Retail Marketing

Retailing & Retailer

Is defined as a set of activities or steps used to sell a pdt or service to consumers for their personal or family use

Derived form French word” retaillier” meaning “to break bulk” or “cut a piece of”

Retailer: Person, agent, Co., or organization instrumental in reaching the goods, merchandise or services to the ultimate customer

Retailer activitiesAnticipating customer’s wantsDeveloping assortment of pdtsAcquiring mkt infoFinancingSelecting target marketsNegotiating with suppliersTraining salespeople

Nature of retail marketing Profitable retailing and satisfactory returns on investment can only

be achieved by identifying, anticipating and satisfying customer needs and desires

What the customers buy determines the nature of the retailer’s business.

The essence of retail marketing is developing merchandise and services that satisfy specific needs of customers, and supplying them at prices that will yield profits.

Nature of retail marketing Cost & profit varies depending on type of operation & major pd line

Manage profit of 9-10% on sales

Sales volume influences business opportunities, merchandise purchase policies, nature of promotion & expense control measures

Retailers act as gatekeepers who decide which new pdts shd fimd their way to the shelves of their stores….a strong say in the success of a pdt being launched

Marketers have to sell a new pdt several times: first within the Co, then to the retailer & finally to the user of the pdt

Key aspects of retailingDirect customer interactionSmall unit size of salePoint of sale promotionsCriticality of locationEmphasis of location

Drivers of Change in RetailingChanging demographics & industry structureExpanding ITEmphasis on lower costs & priceEmphasis on convenience & serviceFocus on pdtivityAdded experimentationContinuing growth of non store retailing

Major concerns relating optimum selection of goods

A wide & increasing range of pdt categories accompanied by multiple brands in each category complicate decision making for both mfg & mkt intermediaries

They have to make an optimum selection of goods to be sold

given the foll major concerns: Selling space..relatively fixed & must return max profits.If such

space is occupied by non moving or slow moving merchandise……resort to substantial price red to get rid of unsold stock

Risk of no performance in terms of quality, supplies which in turn harms image of retail outlet

Retail industry Largest private industry in the world ahead of finance, engineering Contributes 8% to the GDP in developing western countries 50 of the Fortune 500 & 25 of Asia’s top Cos are retailers China..3 of top 10 global retailers : Carrefour, 7-Eleven, Wal-Mart Brazil: top 2 global retailers….30% of the RM

Global RetailingMarket Size & Economics

Infrastructure & Distribution

Competition

Operations

Financial & Tax Reporting

Merchandise Acceptability

Partnering Capability

Factors UsedFactors Usedto Analyzeto AnalyzeGlobal Retail Global Retail MarketsMarkets

Global Retailing

Spread of communication and mass media

Lowering of trade barriers and tariffs

Growth potential in underserved markets

Reasons for Reasons for Global ExpansionGlobal Expansion

Indian retail industry 5th largest retail destination globally Comprising of organized and unorganized sectors, though initially,

the retail industry was mostly unorganized Largest no of retailers abt 12 million… 5 million sell food & related

pdts Retail sector is the 2nd largest employer after agriculture Amounts to US$ 330billion in 2007 to 427b in 2010 & 637 b by 2015 Retail has a share of 10-11% in the GDP 6 times bigger than that of Thailand & 4-5 times bigger than S.Korea

& Taiwan Expected growth rate 25-30% annually. Available mall space 100 mill sq feet by 2011

Growth in Indian retail markets2006-7

Indian retail (Rs bn)

Food & grocery 8680

Clothing & footwear 1356

Non institutional healthcare 1159

Furniture & furnishing 986

Total 14574

Organized retail (Rs bn)

Food & grocery 61

Clothing & footwear 251

Non institutional healthcare 24

Furniture & furnishing 101

Total org retail 598

Share of OR in TR% 4.1%....22% by 2011

Major Retailers in India Pantaloon With more than 450 stores across the country Launched country's first hypermarket ‘Big Bazaar’

Tata Group A major player with its subsidiary Trent, which operates Westside and Star Bazaar. Established in 1998, it also acquired the largest book and music retailer in India

‘Landmark’ in 2005.

RPG Group One of the earlier entrants in the Indian retail market, food & grocery retailing in

1996 with its retail Foodworld stores. Opened the pharmacy and beauty care outlets ‘Health & Glow’.

Reliance More than 300 Reliance Fresh stores and Reliance Mart It's expecting its sales to reach Rs. 90,000 crores by 2011.

A Birla GroupStrong presence in Indian apparel retailing. The brands

like Louis Phillipe, Allen Solly, Van Heusen, Peter England

5 types of cities:Maturing: Delhi & MumbaiTransitional: Bangalore, Kolkata, Hyd, Pune, Ahmedabad,

Chennai..to have 1/3rd of India’s org retail sector High growth: Jaipur, Ludhiana, Chandigarh, Cochin,

Lucknow, Surat, Baroda…next reatil destinationsEmerging: Nagpur, Indore, Nasik, Coimb, Bhubaneshwar,

Goa

Challenges facing Indian retail industry

The tax structure favors small retail business Lack of adequate infrastructure facilities High cost of real estate Dissimilarity in consumer groupsShortage of retail study options Shortage of trained manpower Low retail management skill

Characteristics of RetailingDiffers from manufacturing in foll ways:There is a direct end user interaction Only point in the value chain to provide a platform for

promotionSale if small unit sizesLocation is a critical factorServices are as imp as core pdtsLarge no of retail units to meet the geographical

coverage & population density

Activities of retailers

Sorting

Holding stock

Breaking bulk

Arranging assortment

s

Extending services

Providing additional

services (Channel of commun,

transport, advert) functions)

Categorizing RetailersNo of outletsMargin vs TurnoverLocation

Classification of Retail Operations

ClassificationClassificationof of Retail Retail EstablishmentsEstablishments

Ownership

Level of Service

Product Assortment

Price

Ownership

IndependentRetailers

Chain Stores

Franchises

ClassificationClassificationof of

OwnershipOwnership

Major Types of Retail OperationsDepartment StoresEg: SS, Westside, Globus

Specialty StoresEg: Bata, Nokia world, Adidas

Supermarkets

DrugstoresEg:Medicine Shoppe, Apollo Pharmacies

Convenience Stores

Discount StoresEg: Wal-mart,Big Bazar

Classification SummaryType of RetailerType of Retailer

Department StoreSpecialty Store

Supermarket

Convenience Store

Drugstore

Service Service LevelLevel

Mod Hi-HighHigh

Low

Low

Low-Mod

Assort-Assort-mentment PricePrice GrossGross

MarginMargin

BroadNarrow

Broad

Med-Narrow

Medium

Mod-HighMod-High

Moderate

Mod High

Moderate

Mod HighHigh

Low

Mod High

Low

Retail franchising is a form of chain ownership in which a franchisee pays the franchisor fees or royalties and agrees to run the franchise by prescribed norms, in exchange for use of the franchisor’s name.

Types of Retailers

Importance of marketing in retailing Marketing is a vital tool for every retailer, as it identifies current,

unfulfilled needs and wants, which it defines and quantifies. Marketing determines which target groups the retailer should

serve. Marketing could be seen as delivering an acceptable standard of

living. Marketing can ensure complete satisfaction and sustained

customer loyalty. Marketing depends on the efficient co-ordination of consumer

prediction, product development, packaging design and influencing demand through appropriate communication medium.

Retail Objectives

To increase customer traffic To clear seasonal merchandise Match competitors price price Price leadership status Create entry barriers Encourage repeat buying

Retail Marketing Strategy

Setting short & long term objectives

Define the business in terms of orientation towards to particular sector

Key Tasks Key Tasks in in

StrategicStrategicRetailingRetailing Identifying TM, directing

efforts on basis of customer characteristics & needs

Implementing integrated mkting plan

Evaluation & revision of plan depending on internal & ext environ

Defining a Target Market

Segment the Market

Demographics

Geographics

Psychographics

Value & Lifestyle

Behavioral

Retail marketing mixRetail marketing mix is the term used to describe the

various elements and methods required to formulate and execute retail marketing strategy.

The aim of such coordination is for each store to have a distinct retail image in consumers’ mind.

The mix may vary greatly according to the type of market the retailer is in, and the type of product/services.

The marketing mix planning The retail marketing mix is the vehicle through which

a retailer’s marketing strategy is implemented and, in planning the mix, retailers should be guided by three basic principles:

1. The mix must be consistent with the expectation of target customers;

2. Elements must be consistent with each other to create synergy

3. The mix must be responsive to competitive strategy

The Retailing Mix

TargetTargetMarketMarket

Product

Price

Promotion

Place

Personnel

Process

Retail Marketing MixWhile many elements may make up a firm’s retail marketing mix, the

essential elements may include: merchandise assortments Store ambience customer service Communication with customers Personal selling Store image Store design Sales incentives

Marketing Mix

Place (store location)Target marketChannel structureChannel managementRetailer imageRetail logisticsRetail distribution

Product (merchandise)Product developmentProduct managementProduct features and

benefitsBrandingPackagingAfter-sales services

The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.

The Proper LocationLarge, long-term commitment of resources

Location will affect future growth

Local environment may change over time

Shopping Center & Mall Locations

AdvantagesAdvantages

Design attracts shoppers

Anchor stores draw customers

Ample parkingUnified image

DisadvantagesDisadvantages

Expensive leasesFailure of common

promotion effortsLease restrictionsAnchor store

dominationDirect competitors

Presentation of the Retail Store

Employee Type & Density

Merchandise Type & Density

Fixture Type & Density

Sound

Odors

Visual Factors

Factors Factors ininCreationCreationof a Store’sof a Store’sAtmosphere Atmosphere

PriceCostsProfitabilityValue for moneyCompetitivenessIncentivesQualityStatus

PromotionDeveloping promotional

mixesAdvertising

managementSales promotionSales managementPublic relationsDirect marketing

External Influences on Pricing Strategy

Pricing strategy

Customers

Competitors

Suppliers Government

Basic pricing strategiesEDLPHigh low pricing

Pricing Practices: Combination of the foll Skimming pricing Penetration pricing Loss Leader price Psychological pricing (Prestige , reference, traditional, odd-even pricing) Bundling Fixed & Variable pricing Perceived value pricing Bundled pricing Price lining Multiple – unit pricing Extinction pricing

-

Pricing strategiesVariable pricing – when differences in demand & cost

necessitate a change, with a view to increase demand, off season discount.

Flexible pricing – offering same products & quantities to different customers at different prices.

Price lining – retailers establish specified number of price points for each merchandise type & retailers purchase goods to fit the price points – makes price comparisons easier

– can help store to upgrade / down grade customer s preference.

Multiple unit pricing• Price of each unit in a multiple pack is less than the price of each

unit if it were sold individually. • Suitable for products with high consumption rates.

Bundling• Retailers combine several elements in one basic price,

invariably closely related items.

Leader pricing

When a high demand item is priced low & is heavily advertised to attract customers into the store.

Loss leader pricing – Where an item is sold below cost to build traffic & encourage purchase of other items.

EDLP – When a retailer charges the same low price everyday for long periods and seldom offers the item on sale – stable but lower than prevailing prices but not the lowest.

Retail Pricing Approaches and other Elements of the Retail Marketing

Retail marketing mix variable

Price below market price

Price at market price

Price above market price

Location No parking, poor layout, inaccessible

Central business district, proximity to competition

Monopoly, compatible location to target segment

Service Attributes Self-service, limited offerings, no sales

Support from sales people

Personalized attention to customers, home delivery, exchange facility, customized offerings

Assortment Limited variety Medium Extensive assortment

Store Environment

Poor quality fixtures, limited space to move around, wall shelves, untidy

Compatible store environment

Inviting, impressive store décor, visual merchandise attractive

People elementStaff capabilityEfficiencyAvailabilityEffectivenessCustomer interactionInternal marketing

Process elementOrder processingDatabase managementService deliveryQueuing systemStandardisation

Retail Promotional MethodsCoupons: distributed in magazines, newspapers, direct mail, or street hand-

outs to drive sales to the store.

To be successful, coupons must either pay for themselves through increased

sales of the discounted items, or by introducing new customers to the store

who then find other, full-price items to buy.

Organizing Sales: A good way to try to sell off a inventory that has been

difficult to move.One can move out these clearance items while introducing

the store to new potential customers who will decide to return again when

the sale is over.

Loyalty programs: Encourage purchases by charging less than full price, also

encourages a customer to buy more and to return more often.

Customers will feel they have an investment in the store which is lost if they

switch to a competitor.

Retail Sales Promotion Benefits

Excellent demand generator Build traffic Can play an important role in loyalty programs Generate in-store excitement Assist in introducing new products

Type of sales promotion : Sponsors Self sponsored Joint with supplier

Promotion formats for retail Announce special sales – end of season / regular Organize demos / samples – initiate trial & build traffic Value-added gifts / premiums to build brand loyalty in specific categories Coupons & contest – to retain interest / repeat

What sales promotion can’t do Change buyers preference for un-desired product Compensate for poorly trained sales force Provide long-term support in sales Permanently stop a products’ declining trend/ push a non-

seasonal item in off-season.

Factors Influencing Advertising Age of store

- New stores or those seeking to be re-build image need advertising.

Store location- Stores that are poorly located need more advertising.

Merchandise- Those selling high-image / fashion goods need advertising than a discount / convenience store

Supplier support- The more support a retailer is able to get from suppliers, the more it can advertise.

Five pillars of Retailing 5 important actions for Retailers Solve customer’s problems Treat customers with respect Connect with customer emotions Set the fairest (not the lowest) price Save customer’s time

Measuring Retail Performance & Productivity

1. Performance of Selling Space

Sales per Square FootTotal Net Sales ÷ Square Feet of Selling Space = Sales per

Square Foot of Selling Space

Sales by Department or Product CategoryCategory's Total Net Sales ÷ Store's Total Net Sales =

Category's % of Total Store Sales

2. Measuring Productivity of Staff Sales per Transaction Also known as sales per customer. A store dependant on its sales

clerks to make a sale will use this method

Gross Sales ÷ Number of Transactions = Sales per Transaction

Sales per Employee Retailers need to take into consideration whether the store has full

time or part time workers. Convert the hours worked by part-time employees during the period to an equivalent number of full-time workers.

This form of measuring productivity is an excellent tool in determining the amount of sales a business needs to bring in when increasing staffing levels.

Net Sales ÷ Number of Employees = Sales per Employee

Drivers of Success in RSCustomers - Driving force in changeRe-evaluating the mkting planStrong visual appealWorkplace challenge

Ethical and LegalEthical and LegalIssues in Issues in RetailingRetailing

Ethical and Legal Issues

RetailRetailTheftTheft

ConsumerConsumerFraudFraud

SupplierSupplierLaborLabor

PracticesPractices

SlottingSlottingAllowancesAllowances

Use ofUse ofCustomerCustomer

InformationInformation

EcologicalEcologicalConsiderationsConsiderations

Retail Marketing planPlan elements1. Objectives, SWOT, Distinct positioning

2. Defined target audience

3. Quantifiable goals Growing sales revenue (generating more customers and more dollars per customer) Enhancing profitability (Analyzing product margin and concentrating on those products

that deliver the greatest profitability. In most cases, it involves implementing an effective pricing strategy or overhauling your existing one.)

Generating leads and increasing customer count Adding new products or services

4. Detailed tactical elements

5. Budget, timetable and responsibilities Identifying which weeks advertising will run, when and where will one seek media

coverage for an important event, on what dates for direct mail campaigns, which months for sending an email newsletter, or whatever activity one has planned for the annual calendar. Specific as to date, cost and responsibility

6. Measurability and accountability

Outline of a Marketing plan1.0 EXECUTIVE SUMMARY

1.1 COMPANY

1.2 PRODUCTS & SERVICES

1.3 MARKET ANALYSIS

1.4 STRATEGY & IMPLEMENTATION

1.5 MANAGEMENT

1.6 FINANCIAL PLAN

1.7 SOURCES & USE OF FUNDS

 

2.0 COMPANY

2.1 COMPANY & INDUSTRY

2.2 LEGAL ENTITY & OWNERSHIP

2.3 COMPANY HISTORY TO DATE

2.4 FACILITIES

2.5 KEY ASSETS

 

3.0 PRODUCTS OR SERVICES

3.1 DESCRIPTION

3.2 FEATURES & BENEFITS

3.3 COMPETITION

3.4 COMPETITIVE ADVANTAGE/BARRIERS TO ENTRY

3.5 DEVELOPMENT

 4.0 MARKET ANALYSIS

4.1 TARGET CUSTOMER

4.2 MARKET SIZE

4.3 TRENDS

4.4 SWOT ANALYSIS

 5.0 STRATEGY & IMPLEMENTATION

5.1 PHILOSOPHY

5.2 PRODUCT DEVELOPMENT

5.3 INTERNET STRATEGY

5.4 MARKETING STRATEGY

5.5 SALES STRATEGY

5.6 STRATEGIC ALLIANCES

5.7 OPERATIONS 5.8 GOALS

6.0 MANAGEMENT

6.1 ORGANIZATIONAL STRUCTURE

6.2 LEADERSHIP

6.3 STAFF MEMBERS

 

7.0 FINANCIAL PLAN

7.1 REQUIREMENTS

7.2 USE OF FUNDS

7.3 INCOME STATEMENT PROJECTIONS

7.4 CASH FLOW PROJECTIONS

7.5 BALANCE SHEET

7.6 ASSUMPTIONS

 

How to do a SWOT analysisStrength could be:1.Your specialist marketing expertise.2.A new, innovative product or service.3.Location of your business.4.Quality processes and procedures.5.Any other aspect of your business that adds value to your product or service.

Weakness could be:1.Lack of marketing expertise.2.Undifferentiated products or services (i.e. in relation to your competitors).3.Location of your business.4.Poor quality goods or services.5.Damaged reputation.

An opportunity could be:1.A developing market such as the Internet.2.Mergers, joint ventures or strategic alliances.3.Moving into new market segments that offer improved profits.4.A new international market.5.A market vacated by an ineffective competitor.

A threat could be:1. A new competitor in your home

market.2. Price wars with competitors.3. A competitor has a new,

innovative product or service.4. Competitors have superior access

to channels of distribution.5. Taxation is introduced on your

product or service.