93782885 Retail Marketing

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1

Q 1. (a) De fine RetailMarketing,how itis emerging in Indian

Market? Answer.

Retail Marketing or Retailing

Selling of merchandise directly to the consumer. Retailing began several thousand years ago with peddlhawking their wares at the earliest marketplaces. It is extremely competitive, and the failure rate of retestablishments is relatively high. Price is the most important arena of competition, but other factors incluconvenience of location, selection and display of merchandise, attractiveness of the establishment, and reputatioThe diversity of retailing is evident in the many forms it now takes, including vending machines, door-to-doand telephone sales, direct- mail marketing, the Internet, discount houses, specialty stores, department storsupermarkets, and consumer cooperatives.

Retailing consists of the s a le of goods or merchandise from a fixed location, such as a d e p a rtm e n t s to re ,bou ti quek i osk , or by m a il, in small or individual lots for direct co n su m p ti on by the purchaser. Retailing may inclusubordinated services, such as delivery. Purchasers may be individuals or businesses. In co m m e r c e , a "retailbuys goods or p r oduc ts in large quantities from m a n u f ac tu r e r s or i m p o rte r s , either directly or throughw ho le sa le r , and then sells smaller quantities to the e n d - u s e r . Retail establishments are often called shops stores. Retailers are at the end of the s up p ly c ha i n . Manufacturing m a r ke te r s see the process of retailing as

necessary part of their overalld i s tr i bu ti on strategy. The term "retailer" is also applied where a service providservices the needs of a large number of individuals, such as ap u b li c u ti li ty , like e l e c t r i c p o w e r .

Shops may be on residential streets, shopping streets with few or no houses or in a s hop p i n g m a ll . Shoppistreets may be for p e d e s tr i a n s only. Sometimes a shopping street has a partial or full r oof to protcustomers fromp r e c i p i ta ti o n .Online retailing, a type ofe l e c t r o n i c co mm e r ce used forbus i ne ss - to - co n su m er (B2transactions andm a i l o r de r , are forms of non-shop retailing.

S h op p i n g generally refers to the act ofbuy i n g products. Sometimes this is done to obtain necessities such as foand clothing; sometimes it is done as a r e c r e a ti o n al activity. Recreational shopping often involves windshopping (just looking, not buying) and browsing and does not always result in a purchase.

In the retail banking industry there are four emerging consumer patterns that will shape the future. First, customewant to feel comfortable dealing with a Financial institution. Second, customers continue to

thirst for financial knowledge presented in an easy to understand and personable way. Third, they want produ

and services delivered conveniently. Fourth, customers will reward useful relationships. The fascinating thi

about each of these patterns is that they do not represent revolutionary thinking. Rather, the opportunity lies in t

simple fact that no retail bank has adapted its marketing mix to address all of them adequately.

To adapt to emerging consumer patterns, banks must institute a marketing theory based on solid principles. Th

must build their business vision, objectives and strategies on achieving those principles. Where do you look for

retail marketing program that will allow your bank to be successful? The answer lies in "Affinity Retail Marketing

Indias Growing Consumer Product and Retail MarketTaking on a Life of Its Own

Indias top petrochemicals and non-retail conglomerate, Reliance Industries Ltd., announced in June of this ythat it would invest $5.6 billion in the Indian retail market through a newsubsidiary, Reliance Retail, in everything from food to clothes and travel services in a mixture of convenienstores, supermarkets and hypermarkets around the country, as well as in distribution centers aimed connectingfarm with retail (Reliance has also been in discussions with Target and Home Depot of the U.S.). Threpresents nearly 20% of the companys market value symbolizing the significance of Indias burgeoning consummarket.

The other indicator of the growing attractiveness of Indias consume market was the recent
http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Department_storehttp://en.wikipedia.org/wiki/Department_storehttp://en.wikipedia.org/wiki/Boutiquehttp://en.wikipedia.org/wiki/Kioskhttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Commercehttp://en.wikipedia.org/wiki/Commercehttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Importhttp://en.wikipedia.org/wiki/Importhttp://en.wikipedia.org/wiki/Importhttp://en.wikipedia.org/wiki/Wholesalehttp://en.wikipedia.org/wiki/End-userhttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Public_utilityhttp://en.wikipedia.org/wiki/Electric_powerhttp://en.wikipedia.org/wiki/Shopping_mallhttp://en.wikipedia.org/wiki/Shopping_mallhttp://en.wikipedia.org/wiki/Pedestrianhttp://en.wikipedia.org/wiki/Roofhttp://en.wikipedia.org/wiki/Precipitation_(meteorology)http://en.wikipedia.org/wiki/Precipitation_(meteorology)http://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Mail_orderhttp://en.wikipedia.org/wiki/Mail_orderhttp://en.wikipedia.org/wiki/Shoppinghttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Recreationhttp://en.wikipedia.org/wiki/Department_storehttp://en.wikipedia.org/wiki/Boutiquehttp://en.wikipedia.org/wiki/Kioskhttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Commercehttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Importhttp://en.wikipedia.org/wiki/Wholesalehttp://en.wikipedia.org/wiki/End-userhttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Public_utilityhttp://en.wikipedia.org/wiki/Electric_powerhttp://en.wikipedia.org/wiki/Shopping_mallhttp://en.wikipedia.org/wiki/Pedestrianhttp://en.wikipedia.org/wiki/Roofhttp://en.wikipedia.org/wiki/Precipitation_(meteorology)http://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Mail_orderhttp://en.wikipedia.org/wiki/Shoppinghttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Recreationhttp://en.wikipedia.org/wiki/Sales


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sojourn by the CEO of Wal-Mart International to India to meet with governmentofficials, including Prime Minister Singh, in the hopes of persuading them to lift the banon foreign direct investment by multi-purpose retailers in India.Income Growth Spurs Consumer Spending

India ranked number one in A.T. Kearneys Global Retail Development Index in both 2005 and 2006 for tconsumer markets potential and attractiveness. The gist of the index is that a retailer is thinking about enteritheIndian retail market now is the time to do it.

Fueled by a GDP growth rate that has averaged slightly over 6% over the last a 15 years, second only Chinas, and expected to reach 8% in 2006, per capita income on a purchasing power parity basis (PPP) has ris70% since1998 to around $4,360 ($877 on a non-PPP basis), roughly the same as Chinas was in 2001 (currently $7,044), ais expected to roughly double by 2014.

India retail industry is the largest industry in India, with an employment of around 8% and contributing to ov10% of the country's GDP. Retail industry in India is expected to rise 25% yearly being driven by strong incomgrowth, changing lifestyles, and favorable demographic patterns.

It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion. India retail industis one of the fastest growing industries with revenue expected in 2007 to amount US$ 320 billion and increasing at a rate of 5% yearly. A further increase of 7-8% is expected in the industry of retail in India bgrowth in consumerism in urban areas, rising incomes, and a steep rise in rural consumption. It has further bepredicted that the retailing industry in India will amount to US$ 21.5 billion by 2010 from the current size of U7.5 billion.

Shopping in India have witnessed a revolution with the change in the consumer buying behavior and the whoformat of shopping also altering. Industry of retail in India which have become modern can be seen from the fathat there are multi- stored malls, huge shopping centers, and sprawling complexes which offer food, shoppinand entertainment all under the same roof.

India retail industry is expanding itself most aggressively; as a result a great demand for real estate is beicreated. Indian retailers preferred means of expansion is to expand to other regions and to increase the numbof their outlets in a city. It is expected that by 2010, India may have 600 new shopping centers.

In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9% annually. Tbranded food industry is trying to enter the India retail industry and convert Indian consumers to branded foSince at present 60% of the Indian grocery basket consists of non- branded items.

India retail industry is progressing well and for this to continue retailers as well as the Indian government whave to make a combined effort.

In d ia Shopp ing Ma ll s

Scope of t he In d ian R e t a il M a rketIn d ia n O rgan ized R e t a il M arket

G ro w t h Fac t ors in In d ian O rgan iz e d R e t a il s ec t or

O ppor t un it ie s in In d ian O rgan iz e d R e t a il s ec t or

C ha l lenges f ac ing t he In d ian O rgan iz e d R e t a il s ec t or

R o le o f Supp ly C ha in in In d ian O rgan ized R e t a il

E m p loy m ent G ener a t ion by In d ia n O rgan ized R e t a il S e c t or

In d ia n O rgan ized R e t a il S e c t o r ' s I m p a c t on Li f e s ty les

E m erg ing T rends in In d ian O rgan iz e d R e t a il Sec t o r

G ro w t h of R e t a il C o m pan ies in In d ia

E vo lu t ion of Ind ian R e t a il

F D I in In d ia n O rgan ized R e t a il Sec t or

For m a t s in In d ian O rgan iz e d R e t a il Sec t o r
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IIMM/DH/02/20 06 /815 4, RetailC on s u m er D urab les R e t a il
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Key Findings

Organized retail market in India is expected to reach US$ 50 Billion mark by 2011.Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to 2015.Rural market is projected to dominate the retail industry landscape in India by 2012 with total market

share of above 50%.Organized retailing of mobile handset and accessories is expected to reach close to Rs. 5000 Crore by 20Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20 Billion

by2011.

Apparel, along with food and grocery, will lead the organized retailing in India.


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Q 1. (b)Describethefunctionsofretailinganditsplace in MarketingChannel.

Answer:

FUNCTIONS OF RETAILING

Retailing is supposed to provide: Product Utility

Place utility

Time Utility Ownership UtilityI have already told you, it includes all activities involved in providing goods and services to the ultimate consumeSo it provides final end products to the consumers, not raw materials, end products in usable form to the consumeThereby it creates product utility.Second one, it is given in the place where it is required by the consumer. That is, retailing outlets are open inthe places according to the convenience of the customer and also based on the demand of the consumer.Third One, it creates Time Utility. In the sense that, the shops are open as per the requirement of the consumerthat is between 10 and 8 or 10 to 5. Whenever the consumers want to go and shop they can go and shop at aparticularperiod convenient to the customer.Next one, when the product is sold finally it creates Ownership Utility. So, we can conclude that retailing is

marketing intermediary which creates Product Utility,Place Utility, Time Utility and Ownership Utility in providing goods and services totheConsumers

CLASSIFICATION OF RETAIL INDUSTRY

Retail Sector can basically be classified in to two segments. One is organized segment and another oneunorganized segment. As far as India is concerned this organized segment contributes only to 3% of the retailtradeand the unorganized segment contributes to remaining 97% of the retiltrade.Why is it so?? Because all these days we have been purchasing only from the street vendors and from the loc

shops and organized retailing was not in vogue in India. Only after 1991, after opening up of economy and dto liberalization, this organized sector has come to light and presently it exists in various formats. Super markets

Hypermarkets Departmental stores

Speciality storesFirst one is, presently there are Supermarkets. Eg. Spencers, Nilgiris, Reliance. Basically they operate on low coand low margin basis. These are called as Supermarkets.The next important one, which is coming up in a very big way is Hyper Markets. Big Bazaaris one example

Hyper Markets. The important characteristic of Big Bazaar is they provide a variety of things right from food anon food things and they provide them in a very large area. The third format in which it exists is Departmenstores. These are large scale retail outlets.

Pantaloons, Globus are some of the examples for this Departmental kind of retail outlets. Next type of outlet is, thexist as speciality stores for sales of books and sales of music cassettes. We all know that in previous years we hanever heard of Music world or some stores selling especially books. But presently we have Landmark, MuWorld,

and Planet M which are these speciality kinds of stores selling respective things, either books orcassettes.Now under this unorganized sector we have,Mom and Pop stores and Street Markets, these are sometimes called

Kiosks. All these days, until economic liberation, all the shops were in the form of mom and pop stores, stremarkets and kiosks. Now also along with this organized sector most of the stores in retailing are unorganized athey exist in these formats. With all these unorganized and organized sectors, retail industry has seenphenomenal growth in the last 5 years.Now our discussion will be on the reasons why such revolution has takplace.


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Make retail marketing work for you through creative channel marketingopportunities.

"Channel m a r ke ti n g" is sometimes incompletely explained as a manufacturer determining which items will

promoted through which distribution outlets, at what price, and during what period. This may have been a compl

definition at one time. Today's competitive pressures, however, combined with the powerful tools afforded

new technology, have created additional channel marketing opportunities.

Evolving technology and new m a r ke ti n g te c h n i qu e s have wrought enormous changes in the way products a

sold. Yet, some things remain the same. As always, huge numbers of customers continue to wield their purchasi

power at retail stores and dealerships. In fact, most products still make their way to the end customer via th

distribution "channels" - the retail stores or dealerships where customers purchase every type of manufactur

product from software to eighteen-wheelers.
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While for many companies the distribution channel is regarded in an adversarial manner, the channel m

become a partnership-extension of the m a n u f ac tu r er in order to be maximally effective.

These channel partners (distributors, dealers, resellers and retailers) and the manufacturers which supp

the products they sell, share at least one thing in common: they both benefit by selling more product. Y

manufactures face intense competition from all sides, with the end result that both the channel partner and the e

customer enjoy a wide variety of product choices. The ultimate marketing challenge faced by nearly eve

manufacturer has two parts. First, successfully and consistently influencing dealers and retail outlets to ca

their product. Second, working in tandem with dealers to attract the right customers. Manufacturers

grappling with these challenges now more than ever before.

"Channel marketing" is sometimes incompletely explained as a manufacturer determining which items will

promoted through which distribution outlets, at what price, and during what period. This may have been a compl

definition at one time. Today's competitive pressures, however, combined with the powerful tools afforded

new technology, have created additional channel m a r k e ti n g o p po rt u n i tie s.

Manufacturers have long offered marketing programs and incentives to their dealers and retailers. Regardless

industry, most dealers have experienced more manufacturer marketing programs than they care to rememb

and many dealers have become intensely skeptical of such programs amidst the ceaseless hype and fanfare

the "program du jour." Sadly, this feeling of cynicism towards manufacturers is fitting because most progra

succeed only in wasting time and money. Dealers are too busy for run-of-the-mill or complex m a r k e ti

p r og r a m s. The average dealer now receives more than 100 direct mail pieces monthly from manufacturers-that

more than five per business day.
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Q 6Whatis RetailInformationsystem (RIS)?Explainin detailby drawi ng a suitab l

figure.

Answer:

Retail Information System (RIS):

In the early 1990s, 7-Eleven developed a proprietary Retail Information System (RIS), which deployed to stores by 1999. The system builds efficiencies into ordering, distribution and merchandising processes anddesigned to provide timely, accurate sales information on an item-by-item basis.

Implementation of the first phase, which automated basic in-store accounting processes, began in 1994 and wcompleted in 1996. The second phase, completed in late 1999, provides information about important aspects the store's operation and facilitates inventory management. RIS includes:

Touch-screen point-of-sale (POS) cash registers with scanners,

The integration of credit-card authorization and gasoline sales into the POS register,


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Item-level information to assist in making product-ordering decisions,

Hand-held Mobile Ordering Terminals to facilitate ordering,

Tools to help store personnel determine appropriate product assortment and slow-movingitems,

Daily weather reports and merchandising information and updates,

The automation of some daily reporting requirements, such as merchandise and gasoline sales,and

A payroll time-keeping mechanism.

By effectively using the point-of-sale cash register and the in-store processor, 7-Eleven franchisees and stomanagers have immediate access to the information needed to make informed ordering decisions by store, by dand day-part and by item. Additionally, the product assortment tools supply necessary data to improve decisioon deleting slow-moving items and to make room for top-selling and new items, all with the goal of making suthe right product is available at the right time for each customer.

The system is not designed as a time-saving tool as much as a tool to use time more effectively and to make soubusiness decisions that will boost store sales and profits.

Retail management involves running a store where merchandise is sold. Retail management information systeminclude the use of hardware, software and procedures to manage activities such as planning, inventory contrfinancial management, logistics and point of sale transactions. Use a retail management information systemyour business when you need to manage your store, finances and inventory from one office.

Features

Retail management information systems support distributed stores by linking them. By allowing the instexchange of information, store managers can stay in contact to more effectively control profits for twhole company. The system should support product management. It should also enable detailed analysis customer data. A flexible system allows managers to set prices for variable time periods based on the stolocation. To meet the needs of sales and inventory managers, retail management information systems inclu

a mobile user interface.

Function

Supporting the basic functions of procurement, storage and delivery, a retail management informatisystem allows a manager to manage customers, inventory, suppliers and product sales. The system allows yto track purchase orders and update inventory records dynamically. You can analyze cash, check acredit card transactions to reconcile information. Improve efficiency by examining overage and shortagesreveal trends that can be rectified.

Types

Retail management information systems can be customized for each industry, including, for example, fashidepartment store, supermarket, furniture or prescription drugs. Some systems support multiple languagcurrencies, tax systems and cost structures. In addition, some retail management information systems csupport different business models such as franchise, consignment, direct sales or online.

Benefits

Integration between payments, inventory and transactions improves operations and reduces costs preventing duplicate entries. By tracking inventory effectively you can more quickly respond to customrequests. By being able to respond expediently you can also improve service, expand your customer baand increase profits. Accessing data easily allows you to identify opportunities to improve wa


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reduction, recycling materials and choosing environmentally friendly packaging. These strategies enaba profitable business. System safeguards ensure adherence to legal restrictions on pricing, promotion and othpolicies.


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Considerations

Exploit your databases and utilize sophisticated data mining techniques to identify new customand personalize their service. Avoid overstocking by analyzing customer behavior to predict sales and tmarket need. Retail management information systems are an essential tool for managers in a compldynamic global marketplace.

Information Traffic in RetailThe ultimate condition for obtaining an efficient information distribution channel consists in the freedomand efficiency of information movement between the three parts that form the economic system:supplier, retailer and consumer.

The following figure emphasizes the information flow in retail:

Information

andthe supp lier

Information

andthe

retailer

Information

andthe consumer

Information Flow in Retail

Further more, we shall see what information is required by the commerce aggregates :T he supplier requires the following information:

from the retailer: sales approximation, stock rotation, competition feedback, loyalconsumers situation;from the consumer: attitude towards certain styles and models, brand loyalty expansion,the will to pay more for higher quality;The retailer requires the following information:from the supplier: notices on the new models and on modifications brought to themodels, guidance for use of complex products, sales prognosis, justification for priceincreases;from the consumer: the reasons why they buy from the retailer, what they like and whatthey dont like, where else do they buy from;

The consumer requires the following information:

from the supplier: assembling and using instructions, expanding warranty;from the retailer: about warehousing special merchandise, about accepted paymentpossibilities;Retailers often play an important part in collecting data for other members from the distribution chain, dueto their direct connection to the consumers. For a better information circulation, collaboration andcooperation are imperative especially between suppliers and retailers. This is not always easy, as a seniorexecutive retailer claims: Retailers and suppliers, normally, do not like to share information about thesupply chain. They have the tendency to keep secret this information even if revealing it may be in theirown interest. Thats why there still is a conflict between suppliers and retailers at all levels of thesupplying chain. For this reason the supplying chain shows a deficit[2]. Fortunately many retailers startedtoimprove the traffic of information, due to the fact that they started to realize the importance of


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transparency of information to their activity.Retailers fall often into temptation of guiding research strategies on incomplete and inadequate information


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because of the lack of time and funds, but also because of the lack of experience in marketing research. Theconsequences can be devastating. Here are some examples:

Use of intuition: A theatre asks $10 for a ticket no matter the day or the performance. Themanager believes that because the performance is the same, the audience should pay thesameprice for a ticket for the Mondays morning performance or for Saturdays eveningperformance. If he had analyzed the theatres informational system, he would haveknown that the audience is lower on Mondays, people preferring to go to theatre on

Saturdays. Therefore, tickets should be cheaper in weekend so that clients be as many aspossible.Copying the strategy of a successful competitor. A local independent book shop decides toreduce the price to the best sellers down to the prices of a book shop chain nearby. It haslosses and goes bankrupt. The costs are too high to face competition. The firm missed its

strengths: personnel service, friendly ambiance for clients and close connection to the localcommunity.Low acknowledgement of consumers perception: A florist reduces the price for flowersthat have more than two days since theyve been in his shop from $17 down to $5 per dozen,dueto the fact that, even if they have a shorter life time, they dont sell. What the floristdidnt know is that old flowers are seen as low qualitative flowers, and customers do

associatelow price to low quality, and the low price confirms their doubt and determines them notto buy those low price flowers.What are the conclusions to be drawn from these examples?Inadequate information can lead to a bad strategy that will not achieve the desired goals, or even worse,that will have exactly the opposite effect. This can be avoided by marketing researches that set thebasesfor gathering proper information.

Informational System in Retail

Collecting and analyzing data mustnt be seen as a quick solution to one problem. It is a part of anintegrated ascending process. A Retail Informational System (RIS) anticipates the needed data,organizes

and stores relevant data in a continuous data base; it directs the informational flow towards taking the bestdecisions.The way an Informational System is built and used is showed in the following figure:

Environment

Retailers

philoso phy and

goals

Strategicplans

Coll ecting data, Data control center Data store analyzeandand analysis data update

interpretation

Retail operations

Implementation

Feedback


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11

A good informational system has a few strengths:Information is organized and centered on the company;Data is stored and verified, so to anticipate opportunities and avoid crisis situations;Strategic elements are controllable;


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Making new strategies is faster;Quantitative results are obtained and cost-benefit analysis is possible;Information is directed towards the right addressee;RIS initially requires a lot of effort and time, and setting the basis of such a system takescomplex decisions.Building a RIS requires the following decisions to be taken:What active role should it have?The RIS ought to be pro-active and supply any relevant data, and answer any possiblequestion.Should the RIS be managed from the inside, or by an external source?Any way is convenient as long as the RIS is guided by the information required by theretailer.How much should it cost?Usually, retailers spend between 0.5% up to 1.5% of the income on such a system.What kind of technology should the RIS be managed with?

Many companies rely lately on technologies meant to lead the informational process(PC, low cost networks, low cost software, etc.).

How much data is required?

The purpose of the informational system is to supply enough quantity of information to

allow the retailer to build proper strategies. There must be a balance between few informationand information overload.How should information be stored for future use?Storing the information must allow a fast search and finding.Most retailers hire a CIO Chief Informational Officer, to supervise the system. Informational System

Departments often have annual planning. Computers are used by most companies that have data analysissystems, as well as the Internet for certain functions of the system. 25 years ago most computerizedsystems in retail were used only to decrease errors from the pay desks, or to improve, fasten and easeinventory. Nowadays, they set the bases for informational systems and are used for monitoring,ordering, and transfers between shops. Such activities can be managed by all retailers.


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IIMM/DH/02/20 06 /815 4, Retail Market ing


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Q 5 (a) Narratethe strategy of directmarketing,what are the key issuesinvolved

in it,explain?

Answer:

Strategy ofDirectMarketing:

Direct marketing is a sub-discipline and type ofm a r ke ti n g . There are two main definitional characteristics whdistinguish it from other types of marketing. The first is that it attempts to send its messages directly co n su m e r s , without the use of intervening m e d i a . This involves commercial communication (direct mail, e-mtelemarketing) with consumers or businesses, usually unsolicited. The second characteristic is that it focused on driving a specific "call-to-action." This aspect of direct marketing involves an emphasis trackable, measurable positive (but not negative) responses from consumers (known simply as "response" in industry) regardless of medium.

If the advertisement asks the prospect to take a specific action, for instance call a f r e e p h one number or visiwebsite, then the effort is considered to be d i r e ct r e s p o n s e advertising.

The term direct marketing is believed to have been first used in 1967 in a speech by L e s ter W u n d e r m a n , w

pioneered direct marketing techniques with brands such as Am e r i can E x p r e ss and C o lu m b ia R e co r d s . The tejunk mail, referring to unsolicited commercial ads delivered via post office or directly deposited in consumemail boxes, can be traced back to 1954. The term spa m , meaning "unsolicited commercial email", can be tracback to March 31, 1993, although in its first few months it merely referred to inadvertently posting a messaso many times on U s e N e t that the repetitions effectively drowned out the normal flow of conversation.

Although Wunderman may have been the first to use the term direct marketing, the practice of mail order selli(direct marketing via mail) essentially began in the U.S. upon invention of the ty p e w r i ter in1867.

The first modern mail-order catalog was produced by A a r o n Mo n tgo m e r y W a r d in 1872. The Direct MAdvertising Association, predecessor of the present-day D i r e ct M a r ke ti ng A sso c i a ti o n , was first established

1917. Third classbu lk m a i lpostage rates were established in 1928.

Direct marketing's history in Europe can be traced to the 15th century. Upon Gutenberg's invention of m ovabty p e , the first trade catalogs from printer-publishers appeared sometime around 1450.

Strategy of Direct Marketing

Direct marketing is attractive to many marketers, because in many cases its positive effect (but not negative resulcan be measured directly. For example, if a marketer sends out one million solicitations by mail, and tthousand customers can be tracked as having responded to the promotion, the marketer can say with som

confidence that the campaign led directly to the responses. The number of recipients who are offended by the jumail/spam, however, is not easily measured. By contrast, measurement of other media must often be indiresince there is no direct response from a consumer. Measurement of results, a fundamental element successful direct marketing, is explored in greater detail elsewhere in this article. Yet since the start of tInternet-age the challenges of Chief Marketing Officers(CMOs) are tracking direct marketing responses ameasuring results.

While many marketers like this form of marketing, some direct marketing efforts using particular media habeen criticized for generating unwanted solicitations. For example, direct mail that is irrelevant to recipient is considered junk mail, and unwanted email messages are considered spam. Some consumers

demanding an end to direct marketing for privacy and environmental reasons,[citation neede d]

which direct marketare able to provide by using "opt out" lists, variable printing and more targeted mailing lists.
http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Toll-free_telephone_numberhttp://en.wikipedia.org/wiki/Direct_response_marketinghttp://en.wikipedia.org/wiki/Lester_Wundermanhttp://en.wikipedia.org/wiki/American_Expresshttp://en.wikipedia.org/wiki/Columbia_Recordshttp://en.wikipedia.org/wiki/Columbia_Recordshttp://en.wikipedia.org/wiki/Spam_(electronic)http://en.wikipedia.org/wiki/UseNethttp://en.wikipedia.org/wiki/Typewriterhttp://en.wikipedia.org/wiki/Aaron_Montgomery_Wardhttp://en.wikipedia.org/wiki/Direct_Marketing_Associationhttp://en.wikipedia.org/wiki/Bulk_mailhttp://en.wikipedia.org/wiki/Movable_typehttp://en.wikipedia.org/wiki/Movable_typehttp://en.wikipedia.org/wiki/Movable_typehttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Toll-free_telephone_numberhttp://en.wikipedia.org/wiki/Direct_response_marketinghttp://en.wikipedia.org/wiki/Lester_Wundermanhttp://en.wikipedia.org/wiki/American_Expresshttp://en.wikipedia.org/wiki/Columbia_Recordshttp://en.wikipedia.org/wiki/Spam_(electronic)http://en.wikipedia.org/wiki/UseNethttp://en.wikipedia.org/wiki/Typewriterhttp://en.wikipedia.org/wiki/Aaron_Montgomery_Wardhttp://en.wikipedia.org/wiki/Direct_Marketing_Associationhttp://en.wikipedia.org/wiki/Bulk_mailhttp://en.wikipedia.org/wiki/Movable_typehttp://en.wikipedia.org/wiki/Movable_typehttp://en.wikipedia.org/wiki/Wikipedia:Citation_needed


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Many of the world's largest marketing and advertising agencies started off as direct marketing specialagencies, namely Carlson Marketing, GyroHSR, Proximity and Iris Nation. Due to declining clibudgets and the


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proliferation of audiences, many of these agencies have diversified and expanded to offer "integramarketing" rather than simply selling DM services. The term Integrated Marketing is used by agencies describe how they sell the complete marketing communications package, covering DM, digital, SP, PR, events aadvertising.

Direct Mail

The most common form of direct marketing is direct mail, sometimes called junk mail, used by advertisers w

send paper mail to all postal customers in an area or to all customers on a list.

Any low-budget medium that can be used to deliver a communication to a customer can be employed in diremarketing. Probably the most commonly used medium for direct marketing is mail, in which marketicommunications are sent to customers using the postal service. The term direct mail is used in the dirmarketing industry to refer to communication deliveries by the Post Office, which may also be referred to "junk mail" or "admail" or "crap mail" and may involvebu lk m a i l.

Junk mail includes adv e r ti s i n g circulars, catalogs, free trial CD s , pre-approved c r e d i t ca r d applications, and otunsolicited m e r cha n d i s i n g invitations delivered by m a i l or to homes and businesses, or delivered to consumemailboxes by delivery services other than the Post Office. Bulk mailings are a particularly popular method

promotion for businesses operating in the financial services, home computer, and travel and tourism industries.

In many developed countries, direct mail represents such a significant amount of the total volume of mail thspecial rate classes have been established. In the U n i te d S ta te s and U n i te d Ki n gdo m , for example, there are bumail rates that enable marketers to send mail at rates that are substantially lower than regular first-class ratIn order to qualify for these rates, marketers must format and sort the mail in particular ways which reduthe handling (and therefore costs) required by the postal service.

Advertisers often refine direct mail practices into targeted mailing, in which mail is sent out following databaanalysis to select recipients considered most likely to respond positively. For example a person who h

demonstrated an interest in go lf may receive direct mail for golf related products or perhaps for goods and servic

that are appropriate for golfers. This use of database analysis is a type of da tabase m a r ke ti n g . The U n i te d S ta Pos tal S e r v i ce calls this form of mail "advertising mail" (admailfor short).

Telemarketing

The second most common form of direct marketing is te le m a r ke ti n g ,[citation neede d] in which marketers contconsumers by phone. The unpopularity of co ld c a ll telemarketing (in which the consumer does not expect or invthe sales call) has led some US states and the US federal government to create " n o - ca ll li s ts" and legislatincluding heavy fines. This process may be outsourced to specialist call centres.

In the US, a n a ti o n a l do - n o t- ca ll li st went into effect on October 1, 2003. Under the law, it is illegal telemarketers to call anyone who has registered themselves on the list. After the list had operated for one ye

over62 million people had signed up.[3] The telemarketing industry opposed the creation of the list, but mtelemarketers have complied with the law and refrained from calling people who are on the list.

[citation nee ded]

C a n ada has passed legislation to create a similar D o N ot C a ll L i s t . In other countries it is voluntary, such as tN e w

Zeala nd N ame Remova l S ervi ce

Email Marketing

E m a i l Ma r k e ti n g may have passed telemarketing in frequency at this point,[citation neede d] and is a third type of dir

marketing. A major concern is s p a m , which actually predates legitimate email marketing. As a result of t
http://en.wikipedia.org/wiki/Bulk_mailhttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Compact_Dischttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Merchandisinghttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Databasehttp://en.wikipedia.org/wiki/Golfhttp://en.wikipedia.org/wiki/Database_marketinghttp://en.wikipedia.org/wiki/United_States_Postal_Servicehttp://en.wikipedia.org/wiki/United_States_Postal_Servicehttp://en.wikipedia.org/wiki/United_States_Postal_Servicehttp://en.wikipedia.org/wiki/Telemarketinghttp://en.wikipedia.org/wiki/Telemarketinghttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Cold_callhttp://en.wikipedia.org/wiki/United_States_National_Do_Not_Call_Registryhttp://en.wikipedia.org/wiki/United_States_National_Do_Not_Call_Registryhttp://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Canadian_Do_Not_Call_Listhttp://en.wikipedia.org/wiki/New_Zealand_Name_Removal_Servicehttp://en.wikipedia.org/wiki/New_Zealand_Name_Removal_Servicehttp://en.wikipedia.org/wiki/Email_Marketinghttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Spam_(electronic)http://en.wikipedia.org/wiki/Bulk_mailhttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Compact_Dischttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Merchandisinghttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Databasehttp://en.wikipedia.org/wiki/Golfhttp://en.wikipedia.org/wiki/Database_marketinghttp://en.wikipedia.org/wiki/United_States_Postal_Servicehttp://en.wikipedia.org/wiki/United_States_Postal_Servicehttp://en.wikipedia.org/wiki/Telemarketinghttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Cold_callhttp://en.wikipedia.org/wiki/United_States_National_Do_Not_Call_Registryhttp://en.wikipedia.org/wiki/United_States_National_Do_Not_Call_Registryhttp://en.wikipedia.org/wiki/Direct_marketing#cite_note-2http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Canadian_Do_Not_Call_Listhttp://en.wikipedia.org/wiki/New_Zealand_Name_Removal_Servicehttp://en.wikipedia.org/wiki/New_Zealand_Name_Removal_Servicehttp://en.wikipedia.org/wiki/Email_Marketinghttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Spam_(electronic)


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proliferation of mass spamming, ISPs and email service providers have developed increasingly effective E - M

F i lt e r i n g programs. These filters can interfere with the delivery of email marketing campaigns, even if the pers

has subscribed to receive them,[4] as legitimate email marketing can possess the same hallmarks as spam.
http://en.wikipedia.org/w/index.php?title=E-Mail_Filtering&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=E-Mail_Filtering&action=edit&redlink=1http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3http://en.wikipedia.org/w/index.php?title=E-Mail_Filtering&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=E-Mail_Filtering&action=edit&redlink=1http://en.wikipedia.org/wiki/Direct_marketing#cite_note-3


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Door to Door Marketing

L e a fl e t D i s tr i bu ti on services are used extensively by the fast food industries, and many other business focussing

a local catchment Business to consumer business model, similar to direct mail marketing, this method

targeted purely by area, and costs a fraction of the amount of a mailshot due to not having to purchase stam

envelopes or having to buy address lists and the names of home occupants

Broadcast faxing

A fourth type of direct marketing, broadcast f a x i n g , is now less common than the other forms. [citation nee ded] Thispartly due to laws in the U n i te d S ta te s and elsewhere which make it illegal.[

citation neede d]

Voicemail Marketing

A fifth type of direct marketing has emerged out of the market prevalence of personal voice mailboxes, abusiness voicemail systems. Due to the ubiquity of email marketing, and the expense of direct mail atelemarketing, voicemail marketing presented a cost effective means by which to reach people directly, by voice.

Abuse of consumer marketing applications of voicemail marketing resulted in an abundance of "voice-spam

and prompted many jurisdictions to pass laws regulating consumer voicemail marketing.

More recently, businesses have utilized guided voicemail (an application where pre-recorded voicemails aguided by live callers) to accomplish personalized business-to-business marketing formerly reserved telemarketing. Because guided voicemail is used to contact only businesses, it is exempt from Do Not Cregulations in place for other forms of voicemail marketing.

Couponing

Couponing is used in print media to elicit a response from the reader. An example is a coupon which the readcuts out and presents to a super-store check-out counter to avail of a discount. Coupons in newspapers amagazines cannot be considered direct marketing, since the marketer incurs the cost of supporting a third-pamedium (the newspaper or magazine); direct marketing aims to circumvent that balance, paring the codown to solely delivering their unsolicited sales message to the consumer, without supporting the newspapthat the consumer seeks and welcomes.

Direct response television marketing

Direct marketing on TV (commonly referred to as DRTV) has two basic forms: long form (usually half-hourhour-long segments that explain a product in detail and are commonly referred to as infomercials) and shform which refers to typical 0:30 second or 0:60 second commercials that ask viewers for an immediresponse (typically to call a phone number on screen or go to a website).

TV-response marketingi.e. i n f o m e r c i a ls can be considered a form of direct marketing, since responses arethe form of calls to telephone numbers given on-air. This both allows marketers to reasonably conclude that calls are due to a particular campaign, and allows the marketers to obtain customers' phone numbers targets for telemarketing. Under the Federal Do-Not-Call List rules in the US, if the caller buys anything, marketer would be exempt from Do-Not-Call List restrictions for a period of time due to having a prior businerelationship with the caller. Major players are firms like QV C ,Thane D i r e c t , and Interwood Marketing Group thcross-sell, and up- sell to these respondents.

One of the most famous DRTV commercials was forGi n su K n i v e s b y Gi n su P r oduc ts, I n c. of RI. Several aspectsad, such as it's use of adding items to the offer and the guarantee of satisfaction were much copied and came to considered part of the formula for success with short form direct response TV ads (DRTV)
http://en.wikipedia.org/w/index.php?title=Leaflet_Distribution&action=edit&redlink=1http://en.wikipedia.org/wiki/Faxhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Infomercialshttp://en.wikipedia.org/wiki/QVChttp://en.wikipedia.org/wiki/Thane_Directhttp://en.wikipedia.org/wiki/Ginsuhttp://en.wikipedia.org/wiki/Ginsuhttp://en.wikipedia.org/wiki/Ginsuhttp://en.wikipedia.org/w/index.php?title=Leaflet_Distribution&action=edit&redlink=1http://en.wikipedia.org/wiki/Faxhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Infomercialshttp://en.wikipedia.org/wiki/QVChttp://en.wikipedia.org/wiki/Thane_Directhttp://en.wikipedia.org/wiki/Ginsu


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Direct selling

D i r e c t s e ll i n g is the sale of products by face-to-face contact with the customer, either by having salespeopapproach potential customers in person, or through indirect means such as Tup p e r w a r e parties.

Integrated Campaigns

For many marketers, a comprehensive direct marketing campaign employs a mix of channels. It is not unusual folarge campaign to combine direct mail, telemarketing, radio and broadcast TV, as well as online channels su

as email, search marketing, social networking and video. In a report[5] conducted by the Direct Marketi

Association, it was found that 57% of the campaigns studied were employing integrated strategies. Of thoalmost half (47%) launched with a direct mail campaign, typically followed by e-mail and then telemarketing.

Key Issues

There are a number of key issues here that students need to identify before they can resolve the issues not leaof which are the following:there is little loyalty in this market at the moment and, therefore price is becoming a major issue which leavparticipants vulnerable to price wars; do Dunnans stay with Fieldstone given that they have old and inefficie

practices which may mean they may find it difficult to compete in the future especially as there is excess capacin the market; do Dunnans owe any loyalty to Fieldstone or is the loyalty to Peter who has now retirtheunpredictability of orders is causing problems.

There are many good points that can be identified in this direct marketing campaign, including a clear idea of tobjectives, the way in which the mailing lists were collected, the use of TGI profiling to identify distincticharacteristics that could be exploited for marketing purposes, etc. However, the main weakness is that thconcentrated on retention rather than acquisition, although they had already identified that their target market wageing and they needed to attract new, young users, in addition the activities used did nothing to move tbrand away from its staid and old-fashioned position.

Certain financial controls would need to be put in place given the lack of resources. Estimates, in terms of levof response, would also be needed so that effective human resource and database management planning could done.3. They would need to follow the stages in the acquisition process starting with the setting of objectives. Thcould base the acquisition around the TGI profiling looking for demographic and lifestyle similarities but youngerpeople.

Conclusion.

The aim of direct marketing is to deal with customers on a one-to-one basis through careful analysis of informatiheld on an organizations database. Two key aspects of direct marketing are customer-acquisition and customretention and with the introduction of new technologies and a general move towards media fragmentatiodirect marketing is definitely set to grow even more.
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Q 5 (b) Whilechoo singthe retailer,what are the ba sic ques tionscomesto the mind of acons umer for cons ideration s of cho ice ofretailers.

Ans wer

:

Retailing consists of the s a le of goods or merchandise from a fixed location, such as a d e p a rtm e n t s to re ,bou ti que

k i osk , or by m a il , in small or individual lots for direct co n su m p ti on by the purchaser.[1] Retailing may inclu

subordinated services, such as delivery. Purchasers may be individuals or businesses. In co m m e r c e , a "retailbuys goods or p r oduc ts in large quantities from m a n u f ac tu r e r s or i m p o rte r s , either directly or throughw ho le sa le r , and then sells smaller quantities to the e n d - u s e r . Retail establishments are often called shops stores. Retailers are at the end of the s up p ly c ha i n . Manufacturing m a r ke te r s see the process of retailing asnecessary part of their overall d i s tr i bu ti on strategy. The term "retailer" is also applied where a service providservices the needs of a large number of individuals, such as ap u b li c u ti li ty , like e l e c t r i c p o w e r .

Shops may be on residential streets, shopping streets with few or no houses or in a s hop p i n g m a ll . Shoppistreets may be for p e d e s tr i a n s only. Sometimes a shopping street has a partial or full r oof to protcustomers fromp r e c i p i ta ti o n . Online retailing, a type ofe l e c t r o n i c co mm e r ce used forbus i ne ss - to - co n su m er (B2transactions and m a i l o r de r , are forms of non-shop retailing.

S h op p i n g generally refers to the act ofbuy i n g products. Sometimes this is done to obtain necessities such as foand clothing; sometimes it is done as a r e c r e a ti o n al activity. Recreational shopping often involves windshopping (just looking, not buying) and browsing and does not always result in a purchase.

To become a truly flourishing industry, retailing needs to cross the following hurdles:[19]

margins

Automatic approval is not allowed for foreign investment in retail.Regulations restricting real estate purchases, and cumbersome local laws.Taxation, which favours small retail businesses.Absence of developed supply chain and integrated IT management.Lack of trained work force.Low skill level for retailing management.

Lack of Retailing Courses and study optionsIntrinsic complexity of retailing rapid price changes, constant threat of product obsolescence and lo

When we choose any retailer or a consumer select the retailer then there is some basic questions arose in the mii.e.

1. Location:- While choosing a retailer the first question comes in consumers mind is the location of the stoBasicly its more important factor that is mostly ignored by the retailers. Customer wants the location accordingAccessibility, Visibility and Traffic. So that they can easily approach the Retailer.2. Assortment:- The Second most important question arise in the mind of customer that

a. What kind of variety is there?b. What type of collection the retailer will provide.c. What is the range of the product?d. What is the quality?

3. Credit Facility:

4. Service:

Assortment planning, where retailers decides which products to place on their store shelves, is one of the mfundamental decisions in retailing. Consumers view the assortment as an important category managem

service output that drives their decisions on where to shop (Kok and Fisher [2007]). Consistent with this view,
http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Department_storehttp://en.wikipedia.org/wiki/Boutiquehttp://en.wikipedia.org/wiki/Kioskhttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Retailing#cite_note-fas-0http://en.wikipedia.org/wiki/Retailing#cite_note-fas-0http://en.wikipedia.org/wiki/Retailing#cite_note-fas-0http://en.wikipedia.org/wiki/Retailing#cite_note-fas-0http://en.wikipedia.org/wiki/Retailing#cite_note-fas-0http://en.wikipedia.org/wiki/Retailing#cite_note-fas-0http://en.wikipedia.org/wiki/Commercehttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Importhttp://en.wikipedia.org/wiki/Importhttp://en.wikipedia.org/wiki/Wholesalehttp://en.wikipedia.org/wiki/End-userhttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Public_utilityhttp://en.wikipedia.org/wiki/Electric_powerhttp://en.wikipedia.org/wiki/Shopping_mallhttp://en.wikipedia.org/wiki/Pedestrianhttp://en.wikipedia.org/wiki/Roofhttp://en.wikipedia.org/wiki/Precipitation_(meteorology)http://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Mail_orderhttp://en.wikipedia.org/wiki/Shoppinghttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Recreationhttp://en.wikipedia.org/wiki/Retailing_in_India#cite_note-18http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Department_storehttp://en.wikipedia.org/wiki/Boutiquehttp://en.wikipedia.org/wiki/Kioskhttp://en.wikipedia.org/wiki/Mailhttp://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Retailing#cite_note-fas-0http://en.wikipedia.org/wiki/Commercehttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Importhttp://en.wikipedia.org/wiki/Wholesalehttp://en.wikipedia.org/wiki/End-userhttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Distribution_(business)http://en.wikipedia.org/wiki/Public_utilityhttp://en.wikipedia.org/wiki/Electric_powerhttp://en.wikipedia.org/wiki/Shopping_mallhttp://en.wikipedia.org/wiki/Pedestrianhttp://en.wikipedia.org/wiki/Roofhttp://en.wikipedia.org/wiki/Precipitation_(meteorology)http://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Mail_orderhttp://en.wikipedia.org/wiki/Shoppinghttp://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Recreationhttp://en.wikipedia.org/wiki/Retailing_in_India#cite_note-18


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a recent meta analysis, Pan and Zinkhan [2006] reviewed 14 papers all concluding that assortments are an importdriver


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for consumers' purchase decisions. A recent survey by Nielsen found that store assortment is the second moimportant factor driving consumers' decisions (Nielsen, Dec 17, 2007).

Moreover, category managers believe that their assortments are important competitive tools that allow themdi_erentiate. Understanding the mechanics behind assortment decisions is important for retailers, manufacturand policy makers alike.Over the last few decades there has been an sharp increase in the number of products sold in retail stores, from 1in 1980 to 49k in 1999 (Food Marketing Institute [2004]). With this increase in available products, ret

categorymanagers face a complex decision when selecting the \right" assortment for their categories. These assortmedecisions are impacted by local consumer preferences, competition and costs. Given the large number of availableoptions, the optimization problem is mathematically daunting and empirically challenging. Researchersoften consider simpli_cations to the problem to make it more tractable, for example, considering only a smallnumber of products in a subcategory (Draganska et al. [2007]) or relying on heuristics that the retailer can use (Kand Fisher [2007]).

In this paper we develop a different approach to address the analytical and empirical challenges of modeliretailers' assortment decisions. In the analytical model, we consider the two decisions made by a retail stocategory manager: category assortment and retail prices. We show that the optimal retail assortment can described by ranking the products based on a combination of demand and cost parameters. The advantage of th

representation is that it can be used to study a large number of options in the retailer's consideration set.

This provides a realistic view of managerial decision making, and there is evidence in the literature that retailersdo indeed use a form of rank ordering to make their assortment decisions (Esbjerg et al. [2004]). When considerinthe empirical analysis, we take the view that data are generated from a market equilibrium (Bresnahan [1987])where demand is based on consumer purchase decisions and supply is based on retailers' pricing and assortmentdecisions. Therefore in each market and category we simultaneously model the demand and supplyprocesses. A key advantage of the derived analytical result is that it allows us to consider the retailer'sassortment decision as a sorting problem. This allows us to include information about products not in theassortment when modeling demand and supply parameters. For example, the fact that a store in an a_uentneighborhood does not store value products informs us that consumer preferences for value products are loin this area. Our empirical study models supermarket assortment decisions across 10 categories and 34 loc

markets across the United States. Studying multiple categories allows us to make generalizations aboutretailers' assortment decisions. In our model we introduce a _xed cost of introducing a product on the retailshelf. This _xed cost represents a minimum threshold pro_t that an introduced product must add to the categorypro_ts. Our estimates suggest that the di_erences in _xed costs across categories are driven by the size ofproducts in thecategory and whether or not they require refrigeration. In our framework we empiricallyestimate the three main drivers of local retail store assortments: demand, costs, and competition. This allows uto consider the impact of changes in any of these characteristics on retailer assortment decisions.With our analytical framework and econometric estimates we can quantify the e_ect of changes in assortmesizes on demand or pro_ts (Broniarczyk et al. [1998], Boatwright and Nunes [2001]). When considering changto thesize of the assortment, we describe which UPCs a retailer should store and the prices the retailer should chargIn

our data, we estimate that a 25% reduction in total assortment size results in about a 3% reduction in total pro_This suggests that retailers might strategically reduce their assortments with small impact on category pro_ts if additional shelf space created can be used to carry additional categories. This methodology can be a powerful tothat retailers can use to make assortments decisions across multiple categories.


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Q 2 (a) Enumeratethe degreeofrelationshipbetweenretailersandsupp lierswithpropernarrationof conflictofinteres t;supp ortyou rans wer with suitab le ma rketexamples .

Ans wer:

Retailer Supplier Relationship-

Cooperative relationship between suppliers and retailers to use one anothers knowledge

Suppliers have better knowledge of lead times and production capacities

Retailers have better knowledge of demands

Quick Response Strategy

Suppliers receive POS data from retailers

Suppliers use this information to synchronize their production and inventory activities with actual salesat the retailer.

Retailers still prepare individual orders

POS data are used by suppliers to improve forecasting and scheduling and to reduce lead time

Continuous Replenishment Strategy

Also called rapid replenishment

Suppliers receive POS data

Suppliers use these data to prepare shipments at previously agreed-upon intervals to maintain specificlevels of inventory.

A dva n c e d f o r m of co n ti n uous r e p l en is h m e n to Suppliers may gradually decrease inventory levels at the retail store or distribution center as long as servi

levels are met.

Vendor Managed System (VMI)

Also called vendor-managed replenishment (VMR) system

Supplier decides on the appropriate inventory levels and the appropriate inventory policies to maintainthese levels.

Supplier suggestions initially approved by retailer

Goal of many VMI programs is to eliminate retailer oversight on specific orders.

Wal-Mart and Procter & Gamble VMIo Partnership, begun in 1985

o Has improved P&Gs on-time deliveries to Wal-Mart while increasing inventory turns


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20

Main Characteristics of Retailer Supplier Relationship

Criteria Type Decision maker Inventory Ownership New skills employed by vend

Quick response Retailer Retailer Forecasting skills

Continuous replenishmenCtontractually agreed-to levEeiltsher party Forecasting and inventory co

Advanced continuous

replenishmentContractually agreed-to and

continuously improved leveElisther party Forecasting and inventory co

VMI Vendor Either party Retail management

Retailer Supplier Relationship Requirements

Presence of advanced information systems

Top management commitmento Especially because information will be shared across companies

A level of trust among partnerso Supplier manages retailers inventory

o Retailer provides sales information to supplier

o Reduced inventory leads to space savings

Should not be given to competitors

Retailer Supplier Relationship Inventory Ownership

Who makes the replenishment decisions?

Who owns the inventory until it is sold?o Consignment relationship in VMI programs

Supplier owns the inventory until it is sold

Issues with consignment relationship:o Retailer lowers inventory cost

o Supplier can manage inventory more effectively

o Supplier can move as much inventory as contract allows

o Higher costs to supplier because of longer inventory holding

Power relationship between supplier and retailer may move the supply contract to consider highersystem savings rather than savings from one party only (G lobal v. Loca l)


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Retailer Supplier Relationship Implementation

Performance measurement criteria must also be agreed to.o Non-financial measures as well as the traditional financial measures.

Initial problems can be worked out through communication and cooperation.

Manufacturing technology or capacity at supplier may need to be modified/enhanced to respond tospecifics in the contract:

o Fast response to emergencieso Situational changes at the retailer

Steps in Retailer Supplier Relationship Implementation

Initially, the contractual terms of the agreement must be negotiated on the following:o Inventory ownership

o Credit terms

o Ordering responsibilities

o Performance measures such as service or inventory levels, when appropriate.

The following three additional steps need to be executed:o

Development of integrated information systemso Development of effective forecasting techniques

o Establishment of a tactical decision support tool to assist in coordinatinginventory management and

transportation policies

Advantages of Retailer Supplier Relationship

Better knowledge the supplier has about order quantitieso an ability to control the bullwhip effect

A variety of side benefitso provides a good opportunity for the reengineering of the retailersupplier relationship.

eliminate redundant order entries

automate manual tasks can be automated

reassign tasks for better efficiency

Eliminate unnecessary control steps

Disadvantages of Retailer Supplier Relationship

Necessary to employ advanced technology, which is often expensive.

Essential to develop trust in what once may have been an adversarial supplier retailer relationship.

Supplier often has much more responsibility than formerly.o May force the supplier to add personnel to meet this responsibility.

Expenses at the supplier often increase as managerial responsibilities increase.

Consignment arrangement may increase inventory costs for the supplier.

Floato Retailers accustomed to waiting 30 to 90 days to pay for goods may now have to pay upon delivery


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Q 2 (b) How do you visualize the current issues in retailing? How does the retailing affect the countrys

economy?

Answer:

Retail landscape in India

Retailing in India is emerging as one of the largest industries, with a total market size of USD 320 billion in 20and growing at a healthy CAGR of 5 per cent till date. Rising incomes and increased onsumerism in urban aralong with an upswing in ural consumption will further fuel this growth to around 7-8 per cent. This driver is furthillustrated in the statistic (Fig. 1.1) that the percentage of people in urban areas in India has been growing steadilyreach 29 per cent from just 17 per cent fifty years ago. In addition, India has been ranked as the most attractimarket for global retailers to enter now, according to A.T. Kearney's Global Retail Development Index (GRDfor2006 (Fig. 1.2). The GRDI is conducted annually to follow the attractiveness of top emerging markets for retaFor the past five years, A.T. Kearney has helped retailers prioritize their global development strategies publishing the

GRDI.

The Index ranks 30 emerging countries based on more than 25 macroeconomic and retail-specific variables. Mafactors contribute to India being the most attractive retail target market. A stable democracy provides an economand social background that comforts big international organizations. On the economic front, the country hseen over 7% GDP growth for the last few years, driving increasing prosperity and consumerism. A lookIndia's demographics further lends credibility to the retail story.

India's consumer market today encompasses over 400 million people with rising disposable incomes. Populatshifts towards urban areas and income shifts towards higher income classes are key factors driviconsumerism. Also higher incomes are now in the hands of a younger population with lesser dependenciThis implies more income available for spending rather than for savings and investment. Can any retailer no

afford to miss this story? Another important factor announcing India's significancefor retailers is the current optimal stage of readiness within India for retail and for the entry ofretailers.

Key issues in the way of retail growth in India

That Indian retailing is poised for growth is known to all. But that's not the whole story. We believe there ainfrastructure and policy bottlenecks that need to be removed if Indian retailing needs to get on a faster growtrajectory. These bottlenecks become even more prominent in case of organized retail development. In this sectiowe shall identify and prioritize key issues in the way of retail growth in Characteristics of retail will not homogenous across states - hence it becomes necessary to segment the country into clusters with homogeneacross issues. For this study, we have segmented India into five clusters using economic and demograp

indicators. The demographic indicator used is population. As an economic indicator, we have used Market PotentValue (MPV). It is a comprehensive index that includes purchasing power, consumption behaviour, media reaand awareness. 2.1 shows the five clusters - metros, large cities, small cities, towns and rural. It must be noted tcluster analysis will be used to identify issues and prioritize them - however while some issues can be tackled the cluster level; a majority will need government intervention due to policy impact.


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23


Key ssues dent f cationAn analysis of the retail landscape across India highlights ten key issues that hinder development of thesector. Since these issues can be pertinent for the retail sector specifically or for the overall Indian industry, thwere rated based on their importance for the retail sector and the Indian industrial sector. The origin of theseissuesand hence their ownership lies with different stakeholders. Therefore, these issues were also rated based on thextent to which government and industry could control them. A 2 x 2 matrix was subsequently created which

i i i i

_Generic infrastructure issues - These are environmental challenges faced by the Indian industry as a whole asome of the issues like underdeveloped supply chain are critical for retail sector.

Generic policy issues - They are issues affecting the industrial sector that are shaped by government policiSome of these issues like real estate hurdles can have significant impact on the growth of the retail sectorSpecific infrastructure issues - Issues that are specific to the retail sector and are also controlled bycomprise this category. Since the retail industry can affect these issues, they are very critical from the indusperspective._ Specific policy issues - Retail sector specific policies like sector incentives fall into thiscategory.Fig. 2.2 illustrates the categorization of ten key issues.

The key issues are outlined below:_Underdeveloped Supply Chain - The country lacks quality logistics infrastructure which hinders scaling upretailing operations._Inadequate Utilities - Lack of basic infrastructure like power, transport and communication creates difficultysustaining retail operations across the large geographical spread of country.

_IT Infrastructure Hurdles - Reliable IT infrastructure is important for managing modern supply chains whiare the backbone of any retailing business and India faces a clear problem in this area as the non-urban areas halimited IT infrastructure.

_ Real Estate Hurdles - Archaic laws prevent the much needed growth in real estate development, which imperative for retail growth._ Taxation Hurdles - The tax structure in India is still complex and evolving, creating challenges forretailers.

_Supply Base Hurdles - The supply base for the retail sector is fragmented due to government policies andlegacy issues which prevent economies of scale in retail sector._Inadequate Human Resources - There is hardly any systematic effort to train manpower for the retail sectwhich can create a bottleneck for growth.


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242

_Limited Consumer Insights - There is limited knowledge about the consumer behavior due to limited mark

research conducted on the huge population in towns and rural areas.


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24


_Insuff c ent Government Incent ves - Government is yet to create any major sector specific policies to boost tretail sector._ Pol cy Re ated Hurd es - The policy environment in India is complex, creating challenges for growth anestablishment of new business.s

i i i

i l l

Q 7. SHORT NOTES

(a) Electronic Retailing is the process whereby consumers directly buy goods, services etc from a selinteractively in real-time without an intermediary service over the I n t e r n e t . If an intermediary service is presthe process is called e le c tr o n i c co mm e r c e . An online shop, eshop, e-store, internet shop, webshop, w e bs toonline store, or virtual store evokes the physical analogy of buying p r o d uc ts or s e r v i c e s at a b r i cks - a n d - m o rre ta i ler or in a s hop p i n g m a ll .

The metaphor of an o n li ne ca ta log is also used, by analogy with m a i l o r der catalogs. All types of stores have ret

web sites, including those that do and do not also have physical storefronts and paper catalogs. Online shoppinga form ofe le c tr o n ic co mm e r ce used forbu s i ne s s - to - bus ine ss (B2B) andbu s i ne s s - to - co n su m e r (B2C) transactions

In general, s hop p i n g has always catered to middle class and upper class women. Shopping is fragmented apyramid-shaped. At the pinnacle are elegant boutiques for the affluent; a huge belt of inelegant but ruthlesefficient discounters flog plenty at the pyramids precarious middle. According to the analysis of Susan D. Davat its base are the worlds workers and poor, on whose cheapened labor the rest of the pyramid depends forincredible abundance. Shopping has evolved from single stores to large m a ll s containing many stores that moften offer attentive service, store credit, delivery, and acceptance of returns. These new additions to shopphave encouraged and targeted middle class women.
http://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Webstorehttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Brick_and_mortar_businesshttp://en.wikipedia.org/wiki/Brick_and_mortar_businesshttp://en.wikipedia.org/wiki/Shopping_mallhttp://en.wikipedia.org/wiki/Online_cataloghttp://en.wikipedia.org/wiki/Mail_orderhttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Business-to-businesshttp://en.wikipedia.org/wiki/Business-to-businesshttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Shoppinghttp://en.wikipedia.org/wiki/Mallshttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Webstorehttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Brick_and_mortar_businesshttp://en.wikipedia.org/wiki/Brick_and_mortar_businesshttp://en.wikipedia.org/wiki/Shopping_mallhttp://en.wikipedia.org/wiki/Online_cataloghttp://en.wikipedia.org/wiki/Mail_orderhttp://en.wikipedia.org/wiki/Electronic_commercehttp://en.wikipedia.org/wiki/Business-to-businesshttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Shoppinghttp://en.wikipedia.org/wiki/Malls


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IIMM/DH/02/20 06 /815 4, Retail

25

In recent years, online shopping has become popular; however, it still caters to the middle and upper class. In ordto shop online, one must be able to have access to a computer, a bank account and a d e b i t ca r d . Shopping hevolved with the growth of technology. According to research found in the Journal of Electronic Commerce, if wfocus on the demographic characteristics of the in-home shopper, in general, the higher the level of educatioincome, and occupation of the head of the household, the more favourable the perception of non-store shoppiAn influential factor in consumer attitude towards non-store shopping is exposure to technology, since it hbeen demonstrated that increased exposure to technology increases the probability of developing favouraattitudes towards new shopping channels.

Online shopping widened the target audience to men and women of the middle class. At first, the main usof online shopping were young men with a high level of income and a university education. This profile changing. For example, in USA in the early years of Internet there were very few women users, but by 20women were52.8% of the online population. Sociocultural pressure has made men generally more independent in thpurchase decisions, while women place greater value on personal contact and social relations.

(f) Merchandising is the methods, practices, and operations used to promote and sustain certain categories co m m e r c i al activity. In the broadest sense, merchandising is any practice which contributes to the sale of produto a retail consumer. At a retail in-store level, merchandising refers to the variety of products available for sand the display of those products in such a way that it stimulates interest and entices customers to make a purchas

In retail commerce, visual display merchandising means maximizing merchandise s a le s using p r oduct d e s i selection, pac k ag i n g ,p ri c i n g , and display that stimulates consumers to spend more. This includes disciplinespricing and d i scou n ti n g ,physical presentation of products and displays, and the decisions about which produshould be presented to which customers at what time.

This annual cycle of merchandising differs between countries and even within them, particularly relating cultural customs like holidays, and seasonal issues like climate and local sporting and recreation.

In the United States for example, the basic retail cycle begins in early January with merchandise forV a le n ti nD a y , which is not until mid-February. Following this, Eas te r is the major holiday, while springtime clothiand garden-related merchandise is already arriving at stores, often as early as mid-winter. Mo the r s D a y and Fa th D a y are next, with g r adua ti on gifts (typically small co n su m er e le c tr o n i cs like d ig i tal ca m e r a s ) often beimarketed as "dads and grads" in June (though most semesters end in May). Summer merchandise is neincluding patriotic- themed products with the American flag, out by M e m o r i al D a y in preparation forI n d e p e n d e nD ay (with F lag D ay in between).

By July,back -t o - school is on the shelves and autumn merchandise is already arriving, and at some a rt s a n d c r astores, C h r i s tm as d e co r a ti o n s . By September, the summer merchandise is on final c los e out and ov e r s tock of schosupplies is marked-down some as well, and H a llo w e en (and often even more of the Christmas) merchandiseappearin

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