distribution represents a very significant redistribution of costs across logistics elements and between supply chain organizations, with substantial net benefit. The stor e staff are more aware of deliveries . stock is less of problem and stock space is kept to a minimum. RETAIL LOGISTICS-THE COST STRUCTURE Many retailers pursuer distribution strategies which explicitly or impli citly acknowledge the importance of the Total distribution Concept (TDC) which i s based on the work of West (19898). In so doing they are taking a holistic, ap

proach, strategically and operationally integrating the functions listed below. The TDC encourages everyone in the company to think in terms of all components of distribution from the moment of manufacture to when, in the case of the retai ler, goods are sold through the checkout- as an integrated linear model. Retail Marketing Management Total distribution costs (TDC) TC+FC+CC+IC+HC+PC+MC Where: TC = transport costs FC = facilities costs CC = communications costs IC = inventory costs HC = handling costs PC = packaging costs MC = management cots For example, when we think of some of the costs of inventory (see section below) , we should be aware that all of the total distribution costs (see Fig.5.14) mus t be considered in relation to each other. This will often involve various tra de-offs, for instance between service levels and quality, or between margins and investment in systems. As such, optimizing a logistics system is a difficult a nd demanding task as each component of the system is affected by the level of i nvestment the company is able to make in it. TDC allows retailers to extend the ir control over the costs as well as supply of goods to the consumer. This requ ires an understanding of the interaction of all parts of the logistics process. These costs are discussed in the following sections. TRANSPORT Transport cost structures include substantial fixed cost elements, but p erhaps include greater scope to adapt capacity to match volume . Centralising r etails distribution has had the benefit of dramatically decreasing the number of journeys made with less than full loads, thereby improving efficiency. The use of composite distribution facilities, where the same vehicle handles merchandis e categories requiring different storage regimes, has meant more frequent full-l oad deliveries to stores. Computer software now supports route planning, using interative programmes to identify the optimal schedules for each days deliverie s and thereby achieving lower costs. In addition, retailers make use of back ha ul, where the trucks make collections from suppliers rather than return empty to the distribution center. FACILITIES COST- WAREHOUSING As already identified, retail logistics can be reduced to the areas of w arehousing, transport, inventory and administration, each with its associated co st structure. Facilities costs are taken as the capital and running costs assoc iated with providing warehousing infrastructure and internal systems to store an d pick stock. Warhousing has a high fixed cost element. The lack of flexibilit y makes the initial decision to create warehouse capacity crucial. Spare capaci ty represents wasted resource and short term measures to cope with insufficient capacity will be expensive. Once created, the ability of the business to match warehousing facilities to fluctuating demand will be strictly limited. This is further accentuated if there is to be capital investment in automated merchants handling equipment. A regional distribution center (RDC) is usually located in a low cost area. Such a center can handle a volume in excess of a million case of product a week as recent advances in information system have had a huge impact on the ef ficiency of the operation. It is the application of technologies such as electr onic data interchange (EDI) that have facilitated a reduction of stockholding a t both store and distribution center level. The extent of channeling of supplie s through RDCs may be gauged by the examination of UK grocery retailers (see Tab

le 5.2) . Retailers such as Asda have moved from channeling 10 percent of their supplies through RDCs in 1986 to over 80 percent now. Similarly, the competiti ve change in Tescos position may be gauged from its major increase in usage of RDCs. Table 5.3 Changes in UK grocery retailers usage of RDCs. 1986-96 Retailer 1986 1993 1996 (Argyll) Safeway 40-80 95 95 ASDA 10 78 84 Co-op Retail 40-60 95 95 Co-op Wholesale 40-60 93 93 Wm Low 50 94 -Morrisons 50 90 90 J Sainsbury 80 95 95 Tesco 40-60 95 95 Wait ros 80 90 90 Average 1 92 92 Within an RDC, communication between the Warehouse Management system (WNS) and e ach operative is by radio link, drastically reducing the amount of travel within the center. The WHMS tracks the through put of merchandise and the activity o f each operative. This can allow for individual piece-rares which replace teambased bonuses. The wage bill is a major element within the cost structure of an efficient distribution center,. Hence with the need to match the labour resour ce with the volume throughput annualised hours contracts are now commonplace. This is not always a straightward task as warehouse staff are often unionized a nd the union holds power. Development have to be carefully negotiated and this has led to local agreements, often producing localized differences in working pr actices and sometimes less efficiency. THE COSTS OF INVENTORY The first thing to note is that with steadily increasing sophistication in many product categories and this is particularly the case in retailing- the cost of holding inventory have increased. This, coupled to the increasing conc entration in retailing, means that the end consumer currently expects a wider ra nge of products in smaller quantities. Irrespective of the type of inventory sy stem used by the retailer, and regardless of set service levels, attitudes to di stribution, etc. there will be costs incurred as a result of the maintenance and replenishment of inventory. COMPUTERISED REPLENISHMENT SYSTEMS (CRS) The benefits of the new distribution systems are numerous and extend wel l beyond inventory control and replenishment. The systems are becoming increasi ngly important in the competitive environment of multiple retailing. Sainsbury, Tesco and Safeway have almost 100 per cent of stores with EP OS scanning. In the variety chain stores, BHS has been on full EPOS for several years, their EPOS system being directly linked to their replenishment through c entral distribution centers at Atherstone and Dundee. Marks and Spencer also ha ve full EPOS and have implemented a computerized inventory system, ASR (Automati c Stock Replenishment), from an initial investment of 78 million in 1988/89. The perceived benefits of these systems for inventory are shared and are simple: a reduction of stockholding through more accurate ordering and replenis hment (which in turn gives better product availability to the customer and thus maximizes sales). There is also the benefit of far more accurate sales data on which improved decision making can take place. It can be readily seen that EPO S may serve replenishment. By accurate data capture obtained via EPOS, forecast ing (for example, on the basis of experimental smoothing) future merchandise re quirements and inventory control is facilitated. This enables both more accurate and economical buying. It also affords greater control of stockholding through greater inventory, by the removal of the

human error associated with other forms of stock control.

MODULE-III

Arif.A.Samad Christi Jacob Siyad.A Deepu.S Ganesh.S Hariprasad.

MERCHANDISING MANAGEMENT Merchandising: activities involved in acquirin g particular goods and services and making them available at the places, times a nd prices and in the quantity to enable a retailer to reach its goals. Developing and implementing a merchandising pl an is the key success of a retail strategy .A merchandising philosophy sets the guiding principles for all merchandising decisions that a retailer makes. This p hilosophy must reflect the desire of the target market, the retailers instituti onal type, its marketplace positioning, its defined value chain supplier capabil ities, costs, competitors product trends, and a host of other factors. To capit alize on merchandising opportunities, more retailers are now turning to micro me rchandising and crossed merchandising. With micro merchandising, a retail firm a djust s its shelf-space allocations to respond to customer and other differences among local markets. Wal-mart adapts the space it allotted to various stores to reflect the demographics weather and popularity of different customers recreati onal activities. In cross merchandising, a retailer carries complementary goods and services so that shoppers are encouraged to buy more. DEVISING MERCHANDISING PLAN There are several methods to con

sider in devising merchandising plans: Forecasts, innovativeness, assortment, brands, timing and allocation Forecasts: Forecasts are the projections of expected re tail sales for a given period .because retailers purchase are based on their sal es expectations, forecast are the foundations of merchandise plans .they include these components: over all company projections ,product company projections ,it em by item projections, and store by store projections When preparing forecasts, it is essenti al to distinguish among different type of merchandise. Staple merchandise consis ts of regular product carried out by a retailer. Assortment merchandise consists of apparel, furniture, autos, and other products for which the retailer must ca rry variety of products in order to give customers proper selections. Decisions are two pronged: (1) product lines, styles designs and colors must be projected (2)a model stock plan is used to project specific items .fashion merchandise con sist of product that have cyclical sales due to changing styles and taste. Seasonal merchandise are consists of product sell well over non consecutive time periods. With fad merchandise a high level of sales is generated for short time .Often toys and games are short lived fads. Innovativeness: A retailer determination of the innovati veness of its merchandise plan involve a number of factors: target markets ,good s/services growth potential ,fashion trends and theories , a retailers image com petition, customer segments ,responsiveness to consumers ,investment costs ,prof itability ,risk ,constrained decision making, and declining goods and services a n innovative firm one that carries new goods and services and plans for upcoming trends faces great opportunity-distinctiveness and great risk-possibly misread ing customers and being stuck with large inventories. Retailer should asses the growth potential fo r each new good or services they carry. A useful tool for assessing growth poten tial is the product life cycle, which shows the expected behavior of goods or se rvices over its life An innovative consumer buy new goods or services and recomm ended to their friends, sales increases rapidly .In planning innovativeness, a r etailer should focus is to often on new product additions Select items for possible elimination on the basis of declining sales p rice ,and profits ;the appearance of substitutes ;and loss of usefulness Gather and analyses detailed financial consider and other data about the se items Consider non deletion strategies such as cutting costs ,revising promoti on systems ,price adjustment and cooperating with other retailers After deletion decision is made ,do not over look timing parts and servi cing ,inventory and holdover demand Assortment: An assortment is the selection of merchandise a retailer. It include s both the breadth of product categories and the variety with in each category. After a retailer decides on a product quality to carry consistent with its merchandising philosophy, it determines the width and depth of assortm ent. Width assortment refers to the number of distinct goods /services categorie s with which a retailer is involved. Depth of assortment refers to the variety i n any goods/services category with which a retailer is involved. A common strate gy has been to compete by offering a wide variety of items within a category des igned to appeal to every consumer taste .large assortment strategies can back fi re, however, if the complexity causes information overload such that a consumer

feels overwhelmed and dissatisfied, or choose not to make choice at all. These factors are important if retailer moves toward a wider deeper merchandisin g strategy: -Risks, merchandise investments damages, and obsolescence may increase dra matically. -Personnel may be spread too thinly, some times over dissimilar goods and services. -Inventory control may more difficult -Both positive and negative ramifications of scrambled merchandising may o ccur. Brands: as apart of its assortment planning, a retailer must choose the proper must choose the proper mix of the manufacturer private , and generic brands to c arry a challenge that is becoming more complex with the proliferation of brand s in each grouping. Manufacturer brands are produced and controlled by manufactu rers. Private brands are also known as store brands, contain names design ated by wholesalers or retailers, are more profitable to retailers, and are bett er controlled by retailers ,are not sold by competing retailers ,are less expensive for consume rs and lead to consumer loyalty to retailers (rather than to manufacturers) e.g.: K-mart-Jaclyn smith womens apparel generic brands are feature products generic names are brands ,they are no-frills goods stocked by some retailers .Th ey can form of private brands .these items usually receive secondary shelf loca tions ,have little or no promotion support ,are sometimes of less quality than o lder brands ,are stocked in limited assortment and have plain brands The competition between manufacturer and retailers for shelf space and profit ha s led to phenomenon known as the Battle of brands, where by manufacturers privat e and generic brands fight each other for no more space and control Timing: a retailer must ascertain when each type of merchandise is to be stocked .for ne3w goods and services, it must be decided when they are first displayed and sold. for established goods and services ,the firm must plan merchandise flo w during the year ,to properly plan the timing of merchandise, the retailer shou ld take in to accounts its forecasts and various other factors ; peak seasons ,o rder nards delivery time ,routine versus special orders ,stock turnover ,discoun ts and the efficiency of inventory procedures Planning differs for routine versus orders. Routine orders involv e restocking staples and other regularly sold items. Deliveries are received wee kly, monthly, and so on. Planning and problems are thus minimized. Special order s involve merchandise not sold regularly. These orders need more planning and cl ose cooperation between retailer and supplier Specific delivery dates are usuall y arranged, Custom furniture is product requiring special orders. Allocations: The last part of merchandise plans is allocations of items .a singl e unit retailer usually must choose how much merchandise to place on the sales f loor, how much to place in a stock room, and whether to use a ware house .some r etailers focus entirely on ware houses as a central-or regional-distribution cen ters .the products are shipped from suppliers to these warehouses, and then allo tted and then shipped to individual outlets .other retailers ,including many sup er market chains ,do not rely as much on central or regional ware houses .inst ead ,they have at least some goods shipped directly from suppliers to individual stores. It is vital for chains, whether engaged in centralized or decentralized merchandising, to, have clear store by store allocations IMPLEMENDING MERCHANDISING PLANS

The implementation of merchandising plans comprises these sequential steps Gathering information Selecting and interacting with merchandising sources Evaluation Negotiation Concluding purchases Receiving and stocking merchandise Reordering Reevaluation

Gathering information: after over all merchandising plans are set, more specific information about on going target market needs and perspective suppliers is re quired .a retailer should gather appropriate data before buying or re buying an y merchandise, in gathering information for merchandising decisions ,a retailer has several possible information sources ,the most available is the customer .b y regularly research the target markets demographics, life styles ,and potential shopping plans , a retailer can study consumer demand directly .loyalty program s are especially useful in tracking consumer purchases and interests Other sources of information can be used when direct consumer data are available or insufficient .retail sales and display personnel interest with consumers can pass their observations along to the management .A want book syst em is a formal way to record consumers request for un stocked or out stock merch andise .want books are used in small firms; want slips are used by retailers. Bu ying personnel can learn about consumer demand by visiting suppliers, talking wi th sales personnel, and observing customer behavior. Competitors are other sourc es of information .a conservative retailer may not stock an item until competito rs do. Comparison shoppers, who look at the offerings and prices of competitors, may be employed. Other sources may offer useful prices of consume related info rmation: government sources indicate unemployment, inflation, and product safety data; independent news sources conduct their consumer polls and do investigate reporting; and commercial data can be purchased .whatever the information acquir ed, the retailer should feel comfortable that is sufficient for making decisions as accurately as possible .for routine merchandising decisions, limited informa tion may be adequate. On the other hand, new car purchase can fluctuate widely a nd acquire extensive data for sales fore cast Selecting and interact with merchandise sources: the next step is to select inte ract with merchandise sources .three major options are exist: Company-owned-a large retailer owns a manufacturing and/or wholesaling facility .a Company owned supplier handles all part of the merchandise the retailer reque st Outside regularly used suppliers- this supplier is not to owned by the retailer but used regularly by it .the retailer knows the quality of goods and services a nd reliability of the suppliers through firsthand experience Outside new supplier this supplier is not owned by the retailer; and retailer h as not bought from it before. The retailer may be unfamiliar with the suppliers merchandise quality and reliability. Many retailers have beefed up their use of their use of private brands because they are upset some companies such as polo Ralph Lauren and Gucci for opening their own stores in the same shopping centers. On the other hand ma ny manufacturers are distressed by what they believe retailers excessive use of charge backs, where by retailers, at their discretion, make the deductions in th eir bills for infractions ranging from late shipments to damaged and expired mer chandise Evaluating merchandise: there are three forms of evaluations are possible: inspe ction, sampling, and description .the technique depends up on the items cost, it

s attributes and regularity of purchase .inspections occurs when every single un its is examined before purchase and after delivery .jewelry and art are two exam ples of Expensive, relatively unique purchases before which the retailer care fu lly inspect all items. A retailer uses sampling when it regularly buys a large q uantity of breakable perishable or expensive items .a retailer engages in descri ption buying when it buys standardized, non breakable, and non perishable mercha ndise. The items are not inspected or sampled; they are ordered in quantity form a verbal, written or pictorial description Negotiating the purchase: Once the merchandise source is chosen and pre purchase evaluation is conducted, a retailer negotiates the purchase and items. A new sp ecial order usually results in a negotiated contract .in this case, a reviler an supplier carefully discuss all aspects of the purchase .how ever ,a regular ord er or re order often involves a uniform contract .terms and then standard or ha ve already been agreed on and order is handled routinely .a number of purchase t erms are to be specified ,whether a negotiated a uniform contract is involved .these include the delivery date ,quantity purchased ,price and payment arrangem ents ,discounts ,form of delivery and point of transfer of title .There may also be special clauses Special clauses may be inserted by either party. Sometimes, these clauses are beneficial to both parties other times clauses are insisted o n by the party that is more powerful. a major bone of contention between vendors and large scale retailers is the later increasing use of slotting allowance ,which are payments that retailers require of vendors for providing shelf space in stores. Concluding purchase: for many medium sized and large sized firms, purchase are c oncluded automatically .computers are used to complete and process orders and ea ch purchase is fed in to the computers data bank. Smaller retailers often concl ude purchases manually .how ever with the rapid advances in computerized orderin g software, even small retailers can sometimes place orders electronically-espec ially I they are tied to large wholesalers that supply them with EDI and QR capa bilities Transfer title should be specified with the suppliers .several alternatives are possible: The retailer take title immediately on purchase

The retailer takes title when shipment is received The retailer does not take title until the end of the billing cycle ,whe n the supplier is paid The retailer assumes ownership after merchandise is loaded onto the mode o transportation A consignment or memorandum deal can be made if a vendor in weak posit ion and wants to persuade retailers to carry its items retailer to carry its ite ms. In a consignment purchase, a retailer has no risk because title is not taken ; the supplier owns the goods until sold In a memorandum purchase, risk is still low, but a retailer takes title on delivery and is responsible for damages. In both options, retailers do not pay for items until they are sold and can return items Receiving and stocking merchandise: a firm physically receives and handle items ,which involves such varied tasks as receiving and storing goods ,checking and p aying invoices ,price and inventory making ,setting up displays ,completing tran sactions ,arranging delivery , processing return goods and damages ,and controll ing merchandise .Distribution management is the key success

When orders are received, they must be checked for completeness and product cond ition .invoice must also be checked foe accuracy .prices and inventory informati on marked on merchandise. Supermarkets are estimate that price marking on indivi dual items that price marking on individual items costs them an amount equal to their annual profits and they look forward to the time when it shelf prices will be largely sufficient in all markets .prices and inventory marking can be done in a various ways .small firms may hand post prices and manually keep inventory records. Merchandise handling is not complete until the customer buys and re ceive it from a retailer .this means order taking ,credit or cash transactions , packaging ,and delivery or pick up, automation has improved retailer performanc e in each of these areas merchandise control involves evaluating revenues ,profi ts ,turn over ,inventory shortages ,seasonality ,and costs for each goods / serv ices Category and item carried by a retailer .control is general achieved by preparing inventory data, and then periodically conducting a physical invent ory counts to check the accuracy of figures .the latter usually must be adjusted to reflect damaged goods, pilferage, customer returns, and other factors Reordering merchandise: a procedure for reordering merchandise is necessary for item the retailer purchases more then once .four characters are critical for suc h a plan: order and delivery time, inventory turn over, financial outlays, and i nventory versus ordering costs The turn over for each type of merchandise must be calculated .how long does it take for a retailer to sell out its inventory? a fast selling prod uct gives a retailer two choices :order a surplus of items and spread out re ord er periods or keep a low inventory and order frequently , a slow selling product may let a retailer reduce its initial inventory level and spread out the re or der period Finally inventory holing versus ordering costs must be weighed .adv antages of having a large inventory are customer satisfaction ,quantity discount in purchase , easier control and handling. Advantages of placing many orders an d keeping a small inventory are low investment costs, low opportunity costs, low storage costs and low damages and obsolescence Re evaluating on regular basis: once merchandising plan is enacted, it should be re evaluated regularly, with management reviewing the buying organization and t hat organization assessing the implementation, the over all procedure as well as the handling of individual goods and services, should be monitored. Any conclus ions reached while re evaluating a merchandise plan become a part of the informa tion gathering stage for the future efforts

MANAGEMENT OF RETAIL BRAND BRAND- DEFINITIONS A successful brand is a name, symbol, design or some combination, which identifies the product of a particular organization having a sustainable diff erential advantage. - Peter Doyale. A name, term sign, symbol or design or a combination of them identifiy the goods or services of one seller or group of sellers and to differentiate the m from those of competitors-Kotler.

The Global Retail Scenario Large format retail businesses dominate the retail landscape in the United State s and across Europe, in terms of retail space, categories, range, brands, and vo lumes. Indianretail industry cannot hope to learn much by merely looking at the Western success stories in retail. Their scales of operations are very huge, the profit margins that they earn are also much higher and they operate in multiple formats like discount stores, warehouses, supermarkets, departmental stores, hy per-markets, convenience stores and specialty stores.. The economy and lifestyle of the West is not in line with that of India and hence the retailing scene in India has not evolved in the same format as the West nor can we learn valuable l essons from their style of operations. In retailing, the conventional wisdom use d to be, that, the critical success factor was location. But precise location no longer matters and geo-demographics is increasingly becoming irrelevant. The le ading multiple chain retailers, superstores and malls create their own centers o f gravity, attracting customers by car, bus, train or even by plane to wherever they are located. The growth of multiple chain retailers has been relentless for many years in the west and this has been accompanied by the development of reta il names as brands in their own right. Discount retailer Walmart has catapulted to the top of the Fortune 500 rankings in the U.S. with a turnover of $258 billi ons (2003 revenues the basis for 2004 rankings), ahead even of oil major Exxon Mobil and the mammoth manufacturing giant General Electric. A ruthless policy, of, Always Low prices. Always. has brought Walmart to the top. On the day afte r Thanksgiving in November 2002, Wal-Mart sales hit $1.43 billion in one single day. Walmart and Nordstrom in the U.S. and Sainsburys and Marks & Spencer in th e U.K. have grown by rapid geographic expansion in their own countries. Speciali sts like Benetton of Italy and IKEA of Sweden and The Body Shop of the UK are in ternational and the fast food chains like McDonalds and Pizza Hut are everywher e. The same products are increasingly available from the same names on every con tinent. Retailers worldwide have immensely benefited from the sustained growth o f the disposable income of their global consumers. Geographic saturation The end of the nineties has signified a turning tide of retailer power. The limi t to retail ambition is geographic saturation. There is already a fear that the U.S is over-malled, that available shopping space exceeds customer demand for products. The retailer logic that if we build new stores they will come, is be ing belied. Many retailers have started postponing their store expansion plans. The track record of some of their international store expansions is also not pro mising. Category killer competition The threat of saturation is accompanied by a new competition from the low cost c ategory killers. Specialist competition is eating away at the market share and f orcing down the prices and gross margins of the multiple chains. The success of the giant killers in the toys segment Toys R Us and in home furnishings Hom e Depot, in the are a case in point. Alternative shopping channels. The newest retail format that is showing growth in the U.S., and is more frighte ning for retailers than for consumers, is the Internet. The potential for on-lin e shopping which is growing in the U.S. questions retailers investments in more physical sites and stores and makes it imperative that they too explore the new agenda of E-retailing or e-tailing. What are the fundamental characteristics of a brand? While a myriad of character istics have been catalogued by several researchers on this subject, five charact eristics deserve mention: (1) Recognizability: A true brand is instantly recognized and identified. The br and name passes into every day use (Nikes Just do it) or becomes satirized ( Dont be such a Duracell) or appropriated (Make a Xerox of this document). In dian retailers like Shoppers Stop, the RPG Groups Food World and Music World ha ve already earned national recognition. Subiksha in Tamilnadu and Margin Free supermarkets in Kerala are household names in the two states. (2) Meaning, story, value: This is the second characteristic of a brand. The bra

nd must have a value proposition. It must stand for something and one of the mos t effective ways is to have a story to transmit those values. Examples abound of effective leaderships that have helped to build corporate brand values in other sectors, but few retailers have succeeded in building a story to carry brand me aning. When they do so, their power will increase. (3) Legitimacy: The meaning of the brand should be obviously appropriated by the target customer group. Legitimacy rests on authority, earned by the brand and g ranted by the customers. Lessons can be learned from social organizations like G reenpeace, Medicins sans frontiers, CRY and Helpage India. In this case, legitim acy rests on moral authority. In retail businesses it may rest on an Building Su ccessful Indian Brands by Sundar Bharathidasan Institute of Management, Trichy e motional authority (a unique shopping experience, a store filled with warmth and friendliness.) (4) Consistency, alignment: A brand story should contain no internal contradicti ons and should be appear to be consistent over time. It should be applicable acr oss the business and attempt at total brand integration. (5) Proximity: The brand building process should culminate with assuring the bra nds proximity to the consumer. The brands definition gets expanded by opening stores in a number of locations to make it convenient to the consumer. Retail brand building Product brands make life easier. They make it possible to recognize products, wh ich simplifies the decision making process. Furthermore, product brands make the consumer a part of a group, they create a sense of belonging. But retail brands do even more than that. These brands are visible platforms for kindred spirits: the physical shop is a container for the entire retail formula and therefore co nstitutes a large part of the retail brand. The tangible nature of retail makes the familiar slogan experiencing the brand most logical of all, in a physical store. Retail brands have gained in popularity in the past few years. Indeed, they have a number of advantages above product brands. In the first place, they are close r to the consumer. The physical store space offers the possibility of literally and figuratively communicating with consumers at the moment of purchase (one-toone marketing). Retailers can show who they are and what they stand for through the store formula. Moreover, in principle, retailers are neutral, because the ch oice of product brand (or store brand, if present) is left to the consumers. Ret ailers help consumers because they make a shrewd pre-selection and present their product assortment in a specific manner. Once a consumer knows and trusts a ret ailer and has good experiences and memories about a store, the foundation has be en laid for a long-lasting relationship that will ultimately lead to customer lo yalty. Retail branding creates a brand preference, which goes beyond the product or servicein itself. Retail Branding versus Product Branding A great difference between product branding and retail branding is that in many cases products have an anonymous or even fictitious presenter, whereas in retail , consumers come in direct contact with the company and/or product. A Cadburys Dairy Milk chocolate bar, for example, is a product made according to a set reci pe in a factory that is not open to the public. In addition, the people who work there never come into contact with the consumers because the retail channel lie s in between. And those who do sell the CDM to the end-consumer (the retailers ) do not have very much to do with it by virtue of their function. Therefore it is possible to conceive a brand identity for the product, establish it for a spe cific target group and then fix it in the minds of consumers. Compare the identi ties of Five Star Perk, Gems and Temptations: all very different, yet th ey come from the same manufacturer. Contrast this with a store like Food World, for example. Because of its direct c ontact with the end-user, it must effectively live up to its brand reputation in every aspect, every day. It is impossible for retailers to escape the need to c ontinually sustain the store brand. In a store, the entire retail organization i

s revealed and the true nature of a company can be experienced. A retail store, as said earlier, is the container that holds the entire formula. All the element s of the formula (including the elements of the marketing mix) come together instore. The formula should be deliberately shaped from the standpoint of identity (the brand of the retail organization) with mutual coordination of the elemen ts being important. What might it then mean, when branding is applied to retaili ng? The issue is not of retailers selling brands but branding the retail busines s itself, like the grocery supermarket chain or the fashion store. A hypermarket or department store, may offer several well-known brands, but in todays compet itive world cannot afford to rest on its strategic product assortment and pricin g initiatives to bring in the customers. The retailer must attempt to brand hims elf differently, especially when todays product brands are being launched throu gh their product brands own shops. (Examples in the shoe segment Nike, Adidas and Reebok. Jeans segment Lee and Wrangler, Perfumes Hugo Boss. ) A retail organization, like any other corporate company, will have to ensure tha t its own brand includes the characteristics of product brands detailed above. R etailers need to work on three dimensions to achieve this: (1) Brand value: The retail brand has to embody and transmit clear values to the customer. (Like value for money, Luxury shopping redefined). Some companies have attempted to define this in their mission statements but they are often to o vague and not actionable. For example the U.K. Virgin brand has the value of c hallenging conventions and the U.S. retailer Nordstrom has a built a value of cu stomer service. While many Indian product brands have successfully weaved values around their brands (Hamam on trust, Godrej on quality and TVS on service ) retailers are yet to develop a consistent value across their businesses. (2) Brand strategy: It is imperative that retailers have a systematic strategy o n issues like whether to develop the retail brand or corporate brand and decisio ns on one product/one brand that they may be selling in their shop. Retailers ca n also decide to launch high quality retailer brands (own labels) backed by pr omotional campaigns, reinforcing clear personalities. Pricing policies, today po sition retailer brands as good value lines or premium lines (Nilgiris department stores prices its grocery lines above manufacturer brand prices). The view that retailer brands offer a cheaper alternative to manufacturer brand is no longer valid. There is even scope for retailers to develop alternative types of own la bels targeted at different consumer groups in their outlets. An essential ingre dient for success, in such cases, must be consumer-relevant added values not j ust lower prices. It is only a minority of consumers, today, who are prepared to trade off added values for lower prices. Experienced consumers are no longer pr imarily motivated by low prices. There is scope to attempt a retail segmentation strategy.For example, DCM Benetton India redesigned its stores as per its inter national format and also repositioned the brand from a casual wear brand to a wa rdrobe option. The company is now attempting to target a niche audience through its concept stores. It launched a Baby-on-Board store, which targets mothers-t o-be and kids, an Accessories stores that sells luggage, bags, sunglasses and vanity cases and an Adults Only store that showcases Benetton s apparel collec tion for men and women. (3) Brand structure: Operational levels of the retail business have to be held t ogether to integrate the whole brand proposal. At this level, marketing, human r esources, distribution, logistics, administration and sales have to work towards a common brand value that has to be communicated to the consumer. The retail br ands messages must be Weaved into the every day experiences that the consumer has with the retail bran d. Brand building constitutes a way in which the main value of the retail store shifts to what has been traditionally called an intangible. Indian Retailing is coming of age and needs to have a clear brand proposition to offer the discernin g Indian consumer. There is no doubt that the retail business is gravitating fro m high street towards destination shopping (mall development) with an estimated

10million square feet of mall space expected to hit the metros and mini-metros a cross the country this year. However, we need not assume that retailing at shopp ing-malls, is going to be fundamentally different from shopping at the tradition al shopping areas, except that a mall has a more modern structure and in most ca ses brings multiple brand outlets under a single roof. The local retailers movin g into malls, however, have to face the challenge of building brand recognition and loyalty right from scratch. Most mall developers have on offer, the same com bination of shopping (International/national brands), Entertainment (Theatre Mul tiplex) and food (McDonalds/Pizza Hut/Caf Coffee Day) in their malls. It is th erefore not surprising to note, that many mall visitors come out having no shopp ing bags, since they have been enticed to visit only for watching a movie and / or having a burger or a pizza or even a cup of coffee. Malls are also fast becom ing a place that youth can hang out, but if the crowds do troop in, but the ca sh registers are not ringing, it can harm the serious business of retailing and hurt this nascent industry on the growth path. The critical lesson for mall deve lopers is, to invest some quality effort in understanding the shopping-needs of customers in their targeted areas, and then build a carefully planned portfolio of retail options that can meet the needs of these targeted customers. Mall deve lopers also have to create distinctive (brand) identities for their specific mal ls. It is equally important for the would-be retailer tenants, to realize that merel y moving into a mall does not build their brand or guarantee business for them. They have to work as hard to draw consumers to their own stores once the latter have entered the mall, and then have the right value proposition for them, to ge t them converted into customers, and then to become repeat customers. Building a differentiating brand identity would work for both the mall owner and the mall retailer. We are also seeing organized Indian retailing in several businesses th at speaks volumes of the staggering potential for the expansion of this sunrise sector in our country. But here again, the early initiatives in the sectors illu strated below seem to rely more on novelty and excitement of newer ambiences rat her than truly investing in brand building. Gourmet coffee retailing: The organized coffee retail business is estimated at Rs.250 crores and is showi ng a growth rate of 40%. Apart from the Quickys, Caf Coffee Day and Baristas ch ains, the Tatas have aunched their Bean Coffee Junction chain in Chennai. Coffee World an international gourmet coffee chain is set to launch its outlet in Bang alore this year. Reliance is offering gourmet coffee at some of its Reliance Web World outlets under the brand name Java Green. There are not more than 350 out lets in the organised sector today but retail consultancy KSA Technopak opines t hat Indias potential for coffee retail outlets could be around two thousand. Ho wever the coffee retailers are already cloning each others strategies - by offe ring that total experience right coffee, food and ambience with Wi-fis and j ukeboxes to pull customers, across all their outlets and consumers are finding it hard to identify themselves with any one outlet. Lifestyle retailing: Chennai has witnessed a manifold increase in the total reta il space devoted to non-grocery or lifestyle retail. The four major lifestyle re tailers LifeStyle, Westside, Shoppers Stop, and Globus alone account for a little over 200,000 square feet of retail space. Add to that the retail space of the traditional apparel retailers such as Nalli s and Kumarans and the recent e ntrants such as Pothy s, R.M.K.V and Chennai Silks and that of the scores of mul ti-brand outlets, the figure shoots up. The reasonable real estate prices, overa ll lower cost of operations and accessibility to consumers vis--vis other metro s, have spurned the growth of organized retail at Chennai. But, on the brand bui lding front, the story is no different. A retail analyst has already observed th at Chennai is over-retailed in the lifestyle segment, with little differentiatio n among the players. Petrol pump retailing:

As consumers, we have been noticing how Indias state-owned petroleum companies are undertaking a massive image improvement, makeover and differentiator exerci se. From signage to logos to canopies, clean floors, channel music, lighting, co nvenience stores, uniformed attendants, internet browsing and promotion schemes, the public sector pumps are working hard at delivering a new experience to the Indian motoring consumer. All this, of course, is being done as part of a bigger game plan to cope with th e coming private sector competition from Reliance, Essar and Shell. Lets wait a nd watch whether public sector hindsight into branding pays off for them in the face of private competition in the next few years. Indian Retail Brand Building There is no doubt that the Indian retail shopping experience has been enhanced b y giant superstores and shopping malls across our country. They should however l earn quickly to build the retail brand directly and not look to factors like pr ime location, value pricing or product assortment to build their businesses. Ind ian retailers, to build a strong retail brand presence, can use the following st rategies. Relationship management to enhance in-store shopping experience: Competition will force retailers to think about their customers as individuals, analyze heir shares of customers and calculate their customer lifetime values. Retailers need to build data bases using in-store data collection and launch fre quent shopper rewards, carry on an interactive communication with them, make spe cial offers, drive traffic and add value outside the in-store relationship. Reta il brands get built by developing personal relationships with consumers rather t han only through product and pricing. For example, staff should be trained to re cognize their V.I.P customers. Soft rewards for V.I.P customers include priori ty service, free gift wrapping, enhanced guarantees and sales pre-notifications. Hard benefits include privileged rewards and extra value offers as well as st raight discounts. The quality of management of the customer is becoming an incre asingly important source towards building the retail brand. Education and traini ng of staff needs to be done to enhance customer service. Local store management can be empowered to maximize the value of each customer visit. Analysis of cust omer behavior can guide store merchandising to match the profile of their custom ers and even the needs of the shoppers at different times of the day. External communication to add value outside the store: Retailers use advertising to build their brands and promotions to drive store tr affic. Retailers have, still not felt the concept of individual customer communi cation outside the stores as a necessity. It is necessary that they seek to add a new form of dialogue with their customers. Retail chain Subiksha, for examples , mails a broadsheet to its customers giving them details of the promotional off ers available and price comparisons across brands that helps its customers to ta ke more informed decisions. Motivating the staff to volunteer value : The quality of in-store service is a k ey factor in differentiating the retailer and winning a higher share of customer spend. In one survey, shoppers were asked, would they ask for the same salesper son on their next purchase visit; the yes respondents were found to more likel y give the store a 8-10 rating. On the other hand, shoppers unhappy with the sal esperson gave the store a very low performance on overall service and performanc e. Staff must be trained and motivated to recognize their best customers and to offer them superior service. Successful retailing has always been said to be, about getting the nitty-gritty right of merchandising, forecasting, the supply chain, training and recruitment of high quality personnel and category management. Building retail brands that o ffer value will, in future, overshadow all these areas, and emerge as the domina nt reason for the success of the organized Indian retailer. Indian retailers sho uld also understand that the retail experience has become a popular leisure acti

vity and they are vulnerable to any new competition for customers entertainment . Indian retailers must build their brands with images that seek to entertain an d involve their customers. It is the quality and value of the retail brands tha t they have sought to establish that will determine the loyalty of the retail sh opper in future. BRAND LOYALTY Some consumers use the same retail outlet or purchase the sme brand of product o n most occasions or on a regular basis. This buyer characteristics is known as s tore of brand loyalty. In particular, brand or store loyalty will mean that a pe rson will Feel positively disposed to the brand based upon brand attitudes; Utilize the store more than other stores or buy the brand more freezer b ased upon store or brand preference; Continue to utilize the store or brand overtime. Then we can further segment the demand, based upon brandloyalty, as follows. 1. Hard core loyal: - These consumers buy one brand all the time and demons trate strong allegiance. 2. Soft core loyal: - These consumers will be loyal to two or three brands. 3. Shifting loyal: - This type of consumer shifts their loyalty from one br and to another. 4. Switches: - These consumers are not at all loyal to anyone brand. Loyalty schemes are being introduced in an attempt to retain custmers over longe r periods of time. POSITIONING OF A BRAND Brand identity is a construct that concerns the brand managers. It addre sses the core question- what the brand is? The lack of appreciation of identity aspects are generally for brands giving into minor short term temptations propel led by either competitive adventure or a firms greed and eventually losing in th e long run. The positioning of a brand places in its competitive context. It may be determined on the basis of product usage. A brands position may be determin ed on the basis of price. According to terrorists the focusing on the brand posi tioning is essential for a brand t survive. They express their lack of faith in the intellectual ability of brand managers to assess fully the competition and i n the intellectual ability of the consumers similarly to assess the range of bra nd available to them. The brand managers, who regularly take a sounding to custo mer opinion, are the most likely to maintain a brands positioning successfully. ********************************************************* Retail Location Strategies and Decisions The location of stores is a key concern to any retail organization ... whether it s your first store or your one hundredth. Spending time and mone y wisely in the process of site selection is critical. The importance of store l ocation must not be underestimated. Location decisions can be complex, costs ca n be quite high, there is often little flexibility once a location has been cho sen, and the attributes of a location have a strong impact on the retailer s ove rall strategy: "No matter how good its offering, merchandising, or customer serv ice, every retail company still has to contend with one critical element for su ccess: location." In general a good location may let a retailer succeed even if it s strategy mix is mediocre. On the other hand, a poor location may be such a lia bility that even the most able retailer is unable to overcome it. The selection of a store location may require extensive decision making due to the number of c riteria considered. These include the size and characteristics of the surroundin

g population, the level of competition, access to transportation, the availabil ity of parking, the attributes of nearby stores, property costs, the length of the agreement, population trends, legal restrictions, and other factor. A store location may necessitate a sizable financial investment and a long-term commitme nt by the retailer .Even a firm seeking to minimize its investment by leasing (r ather than owning a building and land) can have a major investment. Store locati on has a strong impact on both long run and short run planning. In choosing a store location, retailers should follow these four steps. 1. Evaluate alternate geographic (trading areas in term of the characterist ics of residents and existing retailers.) 2. Determine whether to locate as an isolated store in an unplanned busines s district or in a planned shopping center within the geographic area. 3. Select the general isolated store, unplanned business district, or plann ed shopping center location. 4. Analyze alternate sites contained in the specific retail location type. The first step in the choice of a retail store location is to descr ibe and evaluate alternate trading areas and then decide on the most desirable o ne. A trading area is a geographical area containing the customers of a particu lar firm or group of firms for specific goods or services. After a trading area is picked, it should be reviewed regularly. The Size and Shape of Trading Areas Each trading area consists of three parts: primary, secondary, and fringe. The primary trading area encompasses 50 to 80 percent of a store s customers. I t is the area closest to the store and possesses the highest density of customer s to population and the highest per capita sales. The secondary trading area con tains an additional 15 to 25 percent of a store s customers. It is located outs ide the primary area, and customers are more widely dispersed. The fringe tradin g area includes all the remaining customers, and they are the most widely dispe rsed. For example, a store could have a primary trading area of four miles, a se condary trading area of five miles, and a fringe trading area of eight miles. Th e fringe trading area typically includes some out shoppers, who are willing to t ravel greater distances to patronize certain stores. The size and shape of a trading area are influenced by such factors as st ore type, store size, the location of competitors, residential housing patterns, travel time and traffic barriers (such as toll bridges or poor roads), and med ia availability. After the size and shape of various alternative trading areas ( existing or proposed) have been determined, the retailer studies the characteris tics of those areas. Of special interest are the attributes of residents and how well they match with the retailer s definition of its target market. Among the trading-area factors that should be studied by most retailers are the populatio n size and characteristics, availability of labor, closeness to sources of suppl y, promotion facilities, economic base, competition, availability of locations, and regulations. The eco-nomic base refers to an area s industrial and commercia l structurethe companies and industries that residents depend on to earn a livi ng. After a retailer investigates alternative trading areas the next step is to dete rmine what type of location is desirable, selects the general location and evalu ates alternative specific store sites. There are three basic location types to d istinguish among: the isolated store, the unplanned business district, and the p lanned shopping center. Each has its own attributes relating to the composition of competing stores, parking facilities, nearness to nonretail institutions (suc h as office buildings), and other factors. The Isolated Store

An isolated store is a freestanding retail outlet located on either a highway or a street. There are no adjacent retailers with which this type of st ore shares traffic. The advantages of this type of retail location are many: There is no competition Rental costs are relatively low. There is flexibility. Isolation is good for stores involved in one-stop or convenience shoppin g Better road and traffic visibility is possible. Facilities can be adapted to individual specifications. Easy parking can be arranged. Cost reductions are possible, leading to lower prices. There are also various disadvantages to this retail location type Initial customers may be difficult to attract. Many people will not travel very far to get to one store on a continuous basis. Most people like variety in shopping. Advertising costs may be high. Operating costssuch as outside lighting, security, maintenance of groun ds, and trash collectioncannot be shared. The existence of other retailers and community zoning laws may restrict access to desirable locations. A store must often be built rather than rented. The Unplanned Business District An unplanned business district is a type of retail location wher e two or more stores situate together (or in close proximity) in such a way that the total arrangement or mix of stores is not due to prior long-range planning. Stores locate based on what is best for them, not the district. Thus, four shoe stores may exist in an area with no pharmacy. There are four kinds of unplanned business district: the central business distri ct, the secondary business district, the neighborhood business district, and th e string. A brief description of each follows. Central Business District: A central business district (CBD) is the hub of retai ling in a city. It is the largest shopping area in that city and is synonymous w ith the term downtown. The CBD exists in the part of a town or city with the gre atest density of office buildings and stores. Both vehicular and pedestrian traf fic are very high. The core of a CBD is often no more than a square mile, with c ultural and entertainment facilities surrounding it. Shoppers are drawn from the whole urban area and include all ethnic groups and all classes of people. The CBD has at least one major department store and a broad grouping of specialty and convenience stores. The arrangement of these stores follows no pre -set format; it depends on history (first come, first located), retail trends, a nd luck. Here are some strengths that allow CBDs to draw a large number of shopp ers and potential shoppers: Excellent goods/service assortment. Access to public transportation. Variety of store types and positioning strategies within one area. Wide range of prices. Variety of customer services. High level of pedestrian traffic. Nearness to commercial and social facilities. These are some of the inherent weaknesses of the CBD: Inadequate parking. Traffic and delivery congestion. Travel time for those living in the suburbs. Many aging retail facilities.

Declining condition of some central cities relative to their suburbs. Relatively poor image of central cities to some potential consumers. High rents and taxes for the most popular sites. Movement of some popular downtown stores to suburban shopping centers. Discontinuity of offerings (such as four shoe stores and no pharmacy).

Secondary Business District: A secondary business district (SBD) is an unplanned shopping area in a city or town that is usually bounded by the intersection of two major streets/citiesparticularly larger onesoften have multiple SBDs, each having at least one junior department store (which may be a branch of a traditi onal department store or a full line discount store), a variety store, and/or so me larger specialty storesin addition to many smaller stores. This type of loca tion has grown in importance as cities have increased in population and "sprawle d" over larger geographic areas. Neighborhood Business District: A neighborhood business district (NBD) is an unplanned shopping area that appeals to the convenience shopping and service nee ds of a single residential area. An NBD contains several small stores, such as a dry cleaner, a stationery store, a barber shop and/or a beauty salon, a liquor store, and a restaurant. The leading retailer is typically a supermarket, a larg e drugstore, or a variety store. This type of business district is situated on t he major street(s) of its residential area. An NBD offers consumers a good location, long store hours, good parking, and a l ess hectic atmosphere than a CBD or SBD. On the other hand, there is a limited selection of goods and services, and prices (on the average) tend to be higher b ecause competition is less than in a CBD or SBD. String: A string is an unplanned shopping area comprising a group of retail stor es, often with similar or compatible product lines, located along a street or hi ghway. A string location has many of the advantages of an isolated store site (l ower rent, more flexibility, better road visibility and parking, and lower opera ting costs), along with some disadvantages (limited product variety, increased t ravel for many consumers, higher advertising costs, zoning restrictions, and the need to build premises). Unlike an isolated store, a string store has competiti on at its location. This draws more people to the string area and allows for som e sharing of common costs among firms. It also means less control over prices an d less store loyalty for each outlet there. But an individual store s increased. The Planned Shopping Center A planned shopping center consists of a group of architecturally u nified commercial establishments built on a site that is centrally owned or mana ged, designed and operated as a unit, based on balanced tenancy, and surrounded by parking facilities. Its location, size, and mix of stores are related to the trading area served. A typical shopping center has one or more anchor stores and a range of smaller stores. Through balanced tenancy, the stores in a planned sh opping center complement each other as to the quality and variety of their prod uct offerings, and the kind and number of stores are linked to the overall needs of the population. To ensure balanced tenancy, the management of a planned shop ping center usually specifies the proportion of total space to be occupied by ea ch kind of retailer, limits the product lines that can be sold by every store t here, and stipulates what kinds of firms can acquire The planned shopping center has several positive attributes: Well-rounded goods and service assortments based on long-range planning. Strong suburban population. Interest in one-stop, family shopping. Cooperative planning and sharing of common costs. Creation of distinctive, but unified, shopping center images. Maximization of pedestrian traffic for individual stores. Access to highways and availability of parking for consumers.

More appealing than city shopping for some people. Generally lower rent and taxes than CBD stores (except for most enclosed regional malls). Generally lower theft rates than CBD stores. Popularity of malls. There are also some limitations associated with the planned shopping center: Landlord-imposed regulations that reduce each retailer s operating flexi bility. Generally higher rent than an isolated store Restrictions on the goods/services that can be sold by each store. A competitive environment within the center. Required payments for items that may be of little or no value to an indi vidual retailed such as membership in a merchants association. Too many malls in a number of areas Rising consumer boredom with and disinterest in shopping as an activity. Aging facilities of some older centers. There are three major types of planned shopping centers: regional, community, an d neighborhood. Their characteristics are displayed below Regional Shopping Center: A regional shopping center is a large, planned shoppin g 1 facility appealing to a geographically dispersed market. It has at least one or two full-sized] department stores (each with a minimum of 100,000 square fee t) and 50 to 150 or more] smaller retailers. A regional center has a very broad and deep assortment of shopping- oriented goods, as well as a number of service s intended to enhance the consumer s experience* at the center. The market for a typical regional center is 100,000+ people, who live or workup to a 30-minute d rive from the center. On average, people travel less than 20 minutes. Community Shopping Center: A community shopping center is a moderate-sized, plan ned shopping facility with a branch department store (traditional or discount), a variety store, and/or a category killer store, in addition to several smaller stores (usually similar to those in a neighborhood center). It offers a moderate assortment of both shopping- and convenience-oriented goods and services to con sumers. About 20,000 to 100,000 people, who live or work within 10 to 20 minutes of the center, are served by this location. Neighborhood Shopping Center: A neighborhood shopping center is a planned shoppi ng facility, with the largest store being a supermarket or a drugstore. Other re tailers in the center often include a bakery, a laundry, a dry cleaner, a statio nary store, a barber shop or beauty parlor, a hardware store, a restaurant, a li quor store, and a gas station. This center focuses on convenience-oriented goods and services for people living or working nearby. It serves 3,000 to 50,000 peo ple who are within a 15-minute drive (usually less than 10 minutes). A neighborhood shopping center is usually arranged in a strip. When first built, it is carefully planned, and tenants are balanced. Over time, the planned aspe cts of this center may diminish and newcomers may face fewer restrictions. Thus, a liquor store may be allowed to replace a barber shop. There would then be no barber shop. A center s ability to maintain balance depends on is continuing att ractiveness to potential tenants (as expressed by the extent of the store vacanc y rate). Location and Site Evaluation. The assessment of general locations and the specific sites contained wit hin them both require extensive analysis. Site selection is as crucial as the ch oice of a retail area, especially for stores that rely on customer traffic patte rns to generate business. Below are some of the factors which should be consider ed while selecting a site.

Pedestrian Traffic Probably the most crucial measures of a location s and site s value are the numb er and type of people passing by. Other things being equal, a site with the high est pedestrian traffic is often best. Because everyone passing a location or site is not necessarily a good prospect f or all types of stores, many retailers use selective counting procedures, such a s counting only males and females carrying shopping bags. Otherwise, pedestrian traffic totals may include too many nonshoppers. For example, it would be improp er for an appliance retailer to count as prospective shoppers all the people who pass a downtown site on the way to work. In fact, much of the pedestrian traffi c in a downtown location may be from people who are in the area for nonretailing activities. A proper pedestrian traffic count should encompass these four elem ents: Separation of the count by age and gender (children under a given age sh ould not be counted). Division of the count by time (this allows the study of peaks, low point s, and changes in the gender of the people passing by the hour). Pedestrian interviews (these let researchers find out the proportion of potential shoppers). Spot analysis of shopping trips (these allow observers to verify the sto res actually visited). Vehicular Traffic The quantity and characteristics of vehicular traffic must be examined, especial ly by retailers appealing to customers who drive there Convenience stores, outl ets in regional shopping centers, and car washes are examples of retailers that rely on heavy vehicular traffic. Automotive traffic studies are quite important in suburban areas, where pedestrian traffic is often limited As in the analysis of pedestrian traffic, adjustments to the raw count of vehicu lar traffic must be made. Some retailers count only homeward-bound traffic, some exclude vehicles passing on the other side of a divided highway, and some omit out-of-state license plates. Parking Facilities Parking facilities must not be overlooked in assessing a location. Most the of U .S. retail stores built over the past 50 years include some provision for nearby off-street parking. In many business districts, parking facilities are provided by individual stores, cooperative arrangements among stores, and municipal gove rnments. In planned shopping centers, parking facilities are shared by all store s there. The number and quality of parking spots, their distances from store sit es, and the availability of employee parking should all be evaluated. It is hard to generalize about a retailer s needs for parking facilities becaus e they depend on such factors as the trading area of the store, the type of stor e, the portion of shoppers using a car, the existence of other parking facilitie s, the turnover of spaces (which depend on the length of the shopping trip), the flow of shoppers during the day and the week, and parking by nonshoppers. A sh opping center normally needs 4 to 5 parking spaces per 1,000 square feet of gros s floor area, a supermarket usually requires 10 to 15 spaces per 1,000 square fe et, and a furniture store generally needs 3 or 4 spaces per 1,000 square feet.

Transportation The availability of mass transportation, access from major highways, and ease of deliveries must be examined in assessing a location and specific sites

In a downtown area, closeness to mass transit is important, particularly for peo ple who do not own cars, who commute to work there, or who would not otherwise s hop in an area with traffic congestion and limited parking. The availability of buses, taxis, subways, trains, and other kinds of public transit must be investi gated for any area not readily accessible by vehicular traffic. Because most do wntown shopping areas are at the hub of a mass transit network, they allow peopl e from all over a city to shop there. Locations dependent on vehicular traffic should be rated on the basis of their n earness to I major thoroughfares. As mentioned in Chapter 9, driving time is a c rucial consideration for many people. In addition, drivers heading eastbound on a highway often do not like to make a U-turn to get to a store on the westbound side of that highway. The transportation network should also be studied for its ability to convey deli very trucks to and from the store. Many thoroughfares are excellent for cars but ban large trucks or cannot bear their weight. Store Composition An area s store composition should be studied. How many stores are there? How la rge are they? The number and size of stores should be consistent with the kind o f location selected. A retailer interested in an isolated site would want no sto res nearby; a retailer desiring a neighborhood business district would want to l ocate in an area with 10 or 15 small stores.

retailing A retail strategy is the overall plan or framework of action that guides a retai ler. The process of strategic retail planning has several attractive features. It provides a through analysis of the requirements for doing busine ss For different types of retailers. It outlines retailer goals. A firm determents how to differentiate itself from competitors and devel op an offering that appeals to a group of customers. The legal ,economics, and completive environment is studied A firms total efforts are coordinated. Crises are anticipated and often avoided. Elements of a retail strategy

Situation analysis Situation analysis is a candid evaluation of the opportunities and threats facing a prospective or existing retailer. It seeks to answer two genera l questions. What is the firms current status? In mission, evaluating ownership and management options, and outlining the goods /services category to be sold. A good strategy anticipates and adapts to both the opportunit ies and threats in the chaining business environment .opportunities are marketpl ace openings that exist because other retailers have not yet not capitalized on

Approaches and planning in

them. Ikea does well because it is pioneer firm in offering a huge selection of furniture at discount prices. Threats are environmental and marketplace factor s that can be adversely affect retailer if they do not react to them (and, someti mes, even if they do). Single screen movie theaters have virtually disappeared in most areas because they have been unable to fend off the inroads made by mul ti screen theaters. A firm needs to sport trends early enough to satisfy customers and stay a head o f competitors. A new retailer can adapt to trends more easily than existing firm s with established images, ongoing leases, and spaces limitations. Small f irms that prepare well can compete in a market with large retailers. During situation analysis, especially for a new retailer or one thinking about making a major strategic change, an honest, in depth self asse ssment is vital. It is all right for person or company to be ambitious and aggre ssive. Organization al mission An organizational mission is a retailers commitment to a type of business and to a distinctive role in the market places. It is reflected in the firms attitude towards consumers, employees, suppliers, competitors, governmen t, and others. One major decision is whether to base business a round the goods and services sold or around consumers needs. A person opening a hardware business must decide if, in addition to hard ware products, a line of bathroom vanities should be stocked. A traditionalist might not carry vanities because they seem unconnected to the proposed business. But if the store is to be a do it-yourself home impr ovement center. Vanities are logical part of the mix .That store would carry any revenant items the consumer wants. A second majored decision is whether a retailer wants a place i n the market as a leader or a follower .it could seek to a unique strategy , such as taco bell becoming the first national quick serve Mexican food chain. o r on it cold emulate the practices of competitors but do a better job in exec uting them ,such as a local fast food Mexican restaurant offering five-minute guaranteed services and a cleanliness pledge. A third basic decision involves m arket scope. large chains often seek aboard customer base (due their resources and recognitions ) .it is usually best for small retailers and startups to foc us on a narrower customer base ,so they can compete with bigger firms that t end not to adapt strategies as well to local markets .Sam goodly is a mall b ased s specialty music retailer offering a board product selection in a youthfu l, consumer-friendly shopping environment .stores carry DVDs ,videos , audios cassettes , music and movie videos. Ownership and management alternatives. An essential aspect of situation analysis is assessing ow nership and management alternatives, including whether to form a sole proprietor ship or corporation. A sole proprietorship is an unincorporated retail firm ow ned by one person .All benefices , profits, risk s, and costs accrue to that i ndividual. it is simple to form, fully controlled by the owner ,operationally flexible, easy to dissolve ,and subject to single taxation by the government. A partnership is an unincorporated retail firm owned by two or more persons, each with financial interest .partners share benefits, prof its ,risks ,and costs .Responsibility and expertise are divided a among mu ltiple principals ,there is a greater is greater capability for raising funds t han with proprietorship ,the format is simpler to form than a corporation ,an d it is subject to single taxation by the government . A corporation is a retail firm is formally incorpor ated under state law .it is legal entity a part from individual officers (or s tock holders).funds can be raised through the sale of stocks, legal claims agai nst individuals are not usually allowed, ownership transfer is relatively easy ,the firm is assured of long term existence (if a founder leaves ,retires, or dies) ,the use of personal managers is encouraged ,and unambiguous operat

ing authority is outlined .Deepening On the type of corporation ,it is subject to double taxation (company earnings and stock holder dividends),face more government rules ,can require a complex p rocess when established ,may be viewed as impersonal, and may separate owner ship from the management. Goods and services category Before a prospective retail firm can fully design a strategi c plan, it selects a goods/services category the line of business in which t o operate. It is an advisable to specify both a general goods/services catego ry and a niche with in that category. Jaguar dealers are luxury auto retailers c atering to upscale customers. Wendys is an eating and drinking chain known for its quality fast-food with a menu that emphasizes hamburgers. Motel 6is a chai n whose forte is inexpensive rooms with few frills. Personal abilities Personal abilities deepened on an individuals aptitude-the prefer ence for a type of business and the potential to do well; education formal lear ning a bout retail practices and policies;and experience practical learning a bout retail and polices . An individual who wants to run a business, like to use initiati ve and has the ability to react quick to competitive developments will be suite d to different type situation than a person who depends on others for advices and does not like to make a decision s. the first individual could be an indepe ndent operate ,in a dynamic business such as appear l; the second might seek pa rtners or a franchise and stable business ,such as a stationery store. Some p eople enjoy customer interaction; they would dislike the impersonality of a se lf services operation .others enjoy the impersonality of mail-order or web retai ling. In certain fields ,education and experience requirement are specific by law; stockbrokers ,real-estate brokers ,beauticians ,pharmacists, and optic ians must all satisfy educational or experience standard s to show competency; f or example ,real estate brokers are licensed after a review of their knowl edge of real estate practices and their ethical character. Finical resources Many retail enterprises, especially new, independent ones, fail bec ause the owners do not adequately project the financial resources need ed to ope n and operate the firm. Novice retailers tend to underestimated the value of pe rsonal drawing account ,which is used for the living expenses of the owner and his or her family in the early ,unprofitable stage of a business .Because few new ventures are immediately profitable, the budget must include such expendit ures .in addition ,the costs of renovating an existing facility often are misca lculated. Under funded firms usually invest in only essential renovation s .This practices reduces the initial investments, but it may give the retailer a poor image. Merchandise assortment, as well as the types of goods and services sold, also affects the financial outlay. Finally, the use of a partner ship, corporati on, or franchise agreement will affect the investment. Time demands Time demands on retail owners (or managers) differ significantly by goo ds or services category. They are influenced both by consumer shopping patents a nd by ability of the owner or manager to automate operations or delegate activit ies to others. Many retailers must have regular weekend and evening hours to serve ti me-pressed shoppers .gift shops, toy stories, and others have extreme seasonal s hifts in their hours .mail order firms and those selling through the web, whic h can process orders during any part of the day .have more flexible hours. The owner may be the key service provider ,with patrons attacked by his or her skills(the major competitive advantage).delegating work to other will l essen consumer loyalty Personal services are not easy to automate. Due to limited funds, the owner and his or her family must often underta ke all operating functions for a small retail firm. Spouses and children work in

40 percent of family owned businesses. In a business that operates on cash basic, the owner must be a round to avoid being cheated. Objectives A after situation analysis retailer sets objectives ,the long run and short run performance targets it hopes to attain .this helps mold a strategy and translates the organs zonal mission into action .a firm can pursue goals related to one or more of these areas; sales profit ,satisfaction of publics , and image. Some retailers strive to achieve all the goals fully; others attended to a few and want to achieve them really well. Think about this array of goa ls for the Kroger. Sales Sales objectives are related to the volume of goods and service a retail er sells. Growth, stability, and market share are the sales goals more often sou ght. Some retailer set sales growth as top priority. They want to expand their busin ess. There may be less emphasis on short-run profits. the assumption is that inv estments in the present will yield future profits .a firm that does well often b ecomes interested in opening new units and enlarging revenues. Flower, managem ent skills and the personal touch are sometimes lost with overly fast expansion. Stability is the goal of retailers that emphasize maintaining their sales volume, market share, price lines, and so on .small retailer often seek st able sales that enable the owners to make a satisfactory living every year with out downswings or upsurges. And certain firms develop a loyal customer following and are intent not on expanding but on continuing the approach that attracted t he original consumers. Profit With profitability objectives ,retailers seek at least a minimum profit level during a designated period ,usually a year .profit may be expressed in dollars or as a percentage of sales .for a firm with yearly sales of 55 millio n and total 4.2 million .pre-tax dollar profit is 800.000 and profits as a per centage of sales are 16percent .if the profit goal is equal to or less than 800 .00 ,or 16 percent ,the retailer is satisfied. if the goal is higher .the firm has not attained the minimum desired profit and is dissatisfied. Firms with large capital expenditures in land, buildings, and equipment often set return on investment (R01) as goal .R01 is the relationship between profits and the investment in capital items. A satisfactory rate of return is pre-def ined and compared with the actual return at the end of the year or other peri od .for a retailer with annual sales of 5 million and expenditures of 4 mil lion ,the yearly profit is 1 million .if the total capital investment is 10 million ,R01 is 1 million /10million ,or 10percent per year .the goal must be 10 percent or less for the firm to be satisfied. Satisfaction of public Retailers typically strive to satisfy their public; stock holders, customers, suppliers, employees and government. Stockholder satisfaction is goa l for any publicly owned retailer .some firms set trained over the long run and indicate good management rather than ones based on innovative id eas that may lead to peaks and valleys in sales and profit . Customer satisfication with the total retail experience is well en trenched goal at most firms now good supplier relation is also a key goal .re tailers must understand and work with their suppliers to secure favorable purchase terms, new products ,good return policies, prompt shipments ,and coope ration . Cordial labor relation is another goal that is often critical to retail ers performances. Good employee morale means less absenteeism, better treatment of customers, and lower staffing turnover Image (positioning) An image represents how a given retailer is perceived by consumers and o thers. A firm may be seen as innovative or conservative, specialized or board b ased, discount-oriented or upscale. The key to a successful mage is that consume

rs view the retailer in the manner the firm intends. Through positioning, a retailer devises its strategy I a way that projects an im age relative to its retail category and its competitors and that elects a positi ve consumer response. A firm setting womens apparel could generally position it self as an upscale or a discount specialty retailer, and if could specifically p osition itself with regard to other retailers carry womens apparel. Two opposite positioning philosophies have gainsaid popularity in recent y ears; mass merchandising and niche retiling .mass merchandising is a positioning approach whereby retailers offer a wall-mart has a wide, deep merchandise mix w hereas sports authority has a narrower, deeper assort. in niche retailing , retailers identify specific customer segments and depl oy unique strategies to address the desires of those segments rather than the mass market nicking creates a high level of loyalty and shields retailers fro m more convention competitors .babiesRU appeals to parents with very young children whereas Catherines stores has fashion for plus size women. Selection of objectives A firm that clearly sets its goals and devises a strategy to a ac hieve them improves its chances of success. An example of a retailer with clear goals and a proper strategy to attain them is papa johns the nearly 3,000 -outl et pizza chain Identification of consumer characteristics and needs The consumer group sought by a retailer is called the target m arket .in selecting its targets market a firm may use one of tree techniques; mass marketing, selling goods and services to a board spectrum of consumers; c oncentrated marketing ,zeroing in on one specifics group; or differentiated m arketing ,aiming at two or more distinct consumer groups, with different retai ling approaches for each group; Supermarkets and drugstores define their target markets broadly. They sell a wide assortment of medium-quality items at popular prices. in contra st, a small upscale mens shoe store appeals to specific consumer group by of fering a narrow, deep product assortment at above a average prices Departments stores are among the retailer seeking multiple ma rket segments. They cater to several customers groups, with unique goods and ser vices for each, apparel may be sold in a number of distinctive boutiques in the store, also large retail chains frequently have division that appeal to differen t market segments. Target Corporation operates Marshall Fields (traditional department stores) for those i nterested in low prices. Overall strategy The retailer develops an in depth overall strategy. This involves tw o components; the aspects of business the firm can directly affect and those to which the retailer must a d apt .the former are called controllable variables an d the latter are called uncontrollable variables. Controllable variables The controllable parts of a retail strategy consist of the basic ca tegories such as store location, managing a business, merchandise management and pricing, and communicating with the customer. Uncontrollable variables The uncontrollable parts of strategy are composed of the factors such as consume rs, competition, technology, economic condition, seasonality, and legal restrict ions. Farsighted external environment and adapt the controllable parts of their strategies to take in to account elements beyond the control.

SITUATION ANALYSIS

Situation analysis is a candid evaluation of the opportunities and threats facin g a prospective or existing retailer. It actually means, being guided by an orga nizational mission, evaluating ownership and management options, and outlining t he goods and services category to be solved. Opportunities are marketplace openings that exist because other retailer s have not yet got capitalized on them. Threats are environmental and market place factors that can adversely af fect retailers if they do not react to them. A firm needs to spot trends as early as enough to satisfy the customers and stay ahead of competitions. A new retailer can adapt to trends more easily than exis ting firms with established images ,ongoing leases and space limitations .small firms that prepare well can compete in the market with large retailers. During situation analysis, especially for a new retailer or one thinking about the making a major strategic decision ,an honest,indepth self ass essment is vital . ORGANISATIONAL MISSION An organizational mission is a retailers commitment to a type of business and t o a distinctive role in the market place. It just reflects the firms attitude t owards the consumers, employees, suppliers, competitors, government and others. Major decision is whether to base a business around the goods and servic es sold or around the consumer needs. A person opening a hardware business must decide if, in addition to hardware products. A second major decision is whether a retailer wants a place in the marke t as a leader or as a follower. It could seek to offer a unique strategy, such a s Taco Bel becoming the first national quick serve Mexican food chain. A third basic decision involves market scope. Large chains often seek a broad customer base .it is usually best for small retailers and startups to focu s on a narrower customer base, so that they can compete with larger firms. Though the development of an organizational mission is the first step in the planning process, the emission should be continually reviewed and adjusted to reflect changing company goals and a dynamic retail environment. OWNERSHIP AND MANAGEMENT ALTERNATIVES An essential aspect of situational analysis is assessing ownership and managemen t alternatives, including whether to form a sole proprietorship, partnership or corporation and whether to start new business ,by an existing business, or becom e a franchisee. A sole proprietorship is an unincorporated retail firm owned by one person, all benefits, profits, risks and cost accrue to that individual, it is simple to for m, fully controlled by the owner, operatiobnally flexible, easy to dissolve and subject to single taxation by the government. It makes the owner personally liab le for legal claims from suppliers, creditors and others and it can lead to limi ted capital and expertise. A partnership is an unincorporated retail firm owned by two or more persons each with a financial interest. Partners share benefits, profit s, risk and cost. Depending on the type of partnership it, too can make owners p ersonally liable for legal claims, can be dissolved due to partners death or dis agreement, binds all partners to actions made by any individual partner acting o n behalf of the firm. A corporation is retail firm that is formally incorpora ted under state loan. It is legal entity apart from individual officers(stockhol ders).funds can be raised through the sale of stock, legal claims against indivi duals are not usually allowed, ownership transfer is relatively easy, the firm

is assured of long term existence, the use of professional managers is encourage d and an ambiguous operating authority is outlined. GOODS OR SERVICE CATEGORY Under the goods and service category, it is advisable to specify both th e general goods and services category and niche within that category. Jaguar dea lers are luxury auto retailers catering to upscale customers. A potential retail business owner should select a type of business that will him or her to match her personal abilities. Financial resources, and time availabil ity with requiremtents of that kind of business. PERSONAL ABILITIES Personal abilities depend on an individual aptitude-the preference for a type of business and the potential to do well.-formal learning about retail practices a nd policies and experience. An individual who want to run a business, likes to use initiative a nd hands the ability to react quickly to competitive developments will be suited to a different type of situation than a person quickly to competive development s will be suited to a different type of situation than a person who depends on o thers for advice and does not like to make decisions. Some skills can be learned and others are inborn.Accordi ngly, potential retail owners have to asses their skills and match them with the demands of a given business. It involves a careful reaction about oneself. Part nerships may be best when two or more parties possess complementary skills perso n with selling experience may join with someone who has the operating skills to start a retail business. FINANCIAL RESOURCES Many retail enterprises, especially new, independent on es ,fail because the owners do not adequately project the financial resource nee ded to open and operate the firm. Novice retailers tend to underestimate the val ue of a personal, join account ,which is used for the leaving expenses of the ow ner and his or her family in the early, unprofitable stage of a business. Becaus e few new ventures are immediately profitable, the budget must include such expe nditures. In addition, the cost of renovating are existing facility often are mi scalculated. Underfunded firms usually invest in only essential renovations. Thi s practice reduces the initial investments, but it may give the retailer a poor image. TIME DEMANDS Time demands on retail owners (or managers) differ significantly by goods or ser vice category. they are influenced both by consumers, shopping pattern and by th e ability of the owner or manager to automate operations or delegate activity to others. Many retailers must have regular weekend and evening hours to serve tim e- pressed Shoppers .gift shops, toy stalls, and other have extreme seasonal shi fts in their hours. Mail- order firms and those selling through the web ,which c an process orders during any part of the day, have more flexible hours. Some bus iness requires less owner involvement, including gas stations with no repair ser vices ,coin operated laundries and movie theaters. They emphasize on automation ,self service, standardization and financial controls ,lets the owner reduce the time investment. Intensive owner participation can be the result of several factors: Owner may be the key service provider, with patrons attracted by his or her skills(the major competitive advantage.).Delegating work to others will less en consumer loyalty. Personal services are not easy to automate. Due to limited funds, the owner and his or her family must often underta

ke all operating functions for a small retail firm. spouses and children work in 40% of family owned businesses. In a business the operates on cash basis, the owner must be around to av oid been cheated.

Retail institutions characterized by

OWNERSHIP Independent Chain Franchise Leased department Vertical marketing system Consumer cooperative

STORE BASED RETAIL STRATEGY Convenience store Conventional super market Food based super store Combination store Box store Warehouse store Specialty store Variety store Traditional department store Full line discount store Off price chain Factory outlet Membership club Flea market

NON STORE BASED RETAIL STRATEGY MIX AND NON TRADITIONALRETAILING Direct marketing Direct selling Vending machine Www Other emerging retail format.

Reference Retail management a strategic approach written by Barry Berman, And Joel R. Evans

MODULE-IV

Anu.R Archana.V.Nair Nelson Thomas Niju.K.George Nisha Das.

Electronic Retailing This area is something like electronic mail order, but with extensions for capab ilities similar to the home shopping networks as seen on television. There are a small but growing number of electronic shopping malls populated with virtual st orefronts. These malls are like the home shopping networks (but without the sale s promotion people), and the storefront is like the product showcase and marketi ng segments that fill the channel s broadcast time. However, the electronic mall s are "non-linear" meaning one can go from any store to any other on-demand, whi le the televised home shopping broadcast is presented in only a "linear" what-yo u-see-now-is-all-that-is-available format. For example, the Internet Shopping Ne twork mall allows shoppers to browse through directories of electronic stores, s ervices, or products, and then proceed through the selected store s entry way. U pon entering, one can browse the store s offerings using an electronic catalog o r by perusing attention-grabbing multi-media product displays. For products that are completely informational (e.g., electronic books, PC software, and computer games, as well as certain banking and financial transactions, and travel arrang ements), then shoppers are often allowed to interactively try out a demonstratio n version of the product, much like that is normally done in conventional consum er electronics stores. Interested customers can then arrange to purchase and "do wnload" the product from the store over the Internet directly into their compute r, or to receive a packaged version of the product via courier or postal deliver y. As such, it is still relatively easy to become a developer of virtual real es tate and electronic shopping malls, but commercial success will likely depend on which retailers you can sign up to lease space in the malls, and what volume of customer traffic you can generate and sustain. Perhaps both a conventional and electronic marketing campaign will be essential to help promote customer awarene ss and retailer offerings, together with promotional incentives aimed at Interne t user segments. Beyond this, opportunities will likely emerge to make shopping in an electronic mall more of an "entertaining" multi-media user experience, as well as also more like a virtual reality experience, so that users can have fun and be entertained while shopping. E-TAILING MODELS

E-Tailing Business Models Virtual merchants Single-channel Web firms that generate almost all their revenue from online sales. Clicks and mortar Companies that have a network of physical stores as their p rimary retail channel, but also have introduced online offerings. Catalog merchants Established companies that have a national offline catalo g operation that is their largest retail channel, but who have recently develope d online capabilities. Online Malls A variation on the virtual merchant business model; they generate revenue from rents and services paid for by retailers who sell under the malls umbrella. Manufacturer-Direct Single or multi channel manufacturers who sell directly o nline to consumers without the intervention of retailers. Electronic auction Proprietary auction site is an application of the supplier -oriented market place. These sites are open only to approved customers. They ar e designed to cement relationships between the company and its regular buyers. S ellers can get rid of surplus goods, and business customers can realize deep dis counts. Electronic Bartering Related to auctions and bidding, electronic bartering is the exchange of goods and/or services without the use of money. Electronic Data Interchange EDI has been on the horizon for almost a decade. The ability of businesses to se nd and receive standardized forms of product data and financial instruments has long been viewed as a key capability for streamlining business to business trans actions. However, there is at present very little EDI taking place over the Inte rnet. Why is this? There are many reasons, including the following: First, m ost current efforts for EDI are based on proprietary computer and communications systems whose network connections are limited to established business partners. Second, there is widespread belief that financial transactions over the Interne t are insecure (they are), although the technical and administrative aspects of this are likely to be resolved fairly soon. For example, privacy-assured and sec ure transaction mechanisms are beginning to appear as products offered by compan ies such as Netscape Communications Corporation. Third, most of the current EDI support systems are "closed systems" that cannot be easily interconnected to eit her existing or new product or financial data systems. For example, there is a g reat deal of interest in using systems such as Lotus Notes over proprietary EDI internetworks, but Notes currently lacks the openness needed to easily exchange data with most existing database management, financial, or computer-aided produc t design and manufacturing systems. Thus, it seems that EDI of the kind being persued to date w ill not support significant opportunities for new ventures on the Internet. Simi larly, investments in current EDI approaches may not have a long period of usefu lness in businesses that must expand or turnover their customer base with greate r frequency.

BAR CODE In 1949, N.J. Woodward filed a patent for a series of cir cular symbols. These symbols were to be placed on every item in a retail superma rket for the purpose of improving productivity and automating the checkout proce ss. But, it was not until more than two decades later (1973) that the grocery in dustry gathered to settle on some standard form of product identification. The e nd result was the U . P.C. (Universal Product Code), a 12-digit number unique to each product. From that initial meeting, an organization was created to standar dize and implement the new concept. The organization later became the UCC (Uniform Code Council ) and now oversees the labeling standards for more than 200,000 member companies . Four years after the implementation of the U.P.C., the EAN (European Article N umbering) system was created on an international scale. Derived from the U.P.C., the EAN-13 is one digit longer to accommodate country codes. In 1968, Identicon Corporation created the 2 of 5 bar code s ymbology for warehouse inventory and cargo handling. The name comes from the fiv e bars per character, two of which are wide. Due to its low density, 2 of 5 caus ed problems for manufacturers of bar code printers. In 1972, an interleaved vari ation created by Interface Mechanisms (Intermec), resolved this issue by combini ng two values into the same five bars, using the four spaces in between. This in terleaving technique meant that a bar code could double the amount of informatio n in the same space. By 1981, Interleaved 2 of 5 became the accepted symbology for U.P.C. retail multipack containers. The UCC developed the SCC-14 standard with which the supplier uses the same data from its U.P.C. product labels and simply adds a packaging indicator to designate cartons. ONCOMING TECHNOLOGIES There will be some great opportunities in storage. There wi ll have ubiquitous storage within the next three years that will help the retail ers truly drive anywhere-anytime-anything computing, which is very important for the business. Wireless will continue to be exploited, and at some point cus tomers will walk into one of the stores and use their own device on the networ k there to accomplish whatever they want. An infrastructure that will enable suc h a process has to be developed. Radio frequency identification is also exciting , and there will be development in cheap chips" which replace bar codes over ti me, and will be able to intelligently drive the supply chain through what s on t he shelf and what s in the back without the associates having to verify it. Voice over IP will certainly take off and will lower costs and help all from an infrastructure standpoint What it s like today when an as sociate moves or transfers and you have to change the phones. They ll simply be able to take the phone with them, plug it back in, and everything will be workin g without any systemic changes. Voice recognition s time will come in the next three. Voice recogniti on technology can be used in distribution centers, and there are many more are as where it s exploited, and it will eliminate the need for some of the mobile i n stores and distribution centers today. FUTURE OF CUSTOMER APPLICATION From a development standpoint, the biggest opportunity is lever aging information. In the future, the business will be simulated business with an inductive model versus a deductive model to determine opportunities to max imize sales before the actual event occurs. There will also be a strategic initiative going on wit h self-service. Self-service technology will be provided to all the salesm en, prospective salesmen, customers and members, and to eliminate paper and pape r forms. Having an associate portal and devices on sales floors will let custo mers and members get product information, and let the sores do computer-assisted selling.

IT AND RETAILING With the increase in globalization of retailers both in terms of their points-of-sale, as well as their points-of-supply, the Informatio n Technology (IT) spend in the retail sector has increased considerably and play s an increasingly important role in managing the complexity of retail operations . 1. INFORMATION TECHNOLOGYS INCREASED ROLE IN THEGLOBAL RETAIL INDUSTRY At the turn of the twenty-first century, there were few g lobal retail chainsmost retail chains were local to countries. This has given w ay to a globalized set of retailers such as Wal-Mart, Tesco, GAP, IKEA, and othe rs. With the increase in globalization of retailers both in terms of their point s-of-sale, as well as their points-of-supply, the Information Technology (IT) sp end in the retail sector has increased considerably and plays an increasingly im portant role in managing the complexity of retail operations. The increased IT spending to be about 13 percent from 2000 through 2004. However, the correspon ding growth in revenues for the retail sector has been at only about two percent , translating IT costs to be a larger fraction of the overall cost base of the r etail sector. This has resulted in considerable pressure on IT to deliver value in the retail sector as well as closer scrutiny of the IT spend. 2. CHALLENGES: RETAILS COMPLEXITY RETAIL OPERATIONS ARE EXTREMELY COMPLEX Much of the retail operations functionality is driven by customized point soluti ons in areas such as merchandizing, supply chain management, in-store operations , seasonality and promotions planning. This means the underlying IT systems to d rive operations are equally complex. Retail operations are inherently complex due to four factors: a) Product complexity. The retail sector has a high degree of product complexity , with the number of SKUs in stores running anywhere from the tens of thousands to more than two hundred thousand, a high degree of seasonal and fashionable ite ms, and a lack of standardization of product hierarchies. b) Supply chain challenges. With so many different outlets and channels, multipl e hands-offs, and high frequency of replenishment, developing and managing an ef ficient supply chain remains one of the primary challenges in the retail sector. c) Scale complexity. Retail operations are executed on an extremely complex scal e. The U.S. retail sector alone deals with hundreds of millions of transactions per day, driven by millions of customers who shop through tens of thousands of o utlets. d) Process complexity. The business processes that support this environment are also inherently complex due to the multiple touch points across players in the v alue chain (manufacturer, distributor, retailer, consumer), the coordination req uired between the different planning cycles of each of these players, and geogra phic dispersion. While third-party packages do exist for several functional area s of the retail world, most retailers find that these packages either do not cov er a broad enough functional footprint and/or they require a fair amount of cust omization, as the out of the box functionality seldom meets the retailers hol istic needs. KEY CHALLENGES IN MANAGING THE COMPLEX RETAIL IT LANDSCAPE The retail sector faces challenges along four key dimensions:

a) IT cost and performance under pressure owing to the high growth in annual IT spend in the retail sector (~13%) while revenues have grown much slower (~2%). b) Lack of standards in a complex, highly customized IT environment leading to i ntegration challenges, making changes and new functionality development cumberso me and expensive. c) High maintenance costs stemming from the high degree of customization and fra gmentation of point solutions, many of which span different technology platforms . d) Poor data integrity, the result of systems fragmentation, point solutions, hi gh degree of customization and lack of an underlying best practice architecture, because there is no good practice standard, out-of-the-box solution that spans the full retail space. 3. SIMPLIFYING A COMPLEX INDUSTRY: THE ROLE OF INFORMATION TECHNOLOGY IT systems are at the heart of retail operations and henc e play a central role in alleviating pressure points in the retail sector. The c onverse also holds trueretailers who do not manage their IT landscape effective ly will find that, in time, the IT systems become part of the problem rather tha n components of the solution. This is particularly true for IT systems in the re tail sector; for example advanced planning and scheduling systems, inventory man agement systems and merchandizing systems. Additional systems that share a cruci al role in retail operations are the promotional and seasonality management syst ems that, when leveraged effectively, can increase the top-linen revenues for th e retailer. There are two critical areas where IT can reduce complexity and improve results: 1. Functional retail areas 2. Data cleansing and architecture FUNCTIONAL RETAIL AREAS Merchandizing systems impact top-line revenues and need to be configured, customized and managed effectively for the retailer to improve i ts top line. To achieve this, retailers need to effectively mine large amounts o f data and leverage this data to carry out effective forecasting, assortment pla nning, and collaboration with its suppliers so that promotions and other merchan dizing activities are effective and efficient. Supply chain systems are key from a bottom line point of view as they play a key role in getting the right produc t to the right place at the right timewhich in turn impacts the inventory level s and the rate of flow of products through the retailers stores, both of which are significant components of the retailers cost of doing business. DATA CLEANSING AND ARCHITECTURE IMPROVEMENT Data cleansing, and thereafter, effective mining (via large data warehouses) is fundamentally important in the retail space because so much decision-making is based on data. If the data is bad, the effectiveness and effi ciency of carrying out retail operations is hampered. This becomes particularly crucial when the retailer is implementing new systems and a large data conversi on effort is requiredit becomes essential that the old data be effectively clea ned, re-architected and made ready in the new system, so that the business funct ions can make decisions effectively. .

MODULE-V

Aravind.M Jayalekshmi.G Rahul.V.R Sreejith.K.B Subhash.J. INTERNATIONAL RETAILING International retailing is defined as all the activities involved in selling pr oducts and services to final international consumers for their personal consumpt ion. Retail internationalization has been defined as the management of retail oper ations in markets which are different from each other in their regulation, econo mic development, social conditions, cultural environment and retail structures U.S. Retailers and Foreign Markets Here are examples of U.S. retailers with high involvement in foreign markets. Until 1991 when it opened its first store in Mexico, Wal-Mart operated stores on ly in the United States. By 1999, it had greatly increased its global presence o utside the United States-including outlets in Argentina, Brazil, Canada, German y, Mexico, China, and Korea. These stores generated $12.5 billion in annual sale s. According to the firm s Web site (www.wal-mart.com): "Wal-Mart s global expan sion has been achieved through a combination of building retail outlets from th e ground up and through a series of acquisitions at the right time and right pla ce. Both approaches have yielded excellent market penetration and financial grow th for Wal-Mart Stores, Inc. Wal-Mart International has found that the retailer s culture is transportable to other cultures worldwide. As a global brand, custo mers recognize that Wal-Mart stands for low cost, best value, and the greatest s election of quality merchandise. Wal-Mart s highest standards oi customer servic e have also been exported and adopted by international associates around the glo be." In the future, Wal-Mart plans to be even more aggressive outside the United States. Toys "R" Us has been active internationally for years, and now has more than 450 stores abroad (up from about 75 in 1990). Among the more than 25 nations in whi ch it has well-, established stores are Australia, Canada, France, Germany, Grea t Britain, Japan, Singapore, Spain, and Sweden. In 1994, it signed its first for

eign franchising agreements, thus entering the United Arab Emirates and other Mi ddle Eastern nations. During 1996, it entered Indonesia, Italy, South Africa, an d Turkey. Why the emphasis on franchising? As its Web site (www.tru.com) said, " their local knowledge of the retail market combined with the Toys "R" Us expert ise in the management of children s megastores should provide a powerful combin ation to fully cover the potential oi the. market and increase the availability of toys." Many of the world s leading mail-order retailers are U.S.-basedincluding Americ an Express, Avon, Ci icorp, Franklin Mint, and Reader s Digest. These firms are efficient and have a clear handle on customers and distribution methods. However , as of now, total worldwide mail-order sales (for both U.S. and foreign turns) outside the United States are less than those in the United States. Thus, there is great growth potential in foreign markets. Blockbuster (v/ww.blockbuster.com) operates more than 2,000 video stores in 26 f oreign countries in Europe, Asia, the Pacific Rim, and North and South America. According to its Web site, it employs over 14,000 people at those storesand at least 12 different languages are j spoken at Blockbuster stores: "The first int ernational Blockbuster store opened in London in 1989. The foreign country with the most Blockbuster stores is Great Britain, with more than 700. The foreign co untry with the fewest Blockbuster stores is Uruguay; with one Blockbuster s newe st foreign market was Poland." For the past 15 years, the majority of McDonald s new restaurants have opened ou tside the United States. Today, sales at 12,500 outlets in 11 5 foreign nations account for one-half of total system wide revenues. Besides Western Europe, McDo nald s also has outlets in such places as Argentina, Australia, Brazil, Brunei, Canada, China, Costa Rica, Czech Republic, Hungary, India, Japan, Malaysia, Mexi co, New Zealand, Philippines, Poland, Russia, Turkey, Venezuela and Yugoslavia. The 15 restaurants in India are unique because "cows are sacred and most people don t eat beef. McDonald s ditched the Big Mac for an Indian stand-in, the Mahar aja Mac. That s two all-mutton patties, special sauce, lettuce, cheese, pickle, and onions, all on a sesame seed bun." Foreign Retailers and the U.S. Market A large number of foreign retailers have entered the United States, in order to appeal to the world s most affluent mass market. Here are three examples. Ikca (\v\v\v.ikea.com) is a Swedish-based home-furnishings retailer with stores in nearly 30 countries. In 1985, Ikea opened its first U.S. store in Pennsylvani a. Since then, it has added stores in such cities as Baltimore, Chicago, Elizabe th (New Jersey), Hicksville (Long Island, New York)r Houston, Los Angeles, San F rancisco, Seattle, and Washington, D.C. The firm offers durable, stylish ready-t o-iisscmble furniture at low prices. Because Ikca positions itself as a dominant furniture retailer, its stores are large and have enormous selections. For exa mple, the outlet in Elizabeth, New Jersey, is 270,000 square feet and has a play room for children and other customer amenities. The firm generates nearly 90 pe rcent of its sales from international operations, including about $700 million d ollars at its U.S. stores. The Netherlands Royal Ahold (www. ihold.com) is a supermarket operator ranking among the world s top retailers with $35 bill on in annual retail sales. It has stores in 17 countries and serves 25 million shoppers weekly. In the United Sta tes, rather than introducing its own stores, Royal Ahold has acquired several ch ains, making it the leading supermarket firm along the eastern seaboard. Its mor e than 1,000 U.S. stores include these chains: Stop & Shop, Giant Food, Tops Mar kets, and Bi-Lo. Body Shop International (www. the-body- shop.com) is a British-based chain that specializes in natural cosmetics and lotions such as Vitamin E Cream, Tea Free O il, Banana Shampoo, and Aloe Vera Lotion -"products that cleanse, beautify, and soothe the human form." There are 1,600 Body Shop stores in 48 countries, Includ ing the United States. The firm has more than 400 U.S. stores (55 percent of whi

ch are company-owned and 45 percent of which are franchised), which generate rou ghly one-quarter of Body Shop s total company revenues. Besides extending their traditional businesses into the United States, a number of foreign firms (such as Royal Ahold) have acquired ownership interests in U.S. retailers. Although the revenues of U.S.-based retailers owned by foreign firms are hard to measure, they cer-tainly exceed $100 billion annually. Foreign owne rship in U.S. retailers is highest for general merchandise stores, food stores, and apparel and accessory stores. Both U.S. retailers operating in foreign marke ts and foreign firms operating in the U.S. market need to be careful in their ap proach: Retailers considering operations abroad must carefully study demographic , economic, and cultural trends; must be flexible in choosing retail formats; an d must be willing to enter into partnerships with local operators. Retailers als o must be prepared to commit capital resources to sustain what may be losing ope rations for several years before consumers accept them. To be sure, overseas ex pansion is risky and requires a long-term outlook, particularly in countries wit h a great potential for growth in the next century. The prospective profits in t hose markets is so large, however, that many retailers cannot afford to miss th ese opportunities.7 There arc about 270 countries encompassing 6 billion people and a $30 trillion economy in the world. The United States accounts for less than 5 percent of the worldwide population and nearly 30 percent of the worldwide economy. This means that although the United States is a very attractive marketplace, there are als o many other appealing markets around the globe. 1 hat is why global retailing i s growing dramatically. It is expected that annual worldwide retailing sales wil l reach $9.2 trillion by 2009.1 when we talk about the global environment of ret ailing; we are referring to both U.S. firms operating in foreign markets and for eign retailers operating in U.S. markets. . The challenge of strategic planning in a global retailing environment is clear: "The world economy is a crazy-quilt of retail markets in which promising new ter ritories are closely mingled with potential quagmires for retailers look-in * to expand beyond their home countries." There are many differences among countri es despite "the growing similarity of consumer tastes and the development of sop histicated information systems." The Strategic Planning Process and Global Retailing Retailers looking to operate in global markets should follow these four step s in conjunction with the strategic planning process described in Chapter 3. ! .Assess Your International Potential: "Because international growth requires a n extension of your firm s resources, you must first focus on assessing your int ernational. potential. This should give you a picture of the trends in your indu stry, your domestic position in that industry, the effects that international ac tivity may have on your current operations, the status of your resources, and a n estimate of your domestic and international sales potential. In general, you s hould not. get into international retailing unless you have a secure base of ope rations in the United States. Find out about candidate countries by using resea rch. It s easy to ruin an otherwise well-conceived plan by making fundamental cu ltural, partnering, or resource allocation mistakes. It s far better to put the time info research at the beginning rather than learn when it s too late that yo u did not do enough homework." 2. Get Expert Advice and Counseling: "Once you have assessed your international poten-tial and made a decision to commit time and resources, the next step is to get expert advice and counseling. Many groups in the private sector and gover nment provide guidance to companies planning to go international. Industry trade associations are also useful, as are private consulting firms and the business departments of major universities. If you are entirely new to international reta iling, call the U.S. government s Trade Information Center, toll-free, at (800) USA-TRADE (800-872-8723). If you are further along, contact the nearest distric t office of the Commerce Department s International Trade Administration. State

governments are another source of assistance." 3. Select Your Countries: "After reviewing your research and digesting the advic e, the next decision is about which country or countries to enter. You need to p rioritize information about each country s environment, including economic stren gth, political stability, regulatory environment, tax policy, infrastructure de velopment, population size, and cultural factors to reflect influences on the c andidate countries. For example, the economy of a country is generally considere d critical to most businesses and is normally ranked high in importance. Equall y critical are political (actors, particularly government regulations. DEVELOPMENT OF INTERNATIONAL RETAILING STRUCTURE INTERNATIONAL EXPANSION OF RETAILERS Retailers are rapidly expanding internationally to gain competitive advantage and to increase sales, profits and overall firm performance. As they expand bey ond their home-country borders, retailers also can take advantage of cost saving s and learn from experiences in a way that could further enhance home-country op erations. Tesco, the British retailer, for example, is using its stores in centr al and Eastern Europe as a testing ground for ideas that are intended for applic ation in the home market: the new Tesco Extra in Newcastle, U.K. is based on a T esco hyper market in Hungary. Retailers from the United States are expanding in Latin America, Asia, and Eu rope. Wal-mart, for example, has adopted an aggressive strategy for internation al penetration. The top European grocery retailers are expected to command a 40 percent marke t share by 2005 in Europe, the five leading European retailers- promodes/ Carref our, metro, intermarche, Rewe, and Auchan presently control a 25.4 percent share of the European grocery market. Some of the international retailers are Wal-Mart (U.S.) with sales of $137,634 million. Metro AG (Germany), $52,131 million. Sears Roebuck (U.S.), with sales of $36,704 million. Rewe Gruppe (Germany), with sales of $36,212 million. Edeka Gruppe (Germany), with sales of $32,573 million. Aldi Gruppe (Germany), with sales of $32,403 million. Dayton Hudson (U.S.) with sales of $30,951 million. Carrefour (France), with sales of $30,489 million. Tenzel Mann Gruppe (Germany), with sales of $30,243 million.

In the process of internationalization, many retailers are subscribing to the cu rrent trade of consolidation in the food and general merchandise sectors. Examples of such consolidation are offered by Wal-Marts acquisition of one of th e largest United Kingdom grocery chains, the Asda Group, Royal Aholds purchase of the path mark , Giant, and stop and shop chains in the United State and the m erger between two medium-sized French Wal-Mart look-alikes promodes and Carrefou r. LEVELS OF INVOLVEMENT IN INTERNATIONAL RETAILING Domestic Approach Comparatively Low Risk Low potential Global Returns

Global Approach

Comparatively High Risk

High potential Global Return

DEVELOPING A STRATEGIC RETAIL MIX After a retailer has identified the most promising areas for foreign expansio n and the desired level of involvement, the next consideration is the retail mix : products, pricing, facilities and promotion. The Global Retail Mix Strategic Orientation Total Customization Total Globalization (Focus on Differences) (Focus on Similarities) 100 0 50 50 0 100 Total Customization approach: An approach, based on differences among markets, in which the retailer develops a unique retail mix for each country in which it operates. Total Globalization: An approach, based on similarities among markets, which emphasizes the complete standardization of the retailers mix for all markets around the globe. Product Offering McDonalds, which leans strongly toward globalization, found that in Mexico its hamburgers were better received when served with chili sauce instead of ketchup. Adding McBeer to its menu in Germany increased traffic and sales there. In Japa n, the firm has added rice balls and the Teriyaki McBurger to better compete wit h local fast-food chains. PRICING Consumer reactions to pricing policies vary greatly around the world. Discount o r warehouse retailing is popular in the United States but beginning to catch on in Japan. The average Japanese is heavily staffed, and consumers are likely to b elieve that the sizable price or service reductions typical of discount stores r eflect poorly on the quality of the stores products.

FACILITIES Retailers may also need to modify their stores layouts. Although Kentucky Fried Chicken, Burger King, and many other retailers have taken steps to standardize t heir facilities around the world, local considerations sometimes have forced the m to alter their prototypes. Rent levels and local retail practices also affect the way merchandise is presen ted. High rents usually dictate grouping merchandise more closely on special fix tures to display more merchandise per square foot. Yet in some nations, includin g Canada and the United States, customers see closely packed merchandise as a si gn of poor quality. In Japan, where customers value individualism, retailers put only a few fashion items on the floor and keep the rest in the stockroom- a str ategy that creates an impression of exclusivity. PROMOTION Promotion is the component of the retail mix that is most likely to be custom ized from country to country. At the least, retailers must translate their adver tising, signage, and sales presentations into the local language. In many instan ces, however, modifications go far beyond translation. In France, children canno t be shown in advertisements. In Germany, retailers cannot use the word best in any advertisement, and comparative advertising of any sort(direct comparisons wi th other retailers products and pricing) is illegal. MEASURING RETAIL STRUCTURE The structure of the retail environment generally refers to the nature and ch aracteristics for the market. Eg: The type of retail operation, the variety of retail offers, store location a nd nature of ownership. In terms of measuring the retail environment, levels of market concentration are often used. Higher levels of concentration are associated with more developed m arkets. The retail industry developed, so multiple organizations begin to take market share from traditional independent and co-operative retailers: thus a small num ber of larger organization are taking a greater proportion of the market. Retail structure development can be measured not just by the number of retail organiza tion, but also the number of retail organizations, increases. As the market beco mes more structured begins to decrease due to the fact that the size of the indi vidual shops has increased, one store can serve a larger group of the population . More advanced More traditional UK Germany Greece France Netherlands Italy Spain Portugal

Fig: A Continuum of Europe Retail Structure The advanced markets of the UK and Germany are characterized by having the highe r level of concentration and clearly segmented market. Next are the structured m arket of France and Netherlands, followed by the intermediary market of Spain an d Italy and, finally the traditional retail structure of Portugal and Greece. The Internationalization of Retailing in Europe In recent article in The New Republic, Daniel Yergen argues that analyses of in ternationalization should focus on globality rather than globalization. Whil

e studies of globalization focus on the processes by which businesses expand int o markets around the world, globality focuses on what happens afterwards. Global ity is associated with: general confidence in the pricing and allocation mechan isms of markets; greater levels of economic integration (EEC in Europe, NAFTA in North America, and Mercosur in South America) new information and communication s technologies that knit the world together; and the convergence of technology a nd economic integration that has turned capital markets into a force unto themse lves. In Yergens view of the world, this means that the control that Government s have over their own economies is decreasing- a trend exemplified in 1999 with the introduction of the euro. In Canada, there is now some discussion of the i mplications of a NAFTA dollar zone. Commercial activities, which include retailing, personal services, entertainm ent, restaurants, and some financial services, have not been immune from these i nternationalizing trends. The papers in this collection, which include some Euro pe, related studies presented at an International Geographical Union workshop on the Impact of the Globalization of Commercial Activities on Communities and a rticles submitted to CSCA subsequently, address collectively both globalization and globality. The restructuring of retailing in the former East Germany consequent to unifi cation with the former West Germany is examined as an example of the outcome of globalization processes (Coles). As many international companies locate in Off-c entre locations, a case study included of the response of some small town centre in the UK to this type of competition (Hallsworth). The monograph concludes wit h a general commentary on the relationship between globalization, globality, and deregulation based on research undertaken at CSCA in metropolitan markets aroun d the world (yeates). The Motives and Reasons for Internationalization. The following are the important motives behind the internationaliza tion of the retail sector. 1. The Economic climate An important factor in assessing the opportunities for expansion is the ability to earn profit within a reasonable period of time .The outcomes stro ngly depends upon the countries economic climate. The ability of the customers t o purchase the products and the cost of operating the stores plays a vital role in its success. 2. The customers buying power. The standard of living of people plays a vital role while determini ng the retail operation in a country. The percapita income, the percapita sales etc. should be considered before fixing the level of operation. The customers b uying power in the developing countries increasing day by day, this offers a str ong market for retail legends. 3. Cost of doing the business is low. The cost of doing the business includes the rent, transportation, wage rates, wa rehousing, taxes etc. Before staring the retail operation they will have to look into the cost of the retail operations. In addition to this they will have to a lso look into the import duties levied by the government. But the liberalization helps to remove all these barriers and creates an easy operating environment. 4. Currency exchange facilities. A major consideration for any retailer is the degree to which foreign currency can be converted into the home currency. Through the foreign exchange markets t

he currencies can be easily converted in to the home currency. The transitions i n the foreign exchange markets are carried on the basis of the global exchange r ates. It facilitates easy business operation in any part of the world. 5. The support of the infrastructure. The business support services by the countries facilitate the conduct of the bus iness activities with in a nation such as dependable supply of electricity, adva nced telecommunication system, etc. Such services comprised of a nations infrast ructure. The increase in infrastructure will enables to attract more foreign in vestments. 6. Consumer preferences. The consumer preference plays a vital role in the success. The preferenc e of the consumer may vary from one country to another. The culture, social norm s etc. plays a vital role in determining the buying habit of the customers. The inability of the local markets to satisfy the increased preference of the custom ers opens a new market for the global retailers. 7. The laws and the political stability. The political stability refers to the degree to which the laws and re gulations are subject to change. The legal environment in the country also plays a significant role. The rules and regulations prevailing in a country, the atti tude of the government towards internationalization, the govt policy and regulat ion etc. remain the motivating factors for foreign investments. 8. The information sources. The easy availability of information from the government and other agencies faci litates the companies to understand the political, social & economic environment prevailing in a country. This would enable them to plan their area of operation . Opportunities and Threats in the International retailing. For a participating firm, there are wide range of opportunit ies and threats in the global retailing; >OPPURTUNITIES 1. The foreign markets represent better growth opportunities. (Here foreign mar ket means the developing countries like India, china etc.) 2. A retailer may be able to offer goods, services, or technology not yet avail able in the foreign market. 3. Less competition compared to the developed countries. 4. Cheaper communication facilities in the developing countries. 5. The liberalized policies by the governments. > THREATS. 1. The cultural difference between the domestic market and the foreign market. 2. The management styles may not be easily adaptable. 3. The governments restriction on some areas of operation.

4. The distribution system may be inadequate. 5. The institutional format may greatly vary from country to country. MARKET ENTRY METHOD Market entry decisions have strategic implications, as the wrong decision can ha ve a long-term constraining impact on future activities in the chosen overseas m arket. The criteria for the initial method of market entry should have been examined du ring the initial screening phase of market selection, as ease of market entry is crucial in reducing overall risk of market failure. The following criteria to be consider considered are: 1. Level of marketing control required over the 7Ps 2. Costs of implementation and follow through 3. Time involved to achieve objectives 4. Level of corporate control with respect to third parties 5. Financial and strategic risks 6. Future commitment to the market 7. Absorption of company resources There are three main categories of market entry; 1. Indirect 2. Direct 3. Overseas production. The first two involve production in the domestic market, the third production ov erseas. 1. Indirect: Companies who do not want to engage in the risks of export markets or who lack the resources, know-how and commitment can consider this ro ute. Third parties, International Trading Companies, Export Management Companies or Manufacturers with complementary products, on the look out for new products to exploit overseas, may purchase within the domestic market, take title and the n export overseas, using their own established networks. Apart from avoiding all the risks of exporting it can also provide added cash flow and sale of slow mov ing stock. The downside is total loss of control over the 7Ps, market knowledge and future footholds in overseas markets during domestic recession. 2. Direct There are a range of possibilities here, depending on the degree of commitment and risk to be taken. Some companies will engage in exporting but in a reactive manner relying on unsolicited orders through fax, trade fairs or dir ectory inserts. Other companies will take a more proactive approach to overseas markets, hopefully resulting in greater: sales, marketing control, marketing inf ormation and the all important networking, albeit increased risks of commercial failure. This method of market entry accounts for about 2/3 of UK exports. (a) Agents These are self-employed nationals, living in the target market, with the product, industry and customer knowledge of benefit to the exporter. They act a s an extension of the domestic sales force, although many will have agency contr acts with other organizations, even possibly a competitor. 3.1 Distributors These are companies that can provide warehousing, physical distribution as well as sales and marketing expertise. They take title of the product and may insist on Own Label branding. With both of these forms of market entry there are pros and cons. The key to the successful use of these intermediaries is the motivation and control from the p rincipal. This can be achieved through competitive incentives, training, regular visits, shared marketing expertise and regular evaluation and efficient communi cation.

Market entry is a strategic issue and sensible practice is to evolve overseas pr esence if the market conditions are conducive. If the agent distributor route ha s proved a success then consideration to a more formal overseas presence should be considered. 2.3 Sales/Marketing Office One common practice is to invite the agent or distributor to head up an overseas sales and marketing subsidiary. This move could then oversee any later methods of further market commitment. 1. Overseas Production This may become a sensible option if the export market becomes large enough for economies of scale to out weigh the increase in risk to the exporter. However, m any developing markets e.g. S.E. Asia, may make this a formal requirement to ent er their markets. Of course there could be very direct benefits to the exporter e.g. lower labour costs, raw materials, access to additional finance and more fa vorable tax regimes. As with the other methods of market entry there are a numbe r of alternatives with varying impacts on the criteria initially stated. 1. Subcontract Manufacturing Is when a company contracts for the assembly of its products by manufacturers es tablished in a foreign market, with targeted sales there or elsewhere, while sti ll maintaining the responsibility for marketing and distributing its products. S ome of its advantages are that in requires minimum investment of cash, time and executive talent and permits a rapid entry into a new market. Furthermore, it is desirable where a local production base is needed but the size of the market do es not warrant an investment, while avoiding currency risks and financing proble ms. Its drawbacks include that profit from manufacturing is transferred to the c ontractor; it is often difficult to find a satisfactory manufacturer; and like l icensing, it trains a potential competitor who will have the know how to manufac ture a high quality product and there is little control of manufacturing quality

2.

Licensing agreements

Is a contractual agreement that occurs when a company transfers to a foreign ent ity, usually another company, the right to use its individual property (patents, technical knowledge or trademarks) in return for a royalty or other compensatio n. The main benefits of establishing a licensing agreement are the ease and low cost of entering a foreign market, and that it can be used to test a foreign mar ket without the risk of capital loss should the market not be receptive to the m anufacturers product. On the other hand, the greatest disadvantages to the lice nsor are that a potential competitor is set up, there is a lack of control over production and marketing, and there could be loss in flexibility since it is oft en difficult to co-ordinate a licensee into a world-wide marketing plan.. 3. Franchise The problem with licensing is the loss of control over the marketing mix. A fran chise helps overcome this problem because the exporter retains control over the 7Ps through the Franchise contract. The Franchisee makes a one off down payment , often in excess of 250,000 for a fast food franchise. Then annual royalty pay ments often tied in with sales turnover. There may even be further payments to t he Franchiser or their suppliers for fittings and the supply of raw materials. O f course the franchiser benefits from a ready made brand name and hopefully less ens the possibility of market failure. 3.4 Joint Venture This may be a mandatory requirement by the host government for the privilege of market entry or it maybe a specific policy to share resources with a partner be they finance, manufacturing, R&D or market knowledge. It takes place when an int ernational company shares in the ownership and control of an enterprise in a for eign country with the purpose of creating a local business. In other words, an i nternational firm agrees to share capital and other resources with a single loca

l company in a common endeavor. Depending of the capital share of the internatio nal company, joint ventures can be classified as majority, minority, or 50-50 ve ntures. 3. 3.5 Strategic Alliance Less restrictive and often more short term e.g. Rover and Honda, strategic allia nces are often sought where no one company can gain the economies of scale, wher e shared financial, market entry, R&D risks benefit both parties. These firms op erate not simply by having subsidiaries in other countries but through a network of relations with other companies to which they subcontract work. Although, the re is often competition between these firms there is also collaboration. We are seeing an increasing number of what are called "tri-polar alliances". An allianc e has been established in the airline industry between British Airways in Europe , United Airlines in the US and Cathy Pacific. And in telecommunications, an all iance has been established between ATT in the US, Unisource in Europe and NTT in Japan. These alliances are established in order to compete with other multinati onals which have established similar alliances with other multinationals in Japa n, Europe and North America. 3.6 Wholly owned production This could be assembly only of components shipped in or full manufacture, althou gh R&D capability is usually retained in the domestic market. The subsidiary cou ld be a Green field site or an acquisition. As the subsidiary matures it may b e used to export to other markets in the region or even back to the domestic bas e. TYPOLOGIES OF INTERNATIONAL EXPANSION Introduction The term Retail Internationalization may seem clear enough, yet a number of c omplexities underline it. Alexander (1997) has highlighted the varying condition s that international players operate in, suggesting that retail internationaliza tion is: The management of retail operation in markets which are different from each othe r in their regulation, economic development, social conditions, cultural environ ment, and retail structures. It is the process of a retailer transferring its retail operations, concept, man agement expertise, technology and/or buying function across national borders. TYPOLOGIES OF INTERNATIONAL EXPANSION Terms such as global, international, multinational and transitional are often us ed interchangeably and without much regard for the differences in implications. While on one level they all suggest the movement of retailer into new markets, t hey also imply differences in terms of the nature of international activity. Cla ssifications of retailers have been determined partially by their direction of e xpansion and market entry method. Salmon and Tordiman (1989) categories three ty pes of international strategy: Investment Global Multinational INVESTMENT Company often uses investment with diverse portfolios that are seeking new growth opportunities and want to spread their risk of investment. At tainting shares in a foreign company acquiring the entire company allows swift e xpansion and may allow the transfer of know-how from the indigenous retailer. Un like the other two classifications, it is strategy implemented by both retailers and no retailers. It implies no real international marketing strategies, as the companies are treated autonomously within the portfolio. GLOBAL

Global retailers replicate a concept in a new market. Typically they have a str ong brand such as Marks & Spencer, IKEA and Benetton. The replication of the ret ail offer implies a standard global marketing strategy, which allows savings fro m economies and efficiencies of scale due to the replication of factors such as assortment, store designs and advertising. There is opportunity for vertical int egration in terms of design production and distribution. However, the lack of au tonomy as a result of centralized management structure requires and leads to the development of excellent information ad communication system. Global retailers are then likely to achieve the greatest rates of international expansion due pri marily to efficiencies of operation. MULTINATIONAL With the third category, multinational retailers, the basic concept is unchanged in the international transfer, but the offer is adapted to suit local condition s, as exemplified by C&S. Although the concept is replicated, the marketing mix is adapted to suit local demand. The store decor, services and pricing are simil ar throughout the world, while the assortment and advertising are subject to loc al determinants. The management structure is decentralized, providing operations within different markets with a significant degree of autonomy. This is an impo rtant source of the transfer of knowledge from one market to another, but the ph ilosophy of adapting to local conditions means that there are few savings from e conomies of scale on a global level. Although multinational retailers are se to expand within the global arena, it is thought unlikely that such expansions will be to the same extent as the global retailers. There is great deal of importance with Salmon model in the position of a retail er within the typology is dependent upon that level of local responsiveness and the degree of benefits from integration. An example of a multinational retailer is Vendex of the Netherlands. It employs a high degree of adaptation to the loca l environment and subsequently has a few benefits from integration because it ha s a variety of diverse retail formats. Global retailers are at the other extreme . They provide the same offer in every market with limited, if any, change made to suit different environments. This does, however, provide them with savings fo rm of economies of scale, and example of this is The Body Shop. DIRECTION OF EXPANSION The direction of international expansion taken by retailer has received a good d eal of attention in recent years. Much of the recent research on internationaliz ations describes either the development of new markets or the invasion of homes markets by foreign competitors. Burt (1993) suggested that the initial direction of international retail expansion is primarily determined by three factors: Cultural proximity Geographical proximity The stage of development of the retail market. CONCLUSION Retailers tend to move into markets that are geographically and culturally close , and those that are less developed than their own. As they develop into experie nced internationalists, they are more likely to move into more diverse markets. Their choice of market entry strategy is dependent upon the types of operations, the organizational structure and culture, and the nature of the host markets. T oday the word is a much smaller place for the retailers. Any retailer that think s retailing is a local business is, or soon will be, competing against a foreign retailer that understands retailing is a global business. The internationalizat ion of retailing is still a relatively recent phenomenon and it is suggested tha t it is a process likely to continue to increase.