Retail marketing basic concept

Contents
Trends in Retail Industry. Retailer Characteristics (features). Food Retailers. General Merchandise Retailers. Non-store Retail Formats. Services Retailing. Types of Ownership

Trends in Retail Industry (1) (2) (3) The greater diversity of retailers Increasing industry concentration Globalization.

1. Growing Diversity of Retail Formats: Over the past twenty years many new retail formats have been developed. Consumers now can purchase the same merchandise from a wide variety of retailers. The internet has produced a new set of retailers offering consumers the opportunity to buy merchandise and services at fixed prices. 2. Increasing Industry Concentration: While the number of different retail format has grown the number of competitors within each format is decreasing. A few national retailers dominate most formats. For example, Wal-Mart, Kmart, and Target account for 85% of the sales in full line discount stores and Walgreens, CVS, and Rite-Aid represent 56% of drugstore sales. 3. Globalization: Historically, retailing has been a local business, stores were owned and operated by people living in the community and patronized by local residents. Today, however, some retailing concepts that are successful in their country of origin have successfully developed a global presence. The reason why some retail concepts work globally, and why some do not, are usually dependent on what provides their sustainable competitive advantage in their home country. Some factors for globalization are:

Maturation of Domestic Markets Skills & Systems Relaxed Trade Barriers

Retailers characterstics:
Types of Retailers: The 1.5 million U.S. store-based retailers range from street vendors selling hot dogs to large corporations. Normally the stores are differentiated on the following basis; 1. 2. 3. 4. 5. Price-Cost Trade-Off: Type of merchandise Variety & Assortment Customer Service Food Retailers

Food retailer:
Conventional Supermarkets: Prior to 1930, most food was purchased in small neighborhood markets referred to as mom-and-pop stores because they were These stores have been replaced by large self-service family -owned and operated. supermarkets, which offers considerable lower prices. A conventional supermarket is a self service food store offering groceries, meat, and products with limited sales of nonfood items, such as health and beauty aids and general merchandise. Big-Box Food Retailers: Over the past 25 years supermarkets have increased in size and have begun to sell a broader variety of merchandise. But their overall share in retail business is decreasing due to the growth of big-box food retailing formats: Super centers, Hypermarkets, Warehouse clubs Super centers: Super Centers are 150,000 to 220,000 sq .ft stores that offer a wide variety of food (30-40 %) and nonfood merchandise (60-70%) they are fastest growing retail category. Super centers stock between 100,000 and 150,000 individual items (SKUs) The largest super center chains in US are Wal-Mart Super centers. Hyper Market

Hyper markets are also large (100,000 to 300,000 square feet) combination food (60-70%) and general merchandise (30-40%) retailers. Hyper markets typically stock less then super centers between 40,000 to 60,000 items. Super centers Vs Hypermarkets The difference between a French hypermarket and a super center is sometimes difficult to distinguish. Both hypermarkets and super centers are large, carry Grocery and general merchandise categories, are self-service and are located in warehouse type structures with large parking facilities. Hypermarkets are larger, but they carry fewer items. Further, fresh food-produce is their specialty, and is the primary reason why many people shop there. Super centers, on the other hand, have a larger percentage of non food items. Further on the food side, their specialty is dry grocery, such as breakfast cereal and canned goods, instead of fresh items. Warehouse Club: It is a retailer with limited assortment of food and general merchandise with little service and low prices to ultimate consumers and small businesses. Stores are large (at least 100,000 to 150,000 square feet, And located in low rent districts. They have simple interior, concrete floors with wide aisles so that forklift can also operate inside. They reduce prices by using low-cost location and store designs, and reduce inventory holding costs by carrying a limited assortment of fast-selling items Convenience Stores: They provide limited variety and assortment of merchandise at a convenient location in a 2,000 to 3,000 sq. ft store with speedy check outs. They are the modern version of neighborhood mom-and-pop stores.They enable consumers to make purchase quickly, without having to search through a large store. They offer a limited assortment and charge higher price than supermarkets.

General Merchandise Retailers

The major types of general merchandise retailers are: Discount stores Department stores Full line specialty stores Drugstores, Category specialists Home improvement centers

Department Stores: They are retailers carrying a broad variety and deep assortment, offer considerable customers services, and are organized into separate department for displaying merchandise.They are

unique in terms of the shopping experience they offer a full range of services from altering clothing to home delivery, the apparel is displayed on mannequins etc. Discount Stores: It is a retailer that offers a broad variety of merchandise, limited service, and low prices. They offer national brands, but these brands are less fashion oriented than brands in the department stores. Specialty Stores: A traditional specialty store, concentrates on a limited number of complementary merchandise categories and provide high level of service in an area under 8,000 square feet, and are in lifestyle retailing. Drug Stores: They are specialty stores and concentrate on health and personal grooming merchandise. Pharmaceuticals often represent over 50% of their sales and greater percentage of their profits also. Category Specialists: A discount store that offers a narrow variety but deep assortment of merchandise, most of these stores use self service approach. By offering a complete assortment in a category at low prices, category specialist can kill a category of merchandise and are frequently called category killers. They can use their buying power to negotiate low prices, excellent terms and assured supplies when items are scarce. Home Improvement Centers: It is a category of specialist offering equipment and material used by do-it-yourself and contractors to make home improvements. It focuses on providing material and information that enable consumers to maintain and improve their homes. Single-Price Retailers: They are off price retailers and sell all their merchandise at a single price typically $1. Off-Price Retailers: They offer an inconsistent assortments. They can sell brand name and even designer-label merchandise at low prices due to their unique buying practices. Most merchandise is bought opportunistically from manufacturers or other retailers with excess inventory at the end of the season. This merchandise might be in odd sizes, or unpopular colors and styles, or it may be irregulars having minor mistakes.

Non-Store Retail Format

Electronic Retailing: It is also called e-retailing and internet retailing, it is a retail format in which the retailer communicates with customers and offer products and services for sale over internet. Customer satisfaction with online shopping is improving to the point where e.retailers have higher satisfaction scores than store based retailers. The continued interests in buying electronically is the result of traditional stores-based and catalog retailers beginning to offer merchandise through an electronic channel. Catalog & Direct Mail Retailing: It is non store retail format in which the retail offering is communicated to a customer through a catalog, whereas direct-mail retailers communicate with their customers using letters and brochures. Historically, catalog and direct mail retailing were most successful with rural consumers, who lacked ready access to retail stores. Types: (1) (2) General merchandise catalog retailers Specialty Catalog retailer

Direct Selling: it is a retail format in which a sales person, contact customer directly in a convenient location, either at the customers home or at work, and demonstrates merchandise benefits, takes an order, and deliver the merchandise to the customer. Direct selling is a highly interactive form of retailing in which considerable information is conveyed to customers through face-to-face discussions. However providing this high level of information, including extensive demonstrations, is also costly. Television Home Shopping: It is a retail format in which customers watch a TV program demonstrating merchandise and then place orders for the merchandise by telephone. It appeal to lower income consumers, 40% of TV home shopping sales are inexpensive jewelry. Vending Machine Retailing: It is a non store format in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card. Vending machines are placed at convenient high-traffic locations such as in the workplace or on University campuses and primarily contain snacks or drinks.

The new vending machine designs also enable the retailers to increase the productivity of the machines. Electronic system in the machine keep track of inventory, cash, and other operating conditions. Then radio devises transmit data back to host computer. These data are analyzed, and communications are sent to route drivers telling them when stock-outs and malfunction occur.

Services Retailing
Types of Service Retailing: It is a growing part of retailing industry, however, service retailers or firms selling primarily services rather than merchandise. For example it includes health services, home cleaning, lawn maintenance, clothes washing and pressing, airlines, automobile repair and maintenance, rent a car, banks, amusement parks, movie theatre, video center etc. However some of these companies are not just retailers, like airlines, banks, hotels etc. They sell their services to business as well as consumers. Differences between Services and Merchandise Retailers: Intangibility Simultaneous Production and Consumption Perishability Inconsistency

Types of Ownership
Another way to classify the retailers is by their ownership. There are three major classifications of retailers ownership, 1. 2. 3. Independent single store establishments Corporate chains Franchises

Independent, Single-Store Establishments: In 1998, over 60,000 new retail businesses were started in U.S. many such stores are owner-managed. Thus management has direct contact with customers and can respond quickly. Corporate Retail Chains: A retail chain is a company operating multiple retail units under common ownership and usually have centralized decision making for defining and implementing its strategy.

Franchising: It is a contractual agreement between a franchisor and the franchisee to operate a retail outlet using the name and format developed and supported by the franchisor. Approximately one third of all U.S sales are made by franchisees. In franchise contract, the franchisee pay lump sum plus a royalty on all sales. The franchisee also agrees to operate in accordance with procedures prescribed by the franchisor. The franchisor provides assistance in locating and building the store, developing the products or services sold, management training and advertising. To maintain the franchisees reputation, the franchisor also makes sure that all outlets provide the same quality of services and products.