The Domain of Retailing

Retailing encompasses those business activities involved with the sale of goods and services to the final consumer for personal, family, or household use. It is the final stage in a channel of distribution. Retailing functions are performed by any firm selling merchandise or providing services to the final consumer.

Categorizing Retailers


Method of Ownership

Independent  Chain  Franchising  Leased Department

Store

Strategy Mix

Nonstore Operations

Direct Marketing (including the Web)  Vending Machine  Direct Selling



Convenience Store  Conventional Supermarket  Food-Based Superstore  Combination Store/Supercenter (Hypermarket)  Specialty Store/Category Killer  Traditional Department Store  Full-line Discount Store  Membership Warehouse Club  Other Discounters

Department Stores
A department store is a retail establishment which specializes in selling a wide range of products without a single predominant merchandise line. Department stores usually sell products including apparel, furniture, appliances, electronics, and additionally select other lines of products such as paint, hardware, toiletries, cosmetics, photographic equipment, jewellery, toys, and sporting goods. Department stores are usually part of a retail chain of many stores situated around a country or several countries.

Department Stores: Carry a wide variety of product lines typically clothing, home furnishings, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers.

Hypermarket
In commerce, a hypermarket is a superstore which combines a supermarket and a department store. The result is a gigantic retail facility which carries an enormous range of products under one roof, including full lines of groceries and general merchandise. When they are planned, constructed, and executed correctly, a consumer can ideally satisfy all of his or her routine weekly shopping needs in one trip to the hypermarket. Hypermarkets, like other big-box stores, typically have business models focusing on high-volume, low-margin sales. Due to their large footprints -- a typical WalMart Supercenter covers 150,000 square feet, a typical Carrefour 210,000 square feet -- and the need for many shoppers to carry large quantities of goods, many hypermarkets choose suburban or out-of-town locations that are easily accessible by automobile.

Hypermarket: Carry a wide variety of product lines under one roof (one stop shopping), focusing on high-volume, low margin sales.
4

Supermarket
A supermarket is a departmentalized self-service store offering a wide variety of food and household merchandise. It is larger in size and has a wider selection than a traditional grocery store. The supermarket typically comprises meat, produce, dairy, and baked goods departments along with shelf space reserved for canned and packaged goods as well as for various nonfood items such as household cleaners, pharmacy products, and pet supplies. Most supermarkets also sell a variety of other household products that are consumed regularly, such as alcohol (where permitted), household cleaning products, medicine, clothes, and some sell a much wider range of non-food products.

Supermarket: Self-service store that carries a wide variety of food, laundry, and household products.

Specialty Stores
Specialty stores are small stores which specialise in a specific range of merchandise and related items. Most stores have an extensive width and depth of stock in the item that they specify in and provide high levels of service and expertise. The pricing policy is generally in the medium to high range, depending on factors like the type and exclusivity of merchandise and ownership, that is, whether they are owner operated or a chain operation which has the advantage of bulk purchasing and centralised warehousing system. They differ from department stores and supermarkets which carry a wide range of merchandise.

Specialty Stores: Carry narrow product lines with deep Assortments within those lines.

Warehouse Club
A warehouse club is a retail store, usually selling a limited variety of merchandise, in which customers pay annual membership fees in order to shop. The clubs are able to keep prices low due to the no-frills format of the stores. The concept is similar to the many consumers' cooperative supermarkets found in Europe, though using bigger stores and not co-operatively owned. The use of members prices without co-operative ownership is also sometimes used in bars and casinos.

Warehouse Club: Off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to members who pay annual membership fees.

Personal Care Stores/Health & Beauty Stores

A personal care store is a retail that sells perfumeries & cosmetics to grocery, and some store is also selling drugs & medicine. This store format is compact and situated in office buildling or shopping center. This store carries a wide variety of health & beauty products. Product Consultant service and Pharmacist are provided at this stores.

Personal Care Stores: Focusing on health & beauty products or product for daily usage.

Convenience Stores (C-Store or GStore)

A convenience store is a small store or shop. They are often located alongside busy roads, or at gas/petrol stations. This can take the form of gas stations supplementing their income with retail outlets, or convenience stores adding gas to the list of goods that they offer. Railway stations also often have convenience stores. They are also frequently located in densely-populated urban neighborhoods.

Convenience Stores: Small stores located near residential areas that are open long hours 7 days a week and carry a limited line of high-turnover convenience goods.

Convenience Stores
Differences from supermarkets Although larger newer convenience stores have quite a broad range of items, the selection is still limited compared to supermarkets, and in many stores only 1-2 choices are available. Prices in a convenience store are typically higher than at a supermarket, mass merchandise store, or auto supply store (with the exception of the goods such as milk, soda and fuel in which convenience stores traditionally do high volume and sometimes use as loss leaders). The stores will sometimes be the only stores and services near an interstate highway exit where drivers can buy any kind of food or drink for miles. Most of the profit margin from these stores comes from beer, liquor, and cigarettes. Although those three categories themselves usually yield lower margins per item, the amount of sales in the categories generally makes up for it. Profits per item are much higher on deli items (bags of ice, chicken, etc), but sales are generally lower. At least in some countries most convenience stores have longer shopping hours, some being open 24 hours.

10

Organizational Classification
Chain Stores: Two or more outlets that are owned and controlled, have central buying and merchandising, and sell similar lines of merchandise. Voluntary Chain: A wholesaler-sponsored group of independent retailers that engages in bulk buying and common merchandising. Retailer Cooperative: A group of independent retailers that bands together to set up a jointly owned, Central wholesale operation and conducts joint merchandising and promotion efforts. Franchise: A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.

11

Methods of Ownership
Independent Operates only one outlet and offers personal service, a convenient location, and close customer contact. Chain Involves common ownership of multiple outlets. It usually has central purchasing and decision making. Franchising An arrangement between a franchisor & a franchisee, which lets the latter run a business with a known name. Leased Department A section of a retail store rented to an outside party .

Store Strategy Mix (1)

Convenience Store A well-situated, food-oriented store with long hours and a limited number of items. Conventional Supermarket A departmentalized food store with minimum annual sales of Rs 10 cr, emphasizing food and related products. Food-Based Superstore A diversified supermarket that sells a broad range of food and nonfood items (accounting for 20 to 25% of sales). Combination Store/Supercenter/Hypermarket Unites food/grocery and general merchandise sales in one facility, with nonfoods providing 25 to 40% of sales. Specialty Store/Category Killer Concentrates on one product category.

Store Strategy Mix (2)

Traditional Department Store Has a great assortment of goods and services, offers many services, is a fashion leader, and is often an anchor store.
Full-Line Discount Store A department store with lower prices, a broad assortment, lower rent, self-service, branded goods, shopping carts, etc.

Membership Warehouse Club A format where final consumers and businesses pay yearly dues to shop in a huge, austere warehouse. Other Discounters Including warehouse-style food stores, off-price specialty chains, discount drug chains, and factory outlet stores.

Nonstore Operations
Direct Marketing Occurs when a consumer is exposed to a good or service by a nonpersonal medium & then orders by mail, phone, or PC. Vending Machine Uses coin- or card-operated machinery to dispense goods or services. Direct Selling Involves personal contact in consumer homes (and other nonstore locations) and retailer-initiated phone solicitations.

Strategies retailing mix

Strategic Retailing Issues: The Marketing Mix

Merchandise Assortment Store Atmospherics Customer Service Retail List Price Discounts Credit

Product #1 Customers
Location, Location, Location!

Price

Place

Advertising Promotion Selling Personal Publicity Sales Promotion

Strategic Issue #1. Retail Store Location

Factors affecting location
Intended target market Type of products Suitability of site for customer access Characteristics of existing retail operations
Three most important words in retailing: Location location

location!

Strategic Issues #1. Location Dynamics

Consumers want convenience, a subjective measurement Convenience Measurements
- Distance - Time - Parking - Traffic congestion

= Convenience

LOCATION sets the trading area

Free standing structure Shopping Malls
- Neighborhood shopping center - Community shopping center - Regional shopping center

Non Traditional Shopping Center

- Factory Outlets - Mini warehouse mall

Strategic Issue #2 Merchandise Assortment

Retail buyers must match their product selection, quality, price with constantly changing consumer wants. Scrambled merchandising- adding unrelated products to generate traffic & higher margins

Types of Merchandise Change

- The retail store merchandise must change as consumer wants change Product Selling Cycles Fad ..a relatively short term selling life cycle (under six months) Fashion .a relatively enduring selling lifecycle (over 1-2 years) -

Strategic Issue #2 Merchandise Assortment Plus:

Store Location Targeted Customers Store Personnel Store Layout/Image

Store Hours Store Services

Store Promotions

Many consumers value finding bargains.

Store Atmospherics
The sum total of all store stimuli, interior & exterior physical characteristics that appeal to emotions (psychological field) Components: Ambient factors, Design and Social Factors.


Ambient Factors (Perceptions) - lighting - sounds - smell

Store Atmospherics
Design Factors (Perceptions) - Floor covering - Ceilings - Wall coverings - Dressing Rooms Displays/Fixtures - Aisles - Color - Layout - Cleanliness - Signage - Furnishings - windows

layouts
Grid layout : common in super markets and discount stores uses space effectively Race track layout : also called loop layout shopin-shops - suitable for large format stores Free form layout : no specific format loses lot of retail space Herringbone layout : For small shops Spine : Exclusive showrooms (Brands) small in size Others y & s (typically boutique showrooms

Store Planning - Circulation Pattern

Free Flow Layout Fixtures and Merchandise are grouped in Freeflowing patterns on the sales floor

Store Planning - Circulation Pattern

Free Flow Layout Fixtures and Merchandise are grouped in Freeflowing patterns on the sales floor

Store Planning - Circulation Pattern

Grid Layout - Counters and Fixtures are placed in long
rows or runs usually at right angles, throughout the store

Store Planning - Circulation Pattern

Grid Layout - Counters and Fixtures are placed in long
rows or runs usually at right angles, throughout the store

Store Planning - Circulation Pattern

Loop Layout - The major customer aisle begins at the
entrance, loops through the store and returns customer to the front of the store

Store Planning - Circulation Pattern

Loop Layout - The major customer aisle begins at the
entrance, loops through the store and returns customer to the front of the store

Store Planning - Circulation Pattern

Spine Layout - The major
customer aisle runs from the front to the back of the store, with merchandise departments branching off to the the back side walls

Store Planning - Circulation Pattern

Spine Layout - The major
customer aisle runs from the front to the back of the store, with merchandise departments branching off to the the back side walls

Space Audit
Hot spot Warm spot Cold spot The floor manager must make sure that every space at the floor is used optimally.

Floors
Creates different atmos, zones, walkways & departments Flooring is chosen in such a way that it matches that particular section Types carpets, wood, tiles, vinyl, linoleum, marble, imitation wood and terracota Should be selected in such a way that cleanliness is maintained with ease & without noise

Interior walls
Painting is cheaper but difficult to maintain Plaster is best but costly Combination of paint & plaster gives a 3 dimensional finish Could also be combined with glass, fibre, concrete & different resins Brick, marble, wood, laminate, mirror, fabric & paper could also be used

ceiling
It conceals lot of vital services : lighting, electrical wiring, air conditioning, security equipment and fire protecting devices. The ceiling should not become dominant visual, distracting the shoppers from merchandise below.

lighting
Proper lighting can increase sales by 20 % Higher store patronage vs purchase intentions No burnt out lights merchandise would look old & grey Ambient lit stores & Theatrical lit stores Dropped bulb head- cost effectivenss it covers the path as well as the racks too Lights on walls defines the total space of the shop (multi floors)

music
Foreground vs background music Youngsters prefer BG music & elderly people prefer FG music (if shopping is pre-planned) Products & clientele should match the music Radio stations affect the mood of purchasers ( due to advertisements) structured music acts on the nervous system and activates the brain with corresponding emotional reactions

Merchandise Presentation Planning

Six Basic methods
Shelving Hanging Pegging Folding Stacking Dumping

Key Psychological Factors

Key Psychological Factors

Value / Fashion Image presentation of product influences image customer has regarding that product

Key Psychological Factors

Value / Fashion Image presentation of product influences image customer has regarding that product

Angles and Sightlines Customers view product at 45 degree angle and at eye level. Where a product is placed on shelves influences sales

Key Psychological Factors

45 degree sightlines angle
Value / Fashion Image presentation of product influences image customer has regarding that product

Angles and Sightlines Customers view product at 45 degree angle and at eye level. Where a product is placed on shelves influences sales

Key Psychological Factors

45 degree sightlines angle
Value / Fashion Image presentation of product influences image customer has regarding that product

Angles and Sightlines Customers view product at 45 degree angle and at eye level. Where a product is placed on shelves influences sales

Vertical Color Blocking - Display

product in vertical bands of color

Examples of Visual Merchandising Visual Merchandising, the art of attracting patrons with visual cues, is central to a retailers ability to generate sales. Visual Merchandising got its start at the turn of the century, when department stores began using theatrical set design and lighting to create exotic displays. Today, the way the departments are arranged, the location of the escalators, the lighting--all are carefully planned to earn the store more sales per square foot.

Examples of Visual Merchandising

Heres sampling of the techniques stores use to generate those sales:

Getm coming and going. Escalators are a focal point of many stores. That makes them ideal locations for promotional signs and for impulse items like perfume.

Examples of Visual Merchandising

Lead them to temptation. Department-store design incorporates a gauntlet of goodies to stimulate impulse buys. Cosmetics, a stores most profitable department, should always be at the main entrance to the store.

Examples of Visual Merchandising

Its all in the display. When an item, such as a watch or a scarf, is displayed in a glass case, it implies luxury. An item in a glass case with a lot of space around it implies real luxury.

Examples of Visual Merchandising

Bazaar? Behavior. Even high fashion stores arent above using the dumping method to display gloves, leather goods, scarves, and other small items the same way bargain stores do. These bins have a way of suggesting a good buy.

Examples of Visual Merchandising

Color is king. Retailers believe consumers are more apt to buy clothes that appear in full size and color assortments.

Examples of Visual Merchandising

Suggestion positioning. Once the customer has already purchased one item, its easier to sell an additional item. Thus apparel retailers strategically place impulse buys like hair bows and costume jewelry by the cashier the same way supermarket checkouts display candy and magazines.

Total Sensory Communication

Sight - discussed previously

Total Sensory Communication

Sight - discussed previously Sound - What background music is playing? Smell - Potpourri, tobacco, stale food, fish. Major influence on buying emotions.

Total Sensory Communication

Sight - discussed previously Sound - What background music is playing? Smell - Potpourri, tobacco, stale food, fish. Major influence on buying emotions. Touch - Is product open to consumer to feel texture?

Total Sensory Communication

Sight - discussed previously Sound - What background music is playing? Smell - Potpourri, tobacco, stale food, fish. Major influence on buying emotions. Touch - Is product open to consumer to feel texture? Taste - Free samples of new products at Supermarkets

Summary
The store itself it s the most meaningful communication between the retailer and the customer The store environment must: Create an Image Increase Productivity

Store Atmospherics
Social factors: In store service (sales personnel social & emotional labor) - Courteous m Rude behavior - Knowledgeable m Low information - Service m Insincere - Employee dress norms (casual ??) Make it convenient & pleasurable for customers to shop and pay for merchandise
Body Scan computers: personal service, selling & awareness?

In Store Pre sale Service

Personal Service Climate- Calls for a highly motivated, experienced & well paid work force - Retail jobs often pay poorly, are not challenging and produce high turnover

Average length of employee tenure with retailers 7 - 12 months

8% 29%
30%
1 - 2 years 3 - 5 years

5 + years

33%

Post-Sale Services
Complaints and adjustments Credit Policies Product maintenance Product information Pick up/Delivery

Strategic Issue Retailer Advertising

Location + Merchandise + Services + Atmospherics + ? Store Image

Advertising Medium(s) Newspapers - Television - Radio Magazine - Direct Mail - Videos-Web Videos-

Ideal Stores: What factors are most important in deciding where to shop? surveyed women said:
Price and Value

44%
Quality and Selection of Merchandise

34%
Service

11%
Shopping Environment

11%

Servicing the retail customer

Customer service
There is only one valid definition of business to create customers Though the Marketing mix could be copied by competitors, customer services cant be Should see business through the eyes of the customer Marketing Myopia ???!!!! Steps in effective customer service are:

Step 1
Identifying the key customer and listening and responding to them Listening helps to understand the moments of truth and the service experiences that they have had Customer hotlines, comments, customer complaints and interactions with the sales staff are a few methods

Step 2
Define superior service and establish a service strategy Vision statement??!!!!! Define parameters, so that it becomes easy to stick to them
Ex McDonald s vision is to be the world s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer at every restaurant smile.

Step 3
Set standards and measure performance Ex Dominoz pizza 30 minute delivery commitment vs pizza hut s Hot Dot Ex If you are not satisfied with the product, we will take it back Setting standards becomes easy to ensure compliance this is the stepping stone of Customer Delight

Step 4
Select, train and empower employees to work for the customer Training on customer skills, communication and product skills Customers get more irritated when management has to be consulted for minor glitches at the sales floor

Step 5
Recognize and reward accomplishment

GAP model
Gap 1 : the knowledge gap Gap 2 : the standard gap Gap 3 : the delivery gap Gap 4 : the communication gap

Mall Management

What is a Mall??!!
#1 space is never sold in Malls. (5% maximum allowed). Its always leased for rent. Cos Tenant-mix will be affected if the space changes hands. Ex Women's apparel store in the food court #2 Partnering with anchor stores leads to agglomeration economies #3 Management team very crucial role

Types of Mall
Seamless Specialty Luxury

Indian Scenario (2010)

CITY Delhi Mumbai Bangalore Chennai Kolkata Hyderabad Pune Ahmedabad No of malls 96 55 14 6 10 12 19 7

Tenant Mix (in India)

Tenant mix Hyper market Departmental stores Food courts Multiplex Entertainment Apparel Shoes Books & music Furniture Jewellery Impulse miscellaneous Lease rentals 7.25% 14.49% 10.14% 5.07% 1.55% 26.09% 4.35% 1.93% 4.35% 4.83% 4.11% 15.85% Area occupied 14.49% 21.43% 8.57% 8.57% 2.29% 17.14% 2.86% 2.29% 2.14% 2.86% 2.86% 11.71%

Retail Positioning
Identifying an underserved market niche, or segment, and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment
Example : Wal-Mart
 

Target Market - Middle class family Position - Price Leadership Every Day Low Prices Rollback gimmick Special Buys

Segmentation, targeting and positioning

Sam Walton computerized operations to lower costs to lower prices to meet target market needs with four different retail concepts: Wal-Mart discount stores Supercenters Neighborhood Markets Sam s Club

1. 2. 3. 4.

Packaged Retail Environments

Functional Advantages
- Focus on customer satisfaction - Integrate total product offerings

Result
- Added value to product - Consumer loyalty increases

Examples: Disneyland

Potential Channel Conflicts

Retailers Exclusive Distribution Store Loyalty Suppliers Intense Distribution Brand Loyalty

High Markup +Volume Low Markup/High Volume Love - Hate Relationship

Consumer Relevancy Awards

Consumer Relevancy Awards, Criteria:  Easy to shop/access  Price/Value  Product Assortment  Service  Enjoyable Shopping experience Consumer Rankings of store attributes: 1. Cleanliness 2. Courtesy & Respect 3. Easily visible prices 4. Well packaged products to avoid damage 5. An honest price

Consumer Relevancy Award Winners

(2001)
Department Stores Grocery Chain Drug Store Chain Electronic Stores Specialty Store Clothing, shoes & accessories Discount Store Chain Overall . . . . . . . . . . . J C Penny Publix CVS Best Buy Barnes & Noble GAP Wal-Mart ???

RESEARCH Knowing Your Customer

Level of Customer Service? High - - - Low

Sales Personnel? Hurried - - - Apathetic

Product Selection? Broad - - - Narrow

Retail Store Characteristics Consumer Profile? Sex Age Education Income

Store Image? Conservative - - - Modern?

Applied Research In Retailing Congruency of scent and music as

a driver of in-store behavior inHypothesis

Matching high arousal scent and high arousal music conditions will lead to enhanced (a) pleasure,(b) store environment, (c) impulse buying and (d) satisfaction, compared to mismatched conditions (ie. high/low or low/high).

 For Scents:

Experiment Variables

Lavender = low arousal scent Grapefruit = high arousal scent

For Music:
Slow tempo classical = low arousal music Fast tempo classical = high arousal music

 Survey Method
343 customers were asked/270 participated Most were female and under 20 62% said they purchased something in the store

Matching conditions produced higher responses than the mismatching conditions. Ex) When low arousal music was paired with low arousal scent, the perceived pleasure was higher than when low arousal music was paired with high arousal scent.

Focus Group Interview Consumer Summary (1 of 2)

Merchandise Selection Quality Prices Store Variety Personnel Appearances Overall Evaluation Positive Negative + (Mixed) + + + + -

Focus Group Interview Consumer Summary (2 of 2)

Store Hours Merchants Bloomsburg Town Convenience Parking Atmosphere Malls Overall Evaluation Positive Negative + + + +

Bloomsburg Retailing Viewed From Three Distinct Perspectives:

Older Consumers - limited expenditures - buy basics - sees average/good variety - captured in town market Working Consumers - economy is causing minimum purchases - sees limited variety - mobile, parking is inconvenient - willing to travel to get it

College Student - spending limited amounts - sees poor variety - can walk to stores

- waits to go home - very selective

Retail Information System (RIS) and Merchandise Management Issues

Company Goals Merchandise Information System Promotion Information Human Resources Information

Operating Information

Accounting and Financial Information

Franchising
A franchiser licenses (to the franchisee) the right to distribute/sell specified products (trademark s) according to operational guide-lines (Time, place, price, supplies, etc.) Develops & controls marketing strategies

Franchising: Advantages
Less Capital Required Use the Experience of Others Assurance of Customers Rapid Product Distribution Smaller Probability of Failure Advertising Assistance Highly Motivated owner/operators

Franchising: Disadvantages
Controlled by Franchiser (Power) Cost of Franchise Hard Work and Long Hours Reduced Personal Control

Merchandise Management
Merchandise Management involves a process by which a retailer attempts 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.

Merchandise Management
Merchandise Management requires a systematic as well as adherence to the concept of Marketing.

Key Aspects of Merchandise Management

Merchandise is being acquired for meeting demand in future, so forward planning is necessary in relation to changing consumption tastes and demand.

Key Aspects of Merchandise Management

It is required to handle the acquired Merchandise appropriately to ensure that it will be sold in perfect condition.

Key Aspects of Merchandise Management

All aspects of the process should be monitored to ensure the adequate financial returns from the investment decision of buying merchandise.

Levis: From Data to Denim (1)

Length 28

Retailer Customizes Jeans Orders

From Data to Denim (2)

Length 32

Data Sent from Sales Floor to Factory

From Data to Denim (3)

Automated Data Goes to Cutting Room

From Data to Denim (4)

Customization Includes Universal Product Code for Routing and Shipping