retailing

MODULE-1

Arun ChandranDhanesh.V.DSajith NairSudeep.K.MVipin.V.V

INTRODUCTION OF RETAILING

Definition and scope of Retailing

The word ‘retail is derived from the French word ‘retailer’, meaning cut a piece off or ‘to break bulk’. In simple terms, it implies a first-hand transition with the customer. Retailing involves a direct interface with the customer and the coordination of business activities from end to end, right from the concept or design stage of a product or offering, to its delivery and post delivery service to the customer. The industry has contributed to the economic growth of many countries and is undoubtedly one of the fastest changing and dynamic industries in the world today.

Retailer

A retailer is any business organization that derives more than half of its sales from retailing. For example, retailing occurs when you purchase gasoline at a service station, movie tickets at a theater, or clothing at a department store. Your local hairstyling salon, your favorite restaurant, and The Gap and Banana Republic stores at the regional shopping center are retailers. Their success or failure is ultimately determined by how well they serve you and other consumer like you.

Manufactures

Manufactures business whose primary economic role is the production o

f goods.

Wholesaler Wholesaler, which acts as market intermediaries between producers and end users of products and services, may engage in retailing activities by selling directly to consumers.

RETAILING AND THE MARKETING MIX

Retailing forms an integral part of the marketing mix and includes element like product, place, price, people, presentation and promotion. Place relates to the distribution and availability of products in various locations. Customers are first introduced to the product at the retail store, Organization sell their products and services through these retail outlets and get feedback on the performance of their products and customers expectations about them. Retail stores serve as communication hubs for customers. Commonly known as the point of sale or the point of purchase, retail stores transmit information to the customers though advertisements and displays. The role of retailing in the marketing mix is very significant.

THE FUNCTIONS OF A RETAILER

The retailer services him by providing the goods, in the required assortment and at the required place and time. From an economic standpoint, the role of a retailer is to provide real added value or utility to the customer. This comes from five different perceptivities.

The first utility arises from the need of providing a product in the form that is acceptable to the customer. The retailer does not supply raw materials, but rather offers finished goods and services in a form that the customers want.

The retailer performs the function of storing the goods, and providing us with an assortment of products in various categories. The creates time utility by keeping the store open when the consumers perfect to shop. By being available at convenient location Finally, when the product is sold, ownership utility is created.THEORIES AND CONCEPTS OF MARKETING MANAGEMENT IN RETAILING

CONCEPTS OF MARKETING MANAGAEMENT IN RETAILING

1. Customer Orientation

Modern business mangers consider marketing oriented. Thus the major function of marketing is the satisfaction of consumers’ desire for goods and services. According to Charles G. Mortiner, “Look at the company through the customer’s EYES. is at the tip of the organization chart. We are not the boss; the consumer is. What the consumer wants the consumer gets.

A businessman is rightly observed, “We are to produce what the people want and not what we can sell”. The businessman is always in search of such needs of customers, which are not even known, to them. The need for television, the customers never thought of refrigerators etc. The invention of such items is the result of customer-oriented attitude of the businessman.

However, for effective customer orientation, the firm has to determine,

� The basic needs of customers, it can satisfy� Market segments, it can serve better taking into account its limited resources, and� Colour, size and design of the p product, pit can choose to satisfy the specific needs of specific customers and introduce its in the market through product differentiation. FigureThe figure makes clear about the difference between the traditional organization chart and the customer oriented organization chart.

2. Integrated Marketing

When all the departments of the company work together to serve the customer’s interest or needs, the result in integrated marketingExamples of Integrated Marketing

The marketing Vice President of a major European airline wants to increase the airlines traffic share. His strategy is to build up customer satisfaction through providing better food, cleaner cabins, better-trained cabin crews and lower fares; yet he has no authority in this matters. The catering department chooses food that keeps down food costs; the maintenance department uses cleaning services that keep down cleaning costs, the human resource department hires people without regard to whether they are naturally friendly, the finance department sets the fares. In such a way that the Vice President of marketing creates an integrated marketing mix.

3. Profit through customer satisfaction

However the ultimate purpose of the marketing concept is to help organizations to achieve their objectives and at the same time satisfy the customer also. Marketing concept advocates serving the customer and maximizing profits at the same time. These goals need not conflict, but they can be reconciled, the guaranteed route to profit is through customer satisfaction.

The aim of modern marketing concept is to please the customers. For this purpose, everyone in the firm should try to be more friendly with his customer.

THEORIES OF RETAIL DEVELOPMENT

Retail development can also be looked at from the theoretical perspective. No single theory can be universally applicable or acceptable. The application of each theory varies from market to market, depending on the level of maturity and the socio-economic conditions in that market.The theories developed to explain the process of retail de development revolve around the importance of competitive pressure, the investments in organizational capabilities and the creation of a sustainable competitive advantage. This requires the implementation of strategic planning by retail organisation.Growth in retail is a result of understanding market signals and responding to the opportunities that arise, in a dynamic manner. Theories of retail development can broadly be classified into:

1. Environmental Theory- Where a change in retail is attributed to the change in the environment in which the retails operate.

2. Cyclical Theory – Where change follows a pattern and phases can have definite identifiable attributes associated with them.3. Conflictual Theory – the competition or conflict between two opposite types of retail results in a new being developed.

Environmental Theory

Darwin’s theory of natural selection has been popularized by the phrase “survival of the fittest”. Retail institutions are economic entities and retailers confront an environment, which is made up of customers, competitors and changing technology. This environment can alter the profitability of a single retail store as well as of clusters and centers. The environment that a retailer competes in is sufficiently robust to squash any retail form that does not adjust.

Thus, the birth, success or decline of different forms of retail enterprises is many a times attribute to the business environment. For example, the decline of department stores in the western marker attribute to the general inability of those retailers to react quickly and positively to environment change. Those retail institutions which are keenly aware of their operating environment and which react without delay, gain from the changes.

Thus, following the Darwinian approach of survival of the fittest, those retailers that successfully adapt according to the technological, economic, demographic and legal changes are the ones that are most likely to grow and prosper. The ability to adapt to changes, successfully, is at the core of this theory.

Cyclical Theory

Wheal of Retailing: The most well known theory of retail evolution is The Wheel of Retailing theory. This theory, described by Mc Nair, helps us in understanding retail changes. This theory suggests that retail innovators often first appear as low-priced operators, with a low-cost structure and low profit-margin requirements, offering some real advances, such as specific merchandise, which enables them to take customers away from more established competitors.

As they prosper, they developed their business, offering a wider acquiring more expansive facilities, but this can mean that they lose the focus that was so important when they entered the market. Such ‘trading up’ occurs as the retailer becomes established in his own right. This in turn, leaves room for others to enter and repeat the process. They then become vulnerable to new discounters and lower-cost structures that take their place along. The wheel Scrambled merchandising occurs as the retailer adds goods and services that are unrelated to each other and the firm’s original business, to increase the overall sales and profit margins. This is termed as the Wheel of Retailing. This is depicted below.

The theory of the wheel of retailing can be understood by taking the examples of department stores which started as low-cost competitors to the small retailers; they developed and prospered; then they were severely undercut by supermarkets and discount warehouses.

This theory does not explain the development of retail in all markets. In less developed markets, introduction may not necessarily occur at a low price, there, introduction may occur at a high price.

Accordian Theory

Hollander was a key observer of retail evolution and he used the analogy of an orchestra comprised exclusively of accordion players to describe the dynamically

shifting retail structure.

This is so called ‘accordion’ effect describes how general stores moved to specialized stores, but then widened their range of merchandise again, as new classes of product were added. Hollander suggested that the players either have ‘open accordion’, representing general retailers with broad products ranges, or closed ‘accordions’ thus indicating a narrowing of the range, focusing on specific merchandise. He suggested that at any point in time, one type of retailer would outnumber the other, but that the situation would continually change the arrival and departure of different stores. This analogy illustrates the complexity of the retail scene, and the way different attitudes to successful retailing will come in and go out of fashion at different times. The Accordion theory and the Wheel or Retailing is known as the cyclical theories of retail evolution.Conflict Theory

Conflict s will always exists between operators of similar formats or within broad retail categories. It is believed that retail innovation does not necessarily reduce the number of formats available to the consumer, but leads to the development of more formats. Retailing thus, evolves through a dialectic process, i.e, the blending of two opposites to create a new format. This can be applied to developments in retailing as follows;

(a)”Thesis”: Individual retailers exists as corner shops all across the country(b) “Antithesis”: A position opposed to the thesis develops over a period of time. These are the department stores. The antithesis is a challenge to the thesis.(c) “Synthesis”: There is a blending of the thesis and the antithesis. The result is a Position between the “thesis” and t he “antithesis”. Supermarkets and hypermarkets thrive. This “synthesis” becomes the “thesis” for the next round of evolution.

THE RETAIL LIFE CYCLE

The concept of a product life cycle, as explained by Philip Kotler, is also applicable to retail organizations. This is because retail organizations pass through identifiable stages of innovation, development, maturity, and decline. This is what commonly termed as the retail life cycle.

Attributes and strategies change as institutions mature. The “Retail Life Cycle” is a theory about the change through time of the retailing outlets. It is claimed that the retail institutions show an “s-shaped” development through their economic life. The “s-shaped” development curves has been classified into four main phases

A: Innovation

A new organization is born; it improves upon the convenience offered or creates other advantages to the finial customers that differ sharply from those offered by other retailers. This is the stage of innovation, where the organization has a few competitors. Since it is a new concept, the rate of growth is fairly rapid and the management fine-tunes its strategy through experimentation. Levels of profitability are moderate and this stage can last up to five years, depending upon the organization.

B: Accelerated Growth

The retail organization faces rapid increases in sales. As the organization moves to stage two of its growth, which is the stage of development, a few competitors emerge. Since the company has been in the market for a while, it is now in a position to pre-empt the market by establishing a position of leadership. Since growth is imperative, the investment level is also high, as is the profitability. Investment is largely in systems and processes. This stage can last from five to eight years. However, towards the end of this phase, cost pressures tend to appear.

C. Maturity

The organization still grows, but competitive pressures are felt acutely, from newer forms of retailing that tend to arise. Thus, the growth rate tends to decrease. Gradually, as markets become more competitive, and direct competition increases, the rate of growth slows down and profits also start declining. This is the time when the retail organization needs to rethink its strategy and reposition itself in the market. A change may occur not only in the format, but also in the merchandise mix offered.

D. Decline

The retail organization looses its competitive edge and there is a decline. In this stage, the organization needs to decide if it is still going to continue in the market. The rate of growth is negative, profitability deciles further and overheads are high. The retail business in India has only recently seen the emergence of organized, corporate activity. Traditionally, most of the retail business in India has been done by small owner-managed business. It is hence, difficult to pick up a retail organization which has passed thorough all the four stages of the retail life cycle.

In the private sector, till a few years ago, most cities in India had a few independent retailers. For examples, Mumbai had stores like Akbarally’s, Persons, Amarsons and Benzer. Then Shopper’s Stop opened its first outlet in Mumbai, in 1991. The store initially offered apparel, imitation jewellery, cosmetics, perfumes and home fashion. It also had a customer loyalty programme in place, which many stores at that time did not offer. The store enjoyed an enviable position for a while. However, with the change in customer expectations and increased competition in the form of other department stores like Globus, Westside, Lifestyle, etc. and with the rise of specialty stores, the company has been forced to rethink its product offering. It now not only stocks apparel, jewellery, cosmetcs,etc. that it earlier stocked, but has also acquired the bookstore chain – Crossword. Crossward counters have been added to many of the existing stores. The store in Andheri also houses Planer M, a music retail chain, and a small coffee shop. Thus, we see that the organization has passed through definite stages of introduction and growth and has had modify its strategy in response to the changes in the environment and in the consumer.

A GROWING EMPHASIS ON CONTROL OF QUALITY

Quality has emerged as a major competitive componenent strategies. There are four main reasons which may account for the increasing rele3vance of quality management.1. Companies need to find a new ways of creating differential advantages by providing better service levels than their competitors. Retail competition has increased because services and goods are available from wide range of channels and manufacturers are creating technically satisfactory goods, which require little after-sales service2. the increased level of consumerism and the greater media attention on quality have meant that companies have to be more responsive to quality issues. Consumers are far more aware of their rights and are less likely to suffer quietly

from the results of poor quality.3. There has been a growing sophistication of consumer market with the non price factors of image, retail offer positioning and service delivery processes becoming more important4. Technology is one of the new applications to quality enhancement.

Quali8ty is the totality of relationship between service provides and features of retailing which are related to the delivery of the satisfaction. It is there for important to create systems of quality control, which are checks and monitoring processes to ensure measurement of service delivery is taking placeA good service guaranty is identified as unconditional, it is understand and communicate meaningful and easy to invoke and obtain recompense.

SERVICES

Service categories include the following elements 1. TangiblesWhat can be experienced from personal, company literature and science, and physical environment of retail encounters. These include aspects of the store or the material customer can see, touch, use, etc such as: • Physical facilities• Appearance of personnel• Tools or equipments used to provide the service• Physical representation of the service, eg; store credit card, fascia design• Other customers in the service facility2. Reliability of staffs to deliver the expected or promise services dependably and accurately. This involves consistency of performance and dependability. It means the company should perform the service right the first time and the owner its promises. This factor also demands that the company is able to trust the employees with the responsibility deliver service which, consistently and accurately, meets policy standards, including • Accuracy in charging • Keeping the correct records• Performing the service at the designated time3. Responsiveness staffs to help customers and provide timely service. This concerns the willingness or readiness of employees to provide service to help customers and give time services such as,

• Mailing a transaction slip immediately• Calling a customer quickly after a query• Giving prompt service4. Competence: an assurance of employees ability to convert trust and confidence through company and product knowledge, as well as by the courtesy of their interpersonal skills; • Knowledge and skill of the contract personnel• Listening to customer needs and explain the desired product or service• Reinforcing the companies reputation• Personnel characteristics of the contract personnel • Ability to respect confidentiality, and display financial and personnel security5. Empathy: Having an understanding of what customers as individual human require in relation to psychological as well as physical needs. This concern individualized attention to customers – a caring individual concern attention for others and emotions:Recognizing regular customersLearning the customer specific requirements and anticipating their needsBeing attentive and providing individualized service Ensuring that if there is a problem it is acknowledged, responsibility is taken, and some action is carried out to ensure the service fault is compensated for.

A CLASSIFICATION OF SERVICE AND QUALITY

We can classify the different approach to quality management into two categories: first, the product-attribute approach; second, the consumer oriented approach (Gilbert and Joshi, 1992). The product- attribute approach is based upon trying to match the product’s conformance to standardized requirements which have been set by reference to what company managers think the failure point to be. Product- attribute approaches rely on trying to control the company’s output by using and internal standard –setting perspective. This relies on an inward- looking and trading-led management style, rather than a marketing-led approach.

It would seem more appropriate to adopt a consumer- oriented approach which recognizes that the holistic process of service delivery has to controlled by taking into consideration the expectations and attitudes of retail customers. If the starting point for management is the understanding of how quality is judged by customers then the perception processes of this judgment, as to whether a service is good or bad, can be managed. Gronroos is a leading author who has defined this concept.

THE GRONROOS MODEL OF PERCEIVED QUALITY MANAGEMENT

Gronroos (1982) developed a model, which is a form of gap analysis to explain what he calls the ‘missing service quality concept.’ The model (Figure) focuses mainly on the construct of image which represents the point at which a gap may occur between expected service and perceived service. Grnroos allows us to be aware of the ways that image is created from the aggregation of different aspects of technical and functional variables. By following his model of different inputs we are alerted to the fact that we should not reduce quality to a simplistic description of itself but that we should try to understand the full range of inputs. This is because to speak simply of quality gives the manage “no indication of what aspects of the whole retail experience should be controlled. Gronroos argues the function and range of resources and activities includes what customers are looking for, what they are evaluating, house service quality is perceived, and in what way service quality is influenced. Gronroos defines ‘perceived quality’ of the service as dependent on two variables: experienced service and perceived service, which collectively provide the outcome of the evaluation.

Gronroos distinguishes between technical quality and functional quality as the components of the service image delivery:

1. Technical quality – refers to what the customer is actually receiving from the service. This is capable of objective measurement, as with tangible goods.

2. Functional quality – refers to how the technical elements of the service are transferred or perceived. We know that a customer in a restaurant will not only evaluate the quality of the food consumed, but also the way in which it was delivered (the style, manner and appearance of the staff or the ambience of the place itself). Figure shows that he management can influence the attitudes, behaviors and general service mindedness of personal.

The Parasuraman, Zeithamal and Berry model

Parasuraman et al. (1985) have also developed a model of service quality, which claims that the consumer evaluates the quality of a service experience as the outcome of the difference (gap) between expected and perceived service (Fig). The model highlights the main requirement for a service provider delivery the expected service quality. From the model five gaps may be identified that could lead to unsuccessful service delivery. By understanding this model, it is possible to

provide greater management control over retail customer service relationships. This should lead to an improved realization of the key points at which the marketer can influence the satisfaction of the consumer. The marketer is then in a better position to be able to reduce or close the gaps.

Gap 1: Ignorance of the customer’s expectations

This is the gap between consumer expectation and management perception. The gap may result from a lack of understanding of what consumers expect from a service. The literature confirms this disparity by revealing that what providers perceive as being important to consumers is “often different from what consumers themselves actually expect. The gap may relate to a lack of communication or feedback from customers or an unpreparedness to address important changes, which are required.

In the early 1990s, Sears failed to realize that customer buying habits had changed and the company retained its traditional catalogue when the customers had embarked upon different modes of shopping. In the modern marketplace there is a need for responsive and adaptive adjustment to the service provision, based upon feedback from staff at all levels in the company. In addition, good relationship marketing programmes should also help in the reduction of customer and “company problems – arising from different expectations of what constitutes of what constitutes an ‘appropriate’ service.

Gap 2: Requirement for service design standards

This is the gap between management perception and service quality specifications. It results when there is a discrepancy between what management perceives to be consumer expectations and the actual service quality specifications established. Management may not set quality standards; the ones they set may not be very clear, or the quality standards set may be clear but unrealistic. Alternatively, although the standards are clear and realistic, management may quite simply not be committed to enforcing them. The need here is to provide service design standards, which are supported by everyone and form the yardstick against which all service standards are judged. These standards will then provide the guidelines against which the overall service and retail staff may be evaluated.

Gap 3: Not delivering to service standards

This is the gap between service quality specifications and service delivery. Even where guidelines exit for performing a service well, service delivery may not be of the appropriate quality owing to poor employee performance. The employee plays a pivotal role in determining the quality of the service. This is because retail staff and their actions revisable to the customer, and can be assessed and judged on a constant basis. Companies may have service standards but not facilitate the service with adequate technology, the appropriate human resource policies or a positive company culture.

Gap 4: In consistency between performance and promises

This is the gap between service delivery and external communication. Consumer expectations are affected by the promise made by the service provider’s promotional message. Marketers must pay close attention to ensure consistency between the quality image portrait in promotional activity and the actual quality offered. The problem is any discrepancy between those who described and promote the service and those who are delivering the service. If a marketing promotion promises a certain offer or service, it has to be available when customer demands it. Marketing has a key role in ensuring that all promotions are coordinated effectively and monitored closely.

This allows the company to plan and-build competitive advantage by establishing leadership principles of service standards and delivery. Once the standards are established there should be a policy to communicate and reinforce the service provision philosophy at every possible opportunity: meetings, training and internal marketing programmes, induction programmes and appraisal systems. The human resource function needs to be aware of marketing so as to ensure that the different levels in service delivery process (see Fig. 4.4) are always clearly understood and reinforced throughout the company - in its culture and in its reward systems. Without good internal company procedures and relationships it is unlikely that even the most well conceived of quality programmes will be successful.

. An approach to deconstructing service deliveryIMPLEMENTATION OF SERVICE MANAGEMENTFor the model in Fig. 4.4 to be successful there is a need foe the implementation process to consider the following areas vital to success.1 Leadership and commitment by senior management, with clear goals and a policy on quality being set and. communicated to others. There is also the need to release the appropriate resources to create changes and achieve the required results. Sam Walton, founder of Wal-Mart, adopted the following philosophy to direct his retail staff and gain pre-eminence in the retail marketplace:

This is the gap between perceived service and delivered service. This gap result when one or more of the other gaps described occurs. If these shortfalls arise, company staffs have to ensure they reduce or close the gaps where problems have appeared.Further factors in service quality deliveryWithin the delivery of services consumers will have different levels of tolerance to what may be judged adequate or expected service. This is known as the zone of tolerance: customers are willing to accept different levels of service, which fall within a zone between the desired and adequate levels of performance. It is important to realize that there are differences between individual customers

�

perceptions; similarly each customer may have different expectations of one brand in comparison with another. For example, if Marks & Spencer has delivered more consistent service over time than C&A then the expectations for the M & S brand are higher. If Marks & Spencer service were to decline to the level consistently offered by C&A, the customer may be more disappointed by the service received from Marks & Spencer - even though the service standards are similar. The focus on perceptions and

�expectations provide a guideline [for quality management int

ervention strategies. To this end, the model proposed by Parasuram et al, has the following two main strengths.1. The model presents an entirely dyadic view to the marketing task of delivering service quality. The model alerts the marketer to consider the perceptions of both parties (marketers and consumers) in the exchange process.2. Addressing the gaps in the model can serve as a logical basis for formulating strategies and tactics to ensure a consistent marketing; approach to the creation of experiences and expectations..Providing promotional methods which lead staff to, achieve high levels of customer care and service quality is becoming increasingly important. One poster targeted on staff read,

�Good enough is not good enough

� which set the standards and

aims of the company personnel above the average. This type of inward marketing is used as a means to change the general attitudes of staff toward quality.A well-positioned service enables the company to:� Differentiate its position so as to distinguish itself from competitors;� Deliver superior service to that accepted as the norm.Members of the stall should be treated as internal customers will assist the to a total quality management (TQM) systems. It is obvious that organizations have customers from within as well as from outside them. If employees visualize the relationships between each other based upon supplier and customer links as .a quality chain, then the question is always: am I meeting the full requirements o

f my role ? For example, the secretary is supplier to the boss and needs too provide timely, error-free work in order to assist the boss work as supplier to his or her internal customers. Such chains are easily weakened or broken by faulty equipments or people

QUALITY AUDITING SYSTEMS

There are various methods that may be used to measure and monitor quality. Buttle 1994 indicated that following research of loyal Jaeger customers a list of 180 service variables was reduced to26 key attributes against which mystery shoppers could assess a store

�s service performance. It is important to note that the f

inal list was based upon customer preferences and did not correlate with what Jaeger

�s own employees had identified as being important. The key items identified

by customers were:•external appearance of the branch

�• Merchandise pricing in window display;• greeting upon entry

�• Staff approachability;• Staff availability to help;• Manager availability;•whether the manager is recognizable;•the number of customers serves simultaneously by one staff member•efficiency /promptness of enquiry handling

�• Branch stock levels;• Staff awareness of fashion trends;• Speed of stock location;•staff awareness of advertised lines;• Helpfulness of staff advice;•honesty of staff advice;•standard of fitting rooms;•availability of advertised stock;•selection within size;•colors/size availability;•availability of alterations advice;•availability of garment reservation;• Eye-catching quality of window displays;•eye-catching quality of interior displays;• speed of till transaction;•comparability of service in other Jaeger branches.IS QUALITY A COST OR A LONG-TERM BENEFIT?It is found that smaller firms embarking upon service quality programmes (SQP) perceive them to be: costly, needing a lot of management time, difficult to measure the intangible benefits, and finally not easy to implement. Given the nature of retailing (people based with employee performance and interaction being of paramount important), it is clear that errors are inevitable, In addition to this element of human error is the nature of human response to it. It is estimated that there is a ratio of 4:1 where individuals will speak of poor service to goods service and therefore pass on more negative than positive aspects of service delivery. The movement of truth - the impact on

THE INTANGIBLE -TANGIBLE PRODUCT CONTINUUMAll products fall on a continuum between pure services and goods, with most products being a combination of the two. A pure service would be consultancy or financial advice, whereas pure good would be more tangible, such as a can of beans or a bottle of lemonade. Very few products are purely intangible or entirely tangible; services such as retailing, however, tend to be more intangible than manufactured goods. Some products will have more of service content than others and if they are assessed as being placed to the left of the center of the continuum they may be termed service products. Retailing falls to the service end of this continuum, despite being associated with the sale of goods. This is due to the na

ture of transactions involving the interpersonal skills of service providers. The added service element is a core part of the transaction.Services such as retailing can be characterized as having the following attributes � Intangibility � Perishability � InseparabilityIntangibilityThis means that some products cannot be easily stored, evaluated or demonstrated in advance of their purchase. For example, a travel agent cannot allow for the testing or sampling of the tourism product; a bank cannot easily demonstrate its service. On the other hand, a car or a computer game can be tested prior to purchase and clothing may be tried on - but this occurs in a retail environment and not in the home. Mail- order sales or similar methods of selling have to utilize printed literature to communicate the benefits of the product. In addition mail - order sales offer only limited visual clues as to the. benefits of the product. Prior to the arrival of the goods potential customer has to make use of intangible clues. However, the clearest example of retailing related to intangibility is telephone banking, where transactions can be carried out by voice mail and no personal or tangible interface exists. Moreover, the experience of retail purchases is not something that can easily be explained or demonstrated away from the branch, store or mall.

The marketers of the more intangible services, which make up retailing, face greater difficulty. Because of fixed time and space constraints, they cannot easily demonstrate the benefits of the retail offer or any merchandise they may be selling. The challenge for the retail service marketer is to overcome intangibility through the use of selling techniques, thephysical layout of the store or a depiction - by graphical, video or display means - of the product in use. In addition, the creation of a positive image surrounding the service willenable customer to envision the retail experience benefits. .

PerishabilityThis means that unlike goods, the service product cannot be stored for sale on a future occasion. For example, if customers do not enter the store when it is fully staffed sales may not occur, for which the revenue can never be recouped. This perishability factor leads to the high-risk nature of the retail industry. Marketers in the retail industry have to devise complex pricing and promotion policies in an attempt to create demand in

� off season

� periods and create greater

synchronization of staffing levels and supply with demand patterns. Weak demand is not the only problem; the industry is also characterized by seasonal demand, such as during the Christmas period, when shoppers are more selective where they shop due to overcrowding and related problems that occur. Stores have a fixed capacity with a maximum upper level demanding constraint. In peak periods retailers often have difficulty in coping with demand; therefore they offer only full prices or have to resort to queuing systems. In the low periods of demand, however, there is a need for greater marketing activity.The challenge for marketers arising from perishability problems is to try to smooth out demand curves use of the marketing mix. To achieve this forecast of demand must be relatively accurate to ensure a productive use of staff.Inseparability

This means retailing delivers a service, which is utilized and produced simultaneously for each customer. Because there is less opportunity to pre- check each sales activity, it may vary in the standard of its service delivery. Theorists sometimes characterize this as heteroginity, Variance occurs due to the inseparable nature of the retailing product

�s delivery where the customer is part of the s

ales process. The simultaneous process of production and consumption may lead to situations where it is difficult to assure the overall satisfaction of consumer

s. For example, peak loads of demand cannot always be forecast and may create dissatisfaction and secondary problems. There is also a constant, threat of problems being caused by one set of customers who may upset another. This provides for the potential for conflict on various levels. Whether it is the young out enjoying themselves, perhaps congregating by the tapes and CDs or in the electrical department by the computer games and annoying older customers, or restaurant users involved in a clash of social values, sets of unacceptable behavior may be exhibited by various groups. Manufactured goods, on the other hand, are produced in advance of being sent to the warehouse and there is little or no contact with the end customer.The service aspects of retail are inseparable - service is intrinsic to retailing. Staff may have personal problems or be feeling ill or tired and this type of problem may affect their level of commitment to giving good service or resolving problems. Because the nature of the retail service product is one of interpersonal relationships, where the performance levels of staff are directly related to the satisfaction experience of the consumer, there is a need for quality assurance mechanisms. Staffs are emotional and changeable and if a high content of the sales experience is based upon interpersonal relationships between

�strangers

�-

as client and a service provider - it is important to ensure standardized service levels are understood and adhered to by everyone. In order to reduce the problems associated with inseparability there is a need to invest in company training programmes.The problems discussed above make it clear that there is a need to ensure quality is managed, as a basis of planning to achieve competitive advantage.

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MODULE-II

Ajith.PJayadeva KrishnanPillai Prajith RamachandranRatheesh.RVimal Dev.

RETAIL PROMOTION

Retailers communicate to their customers on a continuous basis through the store atmosphere, the products and services, promotional literature, advertising and other promotional means. Retail promotion is the descriptive terminator the mix of communication activities which retail companies carry out in order to influence those publics on whom their sales depend. Retailing promotion will have the main objective of influencing consumer perceptions, attitudes and behaviour in order to increase store loyalty, store visits and product purchase. However, the important groups which need to be influenced are not simply the target market group of current and potential customers. There is a need to influence trade contracts such as agents and suppliers as well as opinion formers such as journalist and writers. Even local, national and international politicians and important professional groups may need to be influenced.ADVERTISING

The term advertising includes any paid form of non-personal communication through the media about a product, that has an identified sponsor. The use of payment differentiates advertising from public relations for which no payment is made for the time or space to convey a message. The media may include telephone directors, guides, newspapers, magazines, radio, television, direct mail, Web pages and billboards. It is normally associated with mass communication, where a broad target market is to be contracted.

Advertising is used to achieve a whole range of objectives which may include changing attitudes or building image as well as achieving sales. Advertising is often described as above the line promotion with all other forms of promotion being termed below the line. The difference between above and below the line is simply academic now as the emphasis is on both areas, for example sales promotion and advertising, working together to achieve the greatest impact.

Moreover, in decisions over communication plans, it is the cost-effectiveness that matters most. The use of different combinations of what has traditionally been known as above and below the line has blurred the meaning of the terms and there are may promotional strategies which can be seen to erase the line, or, as it is known, pass ‘through the line’; With direct mail being used to build awareness and TV being used to sell products direct to the consumer, there is a great deal more flexibility in the use of different promotional mediums.

Communication theorists have proposed several models to explain the way advertising works and each have some similarity. One model known as the DAGMAR model (Defining Advertising Goals for measured Advertising Results) describes the sequence of stages through which the prospective customer has to move:• Unawareness;• Awareness;• Comprehension of the offer;• Conviction;• Action

Through advertising, the retailer will make the potential customer aware of the store and its range of offer. As part of the advertising communication process, information has to be clearly transmitted so it can be decoded and comprehended properly. The process is then to make the offer credible so that the potential customer can be moved to a favourable attitude to the store or product. The act of purchase may then follow.

Advertising has the potential to affect a large number of people simultaneously with a single message. The secondary effect of of advertising is personal communication among consumers. This is known as the two-step flow of communication. The first step in the process is the communications flow from media to opinion leaders- the individuals whose attitudes, opinions, preferences and actions affect others. The second step is word-of-mouth communications from opinion leaders to others (followers). This communication can occur through personal conversation between friends or with work colleagues based upon communication about the store or its offers. It can also occur through non-verbal communica

tions when someone displays news bought merchandise in their home or by means of the labels on or in their clothes. One implication of the need to achieve as much benefit s possible from the two-step model is the requirement to reach and influence opinion leaders.Types of advertisingProduct advertising

Product advertising is aimed at enticing people to the store in order to consider specific merchandise. Product advertising will feature the promotion of merchandise that is new, exclusive, and superior in aspects of quality and design as well as creating awareness of complete assortments or special merchandise events. It is aimed at creating awareness of the product, its availability and benefits.Markdown event advertising.

This is used to create some excitement about a special period of lower cost offers for products. It is likely to be more successful if the reduction is believed to be part of a genuine sale of products which in the past had been fairly priced. Institutional advertising

This type of advertising is used to sell the store or shopping mall as a pleasing place to shop. With the use of institutional advertising, the store attempts to reinforce the image of one or more of the following: a leader in fashion, fair prices, wide merchandise selection, superior service or quality, a leisure experience of somewhere to en joy visiting. There is now a trend to a advertise a shopping center rather than individual outlets. The communication emphasis is on the available range of shops, case of parking or other consumer benefits. The frequency of this type of advertising increase at peak demand times such as Christmas. Co-operative advertising

This is used where manufacturers fund part of a promotion by supplying leaflets or advertising material for use by the store. The store can add its own address to ready prepared printed material and carryout mail drops or other methods of distribution. Alternatively a manufacturer may agree share equally the costs of an advertiseing campaign. Manufacturers are keen to have their brands stocked and sold’ therefore; they often enter into joint advertising schemes with retailers. Co-operative advertising may involve a combination promotions may well extend to agreements to provide joint branded window display material and point of sale material.

Retail promotion in relation to that of manufacturersThere are differences between retailer and manufacturer advertising stra

tegies. Retail advertising is often based upon short-term objectives with the emphasis on value or price of the products on offer. This is unlike manufacturers’ approaches; they often attempt to build favourable attitudes to improves the image of the brand or organization over in extended period of time, Whereas a manufacturer will need to create awareness of its brand across major market areas, a retailer may have more geographically concentrated target markets. Therefore, a retailer has to take into account local habits, conditions of the marketplace, availability of local media and have a clear idea of the housing areas where potential customers are living.

The expense of some forms of advertising is excessive-for example TV advertising is extremely expensive due to production as well as transmission costs – and therefore only the larger companies or franchisers will use this medium. The alternative use of direct marketing is often a more cost –effective form of promotion for smaller more geographically dispersed retailers.

Push versus pull strategy

The promotional decisions have to consider whether the company chooses a push strategy or a pull strategy or a balance of the two. A push strategy involves pushing the consumer through the channel (see fig. 5.9 (a). As retailing

is a channel service this approach is unlike that of more traditional forms of product marketing as it is the channel service which is promoted. Then pull strategy is where marketing promotion activities are targeted to the consumer to induce them to buy the retailer’s merchandise or service (see Fig. 5.9 (b)) Retailers may enter third parry agreements for promotion whereby by cost of the promotion is shared between the retailer and the manufacturer to encourage more sales of the manufacturer’s product.

Promotes the benefits of the store and channelRetailer Customer(a) Push strategy(b) Promotes the benefits of products Customer(c) Pull strategy

With the growing use of relationship marketing and the compilation of customer databases, retailers have been concentrating more on push rather than pull strategies. Companies are increasing their efforts to select the most appropriate target groups to direct offers at. This allows marketing programmes to be more finely targeted, with literature for sale periods, special events or offers being tailored to suit the individual customer group.SALES PROMOTION

Sales promotion involves any paid non-personal marketing communication activity; other than advertising, which offers an incentive to induce a desired result from potential customers, trade intermediates, or the sales force . This is sometimes referred to by the term sales incentive. Sales promotion campaigns will add value to the product because the incentives will generally not accompany the product but will typically be offered as mail drope or as coupons to be cut from newspapers, etc. It is usual for a sales promotion campaign to be used as a temporary offer to the customer in order to stimulate an immediate response. For example, free samples or money-off vouchers and offers are frequently used in sales promotion campaigns for brands or companies which need to improve demand at certain periods. Included in these campaigns are displays, contests, sweepstakes, coupons, frequent user (loyalty) programmes, prizes, samples, demonstrations, referral gifts and other limited duration selling efforts not included in the other techniques-see summary of types of sales promotion below. Most incentives are planned to be offered on a short-term basis only.

Sales promotion is often used in combination with other promotional tools in order to supplement the overall effort. However, it has to be remembered that it is sometimes difficult to terminate or change special promotions without causing adverse effects. Loyalty programmes are an example of this (see following section on relationship marketing) A sales promotion for series of promotions) also has to take account of the likely effect it may have on the image of the brand or outlet due to the negative perception change which may occur due to association with banal and frivolous promotions.

To evaluate a sales promotion the retailer should consider.

• the cost of the promotion in employee time, as well as for the cost of any merchandise, giveaway items or promotional literature’• the increase i8n sales and profit, or improvement in awareness, based upon the campaign;• whether the campaign had secondary effects of switching demand from other retailer products;• whether there were any additional sales outside of the promotion, due to customers being attracted to the store.It is not always way to isolate the above effects from other factors, but it is always important to make some assessments of the benefit of different types of promotion.RELATIONSHIP MARKETING –LOYALITY SCHEMES

The retail marketplace is maturing and due to a slow down in growth is becoming more competitive. Against the backdrop, retailers seek different ways of improving sales and profits. In order to address these problems retailers are adopting relationship marketing (RM) schemes based upon loyalty cards which aim to:• build greater customer loyalty and retentions• develop methods of creating longer-term relationships• Lead ultimately to increased sales and profitsRM has been defined by Gronroos (1990, 1991, 1994) who has consistently argued for the importance of ensuring that relationships with customers should be continuously developed.Marketing is to establish, maintain and enhance relationships with customers and other partners, at a profit so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises.

Gronroos argues that all marketing strategies lie on a continuum ranging from transactional to relational marketing, where relationship marketing can be judged in terms of measures of customer retention rather than market share. Christopher et al. (1996) have developed the ideal of a ladder whereby relationships, develop as part of growing custo9mer loyalty (see Fig. 5.10)

The RM process helps to advance relationships to higher levels until advocates status is achieved. This is where the customer as advocate is not only loyal but also champions the company the employees and service to others. RM should not be confused with band loyalty based upon commitment to the produce RM is a far more complex and wider alliance and association.

The rationale for RM is that it makes business sense to focus on long term financial benefits which may accrue once a customer has been won for the first time. This is because it has been estimated it is five to ten times more expensive to recruit a new customer than to retain an existing one. This is based upon the estimated cost of prospecting, advertising and selling, commission, product samples, credit checking administration and database management. The true value of retaining customers is that it enables the costs of conversion of the prospect to the set against the revenues earned over the longer term. Sales and profits improve in direct proportion to the longer a relationship lasts.

RM requires the effective acquisition and reaction of customers for the building of a more efficient operation and, ultimately, a stronger competitive position. Acquisition is based upon the traditional approach to marketing with the identification of customer needs, development of a retail offer to satisfy those needs, and then the targeting of prospects. The movement from acquisition through a retention is checked in the following.

Acquisition:• current methods used to acquire customers from prospects, which then require effective retention. (Customers must be given an incentive to part with their personal information and be recruited to any scheme.Retention• identify more about customer through database analysis;• improve and make the retail/offer/service more attractive;• inform to build customers’ knowledge of the company;• tempt customers through special targeted offers to purchase more regularly, try different products, etc. • retain the customer by developing and delivering different forms of loyalty schemes and rewards;• higher patronage should provide increased customer value to company, which should result in higher profits and the ability to make increased investment in further acquisition of new members to the scheme.The foregoing process can be viewed as an increasing outward spiral which places the company in stronger and stronger position.Incentivesed relationship marketing has become more prominent during the 1990s

following the launch of loyalty card schemes. The customer is rewarded for their loyalty through the collection of points which entitle them to money oft products, free items and other incentives such as Air Miles or charity donations. It would be useful if we were to define loyalty: Loyalty is

A state of mind which predisposes an individual toward a particular retailer and leads to a higher than normal proportion of expenditure to be devoted to the retailer’s offers.Relationship marketing or loyalty schemes have a number of benefits for the retailer.1. The retailer can accurately track the purchasing habit of large numbers of loyalty scheme members and this enables the acquisitions of important data which can be utilized for planning and promotional purposes.2. A good scheme will lead to repeat purchases through targeted incentives and benefits to visit the retail outer and make purchases.3. The scheme will act as a promotion for new customers and they’ in turn, can tell others about their experience.4. The customer may be willing to pay higher prices if the scheme enhances the purchase experience. 5. Customers will not take as much notice of alternative offers and promotions if they are already linked into a worthwhile loyalty scheme.PERSONAL SELLING Personal selling is an attempt to gain benefit through face to face or telephone contact between the seller’s representative and those people with whom the seller wants to communicate. This may be based upon sales activity in-store, evening calls to try to sell services or products, or sales calls by paid salespersons either to companies or to private individuals. The importance of personal selling differs among retail businesses on the basis of the type of merchandise offered. A retailer offering low-risk, low price goods, which are promoted, need only employ sales staff who can complete the transaction and deal with minor enquiries. The typical information required will be the current policy non reductions or special offers, guarantees or possible methods of payment. While the demanour of the staff in this situation is important, there is little sales negotiation skill required to conclude the transaction. However, it should be noted the trends is toward retailers reducing the number of sales personnel by offering greater self-selection of products in order to save on sales staff costs.In a store where there are highly priced or more complex items for sale the consumer has to cope with not only finding a salesperson to relate to but also one who has expert information. Such retail sales employees are often viewed as order takers but they should be viewed as order procurers. This is because for higher risk purchases customer, utilize and seek out expert advice and help. Situations where it is important to have trained staff are:• where the item hasto be made to fit the customer’s specific requirements, for example a wedding dress or made-to-measure clothes;• where the product is technically complex and the range is wide. For example a computer or a video camers;PUBLIC RELATIONS

Public relations is non-personal communication which changes opinion or achieves coverage in a mass medium, which is not paid for by the source. The coverage could include space given to a press release or favourable editorial comment. Public relations (PR) is important not only in obtaining editorial coverage, but also in suppressing potentially bad coverage. A company which has good links with the media is more likely to have the opportunity to stop or moderate news which could be damaging to the company. Consumer affairs television programmes quite often berate retailers for poor service or dangerous products. More recently, the use of cheap child labour in the production of merchandise for Western markets has become a newsworthy subject. This all requires sensible public relations reaction in order to retain a positive image for the retail company and industry.

The major benefit of PR is that it can promote and enhance a company’s image. This is very important for service-based companies which are reliant on

a more tangible positive image in order to be successful. RR is highly credible form of communication as people like to read ‘news stories’ and will believe them to be less biased than information provided in advertisements. However, editorial decisions over what is communicated will mean control over the message, its timing, placement and coverage is out of a company’s hands.

PR activity can either be planned or unplanned. Planned activity means the retailer attempts to retain control over the activity and news release. With unplanned activity, the retailer simply reacts in the most beneficial way to the chance of some publicity or to suppress a negative news item. Planned publicity will involve sending press releases and photographs to the media (trade papers, local and national press, radio and television), organizing press conferences for more newsworthy events, sending letters to editors of journals or local newspapers, organizing different creative ‘stunts’ to acquire the right tone of media coverage, and making speeches 9or writing articles) on informed retail issues in order to be perceived as a well-informed company. The media are interested in their own circulation, listening and viewing figures and therefore, to be successful all PR has to be newsworthy and of benefit to media interests. New and unusual information on new products or technology, expansion and development plans, human interest stories about staff and their achievements – all written up and complemented by photographs- may be placed in trade and local press.OTHER IMPORTANT PROMOTIONAL TOOLS

Within the field of promotion, there is the important area of visual merchandising. Advertising may encourage consumers to visit the store but the retailer’s display may make the difference between making a sale or not. The use of visual merchandising includes visual materials and window displays used in retail outlets to stimulate sales. Visual merchandising is non-personal in-store presentation and exhibition of merchandise, along with printed forms of communication. The approach is to :• ensure maximum product exposure.• Provide displays which enhance product appearance and create interest;• Provide sales and product information such as display cards and posters;• Allow for storage and security pf stock;• Generate additional sales through impulse purchases or by reminding the consumer of what is on offer based upon a message which is directly related to the product. It retailers rely on self-service of items then a selection display such as those found in greetings card or music shops is required. Selection displays are generally open to facilitate easy browsing and inspection. Retailers use selection displays to exhibit their everyday assortments of convenience or shopping goods. Effective use of this approach requires a logical grouping of the merchandise by its usage. Ease of selection through uncomplicated, well-organised arrangements will increase sales. There are also special displays which are placed in well-exposed locations to bring some interest to the store. These can offer a dramatic impact by the use of display equipment and merchandise. Point-of purchase displays are a particular type of special display which will be on the counter, in the store window or other relevant places. The visual display may include banners, counter, in the store window or other relevant places. The visual display may include banners, counter cards, end-aisle stands, video -screen displays, floor-stand displays and shelf extenders.

There is a growing use of sponsorship and direct marketing which do not comfortably fit into the other four promotion categories (See Fig. 5.12) . sponsorship is treated much more seriously today, with sponsors adopting sophisticated planning, selection and evaluation procedures for their sponsorship programmes.

Direct marketing is being used more extensively by a range of direct sell companies as a means of utilizing a retailer’s loyalty scheme’s database address list. The main method is direct mail which a postal communication by an identified sponsor. This is being expanded into database marketing based upon relationship marketing principles and an increasing use of telephone sales campaign

s. Direct methods of contracting prospective customers are used to :• encourage store visits from new customers;• increase sales when there is a unique or special merchandise offer to be made;• take full advantage of using the information from one department to cross sell other aspects of the store or its services’• build loyalty programmes in order to retain customers and increase revenue;• improve the image and competitive position of the store in relation to the competitors;• send out special offers for low season or sales periods in order to increase in-store traffic and sales. There is often resistance to too much direct mail as it is often associated with ;junk mail’ Good direct marketing selects the target carefully and provides the correct offer.

CHARACTERISTICS OF PROMOTIONEach of the promotional elements discussed above has the capacity to ach

ieve a different promotional objective. While personal selling has high potency for achieving communication objectives only a relatively small number of people can be contracted. Therefore, advertising is a better method of reaching a high number of people at low cost. Public relations is more credible than advertising but there is more control over what is communicated through advertising messages and these messages can be repeated on a regular basis. When it is difficult to raise advertising budgets, public relations is a lower cost alternative but it is difficult to control the timing and consistency of PR coverage. Sales promotions, such as leaflet drops which offer retail price discounts may produce an initial trial for a product- for instance, the purchase of a product which is being launched into the market- but this type of promotion is most suitable if used only for a short term period.

Each part of the promotions mix has its own strength and weakness. While this may include the factors of cost, ability to target different groups, and control, there are other important considerations. Figure 5.12 indicates the relative strengths of each of the four form of promotion: advertising, personal selling, PR and sales promotion. They are compared on the basis of the level of awareness of the communication and its comprehension, as well as whether it can build conviction and succeed in creating action.

PLACE –SUPPLY CHAIN MANAGEMENT

The special characteristics of retail business and the emergence of major retailers in the marketplace have led to specific forms of distribution or channel service. Prior to consumption, the retail product has to be both available and accessible. This requires a supply chain distribution system. A distribution system is the channel used to bring items to the place of sale, or the means by which a retail supplier gains access to the potential buyers of the product. More recently the efficiencies of supply chain management linked to TT have made major differences to the effectiveness of retailers and their overall profitability. (Read chapter 10 in order to understand the way IT has changed the whole field of distribution logistics). With the ever- growing size and dispersal of retail operations, controlling merchandise as part of store operations has been of paramount importance. This goes beyond an administration system ; modern supply chain management can achieve competitive advantage through shorter lead times for restocking, reduced inventory size and costs, improved management information and greater overall control.

Retailing cannot be divorced from an understanding of the supply chain as the following retail definition from Davies (1993) indicates:

The management of resources to supply the product and service needs of the end- consumer, encompassing the supply chain of any physical products and the exchange processes involved.

The supply chain includes all the activities and exchanges involved in e

xtracting processing, manufacturing and distributing goods and services from raw materials through to the end consumer. Supply chain management requires a holistic view of these activities and an innovative approach to their organization, in order to meet customer needs with the greatest efficiency.

CHANNELS AND CHANNEL FLOWSThere are different supply chain structures based upon extended, limited

and direct channels. The discussion of supply chain management here will concentrate on the extended channel of retail distribution as this is the most prevalent. An extended channel is where the manufacturer, wholesaler and retailer provide a chain of facilitating services in order to sell the right product to the final customer. The limited channel is when a retailer work directly with the producer and, therefore, can eliminate the wholesaler and the extra costs of this part of the chain. The retailers of furniture, white goods, electrical goods, and so on quite often deal direct with the supplier and create limited supply channels. The final alternative is the direct channel. In this case the product is sold direct by either the producer or retailer. By using different direct sales marketing promotions such as direct mailing, Internet services, telephone sales techniques etc. The channel is kept direct and the extra charges and commissions are thus eliminated. This allows some of the saving to be passed on to the customer who will purchase on the basis of lower price. It is important to realize that whatever part of the chain is eliminated, some of the functions of that link in the chain have to remain. Even if the retailer were to be dispensed with, some of the retail functions have to remain in order to achieve a transaction.

Within ay of the different types of channel the flow is not restricted to physical goods alone. Other types of flow of equal importance in ensuring the channel is successful are as follows:Physical flow: the movement of goods and method of transport, from one part of the chain to another.Ownership flow: the transfer of title for ownership/usage from one channel member to another. This is important for legal aspects of delivery, damage and storage by the producer and intermediary as well as for the final customer;Service flow:- if services are rendered as part of the process or the end product is a service or mainly service based, it is necessary to ensure all the characteristics of the services are fully understood;Information flow”- there is a need for timely and accurate two-way information between all channel members;Payment flow:- there is a necessity for agreed payment transfer terms based upon service rendered or goods delivered.Promotion flow:- a flow of communication material needs to be used to influence both trade partners and consumers. The objectives of the promotion will be to produce a positive attitude and image for the retailer.With the extended channel, the distribution of goods (‘inventory’) by retailers to consumers is achieved through the movement of goods to and from stockholding points (normally warehouses) and then on to points of purchase (stores). In marketing terminology this part of the marketing mix is referred to as ‘place’ but the stages involved in this chain may be referred to as ‘distribution and warehousing’ or, more aptly, as ‘logistics’ and ‘supply chain management’. In the modern competitive marketplace, retailers need to achieve high levels of customer satisfaction and service but at acceptable costs. This has led to the development of increasingly sophisticated distribution systems to ensure optimum service for the supply of goods to the customer. According to Davison (1995), large highly complex and often computerized warehouse facilities may handle several million cases per week (or in excess of 10-15 million worth of stock). Computerised stock management and information system (for example Tesco’s Dallas, Sainbury’s BRS, Safeway’s SM3, etc) which link retailer communications direct to suppliers have been developed (for example Tradenet) and transportation is subject to computerized control systems (for example ‘paragon’). These comprise sophisticated logistics systems which have become not only a means of managing the supply) of goods to the customer but are key strategic tools.

Many retailers benefited from the introduction of new logistics systems in the 1980s through increasing market share or increasing profitability. Companies which have benefited from such policies are generally those which no longer consider distribution and warehousing as purely a support function or an operations’ headache. Rather than simply a functional supply line, the use of retail logistics is now a valued management area with its own operational and strategic objectives.THE SUPPLY CHANNEL

The supply channel is the total process by which products reach the end consumer as goods or services., Figure 5.13 indicates the components of the traditional supply chain channel. Such a chain is an arrangement between paired links, where the emphasis has to be on controlling and managing the relationships in order to move products through the process effectively. This should be based on a marketing and business need for the chain to achieve.* reduced inventory investment in the chain;* improved customer service through its effectiveness* developing of strong links, and hence a strong chain, in order to build competitive advantage , and* lower unit costs which can be used to price more competitivelyAs the whole chain is dependent on the way any two of these parts of the chain interact there is always a question of whether the working relationships will be good and provide the service and economics required. In practice, it is found that the relationships are often ones of rivalry, mistrust and secrecy. None of these is conductive to a retailer being able to provide any added value from the supply chain.

The traditional supply channel for retail products.The manufacturer

The manufacturer or supplier processes raw materials into the finished consumable article, Suppliers may specialize in the type of products that they process (for example Birds Eye) or diversify into a wide product range (for example Unilever). Suppliers of leading brands will use a high level of marketing, including sales representatives and advertising campaign in order to ensure that their products are given maximum public exposure. They may even reduce the cost of their products to encourage retailers to have their producers featured in high flow locations within their stores.The intermediary function

The intermediary, the wholesaler, is in effect a distributor of goods from the manufacturer or supplier to the retailer. Wholesalers have traditionally been responsible for holding large stocks of products, attempting to anticipate demands and seasonal trends etc. Traditionally the wholesaler has also provided a warehousing function for both the supplier and the retailer. This ensures that the supplier does not end up with stockpiles in the factory and is able to continue or switch production; the retailer has similarly benefited from the use of this intermediary in the supply channel by avoiding the need to hold large quantities of stock. This enables the retailer to free up capital, which would otherwise be tied up in stock, for their purposes.

However, modern multiple store groups and supermarket chains have rendered the use of wholesalers unnecessary in the supply chain by assuming the function of the intermediary. This has a cost saving function. At each stage in the chain of distribution the cost price of a product is added to. This build up o

f extra costs may reduce profit margins for the retailer or increase the final selling price to the customer. This is not in harmony with the normal retail objective which is to maximize sales and profitability. Additionally, each extra stage in the supply chain makes it more difficult for the retailer to control the service or the quality of the final product. The more links that are involved in the distribution chain, the less control there may be. This is allied to the risk of conflicts over relationships with each partner attempting to maximize profit.

The larger retailers have, therefore, sought to extend their control over the supply chain and moved away from the use of the intermediary. This has been particularly so in the grocery sector, where currently four grocery chains, Sainsbury, Tesco, Safeway and ASDA, account for major share of sales in the UK packaged groceries market. The size discount prices and to absorb the role of the former wholesale intermediary, while ensuring the quality and service of product to the customer.

For such companies the traditional supply chain no longer exists. Multiple retailers- with their clearly defined strategic objectives, extensive national coverage, centralized organizational structures and highly accurate information systems – have created logistics networks which supplant the intermediary’s role of the supply in filling gaps between production and consumption.

GROWTH OF CANANEL RELATIONSHIPS AND PARTNERSHIPSA number of interrelated power relationship characterize the UK grocery

sector. These range from mutual dependence to alliances based upon secondary suppliers. The relationships are also affected by the concentration of market share in that suppliers are constrained in who they can deal with as the market is dominated by a limited number of multiple –outlet retailers. The negotiating strength of retailers has increased, and thus is even more apparent when own –label products are being offered with gross margins higher than manufacturers’ brands. The power that individual retailers now exert is also compounded by the centralization of decision making, with fewer individuals at head office being involved in deciding the fate of numerous different suppliers. This has meant that store managers have little input to supplier choice and are freer to concentrate on personnel and service quality functions. Such developments have had the effect of fundamentally restructuring the supply chain. This does not apply only to food retailers as the new methods of working have affected all aspects of retail.

Driven by competitive pressure to improve efficiency and to deliver added value for customers, major players in the supply chain have been changing the way that they do business with each other. Retailers and suppliers have started to recognize the degree of mutuality between each of their own objectives. Traditionally supply chain relationships have been adversarial, exhibiting a high degree of conflicts, during the 1990s there has been a recognition that there are benefits in closer working relationships. However ,there is always a potential problem for the large suppliers, which utilize logistics contractors, utilizing their power; this may lead to a situation founded on fear rather than mutual interdependence. Any trading relationship will include a measure of conflict and of co-operation. This can be seen as a continuum extending from a single transaction, with a very minimal requirement for trust between the two parties, to a long- term supply chain ‘partnership’ with a very high degree of trust, at the other extreme. Conflict imposes additional costs on the trading arrangements. Therefore, the aim is to move along the continuum, reducing the level of conflict and increasing the co-operation so that costs are reduced and quality improves.

In pre-checkout scanning days, the retailer had privileged access to current sales data and would use this as a weapon to counteract supplier’s bargaining strength. We can contrast this with recent trends of using EFTPOS and EDI te

chnology to delegate the entire replenishment administration activity to suppliers. Technology hs had a major impact on distribution. Inventory management is now driven by the scanning of merchandise at the checkout. This allows sales for all outlets to be collated and communicated straight through to the supplier, who will be responsible- within agreed parameters- for ensuring that fresh supplies arrive at retailer distribution centers to replenish outlets.

It is important to recognize that transformation to a partnership arrangement represents radical change. The previously prevailing adversarial climate, with its relatively low levels of trust, will remain deep-seated. It is not realistic to expect two organizations previously engaged in a form of opposition to each other suddenly to adopt a spirit of openness, and exhibit faith in each other and the co-operative pursuit of mutual goals. Making such changes requires a fundamental shift in the culture of each organization. This is not achieved overnight and can be a slow process, fraught with difficulties. CORPORATE REPLENISHMENT POLICIES

Corporate retail planning often involves formalized logistics policies related to distribution networks, warehouse, systems, information systems and replenishment systems. These policies allow the head office (HO) of a retail organization to be responsive to operational needs, which include general as well as local patterns of demand, and new market opportunities . Companies that have built into their corporate strategies the logistics of distribution have created dramatic improvements in their return on investment whether that investment be fixed (warehousing, vehicles or other equipmenta0or current (inventory, accounts due and cash). Corporate replenishment (CR) has thus become an integral part of the corporate strategy and is instrumental in enabling the achievement of financial and strategic objectives.

Corporate replenishment policy is a broad policy based upon the organisation’s replenishment ethos related to a system approach. There are two types of stock control systems: the push strategy, where quantities of stock are pushed into stores in anticipation of demand; and the pull strategy, where mechandise is pulled through the supply chain to replenish sales at stores, and a minimum stockholding is planned to be retained in the store. Systems have been developed in the 1990s to encompass quick response or just-in-time (JTT) methods, where the pull strategy becomes the leading method to link inventory to actual customer demand. The channel then becomes a continuous replenishment system triggered by accurate electronic information from the use of EPOS and EDI, As such, JTT systems allow forrestocking to occur in relation to customer demand. JTT is a philosophy as much as a technique, it is based on the premise that no products should be made or moved until there is a ‘downstream’ requirement for them based upon feedback from the supply chain. Within retailing, the fundamental of JTT are often known as ‘quick response’ (QR). The logic is that demand is captured as close to the final customer as possible, allowing a logistics response to be made as a direct result. Quick response will thus include the manufacturer in a vertically integrated supply chain so that all means of JIT are triggered based upon changes in consumer demand patterns. Quick response is a series of technologies which comprise the electronic scanning of product codes, the application of EDI, and the identification and tracking of goods in the supply chain. The main users of QR are the grocery multiples but other companies such as Benetton and Arcadia (formerly the Burtton Group) developed the system at an early stage (Dapiran 1992).Advantages of corporate replenishment (CR)There are four different beneficiaries of corporate replenishment systems:1. the customer;2. Store management’3. the company;4. suppliers;The advantages for each of these groups are discussed below.Customer

The customer is able to receive an improved level of service as the good

s are available at the point of sale, where and when the customer needs them. When items are advertised they are in stock and this adds to customer goodwill as stock is assured through the system. Stores can, and do, order promotional lines in some manual ordering systems. However, across a chain of stores it is unlikely has all relevant managers will order sufficient stock levels- or indeed place orders at all-to meet the promotion, product introduction or range change needs, at the right time Also, in emergences substitute products and so on can be sourced more effectively in advanced CR systems,

Through economies of scale and inventory savings made by being able to carry less ‘safety stock’ the retailer can pass on savings to the customer. The retailer is, through feedback from sales systems and the resultant flow of accurate sales information, able to forecast bulk buying requirements more accurately. This allows the retailer to obtain greater discounts from suppliers, so making sacuings which can be passed on to the customer.

Store managementStore management, through corporate replenishment, may be relieved of th

e time consuming task of stock checking and ordering if the CR is well designed. Under automatic stock replenishment through EPOS and central distribution, store management may be completely freed from stock and ordering worries. The means they have more time to manage resources and implement company policies. Under highly computerized goods receipt systems other duties, associated with shrinkage and delivery security, may also change significantly.

It is believed that automated system swill means managers will not worry about stock situations. This is possible but it must be realized that a basic function of store managers is to ensure stock counting is accurately recorded, whether they or a Head Office buyer is responsible for ordering stock. In EPOS replenishment, stock outs occur for a variety of reasons: unpredictable shifts in demand; product unavailability; poor data capture control; loss of information or computer failure, etc. In such a situation it is incumbent upon store managers to ensure that major stockouts are communicated as soon as possible to the head Office buyer or allocator so that remedial action may be taken. EPOS merely remove the task of physically ordering stock; it does not remove the manager’s responsibility to ensure that maximum customer service, through product availability; is achieved. To achieve this, accurate information input by stores on stockholding is vital. Even with EPOS systems information can be corrupted by poor data capture, by incorrect codes being entered at the checkouts, or by staff coding articles or merchandise incorrectly.

CompanyThe company benefits from maximizing service and minimizing costs. The

central control of inventory replenishment can be managed to keep the amount of stock to an acceptable level. CR avoids dead stock being built up through discontinuity of buying or ordering by store-based management. The main benefit is that reduced stockholding figures prevent capital from being tied up; it may be freed for the expansion and development of the business.

Because of the ability to control stockholding., previously used warehousing and store space is no longer required for that purpose. This enables retailers to maximize store shop floor selling space. In a self-service environment you cannot sell stock that is in the warehouse. In conjunction with central warehousing, economics of scale can be made through composite transports systems. Whether it is an agency or own transport network, corporate replenishment enables improved utilization of the transport fleets and improvements in service.

Given the constraints of supplier fed deliveries, marketing may also benefit from corporate replenishment. It can be assumed that stock will be allocated and received into stores to coincide with advertising, other promotional activities and videos, coupons, competitions etc. Advertisement products which are not available in stores is a major fault possibility that can occur in any type of replenishment system. CR ensures that it is not left to department managers, some of whom will-due to other pressures- be enable to meet the requirements o

f the promotional activity.Suppliers

It is for easier for a supplier to cope with one order for upwards f of 300 stores than for each store independently to place orders. Consequently, the supplier can deliver economically the quantity required in good time. Similarly, it is much more desirable to organize this through central distribution warehousing (CDW), Phoning, faxing or using traditional forms of placing orders is time consuming and often inaccurate. To deal with one electronic system of ordering is desirable to the supplier as well as to the retailer. However, orders may also be placed by the buyers-professionals who are specialists in their field, knowing the merchandise and seasonal trends. Therefore, from the supplier’s point of view, it is preferable not to deal with store based management who have numerous responsibilities to perform and ordering is only one of a list of urgent priorities

INTERNET AND DIRECT DISTRIBUTION SYSTEMSIn addition to more traditional methods of channel management there has

been a change of distribution strategy to increase sales through direct channels. Large retailers now offer many of their products on-line through the Internet. While this is an important trend, retailers long term strategies are still hard to discern. In 1995 J Sainsbury the supermarket group, announced it was offering wine on the Internet; anyone with a computer, a modem and a subscription to an Internet service provider could choose with one-line, through they had to confirm the order and pay for it by telephone (See chapter 10on IT and retail for further discussion of the possibilities of the Internet.

Compu serve, the US-owned on-line information system, announced is UK Shopping Centre in 1995. Subscribers who paid about 7 a month could buy books from WH Smith, CDs from Virgin and cameras from Dixons. Because CompuServe is considered more secure that the Internet, the results of the early schemes have been commented on as position. WH Smith, Sainsbury’s and Tesco reported the service to have been effective. The question underlying any change in channel level is why anyone would need a superstore if manufacturers started selling their well known brands on-line. This would mean that large food retailers may treat on-line shopping as both a threat as well as an opportunity.

Logistical problems will also have to be overcome. These will not be on the hi-tech ordering side as the problems of security for customer and retailer have been largely overcome through sophisticated encryption systems, and devices such as an intelligent agent’ that will search out the best value on the Internet have also been developed. Ordering will soon be possible via a number of media- the Internet, private on-line services, interactive television and even special in home devices. It is the routine business of delivering goods which could prove to be a problem. For example, big retailer are used to shifting pallets of products by lorry, and the packing and delivering of single items quickly is much more difficult and expensive. Therefore, any need for home deliveries may lead the retailers to make alliances with parcel companies, the Post Office, or even local dairies. It may also cause retailers to consider pricing levels . Early adopters may well be prepared to pay a little more for a home deleivery service, recognizing the additional value of the saving in time. THE PRODUCT

The effectiveness of planning the marketing mix depends as much on the ability to select the right target market as on the skill in devising a retail offer which will great high levels of satisfaction. A product is anything that can be offered to market that may satisfy a need or a want. This means a combination of goods and services which includes the store, the staff and the merchandise. IN relating the complete retail offer of location, price levels, merchandise, store layout or method of selling, brand name and service provided playa pivotal role in a firm’s existence and long term success or survival. The shopper has to believe that the merchandise, or outlet, offers added value inn octet fat it to be successful retailing comprises everything an individual at customer res

cuers – both favorable and unfavorable – as part of the total retail transaction should be noted that Chapter 6 is dedicated to a full explanation of the role and functions of merchandise management, which is an important aspect of any discussion of the marketing mix.

A BREAKDOWN OF RETAILINGS AS A PRODUCTThe formulation of a successful retailing operation involves a combinati

on of : Service;

�Quality; �Merchandise; �Brand name; �Features benefits.Service

An agreement to service provision is concerned with creating the level of services to be offered. In a store, how much of the service should the client be expected to perform and how much should be provided by staff? For example, in supermarkets the self-service of food and the customer carrying their owners are now thought of as acceptable and at times less by client: the use of automatic teller midlines (ATMs) at banks attends the availability of the cash retrieval service (and others) beyond typical bank hours, and also allows customers to estimate roughly how long a transaction will rake. There are also systems for self-scanning of goods which cut down on the cost of time.Quality

A decision regarding quality deciding on quality standards and implementing a method of assurance on the performance level of staff and facilities. The management quality becoming an increasingly important management function. It is important to create a good quality reputation for the product and service offered as this provides a positive image for the company or organization and is a major advantage in countering the perception of risk which, for many retail consumers. Retail service providers are more likely to be successful. It the can be depended upon to deliver higher quality service levels than their competitors. Success through quality is often seems as for certain product categories, the outcome of a relationship between a customer’s prior expectations of serviced delivery and the perception to the actual service experience. Quality is also used statically: as away of differentiating merchandise and of positioning the offer or retail outlet in an exclusive way. However, an exclusive position does bring with it the added problems of needing to source more widely to continue to find unique merchandise and having to bear additional overhead costs as a consequence of exclusively.Merchandise

Retailers need to decide on the merchandise to offer by engaging in the sorting process of assembling a range of goods and services from a variety of suppliers. The depth and width of this range will be depend on the specific strategy of each retailer, who must decide how different products will be fir into the overall range of products they offer to the marketplace. A retailer must also decide on whether to include various brands in the range, and whether the offer of traditional or new products should be included. The range of the offer and how each product marches or complements the chosen positioning of the retailer is an important retail consideration; for example, is the company maintaining an up market, mid-market or economy position? The decision regarding the range of products is also important as it affects the need for space for display at the point-of-sale as well as stockholding. The width and depth decisions over the range of merchandise to offer have to be linked to both expectations and the financial consideration of the consumer target group. Decisions over merchandise have to take into account that a consumer may warn to choose to purchase from a range of different types of goods. This could encompass the following categories.

National brands

These are the brands which are heavily promoted by companies, such as Simsbury, Boors and K wik Fir, to achieve consumer awareness and preference, e.g. Boors No.7. For the retailer the problem in offering such a range is that they have no exclusivity and are open to price competition from those discounting national brands.

Own-labelA retailer can offer the advantage of exclusivity and have more control

over the product. They thus need nor enter into heavy advertising, which may give the flexibility of being able to offer lower unit prices.Licensed merchandise

The important of TV or film characters has led to the addition of images and symbols on a range of merchandise from everyday items to clothing. Disney characters, Barr Simpson, etc. have applied to the children’s market and led to major opportunities for increasing the desirability of different types of merchandise.Franchised products via concessions in a store

An advantage may be gained through an exclave deal with a manufacturer (for example, Clinique, Principles, Alexan, ets. ).Brand name

A brand name which is well known and associated with high satisfaction level imparts an improved image and added value to the product or the store. This can lead to store loyalty or consumers insisting on the product by brand name and being less price sensitive. This brand name may be a nationalization own-label brand;/Brand names can be family brand where each of the company’s products adopts the same brand name. Umbrella brand which use a corporate brand symbol are being used to project a consisted image across countries. Nestlé’s brand policy, for example uses umbrella and sub-umbrella branding; corporate branding takes place with Nestle, Carnation, Maggi, C&B, Chambourcy, Buitony, Findus, Friskeys. Herra and Libby’s while sub-branding is used for Nescafe, Nestea, Nesrum, Sveltesse and Lean Cuisine. Addirtionally, individual product brand name such as Nido, Crunch and KitKat are used, where each product is brand differently. It is argued that it is difficult to create marketing success across a wide range of products due to the problem of providing complex brand values to dissimilar products. However, Marks & Spencer are renowned for having built their success on an umbrella own-brand,, St.Michael, which is associated with added value but which may be produced by a range of manufactures in a number of countries.

Some companies opt for individual brand names such as those associated with the Debenham’s orga 111 station the individual brand name approach allows the retailer to search for the most appropriate brand name; its weakness is that the promotional budget for each brand has to be subbocientlyy large to support that brand. With individual branding, a company is able to position brands and products at the cheaper end of the market without the brand damaging the image of the test of the company’s brands. In addition, if there is bad publicity for one of the company’s brands. Then the other company brands do no necessarily suffer..)

With umbrella or family brands there is a spin-off effect for each of the brands from the expenditure on anyone brand. Conversely, if one of the family brands attract poor publicity because of association there will be damage to the other brands. For family branding, careful anemone has to given to the quality control of the product. One of the benefit of family branding is that each product brand performance (PBP) can be measured against the overall family brand performance (FBP). That is to say,- when FBP IS divided by PBP and the ground shows an increase over time, without good reason. It may that the product brand needs modification, revitalization or a detailed review.Features and benefits-A product includes everything that the customer and this includes the core product which is made up of the delivery of benefits and features. We know that consumers buy products for the benefits they deliver to them as this is the outcome value! of the purchase. These are also the different features which are the ta

ngible aspects of the product which help to differentiate it from competitors. Adding In the right features increase the probability that a purchase will occur. Features in a store such as a play area for children, baby change facilities, fast checkouts, free gift wrap service free delivery,.. and so on are all added benefits which may planned into the product otter. Retailers: should take the opportunity o consider factors such as rooms, appropriates of in-store music at mid-wheel periods as well as weekends when the market profile of their customers may change, gift wrapping service, loyalty program benefits etc.STORELAYOUT

The store is products in its own rights. The customers product decisions can be enhanced, or ruined, by the type of pant store layout. Stores should be designed to facilities the moment of customers, to create a planned store experience and to allow the optimum presentation of merchandise. This also involves the full use of floor area- to utilizing obscure and unproductive areas. The retailer’s goal has to be a layout which reflects the branch position of the store and ensures the most effective use of space. It also has to be designed on a proactive rather than a passive basis.Proactive planning is based upon a manipulation 6f the in-store experience rather accepting a passive, totally random experience for customers. Proactive planning accept and repose to the data showing that store layout can influence the consumer5s sopping behavior and perceptions. It is well known that the use of different layout and aisle design will influence the patterns of traffic flow o pass the principal merchandising group. The correct display of merchandise in a highly frequented area can dramatically increase sales conversely a poor display will have a negative effect.Customers have to feel happy and comfortably in an environment if they are to relax and stay for any length of time. Customers are more likely to want to enter and shop in a store then, their senses are satisfied by the way the state environment h<IS been planned. The use of space, color, walls, pillars, floor coverings, lighting, music, ascent and so on can be controlled by the retailer. The combination of these physical messages which are planned are known as atmosphere. This is reinforced by the type of merchandise offered and the method of its display-down to the style and the poss. of mannequins. Atmospherics are created by the combination of a whole series of cusses and stimulants to produce the desired ambience and, emotional response from the group of target customers. The emotional state of the shopper will lead to an increase or decrease in the planned level of purchase. It is essential to know what factors stimulated and please consumers as the result will capture individuals for longer periods in a store and make them more susceptible to merchandise offers.Therefore the design of stores has to strive to produce an efficient layout with the qualities of ambience that attract members of the target market. The following list of factors is useful but not exhaustive.1. Space much be used effectively, with territorial areas planned to break up the store into logical sales sections and functional areas as changing rooms, restaurants and pay points-effective use of space. The store’s layout should be planned for optimum circulation around the store, both outside and inside, has to transform the customer’s attitude and to create a promise of the experience to come.2. Layout should be planned to encourage customers to circulate in specific patterns so as to visit as many merchandise areas as possible-productive layout. The retail layout logic has to be easily comprehensible so that the potential customer quilt understands And assimilates the route they can negotiate past the merchandise. This is often achieved by the use of different floor coverings or textures which act as dues to the customer. It may also be accomplished (through the use of dear and stylist) sign age.3. Stimulants to the senses to improve sales must also be planned. Music can be changed to suit the type of shopper in the store such as playing ‘younger’ background music just after the school close. Faster or slower music will affect the speed at which shopping occurs, national music, such as French or German

tulles, played in a super market will increase the sales of a particular countries wines. Classical music will need to a sale more expensive wines. Another option available is to, are the tempo of the music, a different times of day or in different area to influence the pace of in store traffic movement. For example, when higher turn over of customers is required in the restaurant around lunch time, increasing the tempo of the music will achieve this behavior effect. Fragrance and science of perfumes, latherer, house plans and so on may influence customers o purchase. The aroma of fresh bread, pastrieuecheese, coffee, chocolate, etc can stimulate sales and some stores on restaurant extract the aroma, pumping it outside their believe to attract he passing public.4. Lightening is an important mood setter and very useful in the production of a desired ambience. Lighting can be soft., bright or produce color washes. Merchandise can be high lightened by directional lighting or with the combination create interesting contrasts throughout display area. The use sophisticated lighting system allows the-retailer to adapt the ambience at regular intervals. This can alter perceptions of the size of areas, compliment the merchandise by bringing out its colour and direct the attention of the customer’s gaze. One other important aspect of lightening should be flattering.From a strategic marketing stance it is important than in highly competitive retail sectors the layout of the store is planned in order to reflect the desired market position The position has to be planned on conjunction with clear ideas as to how the atmospherics will differentiate the store as a brand from its competitors. Store layout sort of buying experience they may seek from the store.Aspect of atmospherics and store layout may affect:� The speed at which consumers move from from one point to another� in the store; � The degree of well-being felt by the staff working in the store environment; � The total sales revenue, sales pattern and type of product sold;� The image the consumer has of the store and its merchandise.

RETAIL PRICING The pricing policy selected by retailer will usually be directly Related to the resultant level of demand over a period of time. With right Margins, to the profitability of the enterprise. For the retailer, pricing decision Are critical because without adequate margins the business will not survive for Long. As a business, the retailer has to seek cash flow, profitability and growth in order to improve their market position. The importance of selecting the right strategy is growing as battles among retailers to increase market share are fought on the basis of offering quality, selection and availability at competitive prices. To be successful, retailers are having to forge partnerships with manufactures and introduce technology in order to gain cost advantage without compromising quality. Given this situation it is not surprising that cost, margin and price comprise the most important element of the marketing mix for most retailers. This especially the case given the existence of discount store formats, such as convenience stores, price is important even if it is secondary to the benefits of location and the opening hours for trading. The current situation is that in the competitive retail market-place, price is a major strategic weapon in the battle with the competition.UNDERSTANDINGPRICE AS A CONCEPT

Price may be usefully described as follows:Price is the monetary value assigned by the seller to something purchase

d, sold or offered for sale, and on transaction by a buyer, as their willingness to pay for the benefits the products and channel service delivers.

This definition clearly separate the way retailer treats pricing-as cash flow or income generating function-from the view of the customer, who sees price as more than money. The purchase for the customer includes complexity of emot

ional and functional benefit delivered from the product and the brand. This means that value for the customer us a complex set of perceptions. This is discussed in more details later in this chapter.

We believed that of all the elements of the marketing mix, good pricing decisions are the hardest to make. This is because prices for detail product and channel services have to pay into account the complicity created by seasonability of demand and the inherent perishability of the product due to factors related to fashion or being past the sell-by date. Their has also been major influence on the grocery sector due to the abolition of resale price maintenance (R.P.M) which as led to the offer of loss leaders and more complex pricing policies in order to achieve optima over all profit. In conjunction with this, consumers are now pressurising retailers to change their pricing policies to offer great value for money.

A retailer’s pricing must be consistent with, the overall objectives and reputation of the business. This could be in financial terms such as sales, profits, retune on investment, etc or as pricing’s roll in the growth and expansion of the business. Their may also be broader objective such as the number sales periods, total number and range of prices to be made available, and positioning of the store and merchandise in relation to prices. These pricing goals are important as they provide the consumer with an image of the retail outlet based upon its approach to pricing. In addition, pricing has to integrated with our aspects of the marketing mix and take account of the target market.

APPROACHING TO PRICING THE RETAIL PRODUCTPricing policy has to consider all the potential influences and factors

affecting the market and therefore the scope facing the retailer is remarkably wide. The choice made will probably be one, or a combination, of the following. The major difference is between he cost-oriented approach to pricing.Cost orinted pricing

Cost oriented pricing is related to the costs a retailer incurs when purchasing a product or service for sale o its customers. Cost oriented pricing refers to setting prices on the basis of an understanding of costs to the retailer.

Cost-plus pricing

For the cost-plus methods this will be in relation o either marginal costs or total costs including overheads.

The approach could be to :

• Select the target market; • Determine the cost of the goods in store-storage, selling costs, shrinkage estimate, overheads, etc. • Determine the ceiling price above which the retailer would be offering expensive prices compared with those of competitors.

Apply the mark-up, given the possible range has been identified, in order to achieve profit objectives. Their may be some discretion for pricing individual items within a department or section as it is the overall profit which is important a percentage mark-up is then normally applied to reach the final selling price. This may be expenses and provide the desired level of profit. For example: if we assume a retailer purchases a dress at £ 60 and prices it at £ then the mark–up on cost (£30/£ 60) expressed as a percentage is 50 percent and mark-up on selling price(£30/£90) is 33.3 percent. Some minor adjustment may take place, such as bringing the price to £ 89.95-fine –tuning the final price for psychological and other reasons.

Knowing the cost breakdown of the product is extremely important and it is essential to have calculated the opening cost of each retail outlet or page in a

catalogue. This allows the marketer to know what the net effect of any tactical price reduction will be.

The weakness of cost-oriented pricing as a method is that it does not give adequate consideration to demand for the product, what prices the market place will bear, or the different price levels of the competitors.

Rate of return pricing

Another cost-oriented method is that of rate of return pricing which provides the company with an agreed rate of turn on its investment. Whereas the cost-plus method concentrates on (he costs associated with running of the business,) the rate of return method concentrates on the profits generated in relation to the capital invested. This approach ignores the need to link the pricing policy to the creation of a sales volume which is large enough to cover overheads or to ensure demand will remain consistent overtime. Cost-plus or rate of return methods of pricing are not appropriate for those retail product which have to survive in a highly competitive marketplace.

Demand-oriented pricing

Demand-oriented pricing takes into consideration the factors of demand rather than the level of costs when setting price. In times of shortage of products-from candles at the time of power curs, to vegetables out of season – prices are usually raised to take advantage of higher demand and scarcity of supply.

Discrimination pricing

Discrimination pricing, which is sometimes called variable or flexible pricing, is often used when products are sold at two or more different prices. Quite often students, the unwaged and older people are charged lower prices than other consumer segments at attraction or events. A garage will offer different prices for servicing company cars as opposes to private cars. A customer known to a retailer may be given a personal discount as part of a flexible approach to pricing is often time-related, for example cheaper drinks charges in “happy hour” periods or cheaper meal prices in the early evening prior to the high demand periods. For price discrimination to be successful it is necessary to be able to identify those segments which, without the price differentials, would not purchase the product. To obtain a high flow of business, a DIY retailer will often discount to those customers who offer significant sales demand. This means that small businesses may benefit form volume discount rates and those individuals customers building their own extension, for instance, may be offered a special one – off discount rate.

Discrimination may also be based upon increasing the price of products which have higher potential demand. For example, if the product is fad products then it is normally in high demand, usually demand so strong that it outstrips supply. Therefore, such products as Rubik’s cubes or Teletubbies dolls could be priced at a higher price based upon an increasing level of demand. Another example of this is exhibited on special celebration dates, such as Mother’s day or Valentine’s day. When the price of flowers or plants raised.

Backward pricingThis is a market based method of pricing which focuses on what the consu

mer is willing to pay. The price is worked backward, as the name suggests. First an acceptable margin is agreed upon. Next the costs are closely monitored so that the price which is deemed to be acceptable is able to be matched. If necessary an adjustment is made to the quality of the product offer or service to meet the cost-led needs of this technique. Retailers selling on a price-led basis often consist that their suppliers meet specified Costs, even if this compromis

es some aspects of the quality.This approach can be associated with price lining is a method of simplif

ying the merchandise comparisons for the customer by establishing a number of lines within price points for each classification. Once the price lines have been determined, the retailers purchase goods which fit into each line. For example, for men’s shirts the price lines could be 25, 35 and 45. In order to be a successful trader the monetory difference between the price lines has to be large enough to reflect a value difference for the consumer. Such steps of change in price and value enhance the ability of the saleperson to convince the customer to trade either up or down. The selection of price lines has to be based upon the strength of consumer demand for the bands. The benefit of limiting the number of price lines is that a retailer on achieve broader assortments, which leads to increase sales and fewer markdowns. For example, a retailer which stocks 180 UI1 Its of an item and has 6 price lines would have an assortment of only 30 UI1 Its in each line. On the other hand, if the units were divided among only three price lines there would be 60 units in each line. By utilizing such an approach a retailer may specialize more easily in relation to lines and so create a more defined store image for its merchandise. The advantages of price lining are:

• Sales volume can be increased by the provision of larger assortments at each price line; there is greater clarity of price offer for the customers;• Sales people can offer stepwise change to the customer in order to enable them to convince the customer to trade up or down;• Line concentration allows for improved displays and promotional messages;• With buying process is improved, as buyers have to focus on the retail price point and buy backwards;• The buying process is improved, as buyers have to focus on the retail price point and buy backwards;• Control may be easier with greater price coordination and fewer pricing variables;

Skimming pricingSkimming is utilized when there is a shortage of the product or the brand has been associated with added value and, there for, demand will not be dampened by charging a premium price. Market skimming policies can only occur houses dealing in haute couture or cosmetics companies with strong branding utilize this approach. Leader pricing Some retail items may be priced very competitively in order to sacrifice profit on those items but to genera to more overall demand for other items. These are often known as’ loss leaders’ if they are sold below cost but in reality retailers seldom make a cash loss on the items even though they are heavily discounted. The leader items are normally sold near to cost rather to achieve extra sales of other Christmas holiday provisions. The purpose behind the use of leader prices is to increase store visits, purchase and the perception of good vale. The items chosen for inclusion as loss leaders should be widely known and brought on a frequent basis. The objective would be to price the item low enough to attract numerous buyers. In addition, if information is made available as to the value of the offer, the promotion will usually be far more successful The approach is often employed by supermarkets which feature leader item on a regular basis. As with all forms of price promotion there in an obvious need for retailers to monitor and evaluate their usefulness. In offering lead pricing, the danger is that customer may be selective in what they purchase. If customers are limiting their purchase to the lead item or if that item competes with other items in the store, the price promotion may need to be revised. Competitive pricingCompetitive pricing is employed to match the market prices, of competitive retailers. This is technique which requires knowledge of actual costs as matchin

g the prices of a more efficient retailer may lead to losses on particular items. It is also required an understanding of the importance of the pricing policies of the competition from a consumer perspective. Competitive pricing is reactive rather than proactive form of pricing as a retailer with a strong brand image does not necessarily need to march competitors offers.

Market penetration Market penetration pricing is similar to competitive pricing but is adopted when a company or brand wants to establish itself quickly in a market. Prices are set below those of the completion in order to create high initial acceptance for the company’s retails offers. A company selling fast moving consumer goods FMCGs may use market penetration pricing in the first couple of years and then, when the product becomes established, will slowly increase the prices. In 1996 there was all-out war between the food retailers and major oil companies over the price of petrol, based upon various supermarkets trying to obtain a major market share. It is estimated the petrol price war of 1996 cost Tosco 30 million and 2000 in depended companies were forced out of business. According to an article in Super Marketing(1996),at the height of the price war the average gross profits were only 0.03pa litter and these rose to 5.5p a lire when the war subsided in July of the same year. The penetration strategy quickly established a 21.5 percent share of the petrol market in the UK for the combined supermarkets.

Psychological pricing This is sometimes referred to odd pricing. Retailers will often price products below a round figure: changing a price from say 9 to 9.95 or 9.99 to foster the perception of the price as being that a which the customer is willing to buy. Just as 9.95 may appear to be significantly less than 10, so a price of 488 may seem more on a 400 level than a 500 level. However, there is no conclusive evidence that such pricing policies make any significant difference of profits. Everyday low pricing A number of retailers now adopt the strategy of everyday low pricing (EDLP). This strategy stresses the use pricing policy with the continuity of prices at a level between the normal own store price and the price or the deep discount competitors. The term’ low’ does not mean ‘lowest’; it simply refers to a price position, which is competitive and therefore, can remain stable. A number of retailers who operate EDLP do not believe in markdown policies and sales but attempt to generate all-year-round demand by setting the prices at the right level. One of the most well known retailers to have adopted this strategy is toys 51 Us. EDLP is a strategy, which is open to large operators who have significant economics of scale and buying power.

EDLP can offer a number of benefits, as the following list 1. Perception of fairness. Many customers have become increasingly skeptical about the mark-up and mark-down strategies of retailers. There has been a trend by customers to wait for sale periods or to attempt to gent the best bargains by shopping around for promotions. EDLP allows retailers to withdraw from sale period pricing wars and to concentrate on creating a market position that imparts a perceptions of fairness of pricing.2. Reduced advertising. The stable price policy of EDLPs eliminates the need for communication of sale or special price offer. Instead, the retailer can use the budget to concentrate on improvement of image or the building of relationship marketing schemes.3. Improved customer service management. If the policy IS set to banish, sale period then the demand created is less seasonal and volatile, and sales staff are able to spend adequate rime in dealing with customers. This will improve the customer’s perception of the level of service they receive. The lack of high demand sales period also has the benefit of allowing staff levels to remain r

elatively constant.4. Reduced stock outs and improved inventory management. With more even demand for the products it is easier to control the stock situation. EDLP reduces the large variations in demand and, therefore, periods of stock out when customers may feel dissatisfaction with the retailer‘s service. Increased profit margins. If a retailer can import to the customer an image of fair pricing then, although the prices may be generally lower, the overall effect can be to increase turnover and consequently profitability.

EDLP has come major benefits to recommend it; it could not be appropriate for all retailers. Some retailers would find it difficult to maintain low prices for a continuous period due to lack of economies of sale in buying or due to the competitive nature of their business. Also, retailers selling goods which have a strong fashion content are more likely to want to set initial prices at a high level as this is good business practice. Fashion goods are often priced differently because if a subsequent sale is created for this type of merchandise, if often creates a high level of excitement. The motivation to purchase created from the sale enables the retailer to move a large amount of merchandise in a short period. Therefore, EDLP is not a sensible strategy for some retailers to adopt.

Factors affecting price sensitivity As number of factors will affect the price sensitivity of products. Fro

m a marketing viewpoint a deeper understanding of price sensitivity assists with an understanding of the different retail segments and the development of strategic planning. The main factors when considering retail pricing are listed below.

Perceived substitutes effectBuyers are more sensitive the higher the product’s price is in relation

to another product or substitute they could purchase. Therefore, the consumer may choose a substitute or forgo the purchase if they believe the overall value is unacceptable. For example, local residents may avoid an area with higher priced shops frequented by tourists who are unaware of the alternatives.

Unique value effectBuyers are less sensitive to a product’s price the more they value any

of its attributes that differentiate it from competing products. For example, may customers are loyal to Heinz or Nestle products because they perceive them to offer superior benefits.

Importance of purchase effectIf the risk of the purchase increases then the price will not be the mos

t important aspect of the purchase. The occurs when the item is an important present or when there is a need to purchase medicines. The greater the importance of the product, the less price sensitive (more inelastic) the purchase will be.

Difficult comparison effectBuyers are less sensitive to price when they find it more difficult to c

ompare alternatives. This may lead to a demand for the more established brands, or greater store loyalty, in order to reduce the perception of risk.

Price quality effectA higher price may signal that the product is of superior quality. The result may be less sensitivity to price. This is not a conclusive effect as it applies to some products, while others may generate different reactions. For example, whisky at a higher price may signal improved quality but very few people would think higher priced petrol offered any quality advantage.

Expenditure effect

Buyers become more price sensitive when the expenditure is larger, either in absolute money amounts or as a percentage of their income. This is most prevalent in low income households in which all expenditure is carefully controlled. This effect is also stronger and more likely to occur in times of recession.

Fairness effectIf the buyer believes the price falls outside a band of what would be ju

dged reasonable and fair then they becomes more price sensitive. With some types of products it is relatively easy to judge the offer of alternative brands and products and therefore easy to switch demand to cheaper alternatives. At certain times alternatives are not easy to find. Consumers will perceive retailers, or the brands they stock, to be ripping off’ customers if they exploit situations of shortage by being greedy. For example, street vendors are often seen to be selling drinks or ice creams at highly inflated prices when the temperature is extremely high. CONCEPT OF SUPPLY CHAIN MANAGEMENT

A supply chain is a network of facilities and distribution options, the performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these products to the customers.

Supply chain management ensures a smooth and efficient flow, from raw material to finished goods, into the hands of the consumers. It is a concept which has increasingly replaced the traditional fragmented management approaches to buying, storing and moving goods. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and from firm to firm. It aims to integrate activities across the entire merchandise flow, to achieve quick response in supplying products and services to customers who need them. By doing this, production time can be set close to selling period, achieving better prediction of selling targets. Figures 16.1 illustrate the flow of materials right from the stage of procurement, till they reach the retail store as finished products. This is the flow of goods. On the otherhand, the information on the products purchased by the consumer, flows back from the retail store to the various intermediaries, to aid the creation of the right product. This is the flow of information.

It is difficult to put down the value of the supply chain industry. However , it is estimated that the global market size of the supply chain and logistics industry, is U$$3 trillion, which is a significant chunk of the global domestic gross product.

The estimated market size for supply chains globally, includes aspects like trucking, warehousing, inventory costs, transaction costs and the administration costs for these key elements. The importance of supply chain management in India, can be gauged from fact that logistics cost constitutes 10-12 per cent of our GDP, It is estimated that over Rs. 1,00, 000 crore of the toal capital, is tied up in inventories in the industrial sector. This is close to 22 percent of the aggregate industry sales2. Not long ago, retail stores existed to cater to the needs of local markets. When one needed bread and eggs, one visited the local grocery store. To buy garments, on simply, either bought fabric and had it tailored or bought what was available in the market. Buying for the retail organization was a much simpler task then. It meant dealing with a few products and a limited number of suppliers. What existed at that time, was simple supply chain, as illustrated in Fig 16.2 Managing this was fairly simple and easy for the retailer.

However, as markets expounded and the retailer’s business grew, the number of products offered by the retailer, also increased. While the number of suppliers increased, there was also an increased pressure on margins. Retailers needed to think of ways of cutting costs, In order to be able to cut down on the

costs, it was necessary to integrate the complete supply chain.Supply chain management today, links demand management , resource manag

ement, and supply management and hence, plays an important role in retailing. An extended supply chain is illustrated in Fig. 16.3

Today, retailers operate in a dynamic world. Customers’ buying habits are constantly changing and competitors are continually adding and improving their product offerings. Demand changes mean a shorter life cycle for the company’s products and inventory. The cost of holding inventory may restrict the company from providing a reasonably priced product, as funds are tied up in inventory. The number of suppliers to an organization may vary from a few hundred to thousands, depending on the range of products offered to the consumer. Sourcing, vendor management and logistics play a major role in getting the right product to the right place, at the right time and in the right condition. The second reason, partially, is the increased national and international competition. Customers have multiple source to choose from, to satisfy their demands; locating the product throughout the distribution channel for maximum customer accessibility, at a minimum cost, becomes crucial. The third reason is the increasing pressure on the profit margins earned. Companies are becoming aware that they need to look at the whole picture and not at the functional excellence of individual departments, alone.

Lastly, it is a technology driven world today. Advances in technology enable companies to get sales, inventory and production data, across various locations, not only within the country, but also internationally. Information is the key enabler of supply chain management.

EVOLUTION OF SUPPLY CHAIN MANAGEMENTIn the 70s and early 80s, as cost pressures started to build up, most or

ganizations started to take a hard look at their operations, to see where they could cut costs. Initially, the focus was on optimizing the levels of raw material, work in progress and finished goods stored. Depending on the industry characteristics, different organizations started focusing on achieving efficiencies in different areas, such as procurement, logistics, manufacturing, operations, etc.

Out of these initiatives emerged various models for production and operations control and management, such as the Just-In-Time inventory management model, the total quality management (TQM) model, etc. these models focused on various components of the supply chain, in isolation. Each one of them was oriented towards the optimization of a sub-part of the system. However, soon, organizations realized the need for taking an integrated look at the entire supply chain, to optimize not individual parts, but the entire chain. From this emerged the discipline now commonly referred to as Supply chain Management.

Early beginnings of the supply chain management initiative can be traced to the apparel industry in USA. The textile industry in the USA faced intense competition in the 1980s. The industry leaders came together and formed the Crafted with Pride in the USA council, in 1984. They commissioned a study on supply chain analysis. This study found that the delivery time for the apparel supply chain, from raw material, to the final consumer, was 66 weeks long 40 weeks of which were spent in warehouses or in transit. The long supply chain had resulted in major losses to the industry, due to the need for financing the inventory and the lack of the right product in the right place, at the right time.

In order to overcome the problem., the strategy of quick Response (QR) was developed. The basic premise of quick response, is to share information. Retailers and suppliers work together, to respond more quickly to consumer needs, by sharing information., the installation of the Point of sale (POS) scanning systems and sharing of data through Electronic Data Interchange (EDI), became the new standard of the industry. The industry also adopted the Universal Product Code (UPC). QR incorporates marketing information on promotions planned, discounts and forecasts into the manufacturing and distribution plant. It increases the product availability and lowers inventory investments. It also helps in red

ucing logistics expenses. With QR systems,, retailers can negotiate a direct store delivery system, in which the vendors supply floor ready merchandise to each store, rather than to the distribution Centre (DC). The cost of the DC and transportation can thus be eliminated.

The success of the QR initiative prompted a group of grocery industry leaders in the USA, to create a joint industry task force, called the Efficient consumer Response (ECR) working group. This group primarily, worked on identifying opportunities to make the supply chain more competitive in grocery retailing, worked on identifying opportunities to make the supply chain more competitive in grocery retailing. Studies commissioned by this group revealed that by expediting the quick and accurate flow of information up the supply chain, ECR enabled distributors and suppliers to anticipate future demand far more accurately than the current system. A little change in the technology was required to improve the performance, besides further development of the EDI and POS systems.

LOGISTICS:The word logistics is derived from the French word ‘loger’ which means

to quarter and supply troops. Logistics has developed from the systematic planning required when large number of troops and their equipment move, to that of the moving of large amounts of goods.

Christopher (1992) defined logistics as, Logistics is the process of strategically managing the Inocunement, movement and storage of materials, parts and finished inventory through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost effective fulfillment of orders.

In the last decade, there have been several well published logistics exercises, internationally. The gulf war of 1991 as one of the largest, since World War II.

An integral part of supply chain management is logistics management. The main objective of logistics management is to reduce inventory-holding costs and improve profits.DISTRIBUTION LOGISTICS AND STOCK CONTROL:

The customer’s central expectation of retail service delivery is one of availability. No amount of service enhancement or added incentives will effectively makeup for an empty shelf.

As a customer, the ultimate measure of a retail service is whether the goods or services are available as required. Modern retailing is underpinned by a complex infrastructure that seeks to meet this central customer expectation. All of this has its cost and, therefore, from a management perspective it will be vital to deliver the retail service in an efficient manner.

This is becoming increasingly important as profit growth cannot be easily achieved when sales growth is not high; such extra profit has to be gained from improvements in productivity. The achievement of productivity gains is available from a retail logistics system infrastructure which consists of several elements.

RETAIL LOGISTICSMany international retailers have built their successes on logistical pr

ocess. Speedy restocking of goods, elimination of poor settler, and promotion of successes, also contribute to a clear sales advantage.

Logistics entails more than the mere traveling and distribution goods. For without good information about sales and insight into customer needs. The finest distribution center and transport capabilities are likely to send the wrong products the wrong places at the wrong time. Effective logistics therefore, needs an efficient information system, as well as good transport, distribution cen

ter and store handling capabilities.

A single recipe for success does not exist. A logistics system has to be built to suit the needs to the organization, keeping in mind the kind of products that the company retails and the competition prevailing. Fashion retailers may need to focus of speed, discount retailers on cost. The needs of each are different.ALL OF THIS IS BASED UPON THE ASPECTS OF:• transport• Storage• Inventory

The cost structure of each will be considered next, but at this stage it is important to recognize the interrelationships that exist between the elements. A holistic perspective is essential management is to identify the optimal organization and realize the greatest efficiency for the system as a whole . A ruthless pursuit of cost savings within one element is flawed if the result is simply to push a cost burden onto another.

A similarly holistic view is required of the supply chain in a vertical sense, Porter’s value chain analysis (1985) recognizes that as well as seeking to improve the internal linkages between the activities of the retailer, it will be important to acknowledge the fit with the wider value adding system.

Retailer activity should strive to add value for the customer. This will not be realized if in seeking to pursue efficiency in the supply chain element under the direct control of the retailer, costs are simply pushed onto suppliers. The cost will remain in the system and will ultimately be borne by the customer Managing retail logistics requires a vision of the supply chain ‘big picture’. How could activities be organized or reorganized to take cost out of the supply chain completely and deliver better value for customers at the same time. Such an approach may see retailers taking on an additional cost burden to facilitate a saving for suppliers and ultimately a net saving for the customer.

Here, there is a congruence in the objectives of retailers and suppliers. The recent shift towards supply chain partnerships is logical as it a driven in part by the need to exploit the potential for taking cost out of the supply chain completely.

This holistic approach to retail logistics can be illustrated by the trend in the 1980s and 1990s toward centralized distribution. Depending on volumes, retailers have increasingly created central or regional distribution centers a major investment on property, plant and equipment with associated overheads, Suppliers making individual direct deliveries to retail outlets may then the replaced by suppliers delivering to the retailer distribution centers by the truckload. The center then breaks the built to create store orders, which are then transported on the retailer’s own vehicle fleet. Lead times are reduced and so are the levels of stock held at retail outlets. There are major cost savings and improved supply chain efficiently delivers added value for the customer in the shape of the most recent product being available. Centralising retail distribution represents a very significant redistribution of costs across logistics elements and between supply chain organizations, with substantial net benefit. The store staff are more aware of deliveries . stock is less of problem and stock space is kept to a minimum.

RETAIL LOGISTICS-THE COST STRUCTUREMany retailers pursuer distribution strategies which explicitly or impli

citly acknowledge the importance of the Total distribution Concept (TDC) which is based on the work of West (19898). In so doing they are taking a holistic, ap

proach, strategically and operationally integrating the functions listed below. The TDC encourages everyone in the company to think in terms of all components of distribution from the moment of manufacture to when, in the case of the retailer, goods are sold through the checkout- as an integrated linear model.

Retail Marketing Management

Total distribution costs (TDC) – TC+FC+CC+IC+HC+PC+MCWhere: TC = transport costs FC = facilities costs CC = communications costs IC = inventory costs HC = handling costs PC = packaging costs MC = management cots

For example, when we think of some of the costs of inventory (see section below), we should be aware that all of the total distribution costs (see Fig.5.14) must be considered in relation to each other. This will often involve various trade-offs, for instance between service levels and quality, or between margins and investment in systems. As such, optimizing a logistics system is a difficult and demanding task as each component of the system is affected by the level of investment the company is able to make in it. TDC allows retailers to extend their control over the costs as well as supply of goods to the consumer. This requires an understanding of the interaction of all parts of the logistics process. These costs are discussed in the following sections.

TRANSPORTTransport cost structures include substantial fixed cost elements, but p

erhaps include greater scope to adapt capacity to match volume . Centralising retails distribution has had the benefit of dramatically decreasing the number of journeys made with less than full loads, thereby improving efficiency. The use of composite distribution facilities, where the same vehicle handles merchandise categories requiring different storage regimes, has meant more frequent full-load deliveries to stores. Computer software now supports route planning, using interative programmes to identify the optimal schedules for each day’s deliveries and thereby achieving lower costs. In addition, retailers make use of back haul, where the trucks make collections from suppliers rather than return empty to the distribution center. FACILITIES COST- WAREHOUSING

As already identified, retail logistics can be reduced to the areas of warehousing, transport, inventory and administration, each with its associated cost structure. Facilities costs are taken as the capital and running costs associated with providing warehousing infrastructure and internal systems to store and pick stock. Warhousing has a high fixed cost element. The lack of flexibility makes the initial decision to create warehouse capacity crucial. Spare capacity represents wasted resource and short term measures to cope with insufficient capacity will be expensive. Once created, the ability of the business to match warehousing facilities to fluctuating demand will be strictly limited. This is further accentuated if there is to be capital investment in automated merchants handling equipment.

A regional distribution center (RDC) is usually located in a low cost area. Such a center can handle a volume in excess of a million case of product a week as recent advances in information system have had a huge impact on the efficiency of the operation. It is the application of technologies such as electronic data interchange (EDI) that have facilitated a reduction of stockholding at both store and distribution center level. The extent of channeling of supplies through RDCs may be gauged by the examination of UK grocery retailers (see Tab

le 5.2) . Retailers such as Asda have moved from channeling 10 percent of their supplies through RDCs in 1986 to over 80 percent now. Similarly, the competitive change in Tesco’s position may be gauged from its major increase in usage of RDCs.Table 5.3 Changes in UK grocery retailers usage of RDCs. 1986-96Retailer 1986 1993 1996(Argyll) Safeway 40-80 95 95ASDA 10 78 84Co-op Retail 40-60 95 95Co-op Wholesale 40-60 93 93Wm Low 50 94 --Morrisons 50 90 90J Sainsbury 80 95 95Tesco 40-60 95 95Wait rosé 80 90 90Average 1 92 92

Within an RDC, communication between the Warehouse Management system (WNS) and each operative is by radio link, drastically reducing the amount of travel within the center. The WHMS tracks the through put of merchandise and the activity of each operative. This can allow for individual piece-rares which replace team-based bonuses. The wage bill is a major element within the cost structure of an efficient distribution center,. Hence with the need to match the labour resource with the volume throughput ‘annualised hours’ contracts are now commonplace. This is not always a straightward task as warehouse staff are often unionized and the union holds power. Development have to be carefully negotiated and this has led to local agreements, often producing localized differences in working practices and sometimes less efficiency.

THE COSTS OF INVENTORYThe first thing to note is that with steadily increasing sophistication

in many product categories – and this is particularly the case in retailing- the cost of holding inventory have increased. This, coupled to the increasing concentration in retailing, means that the end consumer currently expects a wider range of products in smaller quantities. Irrespective of the type of inventory system used by the retailer, and regardless of set service levels, attitudes to distribution, etc. there will be costs incurred as a result of the maintenance and replenishment of inventory.COMPUTERISED REPLENISHMENT SYSTEMS (CRS)

The benefits of the new distribution systems are numerous and extend well beyond inventory control and replenishment. The systems are becoming increasingly important in the competitive environment of multiple retailing.

Sainsbury, Tesco and Safeway have almost 100 per cent of stores with EPOS scanning. In the variety chain stores, BHS has been on full EPOS for several years, their EPOS system being directly linked to their replenishment through central distribution centers at Atherstone and Dundee. Marks and Spencer also have full EPOS and have implemented a computerized inventory system, ASR (Automatic Stock Replenishment), from an initial investment of 78 million in 1988/89.

The perceived benefits of these systems for inventory are shared and are simple: a reduction of stockholding through more accurate ordering and replenishment (which in turn gives better product availability to the customer and thus maximizes sales). There is also the benefit of far more accurate sales data on which improved decision making can take place. It can be readily seen that EPOS may serve replenishment. By accurate data capture obtained via EPOS, forecasting (for example, on the basis of experimental smoothing) future merchandise requirements and inventory control is facilitated.

This enables both more accurate and economical buying. It also affords greater control of stockholding through greater inventory, by the removal of the

human error associated with other forms of stock control.

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MODULE-III

Arif.A.SamadChristi JacobSiyad.ADeepu.SGanesh.SHariprasad.

MERCHANDISING MANAGEMENT

Merchandising: activities involved in acquiring particular goods and services and making them available at the places, times and prices and in the quantity to enable a retailer to reach its goals.

Developing and implementing a merchandising plan is the key success of a retail strategy .A merchandising philosophy sets the guiding principles for all merchandising decisions that a retailer makes. This philosophy must reflect the desire of the target market, the retailer’s institutional type, its marketplace positioning, its defined value chain supplier capabilities, costs, competitor’s product trends, and a host of other factors. To capitalize on merchandising opportunities, more retailers are now turning to micro merchandising and crossed merchandising. With micro merchandising, a retail firm adjust s its shelf-space allocations to respond to customer and other differences among local markets. Wal-mart adapts the space it allotted to various stores to reflect the demographics weather and popularity of different customers recreational activities. In cross merchandising, a retailer carries complementary goods and services so that shoppers are encouraged to buy more.

DEVISING MERCHANDISING PLAN There are several methods to con

sider in devising merchandising plans: Forecasts, innovativeness, assortment, brands, timing and allocation

Forecasts: Forecasts are the projections of expected retail sales for a given period .because retailers purchase are based on their sales expectations, forecast are the foundations of merchandise plans .they include these components: over all company projections ,product company projections ,item by item projections, and store by store projections When preparing forecasts, it is essential to distinguish among different type of merchandise. Staple merchandise consists of regular product carried out by a retailer. Assortment merchandise consists of apparel, furniture, autos, and other products for which the retailer must carry variety of products in order to give customers proper selections. Decisions are two pronged: (1) product lines, styles designs and colors must be projected (2)a model stock plan is used to project specific items .fashion merchandise consist of product that have cyclical sales due to changing styles and taste. Seasonal merchandise are consists of product sell well over non consecutive time periods. With fad merchandise a high level of sales is generated for short time .Often toys and games are short lived fads.

Innovativeness: A retailer determination of the innovativeness of its merchandise plan involve a number of factors: target markets ,goods/services growth potential ,fashion trends and theories , a retailers image competition, customer segments ,responsiveness to consumers ,investment costs ,profitability ,risk ,constrained decision making, and declining goods and services an innovative firm one that carries new goods and services and plans for upcoming trends faces great opportunity-distinctiveness –and great risk-possibly misreading customers and being stuck with large inventories. Retailer should asses the growth potential for each new good or services they carry. A useful tool for assessing growth potential is the product life cycle, which shows the expected behavior of goods or services over its life An innovative consumer buy new goods or services and recommended to their friends, sales increases rapidly .In planning innovativeness, a retailer should focus is to often on new product additions

• Select items for possible elimination on the basis of declining sales price ,and profits ;the appearance of substitutes ;and loss of usefulness• Gather and analyses detailed financial consider and other data about these items • Consider non deletion strategies such as cutting costs ,revising promotion systems ,price adjustment and cooperating with other retailers• After deletion decision is made ,do not over look timing parts and servicing ,inventory and holdover demand

Assortment: An assortment is the selection of merchandise a retailer. It includes both the breadth of product categories and the variety with in each category.

After a retailer decides on a product quality to carry consistent with its merchandising philosophy, it determines the width and depth of assortment. Width assortment refers to the number of distinct goods /services categories with which a retailer is involved. Depth of assortment refers to the variety in any goods/services category with which a retailer is involved. A common strategy has been to compete by offering a wide variety of items within a category designed to appeal to every consumer taste .large assortment strategies can back fire, however, if the complexity causes information overload such that a consumer

feels overwhelmed and dissatisfied, or choose not to make choice at all.

These factors are important if retailer moves toward a wider deeper merchandising strategy: -Risks, merchandise investments damages, and obsolescence may increase dramatically. -Personnel may be spread too thinly, some times over dissimilar goods and services. -Inventory control may more difficult -Both positive and negative ramifications of scrambled merchandising may occur.

Brands: as apart of its assortment planning, a retailer must choose the proper must choose the proper mix of the manufacturer private , and generic brands to carry – a challenge that is becoming more complex with the proliferation of brands in each grouping. Manufacturer brands are produced and controlled by manufacturers. Private brands are also known as store brands, contain names designated by wholesalers or retailers, are more profitable to retailers, and are better controlled by retailers ,are not sold by competing retailers ,are less expensive for consumers and lead to consumer loyalty to retailers (rather than to manufacturers) e.g.: K-mart-Jaclyn smith women’s apparel generic brands are feature products generic names are brands ,they are no-frills goods stocked by some retailers .They can form of private brands .these items usually receive secondary shelf locations ,have little or no promotion support ,are sometimes of less quality than older brands ,are stocked in limited assortment and have plain brandsThe competition between manufacturer and retailers for shelf space and profit has led to phenomenon known as the Battle of brands, where by manufacturers private and generic brands fight each other for no more space and control

Timing: a retailer must ascertain when each type of merchandise is to be stocked .for ne3w goods and services, it must be decided when they are first displayed and sold. for established goods and services ,the firm must plan merchandise flow during the year ,to properly plan the timing of merchandise, the retailer should take in to accounts its forecasts and various other factors ; peak seasons ,order nards delivery time ,routine versus special orders ,stock turnover ,discounts and the efficiency of inventory procedures Planning differs for routine versus orders. Routine orders involve restocking staples and other regularly sold items. Deliveries are received weekly, monthly, and so on. Planning and problems are thus minimized. Special orders involve merchandise not sold regularly. These orders need more planning and close cooperation between retailer and supplier Specific delivery dates are usually arranged, Custom furniture is product requiring special orders.

Allocations: The last part of merchandise plans is allocations of items .a single unit retailer usually must choose how much merchandise to place on the sales floor, how much to place in a stock room, and whether to use a ware house .some retailers focus entirely on ware houses as a central-or regional-distribution centers .the products are shipped from suppliers to these warehouses, and then allotted and then shipped to individual outlets .other retailers ,including many super market chains ,do not rely as much on central or regional ware houses .instead ,they have at least some goods shipped directly from suppliers to individual stores. It is vital for chains, whether engaged in centralized or decentralized merchandising, to, have clear store by store allocations

IMPLEMENDING MERCHANDISING PLANS

The implementation of merchandising plans comprises these sequential steps

• Gathering information• Selecting and interacting with merchandising sources • Evaluation• Negotiation • Concluding purchases • Receiving and stocking merchandise • Reordering• Reevaluation

Gathering information: after over all merchandising plans are set, more specific information about on going target market needs and perspective suppliers is required .a retailer should gather appropriate data before buying or re buying any merchandise, in gathering information for merchandising decisions ,a retailer has several possible information sources ,the most available is the customer .by regularly research the target markets demographics, life styles ,and potential shopping plans , a retailer can study consumer demand directly .loyalty programs are especially useful in tracking consumer purchases and interests

Other sources of information can be used when direct consumer data are available or insufficient .retail sales and display personnel interest with consumers can pass their observations along to the management .A want book system is a formal way to record consumers request for un stocked or out stock merchandise .want books are used in small firms; want slips are used by retailers. Buying personnel can learn about consumer demand by visiting suppliers, talking with sales personnel, and observing customer behavior. Competitors are other sources of information .a conservative retailer may not stock an item until competitors do. Comparison shoppers, who look at the offerings and prices of competitors, may be employed. Other sources may offer useful prices of consume –related information: government sources indicate unemployment, inflation, and product safety data; independent news sources conduct their consumer polls and do investigate reporting; and commercial data can be purchased .whatever the information acquired, the retailer should feel comfortable that is sufficient for making decisions as accurately as possible .for routine merchandising decisions, limited information may be adequate. On the other hand, new car purchase can fluctuate widely and acquire extensive data for sales fore cast

Selecting and interact with merchandise sources: the next step is to select interact with merchandise sources .three major options are exist: Company-owned-a large retailer owns a manufacturing and/or wholesaling facility .a Company owned supplier handles all part of the merchandise the retailer request Outside regularly used suppliers- this supplier is not to owned by the retailer but used regularly by it .the retailer knows the quality of goods and services and reliability of the suppliers through firsthand experienceOutside new supplier –this supplier is not owned by the retailer; and retailer has not bought from it before. The retailer may be unfamiliar with the suppliers merchandise quality and reliability.

Many retailers have beefed up their use of their use of private brands because they are upset some companies such as polo Ralph Lauren and Gucci for opening their own stores in the same shopping centers. On the other hand many manufacturers are distressed by what they believe retailers excessive use of charge backs, where by retailers, at their discretion, make the deductions in their bills for infractions ranging from late shipments to damaged and expired merchandise

Evaluating merchandise: there are three forms of evaluations are possible: inspection, sampling, and description .the technique depends up on the items cost, it

s attributes and regularity of purchase .inspections occurs when every single units is examined before purchase and after delivery .jewelry and art are two examples of Expensive, relatively unique purchases before which the retailer care fully inspect all items. A retailer uses sampling when it regularly buys a large quantity of breakable perishable or expensive items .a retailer engages in description buying when it buys standardized, non breakable, and non perishable merchandise. The items are not inspected or sampled; they are ordered in quantity form a verbal, written or pictorial description

Negotiating the purchase: Once the merchandise source is chosen and pre purchase evaluation is conducted, a retailer negotiates the purchase and items. A new special order usually results in a negotiated contract .in this case, a reviler an supplier carefully discuss all aspects of the purchase .how ever ,a regular order or re order often involves a uniform contract .terms and then standard or have already been agreed on and order is handled routinely .a number of purchase terms are to be specified ,whether a negotiated a uniform contract is involved .these include the delivery date ,quantity purchased ,price and payment arrangements ,discounts ,form of delivery and point of transfer of title .There may also be special clauses Special clauses may be inserted by either party. Sometimes, these clauses are beneficial to both parties other times clauses are insisted on by the party that is more powerful. a major bone of contention between vendors and large scale retailers is the later increasing use of slotting allowance ,which are payments that retailers require of vendors for providing shelf space in stores.

Concluding purchase: for many medium sized and large sized firms, purchase are concluded automatically .computers are used to complete and process orders and each purchase is fed in to the computers data bank. Smaller retailers often conclude purchases manually .how ever with the rapid advances in computerized ordering software, even small retailers can sometimes place orders electronically-especially I they are tied to large wholesalers that supply them with EDI and QR capabilities

Transfer title should be specified with the suppliers .several alternatives are possible:

• The retailer take title immediately on purchase

• The retailer takes title when shipment is received• The retailer does not take title until the end of the billing cycle ,when the supplier is paid • The retailer assumes ownership after merchandise is loaded onto the mode o transportation

A consignment or memorandum deal can be made if a vendor in weak position and wants to persuade retailers to carry its items retailer to carry its items. In a consignment purchase, a retailer has no risk because title is not taken; the supplier owns the goods until sold In a memorandum purchase, risk is still low, but a retailer takes title on delivery and is responsible for damages. In both options, retailers do not pay for items until they are sold and can return items

Receiving and stocking merchandise: a firm physically receives and handle items ,which involves such varied tasks as receiving and storing goods ,checking and paying invoices ,price and inventory making ,setting up displays ,completing transactions ,arranging delivery , processing return goods and damages ,and controlling merchandise .Distribution management is the key success

When orders are received, they must be checked for completeness and product condition .invoice must also be checked foe accuracy .prices and inventory information marked on merchandise. Supermarkets are estimate that price marking on individual items that price marking on individual items costs them an amount equal to their annual profits and they look forward to the time when it shelf prices will be largely sufficient in all markets .prices and inventory marking can be done in a various ways .small firms may hand post prices and manually keep inventory records. Merchandise handling is not complete until the customer buys and receive it from a retailer .this means order taking ,credit or cash transactions ,packaging ,and delivery or pick up, automation has improved retailer performance in each of these areas merchandise control involves evaluating revenues ,profits ,turn over ,inventory shortages ,seasonality ,and costs for each goods / services Category and item carried by a retailer .control is general achieved by preparing inventory data, and then periodically conducting a physical inventory counts to check the accuracy of figures .the latter usually must be adjusted to reflect damaged goods, pilferage, customer returns, and other factors

Reordering merchandise: a procedure for reordering merchandise is necessary for item the retailer purchases more then once .four characters are critical for such a plan: order and delivery time, inventory turn over, financial outlays, and inventory versus ordering costs

The turn over for each type of merchandise must be calculated .how long does it take for a retailer to sell out its inventory? a fast selling product gives a retailer two choices :order a surplus of items and spread out re order periods or keep a low inventory and order frequently , a slow selling product may let a retailer reduce its initial inventory level and spread out the re order period

Finally inventory holing versus ordering costs must be weighed .advantages of having a large inventory are customer satisfaction ,quantity discount in purchase , easier control and handling. Advantages of placing many orders and keeping a small inventory are low investment costs, low opportunity costs, low storage costs and low damages and obsolescence

Re evaluating on regular basis: once merchandising plan is enacted, it should be re evaluated regularly, with management reviewing the buying organization and that organization assessing the implementation, the over all procedure as well as the handling of individual goods and services, should be monitored. Any conclusions reached while re evaluating a merchandise plan become a part of the information gathering stage for the future efforts

MANAGEMENT OF RETAIL BRAND

BRAND- DEFINITIONS“A successful brand is a name, symbol, design or some combination, which

identifies the “product” of a particular organization having a sustainable differential advantage”. - Peter Doyale.

“A name, term sign, symbol or design or a combination of them identifiy the goods or services of one seller or group of sellers and to differentiate them from those of competitors”-Kotler.

The Global Retail ScenarioLarge format retail businesses dominate the retail landscape in the United States and across Europe, in terms of retail space, categories, range, brands, and volumes. Indianretail industry cannot hope to learn much by merely looking at the Western success stories in retail. Their scales of operations are very huge, the profit margins that they earn are also much higher and they operate in multiple formats like discount stores, warehouses, supermarkets, departmental stores, hyper-markets, convenience stores and specialty stores.. The economy and lifestyle of the West is not in line with that of India and hence the retailing scene in India has not evolved in the same format as the West nor can we learn valuable lessons from their style of operations. In retailing, the conventional wisdom used to be, that, the critical success factor was location. But precise location no longer matters and geo-demographics is increasingly becoming irrelevant. The leading multiple chain retailers, superstores and malls create their own centers of gravity, attracting customers by car, bus, train or even by plane to wherever they are located. The growth of multiple chain retailers has been relentless for many years in the west and this has been accompanied by the development of retail names as brands in their own right. Discount retailer Walmart has catapulted to the top of the Fortune 500 rankings in the U.S. with a turnover of $258 billions (2003 revenues – the basis for 2004 rankings), ahead even of oil major Exxon Mobil and the mammoth manufacturing giant General Electric. A ruthless policy, of, ‘Always Low prices. Always.’ has brought Walmart to the top. On the day after Thanksgiving in November 2002, Wal-Mart sales hit $1.43 billion in one single day. Walmart and Nordstrom in the U.S. and Sainsbury’s and Marks & Spencer in the U.K. have grown by rapid geographic expansion in their own countries. Specialists like Benetton of Italy and IKEA of Sweden and The Body Shop of the UK are international and the fast food chains like McDonald’s and Pizza Hut are everywhere. The same products are increasingly available from the same names on every continent. Retailers worldwide have immensely benefited from the sustained growth of the disposable income of their global consumers. Geographic saturationThe end of the nineties has signified a turning tide of retailer power. The limit to retail ambition is geographic saturation. There is already a fear that the U.S is ‘over-malled’, that available shopping space exceeds customer demand for products. The retailer logic that ‘if we build new stores they will come’, is being belied. Many retailers have started postponing their store expansion plans. The track record of some of their international store expansions is also not promising. Category killer competitionThe threat of saturation is accompanied by a new competition from the low cost category killers. Specialist competition is eating away at the market share and forcing down the prices and gross margins of the multiple chains. The success of the giant killers in the toys segment – Toys R Us and in home furnishings – Home Depot, in the are a case in point.Alternative shopping channels.The newest retail format that is showing growth in the U.S., and is more frightening for retailers than for consumers, is the Internet. The potential for on-line shopping which is growing in the U.S. questions retailers’ investments in more physical sites and stores and makes it imperative that they too explore the new agenda of ‘E-retailing’ or ‘e-tailing’. What are the fundamental characteristics of a brand? While a myriad of characteristics have been catalogued by several researchers on this subject, five characteristics deserve mention:(1) Recognizability: A true brand is instantly recognized and identified. The brand name passes into every day use (Nike’s ‘Just do it’) or becomes satirized (‘Don’t be such a Duracell’) or appropriated (‘Make a Xerox of this document’). Indian retailers like Shoppers Stop, the RPG Group’s Food World and Music World have already earned national recognition. Subiksha in Tamilnadu and ‘Margin Free’ supermarkets in Kerala are household names in the two states.(2) Meaning, story, value: This is the second characteristic of a brand. The bra

nd must have a value proposition. It must stand for something and one of the most effective ways is to have a story to transmit those values. Examples abound of effective leaderships that have helped to build corporate brand values in other sectors, but few retailers have succeeded in building a story to carry brand meaning. When they do so, their power will increase.(3) Legitimacy: The meaning of the brand should be obviously appropriated by the target customer group. Legitimacy rests on authority, earned by the brand and granted by the customers. Lessons can be learned from social organizations like Greenpeace, Medicins sans frontiers, CRY and Helpage India. In this case, legitimacy rests on moral authority. In retail businesses it may rest on an Building Successful Indian Brands by Sundar Bharathidasan Institute of Management, Trichy emotional authority (a unique shopping experience, a store filled with warmth and friendliness.)(4) Consistency, alignment: A brand story should contain no internal contradictions and should be appear to be consistent over time. It should be applicable across the business and attempt at total brand integration.(5) Proximity: The brand building process should culminate with assuring the brand’s proximity to the consumer. The brand’s definition gets expanded by opening stores in a number of locations to make it convenient to the consumer.

Retail brand buildingProduct brands make life easier. They make it possible to recognize products, which simplifies the decision making process. Furthermore, product brands make the consumer a part of a group, they create a sense of belonging. But retail brands do even more than that. These brands are visible platforms for kindred spirits: the physical shop is a container for the entire retail formula and therefore constitutes a large part of the retail brand. The tangible nature of retail makes the familiar slogan ‘experiencing the brand’ most logical of all, in a physical store.Retail brands have gained in popularity in the past few years. Indeed, they have a number of advantages above product brands. In the first place, they are closer to the consumer. The physical store space offers the possibility of literally and figuratively communicating with consumers at the moment of purchase (one-to-one marketing). Retailers can show who they are and what they stand for through the store formula. Moreover, in principle, retailers are neutral, because the choice of product brand (or store brand, if present) is left to the consumers. Retailers help consumers because they make a shrewd pre-selection and present their product assortment in a specific manner. Once a consumer knows and trusts a retailer and has good experiences and memories about a store, the foundation has been laid for a long-lasting relationship that will ultimately lead to customer loyalty. Retail branding creates a brand preference, which goes beyond the product or servicein itself.

Retail Branding versus Product BrandingA great difference between product branding and retail branding is that in many cases products have an anonymous or even fictitious presenter, whereas in retail, consumers come in direct contact with the company and/or product. A Cadbury’s Dairy Milk chocolate bar, for example, is a product made according to a set recipe in a factory that is not open to the public. In addition, the people who work there never come into contact with the consumers because the retail channel lies in between. And those who do sell the ‘CDM’ to the end-consumer (the retailers) do not have very much to do with it by virtue of their function. Therefore it is possible to conceive a brand identity for the product, establish it for a specific target group and then fix it in the minds of consumers. Compare the identities of ‘Five Star’ ‘Perk’, ‘Gems’ and ‘Temptations’: all very different, yet they come from the same manufacturer.Contrast this with a store like Food World, for example. Because of its direct contact with the end-user, it must effectively live up to its brand reputation in every aspect, every day. It is impossible for retailers to escape the need to continually sustain the store brand. In a store, the entire retail organization i

s revealed and the true nature of a company can be experienced. A retail store, as said earlier, is the container that holds the entire formula. All the elements of the formula (including the elements of the marketing mix) come together in-store. The formula should be deliberately shaped from the standpoint of identity (the ‘brand’ of the retail organization) with mutual coordination of the elements being important. What might it then mean, when branding is applied to retailing? The issue is not of retailers selling brands but branding the retail business itself, like the grocery supermarket chain or the fashion store. A hypermarket or department store, may offer several well-known brands, but in today’s competitive world cannot afford to rest on its strategic product assortment and pricing initiatives to bring in the customers. The retailer must attempt to brand himself differently, especially when today’s product brands are being launched through their product brand’s own shops. (Examples in the shoe segment – Nike, Adidas and Reebok. Jeans segment – Lee and Wrangler, Perfumes –Hugo Boss. )A retail organization, like any other corporate company, will have to ensure that its own brand includes the characteristics of product brands detailed above. Retailers need to work on three dimensions to achieve this:

(1) Brand value: The retail brand has to embody and transmit clear values to the customer. (Like ‘value for money’, ‘Luxury shopping redefined’). Some companies have attempted to define this in their mission statements but they are often too vague and not actionable. For example the U.K. Virgin brand has the value of challenging conventions and the U.S. retailer Nordstrom has a built a value of customer service. While many Indian product brands have successfully weaved values around their brands (Hamam on ‘trust’, Godrej on ‘quality’ and TVS on ‘service’) retailers are yet to develop a consistent value across their businesses.

(2) Brand strategy: It is imperative that retailers have a systematic strategy on issues like whether to develop the retail brand or corporate brand and decisions on one product/one brand that they may be selling in their shop. Retailers can also decide to launch high quality retailer brands (‘own labels’) backed by promotional campaigns, reinforcing clear personalities. Pricing policies, today position retailer brands as good value lines or premium lines (Nilgiris department stores prices its grocery lines above manufacturer brand prices). The view that retailer brands offer a cheaper alternative to manufacturer brand is no longer valid. There is even scope for retailers to develop alternative types of ‘own labels’ targeted at different consumer groups in their outlets. An essential ingredient for success, in such cases, must be consumer-relevant added values – not just lower prices. It is only a minority of consumers, today, who are prepared to trade off added values for lower prices. Experienced consumers are no longer primarily motivated by low prices. There is scope to attempt a retail segmentation strategy.For example, DCM Benetton India redesigned its stores as per its international format and also repositioned the brand from a casual wear brand to a wardrobe option. The company is now attempting to target a niche audience through its concept stores. It launched a ‘Baby-on-Board

� store, which targets mothers-t

o-be and kids, an �Accessories

� stores that sells luggage, bags, sunglasses and

vanity cases and an ‘Adults Only’ store that showcases Benetton�s apparel collec

tion for men and women.

(3) Brand structure: Operational levels of the retail business have to be held together to integrate the whole brand proposal. At this level, marketing, human resources, distribution, logistics, administration and sales have to work towards a common brand value that has to be communicated to the consumer. The retail brand’s messages must beWeaved into the every day experiences that the consumer has with the retail brand. Brand building constitutes a way in which the main value of the retail store shifts to what has been traditionally called an intangible. Indian Retailing is coming of age and needs to have a clear brand proposition to offer the discerning Indian consumer. There is no doubt that the retail business is gravitating from high street towards destination shopping (mall development) with an estimated

10million square feet of mall space expected to hit the metros and mini-metros across the country this year. However, we need not assume that retailing at shopping-malls, is going to be fundamentally different from shopping at the traditional shopping areas, except that a mall has a more modern structure and in most cases brings multiple brand outlets under a single roof. The local retailers moving into malls, however, have to face the challenge of building brand recognition and loyalty right from scratch. Most mall developers have on offer, the same combination of shopping (International/national brands), Entertainment (Theatre Multiplex) and food (McDonald’s/Pizza Hut/Café Coffee Day) in their malls. It is therefore not surprising to note, that many mall visitors come out having no shopping bags, since they have been enticed to visit only for watching a movie and / or having a burger or a pizza or even a cup of coffee. Malls are also fast becoming a place that youth can ‘hang out’, but if the crowds do troop in, but the cash registers are not ringing, it can harm the serious business of retailing and hurt this nascent industry on the growth path. The critical lesson for mall developers is, to invest some quality effort in understanding the shopping-needs of customers in their targeted areas, and then build a carefully planned portfolio of retail options that can meet the needs of these targeted customers. Mall developers also have to create distinctive (brand) identities for their specific malls.It is equally important for the would-be retailer tenants, to realize that merely moving into a mall does not build their brand or guarantee business for them. They have to work as hard to draw consumers to their own stores once the latter have entered the mall, and then have the right value proposition for them, to get them converted into customers, and then to become repeat customers. Building a differentiating brand identity would work for both the mall owner and the mall retailer. We are also seeing organized Indian retailing in several businesses that speaks volumes of the staggering potential for the expansion of this sunrise sector in our country. But here again, the early initiatives in the sectors illustrated below seem to rely more on novelty and excitement of newer ambiences rather than truly investing in brand building.

Gourmet coffee retailing: The organized coffee retail business is estimated at Rs.250 crores and is showing a growth rate of 40%. Apart from the Quickys, Café Coffee Day and Baristas chains, the Tatas have aunched their Bean Coffee Junction chain in Chennai. Coffee World an international gourmet coffee chain is set to launch its outlet in Bangalore this year. Reliance is offering gourmet coffee at some of its Reliance WebWorld outlets under the brand name ‘Java Green’. There are not more than 350 outlets in the organised sector today but retail consultancy KSA Technopak opines that India’s potential for coffee retail outlets could be around two thousand. However the coffee retailers are already cloning each others’ strategies - by offering that “total experience” — right coffee, food and ambience with Wi-fis and jukeboxes — to pull customers, across all their outlets and consumers are finding it hard to identify themselves with any one outlet.

Lifestyle retailing: Chennai has witnessed a manifold increase in the total retail space devoted to non-grocery or lifestyle retail. The four major lifestyle retailers — LifeStyle, Westside, Shoppers

� Stop, and Globus — alone account for a

little over 200,000 square feet of retail space. Add to that the retail space of the traditional apparel retailers such as Nalli

�s and Kumarans and the recent e

ntrants such as Pothy�s, R.M.K.V and Chennai Silks and that of the scores of mul

ti-brand outlets, the figure shoots up. The reasonable real estate prices, overall lower cost of operations and accessibility to consumers vis-à-vis other metros, have spurned the growth of organized retail at Chennai. But, on the brand building front, the story is no different. A retail analyst has already observed that Chennai is over-retailed in the lifestyle segment, with little differentiation among the players.

Petrol pump retailing:

As consumers, we have been noticing how India’s state-owned petroleum companies are undertaking a massive image improvement, makeover and differentiator exercise. From signage to logos to canopies, clean floors, channel music, lighting, convenience stores, uniformed attendants, internet browsing and promotion schemes, the public sector pumps are working hard at delivering a new experience to the Indian motoring consumer. All this, of course, is being done as part of a bigger game plan to cope with the coming private sector competition from Reliance, Essar and Shell. Let’s wait and watch whether public sector hindsight into branding pays off for them in the face of private competition in the next few years.

Indian Retail Brand Building There is no doubt that the Indian retail shopping experience has been enhanced by giant superstores and shopping malls across our country. They should however learn quickly to build the retail brand directly and not look to factors like prime location, value pricing or product assortment to build their businesses. Indian retailers, to build a strong retail brand presence, can use the following strategies.

Relationship management to enhance in-store shopping experience: Competition will force retailers to think about their customers as individuals, analyze heir shares of customers and calculate their customer lifetime values. Retailers need to build data bases using in-store data collection and launch frequent shopper rewards, carry on an interactive communication with them, make special offers, drive traffic and add value outside the in-store relationship. Retail brands get built by developing personal relationships with consumers rather than only through product and pricing. For example, staff should be trained to recognize their V.I.P customers. ‘Soft’ rewards for V.I.P customers include priority service, free gift wrapping, enhanced guarantees and sales pre-notifications. ‘Hard’ benefits include privileged rewards and extra value offers as well as straight discounts. The quality of management of the customer is becoming an increasingly important source towards building the retail brand. Education and training of staff needs to be done to enhance customer service. Local store management can be empowered to maximize the value of each customer visit. Analysis of customer behavior can guide store merchandising to match the profile of their customers and even the needs of the shoppers at different times of the day.

External communication to add value outside the store: Retailers use advertising to build their brands and promotions to drive store traffic. Retailers have, still not felt the concept of individual customer communication outside the stores as a necessity. It is necessary that they seek to add a new form of dialogue with their customers. Retail chain Subiksha, for examples, mails a broadsheet to its customers giving them details of the promotional offers available and price comparisons across brands that helps its customers to take more informed decisions.

Motivating the staff to volunteer value : The quality of in-store service is a key factor in differentiating the retailer and winning a higher share of customer spend. In one survey, shoppers were asked, would they ask for the same salesperson on their next purchase visit; the ‘yes’ respondents were found to more likely give the store a 8-10 rating. On the other hand, shoppers unhappy with the salesperson gave the store a very low performance on overall service and performance. Staff must be trained and motivated to recognize their best customers and to offer them superior service.Successful retailing has always been said to be, about getting the nitty-gritty right of merchandising, forecasting, the supply chain, training and recruitment of high quality personnel and category management. Building retail brands that offer value will, in future, overshadow all these areas, and emerge as the dominant reason for the success of the organized Indian retailer. Indian retailers should also understand that the retail experience has become a popular leisure acti

vity and they are vulnerable to any new competition for customers’ entertainment. Indian retailers must build their brands with images that seek to entertain and involve their customers. It is the quality and value of the retail brands that they have sought to establish that will determine the loyalty of the retail shopper in future.

BRAND LOYALTYSome consumers use the same retail outlet or purchase the sme brand of product on most occasions or on a regular basis. This buyer characteristics is known as store of brand loyalty. In particular, brand or store loyalty will mean that a person will• Feel positively disposed to the brand based upon brand attitudes;• Utilize the store more than other stores or buy the brand more freezer based upon store or brand preference;• Continue to utilize the store or brand overtime.Then we can further segment the demand, based upon brandloyalty, as follows.1. Hard core loyal: - These consumers buy one brand all the time and demonstrate strong allegiance.2. Soft core loyal: - These consumers will be loyal to two or three brands.3. Shifting loyal: - This type of consumer shifts their loyalty from one brand to another.4. Switches: - These consumers are not at all loyal to anyone brand.

Loyalty schemes are being introduced in an attempt to retain custmers over longer periods of time.

POSITIONING OF A BRANDBrand identity is a construct that concerns the brand managers. It addre

sses the core question- what the brand is? The lack of appreciation of identity aspects are generally for brands giving into minor short term temptations propelled by either competitive adventure or a firms greed and eventually losing in the long run. The positioning of a brand places in its competitive context. It may be determined on the basis of product usage. A brands’ position may be determined on the basis of price. According to terrorists the focusing on the brand positioning is essential for a brand t survive. They express their lack of faith in the intellectual ability of brand managers to assess fully the competition and in the intellectual ability of the consumers similarly to assess the range of brand available to them. The brand managers, who regularly take a sounding to customer opinion, are the most likely to maintain a brands’ positioning successfully.

********************************************************* Retail Location Strategies and Decisions

The location of stores is a key concern to any retail organization ... whether it

�s your first store or your one hundredth. Spending time and mone

y wisely in the process of site selection is critical. The importance of store location must not be underestimated. Location decisions can be complex, costs can be quite high, there is often little flexibility once a location has been cho¬sen, and the attributes of a location have a strong impact on the retailer

�s ove

rall strategy: "No matter how good its offering, merchandising, or customer service, every retail company still has to contend with one critical element for success: location." In general a good location may let a retailer succeed even if its strategy mix is mediocre. On the other hand, a poor location may be such a liability that even the most able retailer is unable to overcome it. The selection of a store location may require extensive decision making due to the number of criteria considered. These include the size and characteristics of the surroundin

g popula¬tion, the level of competition, access to transportation, the availability of parking, the attri¬butes of nearby stores, property costs, the length of the agreement, population trends, legal restrictions, and other factor. A store location may necessitate a sizable financial investment and a long-term commitment by the retailer .Even a firm seeking to minimize its investment by leasing (rather than owning a building and land) can have a major investment. Store location has a strong impact on both long run and short run planning.In choosing a store location, retailers should follow these four steps.

1. Evaluate alternate geographic (trading areas in term of the characteristics of residents and existing retailers.)2. Determine whether to locate as an isolated store in an unplanned business district or in a planned shopping center within the geographic area.3. Select the general isolated store, unplanned business district, or planned shopping center location.4. Analyze alternate sites contained in the specific retail location type.

The first step in the choice of a retail store location is to describe and evaluate alternate trading areas and then decide on the most desirable one. A trading area is “a geographical area containing the customers of a particular firm or group of firms for specific goods or services. After a trading area is picked, it should be reviewed regularly.

The Size and Shape of Trading Areas

Each trading area consists of three parts: primary, secondary, and fringe. The primary trading area encompasses 50 to 80 percent of a store

�s customers. I

t is the area closest to the store and possesses the highest density of customers to population and the highest per capita sales. The secondary trading area contains an additional 15 to 25 percent of a store

�s cus¬tomers. It is located outs

ide the primary area, and customers are more widely dispersed. The fringe trading area includes all the remaining customers, and they are the most widely dis¬persed. For example, a store could have a primary trading area of four miles, a secondary trading area of five miles, and a fringe trading area of eight miles. The fringe trading area typically includes some out shoppers, who are willing to travel greater distances to patronize certain stores.

The size and shape of a trading area are influenced by such factors as store type, store size, the location of competitors, residential housing patterns, travel time and traffic barriers (such as toll bridges or poor roads), and media availability. After the size and shape of various alternative trading areas (existing or proposed) have been determined, the retailer studies the characteristics of those areas. Of special interest are the attributes of residents and how well they match with the retailer

�s definition of its target market. Among the

trading-area factors that should be studied by most retailers are the popula¬tion size and characteristics, availability of labor, closeness to sources of supply, promotion facilities, economic base, competition, availability of locations, and regulations. The eco-nomic base refers to an area

�s industrial and commercia

l structure—the companies and industries that residents depend on to earn a living.

After a retailer investigates alternative trading areas the next step is to determine what type of location is desirable, selects the general location and evaluates alternative specific store sites. There are three basic location types to distinguish among: the isolated store, the unplanned business district, and the planned shopping center. Each has its own attributes relating to the composition of competing stores, parking facilities, nearness to nonretail institutions (such as office buildings), and other factors.

The Isolated Store

An isolated store is a freestanding retail outlet located on either a highway or a street. There are no adjacent retailers with which this type of store shares traffic. The advantages of this type of retail location are many:• There is no competition• Rental costs are relatively low.• There is flexibility.• Isolation is good for stores involved in one-stop or convenience shopping• Better road and traffic visibility is possible.• Facilities can be adapted to individual specifications.• Easy parking can be arranged.• Cost reductions are possible, leading to lower prices.There are also various disadvantages to this retail location type• Initial customers may be difficult to attract.• Many people will not travel very far to get to one store on a continuous basis.• Most people like variety in shopping.• Advertising costs may be high.• Operating costs—such as outside lighting, security, maintenance of grounds, and trash collection—cannot be shared.• The existence of other retailers and community zoning laws may restrict access to desir¬able locations.• A store must often be built rather than rented.

The Unplanned Business District

An unplanned business district is a type of retail location where two or more stores situate together (or in close proximity) in such a way that the total arrangement or mix of stores is not due to prior long-range planning. Stores locate based on what is best for them, not the district. Thus, four shoe stores may exist in an area with no pharmacy.There are four kinds of unplanned business district: the central business district, the sec¬ondary business district, the neighborhood business district, and the string. A brief descrip¬tion of each follows.Central Business District: A central business district (CBD) is the hub of retailing in a city. It is the largest shopping area in that city and is synonymous with the term downtown. The CBD exists in the part of a town or city with the greatest density of office buildings and stores. Both vehicular and pedestrian traffic are very high. The core of a CBD is often no more than a square mile, with cultural and entertainment facilities surrounding it. Shoppers are drawn from the whole urban area and include all ethnic groups and all classes of people. The CBD has at least one major department store and a broad grouping of specialty and convenience stores. The arrangement of these stores follows no pre-set format; it depends on history (first come, first located), retail trends, and luck. Here are some strengths that allow CBDs to draw a large number of shoppers and poten¬tial shoppers:• Excellent goods/service assortment.• Access to public transportation.• Variety of store types and positioning strategies within one area.• Wide range of prices.• Variety of customer services.• High level of pedestrian traffic.• Nearness to commercial and social facilities.These are some of the inherent weaknesses of the CBD:• Inadequate parking.• Traffic and delivery congestion.• Travel time for those living in the suburbs.• Many aging retail facilities.

• Declining condition of some central cities relative to their suburbs.• Relatively poor image of central cities to some potential consumers.• High rents and taxes for the most popular sites.• Movement of some popular downtown stores to suburban shopping centers.• Discontinuity of offerings (such as four shoe stores and no pharmacy).

Secondary Business District: A secondary business district (SBD) is an unplanned shopping area in a city or town that is usually bounded by the intersection of two major streets/cities—particularly larger ones—often have multiple SBDs, each having at least one junior department store (which may be a branch of a traditional department store or a full line discount store), a variety store, and/or some larger specialty stores—in addition to many smaller stores. This type of location has grown in importance as cities have increased in population and "sprawled" over larger geographic areas.

Neighborhood Business District: A neighborhood business district (NBD) is anunplanned shopping area that appeals to the convenience shopping and service needs of a single residential area. An NBD contains several small stores, such as a dry cleaner, a stationery store, a barber shop and/or a beauty salon, a liquor store, and a restaurant. The leading retailer is typically a supermarket, a large drugstore, or a variety store. This type of business district is situated on the major street(s) of its residential area.An NBD offers consumers a good location, long store hours, good parking, and a less hec¬tic atmosphere than a CBD or SBD. On the other hand, there is a limited selection of goods and services, and prices (on the average) tend to be higher because competition is less than in a CBD or SBD.String: A string is an unplanned shopping area comprising a group of retail stores, often with similar or compatible product lines, located along a street or highway. A string location has many of the advantages of an isolated store site (lower rent, more flexibility, better road visibility and parking, and lower operating costs), along with some disadvantages (limited product variety, increased travel for many consumers, higher advertising costs, zoning restrictions, and the need to build premises). Unlike an isolated store, a string store has competition at its location. This draws more people to the string area and allows for some sharing of common costs among firms. It also means less control over prices and less store loyalty for each outlet there. But an individual store

�s increased.

The Planned Shopping Center

A planned shopping center consists of a group of architecturally unified commercial establishments built on a site that is centrally owned or managed, designed and operated as a unit, based on balanced tenancy, and surrounded by parking facilities. Its location, size, and mix of stores are related to the trading area served. A typical shopping center has one or more anchor stores and a range of smaller stores. Through balanced tenancy, the stores in a planned shopping center complement each other as to the quality and variety of their prod¬uct offerings, and the kind and number of stores are linked to the overall needs of the population. To ensure balanced tenancy, the management of a planned shopping center usually specifies the proportion of total space to be occupied by each kind of retailer, limits the prod¬uct lines that can be sold by every store there, and stipulates what kinds of firms can acquire

The planned shopping center has several positive attributes:• Well-rounded goods and service assortments based on long-range planning.• Strong suburban population.• Interest in one-stop, family shopping.• Cooperative planning and sharing of common costs.• Creation of distinctive, but unified, shopping center images.• Maximization of pedestrian traffic for individual stores.• Access to highways and availability of parking for consumers.

• More appealing than city shopping for some people.• Generally lower rent and taxes than CBD stores (except for most enclosed regional malls).• Generally lower theft rates than CBD stores.• Popularity of malls.

There are also some limitations associated with the planned shopping center:• Landlord-imposed regulations that reduce each retailer

�s operating flexi

bility.• Generally higher rent than an isolated store • Restrictions on the goods/services that can be sold by each store.• A competitive environment within the center.• Required payments for items that may be of little or no value to an individual retailed such as membership in a merchants

� association.

• Too many malls in a number of areas • Rising consumer boredom with and disinterest in shopping as an activity.• Aging facilities of some older centers.

There are three major types of planned shopping centers: regional, community, and neighborhood. Their characteristics are displayed belowRegional Shopping Center: A regional shopping center is a large, planned shopping 1 facility appealing to a geographically dispersed market. It has at least one or two full-sized] department stores (each with a minimum of 100,000 square feet) and 50 to 150 or more] smaller retailers. A regional center has a very broad and deep assortment of shopping-

� oriented goods, as well as a number of service

s intended to enhance the consumer�s experience* at the center. The market for a

typical regional center is 100,000+ people, who live or workup to a 30-minute drive from the center. On average, people travel less than 20 minutes.Community Shopping Center: A community shopping center is a moderate-sized, planned shopping facility with a branch department store (traditional or discount), a variety store, and/or a category killer store, in addition to several smaller stores (usually similar to those in a neighborhood center). It offers a moderate assortment of both shopping- and convenience-oriented goods and services to consumers. About 20,000 to 100,000 people, who live or work within 10 to 20 minutes of the center, are served by this location.Neighborhood Shopping Center: A neighborhood shopping center is a planned shopping facility, with the largest store being a supermarket or a drugstore. Other retailers in the center often include a bakery, a laundry, a dry cleaner, a stationary store, a barber shop or beauty parlor, a hardware store, a restaurant, a liquor store, and a gas station. This center focuses on convenience-oriented goods and services for people living or working nearby. It serves 3,000 to 50,000 people who are within a 15-minute drive (usually less than 10 minutes).A neighborhood shopping center is usually arranged in a strip. When first built, it is care¬fully planned, and tenants are balanced. Over time, the planned aspects of this center may diminish and newcomers may face fewer restrictions. Thus, a liquor store may be allowed to replace a barber shop. There would then be no barber shop. A center

�s ability to maintain balance depends on is continuing att

ractiveness to potential tenants (as expressed by the extent of the store vacancy rate).

Location and Site Evaluation.

The assessment of general locations and the specific sites contained within them both require extensive analysis. Site selection is as crucial as the choice of a retail area, especially for stores that rely on customer traffic patterns to generate business. Below are some of the factors which should be considered while selecting a site.

Pedestrian Traffic

Probably the most crucial measures of a location�s and site

�s value are the numb

er and type of people passing by. Other things being equal, a site with the highest pedestrian traffic is often best.Because everyone passing a location or site is not necessarily a good prospect for all types of stores, many retailers use selective counting procedures, such as counting only males and females carrying shopping bags. Otherwise, pedestrian traffic totals may include too many nonshoppers. For example, it would be improper for an appliance retailer to count as prospective shoppers all the people who pass a downtown site on the way to work. In fact, much of the pedestrian traffic in a downtown location may be from people who are in the area for nonretailing activities. A proper pedestrian traffic count should encompass these four elements:• Separation of the count by age and gender (children under a given age should not be counted).• Division of the count by time (this allows the study of peaks, low points, and changes in the gender of the people passing by the hour).• Pedestrian interviews (these let researchers find out the proportion of potential shoppers).• Spot analysis of shopping trips (these allow observers to verify the stores actually visited).Vehicular Traffic

The quantity and characteristics of vehicular traffic must be examined, especially by retail¬ers appealing to customers who drive there Convenience stores, outlets in regional shopping centers, and car washes are examples of retailers that rely on heavy vehicular traffic. Automotive traffic studies are quite important in suburban areas, where pedestrian traffic is often limitedAs in the analysis of pedestrian traffic, adjustments to the raw count of vehicular traffic must be made. Some retailers count only homeward-bound traffic, some exclude vehicles passing on the other side of a divided highway, and some omit out-of-state license plates.

Parking Facilities

Parking facilities must not be overlooked in assessing a location. Most the of U.S. retail stores built over the past 50 years include some provision for nearby off-street parking. In many business districts, parking facilities are provided by individual stores, cooperative arrangements among stores, and municipal governments. In planned shopping centers, parking facilities are shared by all stores there. The number and quality of parking spots, their distances from store sites, and the availability of employee parking should all be evaluated. It is hard to generalize about a retailer

�s needs for parking facilities becaus

e they depend on such factors as the trading area of the store, the type of store, the portion of shoppers using a car, the existence of other parking facilities, the turnover of spaces (which depend on the length of the shopping trip), the flow of shoppers during the day and the week, and park¬ing by nonshoppers. A shopping center normally needs 4 to 5 parking spaces per 1,000 square feet of gross floor area, a supermarket usually requires 10 to 15 spaces per 1,000 square feet, and a furniture store generally needs 3 or 4 spaces per 1,000 square feet.

Transportation

The availability of mass transportation, access from major highways, and ease of deliveries | must be examined in assessing a location and specific sites

In a downtown area, closeness to mass transit is important, particularly for people who do not own cars, who commute to work there, or who would not otherwise shop in an area with traffic congestion and limited parking. The availability of buses, taxis, subways, trains, and other kinds of public transit must be investigated for any area not readily accessible by vehic¬ular traffic. Because most downtown shopping areas are at the hub of a mass transit network, they allow people from all over a city to shop there.Locations dependent on vehicular traffic should be rated on the basis of their nearness to I major thoroughfares. As mentioned in Chapter 9, driving time is a crucial consideration for many people. In addition, drivers heading eastbound on a highway often do not like to make a U-turn to get to a store on the westbound side of that highway.The transportation network should also be studied for its ability to convey delivery trucks to and from the store. Many thoroughfares are excellent for cars but ban large trucks or can¬not bear their weight.Store Composition

An area�s store composition should be studied. How many stores are there? How la

rge are they? The number and size of stores should be consistent with the kind of location selected. A retailer interested in an isolated site would want no stores nearby; a retailer desiring a neighborhood business district would want to locate in an area with 10 or 15 small stores.

Approaches and planning in retailing

A retail strategy is the overall plan or framework of action that guides a retailer.The process of strategic retail planning has several attractive features. It provides a through analysis of the requirements for doing business For different types of retailers. It outlines retailer goals. A firm determents how to differentiate itself from competitors and develop an offering that appeals to a group of customers. The legal ,economics, and completive environment is studied A firm’s total efforts are coordinated. Crises are anticipated and often avoided.

Elements of a retail strategy

Situation analysis Situation analysis is a candid evaluation of the opportunities and threats facing a prospective or existing retailer. It seeks to answer two general questions. What is the firm’s current status? In mission, evaluating ownership and management options, and outlining the goods /services category to be sold. A good strategy anticipates and adapts to both the opportunities and threats in the chaining business environment .opportunities are marketplace openings that exist because other retailers have not yet not capitalized on

them. Ikea does well because it is pioneer firm in offering a huge selection of furniture at discount prices. Threats are environmental and marketplace factor s that can be adversely affect retailer if they do not react to them (and, sometimes, even if they do). Single –screen movie theaters have virtually disappeared in most areas because they have been unable to fend off the inroads made by multi screen theaters.A firm needs to sport trends early enough to satisfy customers and stay a head of competitors. A new retailer can adapt to trends more easily than existing firms with established images, ongoing leases, and spaces limitations. Small firms that prepare well can compete in a market with large retailers. During situation analysis, especially for a new retailer or one thinking about making a major strategic change, an honest, in –depth self –assessment is vital. It is all right for person or company to be ambitious and aggressive. Organization al mission An organizational mission is a retailer’s commitment to a type of business and to a distinctive role in the market places. It is reflected in the firm’s attitude towards consumers, employees, suppliers, competitors, government, and others. One major decision is whether to base business a round the goods and services sold or around consumers needs. A person opening a hardware business must decide if, in addition to hard ware products, a line of bathroom vanities should be stocked. A traditionalist might not carry vanities because they seem unconnected to the proposed business. But if the store is to be a do –it-yourself home improvement center. Vanities are logical part of the mix .That store would carry any revenant items the consumer wants. A second majored decision is whether a retailer wants a place in the market as a leader or a follower .it could seek to a unique strategy ,such as taco bell becoming the first national quick serve Mexican food chain. or on it cold emulate the practices of competitors but do a better job in executing them ,such as a local fast food Mexican restaurant offering five-minute guaranteed services and a cleanliness pledge. A third basic decision involves market scope. large chains often seek aboard customer base (due their resources and recognitions ) .it is usually best for small retailers and startups to focus on a narrower customer base ,so they can compete with bigger firms that tend not to adapt strategies as well to local markets .Sam goodly is a mall –based s specialty music retailer offering a board product selection in a youthful, consumer-friendly shopping environment .stores carry DVDs ,videos , audios cassettes , music and movie videos. Ownership and management alternatives. An essential aspect of situation analysis is assessing ownership and management alternatives, including whether to form a sole proprietorship or corporation. A sole proprietorship is an unincorporated retail firm owned by one person .All benefices , profits, risk s, and costs accrue to that individual. it is simple to form, fully controlled by the owner ,operationally flexible, easy to dissolve ,and subject to single taxation by the government.

A partnership is an unincorporated retail firm owned by two or more persons, each with financial interest .partners share benefits, profits ,risks ,and costs .Responsibility and expertise are divided a among multiple principals ,there is a greater is greater capability for raising funds than with proprietorship ,the format is simpler to form than a corporation ,and it is subject to single taxation by the government . A corporation is a retail firm is formally incorporated under state law .it is legal entity a part from individual officers (or stock holders).funds can be raised through the sale of stocks, legal claims against individuals are not usually allowed, ownership transfer is relatively easy ,the firm is assured of long –term existence (if a founder leaves ,retires, or dies) ,the use of personal managers is encouraged ,and unambiguous operat

ing authority is outlined .Deepening On the type of corporation ,it is subject to double taxation (company earnings and stock holder dividends),face more government rules ,can require a complex process when established ,may be viewed as impersonal, and may separate ownership from the management. Goods and services category Before a prospective retail firm can fully design a strategic plan, it selects a goods/services category the line of business –in which to operate. It is an advisable to specify both a general goods/services category and a niche with in that category. Jaguar dealers are luxury auto retailers catering to upscale customers. Wendy‘s is an eating and drinking chain known for its quality fast-food with a menu that emphasizes hamburgers. Motel 6is a chain whose forte is inexpensive rooms with few frills.Personal abilities Personal abilities deepened on an individual‘s aptitude-the preference for a type of business and the potential to do well; education –formal learning a bout retail practices and policies;and experience –practical learning a bout retail and polices . An individual who wants to run a business, like to use initiative and has the ability to react quick to competitive developments will be suited to different type situation than a person who depends on others for advices and does not like to make a decision s. the first individual could be an independent operate ,in a dynamic business such as appear l; the second might seek partners or a franchise and stable business ,such as a stationery store. Some people enjoy customer interaction; they would dislike the impersonality of a self services operation .others enjoy the impersonality of mail-order or web retailing. In certain fields ,education and experience requirement are specific by law; stockbrokers ,real-estate brokers ,beauticians ,pharmacists, and opticians must all satisfy educational or experience standard s to show competency; for example ,real – estate brokers are licensed after a review of their knowledge of real –estate practices and their ethical character. Finical resources Many retail enterprises, especially new, independent ones, fail because the owners do not adequately project the financial resources need ed to open and operate the firm. Novice retailers tend to underestimated the value of personal drawing account ,which is used for the living expenses of the owner and his or her family in the early ,unprofitable stage of a business .Because few new ventures are immediately profitable, the budget must include such expenditures .in addition ,the costs of renovating an existing facility often are miscalculated. Under funded firms usually invest in only essential renovation s .This practices reduces the initial investments, but it may give the retailer a poor image. Merchandise assortment, as well as the types of goods and services sold, also affects the financial outlay. Finally, the use of a partner ship, corporation, or franchise agreement will affect the investment. Time demands Time demands on retail owners (or managers) differ significantly by goods or services category. They are influenced both by consumer shopping patents and by ability of the owner or manager to automate operations or delegate activities to others. Many retailers must have regular weekend and evening hours to serve time-pressed shoppers .gift shops, toy stories, and others have extreme seasonal shifts in their hour’s .mail –order firms and those selling through the web, which can process orders during any part of the day .have more flexible hours. The owner may be the key service provider ,with patrons attacked by his or her skills(the major competitive advantage).delegating work to other will lessen consumer loyalty Personal services are not easy to automate. Due to limited funds, the owner and his or her family must often undertake all operating functions for a small retail firm. Spouses and children work in

40 percent of family –owned businesses. In a business that operates on cash basic, the owner must be a round to avoid being cheated.Objectives A after situation analysis retailer sets objectives ,the long –run and short run performance targets it hopes to attain .this helps mold a strategy and translates the organs zonal mission into action .a firm can pursue goals related to one or more of these areas; sales profit ,satisfaction of publics ,and image. Some retailers strive to achieve all the goals fully; others attended to a few and want to achieve them really well. Think about this array of goals for the Kroger.Sales Sales objectives are related to the volume of goods and service a retailer sells. Growth, stability, and market share are the sales goals more often sought. Some retailer set sales growth as top priority. They want to expand their business. There may be less emphasis on short-run profits. the assumption is that investments in the present will yield future profits .a firm that does well often becomes interested in opening new units and enlarging revenues. Flower, management skills and the personal touch are sometimes lost with overly fast expansion. Stability is the goal of retailers that emphasize maintaining their sales volume, market share, price lines, and so on .small retailer often seek stable sales that enable the owners to make a satisfactory living every year with out downswings or upsurges. And certain firms develop a loyal customer following and are intent not on expanding but on continuing the approach that attracted the original consumers. Profit With profitability objectives ,retailers seek at least a minimum profit level during a designated period ,usually a year .profit may be expressed in dollars or as a percentage of sales .for a firm with yearly sales of 55 million and total 4.2 million .pre-tax dollar profit is 800.000 and profits as a percentage of sales are 16percent .if the profit goal is equal to or less than 800.00 ,or 16 percent ,the retailer is satisfied. if the goal is higher .the firm has not attained the minimum desired profit and is dissatisfied. Firms with large capital expenditures in land, buildings, and equipment often set return on investment (R01) as goal .R01 is the relationship between profits and the investment in capital items. A satisfactory rate of return is pre-defined and compared with the actual return at the end of the year or other period .for a retailer with annual sales of 5 million and expenditures of 4 million ,the yearly profit is 1 million .if the total capital investment is 10 million ,R01 is 1 million /10million ,or 10percent per year .the goal must be 10 percent or less for the firm to be satisfied.Satisfaction of public Retailers typically strive to satisfy their public; stock holders, customers, suppliers, employees and government. Stockholder satisfaction is goal for any publicly owned retailer .some firms set trained over the long run and indicate good management rather than ones based on innovative ideas that may lead to peaks and valleys in sales and profit . Customer satisfication with the total retail experience is well –entrenched goal at most firms now good supplier relation is also a key goal .retailers must understand and work with their suppliers to secure favorable purchase terms, new products ,good return policies, prompt shipments ,and cooperation . Cordial labor relation is another goal that is often critical to retailer’s performances. Good employee morale means less absenteeism, better treatment of customers, and lower staffing turnover Image (positioning) An image represents how a given retailer is perceived by consumers and others. A firm may be seen as innovative or conservative, specialized or board –based, discount-oriented or upscale. The key to a successful mage is that consume

rs view the retailer in the manner the firm intends.Through positioning, a retailer devises its strategy I a way that projects an image relative to its retail category and its competitors and that elects a positive consumer response. A firm setting women’s apparel could generally position itself as an upscale or a discount specialty retailer, and if could specifically position itself with regard to other retailers carry women’s apparel. Two opposite positioning philosophies have gainsaid popularity in recent years; mass merchandising and niche retiling .mass merchandising is a positioning approach whereby retailers offer a wall-mart has a wide, deep merchandise mix whereas sports authority has a narrower, deeper assort. in niche retailing , retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market nicking creates a high level of loyalty and shields retailers from more convention competitors .babies”RU” appeals to parents with very young children whereas Catherine’s stores has fashion for plus size women. Selection of objectives A firm that clearly sets its goals and devises a strategy to a achieve them improves its chances of success. An example of a retailer with clear goals and a proper strategy to attain them is papa john’s the nearly 3,000 -outlet pizza chain Identification of consumer characteristics and needs The consumer group sought by a retailer is called the target market .in selecting its targets market a firm may use one of tree techniques; mass marketing, selling goods and services to a board spectrum of consumers; concentrated marketing ,zeroing in on one specifics group; or differentiated marketing ,aiming at two or more distinct consumer groups, with different retailing approaches for each group; Supermarkets and drugstores define their target markets broadly. They sell a wide assortment of medium-quality items at popular prices. in contrast, a small upscale men’s shoe store appeals to specific consumer group by offering a narrow, deep product assortment at above a average prices Department’s stores are among the retailer seeking multiple market segments. They cater to several customers groups, with unique goods and services for each, apparel may be sold in a number of distinctive boutiques in the store, also large retail chains frequently have division that appeal to different market segments. Target Corporation operates Marshall Fields (traditional department stores) for those interested in low prices. Overall strategy The retailer develops an in depth overall strategy. This involves two components; the aspects of business the firm can directly affect and those to which the retailer must a d apt .the former are called controllable variables and the latter are called uncontrollable variables. Controllable variables The controllable parts of a retail strategy consist of the basic categories such as store location, managing a business, merchandise management and pricing, and communicating with the customer.Uncontrollable variablesThe uncontrollable parts of strategy are composed of the factors such as consumers, competition, technology, economic condition, seasonality, and legal restrictions. Farsighted external environment and adapt the controllable parts of their strategies to take in to account elements beyond the control.

SITUATION ANALYSIS

Situation analysis is a candid evaluation of the opportunities and threats facing a prospective or existing retailer. It actually means, being guided by an organizational mission, evaluating ownership and management options, and outlining the goods and services category to be solved.

Opportunities are marketplace openings that exist because other retailers have not yet got capitalized on them.

Threats are environmental and market place factors that can adversely affect retailers if they do not react to them.

A firm needs to spot trends as early as enough to satisfy the customers and stay ahead of competitions. A new retailer can adapt to trends more easily than existing firms with established images ,ongoing leases and space limitations .small firms that prepare well can compete in the market with large retailers.

During situation analysis, especially for a new retailer or one thinking about the making a major strategic decision ,an honest,indepth self assessment is vital .ORGANISATIONAL MISSION

An organizational mission is a retailer’s commitment to a type of business and to a distinctive role in the market place. It just reflects the firm’s attitude towards the consumers, employees, suppliers, competitors, government and others.

Major decision is whether to base a business around the goods and services sold or around the consumer needs. A person opening a hardware business must decide if, in addition to hardware products.

A second major decision is whether a retailer wants a place in the market as a leader or as a follower. It could seek to offer a unique strategy, such as Taco Bel becoming the first national quick serve Mexican food chain.

A third basic decision involves market scope. Large chains often seek a broad customer base .it is usually best for small retailers and startups to focus on a narrower customer base, so that they can compete with larger firms.

Though the development of an organizational mission is the first step in the planning process, the emission should be continually reviewed and adjusted to reflect changing company goals and a dynamic retail environment.

OWNERSHIP AND MANAGEMENT ALTERNATIVES

An essential aspect of situational analysis is assessing ownership and management alternatives, including whether to form a sole proprietorship, partnership or corporation and whether to start new business ,by an existing business, or become a franchisee.A sole proprietorship is an unincorporated retail firm owned by one person, all benefits, profits, risks and cost accrue to that individual, it is simple to form, fully controlled by the owner, operatiobnally flexible, easy to dissolve and subject to single taxation by the government. It makes the owner personally liable for legal claims from suppliers, creditors and others and it can lead to limited capital and expertise. A partnership is an unincorporated retail firm owned by two or more persons each with a financial interest. Partners share benefits, profits, risk and cost. Depending on the type of partnership it, too can make owners personally liable for legal claims, can be dissolved due to partners death or disagreement, binds all partners to actions made by any individual partner acting on behalf of the firm. A corporation is retail firm that is formally incorporated under state loan. It is legal entity apart from individual officers(stockholders).funds can be raised through the sale of stock, legal claims against individuals are not usually allowed, ownership transfer is relatively easy, the firm

is assured of long term existence, the use of professional managers is encouraged and an ambiguous operating authority is outlined.GOODS OR SERVICE CATEGORY

Under the goods and service category, it is advisable to specify both the general goods and services category and niche within that category. Jaguar dealers are luxury auto retailers catering to upscale customers.A potential retail business owner should select a type of business that will him or her to match her personal abilities. Financial resources, and time availability with requiremtents of that kind of business.PERSONAL ABILITIES

Personal abilities depend on an individual aptitude-the preference for a type of business and the potential to do well.-formal learning about retail practices and policies and experience. An individual who want to run a business, likes to use initiative and hands the ability to react quickly to competitive developments will be suited to a different type of situation than a person quickly to competive developments will be suited to a different type of situation than a person who depends on others for advice and does not like to make decisions. Some skills can be learned and others are inborn.Accordingly, potential retail owners have to asses their skills and match them with the demands of a given business. It involves a careful reaction about oneself. Partnerships may be best when two or more parties possess complementary skills person with selling experience may join with someone who has the operating skills to start a retail business.

FINANCIAL RESOURCES Many retail enterprises, especially new, independent ones ,fail because the owners do not adequately project the financial resource needed to open and operate the firm. Novice retailers tend to underestimate the value of a personal, join account ,which is used for the leaving expenses of the owner and his or her family in the early, unprofitable stage of a business. Because few new ventures are immediately profitable, the budget must include such expenditures. In addition, the cost of renovating are existing facility often are miscalculated. Underfunded firms usually invest in only essential renovations. This practice reduces the initial investments, but it may give the retailer a poor image.

TIME DEMANDS

Time demands on retail owners (or managers) differ significantly by goods or service category. they are influenced both by consumers, shopping pattern and by the ability of the owner or manager to automate operations or delegate activity to others. Many retailers must have regular weekend and evening hours to serve time- pressed Shoppers .gift shops, toy stalls, and other have extreme seasonal shifts in their hours. Mail- order firms and those selling through the web ,which can process orders during any part of the day, have more flexible hours. Some business requires less owner involvement, including gas stations with no repair services ,coin operated laundries and movie theaters. They emphasize on automation ,self service, standardization and financial controls ,lets the owner reduce the time investment.Intensive owner participation can be the result of several factors:• Owner may be the key service provider, with patrons attracted by his or her skills(the major competitive advantage.).Delegating work to others will lessen consumer loyalty.• Personal services are not easy to automate.• Due to limited funds, the owner and his or her family must often underta

ke all operating functions for a small retail firm. spouses and children work in 40% of family –owned businesses.• In a business the operates on cash basis, the owner must be around to avoid been cheated.

Retail institutions characterized by

OWNERSHIP

• Independent• Chain• Franchise• Leased department• Vertical marketing system• Consumer cooperative

STORE BASED RETAIL STRATEGY

• Convenience store• Conventional super market• Food based super store• Combination store• Box store• Warehouse store• Specialty store• Variety store• Traditional department store• Full line discount store• Off price chain• Factory outlet• Membership club• Flea market

NON STORE BASED RETAIL STRATEGY MIX AND NON TRADITIONALRETAILING

• Direct marketing• Direct selling • Vending machine• Www• Other emerging retail format.

ReferenceRetail management a strategic approach written by Barry Berman, And Joel R. Evans

�MODULE-IV

Anu.RArchana.V.NairNelson ThomasNiju.K.GeorgeNisha Das.

Electronic RetailingThis area is something like electronic mail order, but with extensions for capabilities similar to the home shopping networks as seen on television. There are a small but growing number of electronic shopping malls populated with virtual storefronts. These malls are like the home shopping networks (but without the sales promotion people), and the storefront is like the product showcase and marketing segments that fill the channel

�s broadcast time. However, the electronic mall

s are "non-linear" meaning one can go from any store to any other on-demand, while the televised home shopping broadcast is presented in only a "linear" what-you-see-now-is-all-that-is-available format. For example, the Internet Shopping Network mall allows shoppers to browse through directories of electronic stores, services, or products, and then proceed through the selected store

�s entry way. U

pon entering, one can browse the store�s offerings using an electronic catalog o

r by perusing attention-grabbing multi-media product displays. For products that are completely informational (e.g., electronic books, PC software, and computer games, as well as certain banking and financial transactions, and travel arrangements), then shoppers are often allowed to interactively try out a demonstration version of the product, much like that is normally done in conventional consumer electronics stores. Interested customers can then arrange to purchase and "download" the product from the store over the Internet directly into their computer, or to receive a packaged version of the product via courier or postal delivery. As such, it is still relatively easy to become a developer of virtual real estate and electronic shopping malls, but commercial success will likely depend on which retailers you can sign up to lease space in the malls, and what volume of customer traffic you can generate and sustain. Perhaps both a conventional and electronic marketing campaign will be essential to help promote customer awareness and retailer offerings, together with promotional incentives aimed at Internet user segments. Beyond this, opportunities will likely emerge to make shopping in an electronic mall more of an "entertaining" multi-media user experience, as well as also more like a virtual reality experience, so that users can have fun and be entertained while shopping.

E-TAILING MODELS

E-Tailing Business Models Virtual merchants Single-channel Web firms that generate almost all their revenue from online sales.

Clicks and mortar Companies that have a network of physical stores as their primary retail channel, but also have introduced online offerings.Catalog merchants Established companies that have a national offline catalog operation that is their largest retail channel, but who have recently developed online capabilities.

Online Malls A variation on the virtual merchant business model; they generate revenue from “rents” and services paid for by retailers who sell under the mall’s umbrella.

Manufacturer-Direct Single or multi channel manufacturers who sell directly online to consumers without the intervention of retailers.

Electronic auction Proprietary auction site is an application of the supplier-oriented market place. These sites are open only to approved customers. They are designed to cement relationships between the company and its regular buyers. Sellers can get rid of surplus goods, and business customers can realize deep discounts.Electronic Bartering Related to auctions and bidding, electronic bartering is the exchange of goods and/or services without the use of money.Electronic Data InterchangeEDI has been on the horizon for almost a decade. The ability of businesses to send and receive standardized forms of product data and financial instruments has long been viewed as a key capability for streamlining business to business transactions. However, there is at present very little EDI taking place over the Internet.

Why is this? There are many reasons, including the following: First, most current efforts for EDI are based on proprietary computer and communications systems whose network connections are limited to established business partners. Second, there is widespread belief that financial transactions over the Internet are insecure (they are), although the technical and administrative aspects of this are likely to be resolved fairly soon. For example, privacy-assured and secure transaction mechanisms are beginning to appear as products offered by companies such as Netscape Communications Corporation. Third, most of the current EDI support systems are "closed systems" that cannot be easily interconnected to either existing or new product or financial data systems. For example, there is a great deal of interest in using systems such as Lotus Notes over proprietary EDI internetworks, but Notes currently lacks the openness needed to easily exchange data with most existing database management, financial, or computer-aided product design and manufacturing systems.

Thus, it seems that EDI of the kind being persued to date will not support significant opportunities for new ventures on the Internet. Similarly, investments in current EDI approaches may not have a long period of usefulness in businesses that must expand or turnover their customer base with greater frequency.

BAR CODE In 1949, N.J. Woodward filed a patent for a series of circular symbols. These symbols were to be placed on every item in a retail supermarket for the purpose of improving productivity and automating the checkout process. But, it was not until more than two decades later (1973) that the grocery industry gathered to settle on some standard form of product identification. The end result was the U . P.C. (Universal Product Code), a 12-digit number unique to each product. From that initial meeting, an organization was created to standardize and implement the new concept. The organization later became the UCC (Uniform Code Council) and now oversees the labeling standards for more than 200,000 member companies. Four years after the implementation of the U.P.C., the EAN (European Article Numbering) system was created on an international scale. Derived from the U.P.C., the EAN-13 is one digit longer to accommodate country codes. In 1968, Identicon Corporation created the 2 of 5 bar code symbology for warehouse inventory and cargo handling. The name comes from the five bars per character, two of which are wide. Due to its low density, 2 of 5 caused problems for manufacturers of bar code printers. In 1972, an interleaved variation created by Interface Mechanisms (Intermec), resolved this issue by combining two values into the same five bars, using the four spaces in between. This interleaving technique meant that a bar code could double the amount of information in the same space. By 1981, Interleaved 2 of 5 became the accepted symbology for U.P.C. retail multipack containers. The UCC developed the SCC-14 standard with which the supplier uses the same data from its U.P.C. product labels and simply adds a packaging indicator to designate cartons. ONCOMING TECHNOLOGIES There will be some great opportunities in storage. There will have ubiquitous storage within the next three years that will help the retailers truly drive anywhere-anytime-anything computing, which is very important for the business. Wireless will continue to be exploited, and at some point customers will walk into one of the stores and use their own device on the network there to accomplish whatever they want. An infrastructure that will enable such a process has to be developed. Radio frequency identification is also exciting, and there will be development in “cheap chips" which replace bar codes over time, and will be able to intelligently drive the supply chain through what

�s on t

he shelf and what�s in the back without the associates having to verify it.

Voice over IP will certainly take off and will lower costs and help all from an infrastructure standpoint What it

�s like today when an as

sociate moves or transfers and you have to change the phones. They�ll simply be

able to take the phone with them, plug it back in, and everything will be working without any systemic changes.

Voice recognition�s time will come in the next three. Voice recogniti

on technology can be used in distribution centers, and there are many more areas where it

�s exploited, and it will eliminate the need for some of the mobile i

n stores and distribution centers today.

FUTURE OF CUSTOMER APPLICATION From a development standpoint, the biggest opportunity is leveraging information. In the future, the business will be simulated business with an inductive model versus a deductive model to determine opportunities to maximize sales before the actual event occurs. There will also be a strategic initiative going on with self-service. Self-service technology will be provided to all the salesmen, prospective salesmen, customers and members, and to eliminate paper and paper forms. Having an associate portal and devices on sales floors will let customers and members get product information, and let the sores do computer-assisted selling.

IT AND RETAILING With the increase in globalization of retailers both in terms of their points-of-sale, as well as their points-of-supply, the Information Technology (IT) spend in the retail sector has increased considerably and plays an increasingly important role in managing the complexity of retail operations. 1.INFORMATION TECHNOLOGY’S INCREASED ROLE IN THEGLOBAL RETAIL INDUSTRY

At the turn of the twenty-first century, there were few global retail chains—most retail chains were local to countries. This has given way to a globalized set of retailers such as Wal-Mart, Tesco, GAP, IKEA, and others. With the increase in globalization of retailers both in terms of their points-of-sale, as well as their points-of-supply, the Information Technology (IT) spend in the retail sector has increased considerably and plays an increasingly important role in managing the complexity of retail operations. The increased IT spending to be about 13 percent from 2000 through 2004. However, the corresponding growth in revenues for the retail sector has been at only about two percent, translating IT costs to be a larger fraction of the overall cost base of the retail sector. This has resulted in considerable pressure on IT to deliver value in the retail sector as well as closer scrutiny of the IT spend.

2.CHALLENGES: RETAIL’S COMPLEXITYRETAIL OPERATIONS ARE EXTREMELY COMPLEXMuch of the retail operations functionality is driven by customized point solutions in areas such as merchandizing, supply chain management, in-store operations, seasonality and promotions planning. This means the underlying IT systems to drive operations are equally complex.

Retail operations are inherently complex due to four factors:

a) Product complexity. The retail sector has a high degree of product complexity, with the number of SKUs in stores running anywhere from the tens of thousands to more than two hundred thousand, a high degree of seasonal and fashionable items, and a lack of standardization of product hierarchies.

b) Supply chain challenges. With so many different outlets and channels, multiple hands-offs, and high frequency of replenishment, developing and managing an efficient supply chain remains one of the primary challenges in the retail sector.

c) Scale complexity. Retail operations are executed on an extremely complex scale. The U.S. retail sector alone deals with hundreds of millions of transactions per day, driven by millions of customers who shop through tens of thousands of outlets.

d) Process complexity. The business processes that support this environment are also inherently complex due to the multiple touch points across players in the value chain (manufacturer, distributor, retailer, consumer), the coordination required between the different planning cycles of each of these players, and geographic dispersion. While third-party packages do exist for several functional areas of the retail world, most retailers find that these packages either do not cover a broad enough functional footprint and/or they require a fair amount of customization, as the ‘out of the box’ functionality seldom meets the retailer’s holistic needs.

KEY CHALLENGES IN MANAGING THE COMPLEX RETAIL IT LANDSCAPE The retail sector faces challenges along four key dimensions:

a) IT cost and performance under pressure owing to the high growth in annual IT spend in the retail sector (~13%) while revenues have grown much slower (~2%).

b) Lack of standards in a complex, highly customized IT environment leading to integration challenges, making changes and new functionality development cumbersome and expensive.

c) High maintenance costs stemming from the high degree of customization and fragmentation of point solutions, many of which span different technology platforms.d) Poor data integrity, the result of systems fragmentation, point solutions, high degree of customization and lack of an underlying best practice architecture, because there is no good practice standard, out-of-the-box solution that spans the full retail space.

3. SIMPLIFYING A COMPLEX INDUSTRY: THE ROLE OF INFORMATION TECHNOLOGY

IT systems are at the heart of retail operations and hence play a central role in alleviating pressure points in the retail sector. The converse also holds true—retailers who do not manage their IT landscape effectively will find that, in time, the IT systems become part of the problem rather than components of the solution. This is particularly true for IT systems in the retail sector; for example advanced planning and scheduling systems, inventory management systems and merchandizing systems. Additional systems that share a crucial role in retail operations are the promotional and seasonality management systems that, when leveraged effectively, can increase the top-linen revenues for the retailer.

There are two critical areas where IT can reduce complexity and improve results:1. Functional retail areas2. Data cleansing and architecture

FUNCTIONAL RETAIL AREAS Merchandizing systems impact top-line revenues and need to be configured, customized and managed effectively for the retailer to improve its top line. To achieve this, retailers need to effectively mine large amounts of data and leverage this data to carry out effective forecasting, assortment planning, and collaboration with its suppliers so that promotions and other merchandizing activities are effective and efficient. Supply chain systems are key from a bottom line point of view as they play a key role in getting the right product to the right place at the right time—which in turn impacts the inventory levels and the rate of flow of products through the retailer’s stores, both of which are significant components of the retailer’s cost of doing business.

DATA CLEANSING AND ARCHITECTURE IMPROVEMENT

Data cleansing, and thereafter, effective mining (via large data warehouses) is fundamentally important in the retail space because so much decision-making is based on data. If the data is bad, the effectiveness and efficiency of carrying out retail operations is hampered. This becomes particularly crucial when the retailer is implementing new systems and a large data conversion effort is required—it becomes essential that the old data be effectively cleaned, re-architected and made ready in the new system, so that the business functions can make decisions effectively. .

MODULE-V

Aravind.MJayalekshmi.GRahul.V.RSreejith.K.BSubhash.J. INTERNATIONAL RETAILING

International retailing is defined as “all the activities involved in selling products and services to final international consumers for their personal consumption”.

Retail internationalization has been defined as “the management of retail operations in markets which are different from each other in their regulation, economic development, social conditions, cultural environment and retail structures”

U.S. Retailers and Foreign Markets

Here are examples of U.S. retailers with high involvement in foreign markets.Until 1991 when it opened its first store in Mexico, Wal-Mart operated stores only in the United States. By 1999, it had greatly increased its global presence outside the United States-—including outlets in Argentina, Brazil, Canada, Germany, Mexico, China, and Korea. These stores generated $12.5 billion in annual sales. According to the firm

�s Web site (www.wal-mart.com): "Wal-Mart

�s global expan

sion has been achieved through a combina¬tion of building retail outlets from the ground up and through a series of acquisitions at the right time and right place. Both approaches have yielded excellent market penetration and financial growth for Wal-Mart Stores, Inc. Wal-Mart International has found that the retailer

�s culture is transportable to other cultures worldwide. As a global brand, customers recognize that Wal-Mart stands for low cost, best value, and the greatest selection of quality merchandise. Wal-Mart

�s highest standards oi customer servic

e have also been exported and adopted by international associates around the globe." In the future, Wal-Mart plans to be even more aggressive outside the United States.Toys "R" Us has been active internationally for years, and now has more than 450 stores abroad (up from about 75 in 1990). Among the more than 25 nations in which it has well-, established stores are Australia, Canada, France, Germany, Great Britain, Japan, Singapore, Spain, and Sweden. In 1994, it signed its first for

eign franchising agreements, thus entering the United Arab Emirates and other Middle Eastern nations. During 1996, it entered Indonesia, Italy, South Africa, and Turkey. Why the emphasis on franchising? As its Web site (www.tru.com) said, "‘their local knowledge of the retail market combined with the Toys "R" Us expertise in the management of children

�s megastores should provide a power¬ful combin

ation to fully cover the potential oi the. market and increase the availability of toys."Many of the world

�s leading mail-order retailers are U.S.-based—including Americ

an Express, Avon, Ci�icorp, Franklin Mint, and Reader

�s Digest. These firms are

efficient and have a clear handle on customers and distribution methods. However, as of now, total world¬wide mail-order sales (for both U.S. and foreign turns) outside the United States are less than those in the United States. Thus, there is great growth potential in foreign markets.Blockbuster (v/ww.blockbuster.com) operates more than 2,000 video stores in 26 foreign countries in Europe, Asia, the Pacific Rim, and North and South America. According to its Web site, it employs over 14,000 people at those stores—and at least 12 dif¬ferent languages are j spoken at Blockbuster stores: "The first international Blockbuster store opened in London in 1989. The foreign country with the most Blockbuster stores is Great Britain, with more than 700. The foreign country with the fewest Blockbuster stores is Uruguay; with one Blockbuster

�s newe

st foreign market was Poland."For the past 15 years, the majority of McDonald

�s new restaurants have opened ou

tside the United States. Today, sales at 12,500 outlets in 11 5 foreign nations account for one-half of total system wide revenues. Besides Western Europe, McDonald

�s also has outlets in such places as Argentina, Australia, Brazil, Brunei,

Canada, China, Costa Rica, Czech Republic, Hungary, India, Japan, Malaysia, Mexico, New Zealand, Philippines, Poland, Russia, Turkey, Venezuela and Yugoslavia. The 15 restaurants in India are unique because "cows are sacred and most people don

�t eat beef. McDonald

�s ditched the Big Mac for an Indian stand-in, the Mahar

aja Mac. That�s two all-mutton patties, special sauce, lettuce, cheese, pickle,

and onions, all on a sesame seed bun."

Foreign Retailers and the U.S. Market

A large number of foreign retailers have entered the United States, in order to appeal to the world

�s most affluent mass market. Here are three examples.

Ikca (\v\v\v.ikea.com) is a Swedish-based home-furnishings retailer with stores in nearly 30 countries. In 1985, Ikea opened its first U.S. store in Pennsylvania. Since then, it has added stores in such cities as Baltimore, Chicago, Elizabeth (New Jersey), Hicksville (Long Island, New York)r Houston, Los Angeles, San Francisco, Seattle, and Washington, D.C. The firm offers durable, stylish ready-to-iisscmble furniture at low prices. Because Ikca positions itself as a dominant furniture retailer, its stores are large and have enormous selec¬tions. For example, the outlet in Elizabeth, New Jersey, is 270,000 square feet and has a play¬room for children and other customer amenities. The firm generates nearly 90 percent of its sales from international operations, including about $700 million dollars at its U.S. stores.The Netherlands

� Royal Ahold (www. ihold.com) is a supermarket operator ranking

among the world�s top retailers with $35 bill on in annual retail sales. It has

stores in 17 coun¬tries and serves 25 million shoppers weekly. In the United States, rather than introducing its own stores, Royal Ahold has acquired several chains, making it the leading supermarket firm along the eastern seaboard. Its more than 1,000 U.S. stores include these chains: Stop & Shop, Giant Food, Tops Markets, and Bi-Lo.Body Shop International (www. the-body- shop.com) is a British-based chain that specializes in natural cosmetics and lotions such as Vitamin E Cream, Tea Free Oil, Banana Shampoo, and Aloe Vera Lotion -"products that cleanse, beautify, and soothe the human form." There are 1,600 Body Shop stores in 48 countries, Including the United States. The firm has more than 400 U.S. stores (55 percent of whi

ch are company-owned and 45 percent of which are franchised), which generate roughly one-quarter of Body Shop

�s total company revenues.

Besides extending their traditional businesses into the United States, a number of foreign firms (such as Royal Ahold) have acquired ownership interests in U.S. retailers. Although the revenues of U.S.-based retailers owned by foreign firms are hard to measure, they cer-tainly exceed $100 billion annually. Foreign ownership in U.S. retailers is highest for general merchandise stores, food stores, and apparel and accessory stores. Both U.S. retailers operating in foreign markets and foreign firms operating in the U.S. market need to be careful in their approach: Retailers considering operations abroad must carefully study demographic, economic, and cultural trends; must be flexible in choosing retail formats; and must be willing to enter into partnerships with local operators. Retailers also must be prepared to commit capital resources to sustain what may be losing operations for several years before con¬sumers accept them. To be sure, overseas expansion is risky and requires a long-term outlook, particularly in countries with a great potential for growth in the next century. The prospective profits in those markets is so large, however, that many retailers can¬not afford to miss these opportunities.7There arc about 270 countries —encompassing 6 billion people and a $30 trillion economy— in the world. The United States accounts for less than 5 percent of the worldwide population and nearly 30 percent of the worldwide economy. This means that although the United States is a very attractive marketplace, there are also many other appealing markets around the globe. 1 hat is why global retailing is growing dramatically. It is expected that annual worldwide retailing sales will reach $9.2 trillion by 2009.1 when we talk about the global environment of retailing; we are referring to both U.S. firms operating in foreign markets and foreign retailers operating in U.S. markets. .

The challenge of strategic planning in a global retailing environment is clear: "The world economy is a crazy-quilt of retail markets in which promising new territories are closely min¬gled with potential quagmires for retailer’s look-in * to expand beyond their home countries." There are many differences among countries despite "the growing similarity of consumer tastes and the development of sophisticated information systems."

The Strategic Planning Process and Global Retailing

Retailers looking to operate in global markets should follow these four steps in conjunction with the strategic planning process described in Chapter 3.! .Assess Your International Potential: "Because international growth requires an extension of your firm

�s resources, you must first focus on assessing your int

ernational. potential. This should give you a picture of the trends in your industry, your domestic position in that industry, the effects that international activity may have on your current operations, the sta¬tus of your resources, and an estimate of your domestic and international sales potential. In general, you should not. get into international retailing unless you have a secure base of oper¬ations in the United States. Find out about candidate countries by using research. It

�s easy to ruin an otherwise well-conceived plan by making fundamental cu

ltural, partnering, or resource allocation mistakes. It�s far better to put the

time info research at the beginning rather than learn when it�s too late that yo

u did not do enough homework."2. Get Expert Advice and Counseling: "Once you have assessed your international poten-tial and made a decision to commit time and resources, the next step is to get expert advice

� and counseling. Many groups in the private sector and gover

nment provide guidance to companies planning to go international. Industry trade associations are also useful, as are private consulting firms and the business departments of major universities. If you are entirely new to international retailing, call the U.S. government

�s Trade Information Center, toll-free, at (800)

USA-TRADE (800-872-8723). If you are further along, contact the near¬est district office of the Commerce Department

�s International Trade Administration. State

governments are another source of assistance."3. Select Your Countries: "After reviewing your research and digesting the advice, the next decision is about which country or countries to enter. You need to prioritize information about each country

�s environment, including economic stren

gth, political stability, regula¬tory environment, tax policy, infrastructure development, population size, and cultural fac¬tors to reflect influences on the candidate countries. For example, the economy of a country is generally considered critical to most businesses and is normally ranked high in impor¬tance. Equally critical are political (actors, particularly government regulations.

DEVELOPMENT OF INTERNATIONAL RETAILING STRUCTURE

INTERNATIONAL EXPANSION OF RETAILERS

Retailers are rapidly expanding internationally to gain competitive advantage and to increase sales, profits and overall firm performance. As they expand beyond their home-country borders, retailers also can take advantage of cost savings and learn from experiences in a way that could further enhance home-country operations. Tesco, the British retailer, for example, is using its stores in central and Eastern Europe as a testing ground for ideas that are intended for application in the home market: the new Tesco Extra in Newcastle, U.K. is based on a Tesco hyper market in Hungary.

Retailers from the United States are expanding in Latin America, Asia, and Europe. Wal-mart, for example, has adopted an aggressive strategy for international penetration.

The top European grocery retailers are expected to command a 40 percent market share by 2005 in Europe, the five leading European retailers- promodes/ Carrefour, metro, intermarche, Rewe, and Auchan presently control a 25.4 percent share of the European grocery market.

Some of the international retailers are

• Wal-Mart (U.S.) with sales of $137,634 million.• Metro AG (Germany), $52,131 million.• Sears Roebuck (U.S.), with sales of $36,704 million.• Rewe Gruppe (Germany), with sales of $36,212 million.• Edeka Gruppe (Germany), with sales of $32,573 million.• Aldi Gruppe (Germany), with sales of $32,403 million.• Dayton Hudson (U.S.) with sales of $30,951 million.• Carrefour (France), with sales of $30,489 million.• Tenzel Mann Gruppe (Germany), with sales of $30,243 million.

In the process of internationalization, many retailers are subscribing to the current trade of consolidation in the food and general merchandise sectors.

Examples of such consolidation are offered by Wal-Marts acquisition of one of the largest United Kingdom grocery chains, the Asda Group, Royal Ahold’s purchase of the path mark , Giant, and stop and shop chains in the United State and the merger between two medium-sized French Wal-Mart look-alikes promodes and Carrefour.

LEVELS OF INVOLVEMENT IN INTERNATIONAL RETAILING

Domestic Comparatively Low potential Approach Low Risk Global Returns

Global Comparatively High potentialApproach High Risk Global Return

DEVELOPING A STRATEGIC RETAIL MIX

After a retailer has identified the most promising areas for foreign expansion and the desired level of involvement, the next consideration is the retail mix: products, pricing, facilities and promotion.

The Global Retail Mix

Strategic Orientation

Total Customization Total Globalization

(Focus on Differences) (Focus on Similarities) 100 0 50 50

0 100

Total Customization approach:

An approach, based on differences among markets, in which the retailer develops a unique retail mix for each country in which it operates.

Total Globalization:

An approach, based on similarities among markets, which emphasizes the complete standardization of the retailer’s mix for all markets around the globe.

Product Offering

McDonald’s, which leans strongly toward globalization, found that in Mexico its hamburgers were better received when served with chili sauce instead of ketchup. Adding McBeer to its menu in Germany increased traffic and sales there. In Japan, the firm has added rice balls and the Teriyaki McBurger to better compete with local fast-food chains.PRICINGConsumer reactions to pricing policies vary greatly around the world. Discount or warehouse retailing is popular in the United States but beginning to catch on in Japan. The average Japanese is heavily staffed, and consumers are likely to believe that the sizable price or service reductions typical of discount stores reflect poorly on the quality of the store’s products.

FACILITIESRetailers may also need to modify their stores layouts. Although Kentucky Fried Chicken, Burger King, and many other retailers have taken steps to standardize their facilities around the world, local considerations sometimes have forced them to alter their prototypes. Rent levels and local retail practices also affect the way merchandise is presented. High rents usually dictate grouping merchandise more closely on special fixtures to display more merchandise per square foot. Yet in some nations, including Canada and the United States, customers see closely packed merchandise as a sign of poor quality. In Japan, where customers value individualism, retailers put only a few fashion items on the floor and keep the rest in the stockroom- a strategy that creates an impression of exclusivity.

PROMOTION

Promotion is the component of the retail mix that is most likely to be customized from country to country. At the least, retailers must translate their advertising, signage, and sales presentations into the local language. In many instances, however, modifications go far beyond translation. In France, children cannot be shown in advertisements. In Germany, retailers cannot use the word best in any advertisement, and comparative advertising of any sort(direct comparisons with other retailers products and pricing) is illegal.

MEASURING RETAIL STRUCTURE

The structure of the retail environment generally refers to the nature and characteristics for the market.Eg: The type of retail operation, the variety of retail offers, store location and nature of ownership.In terms of measuring the retail environment, levels of market concentration are often used. Higher levels of concentration are associated with more developed markets. The retail industry developed, so multiple organizations begin to take market share from traditional independent and co-operative retailers: thus a small number of larger organization are taking a greater proportion of the market. Retail structure development can be measured not just by the number of retail organization, but also the number of retail organizations, increases. As the market becomes more structured begins to decrease due to the fact that the size of the individual shops has increased, one store can serve a larger group of the population.

More advanced More traditional

UK Germany France Netherlands Italy Spain Portugal Greece

Fig: A Continuum of Europe Retail Structure

The advanced markets of the UK and Germany are characterized by having the higher level of concentration and clearly segmented market. Next are the structured market of France and Netherlands, followed by the intermediary market of Spain and Italy and, finally the traditional retail structure of Portugal and Greece.

The Internationalization of Retailing in Europe

In recent article in The New Republic, Daniel Yergen argues that analyses of internationalization should focus on “globality” rather than “globalization”. Whil

e studies of globalization focus on the processes by which businesses expand into markets around the world, globality focuses on what happens afterwards. Globality is associated with: general confidence in the pricing and allocation mechanisms of markets; greater levels of economic integration (EEC in Europe, NAFTA in North America, and Mercosur in South America) new information and communications technologies that knit the world together; and the convergence of technology and economic integration that has turned capital markets into a force unto themselves. In Yergen’s view of the world, this means that the control that Governments have over their own economies is decreasing- a trend exemplified in 1999 with the introduction of the “euro”. In Canada, there is now some discussion of the implications of a NAFTA dollar zone.

Commercial activities, which include retailing, personal services, entertainment, restaurants, and some financial services, have not been immune from these internationalizing trends. The papers in this collection, which include some Europe, related studies presented at an International Geographical Union workshop on the “Impact of the Globalization of Commercial Activities on Communities” and articles submitted to CSCA subsequently, address collectively both globalization and globality.

The restructuring of retailing in the former East Germany consequent to unification with the former West Germany is examined as an example of the outcome of globalization processes (Coles). As many international companies locate in Off-centre locations, a case study included of the response of some small town centre in the UK to this type of competition (Hallsworth). The monograph concludes with a general commentary on the relationship between globalization, globality, and deregulation based on research undertaken at CSCA in metropolitan markets around the world (yeates).

The Motives and Reasons for Internationalization.

The following are the important motives behind the internationalization of the retail sector.

1. The Economic climate

An important factor in assessing the opportunities for expansion is the ability to earn profit within a reasonable period of time .The outcomes strongly depends upon the countries economic climate. The ability of the customers to purchase the products and the cost of operating the stores plays a vital role in its success.

2. The customers buying power.

The standard of living of people plays a vital role while determining the retail operation in a country. The percapita income, the percapita sales etc. should be considered before fixing the level of operation. The customers buying power in the developing countries increasing day by day, this offers a strong market for retail legends.

3. Cost of doing the business is low. The cost of doing the business includes the rent, transportation, wage rates, warehousing, taxes etc. Before staring the retail operation they will have to look into the cost of the retail operations. In addition to this they will have to also look into the import duties levied by the government. But the liberalization helps to remove all these barriers and creates an easy operating environment.

4. Currency exchange facilities. A major consideration for any retailer is the degree to which foreign currency can be converted into the home currency. Through the foreign exchange markets t

he currencies can be easily converted in to the home currency. The transitions in the foreign exchange markets are carried on the basis of the global exchange rates. It facilitates easy business operation in any part of the world.

5. The support of the infrastructure.The business support services by the countries facilitate the conduct of the business activities with in a nation such as dependable supply of electricity, advanced telecommunication system, etc. Such services comprised of a nations infrastructure. The increase in infrastructure will enables to attract more foreign investments.

6. Consumer preferences.

The consumer preference plays a vital role in the success. The preference of the consumer may vary from one country to another. The culture, social norms etc. plays a vital role in determining the buying habit of the customers. The inability of the local markets to satisfy the increased preference of the customers opens a new market for the global retailers.

7. The laws and the political stability.

The political stability refers to the degree to which the laws and regulations are subject to change. The legal environment in the country also plays a significant role. The rules and regulations prevailing in a country, the attitude of the government towards internationalization, the govt policy and regulation etc. remain the motivating factors for foreign investments.

8. The information sources.The easy availability of information from the government and other agencies facilitates the companies to understand the political, social & economic environment prevailing in a country. This would enable them to plan their area of operation. Opportunities and Threats in the International retailing.

For a participating firm, there are wide range of opportunities and threats in the global retailing;

>OPPURTUNITIES

1. The foreign markets represent better growth opportunities. (Here foreign market means the developing countries like India, china etc.)

2. A retailer may be able to offer goods, services, or technology not yet available in the foreign market.

3. Less competition compared to the developed countries.

4. Cheaper communication facilities in the developing countries.

5. The liberalized policies by the governments.

> THREATS.

1. The cultural difference between the domestic market and the foreign market.

2. The management styles may not be easily adaptable.

3. The government’s restriction on some areas of operation.

4. The distribution system may be inadequate.

5. The institutional format may greatly vary from country to country.

MARKET ENTRY METHODMarket entry decisions have strategic implications, as the wrong decision can have a long-term constraining impact on future activities in the chosen overseas market. The criteria for the initial method of market entry should have been examined during the initial screening phase of market selection, as ease of market entry is crucial in reducing overall risk of market failure. The following criteria to be consider considered are: 1. Level of marketing control required over the 7P’s 2. Costs of implementation and follow through 3. Time involved to achieve objectives 4. Level of corporate control with respect to third parties 5. Financial and strategic risks 6. Future commitment to the market 7. Absorption of company resources There are three main categories of market entry;1. Indirect2. Direct 3. Overseas production.The first two involve production in the domestic market, the third production overseas. 1. Indirect: Companies who do not want to engage in the risks of export markets or who lack the resources, know-how and commitment can consider this route. Third parties, International Trading Companies, Export Management Companies or Manufacturers with complementary products, on the look out for new products to exploit overseas, may purchase within the domestic market, take title and then export overseas, using their own established networks. Apart from avoiding all the risks of exporting it can also provide added cash flow and sale of slow moving stock. The downside is total loss of control over the 7P’s, market knowledge and future footholds in overseas markets during domestic recession. 2. Direct There are a range of possibilities here, depending on the degree of commitment and risk to be taken. Some companies will engage in exporting but in a reactive manner relying on unsolicited orders through fax, trade fairs or directory inserts. Other companies will take a more proactive approach to overseas markets, hopefully resulting in greater: sales, marketing control, marketing information and the all important networking, albeit increased risks of commercial failure. This method of market entry accounts for about 2/3 of UK exports. (a) Agents These are self-employed nationals, living in the target market, with the product, industry and customer knowledge of benefit to the exporter. They act as an extension of the domestic sales force, although many will have agency contracts with other organizations, even possibly a competitor. 3.1 Distributors These are companies that can provide warehousing, physical distribution as well as sales and marketing expertise. They take title of the product and may insist on ‘Own Label’ branding. With both of these forms of market entry there are pros and cons. The key to the successful use of these intermediaries is the motivation and control from the principal. This can be achieved through competitive incentives, training, regular visits, shared marketing expertise and regular evaluation and efficient communication.

Market entry is a strategic issue and sensible practice is to evolve overseas presence if the market conditions are conducive. If the agent distributor route has proved a success then consideration to a more formal overseas presence should be considered. 2.3 Sales/Marketing Office One common practice is to invite the agent or distributor to head up an overseas sales and marketing subsidiary. This move could then oversee any later methods of further market commitment. 1. Overseas Production This may become a sensible option if the export market becomes large enough for economies of scale to out weigh the increase in risk to the exporter. However, many developing markets e.g. S.E. Asia, may make this a formal requirement to enter their markets. Of course there could be very direct benefits to the exporter e.g. lower labour costs, raw materials, access to additional finance and more favorable tax regimes. As with the other methods of market entry there are a number of alternatives with varying impacts on the criteria initially stated. 1. Subcontract Manufacturing Is when a company contracts for the assembly of its products by manufacturers established in a foreign market, with targeted sales there or elsewhere, while still maintaining the responsibility for marketing and distributing its products. Some of its advantages are that in requires minimum investment of cash, time and executive talent and permits a rapid entry into a new market. Furthermore, it is desirable where a local production base is needed but the size of the market does not warrant an investment, while avoiding currency risks and financing problems. Its drawbacks include that profit from manufacturing is transferred to the contractor; it is often difficult to find a satisfactory manufacturer; and like licensing, it trains a potential competitor who will have the know how to manufacture a high quality product and there is little control of manufacturing quality 2. Licensing agreements

Is a contractual agreement that occurs when a company transfers to a foreign entity, usually another company, the right to use its individual property (patents, technical knowledge or trademarks) in return for a royalty or other compensation. The main benefits of establishing a licensing agreement are the ease and low cost of entering a foreign market, and that it can be used to test a foreign market without the risk of capital loss should the market not be receptive to the manufacturer’s product. On the other hand, the greatest disadvantages to the licensor are that a potential competitor is set up, there is a lack of control over production and marketing, and there could be loss in flexibility since it is often difficult to co-ordinate a licensee into a world-wide marketing plan.. 3. Franchise The problem with licensing is the loss of control over the marketing mix. A franchise helps overcome this problem because the exporter retains control over the 7P’s through the Franchise contract. The Franchisee makes a one off down payment, often in excess of £250,000 for a fast food franchise. Then annual royalty payments often tied in with sales turnover. There may even be further payments to the Franchiser or their suppliers for fittings and the supply of raw materials. Of course the franchiser benefits from a ready made brand name and hopefully lessens the possibility of market failure. 3.4 Joint Venture This may be a mandatory requirement by the host government for the privilege of market entry or it maybe a specific policy to share resources with a partner be they finance, manufacturing, R&D or market knowledge. It takes place when an international company shares in the ownership and control of an enterprise in a foreign country with the purpose of creating a local business. In other words, an international firm agrees to share capital and other resources with a single loca

l company in a common endeavor. Depending of the capital share of the international company, joint ventures can be classified as majority, minority, or 50-50 ventures. 3. 3.5 Strategic Alliance Less restrictive and often more short term e.g. Rover and Honda, strategic alliances are often sought where no one company can gain the economies of scale, where shared financial, market entry, R&D risks benefit both parties. These firms operate not simply by having subsidiaries in other countries but through a network of relations with other companies to which they subcontract work. Although, there is often competition between these firms there is also collaboration. We are seeing an increasing number of what are called "tri-polar alliances". An alliance has been established in the airline industry between British Airways in Europe, United Airlines in the US and Cathy Pacific. And in telecommunications, an alliance has been established between ATT in the US, Unisource in Europe and NTT in Japan. These alliances are established in order to compete with other multinationals which have established similar alliances with other multinationals in Japan, Europe and North America. 3.6 Wholly owned production This could be assembly only of components shipped in or full manufacture, although R&D capability is usually retained in the domestic market. The subsidiary could be a ‘Green field’ site or an acquisition. As the subsidiary matures it may be used to export to other markets in the region or even back to the domestic base.TYPOLOGIES OF INTERNATIONAL EXPANSIONIntroductionThe term ‘ Retail Internationalization’ may seem clear enough, yet a number of complexities underline it. Alexander (1997) has highlighted the varying conditions that international players operate in, suggesting that retail internationalization is: The management of retail operation in markets which are different from each other in their regulation, economic development, social conditions, cultural environment, and retail structures.

It is the process of a retailer transferring its retail operations, concept, management expertise, technology and/or buying function across national borders.TYPOLOGIES OF INTERNATIONAL EXPANSIONTerms such as global, international, multinational and transitional are often used interchangeably and without much regard for the differences in implications. While on one level they all suggest the movement of retailer into new markets, they also imply differences in terms of the nature of international activity. Classifications of retailers have been determined partially by their direction of expansion and market entry method. Salmon and Tordiman (1989) categories three types of international strategy:

� Investment

� Global

� Multinational� INVESTMENT

Company often uses investment with diverse portfolios that are seeking new growth opportunities and want to spread their risk of investment. Attainting shares in a foreign company acquiring the entire company allows swift expansion and may allow the transfer of know-how from the indigenous retailer. Unlike the other two classifications, it is strategy implemented by both retailers and no retailers. It implies no real international marketing strategies, as the companies are treated autonomously within the portfolio.� GLOBAL

Global retailers replicate a concept in a new market. Typically they have a strong brand such as Marks & Spencer, IKEA and Benetton. The replication of the retail offer implies a standard global marketing strategy, which allows savings from economies and efficiencies of scale due to the replication of factors such as assortment, store designs and advertising. There is opportunity for vertical integration in terms of design production and distribution. However, the lack of autonomy as a result of centralized management structure requires and leads to the development of excellent information ad communication system. Global retailers are then likely to achieve the greatest rates of international expansion due primarily to efficiencies of operation.� MULTINATIONALWith the third category, multinational retailers, the basic concept is unchanged in the international transfer, but the offer is adapted to suit local conditions, as exemplified by C&S. Although the concept is replicated, the marketing mix is adapted to suit local demand. The store decor, services and pricing are similar throughout the world, while the assortment and advertising are subject to local determinants. The management structure is decentralized, providing operations within different markets with a significant degree of autonomy. This is an important source of the transfer of knowledge from one market to another, but the philosophy of adapting to local conditions means that there are few savings from economies of scale on a global level. Although multinational retailers are se to expand within the global arena, it is thought unlikely that such expansions will be to the same extent as the global retailers.

There is great deal of importance with Salmon model in the position of a retailer within the typology is dependent upon that level of local responsiveness and the degree of benefits from integration. An example of a multinational retailer is Vendex of the Netherlands. It employs a high degree of adaptation to the local environment and subsequently has a few benefits from integration because it has a variety of diverse retail formats. Global retailers are at the other extreme. They provide the same offer in every market with limited, if any, change made to suit different environments. This does, however, provide them with savings form of economies of scale, and example of this is The Body Shop. DIRECTION OF EXPANSIONThe direction of international expansion taken by retailer has received a good deal of attention in recent years. Much of the recent research on internationalizations describes either the development of new markets or the invasion of homes markets by foreign competitors. Burt (1993) suggested that the initial direction of international retail expansion is primarily determined by three factors:

� Cultural proximity

� Geographical proximity

� The stage of development of the retail market.

CONCLUSIONRetailers tend to move into markets that are geographically and culturally close, and those that are less developed than their own. As they develop into experienced internationalists, they are more likely to move into more diverse markets. Their choice of market entry strategy is dependent upon the types of operations, the organizational structure and culture, and the nature of the host markets. Today the word is a much smaller place for the retailers. Any retailer that thinks retailing is a local business is, or soon will be, competing against a foreign retailer that understands retailing is a global business. The internationalization of retailing is still a relatively recent phenomenon and it is suggested that it is a process likely to continue to increase.