Professional Documents
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Strategic marketing for retailing, knowing your customers Fundamentals of Merchandising, establishing a pricing strategy,
The Retail Concept- is a management orientation through which the retailers try to focus on the needs of their target market and satisfy theit needs more effectively than the compititor
Strategic marketing for retailing, Sustainable competitive advantage can be gained by-
Location
Human resourse management
Establish specific objectives and allocate tesources Devlop a retail mix to implement strategy
Range of merchandise
Convenience
Time to travel
Socio-economic background and culture The stage of the family life cycle
Understanding the retail customer The customer decision making process Identification of a need Search for information Evaluating alternatives The purchase decision
MERCHANDISE MANAGEMENT
Fundamentals of Merchandising
Merchandising management involves a process by which the retailer tries to offer the right quantity of the right merchandise in the right place at the right time along with meeting the financial goals of the company
Fundamentals of Merchandising
Merchandise management is the planning and implementation of the acquisition handeling and monitoring of merchandise categories for an identified retail organisation
Fundamentals of Merchandising
Key emphasis
Forward planning
Monitoring handling
Retail Merchandising is the process of developing, securing, pricing, supporting and communicating the retailers merchandise offering.
It means offering the right product at the right time at the right price with the right appeal!!
Fundamentals of Merchandising
Categorising the buying process Meaning of Category
A category is an assortment of items which the customer may percieve as substitites for each
other
Fundamentals of Merchandising
Category Management
Category management is the process by which a retail business is managed with the objective of maximising the sales and profit of a category
Fundamentals of Merchandising
Categorising Merchendise Merchendising group Department Classification SKU
Fundamentals of Merchandising
Merchendise Plan-
The Objective
Defining the target Market Establishing performance goals
Fundamentals of Merchandising
Phases in merchendise Plan
Maketing Consideration
Mercchendising strategy option Types of customer needs Financial plan Merchendise assortment search
Develop the merchandise mix and establish the merchandise budget. Build the logistic system for procuring the merchandise mix. Price the merchandise offering. Organize the customer support service and manage the personal
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Planning And Controlling Retail Sales 2. Planning And Controlling Inventory Levels 3. Planning And Controlling Retail Reductions 4. Planning And Controlling Purchases 5. Planning And Controlling Profit Margins
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(# of product lines)
Merchandise
(# of product items)
Merchandise
1.The compatibility among product lines. Must Consider: Product substitutes Product complements Unrelated products
Product bulk
Product standardization
FACTORS USED TO EVALUATE PRODUCT LINES The role branding plays in the success of the product line. Must Consider:
How brands can distinguish a retailer from competitors How brands can build store loyalty The advantages and disadvantages of offering different types of brands no names, vendor brands, store brands (private labels) and licensed merchandise
How well the product matches consumption patterns and buying needs of targeted consumers The relative advantage, affinity, trialability, observability and complexity of new product introductions Market trends provide products the market wants!!
Targeted customers activities, interests, and opinions The match between consumers lifestyle and retailers image Usefulness of trade shows to identify product lines for targeted consumers lifestyles
No rules for what should be included in the merchandise mix and what should be excluded
Two useful management methods I. Category Management: each product managed as a business unit at the store level II. ABC Analysis: each product line is rank ordered based on performance
Must Must
organize the merchandise mix as to the number of different product lines carried decide on:
Brands
Sizes Colours Material Styles
Goal is to ensure that product choice meets targeted consumer needs Must carefully plan the number of units to have on hand to meet the expected sales for the brand, size, color combinations Must develop merchandise lists 1. Basic Stock List (staple items) 2. Model Stock List (fashion items) 3. Never Out List (key items and best sellers)
Involves monitoring and adjusting the types of product lines that are added and dropped from the merchandise mix Two widely used methods to control assortment and support: 1. Inventory turnover: rate at which the retailer depletes and replenishes stock 2. Open-to-buy:amount of new
Discount Stores
Pricing in Retail
If you get your customers because of price, you are going to Loose them because of price.
Markup on cost can be calculated by adding a pre-set (often industry standard) profit margin, or percentage, to the cost of the merchandise. Markup on retail is determined by dividing the dollar markup by retail.
Vendor Pricing
Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller retail shops to avoid price wars and still maintain a decent profit. By pricing products with the suggested retail prices supplied by the vendor, the retailer is out of the decision-making process. Another issue with using pre-set prices is that it doesn't allow a retailer to have an advantage over the competition.
Competitive Pricing
Consumers have many choices and are generally willing to shop around to receive the best price. Retailers considering a competitive pricing strategy will need to provide outstanding customer service to stand above the competition.
Pricing below competition simply means pricing products lower than the competitor's price. This strategy works well if the retailer negotiates the best prices, reduces costs and develops a marketing strategy to focus on price specials.
Prestige pricing, or pricing above competition, may be considered when location, exclusivity or unique customer service can justify higher prices. Retailers that stock high-quality merchandise that isn't available at any other location may be quite successful in pricing their products above competitors.
Psychological Pricing
Psychological pricing is used when prices are set to a certain level where the consumer perceives the price to be fair. The most common method is odd-pricing using figures that end in 5, 7 or 9. It is believed that consumers tend to round down a price of $9.95 to $9, rather than $10.
three items for $1.00. Not only is this strategy great for markdowns or sales events, but retailers have noticed consumers tend to purchase in larger amounts where the multiple pricing strategy is used.
Discount pricing and price reductions are a natural part of retailing. Discounting can include coupons, rebates, seasonal prices and other promotional Markdowns. Merchandise priced below cost is referred to as loss leaders. Although retailers make no profit on these discounted items, the hope is consumers will purchase other products at higher margins during
As you develop the best pricing model for your retail business, understand the ideal pricing strategy will depend on more than costs. It is difficult to say which component of pricing is more important than another. Just keep in mind, the right product price is the price the consumer is willing to pay, while providing a profit to the retailer.
Level of Service
Product Assortment
Price
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Classification of Ownership
Independent Retailers Chain Stores
Franchises
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Level of Service
Full Service
Self Service
Exclusive stores
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Mass Merchandising
Retailing strategy using moderate to low prices on large quantities of merchandise and lower service to stimulate high turnover of products.
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Hypermarket
Supercenter
Retail store combining groceries and general merchandise goods with a wide range of services.
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Nonstore Retailing
Automatic Vending
Direct Retailing
Direct Marketing
Electronic Retailing
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Direct Retailing
Direct Retailers sell products:
NFL.COM
Door-to-Door Office-toOffice
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Direct Marketing
Direct Mail
Telemarketing
Electronic Retailing
56 On Line http://www.avon.com
Electronic Retailing
Shop-at-Home Networks
On-Line Retailing
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On Line http://www.sylvanlearning.com
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Psychographics
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Price Promotion
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Target Market
Presentation
Place
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Price
Product Offering
The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.
On Line http://www.kroger.com
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Public Relations
Publicity
Sales Promotion
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Geography
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Location Decisions
Freestanding Store Shopping Center Tenant Mall Tenant
On Line http://www.mallofamerica.com
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Advantages
Design attracts shoppers
Activities and anchor stores draw customers Ample parking
Unified image
Price
High Price
Low Price
Good Value
Quality Image
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Sound
Odors
Visual Factors
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Global Retailing
Reasons for Global Expansion
Spread of communication and mass media Lowering of trade barriers and tariffs
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Merchandise Acceptability
Partnering Capability
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Global Retailing
Consistent Secure Global and Long-Term Domestic Corporate Perspective Position Strategies
73 On Line http://www.walmartstores.com
Trends in Retailing
Entertainment
Trends in Retailing
Customer Management
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Clienteling
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Importance of location decision: Requires complex decision making Costs lots of money Little flexibility once a location has been chosen Attributes of location have a strong impact on the retailers strategy
Criteria to be considered:
Size & characteristics of population Level of competition Access to transportation Availability of parking Attributes of nearby stores Property costs Length of agreement (if lease) Population trends Legal restrictions
Site Evaluation
Accessibility
Locational advantages
Terms of occupancy
Legal considerations (e.g. environmental considerations, zoning restrictions, building codes, signs, licensing requirements)
Population and/or household base Population growth potential Lifestyles of consumers Income potential Age makeup Population of nearby special markets, that is, daytime workers, students, and tourists, if applicable Occupation mix
Number and type of vehicles passing location Access of vehicles to location Number and type of pedestrians passing location Availability of mass transit, if applicable Accessibility of major highway artery Quality of access streets Level of street congestion Presence of physical barriers that affect trade area shape
Site Selection
Trade area -- contiguous geographic area that accounts for the majority of a stores sales and customers
Primary trade zone -- Usually 3-5 mile radius; generates 60-65% of customers
Secondary trade zone -- Usually 3-7 mile radius; generates 20% of customers
Tertiary trade zone -- Usually 15 - 50 mile
Demographic and socioeconomic characteristics of consumers can be determined Focus of promotional activities can be ascertained Impact of branch store can be determined Geographic weaknesses can be highlighted
Merchandises Division
Width
Length Depth
SKUs?
Inventory control count that represents one or more items that will be sold together. For example, a retail bed store would consider one bed frame with four wheels equal to one SKU (even though the frame and the wheels come from different suppliers), because a frame is never sold without wheels, and wheels are never sold alone. Conversely, a frame, a box spring, and a mattress would be considered three SKUs, because any of the three items might be sold separately.
A retail chain that seeks to locate itself in busy shopping areas (generally less than 2,000 sft, with no parking facilities and focused merchandise categories)
c) Destination format:
Independent retail stores located specifically in an area with alluring propositions (usually large in size, with ample concessions, huge parking space, wide merchandise categories)
Promotion: Moderate
Generally higher level of independent retailers exists 50% of these are run by owners and their families Why so many? Ease of entry
b) Franchise:
A contractual agreement between a franchisor and a retail franchisee, which allows the franchisee to conduct business under an established name and according to a given pattern of business Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for the exclusive rights to sell
Flexibility in formats, locations, and strategy Control over investment costs and personnel functions, strategies Personal image
Disadvantages Lack of bargaining power Lack of economies of scale Labor intensive operations Over-dependence on owner Limited long-run planning
Disadvantages oversaturation could small capital required occur franchisors may acquire well-known overstate potential names locked into contracts operating/management agreements may be skills taught cancelled or voided cooperative marketing royalties are based possible on sales, not profits exclusive selling rights less costly per unit
Promotion: Little
Bazaars?
Seasonal
Structured
Un-structured Thematic