RETAIL MARKETING

MODULE-1

RETAIL MARKETING MANAGEMENT

Retailing include all the activities involved in selling goods or services directly to the final consumers for personal non business use A retail store is any organization whose sales volume comes primarily from retailing Retailing is the last stage of the distribution process In contrast wholesaling is an intermediate stage in the distribution process in which goods and services are not sold to final customers but to business customers.

RETAIL MARKETING MANAGEMENT

Retailing also encompasses the sale of services Mail and telephonic orders, direct selling to customers in their home and office, web transaction ,vending machines sales all within the scope of retailing

RETAILING Functions

Retailing is the last stage in a channel of distribution Retailers play a keyrole as they contact between manufactures,wholesalers and the final customers Retailers collect an assortment(collection of various product mix ) of goods and services from various sources buy them in large quantity and offer to sell them to customers.This is the sorting process Wide retail assortment let customers do one stop shopping

RETAILING FUNCTIONS IN DISTRIBUTION

A typical channel of distribution

manufacturer wholesaler Retailer

Final consumer

RETAILING FUNCTIONS IN DISTRIBUTION

Another function for retailers is communicating both with customers,Manufacture and wholesalers

BRAND A BRAND B BRANDC BRAND D WHOLE SALER RETAILER WHOLE SALER Customers Of BRANDs

BRAND E
WHOLE SALER BRANDF

MANUFACTURES

RETAILING FUNCTIONS IN DISTRIBUTION

Manufactures,wholesalers and others are informed about sales forecast,delivery delays,customercomplaints,defective items ,inventory turnover etc by the retailer Retailers also complete transaction with customers. Retailers also provide customer services gift wraping,delivery and installation For these reasons goods and services are sold via retail firms not owned by manufactures.This let the manufacturer (whole saler) reach more customers,reduce cost,increase sales more rapidly.

CLASSIFICATION METHOD FOR RETAILING INSTITUTIONS

Ownership based

Independent Chain franchise Leased department Vertical marketing system Consumer Cooperatives

Store Based

Convenience store Conventional Supermarket Food Based Super store Combination store Limited line 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

Food based retailers

General merchandise retailers

Non store Based

Direct marketing Vending machines World Wide Web

Convenience store

A convenience store is usually food oriented retailer,well located,open long hours,carries a moderate number of items This type of retailer is small,has average to above average price,average atmoshere and customer service The ease of purchase and impersonal nature of store attract customers. Items such as milk ,eggs and bread once represented the major portion of sales. Now sandwiches,tobaccoproducts,snack foods,news paper ,magazines,beer&wine,video rentals,lottery,and car wash ATM facility Gasoline(petrol ) sales eg 7-Eleven,Circle-K

Conventional Supermarket

A super market is a self service food store with grocery,meat,and produce departments A conventional supermarket is a departmentalized food store with a wide range of food and related products Easy parking and lower prices were tactics used by the supermarket to exploit these inventions. Conventional supermarket have generally relied on high inventory turnover (volume sales).Their profit margins are low. In general average gross margin(selling pricemerchandise cost) are 20-22% of sales and net profits are 1-3% of sales Competition is high from convenience stores and food based superstores and combination stores have more productlines and greater variety within them as well as better margin.

Food Based Super store

Larger and more diversified than a combination store. 25000-50000 sqft 20-25% revenue is from general merchandise itemssuch as flowers and garden supplies,small house hold appliances,wine,caters complete grocery needs One stop shopping Stimulate impulse purchases and feature high profit general merchandise It is easier to convert soopermarket in to food based super stores than in to combination stores

Combination store(super center category)

A combination store unites supermarket and general merchandise sales in one facility,with general merchandise typically accounting for 2540% of total sales They are large 30,000 up to 100,000 or more square feet,leads operating efficiency and cost savings. Consumers like one stop shopping and will trvel further to get to the store Super center is a combination of blending an economy supermarket with a discount department store.It is the US version of hyper market Eg Walmart,K mart

Limited line store (BOX store)

Limited line store (BOX store) is Food based discounter that focuses on a small selection of items,moderate hours of,few services and limited manufacturer brands There are usually less than 1500 items,few or no refrigerated perishables,price marking is on the shelf. Customers do their own bagging,checks are not accepted and items are displayed in cut cases Box stores depend on low priced private label brands Eg Aldi in US

Warehouse store

A ware house store is a food based discounter offering a moderate number of food items in a no-frill setting. Unlike box stores,ware house stores appeal to one stop food shoppers Concentrate on special purchase of manufacturer brands Provide little service,post prices on shelves,and locate in secondary sites. Lack of brand continuity.Since products are bought when special deals are available,brands may be permanently out of stock.

General Merchandise retailers

Specialty store Variety store Traditional Department store Full line discount store Off-price chain factory outlet Membership club Flea market

Specialty store

A speciality store concentrates on selling one goods or service line,such as apparel and accessories,toys,furniture or repair services In contrast to massmarketing approach,speciality stores usually carry a narrow but deep assortment in their chosen category and tailor the strategy to selective market segments Among the popular categories of apeciality stores are apparel,personal care,auto supply ,home furnishings,electronics,books,toys,home improvement,pet supplies,jewellery and sporting goods

Variety store
A Variety store handles a wide assortment of in expensive and popularly priced goods and services,such as stationary ,gift items,womens accessories,health and beauty aids,shoe repair etc Eg US Mc Crory,with 160 stores is the leader

Traditional Department store

Merchandise Quality ranges from average to quite good Pricing is moderate to above average Customer service ranges from medium levels of sales help,credit delivery Traditional department store is a large retail unit with an extensive assortment of goods and service that is organised in to separate departments for buying,promotion,customer service,and control. Do not carry such lines as furniture,consumer electronics and major appliances. Eg Macy,Bloomingdale

Full line discount store

1. 2.

3.
4. 5. 6. 7.

A full line discount store has the features It conveys the image of a high volume,low cost,fast turnover outlet selling a broad merchandise assortment for less than conventional prices It carry the range of product line expected at department stores,including consumer electronics,furniture and appliances There is also greater empasis on such items as auto accessories,gardening equipment and house wares Centralised checkout service Less fashion sensitive merchandise Customer service is not usually provided within store departments,but at centralised area Nondurable goods carried tend to feature private brands where as durables are well known manufacturer brands

Off-price chain

An off price chain features brand name apparel and accessories,footwear,linens,fabrics,cosmet ics or housewares and sell them at everyday low prices in an efficient,limited service environment

factory outlet
A factory outlet is a manufacture owned store selling manufacturer closeouts,discontinued merchandise,some times in season Eg SAMSONITE

Membership club

A membership club appeals to price conscious consumers,who must be members to shop there

Flea market

Has many retail vendors offering a range of products at discount prices in plain surroundings.

RETAILING FUNCTIONS
1. 2. 3.

4.

PROVIDING ASSORTMENT OF PRODUCTS AND SERVICES BREAKING BULK HOLDING INVENTORY PROVIDING SERVICE

1,PROVIDING ASSORTMENT OF PRODUCTS AND SERVICES

Supermarkets typically carry 20000 to 30000 different items made by over 500 companies Offering an assortment enables their customers to choose from a wide selection of brands,designs,sizes and prices at one location All retailers offer assortments of products but they specialise in the assortment they offer Eg supermarketprovide assortments of food,health and beauty care and house hold products

2,BREAKING BULK
Retailers offer the products in smaller quantities tailored to individual consumers and house holds consumption pattern This is called breaking bulk

3,HOLDING INVENTORY

A major function of retailers is to keep inventory that is already broken in to user friendly sizes so that products will be available when consumers want them.By maintaining an inventory retailers provide benefit to consumers,ie they reduce the consumers cost of storing products

4,PROVIDING SERVICE
Retailers provide service that make it easier for customers to buy and use products. They display products so consumers can see and test them before buying

SUPER MARKETS
A conventional supermarket is a self service food store offering groceries,meat,and produce with limited sales of non food items such as health and beauty aids and general merchandise. Perishables like meat and produce account for 44% of supermarket sales and typically have higher margins than packaged goods Eg Kroger,Albertsons,Safeway,Ahold USA and Publix

SUPER CENTERS
The fastest growing retail category are large stores of 1,50,000-2,20,000sqft Combine a supermarket with a full-line discount stores Walmart operates over 2000 super centers in US ,4 times more than its competitors Meijer, Kmart,Fred Meyer(a division of Kroger)

SUPER CENTERS

By offering broad assortments of grocery and general merchandise products under one roof,super centers provide a one stop shopping experience. Customers will typically drive farther to shop at these stores than to visit conventional supermarkets. General merchandise items are often purchased on impulse when customers primary reason for coming to the supercenter to buy groceries. The general merchandise has higher margin enabling the super centers to price food items more aggressively Supercenters are large some customers find them inconvenient because it can take a long time to find the items they want

HYPERMARKET
Large(1,00,000-3,00,000 sqft) Combination of food (60-70%) and general merchandise(30-40%) stores. Hypermarket typically stock fewer SKUs than Supercenters-between 40,000 and 60,000 items ranging from groceries,hardware,and sport equipment to furniture and appliances Eg LULU

Theories of Retailing

Theories of retail change make sense of what has happened to retail organizations in the past and more importantly help retailers to forsee future scenarios for their business and those of their competitors

Theories of Retailing

1.
2. 3.

There are 3 main categories of theory Cyclical Theory Environmental theories Conflict Theory

CYCLICALTheories of Retailing
1.

2.
3. 4. 5.

The wheel of retailing The retail life cycle The Retail Accordian Melting Plot Theory Polarization Theory

1,The wheel of retailing

Oldest and most acceptable theory(McNair 1958) Retailers enter the business at fairly low status,low price operation This helps them to compete against establish retailers.Withtime,when such retailers succeed,they acquire more sophisticated and elaborate facilities. Finally they mature as high cost,high price retailers who become vulnerable to new entrants,who inturn go through same process

2,The retail life cycle

1.

2.

3.

4.

All retail organisation have a finite life span,during which they go through four phases of development INNOVATION-A new retail format will spend a short time only a few years in the innovation stage of the life cycle.Non successful innovators will not enter the next phase.while successful innovators can take advantage of lack of direct competiotors to grow sales rapidly and develop retail unit numbers,entering the growth phase GROWTH-The number of units is expanded rapidly,often withcentralised planning and control.Both sales and profitability growth should follow MATURITY-Maturity on the otherhand will last indefenitely as long as the retailer is customer and competition oriented.A mature retail format will have many direct competitors and the sales growth slows together with the level of profitability DECLINE -The sales growth become negative and profitability is very low can also last indefenitely

2,The retail life cycle

sales

maturity

decline

innovation time

growth

3,The Retail Accordian

Retail development is linked to human habitation Expands with geographical expansion of society Starting with general stores in the neighbouring locality Changing to specialist stores having restaurants ,entertaintment etc These specialist retailers when matured start adding variety and become general stores Slowly change to category killer( a category killer is a specialised discount store,category killers kill brands buy allowing discount)

3,The Retail Accordian

This theoy relates retail development overtime to merchandise range This theory noted that there was a tendency for retail organisation to move alternatively towards specialisation and diversification over time. The earliest stores where general stores delivering a wide merchandise range with narrow depth of category to small dispersed communities As urban area grew they could support speciality retailers with limited product assortment but depth of category such as shoe stores. The next expansion of the accordion brought the development of department stores offering a wide merchandise range and depth of category.

4,Melting Pot Theory

According to this theory a new value proposition by one retailer gives rise to two new retailers with the same proposition. This process is known as dialectic process suggests that retail firms adapt mutually to the emerging competition and tend to adopt the plans and strategy of the opposition.Eg Tesco simply match what Sainsbury would offer.This policy 10 years for Tesco to recover and become the most repected retailer

5,Polarisation theory

This theory suggest that in a longer term the industry consist of mostly large and small sized retailers The medium size become unviable.This is called polarisation The large size retailers take advantage of large and direct purchase from the manufactures and offer a large range at very competitive prices.This phenomenon has led to increase in the size of retailers. The smaller retailers tend to offer a limited range of products but add value to their offers with other services,or tend to specialise It is found that firms tend to be more profitable when they are either smaller in size or they are big. The mid size firms fall into the Bermuda Triangle(Bermuda triangle effect)

ii,Environmental Theories

1.
2.

Environmental theories are concerned with the interplay between the external environment and organisational environment The various influences of the external environment-political,legal,socio cultural,demographic,economic and technological-changes over time Conditions can change slowly or rapidly and only those organisations which can adapt to change and take advantage of the opportunities offered by the environment will grow develop and thrive EVOLUTION THEORY INSTITUTIONAL THEORY

1,EVOLUTION THEORY

In retailing,organisatios which successfully adapt to changes in the external environment are those most likely to thrive.

2,INSTITUTIONAL THEORY
Institutional theory recognizes that the organisation is an organic part of its environment and that there is a degree of interdependency between them. According to this theory, the decisions and actions of a retail organization reflect the economic and cultural norms of the environment in which it exists.

CONFLICT THEORY

When an innovator successfully enters the market through some competitive advantage, existing organizations will take actions designed to minimize that competitive advantage, which eventually lead to a modification of their operating methods. Meanwhile,the innovating organisation will also adapt as it becomes established in the market. The continual adaptation will bring the two differing type of trading closer and closer together until they are virtually indistinguishable.

SERVICE AND QUALITY IN RETAILING

SERVICE AND QUALITY IN RETAILING

Service quality may be defined as" the ability of the organization to meet and exceed customer expectations.

SERVICE QUALITY

Managing the quality of service

CUSTOMER SATISFACTION

Customers expectation and experience of the quality of service delivery

MANAGEMENT OF CONSUMER SERVICE INVOLVES

1.

2.
3. 4.

Renewing the service offering Localizing the point of service system Leveraging the service contract Using information power strategically

SERVICE CHARACTERISTICS AND THEIR IMPLICATION FOR CUSTOMER SERVICE

Service and products differ in a number of important ways which have implications for purchasers and for customer service itself. By understanding the characteristics of services,retailers can learn to overcome the problems they pose for service providers

SERVICE CHARACTERISTICS AND THEIR IMPLICATION FOR CUSTOMER SERVICE

Retailing is itself a service-retailers make a variety of goods available for the customer in a single location,offer information display merchandise,provide finance and an array of additional service.

THE CHARACTERISTICS OF SERVICE

Intangibility Heterogeneity Perishability Ownership Inseparability

Intangibility

Services cannot be touched or held. While store customers buy tangible goods the service of providing them ,selling them, giving information about them and delivering them cannot be touched You can assess the quality and value of a product, the quality of the service the retailer has provided in sourcing, displaying and selling the product is assessed through perception,observation and communication That is why retailers provide a pleasant environment in which to buy the product,and why staff attitude and communication are so important in conveying the quality of service the retailer intend his customers to experience

Heterogeneity

Heterogeneity may be defined as different in kind or composed of parts of different kinds. services are experienced in different ways on different occasions by the same consumer. Similarly, different consumers will have dissimilar experience of the same service at the same time. As a customer when you go in to a store on different occasions, the experience will defer in terms of display,staff,goods,communication and so on. Every experience you have of service in the same store vary in someway from all the other experience

Perishability

Perishability can be defined as the ability to be lost or waste away The opportunity to experience or to provide a service once passed is lost forever As a customer You can buy a product and store it,use it and often reuse it.Not so with service. If you go to a store to buy an apple you occupy a service experience in a certain location at a certain point of time.That opportunity will never recur. You cannot go in to buy the same apple at a different time or go to buy another and experience the same service. If a customer decide not to buy or to buy elsewhere,then the retailer has lost the particular service opportunities for ever.

Ownership

Ownership is the ability to possess In terms of retail service provision this means that while a customer can own a product,they cannot own the service provided in making the product available or any of the other related services which retailing entails. When you buy a vegetable you can take it away with you and do what you want with it. You cannot own the service the retailer provides you with in sourcing and selling the vegetable. You cannot own the service provided by staff who have directed younnto the display or the information conveyed by the display

Inseparability

Inseparability is defined as the inability to be separated It means that the service you experience as a customer is inseparable from the service being provided by the retailer. When you buy an apple,the service you experience is intrinsically related to the people providing the service,most notably the personnel who communicate with you in the store,but also linked in to the personnel who,though invisible to the customer,help to make the product and service available.

IMPROVING THE QUALITY OF CUSTOMER SERVICE

Customers perception of the quality of service provided by retailers depends upon the level of satisfaction they experience in the process of shopping. Their satisfaction is affected by both their expectations of shopping experience and the actuality of the experience If customer experience higher levels of service than expected over time, then they will perceive the retailer as offering a high quality of service. If the level of service is lower than expected over time,the retailer will be perceived as offering a low level of service quality.

SERVQUAL-A model for improving service quality

The SERVQUAL model has been widely applied as a means to measure service quality(Parasuraman 1985) In this model,the service gap-that is the difference between the level of service quality which customers expect and the level they experience is the result of 4 main criteria

SERVQUAL-A model for improving service quality

Word of mouth communication Personal needs Expected service Customer GAP 5 Perceived service Service Delivery GAP 1 GAP 3 GAP4 External communication to customers Past experience

Provider

Service quality specifications

GAP 2 Management perceptions of customer expectations

SERVQUAL-A model for improving service quality

1. 2.

3.

1.

The gap between what customers expect and what managers think-KNOWLEDGE GAP The gap between what managers think customers expect and the standards of service they specify-THE STANDARDS GAP The gap between standards of service set by managers and standards of service THE DELIVERY GAP The gap between standards of service delivered and those communicated to the customer-THE COMMUNICATION GAP

INDIAN RETAIL FORMATS

Indian retail sector is highly fragmented 96% of its business being run by about 12 million retail outlets in the organised sectors,like the traditional family run Kirana Stores The organised retail in the last few years has made an impressive appearance in metros,cities and towns across india. Shopping centres,multi storeyed malls and huge complexes that offer one stop shopping experience,entertainment,and food all under one roof are expanding.

INDIAN RETAIL FORMATS

Several players such as Tata,RPG,Future group,Piramel,Rahejas,Reliance,Bharti and Birla have already entered the Indian retail market.

EVOLUTION OF INDIAN RETAILSECTOR

Historic Traditional GOVT supported Modern Hyper market Supermarket Department stores

Khadi, Co-operative stores Convenience stores or Mom/pop or kirana Weekly market, Village fairs,melas Neighbourhood stores Availability lowcost

Shopping Experience

Source of entertainment

EVOLUTION OF INDIAN RETAILSECTOR

Evolution of retailing in india can be traced back to the village haats and small town market. The rural retail industry could be categorised in to two formats; Weekly haats and village melas. Weekly formats catered to the daily necessities of villages. Village melas were larger in size with a wide variety of goods sold from food,clothing ,cosmetics and small consumer durables

EVOLUTION OF INDIAN RETAILSECTOR

With the emergence of larger towns and cities the neighborhood Kirana stores which cater to the convenience of the indian consumers became popular To provide equal opportunities of employment and earning to the rural craftsmen Khadi and Village Industries commission set up a country wide chain of 7000 plus stores in India In big cities government encouraged setting up of super bazars and co-operative stores to make available all essential items at far prices.

EVOLUTION OF INDIAN RETAILSECTOR

Today the modern retail evolution can be seen in India Small towns, cities and metros are being exposed to the new shopping formats through the emergence of world class malls and huge shopping complexes that offer shopping,entertainment and food all under one roof The life style stores and shopping malls provide a complete destination experience to the consumers The hyper and super markets are consistently trying to provide the customer with the value,variety and volume.

RETAIL FORMATS ADOPTED BY KEY PLAYERS IN INDIA

Retailer
RPG

Original format
Supermarket (food world)

Later formats Hyper market (spencers) Discount store (Tru mart) Supermarket(food bazar) Hypermarket(Bigbazar) Hypermarket (Star India Bazar)

Piramels

Department store (piramyd megastore)

Small format outlet Department store (pantaloon) Department store (West side)

Pantaloon

Tata

HYPER MARKETS IN INDIA

NAME Big Bazar Spencer Shoppers stop Reliance Retail

CITIES
26 All India Mumbai Bangalore

FORMAT HYPERMARKET HYPERMARKET HYPERMARKET HYPERMARKET

SUPER MARKETS IN INDIA

NAME
OWNED BY

FORMAT
Super Market

Reliance Fresh

Reliance

More

Adityaq Birla Group

Super Market

FOOD BASED RETAIL IN INDIA

Convenience store (KIRANA STORES IN INDIA or MOM-POP Stores) Conventional Supermarket(RELIANCE FRESH,MORE) Food Based Super store(PIZA HUT,MC DONALDS) Combination store(WALMART) Warehouse store

General Merchandise retailers

Traditional Department store Full line discount store Specialty store Category specialists Off-price chain factory outlet Membership club Flea market(flea market is dispersed through out India) Variety store

Traditional Department store

are retailers that carry a broad variety and deep assortment, offer customer service and organize their stores in to distinctly separate departments for displaying merchandise (Macys,Sears,JC penny and Kohls) They sold soft goods (apparel,bedding) and hard goods(appliances,furniture and consumer electronics)

Full line discount store

Are retailers that offer a broad variety of merchandise,limited service and low price Discount stores-Subhiksha,Apna Bazar etc

Specialty store
Concentrate on a limited number of complementary merchandise categories and provide a high level of service in relatively small stores. Speciality stores tailor their retail strategy towards a very specific market segment by offering deep but narrow assortments and sales associate expertise. APPAREL-wills Lifestyle,Zodiac,The Raymondshop,Van Heusen JEWELLERY-Tanishq(TATA),Nakshatra FURNITURE-Style spa,Godrej interior

Category Specialist(Category Killers)

Category specialists are big box discount stores that offer a narrow but deep assortment of merchandise. APPAREL-Pantaloons MUSIC-Music World,Planet M These retailers are basicaally discount speciality stores

RETAILING in India

Life style changes in Indian middle class The Indian consumers is increasingly focusing on value,convenience ,variety and better shopping experience There is significant number of new competitors in the retailmarket and established players are seeking opportunities to expand rapidly The government does not allow 100% FDI in retail sector. Walmart took the franchising rout to enter India,has now planning for joint venture

CHALLENGES OF RETAILING in India

Real Estate Issues Capital availability Legal frameworks Human Resources Supply chain development and management-Bottleneck in the supplychain result in limited assortment and increased cost of sourcing

CHALLENGES OF RETAILING in India

At present varying sales tax in different states remain substantial hindrance to growth of retail sector. Its success largely depends on government support

Structure of Indian Retail Industry

1.
2. 3. 4.

Classified based on Size Food vs Non food distribution Sectoral classification Human Resources

SHOPPING MALLS
Shopping malls are enclosed climate controlled lighted shopping centers with retail stores on one or both side of an enclosed pathway. Parking is usually provided around the perimeter of the mall. Shopping malls are classified as either 1. Regional(less than 1 million sqft) 2. Super-regional(More than 1 million sq.ft) Because of the large size,they have speciality store and recreational opportunities and draw from a larger geographic area Eg-Dubai mall,China Mall,Oberon Mall,K Mall

SHOPPING MALLS

Shopping malls have several advantages over alternative locations Because of the many different types of stores,the merchandise assortments available within those stores,and the opportunity to combine shopping with entertainment,shopping malls attract many shoppers and have a large trade area. Most of the shopping malls provide multiplex facilities including food stores. They have become the main street for todays shoppers,generally significant pedestrian traffic infront of the mall stores Retailers and their customers dont have to worry about their external environment

SHOPPING MALLS
The MALL MANAGEMENT takes care of maintaining common areas and marketing the mall to attract consumers. Mall tenants can look forward to a strong level of homogenous operations. Major malls enforce uniform hours of operation. Shopping malls are enclosed,customers are protected from the weather.

SHOPPING MALLS
Disadvantages 1. For most retailers,mall occupancy costs are higher 2. Some tenants maynot like mall management control their operations For eg most malls have strict rules governing window display and signage. 3,Competition within shopping centres can be intense.Several speciality and department stores might sell very similar merchandise and located in close proximity.

SHOPPING MALLS
1. 2.

3.

4.

CHALLENGES Shopping malls appeal to consumers who have the time to enjoy wandering through stores. The time scarcity and the increasing number of two income families with a single house hold head in creating more time pressures for the consumers Most retailers in shopping malls sell fashionable apparel ,a merchandise category that has seen limited growth in last 10 years due to more casual life styles and a shift in taste from fashion to traditional style. Many malls are ageing and therefore unappealing to shoppers