Week 1

Chapter 1: An Introduction to Retailing

Chapter 2: Building and Sustaining Relationships in Retailing
Learning Outcome:
- Define retailing & contextualize the sector
- Discuss the special retail characteristics
- Discuss the retailing concept
- Explain value in retailer relationships
- Describe customer relationships
- Explain differences between goods & service retailers
Retailing
- All activities culminating in selling goods and services to end-user consumers
for their personal, family or household application.
- This is done across various platforms.
- Goods and services do not simply evolve into a retail outlet. They have to rely on
others.
- Complex process of getting the appropriate products in the appropriate time and
location.
Opportunities in Retailing
- Starting new retail businesses
- Opening up a franchise
- Tap into globalisation phenomena
- Internet & online shopping
Major Trends in Australia in Retailing (MPRCRC)
1) Multi-channel retailing
- A retailer potentially sells to consumers through multiple retail formats. Ex:
- Websites
- Physical stores
- Mail catalogues
- Telemarketing
Must have synergy across all platforms)
2) Private labelling
(Supermarkets are a good example of this, ex: Coles & Woolies have their own
private brands.)
3) Retail technology
(Ex: Self-service technologies/ self-service checkouts. Shapes the retail industry)
4) Customer Relationship Management (CRM)
(Loyalty programs. Ex: Qantas Frequent Flyer Program/ Woolies Everyday
Rewards. Helps build a database of consumer details and target them directly and
more effectively through those channels.)

5) Retaining Retail Staff

- Looking at how to retain staff because many trades worker has gone to work for the
mines
- Important to retail staff because the capacity to retain staff and the capacity to
provide excellent services are interlinked
6) Changing Consumers
(Ex: Value consumer, busy consumer, green consumer, local consumer & digital
consumer)
- Ex: Busy consumers turning to speed and convenience such as online shopping
- Ex: Green consumers are willing to pay more for green products
Typical Examples Within the Retail Sector
- Automotive Sales & Parts
- Banking & Finance Services
- Department & Fashion Stores
- Education
- Entertainment & Sporting Events
- Fast Moving Consumer Goods (FMCG)
Ex: Supermarkets
- Information technology
- Professional services
(Doctors/Lawyers)
- Real estate agents
Major Challenges Facing Retailers
1) How to best serve customers and create value for them while earning a fair
profit
2) How to be competitive in a highly competitive environment where consumers
have many choices
3) How to grow the business while retaining a core of loyal customers (and staff)
(How to nurture consumers)
4) How to deal with a changing retail landscape
Philosophy Behind Effective Retailing
- Retailers can best address these challenges by understanding and applying the
basic principles of retailing in the framework of a well-structured, systematic, and
focused retail strategy. To do this retailers can adopt what is known as the Retailing
Concept.

The Retailing Concept

Touch point = Ads. Like when you drive past and see a billboard
Customer Orientation:
A retailer must always identify:
- What do consumers want?
- Whats in it for them?
- Whats in it for you?
In order to take action and satisfy the needs and demands of consumers.
Value Driven
- Retailer must offer good value to its customers, through appropriate pricing of
goods and services, for example. Because each consumer has a different perception
of what value is you have to know what they want.
Coordinated Effort
- Retailer must integrate all his/her plans and activities to maximise efficiency
Goal orientation
- Retailer must always set goals and use his/her strategies to attain them.
Channels of Distribution

- Multi-channel retailing
- A retailer potentially sells to consumers through multiple retail formats. Ex:
- Websites
- Physical stores
- Mail catalogues
- Telemarketing
Must have synergy across all platforms)
- Omni Channel Retailing
Aims to provide the customer with a seamless shopping experience whether the
customer is shopping online via the Internet, shopping from a mobile device,
catalogues or a brick-and-mortar store.
Relationship Retailing
Retailers often seek to establish and maintain long-term bonds with customers.
This means they do not act as if each sales transaction is a completely new encounter
therefore must:
- Concentrate on the total retail experience
- Monitor satisfaction
- Stay in touch with customers
- Considering customer loyalty programs
Types of Loyalty Programs
- Additional discounts at cash register
Not a real loyalty program
- 1 free with every n items purchase
Not a long term strategy
Easily copied
No customer database
- Rebates based on cumulative purchases
- Maintain customer records
- Targeted offerings & mailing based on purchase history
Tesco example Market research staff know more about my customers than
board chairperson
- Retailers can try developing bonds with their customers to attract and hold
them. (Not a short term activity, its something that has got to be progressive and
sustainable for the long run)
- Financial incentives (Eg: Shop at Coles get discount at Shell)
- Psychological bonds
(Where customers are attached to a particular retailer/brand)
(Eg: Qantas/ Dick Smith)
- Structural bonds
(Difficult to form but also difficult for the customer to go else where)
(Created by providing services to the client that designed right into the service
delivery systems.)

(Often structural bonds are created by providing customised services to the

client that are technology based and serve to make the customer more
productive)
(Can only purchase/download music on the iTunes store if you buy an iPod
Nano using an Apple account. So consumers are locked in)
- Need to combine financial incentives, psychological bonds and structural bonds
to be successful)
Multi-Channel Retailing
- A retailer potentially sells to consumers through multiple retail formats. Ex:
- Websites
- Physical stores
- Mail catalogues
- Telemarketing
Must have synergy across all platforms)
Aspects of Multi-Channel Retailing
- Cross-selling possible across channels (They can view the product online and buy
it in store or the other way round )
- Consistent pricing in all channels (credibility)
- Can buy, and return product regardless on channel
Role/benefits of each channel
Store
- Try on, ease of return, fast availability (immediacy), compare offerings
Catalogue
- Convenient and allows consumers to have an overlook of the products offered
by a company as well as the price
- Can be stored and kept by consumers
Web
- 24/7, product information, product reviews by customers, personalization
(tailor offerings upon past purchases), most current pricing, closeout sales
Influence of Social Media & M-Commerce
- Use of smartphones has changed the way people shop.
- 59% of people who use a smartphone to search for information on a product do so in
a public space or on the go.
- 34% of smartphone users have made a purchase on their smartphone in the last 3
months.
- 49% of people say smartphones have changed the way they shop.
Social Media Influence
- 70% used a retail blog to get to firms website
- 68% used YouTube to browse and research products
- 59% of those that use Pinterest purchased after they saw an item on this social media
site
- 33% of Facebook users purchased an item after they saw it on their newsfeed

Distribution Types Impacting Retailers

Exclusive Distribution
- Manufacturers/ suppliers have one or few retailers, designating such retailers as
the only ones to carry certain brands or products within a specified area.
- Retailer/ manufacturer success inter-linked
- Retailer has no free-rider concerns
- Retailer has less price competition
- Manufacturer is assured of high customer support
Intensive Distribution
- Manufacturers/ suppliers sell their offerings through as many retailers as
possible
- Manufacturer maximises sales
- Retailers compete on price/service
Selective Distribution
- Manufacturers/ suppliers sell their offerings through a moderate number of
retailers.
Exclusive Vs. Intensive Distribution (The two extreme points)
Intensive
- Manufacturer maximises sales
- Retailers compete on price/service
Exclusive
- Retailer/ manufacturer success inter-linked
- Retailer has no free-rider concerns
- Retailer has less price competition
- Manufacturer is assured of high customer support

Strategic Retailing
Retail Management: A Strategic Approach
Comprised of different elements:
1) Strategic planning (Links to the retail concept in terms of having goals for the
company, customers & members of the channel)
2) Building relationships (Through that process you have to build professional
relationships with all members of the channel. Therefore retailing has shifted from a
day-to-day operation to a more strategic and professional institute.)
3) Make the retailing institutions professional
4) Consumer behaviour and information gathering
5) Implement elements of retailing strategy
6) Integrating, analysing, and improving retail strategy
What is Retail Strategy Planning?
It is regarded as:
- An overall plan for guiding a retail firm
- Influencer of retailers business activities and response to market forces
Six Steps in Retail Strategy Planning:
1) Define the type of business
2) Set long-run and short-run objectives
3) Determine the customer market
4) Devise an overall, long-run plan
5) Implement an integrated strategy
6) Evaluate and correct.
Aspects of Targets Strategy
- Growth objectives
- Appeal to a prime market
- Distinctive image
- Focus
- Customer service
- Multiple points of contact
- Employee relations
- Innovation
- Commitment to technology
- Community involvement
- Monitoring performance
What is Value?
Does value mean consumers
- Demand more for less from the shopping experience?
- Want to spend less time shopping?
- Split the commodity-shopping trip from the value-added shopping trip?
- Look for entertainment in the shopping experience?
- All of the above & other things in the shopping experience?

Value has a few perspectives:

Channel viewpoint
(Retailers, manufacturers and wholesalers perspective):
- Value for them represents the series of activities and processes that caters to
consumers.
ex: After sales services? Any returns policy?
Customer viewpoint:
- Value for them refers to the shoppers perception of the value chain.
- It is the view of all the benefits versus the price paid.
Value Through The Retail Channel
- Value represents the total bundle of benefits offered to consumers through a
channel of distribution.
- Includes factors (but not limited to) such as:
- Store location and parking
- Retailer ambience
- Customer service
- Brands/ products carried
- Product quality
- Retailers in-stock position
- Shipping, prices, image, and other elements
Potential Major Pitfalls to Avoid When Planning
- Dont plan value solely from a price perspective.
- Dont provide value-enhanced services that customers do not want or will not
pay extra for.
- Dont compete in the wrong value/ price segment
- Believe augmented elements alone create value
- Dont ever pay lip service to customer service (Dont promise and underdeliver)
A Value-Oriented Checklist for Retailers
(Checklist for creating value for your consumers)
- Is value defined from a consumer perspective?
- Does the retailer have a clear value/price point?
- Is the retailers value position competitively defensible?
(If you have a frequent flyers program, is it easy to be replicated by another retailer?)
- Are channel partners capable of value-enhancing services?
Fundamental Service Decisions
(/Questions you have to consider as a retailer)
- What customer services are expected/augmented?
- What level of customer service complements image?
- Should there be a choice of customer services?
- Should customer services be free?
- How can a retailer measure the benefits of providing customer services against
associated costs?
- How can retailers terminate customer services?

Common Loyalty Programs

To be strategic these must be:
- Useful rewards to customers
- Recognize loyal behaviour
- Be appealing and attainable to customers
- Capable of honouring shopping behaviour
- Unique to participating retailers
- Comprised of personalized communication
- Consistent with the retailer image & offerings
Elements of Effective Channel Relationships

- Trust, fairness, reliability, communication, coordination, inventory planning

(make sure you have inventory at the right time & place), proper lead-time (When
you contact your suppliers they have to be able to tell you/ have the products in store
on time for you/ during the right time frame), final consumer orientation (Critical
because without consumers, a retailer fails. Aim here is to maximise the value and
benefit that youre offering to your consumers and ensure in doing that, they will
revisit your store and hopefully remain loyal)

Strategy Aspects of Customer Service to Consider

- Expected Customer Service is the service level that customers want to receive
from any retailer such as basic employee courtesy
Ex: Having knowledgeable staff
- Augmented Customer Service includes the activities that enhance the shopping
experience and give retailers a competitive advantage
(Addition to what is normally expected.)
Approach to Classifying Customer Services

As a retailer you want to maximise value to the consumer and minimise the cost to the
organisation. Patronage is probably the best type of service. Doesnt cost your
organisation much and consumers love it.
Key aspect: Trading off the value that service provides versus the cost of providing
that service.
Turning Around Weak Customer Service
1) Focus upon customer concerns
2) Empower frontline employees (By giving them the ability to make decisions on
behalf of the retail org. Different types of empowerment. Routine discretion and
creative discretion. Routine discretion is the routine responses to complaints,
whereas creative discretion allows employees to make up solutions for the
customer.)
3) Show that you are listening/ empathy
4) Express sincere understanding
5) Apologize and rectify the situation

Factors Impacting Perceptions of Service Retailing

- Retailer understanding of consumer needs, convenience of service, promptness

of service, service quality and reliability & quality of employees
Examples of Time Value by Service Retailers:
1) Self-service checkout
2) McDonalds order here and collect in front
3) Prepacked meals
Characteristics of Service Retailing IIPV
- Intangibility
- Cannot touch to service
- Inseparability
- Must be present to experience
- Perishability
- Cannot store the service
- Variability
- Difficult to repeat same quality
Kinds of Service Retailers
- Rented goods services (DIY equipment)
- Owned goods services (Motor vehicles)
- Non-goods services (Haircuts)
Aspects of Retailing that Help Drive Excellence
- Use of technology in retailing
- Ethics in retailing
- Social responsibility in retailing
(Triple bottom line)
- Consumerism in retailing
- Increasing customer interactions & services

Week 2
Strategic Planning in Retailing (Chapter 3)
Learning Outcomes
- Show the value of strategic planning for retailers.
- Explain steps in strategic planning for retailers.
- Examine individual elements of a retail strategy (both controllable and
uncontrollable)
- Discuss factors impacting global retailing.
Retail Strategy
The overall plan of action that guides a retailer in activities, normally:
- One year in duration.
- Outlines mission, goals, consumer market, overall and specific activities, and
relevant control mechanisms.
- Provides a framework to assist in that planning and implementation of strategy.
(In other words, it is a roadmap. It looks at your current situation and where you
would like to be in the future. Very much like strategic marketing plan. However,
retail strategy looks at a one year duration, whereas a strategic marketing plan is
often 3-4 years.)
Elements of a Retail Strategy (SOIOSC)

1) Situation Analysis
Looks at the operational context
- What is the retailers mission/reason for existence
- What are the different types of ownership and management alternatives that
might guide strategy
- What particular goods and services category will the organisation operate in
(Decide upon ownership/management)
- Goods/service category changes over time as the retailer evolves
- Define type of offerings
1) Situational Analysis:

Organisational Mission
Retailers commitment to a type of business and to a distinctive role in the
chosen marketplace
Ex: Lands End Fashion Retailer
- Global multi-channel retailer
- Mission statement: We provide our customers with the highest levels of service in
our industry, unparalleled quality and value, and an unequivocal ironclad
guarantee
Situational Analysis:
Ownership & Management
Sole proprietorship: Unincorporated retail firm owned by one person
Partnership: Unincorporated and owned by two or more persons
Corporation: Retail firm incorporated state law
Situational Analysis
Goods & services categories (examples)
- Durable Goods Retailers:
Automotive; Furniture & appliances; Timber & Hardware
- Nondurable Goods Retailers:
Apparel; Food; General Merchandise; Petrol Stations
- Service Retailers (Personal):
Laundry & dry cleaning; Beauty/barber; Health-care services
Service Establishments (Hotel) (Examples):
Hotels & Motels; Caravan Parks and Camps
2) Objectives
- Looks at the outcomes that the retailer seeks to achieve
- Can be sales, profit, satisfaction of the public or simply the image and
position that the retailer wishes to portray in the marketplace.
- Define sales & profit objectives
- Satisfaction of publics (not just general public; supplier/manufacturer)&
image objectives
2) Objectives:
Retailer Image & Position
- An image represents how consumers & other stakeholders perceive a given
retailer
Ex: Outstanding tourist parks characterised by quality appointments offering an
exceptional range of facilities & guest services. Pool, BBQ, roadways, sites &
recreational facilities of an excellent standard
General Approaches to Retail Positioning
- Mass Merchandising
Retailers offer a discount or value-oriented image, a wide or deep
merchandise selection, and large store facilities.

Ex: IKEA/ Harvey Norman

-

Niche Retailing (Specialise in particular areas with specific consumers)

Retailers identify specific customer segments and deploy unique strategies
to address the desires of those segments rather than the mass market
Ex: Jim Kidd Sports

Examples of Retailer Positioning

- 24/7 McDonald (Convenient for consumers)
- McDonald drive through (Convenience)
- McCafe (Offer parents opportunity to come in and relax while the kids play in
the McD play area)
- Subway Eat Fresh (Logo says eat fresh to counter argue the typical stereotype
that fast food outlets are not healthy)
Selected Retail Positioning Strategies

- Upscale Specialty Store = Louis Vuitton

- Upscale Department Stores = David Jones
- Discount Specialty Stores = Payless ShoeSource
- Discount Department Stores = Big W
2) Objectives
Sales & Profit Outcomes
Sales outcomes
- Generally function of volume of goods & services sold. Growth, stability and
market share most frequent outcomes.
Profit outcomes
- Generally retailers look for a minimum level. Usually expressed in dollar
($) or percentage (%) of a retailers sales.

3) Identification of consumers
- Deals with the different target markets that the retailer would like to
cater to
- Retailer needs to identify the different types of consumers and a decision
needs to be made whether to take a mass marketing approach, a
concentrated marketing approach or a differentiated marketing
approach.
- Mass, concentrated or differentiated?
3) Identification of Consumers
Three techniques that also impact positioning:
- Mass marketing (low cost)
Ex: John Hughes/ Offers low cost
- Concentrated marketing
Ex: Barbagallo (Luxury cars)
- Differentiated marketing (Retailer knows there are different segments within the
market but dont operate in all segments of the marketplace)
Ex: Southside Mitsubishi
Retail Strategy Low Costs (How to cut cost)
- Removal of bad costs (Bad costs = items that are not selling/overpriced)
- Use of private label products to reduce costs of national/manufacturer brands
- Reduce product proliferation (rapid production)
- Obtain best net price not focus upon promotional monies, trade incentives and
forward buying
- Low promotional expenses (Everyday low pricing)
- Proper employee utilisation
Retail Strategy Differentiation
- Well-thought out private labels (Trader Joes, Target, King Arthur Flour)
(There are 3 kinds of labels. Private labels, generic brands and international brands.
As a retailer you need to get a good balance of those brands)
- Hiring right employees (value-profit chain)
- Empowering employees
- Use of a fun atmosphere
- Little things that mean a lot
- Money-back guarantees
Strategic Implications of Approach Taken
Selection of target market is likely to impact upon the following factors:
- Retailers location
(If retailer is targeting top end of market, then in Perth Claremont may be an ideal
location. If its a differentiated approach it may be useful to target suburbs. If retailer
is targeting the trade you may look at Wangara)
- Goods and service mix
(Ex: Dome)
- Promotional efforts

(Letterbox drops, brochures)

- Price orientation
(High scale retailer will have higher prices; and that affects the overall strategy of the
retailer. Good approach is to look at the consumer groups then make a decision on
which type of approach to adopt.)
- Overall strategy
4) Overall strategy
- Looks at the broad outline of activities that retailers have to do
- Two dimensions that have to be considered, controllable variables and
uncontrollable variables
- Uncontrollable variables are the ones that retailers have to respond to in
the marketplace
Controllable: Store location, managing business, merchandising/pricing &
communicating with customers
Uncontrollable: Consumers, competition, technology, economic condition,
seasonality & legal restriction
4) Overall Strategy

Controllable Variables: SMMC

1) Store location
- Zoning laws
(Has impact on the type of operation that can be carried out/ if retailer is located in the
CBD, requirements for parking bays are different from being located in the suburbs.
Ex: IKEA cant be in the CBD because there is no parking)
- Environmental laws
(Recycling laws in south Australia to recycle bottles/ Retailers have to charge extra
for drinks and if customers return the bottle they get a refund/ Can affect packaging.
Need to print additional labels for drinks in south Australia)
- Direct selling laws
- Local ordinances
- Leases & mortgages
2) Managing business
- Licensing provisions
- Employment laws
- Antitrust laws
- Franchise agreements
- Business taxes
- Recycling laws

3) Merchandise management & pricing

- Trademarks
- Merchandise restrictions (In WA the sales of alcohol is prohibited in departmental
stores)
- Product liability laws and lemon laws
- Sales taxes
- Unit-pricing laws
- Collusion laws
- Sale prices; price discrimination laws
4) Communicating with customers
- Truth-in-advertising and selling laws
- Truth-in-credit laws
- Telemarketing laws
- Bait-and-switch and switch laws (Cannot advertise for a particular product when it
is not available and when consumers come in store to buy the product you propose an
alternative)
- Inventory laws
- Labelling laws (Must include all the information in labels)
- Cooling-off laws
Benefits of Strategic Retail Planning
- Provides thorough analysis of requirements for doing business for different types
of retailers
- Outlines retailer goals/outcomes
- Allow retailers to determine how to differentiate themselves from competitors
- Allow retailers to develop an offering that appeals to a group of customers
- Offers an analysis of the legal, economic and competitive environment
- Provides for the coordination of firms total efforts
- Encourages anticipation and avoidance of crises
Additional Concerns/Considerations for Retailing Strategy Formulation
- Strategic planning may need to factor some global retailing considerations,
namely:
- Assessing your international potential (Assess if there is demand)
- Getting expert advice and counselling
- Selecting your countries
- Developing, implementing and reviewing an international retailing
strategy
Factors Affecting Success of a Global Retailing Strategy
- Timing of entry
- A balanced international program
- A growing middle class (Ex: China & India. 300-400 million people. Cant
overlook countries like Vietnam & Indonesia)
- Matching concept to market
- Solo or partnering (Whether we should engage with an experienced retailer
overseas)

- Store location and facilities

- Product selection (McD in India doesnt always serve beef)
Factors to Consider When Going Global

Institutional factors, consumer factors, store location factors, operations factors,

merchandising factors, pricing factors & image and promotional factors.
MOPIICS

Week 3
Retail Institutions by Ownership (Ch. 4)
Retail Institutions by Store-Based Strategy Mix (Ch. 5)
Ownership Forms (ICFLVC)
There are 6 types of ownership structures. Not mutually exclusive and can be
interrelated.
1) Independent retailers
2) Chain retailers
3) Franchises
4) Leased departments
5) Vertical Marketing System
6) Consumer Cooperatives
1) Independent Retailers
There are many independent retailers in the US because the setup costs are low. Entry
into the market is relatively easier compared to other forms such as franchising.
- 2.2 million independent US retailers
- Account for one-third of total store sales
- 70% of independents operated by owners and their families
- In Perth 32%
- Why so many? Easy of entry?
Advantages
- Flexibility in formats, locations and strategy
- Control over investment costs, personnel functions and strategies
- Strong entrepreneurial leadership
- Personal image
- Consistency & independence
Disadvantages
- Lack of bargaining power
- Lack of economies of scale
- Limited long-run planning
- Over-dependence on owner
- Labour intensive operations
2) Chain retailers
- Operate multiple outlets under common ownership structure.
- Engage in some level of centralized or coordinated purchasing and decision-making
(Advantage)
- In the US, there are roughly 110,000 retail chains operating about 900,000
establishments.
- Ex: EB games; Coles Group (Target, Bunnings, Kmart); Woolies Group (BWS,
Big W, Masters)
Advantages
- Bargaining power
- Cost efficiencies

- Efficiency maintained by computerisation, warehouse sharing and other

functions
- Defined management philosophy
- Considerable efforts in long run planning
Disadvantages
- Limited flexibility
- Higher investment costs
- Complex managerial control
- Limited independence among personnel
Franchising (2 formats, 3 structural arrangements)
- A contractual agreement between a franchisor and a retail franchisee that
allows the franchisee to conduct business under an established name and
according to a given pattern of business.
- Franchisee pays an initial free and a monthly percentage of gross sales in exchange
for the exclusive rights to sell goods & services in an area.
- Are there any other aspects of the franchise that can generate revenue for the
franchisor?
They can charge a fee for delivering products to the store, they could charge a
fee for setting up the store layout, they could charge a fee in training franchisees in
how to effectively operate their business. Franchisor essentially has minimum risk.
Franchises are a good way to enter the retail market because you are guided.
Examples in Australia: Jetts, Boost, 7/11
Examples of retail extensions: Jims Mowing, Jims Cleaning, Jims Pool Care
Different Franchise Formats
Product/Trademark Format
- Franchisee acquires the identity of a franchisor by agreeing to sell products
and/or operate under the franchisor name
- Franchisee operates autonomously
- 2/3 of retail franchising sales
- Example: IGA (IGA is not only independent, but also considered a franchise)
Business Format
- Franchisee receives assistance: location, quality control, accounting systems,
startup practices, management training.
- Common for restaurants, real estate.
(Chicken treat)

Structural Arrangements in Retail Franchising

1) Manufacturer-retailer:
A manufacturer gives independent franchisees the right to sell goods and related
services through a licensing agreement.
Ex: Auto/truck dealers (General Motors)
Petroleum products dealers (ExxonMobil)
2) Wholesaler-retailer:
- Voluntary
(A wholesaler sets up a franchise system and grants franchises to individual
retailers)
Ex: Auto accessories stores (Champion Auto)
Consumer electronics stores (Radio Shack)
- Cooperative
(A group of retailers sets up a franchise system and shares the ownership and
operations of a wholesaling organization)
Ex: Food stores (Associated food)
Hardware stores (Ace)
3) Service Sponsor-Retailer
A system of service product delivery in which an organisation producing a service
(eg. car rental, restaurants, financial services, etc.) sets up a number of
independently-owned franchised outlets in locations convenient to its customers.
Ex: Auto rental firms (Hertz)
Auto repair shops (Midas Muffler)
Hotels/Motels (Days Inn)
Lawn care firms (Lawn Doctor)
Fast-Food restaurants (Maccas)
Franchising in Australia
The governing body for franchising in Australia is the Franchising Council of
Australia (FCA). This is a non-profit body. The major objectives of the council
includes:
- To establish standards of international best practices
- To provide information and education about franchising
- To lobby state and federal governments
- Develop a vital, strong and financial franchising sector
- Advance the interests of members
- Foster broad understanding among stakeholders
- Build value-added services for members
Competitive State of Franchising
Advantages
- Low capital required
- Acquisition of well known names
- Operating/management skills taught
- Cooperative marketing possible

- Exclusive rights
- Less costly per unit
Disadvantages
- Over-saturation could occur
- Franchisors may overstate potential
- Contractual confinement (locked in by contract)
- Agreements may be cancelled or voided
- Royalties are based on sales, not profits
From the Franchisors Perspective
Benefits
- National and/or global presence possible
- Qualifications for franchisee/operations are set and enforced
- Money obtained at delivery
- Royalties represent revenue stream
Potential Problems
- Potential for harm to reputation
- Lack of uniformity may affect customer loyalty
- Ineffective franchised units may damage resale value, profitability
- Potential limits to franchisor rules
Potential Conflicts:
Franchisor Vs. Franchisee
- High power of franchisor relative to franchisee
- Franchisor obtains profit based on gross sales, not on franchisees profitability
- Franchisor requires goods and services to be purchased from itself or approved
vendor
- Franchisor can break up territory of existing franchisee, reducing its sales and
profitability
Leased Departments
A leased department is a department in a retail store that is rented to an outside
party:
- The proprietor is responsible for all aspects of its business and pays a
percentage of sales as rent
- The department store sets operating restrictions to ensure consistency and
coordination
Common Leased Departments for Department Stores
- Cosmetic/fragrances
- Beauty Salon/Spa
- Fine jewellery, shoes
- Banks
- Photography studios
Competitive State of Leased Departments

Benefits
- Provides one-stop shopping to customers
- Lessees handle management
- Reduces store costs
- Provides a stream of revenue
Potential Pitfalls
- Lessees may negate store image
- Procedures may conflict with department store
- Problems may be blamed on department store rather than lessee
Vertical Marketing Systems (ICS, PIS, FIS)
1) Independent Channel System
Functions:
- Manufacturing
- Wholesaling
- Retailing
Ownership:
- Independent manufacturer
- Independent wholesaler
- Independent retailer
2) Partially Integrated System
Functions:
- Manufacturing
- Wholesaling
- Retailing
Ownership:
- Two channel members own all facilities and perform all functions.
Ex: Coles
3) Fully Integrated System
Functions:
- Manufacturing
- Wholesaling
- Retailing
Ownership:
- All production and distribution functions are performed by one channel
member.
Ex: Apple. They have their retail store and is also involved in wholesaling as well as
making their own products as a manufacturer.
Consumer Cooperatives
- A cooperative is an organisation of individuals who pursue a common goal.
- It is run differently to any typical business
- Focus is on welfare of its members

- Aim is to cooperate with each other and not to compete against each other
- Different types: Consumer cooperatives, producer cooperatives, hybrid
cooperatives, credit union etc
- Hybrid cooperatives = Mixture of producers and consumers who both own and
control the business
- Credit union = Provide banking and loan services to its members
Retail Institutions by Store-Based Strategy Mix
- Store-based strategy mix helps us define a retailer based on the following items:
1) Retailer strategy
2) Retailer types
3) Mix retailer types
Retailer Strategy Mix
A strategy mix is the firms particular combination of:
- Store location
- Operating procedures
- Goods/services offered
- Pricing tactics
- Store atmosphere
- Customer services
- Promotional methods
- A combination of those will tell us the nature/type of the retail store
Earning Destination Retailer Status
(Destination retailer is a large store in a shopping centre)
- Must be price-oriented and cost efficient
- Must be upscale
- Must be convenient
- Should offer a dominant assortment
- Should offer superior customer service
- Must be innovative or exclusive

Retail Strategy Parameters

The Wheel of Retailing

Lessons of the Wheel of Retailing

- Do not lose sight of your prime customers price consciousness
- Beware of the dangers in upgrading target markets- Old segment gets sticker
shock and new segment does not accept retailers revised positioning
- Do not create opening for new cost-conscious retailer to emerge
- Employ customer benefit costing to weigh the cost and benefits of specific service
upgrades
- Use unbundled pricing to separately charge for selected services such as delivery,
installation etc

The Retail Life Cycle

Retail institutions pass through identifiable life stages

How Retail Institutions Are Evolving

- Mergers, diversification & downsizing
- Cost-containment & value-driven retailing
Methods for Cost Containment
(The process of controlling the expenses required to operate an organization or
perform a project within pre-planned budgetary constraints. The cost
containment process is an important management function that helps keep
costs down to only necessary and intended expenses in order to satisfy
financial targets.)
- Standardizing procedures, store layouts, store size, and product offerings
- Using secondary locations
- Placing stores in smaller communities
- Using inexpensive construction materials
- Using plainer fixtures and displays
- Buying refurbished equipment
- Joining cooperative buying and advertising
- Creatively financing inventories
Store-based Retail Strategy Mixes
Food-Oriented
- Convenience store (Coles express)
- Convenience supermarket (Coles)
- Food-based superstore (Tesco)
- Combination store (Walmart)
- Box (limited-line) store (Aldi)
- Warehouse store (Cub Foods)
General Merchandise
- Specialty store (JB Hi-Fi)
- Traditional department (MYER)
- Full-line discount store (Kmart)
- Variety store (Red Dot)
- Off-price chain (Chemist Warehouse)
- Factory outlet (Adidas Factory Outlet)
- Membership club (Metcash)
- Flea market

Food Based Strategy Mix Retailer Types

Convenience Store (Coles express)
Typical Location:
Neighbourhood
Merchandise:
Medium width and low depth of assortment; average quality
(Width = variety / number of types of product category)
(Depth = amount of choice of product and brand variation offered within a
product category)
Prices:
Average to above average
Atmosphere & Services:
Average
Promotion:
Moderate
Conventional Supermarket (Coles)
Typical Location:
Neighbourhood
Merchandise:
Extensive width and low depth of assortment; average quality; manufacturer,
private & generic brands
Prices:
Competitive
Atmosphere & Services:
Average
Promotion:
Heavy use of newspapers, flyers, and coupons
Food-Based Superstore (Tesco)
Typical Location:
Community shopping centre or isolated site
Merchandise:
Full assortment plus health and beauty aids and general merchandise
Prices:
Competitive
Atmosphere & Services:
Average
Promotion:
Heavy use of newspapers, flyers, and coupons
Combination Store (Ex: WalMart)
Typical Location:
Community shopping centre or isolated site
Merchandise:
Full assortment plus health and beauty aids and general merchandise
Prices:
Competitive

Atmosphere & Services:

Average
Promotion:
Heavy use of newspapers, flyers, and coupons
Box Store (Ex: ALDI)
Typical Location:
Neighbourhood
Merchandise:
Low width and depth of assortment; few perishables; few national brands
Prices:
Very low
Atmosphere & Services:
Low
Promotion:
Little or none
Warehouse Store (Ex: Cub Foods)
Typical Location:
Secondary site, often in industrial area
Merchandise:
Moderate width and low depth of assortment; emphasis on manufacturer
brands bought at discount
Prices:
Very low
Atmosphere & Services:
Low
Promotion:
Little or none
General Merchandise Strategy Mix Retailer Types
Department Stores (MYER)
Typical Location:
Business district, shopping centre or isolated store
Merchandise:
Extensive width and low depth of assortment; average to good quality
Prices:
Average to above average
Atmosphere & Services:
Good to excellent
Promotion:
Heavy ad & catalogue use; direct mail; personal selling
Specialty Store (JB Hi-Fi)
Typical Location:
Business district or shopping centre
Merchandise:
Very narrow width and extensive depth of assortment; average to good quality

Prices:
Competitive to above average
Atmosphere & Services:
Average to excellent
Promotion:
Heavy use of displays; Extensive sales force
Full-Line Discount Store (Kmart)
Typical Location:
Business district, shopping centre or isolated store
Merchandise:
Extensive width and depth of assortment; average to good quality
Prices:
Competitive
Atmosphere & Services:
Slightly below average to average
Promotion:
Heavy use of newspapers; price-oriented selling
Variety Store (Red Dot)
Typical Location:
Business district, shopping centre or isolated store
Merchandise:
Good width and some depth of assortment; below-average to average quality
Prices:
Average
Atmosphere & Services:
Below average
Promotion:
Use of newspapers
Off-Price Chain (Chemist Warehouse)
Typical Location:
Business district, shopping centre or isolated store
Merchandise:
Moderate width and poor depth of assortment; average to good quality; low
continuity
Prices:
Low
Atmosphere & Services:
Below average
Promotion:
Use of newspapers; brands not advertised; limited selling
Factory Outlet (Adidas Outlet)
Typical Location:
Out of the way site or discount mall
Merchandise:
Moderate width and poor depth of assortment; low continuity

Prices:
Very low
Atmosphere & Services:
Very low
Promotion:
Little
Membership Club (Metcash)
Typical Location:
Isolated store or secondary site
Merchandise:
Moderate width and poor depth of assortment; low continuity
Prices:
Very low
Atmosphere & Services:
Very low
Promotion:
Little; some direct mail
Flea Market
Typical Location:
Isolated store
Merchandise:
Extensive width and poor depth of assortment; low continuity; variable quality
Prices:
Very low
Atmosphere & Services:
Very low
Promotion:
Limited

Week 4
Web, Non-Store Based & other Forms of Non-Traditional Retailing (Chapter 6)
Learning Outcomes:
- Contrast single and multi-channel retailing
- Discuss direct marketing and direct selling
- Discuss vending machines, electronic retailing & other retailing formats
Overall Classifications of Retail Institutions
- Ownership (Last Epi)
- Store-based Retail Strategy Mix (Last epi)
- Non-store based retail strategy mix
Retail Strategy Mix
Single & Multi-Channel Marketing
Approaches to Retailing Channels

- Single channel approach means that the retailer will only adopt 1 method of
interacting with its consumers.
- Many retailers are moving away to a multi-channel approach
- Harvey Norman for instance engages in a multi channel retailing and it has a brick
and mortar operation, as well as online operations. On the other hand, Amazon.com,
example of a pure-play retailer, adopts a single channel approach to retailing.
Multi-Channel Retailing
1) Seek synergies among formats, for example:
- Get product information on Web
- Order through catalogue then pick-up in store
- Use kiosks for out-of-stock merchandise
2) Views each channel as creating value, for example:
- Immediacy of store
- 24/7 of Web
- Long lasting impression of catalogue

3) Channels are viewed as complementary, not competitive

Emerging Trends
- Increasing competition (Eg. More Airlines in Australia)
- Change customer lifestyles
- Increasing usage of dual distribution channels
- Changing media roles, technological advances, and global penetration
(Market dynamics tend to suggest that retailers should adopt a multi and/or a merged
channel approach to retailing to stay competitive.
Non-Traditional Retailing
- Non-traditional retailing also includes formats that do not fit into store and nonstore based categories. Examples:
Direct marketing
Airport retailing
Vending machines
Video kiosks
Online
Direct Marketing (DM)
- Customer is initially exposed to a good or service through a non-personal medium
and then orders by mail, phone, fax, or online. (Ex: Dick Smith. Take ur information
in store and target you later)
- Annual US sales exceed $325BN (Including the Web)
- Other leading countries include:
- Japan
- Germany
- Great Britain
- France
- Italy
Characteristics of DM Customers
- Married
- Upper middle class
- 35-50 years old
- Desire convenience, unique items, good prices
Advantages of Direct Marketing
- Ability to pinpoint customer segments
- Reduced costs and thus lower prices
- Large geographic coverage
- Convenient to customers
- Ability to eliminate some sales taxes
- Supplements regular business without additional outlets
Limitations of Direct Marketing
- Products often cannot be examined prior to purchase
- Costs may be underestimated
- Response rates to catalogues under 10% (Low response rate to catalogues)

- Long lead time required

- Industry reputation sometimes negative
- Clutter in the market will exist (Clutter = When theres too much junk mail and you
start throwing the catalogues away)
Database Retailing
- Database marketing can also help underpin direct marketing and comprises the
collection, storage and usage of customer information
- Name and address
- Background of the consumer
- Shopping interests
- Purchase behaviour
- Observation of 80-20 rule (80% of your revenue comes from 20% of your
consumers)
- Involves data mining (With data mining you can identify which consumers are
likely to spend more)
Ex: Dick Smith/ Fantastic Furniture
Factors Customers use to select a DM Firm
- Company reputation and image
- Ability to shop whenever consumer wants
- Types of goods and services
- Availability of toll-free number or web site for ordering
- Credit card acceptance
- Speed of performance delivery time
- Satisfaction with past purchases and good return policy
- Competitive prices comparative webpages?
Direct Marketing Media Selection
- Printed catalogues
- Direct-mail ads & brochures
- Inserts with monthly credit card and other bills (statement suffers)
- Freestanding displays
- Ads or programs in mass media
- Banner ads or hot links on the Web
- Video kiosks
Executing a Direct Media Strategy

Business definition
- Be clear on your companys mission statement. What you want to achieve
Direct Selling
Direct selling includes personal contact with consumers in their homes, other nonstore locations and phone solicitations initiated by retailer.
- One to one but not necessarily face to face
- Example: Amway
- Annual sales of $31 billion in the US, where 15 million people are employed (more
than 80% part time)
- Annual foreign revenues of $85BN generated by 48 million salespeople (US)
Direct selling industry (Global)
- 81% women
- 55 million employed
- 2 million home visits per month
- $1.6 billion annual sales
Vending Machines, Electronic Retailing & Other retailing forms
- Vending machines are a cash or card-operated retailing format that sells goods
and services
- Eliminates sales personnel & allows 24-hour sales
- Machines placed wherever convienient for consumers
- 95% of the $50 billion in annual U.S vending machine sales involve hot/cold
beverages and food items
Emergence of World Wide Web (WWW)
- The WWW way to access information on the Internet
- People work with easy-to-use Web addresses. This can be search engine driven
- Web users see words, charts, pictures, and video while hearing audio
- Both internet and world wide web convey the same central theme: online
interactive retailing
Why do retailers use the web?
- Projects a retail presence in cyberspace
- Enhances image of current offerings
- Generates additional sales
- Reaches geographically-dispersed customers
- Provides information to customers
- Promotes new products
- Demonstrates new product benefits
- Support other elements in the retail mix
- Provides customer service (eg. email)
- Can be more personal with consumers
- Conducts a retail business efficiently
- Helps obtain customer feedback
- Can promote special offers
- Describes employment opportunities
- Presents information to potential investors, franchisees, and the media

Five Stages Of Developing Retail Web Presence

1) Brochure Web Design
Site built rapidly on a small budget. Few items
2) Commerce Web Design
Full scale selling. Customer service support
3) Web Site Integrated with Existing Processes
Integrated into retailers buying & selling activities
4) Site Integrated with Manufacturer Systems
Integrated into other stores and partners
5) The Webified Store
Integrated into the value chain activities
Ex: Amazon.com
Web and Online Strengths
Using the Web and online shopping has a number of distinct advantages, namely:
- Wide variety of information
- Source of entertainment and fun
- Helps with interactive communications
- Wider selection of items
- Allows quick access to prices
- More convenient (24/7)
Reasons Customers DO NOT like to Shop Online
- Lack of trust
- Fear of purchases
- Lack of security
- Lack of personal communication
Recommendations for Web Retailers
- Develop/exploit a well-known, trustworthy retailer
- Tailor the product assortment for Web shoppers
- Enable the shopper to click as little as possible
- Provide a solid search engine
- Use customer information
Video Kiosks
These are freestanding, interactive, electronic terminal that displays products and
related information.
- Some kiosks are located in stores to enhance customer service; others let
consumers place orders.
- Approx. 2.2million video kiosks are in use globally. Nearly 1m+ of which are
internet-connected.
Airport Retailing Some issues
- Large group of prospective shoppers (might not even buy)
- Captive audience

- Strong sales-per-square-foot of retail space

- Strong sales of gift and travel items
- Difficulty in replenishment
- Longer operating hours
- Duty-free shopping possible
Multi-Channel Retailing (Principles)
- Use same product identification in all channels
- Price to give the same value in all channels
- Assess infrastructure economies
- Direct marketer database and delivery system
- Cross promote goods across channels
- Use suitable partners (Amazon to sell, FedEx to deliver)

Week 5
Understanding & Identifying Customers (Chapter 7)
Episode Outcomes
- Explain how demographics & lifestyles apply to retailing
- Examine consumer attitudes, shopping behaviour, and the consumer decision
process
- Examine how environmental factors affect shopping
- Briefly describe the marketing research process
Retailer-Customer Link

- To develop effective retailing strategy, we need to understand consumers. We

call this consumer behaviour.
- We also need to use some processes to understand these consumers, known as
Marketing Research.
- And we can use marketing research to determine if our retail strategy & tactics
are working.
What Makes Retail Shoppers Tick

- There are 6 factors that impact consumers motivation to shop.

1) Demographics of the consumers
2) Lifestyle of the consumers

3) Needs & wants of the consumer

4) Consumers shopping attitudes and behaviour
5) Retailer actions
6) Environmental factors
Demographics and Lifestyles
Demographics
- Consumer data that is objective, quantifiable, easily identifiable and
measurable
- Its the size of the population, the structure and the distribution of that population
(The clustering of residents gives you an idea of the potential market for a particular
product)
Lifestyles
- Ways in which consumers and families live and spend time/money
(First start with demographics, then look at the lifestyle)
- Based on social and physiological factors that are influenced by demographics
- Can be defined simply as how one lives and it reflects the attitudes, interest and
opinions of consumers
- Impacts greatly on the nature of spending patterns within households and families
Lifestyles: Psychological Factors (PAPCP)

- Lifestyles can be influenced by a whole range of psychological factors

1) Personality
- Brands and retailers have their own personalities too, similar to consumers. The goal
here is to match the brand/retailers personality to the consumer groups
2) Attitudes
3) Perceived risk
4) Class consciousness
- Different from social class. Social class is the categorisation of classes. Class
consciousness means as a consumer, do I believe I belong to a particular class?
Using products to reinforce my belief that I belong to it.
5) Purchase importance

Perceived Risk and Consumers

Types of Perceived Risk FFPPST

1) Functional
2) Physical
3) Financial
4) Social
5) Psychological
6) Time
Factors Affecting Perceived Risk
- Product/retailer newness
- Consumers budget
- Level of consumer experience
- Number of alternatives
- Social visibility
- Amount of information available
- Time available to shop
- Urgency of need
- Price of product
Outcome
- Purchase new product
- Stick with old brand
- Talk to friends
- Seek more information
- Non-purchase

Lifestyles: Social Factors CRTFHS

1) Culture
2) Reference groups
3) Time utilisation
4) Family life cycle
5) Household life cycle
6) Social class
Pepsi Segmentation
(Segmenting with demographics & psychographics)

Implications of Demographic & Lifestyle on Retailing

Some areas lifestyles likely to impact:
- Gender roles (Who is buyer, influencer & user)
- Consumer sophistication and confidence
- Poverty of time
- Component lifestyles
Consumer Needs and Desire
- Needs are a persons basic shopping requirements consistent with present
demographics and lifestyle
- Desires are discretionary shopping goals that impact upon a persons attitudes
and behaviour

Blurring Gender Roles

(Example of change)
- Since both parties (male and female) are making joint decisions now, as a marketer
you need to target both genders/individuals in your advertising campaign.
Three Special Market Segments
- In-home shoppers
- Online shoppers
- Out-shoppers
In-home shoppers
- Shopping is discretionary, not necessary (Want, not need)
- Convince is important
- Active, affluent, well educated
- Self-confident, younger, adventuresome
- Time scarcity is not a motivator
Online Shoppers
- Use of Web for decision-making processes as well as buying process
- Convenience is important
- Above average incomes, well-educated (All have credit cards, which is a must for
online shopping)
- Time scarcity is a motivator
Out-Shoppers
- Out-of-hometown shopping
- Young, members of a large family, and new to the community
- Income and education vary
- Like to travel, enjoy fine food, are active, and read out-of-town newspapers
Attitudes Towards Shopping
- Level of shopping enjoyment
- Shopping time
- Shifting feelings about retailing
- Why people buy or not on a shopping trip
- Attitudes by market segment
- Attitudes toward private brands
Top Reasons for Leaving an Apparel Store without Buying
- Cannot find an appealing style
- Cannot find the right size
- Nothing fits
- No sales help is available
- Cannot get in and out of the store easily
- Prices are too high
- In-store experience is stressful
- Cannot find a good value

Where Americans Shop

(Often similar for Australians too)

Cross Shopping
- Shopping for a product category at more than one retail format during the year
- Visiting multiple retailers on one shopping trip
The Consumer Decision Process

- Influenced by demographics & lifestyle

Key Factors in the Purchase Act

Types of Consumer Decisions

Degree of involvement is the level of interest and concern that the customer has
to make the right choices

- High risk = Extended decision-making process

- Low risk = Routine decision-making process
(Ex: Buying milk = Routine purchase)
(Ex: Buying phone/car = You will conduct greater information search = Extended
purchase)
Types of Impulse Shopping
- Completely unplanned No intention of making a purchase
- Partially unplanned Decided to make a purchase but no brand/model decided
upon
- Unplanned substitution Decided to make a purchase with brand/model
decided upon but changes mind in-store
Stimulating Impulse Purchase
- Having items on sale
- Layout of goods
- Bright colours on advertising
- Products near the checkout counter
Devising a Target Market Strategy
1) Determine target market approach
2) Select specific target market(s)
3) Study characteristics, needs, and attitudes of target market(s)
4) Examine how consumers make decisions- by product category
5) Develop and enact appropriate retail strategy mix(es) for the target market(s)
chosen
Possible Retailer Approaches
1) Mass Marketing
- Kohls Department Stores
2) Concentrated Marketing
- Foot Locker
3) Differentiated Marketing
- Family dollar

Environmental Factors & Consumers

- State of the economy (If booming, we spend more. Eg: Buy houses)
- Rate of inflation (If inflation high, purchasing decreases)
- Infrastructure for shopping
- Price wars
- Emergence of new retail formats
- People working at home
- Regulations on shopping
- Changing social values and norms
Information Gathering & Processing (Chapter 8)
How Information Flows in a Retail Distribution Channel

- All about getting information and deciphering that information in a meaningful way,
and interpreting it so we can develop tactics or solve business problems.
- We can see that information required by the retailer is at a number of levels, looking
down the channel it relates to customers and looking up the channel, it relates to
suppliers.
- If youre a retailer, it might involve wholesalers and manufacturers.
- We can see that retailing is one of the most complex parts of the value chain.
Because youre looking both down and up the chain at the same time.
Suppliers Need to Know
From the Retailer
- Estimates of category sales
- Inventory turnover rates
- Feedback on competitors
- Level of customer returns
(Customers may be returning damaged goods)
From the Customer
- Attitudes towards styles and models
- Extent of brand loyalty
- Willingness to pay premium for superior quality
Retailers Need to Know
From the Supplier
- Advance notice of new models & model changes
- Training materials
(Whos responsible for training? Ex: If youre a car dealership and have a whole range
of models coming in, who will train the mechanics to fix the new model, train the
sales person with the new sales pitch etc)
- Sales forecasts

(What the supplier has for sales forecast)

- Justifications for price changes
From the Customer
- Why people shop there
- Customers likes & dislikes
- Where else people shop
(What percentage of a customers wallet is being spent in your outlet vs. someone
elses? Share of wallet.)
Consumers Need to Know
From the Supplier
- Assembly and operating instructions
- Extent of warranty coverage
- Where to send a complaint
From the Retailer
- Where specific merchandise is stocked in the store
- Methods of payment acceptable
- Rain check and other policies
(Rain check = If you dont have this item now when will it be coming in?)
Retail Information System (RIS)
- Anticipates information needs of retail managers
- Collects, organizes, and stores relevant data on a continuous basis (and feed that
into tactics and strategies)
- Directs the flow of information to the proper decision makers (eg. Suppliers &
manufacturers)
- RIS is a centralised database system that controls all information flows into and
out of the retailer
A Retail Information System

Database Management
- A major element in an RIS
- System gathers, integrates, applies and stores information in related subject areas
- Used for:
- Frequent shopper programs
- Customer analysis
- Promotion evaluation
- Inventory planning
- Trading area analysis
(Inventory costs the most. As a general rule you want to try and minimize the
inventory level but have offerings in store when consumers want it)
Five Steps to Database Management
1) Plan the particular database and its components and determine information
needs
2) Acquire the necessary information
3) Retain information in usable & accessible format
4) Update the database regularly to reflect changing demographics, recent
purchases etc
5) Analyse the database to determine strengths & weaknesses
Database Management in Action

Ultimate aim here is to make effective decisions, based on the information available.

Data Warehousing

Components of a Data Warehouse

- Physical store location for data the warehouse
- Software to copy original databases and transfer them to warehouse
(Soft copy of your data)
- Interactive software to allow processing of inquiries
(Might find that your self-service technology and your checkout registers share the
same software (inventory management software))
- A directory for the categories of information kept in the warehouse
Data Mining and Micromarketing
Data Mining
- The in-depth analysis of information to gain specific insights about customers,
product categories, vendors, etc
Micromarketing
- An application of data mining whereby retailers use differentiated marketing
and develop focused retailer strategy mixes for specific customer segments
(Data mining is taking information, looking at their various patterns and doing an indepth analysis based on the data you have and developing tactics and strategies
from that data mining activity, known as micromarketing.)
Applying Universal Product Code (UPC) Technology to Gain Better Information
- Barcodes & QR codes
- Has provided retailers with instant access to information and allows them to get
more information at any point in time
- Can also impact on how consumers can shop within a retail store (Eg. QR code
scanner apps that you can download in your phone to scan a barcode within a retail
store. Eg: RedLaser can tell you where this product can also be purchased at other
places) (RedLaser = Scan, compare & save)

Market Research
Market Research Process

- We need to follow a process of deciding on how we develop tactics and strategies.

Ad we use marketing researchers for that.
- Define issues or problems to be research
(Eg. Why arent consumers buying this product?)
- Try to first look at secondary data because they are often much cheaper
Marketing Research in Retailing
- The collection and analysis of information relating to specific issues or problems
facing a retailer
Secondary Data
(Data gathered for other purposes)
Advantages
- Inexpensive
- Fast
- Several sources and perspectives
- Generally credible
- Provides background information
Disadvantages
- May not suit current study
- May be incomplete
- May be dated
- May not be accurate/credible
- May suffer from poor collection techniques
Secondary Data Sources
Internal
- Sales reports
- Billing reports
- Inventory records
- Performance reports
External
- Government based information
- Bureau of statistics data
- Census data
- Retail Trade Association data
- Public records
- Academic sources

Primary Data
Advantages
- Collected for specific purpose
- Current
- Relevant
- Known & controlled source
Disadvantages
- May be more expensive
- Limited perspectives
- Tends to be more time consuming
- Information may not be required
Primary Data Decisions
- In-house or outsource?
- Sampling method?
- Probability?
- Non-probability?
- Data collection method?
- Survey
- Observation
- Experiment
- Simulation
Survey Methods
- In person
- Over the telephone
- By mail
- Online
- Disguised (Dont let participants know the real purpose of this survey)
- Non-disguised (Discloses main purpose of survey)
A Semantic Differential for 2 Furniture Stores

- Doesnt solve the issue for you, but rather, it indicates to you what types of potential
actions you can take to solve the problem.
Mystery Shoppers
- Retailers hire people to pose as customers in order to evaluate aspects of the store
environment (eg. scales representations, display maintenance, and service calls)
Experiments
An experiment is a research method in which one or more elements of a retail strategy
mix are manipulated under controlled conditions.
- An element may be a price, a shelf display, store hours etc
- If a retailer wants to find out the effects of a price change on a brands sales, only the
price of that brand is varied
(Ex: If youre a 7-11 you can attempt changing the layout of one side of the store, and
remain the other side of the store to be the same and see whether there has been an
impact on the overall consumption level)
Simulation
- A simulation is a type of experiment whereby a computer program is used to
manipulate the elements of a retail strategy mix rather than test them in a real-life
setting
- Two simulation types are now being applied in retail setting: those based on
mathematical models and those involving virtual reality

Week 12
Integrating & Controlling Retail Strategy [A]
Logistics & Supply Chain Management [B]
Part A: Chapter 20
Part B: Chapters 15 & 16
Learning Outcomes
- Provide overview of retail performance measures.
- To show the value of a retail audit
- Discuss factors impacting effective audits
Some Retailer Performance Measures
Total sales.
Average sales per store.
Sales by goods/ service category.
Sales per square foot.
Gross margins.
Gross margin return on investment.
Operating income.
Inventory turnover.
Markdown percentages.
Employee turnover.
Financial ratios.
Profitability
Another widely accepted measure of service retailer performance is SERVQUAL
Measuring Service Quality - SERVQUAL
Reliability dependable and accurate
Responsiveness - prompt service
Assurance - instill confidence in customers
Empathy - caring, in best interests of customers
Tangibles - visually appealing facilities
Measurement Tool for Service Retailing
Service Performance:
- Reliability
- Empathy
- Responsiveness
- Assurance
- Tangibles
Outrage, Satisfaction and Delight
Outrage occurs when must-be attributes not met such as adequate parking,
advertised goods in stock, etc.
Satisfaction occurs when expectations are met or exceeded. Under-promise,
over-deliver. Any consequences?
Delight occurs when positive, surprise and memorable activities occur.
Problem is the need to constantly surprise consumer to garner delight

Both outrage and delight have high levels of word-of mouth

communication
Utilizing Gap Analysis

Benchmarking: Operating Statements [Examples]

How to Minimize Gaps?

- Customer insight
- Customer profiling
- Customer life-cycle
- Extended business model
- Relationship program planning & design
- Implementation
- Use retail audit to help performance

The Retail Audit Process

Obstacles for Doing a Retail Audit

An audit may be costly.
Incorrect data may be collected.
It may be quite time consuming.
Performance measures may be inaccurate.
Management not responsive to the findings.
Employees feel threatened & non-cooperative.
Example of general outcome from audit
American Customer Satisfaction Index (ACSI)
Are customer satisfaction & evaluation of quality improving or declining in
the United States?
Are these attitudes improving or declining for particular sectors of the retail
industry and/or specific companies?
Do we regard this as an important aspect of retailing in our own country?
Physical Distribution & Logistics
(This part of the lecture is based largely upon:
Coghlan, et. al. Chs. 15 & 16)
Learning Outcome:
Provide overview of distribution systems.
To show factors underpinning distribution success.
Discuss supply chain management (SCM)

Physical Distribution & Logistics

This aspect of retailing is concerned with the building blocks of logistics:
Inventory (storage and warehousing)
Fulfillment (picking and packing)
Transportation (freight)
Payment (flow of orders and invoices)
Functions Performed by Distribution Systems
Exchange:
Buying & selling
Negotiating terms of sale
Marketing communication
Physical Supply:
Handling
Breaking bulk
Creating assortments
Storing
Transporting
Facilitation:
Financing
Risk bearing
Market feedback
Market information
Concept of Wholesalers
Their main role is to help manage inventory throughout phases of the supply chain
provide information service, market research, sales and accounting data.
Wholesaler Types
- Merchant wholesalers
- Manufacturers Agents
- Sales Agents
- Brokers and Commission Merchants
Role of Retailers
- Both buyers and sellers of goods & services. Can be classified by numbers: i.e.
ownership and control and category of merchandise.
- Manage inventory & feedback to wholesalers
- This brings us back the questions related to the three Cs in the channel, namely:
Control
Coverage
Conflict Management
Vertical Marketing Systems
An organized form of channel control involving any number of intermediaries, may
be completely or partially integrated with various stages of production and
distribution under one ownership or control

Channel Management - Current & Future Issues

Channel power and relationships; need for mutual trust and cooperation.
Vertical marketing system; offers competitive advantage through control of all
or part of the supply chain.
Impact of technology - more efficient inventory management and cost
reduction, E-commerce and sophisticated data base management, more
automation of the distribution process.
Legal and ethical issues; antitrust and fair dealing legislation, international and
local laws for overseas transactions [e.g. no sales tax $1,000).
Emerging channel structures; increase in use of vertical integration and
multiple channels to gain channel domination.
Concept of supply chain management (SCM) has strongly immerged in the
channel
Supply Chain Management (SCM)
Distribution has metamorphosed into the concept of supply chain management
(SCM).
SCM is an organizing concept that starts with customer service and argues that
this results from cumulative efforts of the entire channel.
Suppliers Manufacturers Wholesalers Retailers Consumers
Basic premise is that logistics should be a key influence in marketing
decisions.
Aim to provide the right product at the right time in the right place
This has implications for every element of the chain going upstream or
downstream e.g., transaction at the grocery check out counter could suggest to
a farmer what to plant
Inventory Management in Marketing Channels
Reasons for Holding Inventory
Demand surges may outstrip supply
Economies of scale
Transportation takes time
However, holding costs need to be considered and include the following items:
Capital internal cost of funds x cost of inventory.
Storage climate, security, insurance, etc.
Obsolescence loss of value such as fashion items
Quality deterioration of quality such as foodstuffs.
Reducing Inventory Level Strategies:
Avoid slow turnover items
Reduce variety of items
Lengthen life of goods
Find vendor who can supply items faster
Locate cheaper warehouse