CRMG200: Retailing Management

Book Notes

Chapter 1

Define Retailing – set of business activities that add value to products and services sold to consumers for personal or family use(not all retailing is done in stores – catalogue, internet, direct sales)

- retailing is a global high-tech industry - walmart is the the worlds largest corporation - Carrefour second largest retailer (not in Canada or us) - Lawblaws is the largest retailer in Canada, also largest wholesales food

distributor in canada - Failure is trying to please everyone - target markets, retail locations, detemining what merch and services to offer,

negogating with suppliers and distributing merch to stores, training motivating sales associates, deciding how to price, promote, and present merch

o satisfy consumers by haing the right merch at the right price at the right place at the right quantities at the right time

Success in Retailing

- understanding an engaing customers - brand image, customer service, management of employees - growth stratigies and deal with current economic crisis

o cut costs o think; risk management, customer experience, human capital

management, smaller stores, market segmentation, global o re-think supply chains o you are a brand o think multichannel

Understand the role retailers play in the distribution channel and the functions they perform

Distribution Channel – set of firms that facilitate the movement of products from point of production to the point of sale to the ultimate consumer

- Manufacturing, wholesale, retailer, consumer

Vertical Integration – firm performs more than one set of activities in the channel

- backwards integration

o retailer performs some distribution and manufacturing activities - forward integration

o when a manufacturer undertakes retailing activities

Functions performed by retailers – to increase value consumers receive from product

- providing an assortment of products and services o selection of brands, sizes, designs, colours, and prices

- breaking bulk o cost effective for manufacturers to ship in bulk, easier for consumers

to purchase in smaller quantities - holding inventory

o reduce consumers cost of holding inventory, useful for perishable products

- providing service and services o various methods of payment, payment plans o display products to been seen and tested before purchase o knowledgeable sales staff to answer questions and provide info o multichannel – answer questions online anytime

Know the economic significance of retailing in Canada

Corporate social responsibilities

- voluntary actions taken by a company to address the ethical, social, and environmental, impacts of its business

- growing in popularity in Canadian retail industry o asked to explain and the suitable strategies to seize the related

opportunities

Discuss the different types of decisions retail manager make

Management Opportunities

- hiring and promoting people with a wide range of skills and interests o to undertake most of the traditional business activities, raise capital

from financial institutions – purchase goods and services, develop accounting and management systems to control operations – manage warehouse and distribution systems, design and develop new products, undertake marketing activities – advertising, promotions, sales force management, market research

o employ people who have expertise and interest in; finance, accounting, human resource management, logistics, computer systems, and marketing

Retail Strategy

- how the firm plans to focus its resources to accomplish its objectives

o target market, or markets o nature of merch and/or services to offer to satisfy customers needs o how the retailer will build long term advantage over competitors

Strategic Decision Areas

- market strategy o analyze environment and the firm’s strengths and weaknesses o must be consistent with financial objectives

- location strategy o usually consumers top considertion o can gain long term advantage over competition when their location is

the best - organizational structure and human resource strategy

o related to market strategy o coordinates the implementation of the retailing strategy by buyers,

store managers, and sales associates - information systems and supply chain strategies

o opportunity to gain strategic advantage in the coming decade o point of sales (POS)

terminals read price and product info that’s coded into universal product codes (UPC) affixed to the merch

overall inventory management

give customers a more complete selection of merch

increase awareness of inventory levels

decrease inventory investment - customer relationship strategies (CRM)

o business philosophy and set of strategies, programs, and systems that focus on indentifying their most valued customers

once indentified special programs are created to build their loyalty

implementing retail strategy

- elements of the retail mix o product

intensity, assortment

types of merch/services offered o place

size, layout and design, location

store design, merch display, convenience of stores location

o value quality, price

value perception o people

climate, knowledge, service

climate is the measure of what it is like to shop in the store, product knowledge, policies, get customers in and out efficiently

o communication promotional max

public relations, sales promotion, advertising, direct marketing, personal selling

ethical and legal considerations

- ethics o principle governing behaviour of individuals and companies to

establish appropriate behaviour and indicate what is right and wrong o easily varies from country to county, and industry to industry

- retail manager must rely on their own code of ethics and that of the companies to decide what is right and wrong

Examine the various career and entrepreneurial opportunities retail offers

Entrepreneurial opportunities

- can provide opportunities for those who wish to start their own business o tim hortons, eddie black (black’s cameras), john holt and G.R.

Renfrew

Retail council of Canada

- started 1963 – voice of retail in Canada - not for profit and represents over 40000 members across Canada by

providing support in today’s competitive market place - training at the canadian retail institute

o promote retail education, career awareness, advancing professional designation programs

Understand the meaning of ethics and social responsibility and how they relate to the individual, retailer, and society

Fair trade

- items were produced in factories that pay workers far more then the prevailing min. wage and offered other benefits

Socially responsible retailers

- fair trade - educate consumers with products and donate a portion of profits to global

funds - lower the use of bags - hands on by contributing hours of service in their community

Other notes

Chip Wilson

- creator of Lululemon Athlectia inc. o no traditional advertising – television commercials, radio ads, national

newspaper campaigns - simply word of mouth programs o made the website more like an online community o Ivianna – tween market – brightly coloured dance inspired

- started the surf and snowboard trend in van. with Westbeach Snowboard Ltd.

- Newline Oqoqo o Uses economical feasible fabrics

- Business module: to elevate the world from mediocrity to greatness o Built on empowerment and personal responsibility for “creating,

creating”

Retail sales in Canada

- driving force of canadas economy o largest employer nationally – 2008

- largest share of retail sales in Canada are Ontario and quebec, then BC and Alberta

o largest cities o where leading retailers concentrate operations

- one of every 10 business is a retail store - roughly 6 store locations for every 1000 persons - largest retail sectors of retail sales

o food and automotive – occupying roughly half of the retail landscape - retail sales trade groups

o automotive, furniture/home furnishings/electronic stores, building and outdoor home supply stores, pharmacies and personal care stores, clothing and accessories, general merch, misc retailers

o pg. 9 - top three retailers in Canada

o Weston group Second largest private employer in the nation Largest retailer Third largest firm in Canada

o walmart, the sobey’s group o Controlled approx 20% of non automotive retail market

- Foreign companies control 40% of canadas retail market, 38% being from American companies

Global Retailers

- walmart, Carrefour, royal ahold, metro, Schwartz

o each generate more than $20 billion annually - good retailers continue to be among the largest retailers - European and American have the largest international presence

o 34.8% us, 39.6% euro, 9.6% japan, 4.4% Canada (headquarters)

- 2009 was a challenging year as it resulted in a global recession

- North America saw a decline in retail sales - Elsewhere the retail market saw various growth rates

Competitors

- intratype competition o comp between retailers of the same type or similar merch in different

format stores o variety – which creates scrambled merchendising

number of diff merch in a store can create one stop shopping

- know competitors to implement retail strategies

Customers

- needs are changing at an increasing rate - increased importance of shopping convenience - retailers must understand

o why customers shop o how they select a store o how they select among a stores merch

Chapter 2 – Types of retailers

Explore Various trends that are shaping todays retailers

changes in retail industry

- changing consumer preferences - increasing industry concentration - globalization of retail - the use of multiple channels to interact with consumers - increasing competition in the Canadian marketplace - the growing importance of tech to retail success - retail branding

Compare and contrast different types of retailers

Examine how retailers differ in terms of how they meet the needs of their customers

retailer characteristics

- to satisfy a group of consumers needs more efectivily then its competetors o type of merch sold (variety and assortment) o level of customer service o value is a combination of price and quality o communicate the stores position o place which includes location, store layout, and design

tradeoff between costs and benefits for maintaining additional inventory or additional services

variety

- breadth of merch – number of merch categories a retailer offers - number of product lines – ex. Shoes, appliances, apperal

assortment

- depth of merch – number of different items in a merch category - number of items within each product line ex – shoes – running, dress,

children

SKU (stock keeping unit)

- each different types of merch is called a SKU - when a retailer offers many SKUs, inventory investment increases because

the retailer must have backup stock for each SKU

customer servies

- customers expect retailers to provide some services o accepting credit and debit payment o providing parking o and being open during convienient hours

- services attract customers but are costly o more sales people = more $$$

Review how services retailers differ from merch retailers

Indentify the types of ownership for retail firms

Explore how multichannel retailers provide more value to their customers

Recognize the key success factors in multichannel retailing

Other notes

Imagewear multi channel approach elements – to reach the business customer wherever he or she may be

o the creation of an online presence, featuring a complete list of products

o a print catalogue/guide featuring a complete list of product possibilities

o making imagewear accessible through all stores and online presence o launching a fleet of mobile imagewear service vehicles o reaching business directly through a 100-strong sales force with a 1-

800 number

increasing industry concentration

- number of diff types of retailers has grown, number of competitors within each format is decreasing

- marketplace is dominated by few large retailers

NAICS

- north American industry classification system o six digit code based on type of products and services it produces and

sells - united states, Canada, mexico developed this classification system

Discount stores (or mass merchandisers or full-line discount stores)

- offers a broad variety of merch, limited services and low prices - have private labels and national brands – less fashion oriented - wamart accounts for almost 66% of all discount stores and pioneered the the

everyday low price concept - full-line discount stores face lots of competition from supercentres and

discount speciality stores - issues

o competition with; supercentres – carry grocery items as well, speciality stores

o to fix issues they; strong emphasis on fashion, layout of store/shopping environment, placed more emphasis on strong private labels

specialty stores

- limited number of complementary merch categories and provides a high level of service

- issues o specific target market and lots of tailoring to it, knowledgeable sales

staff, deep but narrow assortment – vulnerable to shift in consumers tastes and preferences

category specialist/category killer

- offering merch that is specialized - SA must be knowledgeable and reflect company, hired for their specific

expertise - Offer complete assortment at low prices, kill all competitors in set category - Most successful in this group is a home improvement centre - Issues

o Start in one region, then expand after saturating the one region o Once expanded competition is difficult since they are all the same

with low prices and it is difficult to differentiate themselves with competitors – therefore lower prices – therefore lower profit

To fix this they; reduce costs by increasing operating efficiency, and aquire smaller chains, service

Department stores

- retailers that carry a broad variety and deep assortment of stock, offer some customer services, separate departments to display merch

- largest in Canada; sears, the bay (now owned by US based Lord and taylor) - categorized into three tiers

o first tier - upscales, high fashion exclusive designer merch and exellent customer service –

holts o second tier – upscales, more modestly prices, less customer service

the bay o third tier – value-oriented cater to price conscious consumers

sears canada - leased department is when there is a space in a department store that is

leased/rented to an independent firm o pays department a percentage of sales

- issues o overall department stores sales have become stagnant due to

increase competition with discount/specialty stores and overall lowered perception of merch and services

- QR – quick response o When department store retailers work closely with vendors to ensure

better instock positions and reduce average inventory levels – monitor and choose stock as it comes but pay at beginning

Drugstores

- speciality stores that concentrate on health and personal grooming merch - pharmacies represent 50% of drugstore sales and greater % of their profits - issues

o non prescription side is having trouble due to elderly demands and from discount store sales

off-price retailers

- offer inconsistent assortment of brand-name, fashion oriented soft goods at low prices due to unique buying and merch practices

- winners – launched in 1982 - closeout retailers

o off price, that sell a broad but inconsistent assortment of merch – usually get merch from failing buisnesses

- outlet stores o off price, owned by manufacturers or retailers (those owned by

manufacturers are known as factory outlets) o offer added services, usually clustered together, food and beverages

value retailers

- general merch discount stores that are found in either lower income urban, or middle income suburbs, or rural areas and are smaller than original discount stores

- fastest growing segmant in Canadian retail

pop-up stores

- temporary stores – word of mouth, email, signs - create a retail buzz – reach out in no traditional ways or locations to respond

to consumers - can be a promotional medium

food retailers

- where grocery shoppers do most of their food shopping o 56 – conventional supermarket

self service food store offering groceries, meat, produce with limited sales and nonfood items

superstores are larger 1 – offer fresh perishables 2- target health conscious and

ethnic consumers 3- better instore experience 4 – more private label brands

o 23 – super centres/ big box sell 30-40% food and 60-70% non food fastest growing retail category one stop shopping experience

o 12 – others (like convenience stores) convenience stores

limited variety and assortment of merch at a convenient location

higher prices then supermarkets

couche-tarde/mac’s is canada’s biggest – known as circle k in the states

o 5 – limited assortment supermarket o 4 – warehouse clubs

limited merch and food (about half and half) with little service to offer the lowest price

located in low rent districts and simple structure Costco – usually annual fee

- worlds largest food retailer is walmart (which is only 40% of revenue) - issues in food retailing

o increased competition from other retailers grocery chains are making hot meals/meal solutions

Nonstore Retail Format

- primary modes of operation are not bricks-and-mortar stores - electronic retailing (e-tailing, online retailing, internet retailing)

o merch for sale over the internet o creation of over 10000 entrepreneurial retailers in the last 5 yrs o amazon over 3$billion annually, craigslist (online urban communities

with classified ads) o usually lack understanding of consumer needs and retaiing expertise o when the new channel is added it only benefits the consumers

(multichannel) - catalogue and direct-mail retailing

o nonstore retail format where retailer offers merch communicated to a customer through a catalogue

jc penny, sears, Williams-sonoma, limited brands (like VS), LL bean

o direct mailing retailer does this with letters and brochures o historically most successful with rural consumers who lack access to

stores o now it as used to create multichannel by putting internet into

catalogues – way to almost adertise the website o 95% of cata describe themselves as multichannel retailers

types

general merch cata retailers – broad variety of merch cata’s are periodically mailed

specialty cata retailers – specific catagories of merch

direct mail retailers – usually for specific product or service

o issues in cata retailing start up cost are low, but business is challenging hard for small retailers to compete with large who are well-

established mailing and printing costs are high and rising consumers are mailed so many it is hard to get their attention

timely to design, develop, distribute – hard to respond quickly to new trends and fashions

Direct selling

- salesperson (independent businessperson) contact consumer directly in convenient location, demonstrates merch benefits, takes order, then delivers

- face-to-face - annual sales in US are over $30 billion – worldwide 100billion - personal care – home/family care, wellness, other services,

leisure/educational items - use internet to complement face-to-face, but 73% are face-to-face - 14million people are direct sellers and almost all independent and 87% work

part time - party plan system

o 27% of sales o consumer invites friends over where the merch is demonstrated o host receives gift

- multilevel network o people serve as master distributors then get other people to

distribute in their network o pyramid scheme (illegal)

firm and program are designed to sell merch to other distributors instead of end users

Television Home Shopping (t-commerce or teleshopping)

- customers watch tv program demonstrating merch then consumers place order over telephone

o now you can also place order using tv romote control - three forms of electronic home shopping are

o cable channels dedicated to television shopping o infomercials

tv programs, usually 30min, mix entertainment with product o direct-response advertising

advertisements on tv or radio describe product and give opertunity to order

- the shopping channel (located in Ontario – mississauga) goes through thousands of units daily

o 18h of live broadcast per day o tv/satellite, website, catalogue, soon interactive television (tele with

comp) - competition are home shopping networks in the US through infomercials and

online also amazon, ebay, sears - advantage – see merch and demonstration, but cant choose which item

o to fix this issue categories of merch for specific time

Vending Machine Retailing

- nonstore format, where merch or services are stored in a machine and dispensed to customers when cash or credit is deposited

- placed at convenient high-traffic locations - 25.6 billion are sold annually in north America - growth is slow, 5%, and mirrors growth of economy - new concept: Get&Go Express combines convience store and vending

machine o 16 machine accept credit or debit and cash

Services Retailing

- sell primarily services rather than merch – large and growing part of retail industry

- trends that support growth o ageing requires health services – and younger are more interested in

health/fitness o more income in family allows more room to spend – cleaners

- differences between services (left of continuum) and merch retailers (right on continuum)

o intangibility hard to evaluate can rely on evaluations and complaints

o simultaneous production and consumption create and deliver the service as the customer consumes it,

therefore difficult to reduce costs with mass production – unless industrialized (mcD)

o Perishability Because creation and consumption is at the same time it can

not be saved, stored, or resold – must match supply and demand – large investments

o Inconsistency Services produced by people no two services will be identical –

consistently high quality services

Types of Ownership

- independent, single store establishments o entrepreneurial activity is extensive, over 60thousand are started

each year in north America o usually owner is manager, so quick response to demands o advertising and lower costs are more difficult – also owner must be

able to do a lot of jobs o to better compete with corporate chains retailers join wholesale-

sponsored voluntary cooperative group – offers merch program to small retailers on voluntary basis

IGA (independent grocers alliance)

- Cooperate retail chains o Retail chain – company operating multiple retail units under common

ownership and usually centralized decision making for strategy o Average has 35 stores and sells $140million yearly o Concern that coperate retail chains drive independent retailers out of

business – lower price – but local offer complementary merch and services

- Franchises o Agreement between franchisor and franchisee that allows franchisee

to operate a retail outlet using a name and format developed and supported by the franchisor

1/3 of all north American retail sales are by franchisee o contract – franchisee pays lump sum plus royalty on all sales for the

right to operate the store in specific location, also operate outlet in accordance of procedures by franchisor

franchisor helps with location and building, developing products or services sold, management training, and ads – to maintain reputation

o combines advantages of owner-managed business with efficiency of centralized decision making

Multichannel retailing

- retailer that sells merch or services through more than one channel - stores

o browsing preferred form of browsing

o touching and feeling greatest benifit

o personal service can provide meaningful, personalized info

o cash payment only channel that accepts this

o immediate gratification o entertainment and social interaction

break from daily routine - catalogue

o convenience place order at anytime

o portability o safety o visual presentation

better then CRT screen - internet

o convenience, safety, broad selection, detailed info, personalized, problem-solving info

- evolution o reach new market online, leverage skills and assets to grow revenue

profits, expand product and info, allows retailer to gain valuable insight on consumer, increase “share of wallet”

toad hall is one of canadas largest independent toy retailers – unique items

1990 etail site – servers and payment were outsourced - turning into the multichannel universe

o reasons for using internet 50% - purchasing products and services 77% - information seeking

- in store electronic kiosks o space in store where there is a computer connected to internet of

stores central offices o can be used by customers or sales people o create synergy between website and store – can show additional

products and information - customer service using technology

o 6/10 canadians believe in the importance of customer service, with a SA or kiosk

- integrated concept o brand image

project same image through all channels

talbots makes it look like your endtering their store “always classic..”

o merch assortment might use multichannel to expand assortment, colours, sizes

ex. Gap o pricing

- customization approach o encourages retailers to tailor services to meet each customers

personal needs Land’s End allows customers to chat with service

representatives (orders increased by 8%) - Designing the website

o Simplicity matters o Getting around o Blend website with store o Prioritize o Type of layout o Let them see it

Chapter 3 – customer buying behaviour

Explore how customers make decisions about whether to patronize a retailer and buy merch

The buying process

- the stages consumers go through to purchase merch or services - need recognition

o buying process triggered when consumer realizes they have an unsatisfied need

o utilitarian needs - needs motivating consumers to go shopping and accomplish a specific task

o hedonic needs - needs motivating consumers to go shopping for pleasure

stimulation – music, visual displays, scents, demonstrations social experience – meet friends and develop new

relationships learning new trends – visiting retailer lean about new trends

and ideas status and power – one of the few places they can get

attention and respect self reward – the merch and also providing a service like

personal makeover adventure – treat shopping as a game to be won – bargains

and low prices o leisure shopper – spends $113.33 on average per trip – most

profitable shopper o conflicting needs – since shoppers cannot satisfy in one store or one

product they appear to be inconsistent cross-shopping

a pattern of buying both premium and low-priced merch or patronizing expensive, status oriented retailers and price-oriented retailers

o stimulating need recognition advertising, internet promotions, direct mail, publicity, special

events - information search

o the stage in the buying process in which a customer seeks additional information to satisfy a need

o amount of information needed the nature and use of the product being purchased characteristics of the individual customer aspects of the market and the buying situation

# of competing brands and retail outlets

time pressure under which the purchase must be made o sources of info

internal – info in a customers memory such as names, images, and past experiences with different stores

external – info provided by media and other people o reducing information search

everyday low pricing strategy (EDLP) – a pricing strategy that stresses continuity of retail prices at a level somewhere between the regular nonsale price and the deep-discount sale price of the retailers competitors

- evaluations of alternative: the multiattribute model o a model of customers decision making based on the notion that

consumers see a retailer or a product as a collection of attributes or characteristics. The model can also be used for evaluating a retailer, product, or vendor. The model uses a weighted average score based on the importance of various issues and performance of those issue.

o Beliefs about performance o importance weighs (differs for each customer) o evaluating stores (performance belief x importance eights) o implications for retailers – can do market research to collect following

info: alternative retailers that customers consider characteristics or benefits that customers consider when

evaluating and choosing a retailer customers’ ratings of each retailer’s performance on

characteristics the importance weights that customers attach to the

characteristics o getting into the consideration set - the set of alternatives the

customer evaluates when making a merch selection four methods to increase customers chances of selecting set

store

increase beliefs about the store’s performance

decrease the performance beliefs for competing stores in the considering set

increase customer’s importance weights

add a new benefit o changing performance beliefs

change customer’s belief about performance by improving a performance rating in one characteristic – important to set target market

Lowe’s example

More then 50% of cust are woman

Widened isles to prevent “butt brush”

Shorter shelves and signs like a grocery store

Website has a DIY section Or decrease performance rating on another store – can be

illegal and uneffective, can backfire o Changing importance weights

Can influence store choice – improve benefits and decrease importance of inferior performance

o Adding a new benefit Example – Fair Indigo – made it so employees were paid a fair

wage , picked ethical factories Easier to change cust evaluations of newer benefits

- Purchasing the Merchandise or Service o Retailers use various tactics to increase the chances that cust will

convert positive merch or service evaluations into purchases Make it easier to purchase, quicker, entertaining Risk in making decision - reviews Risk in purchase so eliminate by adding return policies,

refunds - Postpurchase evaluation

o Satisfaction – a post consumption evaluation of the degree to which a store or product meets or exceeds customer expectations

o Postpurchase evaluation – the evaluation of merch or services after the cust has purchased and consumed them

o High levels build store and brand loyalty – competitive advantage

Social Factors Influencing Buying Decisions

- 6% of shoppers had a problem with retailer and contacted them, but 31% did and told friends – word of mouth it costly

- family o family decision making

needs of all members children play important role – must consider them in all

situations - reference groups

o one or more people whom a person uses as a basis of comparison for beliefs, feelings, and behaviours

offering info providing rewards for specific purchasing behaviour enhancing a consumer’s self-image

o store advocates are customers who like a store so much that they actively share their positive experiences with friends and family

perfect target - alpha moms – educated, tech savvy, type a mom with a common goal: mommy excellence

- canada’s multicultural market o minorities make up 13% of Canadian pop, 20% and 16% of labor force

by 2016 8/10 are first gen immigrants and 48% of torontos pop is

foreign born making Toronto most ethically diver city in the world – also van more diverse than any city in US

immigrants usually arrive to Canada with money and suitcase, they will need to buy necessary supplies and housegold items

immigrants are often used to sophisticated marketing from their home country and will look to advertising for information, store product, price, location

o culture – the meaning and values shared by most members of a society

haggling – is about building a relationship, learning about product, talking to shop owner – a challenge for many Canadian retailers

not about seeling to a market but serving, building a relationship

Ex. General motors Canada knows 2,8,9 are lucky to Chinese and lets cust choose license plate

Ethically diverse staff o Walmart has been airing ethnic ads since 1998 in Toronto – different

ethnicities speaking in their own language o Quebec

Non quebers have a tough time marketing in quebec – francophone

More beauty and fashion publications then rest of Canada combined

o Subcultures – a distinctive group of people within a culture. Members of a subculture share some customs and norms with the overall society but also have some unique perspectives

Age, geography, ethnicity, or lifestyle - Impact of the external environment

o Can occur through extreme forces that a retailer can neither foresee nor control

Ex. SARS – 2003 – Toronto - retailers sales dropped, but not in supermarkets or grocery stores

Retail sales -3.8%

Toronto sales account for 40% of Ontario and 15% of Canada

Ex. BSE – 2003 – western Canada – destruction of herds of cattle – avoid eating beef – beef export market closed – only one cow actually found

Lost $7.8 billion

Ex. – 9/11 – negative for flight sales to resort destinations and impact of duty free sales in 2006

Market Segmentation

- a group of customers whose needs will be satisfied by the same retail offering because they have similar needs and go through similar buying process

o internet effectively allows retailers to target individual customers and market products to them

- criteria for evaluating market segments o actionability – means that the definition of a market segment must

clearly indicate what the retailer should do to satisfy its needs customers in the segment must have similar needs, seek

similar benefits, and be satisfied by a similar retail offering those customers’ needs must be different from the needs of

customers in other segments o identifibility – permits a retailer to determine a market segment’s size

and with whom the retailer should communicate when promoting its retail offering

the segments size with whom the retailer should communicate when promoting

its retail offering o accessibility 1) the degree to which customers can easily get into and

out of a shopping centre 2) ability of the retailer to deliver the appropriate retail mix to the customers in the segment

o Size Must be large enough to support a unique retail mix

- Approaches for segmenting markets o Geographic segmentation – segmentation of potential customers by

where they live. A retail market can be segmented by countries, provinces, cities, and neighbourhoods.

o Demographic segmentation – a method of segmenting a retail market that groups consumers on the basis of easily measured, objective characteristics such as age, sex, income, and education

Who is the male shopper?

Do not care about showing expertise – most value for money

Tend to select well known brands

Most impulse purchasing The power of women

81% of all retail and service purchases o 51% of consumer electronics o 51% of cars o 50%computer

o 51% of travel

bring in more then half the income in most north American households

70% of women ignore ad camp. that aren’t tailored to women – Gender Mark international

is a woman has a bad experience she will tell 28 people o want a more intelligent honest approach to

retailing

80% of the shopping channel – 50% of online shoppers (35-54 age)

show no loyalty because price matters more than brand

knowledge of demographic is critical

to understand product demand and retailers strategy

a handy guide to make shopper (2006) identified five profiles

o the metrosexual alluent urban sophisticated 20-50 yrs loves to shop

o the maturiteen savvy, responsible, mature, pragmatic,

tech master o modern man

comfortable with woman – does not like to shop with them

20-30yrs o the dad

ignored by retailers, shops for necessities

o the retrosexual happy in traditional male behaviour rejects feminism and moisturizers for

men

harley Davidson o 1990 – best customer 32 yrs o 1998 – 38 yrs o 2001 – 46 yrs o older market (no longer boomers) now aiming

at women

david foot – demographic prof at UofT o auth boom, bust & echo

o 1/3 of north American pop was born after WW2 (boomers – 1946-1960) large impact of social and economic life

tween consumer

Growing up digital (1998) auth – Don Tapscott o 88mil people, 2-22 yrs o smart savvy, first gen to grow up around digital

media o pre teens have incredible purchasing power –

35$ bil on food/yr - Retailing to Tweens

o 8-13yrs – 2.5 million o fastest growing segment in Canada o spend $4.9 mill annually, and influence the $20 bill

KIDFLUENCE – the influence kids have on parents spending o Very sophisticated due to media exposure

Tele is the #1 place they learn about brands and products o West 49 (15 yrs)

Knows skateboarders and knows youth culture exclusively Sam bio – created concept dedicated to tweens

How do you remain sustainable? o Selling dream and lifestyle o Stores have notendo games o Young staff all sports enthusiasts o Shopping centre – youth cant drive o West 49 ambition skatecamp tv

Targets gen Y, action, sports lovers o Female tweens spend $700 mill on retail, double then boys o YTV kid and tween – 2.5 mill tweens are given…

$74 for birthday $7.70 weekly allowance 1/6 have part time job 5.60/h $800 each fall for back to school

- geographic segmentation – a market seg system that uses both geographic and demographic characteristics to classify consumers

o postal code by postal code – same neighbourhood same/similar products

o geodemographers – juggling postal codes, group people in clusters using census data

66 consumer clusters were found

wealthiest – cosmopolitan elite, $330000 annually, .21% of pop – lives in forest hill or montreal westmount

15 clusters unique o quebec

16 clusters similar to US o environics analytics specialize in data mining, consumer habits by

region, city, neighbourhood - lifestyle segmentation – a method of segmenting a retail market based on

how consumers live, how they spend their time and money, what activities they pursue, and their attitudes and opinions about the world

o psychographics – refers to how people live, spend time and money, what activities they pursue, and their attitudes and opinions about the world

very difficult to access – FP markets – Canadian demographics by the financial post

provides # of households in specific categories by city or town

GDsourcing, Ipsos-reid, leger marketing, pollara, decima research, environics

o Micheal adams – social scientist – president of environics – best selling author

Better happy then rich (2000)

Money is primary manifestation of values – earn, spend, invest, give away – how the world works and how we like to see it work

o Exhibit 3-6 pg. 87 - Buying situation segmentation – a method of segmenting a retail market

based on customer needs in a specific buying situation such as fill-in shopping trip versus a weekly shopping trip

- Benefit segmentation – a method of segmenting a retail market on the basis of similar benefits sought in merchandise service

- Composite segmentation approaches – a method of segmenting a retail market using multiple variables, including benefits sought, lifestyles, and demographics

o Best buy “customer centricity” program to target 5 composite segments

Barrys – best cust – professional men – 30-6- yrs – min income of $150 000, luxury cars

Jills – busy suburban moms Buzzes – focused, active younger men Rays – fam men who like practical tech 5th – small businesses

consumer behaviour towards fashion

- fashion: category of merch that typically lasts several seasons; sales can vary dramatically from one season to the next

- to profit retailers need to

o understand how fashions develop and diffuse through the market place

o use operating systems that enable them to match supply and demand for this volatile merchandise

- consumer needs satisfied by fashion o opportunity to satisfy emotional and practical needs o fashion to manage apperance, express self image and feelings,

enhance egos, make impression on others - what creates fashion

o economic factors luxury – beyond satisfying basic needs

o sociological factors fashion changes reflect changes in our social environment

o psychological factors adopt fashion to overcome boredom

- how do fashions develop and spread o fashions are not universal o fashion lifecycle

creation adoption by fashion leaders

trickle down theory

knock-offs

mass market theory – trickle across

buzz – general excitement about a hot new product

hype – artificially generated word of mouth manufactured by public relations

subculture theory – trickle up spread to larger consumer groups

compatibility – the degree to which the fashion is consistant with existing norms, values, and behaviours

complexity – refers to how easy it is to understand and use a new fashion. Consumers have to learn how to incorporate a new fashion into their lifestyle for it to be successful

trialability – the costs and commitment required to initially adopt a fashion

observability – the degree to which a new fashion is visible and easily communicated to others in a social group

saturation

highest level of social acceptance – can be considered old and boring for many people

decline in acceptance

once it has reached saturation its less appealing obsolescence

Determine what social and personal factors affect customer purchase decisions

Investigate how retailers can get customers to visit their stores more frequently and buy more merch during each visit

Discuss why and how retailers group customers into market segments

- half of the pop still likes traditional means of a customer experience o banks cut back on tellers due to ATM – relized a mistake

- Canadian marketplace exhibits some general consumer trends: o Value-oriented consumer o Bigger is better (stores – big-box, power centres) o Consumers are time stressed o Woman are dominant consumer (52% of pop and 81% buying power) o Tweens have money and influence parents spending o Ethnic markets are growing in Canada – opportunity o Loyalty – whats in it for me? o Customer satisfaction o Shopping centres need to re-invent – develop a niche o Tech is embraced by most consumers – retailers need to get online o Aging pop (boomers) more elderlies then children under 14 by 2016

Chapter 4 – retail market strategy

Breathing room for beauty

- murale, in ottawas shopping centre, packed with products and services, illusion to make it look more intimate

o Michele slepekis – vice-president of marketing, branding, and creative and james Hargreaves vice president of design and construction and Gregory tait music designer

Review basic principles of retail strategy

Definition of retail market strategy

- it indentifies the retailers o target market o the format the retailer plans to use to satisfy the target markets

needs o the base upon which the retailer plans to build a sustainable

competitive advantage - target market – the market segments toward which the retailers plans to

focus its resources and retail mix

- retail format – the retails type of retail mix (nature of merch and services offered, pricing policy, advertising and promo program, approach to store design and visual merch, and typical location).

- Sustainable competitive advantage – a distinctive competency of a retailer relative to its competitors that can be maintained over a considerable time period

- Curves – fitness centre o Over 10000 franchises in over 70 countries – fastest growing

franchise in history o Market leader in canada and 23 others, including US o Aging baby boomers – small towns – use hydraulic resistance

machines - Starbucks

o More than 17000 stores and kiosks – asia, australia, Europe, north America – 176000 employees

o Annual sales of over $10.4 bill

Long term strategic planning – more important

- because… o emergency of new competitors, formats, tech, shifts in consumer

preferences - must examine…

o easy to navigate store, merch offerings, efficiency of distribution systems, service attributes, loyalty programs, position in retail marketplace

target market and retail format

- retailing concept – a management orientation that holds that the key task of a retailer is to determine the needs and wants of its target market to direct the firm toward satisfying those needs and wants more effectively and efficiently than competitors

- retail market – a group of consumers with similar needs (a market segment) and a group of retailers using similar retail format to satisfy those consumer needs

- retail market for womens apperal o fashion segments

conservative; pay less shoes, salvation army traditional; the gap, laura, sears, walmart, zellers, eddie bauer,

sears fashion forward; club Monaco, le chateau, holts, the bay,

winners o retail formats

specialty store; the gap, laura, club Monaco, le chateau department; sears, the bay, holts

discount; pay less, zellers, walmart off price; salvation army, winners catalogue; sears, eddie bauer

Examine how a retailer can build a sustainable competitive advantage

Building a sustainable competitive advantage

- two variable must be assessed o micro-environment – all of the things within the retailers control

including the retail product sold, the price for the product, the promo and visual image of the store, and the store management decisions

o macro-environment – the external environment that the retailer cannot control, including competition, economic stability of the trade area, the tech that will make retailing more efficient, the regulatory and ethical environment in which the business operates, and the social trends including consumer behaviour and lifestyle and demographic trends.

Competition Economic stability of trade area The tech that makes retailing more efficient The regulatory and ethical environment in which the business

opertates Social trends – consumer behaviour, demographic and lifestyle

trends - SWOT analysis – an analysis of strengths, weaknesses, opertunities, and

threats designed to asses both the micro- and macro- environments and their relation to the retailer

- Exhibit 4-3 pg 99 - Seven important opportunities for retailers to develop sustainable

competitive advantage o Cust loyalty – customers commitment to shopping at a store

Develop clear and precise positioning strategies

The design and implementation of a retail mix to create in the customers mind an image of the retailer relative to its competitors, also called brand building

Usually use a map with two dimentions o Ex womens clothing

Fashion/style, service Develop a strong brand for the store or store brands

Private label brands Creating an emotional attachment with consumers though

loyalty programs

CRM – customer relationship management

o Ex. Canadian tire money, shopper optimum card, HBC rewards, air miles, aeroplan

o Info stored in data warehouse – the coordination and periodic copying of data from various sources, both inside and outside the enterprise, into an environment ready for analytical and informational processing. It contains all of the data the firm has collected about its customers and is the foundation for CRM activities

o Location Critical factor in consumer selection Starbucks – urban penetration, timmies – suburban

penetration o Human resource management

Employees play major role in cut loyalty o Distribution and information systems

Goal

Get cust merch they want, when they want it, in the quantities, at lower delivery cost

Walmart has largest data warehouse in the world – fine tune merch make it seamless – allow it to be the lowest cost provider of merch in every market it competes

o Unique merch Private label brands – products developed and marketed by a

retailer and only available for sale by that retailer, also called store brands

o Vendor relations May gain exclusive rights to

Sell merch in a specific region

Obtain special terms of purchase that are not available to competitors who lack such relations

Receive popular merch in short supply o Customer service

Once you have a reputation it is hard to change it Harry rosen – 50 years

Annual sales of $15 mill, 15 stores from Toronto to van

Fundraising to support prostate cancer

2004 voted prestigious order of Canada - multiple approach – multiple sources of advantage

o mcdees fast food, good value, hot and fresh

simple service expectations – reduce service time – quickly and courteously

quality ingredients available at each location great locations – kid friendly

Explore the steps retailers go through to develop strategy

Strategic retail planning process – the steps a retailer goes through to develop a strategic retail plan. It describes how retailers select target market segments, determine the appropriate retail format, and build sustainable competitive advantages

- re gifts to go – owner Kelly bradford o upper income men and women looking for gifts in the $50-500 range o SA like family, many benefits, very knowledgeable

1. define the business mission a. mission statement – a broad description of the scope of activities a

business plans to undertake – select objectives i. managers must answer 5 questions

1. what business are we in? 2. what should be our business in the future? 3. Who are our customers? 4. What are our capabilities? 5. What do we want to accomplish?

ii. Re gifts to go – “the mission of .. is to be the leading retailer of higher priced gifts in the van area and provide a stable income of $100000 per year for the owner”

2. Conduct a situation audit – an analysis of he opportunities and threats in the retail environment and the strengths and weaknesses of the retail business relative to its competitors – or SWOT analysis (strengths, weaknesses, opportunities, threats)

a. Market factors i. Size –measure in retail sales dollars – retailers opportunity

ii. Growth – growing is more attractive than mature or declining iii. Seasonality – less attractive because more resources are

needed for peak seasons iv. business cycles

b. Competitive factors i. barriers to entry – conditions in a retail market that make it

difficult for firms to entre the market 1. scale economics – cost advantage due to the size of a

retailer 2. customer loyalty 3. great/availability locations

ii. bargaining power of vendors – a competitive factor that makes a market unattractive when a few vendors control the

merch sold in it. In these sit, vendors have an opportunity to dictate prices and other terms, reducing the retailers profit.

iii. competitive rivalry – the frequency and intensity of reactions to actions undertaken by competitors

1. conditions that lead to intense rivalry include a. a large number of competitors that are all

anout the same size b. slow growth c. high fixed costs d. the lack of perceived differences between

competing retailers 2. re Kelly – department stores, craft galleries, internet

retailers, catalogues c. Enviro factors

i. tech ii. economic

iii. regulatory iv. social v. macro-environment questions to answer

1. what new developments or changes might occur, such as a new tech and regulations diff social factors and eco conditions?

2. What is the likelihood that these enviro changes will occur? What key factors affect whether these changes will occur?

3. How will these changes impact each retailer market, the firm and its competitors?

vi. Re Kelly – potential growth of internet gift retailers like RedEnvelope

d. Analysis of strengths and weaknesses – a critical aspect of the situation audit in which a retailer determines its unique capabilities – its strengths and weaknesses relative to its competition (exhibit 4-8)

i. Management capabilities ii. Financial resources

iii. Locations iv. Operations v. Merch

vi. Store management vii. Customer loyalty

viii. Re Kelly (pg. 115) 3. Indentify strategic opportunities

a. Opportunities for increasing retail sales i. Market prep

ii. Market expansion

iii. Retail format development iv. Diversification v. Re Kelly ex. 4-5

4. Evaluate strategic opportunities a. Identify opportunities found in the situation audit

i. Focus on opportunities that utilize its strength and its area of competitive advantages

5. Establish specific objectives and allocate resources a. Three components

i. The performance sought, including a numerical index against which progress may be measured

ii. A time frame within which the goal is to be achieved iii. The level of investment needed to achieve the objective

6. Develop a retail mix to implement strategy 7. Evaluate performance and make adjustments

Indentify different strategic opportunities retailers can pursue

Build a bear – Maxine clark (founder)

- executive trainee at May department store – over 20 yrs variety of positions at retail stores - 1992, president of payless shoes

- 1997 launched buid a bear concept – first location in st. louis, now over 400 stores

- 2008 over $468 mill annual sales – 10th largest toy retailer in US - keys to success – great merch, great people, great store execution - competitive strengths

o exciting interactive shopping experience o broad and loyal guest base o strong merch expertise o high level of guest service through consistent execution o attractive store economic model o highly experienced and disciplined management team

- raised over 700000 for children health and wellness causes

growth strategies

- market penetration opportunity – an investment opportunity strategy that focuses on increasing sales to present customers using the present retailing format

o approaches for increasing market penetration attracting new customers by opening more stores in target

market and longer hours display merch for impulse buying

cross- selling – when sales associates in one department attempt to sell complementary merch from other departments to their cust

- market expansion opportunity – a strategic investment opportunity that employs the existing retailing format in new market segments

o ex. A and F – uni Hollister – teens - retail format development opportunity – an investment opportunity strategy

in which a new retail format – a format involving a different retail mix – to the same target market

o ex. Chapters – began to use internet to sell books o or when they add another merch, amazon started to sell dvds o or best buy starting to offer services of installation

- diversification opportunity – a strategic investment opportunity that involves an entirely new retail format directed toward a market segment not presently being served

o can be risky and don’t always work as well o ex. La senza opened la senza girl o related vs. unrelated diversification

related diversification opportunity – a diversification opportunity strategy in which the retailers present offering and market share something in common with the market and format being considered

unrelated diversification – diversification in which there is no commonality between the present business and the new business

ex. Footlocker – worlds largest athletic footwear retailer

o 1990 – owned some burger king ect. Dumped once realized not important to main business

o “stick to you knitting” o vertical integration – by retailers into wholesaling or manufacturing

private label is related because you build on the retailers knowledge of the customer, but is unrelative because it is making product – can pay off big time in the end

- strategic opportunities and competitive advantage o RONA – established in 1939 was dealer owned now publicly traded

company 2000 purchased 66store chain cashway building centres, 2001

revelstoke and revy and lansing were added to RONA banner three major competitors; home depot, home hardware, RONA

- $4 bill/yr each 2005 signed with Olympic para winter games for 2010

o builds retailers reputation and success

global growth opportunities

- commonly targeted regions; mexico, latin America, Europe, china, and japan - can be risky, must deal with differences in; gov regulations, cultural

traditions, supply chain consideration, lang

Chapter 7 – international retail strategy

Review the factors in the home marketplace that would encourage a move to international retail expansion

Discuss the differences between a global retailer and a multinational retailer

Explore why Canadian retailers have a low success rate in US market

Indentify strategic decisions that must be considered when entering the international retail marketplace

Discuss which Canadian retailers are best positioned to become global retailers

- IKEA – name is founders initials and first letters of farm and village he grew up in

o Need furniture with sophisticated taste, low price o 254 stores in 35 countries o Swedish style food in caf o Entered US in 1987 – had to make changes to adapt to the US market o 2004 saudi aribia – two men trampled to death – rush of 20000 cust

to claim vouchers o with Canada, IKEA made the instructions easier

international retailing; Canadian issues

- American retailers come to Canada o 1952 – multimillion merger of two of the worlds largest mail order

companies (Simpsons ltd. Of Toronto and sears, Reobuck and co. of Chicago)

Simpsons-sears

1971 simpsons name was dropped – confused cust o 2006 the bay, canadas oldest retailer, was aquired by American

billionair jerry zucker then sold to NRDC in 2008 HBTC is now the leading north American retailer with four

divisions

lord and tayor, fortunoff, creative design studios, hudsons bay company

o free trade also made Americans want to venture north Canada is regarded as “the promise land” North American free trade agreement (NAFTA, 1994)

prompted big box retailers into Canada, put Canada in a crises in 1995

Bankruptcies and decent of; eatons woolco, kmart, Woolworth inc, and consumer distributing

Made those Canadian retailers who went to US to come back to Canada 90% failure rate

Also buyouts of Canadian retailers by Americans; shoppers (1999, kolberg and Roberts), club Monaco (1999 ralph Lauren), tim hortens (merged with Wendy’s), future shop (2002 purchased by best buy), winners (tj maxx)

US banners now control 38% of all retail sales in Canada

- Canadian retailers in US o Retailers who have been successful

Canadian tire (twice), future shop, Mark Work wearhouse, shoppers drug mart, coles books, colour your world, second cup, la senza, roots, aldo

Le chateau and danier have both been in new york but struggled

o Problems identified Inability to secure good real estate Underfunded advertising budgets. US retailers spend about

6% of overall sales on ads when Canada only uses 3% Underestimating the competiveness of the US market Failing to do adequate research Not devoting enough money and resources into the project

o More successful route Acquisition of existing US retailers Developing a unique product that people want

o Pharm-Escomptes Jean Coutu– quebec based 50 yrs 296 stores in quebec, 16th largest retailer in canada 2004 purchased Eckerd drugstore in eastern US for 3.1 bill 1987 took over 333 Brook pharmacies in US

o Roots Micheal budman and Don green founded roots 1973 121 stores in Canada - $248 mill in 2007 secured contract with negano olympics in 1998 “poorboy cap”

2003 roots secured international deals with US, Britain, Barbados

loss of 2010 olympics hurts roots o aldo

international since 2001, 15 countries, 10 corporate in England and 50 franchised

one of the few Canadian companies who built a successful global consumer brand

global growth opportunities

- international expansion is a strategy o commonly targeted regions; mexico, latin America, Europe, china,

india, and japan - 10 global retail trends, highlighted by Anthony Stoken and Russell Connolly

‘Naked consumption’ o walmart will increase its retail power across all income levels o price emphasis focuses on utilitarian store environments o go beyond entertainment to attract niche markets o consumers use the internet to comparison shop o kids are a big market opportunity; $25 BILL IN DIRECT SALES AND

$500 bill worth influencing parents spending in north America o consumers like the value low priced merch o affordable luxury elements in product for all shoppers o sales online will remain a minor share of overall retail sales o value in keeping and growing existing customer base o successful retailers will build their own brands

- issues to why retailers might want to grow internationally o saturated home marketplace with no room to grow o highly competitive marketplace o ageing pop that spends less and saves more

Taiwan, south korea Singapore are also ageing o eco recession, which limits consumer spending o high operating costs including staff wages, rental costs, and taxes o restrictive policies on retail development o shareholder pressure

- reasons to entre international marketplace o limited comp in the international marketplace o rising numbers of middle class consumers with improved standard

living o younger pop with purchasing power o trade agreements; north American free trade agreement (NAFTA),

world trade organization (WTO), european union (EU) o relaxed regulatory framework o favourable operating costs, including lower wages o opportunity to diversify o opportunity to try innovative concepts

- Giorgio Armani – china beijing 1998 - wants 30 stores in china by 2008 - The worlds largest shopping district

o Launched may 2006, bawdi, in dubailand o Asia-asia will be in the centre, worlds largest hotel

- Who is successful and who isn’t o Retailers with strong names have competitive advantages – gap, zara,

walmart, Carrefour, royal ahold, metro AG o Category killers and hypermarkets have higher success rates

- Keys to success o Globally sustainable competitive advantage – one of the

characteristics of retailers that have successfully exploited international growth opportunities

o Adaptability – a companies recognition of cultural differences and adaptation of its core

o Pg 190