retail management

Distribution & Retail

Management

- Prof. Shashank Divekar

DISTRIBUTION

Distribution can be defined as an operation, or a series of

operations, which physically bring goods manufactured or

produced by any particular manufacturer into the hands of

the final consumer or user.

Distribution is an integral part of marketing. Its function is to

distribute or sub-divide the total product of a manufacturer on a

geographical basis to various specific markets.

Distribution is estimated to account for one-quarter of the price

of the consumer goods people buy.

Distribution creates time utility and space utility.

DISTRIBUTION

Market Logistics Objectives

“Getting the right goods at the right place at the right time..

.. At the least cost”.

DISTRIBUTION

Market Logistics

Primary Activities Secondary Activities

1. Transportation

2. Warehousing

3. Order Processing

4. Inventory Maintenance

5. Product Packaging

6. Product Handling

7. Acquisition

8. Product Scheduling

9. Information

Maintenance

CHANNELS OF DISTRIBUTION

A Distribution channel is a chain of people and/ or entities

involved in the transfer of title or ownership, as the

product moves from the producer to the end-consumer.

A path through which goods and services flow in one direction

(from vendor to the consumer), and the payments generated

by them that flow in the opposite direction (from consumer to

the vendor).

The structure of intra-company organisation units and extra-

company agents, dealers, wholesalers and retailers through

which a commodity, product or service is marketed.

- The American Marketing Association

Retailer : The retail outlet distributes the product to the

consumer / end-user, for personal, non-business use.

Maintains limited stock of goods for sale.

Wholesaler : Performs all activities involved in selling goods

and services to those who buy for re-sale or business use.

Maintains large stocks of goods for distribution.

Agent : Is usually a direct representative of the company in the

market. He approaches customers, negotiates and closes deals

with customers on behalf of the company. Agents rarely stock

goods with themselves.


C&FAs/ CSAs : This category is also known as ‘Facilitators’.

C&FAs (Carrying & Forwarding Agents) carry the goods

physically but do not pay for it, while CSAs (Consignment

Selling Agents) act as C&FA but also perform the selling

function and remit the collections to the company.

PHYSICAL DISTRIBUTION FUNCTIONS :

1. Breaking Bulk : Buying in large quantities and selling in small quantities - Reduces costs for both manufacturers as well as buyers.

2. Creating Bulk : Intermediary works as an ‘assembler’. Buys in small quantities and accumulates bulk for the buyer.

3. Creating Assortments : Creation of assortments of merchandise that would otherwise not be available. Offers a variety of products to the buyer.

4. Reducing transactions : The no. of necessary transactions to accomplish the exchanges necessary for economic activity is brought down substantially.

5. Transportation and storage : Intermediaries carry goods and also provide regional and local storage.


Manufacturer/ Producer

1

Wholesaler

Manufacturer’s

Chain Stores Retailer

Manufacturer’s

Branch Offices

Consumer


TYPICAL CHANNELS OF DISTRIBUTION

For Consumer Goods & Services :

Manufacturer Consumer

Manufacturer Retailer Consumer

Manufacturer Wholesaler Retailer Consumer

Manufacturer Agent Consumer


Functions of Marketing Channels

1. Provide Distribution Efficiency Thereby leaving the manufacturer free to concentrate on other

activities.

2. Salesmanship

3. Assist implementation of a Price Mix

4. Physical distribution & Financing

5. Merchandising

6. Market Intelligence

7. Demand Generation

8. Managing Various Flows in Distribution Physical, title, risk, negotiation, payments and information flow


Designing a Physical Distribution System

• Articulating distribution objectives

• Understand customer expectations in product delivery

• Optimising costs

• Keeping the system flexible.

• Understand competitors distribution policies


• Specifying the minimum service level desired in product delivery

• Evaluating channel alternatives


WHOLESALING

Wholesaling involves sale and distribution of goods to users

other than end consumers.

Wholesaling involves selling merchandise to retailers, other

wholesalers and merchants, or to industrial, commercial and

institutional users.

Wholesaling often occurs when large quantities of goods are

re-assembled, sorted, then repackaged, and distributed in

smaller lots, at a cost significantly lower than the average

retail price.

Buying of goods in large quantities from producers and selling

the same in small quantities to retailers is termed as wholesale

trade and the person who carries on wholesale trade is called

the "Wholesaler".


IMPORTANCE OF WHOLESALING

1. Providing retailers access to various products

2. Providing suppliers/ manufacturers access to

markets

3. Providing stocking and warehousing services

4. Value-addition to the distribution process by

participating in promotion, financing, payment

collection and market intelligence.

5. Sometimes wholesalers also share part of the

business risks.


FUNCTIONS OF WHOLESALING

The primary functions performed by the wholesalers are :

1. He collects varieties of goods from different producers.

2. He performs the warehousing function. This fills up the time

gap between the production and consumption.

3. He distributes the assembled goods to the retailer or to the

consumer directly. He thus helps in the dispersion process of

marketing.

4. He helps in the transportation of goods from the place of

production to his godown and further to the retailer.

5. Bulk-breaking


FUNCTIONS OF WHOLESALING

6. He provides financial assistance to the retailers by supplying

products on credit.

7. He helps in proper grading of goods as per quality, size and

colour.

8. He involves all the risks associated with the ownership as he

makes bulk purchases and makes arrangement for

assembling and warehousing.

9. Financing & Risk bearing

10. Services & training to industrial buyers


RETAILER

Any business entity selling products and services to end-

consumers is ‘retailing’.

Retailing includes all activities involved in selling and/ or

renting consumer products and services directly to ultimate

consumers for their personal or home consumption.

A retailer purchases goods or products in large quantities

directly from manufacturers or through a wholesaler, and

sells in smaller quantities to the consumer for a profit.

Retailing can be done in either fixed locations, mobile outlets

or online.


RETAILER

1. Retailing creates time, place and possession utility.

2. Makes a wide variety of goods available to consumers.

3. Plays a valuable role in creating a product and brand

image.

4. Retailer is a vital communication link between the

manufacturer and the end-user.

5. Personalised service and customising as and when

required.

Importance of Retailing :


RETAILER

Functions of Retailing :

1. Breaking Bulk

2. Sorting and categorising of goods

3. Offer advise and guidance to help customers

make the right choices.

4. Holding stock

5. Credit services

6. Training and after-sales service to end-users


Types of Retailers :

Retailers are classified based on the following factors :

• Ownership

• Merchandise Offered

• Format of Stores / Selling Method



Classification based on Merchandise Offered :

• General Stores

• Departmental Stores

• Variety Stores

• Speciality Stores

• Category Stores



Classification based on Format/ Method of selling :

• Warehouse Stores

• Vending Machines

• Street Vendors

• Corporate Chains

• Discount Stores

• Hypermarkets/ Supermarkets

• Malls

• E-Tailers

• Consumer Co-operatives



Classification Based on Ownership :

1. Independent Retailer/ Entrepreneur

2. Existing Retail Business

3. Franchise

4. Dealership

5. Network Marketing

RETAILING

FRANCHISING

Franchising is a business model in which A parent company

allows entrepreneurs to use a successful company's strategies,

techniques and trademarks; in exchange, the franchisee pays an

initial fee and royalties based on revenues.

The parent company also provides the franchisee with support,

including advertising and training, as part of the franchising

agreement.

Arrangement where one party (the franchiser) grants another

party (the franchisee) the right to use its trademark or trade-

name as well as certain business systems and processes, to

produce and market a good or service according to certain

specifications.

Advantages of franchising

To the franchisee :

1. Immediate name recognition

2. Tried, tested and successful products/ offerings

3. Standard building design/ décor

4. Detailed techniques in running and promoting the business

5. Training of employees

6. Ongoing help in promoting and upgrading the products

7. Lower financial risk and smaller gestation period due to an

established brand and goodwill.

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Disadvantages of franchising

To the franchisee :

1. Considerable capital allocation : In order to build

infrastructure and décor as per the franchisor’s specifications.

2. Lesser operational freedom and autonomy : Since all

operations are directed and monitored by the franchisor.

3. Benefits could be superficial/ illusory : Unless the franchisor

is a well-established brand and product, the benefits of

franchising arrangements could be limited or non-existent to

the franchisee.

4. Reduced margins : On-going royalty payments as well as

share in revenues/ profits can lead to reduced margins for the

franchisee.

RETAILING

Advantages of franchising

To the franchisor :

1. Capitalised expansion : Rather than investing own or

borrowed funds and human efforts for expansion,

franchising facilitates faster expansion with the

franchisee’s funds.

2. Brand development : The faster multi-unit expansion

serves to supplement and expand the brand

geographically.

3. Economies of scale : Larger volumes generated by multi-

unit expansion results in higher volumes of purchases

and leverage with suppliers and vendors.

4. Continuing revenue streams : Continuing royalty serves

as a steady cash inflow.

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Disadvantages of franchising

To the franchisor :

1. Greater risk of losing brand value and goodwill due to mistakes

or poor customer service on part of the franchisee.

2. Risks associated with sharing of confidential information,

techniques, trade secrets etc. with the franchisee.

3. Legal hassles : Franchising agreement involves lot of legal

formalities as well as government regulation, paperwork etc.

4. Limited control : Since a franchisee is an outsider to the parent

organisation, the franchisor has limited control over the way

business is carried out.

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Why is location so important for a retail outlet ?

• Location determines a large part of the

capital investment

• Location affects transportation costs

• Location affects labour and HR costs

• Location determines customer traffic

• Location affects volume of business

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Retail Location Decision

Location is typically the prime consideration in a customer’s

store choice decision. Locations are also used to develop a

sustainable competitive advantage.

An ideal location for a retail outlet is determined by

• Target market

• Competition

• Costs

Location of the retail store affects all aspects of business, such as :

• Attracting customers

• Convenience for labour/ employees

• Transportation and logistics

• Safety and security

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Secondary Factors determining locations :

• Demographics/ Target customers

• Competition

• Merchant Associations

• City rules/ by-laws

• Future Growth

Primary Factors determining locations :

• Business Requirements (Type of merchandise)

• Accessibility

• Traffic/ Footfalls

• Availability

• Costs (Acquisition, maintenance & security)

• Unique business requirements Lighting & display

Fire safety

Sanitation service

Children

Disabled persons

RETAILING

LEVELS OF RETAIL LOCATION DECISION

CITY CHOICE

• Trading area

• Population &

Growth trends

• Economic

Conditions

• Purchasing power

• Trade potential

• Competition

LOCALITY

CHOICE

• Shopping District

• Competition

• Accessibility

• Civic body rules &

Restrictions

• Expanding

localities

• Law & Order

SITE CHOICE

• Cost & Capacity

• Passing Customer

Traffic

• Interception

Potential

• Complementary

Outlets

• Parking &

Convenience

• Visibility

RETAILING

STORE DESIGN

Store design, architecture and layout are critical factors for the

success of any form of retail business. The physical

environment determines the shopping behaviour, mood and

hours spent by the customers.

Space, atmosphere, placement and illumination are important

since these affect the perception and interest generated in the

merchandise.

Carefully designed physical atmosphere :

• Attracts customers

• Enhances display effects

• Generates interest in the merchandise

• Improves quality of shopping experiences

• Helps customer retention efforts

• Helps brand positioning for the store

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STORE DESIGN

Key Components of Retail Atmosphere :

1. Exterior Atmosphere

2. Interior Atmosphere

3. Store Layout

4. Visual Merchandising

External Atmosphere : This includes all elements of physical

environment found outside the store, including the exterior,

entrance, approach road, traffic, windows, lighting, signages etc.

Storefront is considered very important in competitive markets as

strong differentiating factors. It is equally important for attracting

new shoppers in unknown markets.

RETAILING

STORE DESIGN

Elements of Exterior Atmosphere :

• Storefront

• Building Size and Height

• Visibility

• Surrounding Stores and marketplace

• Approach

• Marquee

• Parking Facilities

• Entrance

• Display Windows

• Illumination

• Uniqueness

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STORE DESIGN

Interior Atmosphere includes all elements of physical environment

found inside the store. Its importance lies in the fact that it

determines to a great extent the time spent, behaviour of the

visitors and the sales.

The internal retail environment contains various stimuli that play

upon the customer’s senses and influence the shopping

behaviour. The important aspects of internal environment are :

• Cleanliness, fragrance and freshness of air

• Floorings

• Wall colours and Textures

• Lighting

• Fixtures

• Width of aisles

• Personnel & Service quality

• Merchandise and display

• Vertical Transportation

RETAILING

STORE DESIGN

Store Layout is the internal retail store arrangement of

departments and groupings of merchandise.

A carefully planned, customer-friendly layout encourages the

customers to move around the store and shop for more than

what they have planned for.

The main objective of the layout should be :

1. Facilitating smooth and easy movement through the store,

without missing any section and without any confusion.

2. Uplifting the display and attracting the customers towards

specific merchandise.

3. Enhancing the overall impression about the store, its

contents, variety of goods and all relevant information.

4. Making the entire experience pleasant and satisfying for the

customers.

RETAILING

STORE

DESIGN

Target

Customers

Merchandise

Mix

Location

Parking

Access

Building

Architecture

Health &

Safety

Frontage

&

Entrance

Area

Available

Store Theme

STORE DESIGN MIX

Visibility

Neighbor-

hood

RETAILING

Principals of Store Design

• Totality

The entire store has to be conceived as one unit,

thereby incorporating the retailers image, positioning,

target customers, merchandise and services together.

• Focus

The primary focus for the retailer is the goods or

merchandise. This aspect should not be lost while

designing the décor and ambience.

• Ease of Shopping

The layout and interiors should facilitate ease of

navigation, access, information and service to

the customers.

• Change & Flexibility

Store designs have to be adaptable to the environment.

There should be adequate provision for changes,

modifications, expansions and up-gradations, from

time to time.

RETAILING

Store Display

Product placement plays a key role in enhancing the effect of

display and the selling opportunities. It attracts, creates desire

and also encourages the buyers to pick complimentary or related

items to the one already chosen.

Display decisions are determined by 3 key elements :

• Display Theme

• Location for the display

• Display Components

Display Concepts are based on a combination of one or more of

the following themes :

• Seasons

• Festivals

• Moods and Colours

• Special Days

• Zodiac Signs

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RETAILING

Store Layout :

The layout of the store is the manner in which merchandise or

products are arranged in a retail store.

It describes the interior arrangement of departments, sections or

groupings of merchandise.

While designing a customer-friendly layout, the following factors

are considered most important :

1. The number and flow of customers at peak hours

2. The shopping space allotted to the customers

3. Sufficient space for merchandise display

4. Safety and security

A customer-friendly store layout is likely to motivate the shoppers

to move around the store and shop more than what they planned.

RETAILING

Store Layout :

The layout of the store may vary across retailers, depending upon

the types of merchandise, customer habits and the space

available.

The objective of the layout should be to facilitate ease of

movement, ease of understanding the locations of different

merchandise and also take the customer through all the sections.

Typical store layout patterns are catagorized as below :

a) Grid Layout

b) Race-Track Layout

c) Freeform Layout

d) Storeyed Layout

RETAILING

Grid Layout :

This is the most commonly followed system which facilitates

movement within the area and uses space effectively.

The grid comprises of long gondolas with merchandise displayed

along the passages in a repetitive form.

The grid form is mostly employed by retail stores primarily selling

grocery items, FMCG goods or drugs (Medicines). The system

also facilitates display of large variety and quantity of goods

because of large shelf spaces.

Grid layout is not very appealing aesthetically but it facilitates

smooth shopping movement and ensures optimum space

utilisation, and is therefore cost efficient.

RETAILING Grid Layout :

Bakery

Fruits

F&B

Race-Track Layout :

This is also known as the ‘Loop’ layout. Here, the display is in the

form of a loop or a race-track, wherein a major aisle runs through

the store.

The aisle provides access to various smaller shops or

departments within the store. This design encourages impulse

purchasing, as shoppers are taken through various departments.

The departments place fresh or new merchandise on the aisles to

attract customers into the department. Different surfaces or

colours are used to differentiate between various departments.

This arrangement is not very common but offers an interesting

and entertaining shopping experience.

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RETAILING RACE-TRACK LAYOUT

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Free-Form Layout :

This format is used in large departmental stores, having several

sections.

Under the free-form format, the various sections or departments

are scattered across the retail floor, in different directions. There

is no particular route or pattern of movement of the customers.

This format provides an informal setting to the shoppers, allowing

them to roam around and browse at their will. Sales staff on the

retail floor have a challenging task to perform in this layout since

the customers are not drawn automatically.

Free-form layout may not provide for maximum utilisation of the

retail space available. There is also litlle or no possibility of

storage facility on the retail floor.

RETAILING Free-Form Layout

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Storeyed Layout :

Under this layout a multi-storeyed retail store can devote every

floor to a different category of goods and services.

This is a common form of store-layout design among leading retail

chains in India.

This layout offers not only the best utilisation of avaiilable floor

space but also provides comfort and ease to shoppers. It also

helps the retailers to manage the goods display more effectively.

Storeyed layout is more popular among leading fashion

department stores and supermarkets in India. Such

establishments can also provide restaurants, coffee shops and/

or entertainment and other services within the premises.

RETAILING

Factors affecting store layout :

1. Available floor space (Retail & Storage)

2. Variety of departments and sections

3. Other services offered

4. Types and variety of merchandise

5. Expected customer traffic

6. Display and demo requirements

7. Safety and security requirements

8. Horizontal and vertical transportation requirements

RETAILING

Floor Space Management :

FSM is about best possible allocation of space to various

departments, product categories and customer movements.

FSM not only attracts business by offering convenience to

customers, but also places the merchandise strategically so as to

help the sales efforts.

Space Planning affects the following factors :

• The location of various departments

• Placement of various products within the departments

• Specific locations for impulse buying, seasonal products

and complimentary products

• Revenue and profits per unit of space

RETAILING

Floor Space Management :

The retailer has to work out the best possible utilisation of the

limited space available.

Space allocation is the process of allocating the right amount of

space, to the right merchandise, at the right time according to the

customer demand.

Effective store space management requires a thorough

understanding of the following factors :

• The nature of merchandise, suppliers and departments

within the store.

• The quantity of the merchandise the store wants to carry

and display

• The location and proportion of space allotted to different

types of merchandise

RETAILING

MERCHANDISING

‘Merchandising’ is the process of acquiring, promotion and sale of goods in a retail outlet.

Merchandising involves the promotion of merchandise sales by coordinating production and marketing, and developing advertising, display and sales strategies to increase retail sales.

Merchandising is also understood as the marketing practice in which the brand or image of one product or service is used to sell another.

While retailers have traditionally engaged in the task of retail merchandising in a physical location, the Internet has now made it possible to apply these same basic principles in a virtual setting.

RETAILING

MERCHANDISING

The merchandise mix management involves decisions on important factors such as –

• The variety of merchandise to be offered • Assortment • Support

Merchandise variety refers to the number of different product lines to be stocked in the store.

Merchandise assortment refers to the number of different product items within a particular product line.

Merchandise support deals with the planning and control of the number of units the retailer needs to have on hand to meet the expected sales for a particular product.

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Strategic issues in merchandising decisions :

1. Who are our target customers ?

2. Which of their needs can we satisfy ?

3. What are our competitors doing ?

4. How can we do it differently ?

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Merchandise Management is the process of analysis, planning, acquisition, handling and control of the merchandise investments of a retail business with the objective of maximising the sales and profits of a category.

It is the process by which a retailer attempts to offer the right quantity of the right product at the right place and time, while meeting the retail firm’s financial objectives.

Planning and control of the merchandise inventory of the retail firm, in a manner which balances the expectations of the target customers and the strategy of the firm.

Merchandise management drives a retailer’s business strategy and has immense cost and profit implications.

RETAILING

Visual Merchandising Visual merchandising is the activity and profession of developing the floor plans and three-dimensional displays in order to maximise sales. This can be called the ‘silent salesmanship’ for retail formats. VM involves presentation of the store’s merchandise to highlight its function and aesthetic appeal to a consumer considering a purchase. It creates an engaging and enjoyable atmosphere, which invites consumers to spend more time in the store, and thus increase the turnover potential. These displays must attract attention to the merchandise, help create interest, fuel desire, and enhance perceived value.

RETAILING

Objectives of Visual Merchandising 1. Reflect the brand image

2. Strengthen brand awareness and brand recognition at the point-of-sale

3. Increase sales and multiple sales

4. Present concept and colour, co-ordinate merchandise

5. Create a comfortable, enjoyable and exciting shopping environment for consumers

6. Support sales staff, as a ‘silent’ selling tool

7. Reduce ‘mark-downs’

RETAILING

Principles of Visual Merchandising 1. Make it easier for the customers to locate the desired

category and the merchandise

2. Make self-selection simple and easy

3. Make coordination and accessorisation possible

4. Educate about the product in an effective and creative manner

5. Make arrangements in a manner which will push the sales of unsought goods.

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Role of 5 Senses in VM

In order to give the customers a pleasant store and purchase experience , the VM has to bear in mind certain factors which enhance the store display and customer perception.

For this purpose, all 5 Senses have to be kept in mind so as to create an overall favourable store atmosphere.

Sight : The retail space needs to be pleasing to the eye and uncluttered. It should be made easy for the customer to spot interesting merchandise.

a) Consistent colour scheme b) Fresh flowers decoration around the place c) Placing the merchandise at eye level

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Role of 5 Senses in VM

Sound : 1. Play music that is appropriate with the store theme 2. Play music that enhances the mood of the store 3. Play music according to the tastes and preferences of your

target customers 4. Make the environment alive, keep things humming

Taste : A fast-food outlet or an ice-cream or candy store helps uplift the mood of the customers.

Smell : The atmosphere and scent of the room must match the store theme.

Touch : Usually, cozy or unique items are placed within reach of the customers to experience. Comfortable chairs, soft leather furniture, samples of hand lotions etc.

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MERCHANDISE PLANNING Merchandise planning is the financial tool for planning and controlling the retailer’s investment in merchandise inventory. Retailers use the merchandise plan to determine and control sales volumes, inventory levels, procurement and profit margins. The four important components of the merchandise budget plan are as follows :

1. Sales Projection 2. Inventory Plan 3. Estimated Reductions 4. Estimated Purchase

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CATEGORY MANAGEMENT The phrase "category management" was coined by Brian F. Harris. A Category is an assortment of items that the customer views as products reasonably substituting each other. Category Management refers to the practice of managing a retail business with the objective of maximising the sales and profits of a category rather than the performance of individual models or brands. Category management involves managing product categories as business units and customizing them It is a systematic, disciplined approach to managing a product category as a strategic business unit.

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CATEGORY MANAGEMENT

Category management enables the retailers to devise merchandising strategy and to maximise the total return on the resources assigned.

In recent times, emergence of multiple brands in every product category and availability of a variety of substitute products has led to the emergence of category management as a retail business practice.

ADVANTAGES OF CATEGORY MANAGEMENT :

1. Increased Sales

2. Reduced inventory investment

3. Improved warehouse efficiency

RETAILING CATEGORY MANAGEMENT

The category management 8-step process :

Define the

category

Define the role of

the category (Within the retailer)

Assess the

current

performance

Set objectives

and targets for

the category

Devise an overall

strategy

Devise specific

tactics Implementation

Review

RETAILING

‘Product Range’ is the total product offering, expressed in terms of ‘Width’ and ‘Depth’. Product Width is the variety and number of types of product category (Packaged Foods, Personal Care, Grocery, Dairy, Fruits & vegetables, Electronics, Consumer durables, Garments etc.) Product Depth refers to choice of product and choice variations offered within every product category (Deep or shallow). (The deeper the assortment, the greater is the number of price levels offered) SKU (Stock Keeping Units) A number assigned to a product by a retail store to identify the price, product options and manufacturer of the merchandise.

Assortment Planning

RETAILING

SKUs are used by suppliers within their data management systems, to help track amounts of product in inventory, and/or units of billable entities sold. SKUs help suppliers be able to track efficiently, the numbers of individual variants of products/services sold or remaining in stock. Assortment Planning

Assortment refers to the number of SKUs 9Stock Keeping Units) within a merchandise category, group or department.

It is the process to determine what and how much should be carried in a merchandise category. Assortment plan is a trade-off between the bredth and depth of products that a retailer wishes to carry.

RETAILING

Questions to be considered during Assortment Planning : 1. Which SKUs drive sales & profits ?

2. Criteris to be applied for adding and deleting items

3. Opportunities likely to be missed by not carrying certain items

4. Items representing true variety, without duplication

5. Merchandise critical to customer loyalty or category image

6. Items not relevant or not contributing to category

RETAILING

PRIVATE LABEL BRANDS : Private Labels are also known as ‘Store Brands’. These are typically products which are manufactured by a company under exclusive contract with another, which sells and markets these brands through its own retail network. Private Label brands are made available to consumers through certain exclusive retail outlets, carrying the name and brand owned by the retailer, and are not widely available through conventional retailers. Store brands/ Private labels have become a way for retailers to differentiate themselves from their competitors and to create loyalty to their stores in a tightly concentrated marketplace.

RETAILING

PRIVATE LABEL BRANDS :

Retailers have extended the concept of private label to identify a brand with a store, a concept known as the store brand. This can be a far more profitable business than selling nationally advertised brands.

Use of private labels is most visible in food products and certain FMCG categories such as soaps and detergents. However it has also seen increasing application in clothing, apparels and cosmetics.

Private Label may be an extremely profitable business for companies or corporations already commanding an important share of the market, with certain products that enjoy a high customer recognition.

In the US, Private labels represent 20 percent of grocery store and 18 percent of supercenter sales.

RETAILING

ADVANTAGES OF PRIVATE LABEL BRANDS : 1. Control over quality

2. Control over pricing

3. Own ideas on positioning and marketing

4. Create unique identity, thereby leading to customer loyalty

5. Flexibility in pricing and selling strategies

6. Differentiation for retailer

RETAILING

Retailing Pricing

Pricing is one of the most important variables in retail decision making.

Price factor is the one that most easily elicits a response from the consumers. In retail marketing, price is frequently a major reason for shopping at a particular store.

Price can also influence the quantities of various products or services that consumers will buy, which in turn determines the total revenue an profits earned by the retailer.

Retail Pricing Objectives :

Primary objectives : 1. Maximise short & long-term profits 2. Build volumes 3. Increase market value

4. Establish a distinct image 5. Optimize price-value relationship

RETAILING

Retail Pricing Objectives : Secondary Objectives :

1. Maintain a proper store image

2. Discourage customers from becoming overly price conscious

3. Be perceived as fair by all parties

4. Be consistent in setting prices

5. Increase customer traffic during slow periods

6. Clear out seasonal merchandise

7. Match competitors prices without starting a price war

8. Create and maintain customer interest

9. Encourage repeat business

RETAILING

Retail Price Determinants :

1. Market factors – Market type, city type etc.

2. Competitor factors

3. Category/ Merchandise

4. Store and chain factors

5. Customer factors – Income and loyalty

6. Brand factors

7. Business Environment

8. Location

RETAILING

Approaches to Retail Pricing

EDLP High-Low

Pricing Loss Leader

Pricing

Skimming Pricing

Bundled Pricing

Penetration Pricing

Extinction Pricing

Price Lining

Retail Communication : Location, merchandise and price are crucial elements in attracting customers to a retail outlet and in generating business. However, the retailer also has to undertake promotional activities in order to publicise the business. The retailer has to design an effective communication programme to provide information to the customers and to persuade them to visit and shop at the store. Retail promotion is a philosophy that revolves around customer expectations and satisfaction. Its function is to invite, persuade and stimulate interest in the retailer.

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Retail Promotional Objectives : Retailers develop a promotional mix in order to accomplish several objectives, such as:

1. Positioning of the retailer

2. Immediate customer visibility

3. Increasing the customer traffic

4. Increasing sales

5. Announcing special events

6. New Products

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Contd..

Retail Promotional Objectives :

7. Information about the store location

8. Information about the merchandise offered

9. Develop repeat purchases

10. Develop Brand loyalty

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Contd..

Planning retail communication :

A promotion plan put together skillfully, plays an important role in the retailer’s effectiveness in communicating with the customers.

The planning process involves the following steps :

1. Setting the communication objectives

2. Determining the promotional budget

3. Assigning the budget to various activities

4. Implementation and evaluation

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Deciding the Promotional Budget : Promotional budgets can be decided using any of the following methods :

• Marginal Analysis

• Objective and task method

• Thumb rule method Affordability Percentage of sales Competitive parity

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International Retailing International retailing includes all activities involved in selling products and services to final international customers for their personal consumption. According to the Wharton School of Business at the University of Pennsylvania, the international retail market includes all buyers and sellers, regardless of their location throughout the world. The economic boom in several countries, coupled with globalization have given way to major retailers looking at expanding businesses across borders. The advent of internet and multimedia has further changed the dimensions as far as International Retailing is concerned.

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International Retailing is broadly categorised as

a. Global Grocery Retailers

b. International Fashion Brands

Wal-Mart, Carrefour, Metro, Tesco etc. are a few of the leading international grocery retailers having multi-national presence.

Gucci, Ralph Lauren, Mango, Zara, Benetton etc. are some of the major global fashion retailers.

There is yet another group of International retailers like IKEA, Lego, Toys ‘R’Us etc who focus and specialise in particular segments.

The key success factors in international retailing are :

• The Internet - an e-commerce web presence • Data Gathering - accumulation of demographic data on Web users • Global Sourcing - maximization of global sourcing opportunities

The Internet : Merely having a presence on the web is not considered enough. It must effectively deliver the product or service, make transactions procedures clear and easy with as few steps as possible, be able to load all content quickly and also ensure privacy of the customer’s personal and financial information.

Data Gathering : A organisation’s ability to source and use demographic information and data is the key to success of any international retail activity. It helps the retailer to break the global marketplace down into smaller segments, which are easier to target strategically.

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Global Sourcing : Global sourcing is defined as the process of identifying, developing and utilising the best sources of supply for the enterprise, regardless of location.

Global sourcing Involves proactively integrating and coordinating common items and materials, processes, designs, technologies and suppliers across worldwide purchasing, engineering, and operating locations.

Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs.

Global sourcing brings down the costs associated with all of the previously mentioned processes and allows for the passage of monetary savings along to the consumer.

RETAILING Factors to be considered for global sourcing :

1. Total landed cost

2. Quality

3. Logistics Capability

4. Location

5. Trade regulations (Taxes, Tarriffs and Duties)

6. Finances

7. Time to Market/ Responsiveness of the supplier

8. Value-added services

9. Communication/ IT Capabilities

10. Supply and operational risks

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Advantages of Global Sourcing :

1. Reduction in costs

2. Access to fresh research, design and specialised intellectual capital

3. Availability of new technology and capacity

4. Superior Quality

5. Companies can focus on core processes and have more capital to

invest in them.

6. The supplier base is not restricted to the domestic market, giving companies the opportunity to transact with more competitive suppliers.

7. Time difference between countries can be used as a huge advantage where processing times are of high importance

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Disadvantages of Global Sourcing : 1. Hidden costs that may arise due to time-zone or cultural differences

2. increased ‘monitoring’ costs when work is near-shored or off

shored when compared to domestic suppliers.

3. Increased risk of loss of data

4. Risk of shut-down of operations due to conditions arising in the

supplier country

5. Job loss in the sourcing countries

retail management

Marketing

distribution of goods

distribution physical

distribution efficiency

distribution process

right goods

stock goods

large quantities of

consumer goods people