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Retail Marketing
Retailing & Retailer
Is defined as a set of activities or steps used to sell a pdt or service to consumers for their personal or family use
Derived form French word” retaillier” meaning “to break bulk” or “cut a piece of”
Retailer: Person, agent, Co., or organization instrumental in reaching the goods, merchandise or services to the ultimate customer
Retailer activitiesAnticipating customer’s wantsDeveloping assortment of pdtsAcquiring mkt infoFinancingSelecting target marketsNegotiating with suppliersTraining salespeople
Nature of retail marketing Profitable retailing and satisfactory returns on investment can only
be achieved by identifying, anticipating and satisfying customer needs and desires
What the customers buy determines the nature of the retailer’s business.
The essence of retail marketing is developing merchandise and services that satisfy specific needs of customers, and supplying them at prices that will yield profits.
Nature of retail marketing Cost & profit varies depending on type of operation & major pd line
Manage profit of 9-10% on sales
Sales volume influences business opportunities, merchandise purchase policies, nature of promotion & expense control measures
Retailers act as gatekeepers who decide which new pdts shd fimd their way to the shelves of their stores….a strong say in the success of a pdt being launched
Marketers have to sell a new pdt several times: first within the Co, then to the retailer & finally to the user of the pdt
Key aspects of retailingDirect customer interactionSmall unit size of salePoint of sale promotionsCriticality of locationEmphasis of location
Drivers of Change in RetailingChanging demographics & industry structureExpanding ITEmphasis on lower costs & priceEmphasis on convenience & serviceFocus on pdtivityAdded experimentationContinuing growth of non store retailing
Major concerns relating optimum selection of goods
A wide & increasing range of pdt categories accompanied by multiple brands in each category complicate decision making for both mfg & mkt intermediaries
They have to make an optimum selection of goods to be sold
given the foll major concerns: Selling space..relatively fixed & must return max profits.If such
space is occupied by non moving or slow moving merchandise……resort to substantial price red to get rid of unsold stock
Risk of no performance in terms of quality, supplies which in turn harms image of retail outlet
Retail industry Largest private industry in the world ahead of finance, engineering Contributes 8% to the GDP in developing western countries 50 of the Fortune 500 & 25 of Asia’s top Cos are retailers China..3 of top 10 global retailers : Carrefour, 7-Eleven, Wal-Mart Brazil: top 2 global retailers….30% of the RM
Global RetailingMarket Size & Economics
Infrastructure & Distribution
Competition
Operations
Financial & Tax Reporting
Merchandise Acceptability
Partnering Capability
Factors UsedFactors Usedto Analyzeto AnalyzeGlobal Retail Global Retail MarketsMarkets
Global Retailing
Spread of communication and mass media
Lowering of trade barriers and tariffs
Growth potential in underserved markets
Reasons for Reasons for Global ExpansionGlobal Expansion
Indian retail industry 5th largest retail destination globally Comprising of organized and unorganized sectors, though initially,
the retail industry was mostly unorganized Largest no of retailers abt 12 million… 5 million sell food & related
pdts Retail sector is the 2nd largest employer after agriculture Amounts to US$ 330billion in 2007 to 427b in 2010 & 637 b by 2015 Retail has a share of 10-11% in the GDP 6 times bigger than that of Thailand & 4-5 times bigger than S.Korea
& Taiwan Expected growth rate 25-30% annually. Available mall space 100 mill sq feet by 2011
Growth in Indian retail markets2006-7
Indian retail (Rs bn)
Food & grocery 8680
Clothing & footwear 1356
Non institutional healthcare 1159
Furniture & furnishing 986
Total 14574
Organized retail (Rs bn)
Food & grocery 61
Clothing & footwear 251
Non institutional healthcare 24
Furniture & furnishing 101
Total org retail 598
Share of OR in TR% 4.1%....22% by 2011
Major Retailers in India Pantaloon With more than 450 stores across the country Launched country's first hypermarket ‘Big Bazaar’
Tata Group A major player with its subsidiary Trent, which operates Westside and Star Bazaar. Established in 1998, it also acquired the largest book and music retailer in India
‘Landmark’ in 2005.
RPG Group One of the earlier entrants in the Indian retail market, food & grocery retailing in
1996 with its retail Foodworld stores. Opened the pharmacy and beauty care outlets ‘Health & Glow’.
Reliance More than 300 Reliance Fresh stores and Reliance Mart It's expecting its sales to reach Rs. 90,000 crores by 2011.
A Birla GroupStrong presence in Indian apparel retailing. The brands
like Louis Phillipe, Allen Solly, Van Heusen, Peter England
5 types of cities:Maturing: Delhi & MumbaiTransitional: Bangalore, Kolkata, Hyd, Pune, Ahmedabad,
Chennai..to have 1/3rd of India’s org retail sector High growth: Jaipur, Ludhiana, Chandigarh, Cochin,
Lucknow, Surat, Baroda…next reatil destinationsEmerging: Nagpur, Indore, Nasik, Coimb, Bhubaneshwar,
Goa
Challenges facing Indian retail industry
The tax structure favors small retail business Lack of adequate infrastructure facilities High cost of real estate Dissimilarity in consumer groupsShortage of retail study options Shortage of trained manpower Low retail management skill
Characteristics of RetailingDiffers from manufacturing in foll ways:There is a direct end user interaction Only point in the value chain to provide a platform for
promotionSale if small unit sizesLocation is a critical factorServices are as imp as core pdtsLarge no of retail units to meet the geographical
coverage & population density
Activities of retailers
Sorting
Holding stock
Breaking bulk
Arranging assortment
s
Extending services
Providing additional
services (Channel of commun,
transport, advert) functions)
Categorizing RetailersNo of outletsMargin vs TurnoverLocation
Classification of Retail Operations
ClassificationClassificationof of Retail Retail EstablishmentsEstablishments
Ownership
Level of Service
Product Assortment
Price
Ownership
IndependentRetailers
Chain Stores
Franchises
ClassificationClassificationof of
OwnershipOwnership
Major Types of Retail OperationsDepartment StoresEg: SS, Westside, Globus
Specialty StoresEg: Bata, Nokia world, Adidas
Supermarkets
DrugstoresEg:Medicine Shoppe, Apollo Pharmacies
Convenience Stores
Discount StoresEg: Wal-mart,Big Bazar
Classification SummaryType of RetailerType of Retailer
Department StoreSpecialty Store
Supermarket
Convenience Store
Drugstore
Service Service LevelLevel
Mod Hi-HighHigh
Low
Low
Low-Mod
Assort-Assort-mentment PricePrice GrossGross
MarginMargin
BroadNarrow
Broad
Med-Narrow
Medium
Mod-HighMod-High
Moderate
Mod High
Moderate
Mod HighHigh
Low
Mod High
Low
Retail franchising is a form of chain ownership in which a franchisee pays the franchisor fees or royalties and agrees to run the franchise by prescribed norms, in exchange for use of the franchisor’s name.
Types of Retailers
Importance of marketing in retailing Marketing is a vital tool for every retailer, as it identifies current,
unfulfilled needs and wants, which it defines and quantifies. Marketing determines which target groups the retailer should
serve. Marketing could be seen as delivering an acceptable standard of
living. Marketing can ensure complete satisfaction and sustained
customer loyalty. Marketing depends on the efficient co-ordination of consumer
prediction, product development, packaging design and influencing demand through appropriate communication medium.
Retail Objectives
To increase customer traffic To clear seasonal merchandise Match competitors price price Price leadership status Create entry barriers Encourage repeat buying
Retail Marketing Strategy
Setting short & long term objectives
Define the business in terms of orientation towards to particular sector
Key Tasks Key Tasks in in
StrategicStrategicRetailingRetailing Identifying TM, directing
efforts on basis of customer characteristics & needs
Implementing integrated mkting plan
Evaluation & revision of plan depending on internal & ext environ
Defining a Target Market
Segment the Market
Demographics
Geographics
Psychographics
Value & Lifestyle
Behavioral
Retail marketing mixRetail marketing mix is the term used to describe the
various elements and methods required to formulate and execute retail marketing strategy.
The aim of such coordination is for each store to have a distinct retail image in consumers’ mind.
The mix may vary greatly according to the type of market the retailer is in, and the type of product/services.
The marketing mix planning The retail marketing mix is the vehicle through which
a retailer’s marketing strategy is implemented and, in planning the mix, retailers should be guided by three basic principles:
1. The mix must be consistent with the expectation of target customers;
2. Elements must be consistent with each other to create synergy
3. The mix must be responsive to competitive strategy
The Retailing Mix
TargetTargetMarketMarket
Product
Price
Promotion
Place
Personnel
Process
Retail Marketing MixWhile many elements may make up a firm’s retail marketing mix, the
essential elements may include: merchandise assortments Store ambience customer service Communication with customers Personal selling Store image Store design Sales incentives
Marketing Mix
Place (store location)Target marketChannel structureChannel managementRetailer imageRetail logisticsRetail distribution
Product (merchandise)Product developmentProduct managementProduct features and
benefitsBrandingPackagingAfter-sales services
The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.
The Proper LocationLarge, long-term commitment of resources
Location will affect future growth
Local environment may change over time
Shopping Center & Mall Locations
AdvantagesAdvantages
Design attracts shoppers
Anchor stores draw customers
Ample parkingUnified image
DisadvantagesDisadvantages
Expensive leasesFailure of common
promotion effortsLease restrictionsAnchor store
dominationDirect competitors
Presentation of the Retail Store
Employee Type & Density
Merchandise Type & Density
Fixture Type & Density
Sound
Odors
Visual Factors
Factors Factors ininCreationCreationof a Store’sof a Store’sAtmosphere Atmosphere
PriceCostsProfitabilityValue for moneyCompetitivenessIncentivesQualityStatus
PromotionDeveloping promotional
mixesAdvertising
managementSales promotionSales managementPublic relationsDirect marketing
External Influences on Pricing Strategy
Pricing strategy
Customers
Competitors
Suppliers Government
Basic pricing strategiesEDLPHigh low pricing
Pricing Practices: Combination of the foll Skimming pricing Penetration pricing Loss Leader price Psychological pricing (Prestige , reference, traditional, odd-even pricing) Bundling Fixed & Variable pricing Perceived value pricing Bundled pricing Price lining Multiple – unit pricing Extinction pricing
-
Pricing strategiesVariable pricing – when differences in demand & cost
necessitate a change, with a view to increase demand, off season discount.
Flexible pricing – offering same products & quantities to different customers at different prices.
Price lining – retailers establish specified number of price points for each merchandise type & retailers purchase goods to fit the price points – makes price comparisons easier
– can help store to upgrade / down grade customer s preference.
Multiple unit pricing• Price of each unit in a multiple pack is less than the price of each
unit if it were sold individually. • Suitable for products with high consumption rates.
Bundling• Retailers combine several elements in one basic price,
invariably closely related items.
Leader pricing
When a high demand item is priced low & is heavily advertised to attract customers into the store.
Loss leader pricing – Where an item is sold below cost to build traffic & encourage purchase of other items.
EDLP – When a retailer charges the same low price everyday for long periods and seldom offers the item on sale – stable but lower than prevailing prices but not the lowest.
Retail Pricing Approaches and other Elements of the Retail Marketing
Retail marketing mix variable
Price below market price
Price at market price
Price above market price
Location No parking, poor layout, inaccessible
Central business district, proximity to competition
Monopoly, compatible location to target segment
Service Attributes Self-service, limited offerings, no sales
Support from sales people
Personalized attention to customers, home delivery, exchange facility, customized offerings
Assortment Limited variety Medium Extensive assortment
Store Environment
Poor quality fixtures, limited space to move around, wall shelves, untidy
Compatible store environment
Inviting, impressive store décor, visual merchandise attractive
People elementStaff capabilityEfficiencyAvailabilityEffectivenessCustomer interactionInternal marketing
Process elementOrder processingDatabase managementService deliveryQueuing systemStandardisation
Retail Promotional MethodsCoupons: distributed in magazines, newspapers, direct mail, or street hand-
outs to drive sales to the store.
To be successful, coupons must either pay for themselves through increased
sales of the discounted items, or by introducing new customers to the store
who then find other, full-price items to buy.
Organizing Sales: A good way to try to sell off a inventory that has been
difficult to move.One can move out these clearance items while introducing
the store to new potential customers who will decide to return again when
the sale is over.
Loyalty programs: Encourage purchases by charging less than full price, also
encourages a customer to buy more and to return more often.
Customers will feel they have an investment in the store which is lost if they
switch to a competitor.
Retail Sales Promotion Benefits
Excellent demand generator Build traffic Can play an important role in loyalty programs Generate in-store excitement Assist in introducing new products
Type of sales promotion : Sponsors Self sponsored Joint with supplier
Promotion formats for retail Announce special sales – end of season / regular Organize demos / samples – initiate trial & build traffic Value-added gifts / premiums to build brand loyalty in specific categories Coupons & contest – to retain interest / repeat
What sales promotion can’t do Change buyers preference for un-desired product Compensate for poorly trained sales force Provide long-term support in sales Permanently stop a products’ declining trend/ push a non-
seasonal item in off-season.
Factors Influencing Advertising Age of store
- New stores or those seeking to be re-build image need advertising.
Store location- Stores that are poorly located need more advertising.
Merchandise- Those selling high-image / fashion goods need advertising than a discount / convenience store
Supplier support- The more support a retailer is able to get from suppliers, the more it can advertise.
Five pillars of Retailing 5 important actions for Retailers Solve customer’s problems Treat customers with respect Connect with customer emotions Set the fairest (not the lowest) price Save customer’s time
Measuring Retail Performance & Productivity
1. Performance of Selling Space
Sales per Square FootTotal Net Sales ÷ Square Feet of Selling Space = Sales per
Square Foot of Selling Space
Sales by Department or Product CategoryCategory's Total Net Sales ÷ Store's Total Net Sales =
Category's % of Total Store Sales
2. Measuring Productivity of Staff Sales per Transaction Also known as sales per customer. A store dependant on its sales
clerks to make a sale will use this method
Gross Sales ÷ Number of Transactions = Sales per Transaction
Sales per Employee Retailers need to take into consideration whether the store has full
time or part time workers. Convert the hours worked by part-time employees during the period to an equivalent number of full-time workers.
This form of measuring productivity is an excellent tool in determining the amount of sales a business needs to bring in when increasing staffing levels.
Net Sales ÷ Number of Employees = Sales per Employee
Drivers of Success in RSCustomers - Driving force in changeRe-evaluating the mkting planStrong visual appealWorkplace challenge
Ethical and LegalEthical and LegalIssues in Issues in RetailingRetailing
Ethical and Legal Issues
RetailRetailTheftTheft
ConsumerConsumerFraudFraud
SupplierSupplierLaborLabor
PracticesPractices
SlottingSlottingAllowancesAllowances
Use ofUse ofCustomerCustomer
InformationInformation
EcologicalEcologicalConsiderationsConsiderations
Retail Marketing planPlan elements1. Objectives, SWOT, Distinct positioning
2. Defined target audience
3. Quantifiable goals Growing sales revenue (generating more customers and more dollars per customer) Enhancing profitability (Analyzing product margin and concentrating on those products
that deliver the greatest profitability. In most cases, it involves implementing an effective pricing strategy or overhauling your existing one.)
Generating leads and increasing customer count Adding new products or services
4. Detailed tactical elements
5. Budget, timetable and responsibilities Identifying which weeks advertising will run, when and where will one seek media
coverage for an important event, on what dates for direct mail campaigns, which months for sending an email newsletter, or whatever activity one has planned for the annual calendar. Specific as to date, cost and responsibility
6. Measurability and accountability
Outline of a Marketing plan1.0 EXECUTIVE SUMMARY
1.1 COMPANY
1.2 PRODUCTS & SERVICES
1.3 MARKET ANALYSIS
1.4 STRATEGY & IMPLEMENTATION
1.5 MANAGEMENT
1.6 FINANCIAL PLAN
1.7 SOURCES & USE OF FUNDS
2.0 COMPANY
2.1 COMPANY & INDUSTRY
2.2 LEGAL ENTITY & OWNERSHIP
2.3 COMPANY HISTORY TO DATE
2.4 FACILITIES
2.5 KEY ASSETS
3.0 PRODUCTS OR SERVICES
3.1 DESCRIPTION
3.2 FEATURES & BENEFITS
3.3 COMPETITION
3.4 COMPETITIVE ADVANTAGE/BARRIERS TO ENTRY
3.5 DEVELOPMENT
4.0 MARKET ANALYSIS
4.1 TARGET CUSTOMER
4.2 MARKET SIZE
4.3 TRENDS
4.4 SWOT ANALYSIS
5.0 STRATEGY & IMPLEMENTATION
5.1 PHILOSOPHY
5.2 PRODUCT DEVELOPMENT
5.3 INTERNET STRATEGY
5.4 MARKETING STRATEGY
5.5 SALES STRATEGY
5.6 STRATEGIC ALLIANCES
5.7 OPERATIONS 5.8 GOALS
6.0 MANAGEMENT
6.1 ORGANIZATIONAL STRUCTURE
6.2 LEADERSHIP
6.3 STAFF MEMBERS
7.0 FINANCIAL PLAN
7.1 REQUIREMENTS
7.2 USE OF FUNDS
7.3 INCOME STATEMENT PROJECTIONS
7.4 CASH FLOW PROJECTIONS
7.5 BALANCE SHEET
7.6 ASSUMPTIONS
How to do a SWOT analysisStrength could be:1.Your specialist marketing expertise.2.A new, innovative product or service.3.Location of your business.4.Quality processes and procedures.5.Any other aspect of your business that adds value to your product or service.
Weakness could be:1.Lack of marketing expertise.2.Undifferentiated products or services (i.e. in relation to your competitors).3.Location of your business.4.Poor quality goods or services.5.Damaged reputation.
An opportunity could be:1.A developing market such as the Internet.2.Mergers, joint ventures or strategic alliances.3.Moving into new market segments that offer improved profits.4.A new international market.5.A market vacated by an ineffective competitor.
A threat could be:1. A new competitor in your home
market.2. Price wars with competitors.3. A competitor has a new,
innovative product or service.4. Competitors have superior access
to channels of distribution.5. Taxation is introduced on your
product or service.