IGNOU Study Notes BRL-002 | Unit-1 ( Overview of Retail Marketing )

Unit -1 | OVERVIEW OF RETAIL MARKETING

Structure

1.0 Objectives
1.1 Introduction
1.2 Elements of Retailing Industry
1.3 Importance of Retailing
1.4 Retail Strategy and Structure
1.5 Retail Formats (Classifying Retail Firms)
1.6 The Whell of Retailing
1.7 Retailing Decisions
1.8 Emerging Trends in Retail Marketing
1.9 Concept of Marketing Management in Retail
1.10 Core Marketing Concepts
1.11 Marketing in the New Economy

1.0 OBJECTIVES

After studying this unit, you will be able to:

• Describe the retailing and indentify elements of retailing;
• Explain different types of retailers both in store and non store categories;
• Identity retail formats;
• List out factors for retailing decisions;
• Analysis emerging trends in marketing;
• Explain the core concepts of marketing in the light of retail;
• Describe the scope of marketing in the light of retail;
• Describe the new development in retail marketing;
• Synthesize the concepts of retail and marketing;
• Explore major decisions areas in retail marketing and management.

1.1 INTRODUCTION

→ Indain has often been called a nation of shopkeepers. Presumably the reasons for this is; that, a large number of retail enterprises exist in India. In 2004, there were 12 million plus retailers compared to the 0.9 million in the USA. Out of the 12 million 98% are small family business, utilizing only household labour.
→ The worl "Retail" as defined in oxford dictionary means "Sales of goods to consumers".
→ The word "Retailing" as defined in dictionary means "sale of goods to the public in smal quantities".
→ Retailing is the combination of activites invloved in selling or renting consumer goods and services directly to ulimate consumer for their personal or household use. In addition to selling, retailing incldues such diverse activites as, buying, advertising, data processing and maintaing inventory. With economy opening and the goverment favoring an open economy, more Global player in retail are to enter India by the beginning of the year 2010.

1.2 ELEMENTS OF RETALING INDUSTRY

The retailing include the following :-

• Department Stores
• Discount Stores
• Clothing Stores
• Specialty Stores
• Convenience Stores
• Grocery Stores
• Drung Stores
• Home furnising retailers
• Auto Retailers
• Direct Sales Catalog and mail order compaines
• Some e-commerce business

1.3 THE IMPORTANCE OF RETAILING

→ Organized retailing in India was estimated at Rs. 25000 croress in 2005-2006 and has grown at about 4% over the last 3-5 years (Soure : KSA Reatail Outlook). Retailing has a tremendous impact on the economy. In involves high annual sales and employemnt. As a major source of employemnt retailing offers a wide range of career opportunites. As a major source of employemnt retailing offers a wide range of career opportunites including; A retailr's service also helps to enhance a product's image. In general, retailers perform four distinct fuctions as shown in Figure 1.1. below:
→ Retailers participate in the sorting process by collecting as assortment of goods and services from a wide variety of supplliers and offering them for sale. The width and depth of assortment depend upon the individaul retailer's strategy. They complete transactions by using appropriate locations, and timings, credit policies, and other service e.g. delivery. Retailing in a way, in the final stage in marketing channels for consumer products.

1.4 RETAIL STRATEGY AND STRUCTURE

A Retail Strategy is a statement indentify

a) The Retailers target market
b) The format of retailing the retailer plans to use to satisfy market needs
c) The base on which the Retailer plans to build a sustainable competitive advatage
The target market is the focus segment on which the retailer plans his resources and merchandise using a retail mix. For example BATA is a specialty retailer whose retail mix foucs on various of footwear.
Successful retail operations depend largely on two main dimensions: margin and turnover. How far a retail enterprise can reach in margin and turnover depends essentially on the type of business (product lines) amd the style and scale fo the operations. In additionss the turnover also depend upon the professional competence fo teh enterprise.

Margin Turnover Model

→ Ronald R.Gistl "Suggested a conceptual frame work, usig margin and turnover for understanding the retail structure and evlving a retail stategy". Margin is defined as the percentage mark tip at which the inventory in the store is sold and turnover is the number of time the average inventory is sold in a year. Fig. 1.2 is a diagrammatic repersentation of the frame work and can be applied to almost any type of retail business.

Low Margin High Turnover Stores

→ Such an operation assumes that low price is the most significant determinant of customer patronage. The stores in this category price thier products below of the market level. Marketing communication focuses mainly on price. They provide limited options in merchandise; no frills enviornment and they normally entail an extra charge whenever they offer service such as gift wrapping etc. The the customers buy the the product, rather than the store selling them. These stores are typically located in residential locations and usually stock a wide range of fast moving goods in several merchandise lines.

High Margin Low Turnover

→ This operation is based on the premise that distinctive merchandise, service adn sales approach ar the most important factors for attracting customers. Stores in this category price their products higher than those in the market, but not necessarily higher than those in similar outlets. The focus in maketing communication is on product quality and uniqueness.
The BOMBAY STORES is an example of this category of stoes. They retail products which are unique for gifting and available in samll quantities. The products mix being unique attracts customers to its store and generates business which hs high margin but are low in turnover.

Hight Margin High Turnover Stores

→ These stores generally stock a narrow line of products with turnover reasonably high frequency They could be situated in a non commercial area but not too far from a major thoroughfare. Thier location advatage allows them to charge a higher price. High over head cots and, low volumes also necessitate a higher price. GODREJ have been leaders in steel cupboard business and now office automation.

Low Margin-Low Turnover Stores

→ Retail enterprises in this category are pushed to maintain low margins because of price wars. Compounding this problem is the low volume of sales, which is probably a result of poor management, unsutiable location etc. suc businesses normally get wiped out ovver a period of time. CORONA was once a competitor to BATA in India and offered footwear at lower prices and ultimately could not sustain in the long run and shut shop.

1.5 RETAILING FORMATS (CLASSIFYING RETAIL FIRMS)

Regardless of the particular type of retailer (such as a super market or a Department store), retailers can be categorized by Owmership, and operate various formate of retail stores. Figure 1.3 on the next page illustrates this concept whic already explained in detail in BRL-001
Form of Ownership
A retail business like any other type of business can be owned by a sole proprietor, partner or a corporation. A majority of retial business in India are sole propreitroships and partnerships.
Basis

i. Form of Ownership	• Independetn    • Chain    • Franchising    • Cooperative
ii. Store Strategy Mix	• Convenience Store    • Convenienal Supermarket    • Superstore    • Combination store/ Hyper Market    • Specialty Store    • Traditional Department Store    • Full Time Department Store    • Retial Catalog showroom
iii. Non Store Operations	• In home retailing    • Telephone retailing    • Catalog retailing    • E-Retailing

1.6 THE WHEEL OF RETAILING

→ There is a hypothesis that attempts to expliain teh emrgence of new reailing instituations and their eventual decline and replacement by newer retailing instituations Like products retailing instituations also havea life cycle.
→ The cycle begins wit reailers attraching customers by offering low price and low service. Over a period of time these reailers want to exapnd thier markets and begin to stock more merchandise, provide more services, and open more convenient location.
→ The evolution of the departmetn store illustrates teh "wheel of retailing" theory. In its entry phase, the department store was a low cost-low srvice venture. With time it moved up into trading-up phase. It upgraded its facilites.
→ The same department store then moves into the vulnerabillity phase, becaause it becomes vulnerable to low cost/ low srvice formats, sucsh as full line discount stores and categroy specialists.

1.7 RETAILING DECISIONS

• There are many factors for reailers to consider while developing and implementing theri marketing plans. They depend on the folllwoing factors (a) Target markets (b) Merchandise management (c) Store location (d) Store image (e) Store Personal (f) Store design (g) Promotion, and (h) Credit and collection.

Retailing Decisions

• Target Markets    • Merchandise Management    • Store Location    • Store Image    • Store Personal    • Store Design    • Promotion    • Credit & Collection

Target Markets :
→ Through a careful definition of target markets, retailers can use their resources and capabilites to position themselves more effectively and achieve advatage.
→ The tremendous growth in mumber of spefiality stores in recent years is largely due to their ability to define precisely the type of customers, they want to serve.

Merchandise Management :
→ Merchandise Management includes :- (i) merchandise planning (ii) merchandise purchase, and (iii) merchandise control
→ Merchandise Planning deals with decision relating to the breadth adn depth of the merchandise mix.
→ Needed to satisy target customers to achieve the retailers return on investment (ROI).
→ Merchandise buying involves decisions relating to centralized or decentralized buying, resources and negotiaation with suppliers
→ Merchandise Control : deals with maintaining the proper level of inventory and protecting it against shrikage (theft, pilferatge etc.)

Store Location :
→ Location is critical to the success of a retail store
→ A store's trading-area is the area surrounding the store from which the outlet draws a majority of its customers
→ The extent of this area depends upon the merchandise sold.

Store Image :
→ A store image is the mental picture, or personality of the store.
→ Image is affected by advertising services; store layout, personnel, as well as the quality, depth and breadth of merchandise.

Store Personnel :
→ Sales personal at a retail store can help build customer loyalty and store image.
→ A major complaint in many lanes of retailing is the poor attitude of a salesperson.
→ To provide training to these sales clerks to convert them from order takers to effective sales associates.

Store Design :
→ A store's exterior or the facade and store interior design influences the mind of the customers
→ The exterior should be attractive and inviting and should blend with store's general surroundings.
→ A good inviting window can influence customers to walk into a store for impulsive buying.

Promotion :
→ Retail promotion incldues all communication from retailers to consumers and between sales people and customers.
→ The objective is to build the store image, promote customer traffic and wel specific products.
→ It incudes both, personal and no personal promotion
→ Personal communication is personal selling - the face to face interaction between the buyer and the seller.
→ All retailers use sales promotion during occasions like New sale, valentine's Day, Mother's Day, Children Day, Christmas etc.
→ Non personal promotion is advertising The media used are T.V, Radio, Newspapers, Outdoor displays and direct mail.

Credit & Collections :
→ Customers prefer some form of credit while purchasing.
→ The explains the popularity of different types of credit cards and debit cards.
→ Most white goods like refreigerators, washing machines, microwavesm television, kitchen appliancs etc are sold by retailers in association with credit card issuing banks on easy Installments thereby reducing their direct credit risks.

1.8 EMERGING TRENDS IN RETAIL MARKETING

Shopping Malls :
→ A growing number of shopping malls are coming up all over the country specially in Metro's and "A" cities
→ Malls generally target higher income group customers,
→ Malls have become weekend desitnations for entertainment and dining out

Factory Outlets :
→ Factory outlets are generally run by reputed brands
→ Factory outlets are used for clearing non seasonal merchandise that have remained unsold at the end of a particular season.

Non Store Retailing :
→ The other research findings showed that customer would not prefer buying without the Touch Feel Experience of the "TFE" technique as widely now known among retailers.
→ Non Store retailing have worked well for delivering Bouquets, Cakes and books as gifts for bithdays and anniversaries.

Diversification of Offerings :
→ Scrambled (unrelated products or services) merchandising is taking on a broader meaning and inter type competition among retilers is growing
→ For instance Citibank is organizing tourist trips and sending mail order catalogues to its credit card customers.

Impact of Technology on Shopping Behaviour :
→ The way retailers present their merchandise and conduct thier transactions are changing.
→ Cable TV channels are used to present merchandise.
→ Videos have replaced catalogues
→ Virtual shopping another possibility.

Multi Channel Retailing :
→ Traditional store based and catalogues retailers are placing more emphasis on their electronic channels.
→ Evolving into multi channel retailes, because they can reach new markets and overcome limitations posed by traditional formats.

Definition of Marketing :
→ Marketiong is the economic process bt whih goods and service are exchanged between the producer and the consumer and their → values determined in terms of money prices.

1.9 CONCEPT OF MARKETING MANAGEMENT IN RETAIL

The concept of marketing revolves around demand for the product/ services.

Needs, Wants, and Demands :
• Marketing thinking starts with the fact of human needs and wants.
• Needs are the basic human requirements.
• People needs for food, air, water, clothing & shelter to survive.
• People also have needs for rereation, eduaction and entertainment. Eg: Hunger for food.
• All the human needs can be categorized as shown in the diagram below.

Wants :
• The needs become wants they are directed to specific objects that might satisfy the needs.
→ Eg: Mercedes. "Needs Pre-exists" (can't be created). Wants can be created.

Demands :
• Demands are wants for specific products that are bagged by an ability and willingness to buy them.

Prodcut :
• Anything that can be offered to satisfy a need or a want, is a prodcut.

Marketing Myopia • Sellers who concentrate their thinking on the physical product instead of the customer need are said to suffer from 'marketing myopia'.
→ Example - It is the process of obtainning a desried product from someone by offering something in return.

There are five conditions that needs to be satisfied: • There are at least two parties. Each party has something that might be of value to the other party.
• Each party is capable of communication & delivery.
• Each party is free to accept or reject the exchange offer.
• Each party believes it is appropriate or desirable to deal with the other party.

1.10 CORE MARKETING CONCEPTS

The effective marketing starts with the identification of consumer and his need.
The marketin process consists of four steps:
1. Analying the marketing envrironment.
2. Selecting target markets
3. Developing the marketing mid
4. Implementing and controlling.

1. Analying the marketing enviornment:
→ The first step in the marketing processs is the analysis of marketing envrironment to identify the new needs or the existing needs not satisfied by any prodcut offer or the needs which can be satisfied through better prodcut offerings.
→ Marketing analysis taks about finding out the current position of the company in the form of current market share, market power, teh relevant strengths and weakness of the company.
→ The marketers use various technique like SWOT analysis, SCENARIO buildings, CROSS IMPACT analysis and other enviornmental scanning technique.

2. Selecting target markets:
→ At the second stage the marketer has to decide about the target,
→ The company's business mission, the categroy of customers market it want to serve, the type of strategy to arrive at teh set goals.

→ Once a particular customer group is identified and analysed, the marketing manager can direct company resources and activites to profitability satisfy teh selected segment.
→ At this stage marketer divides the market into various segmetns, called market segmentation. Each segment consists of consumers who respond to similar way to a given set of marketing efforts.
→ Then the marketer evaluates each segment and select and selects one or more segmetns in which he can generate to greatest customer value and sustain it over a long period. This is called market targeting. 3. Developing the marketing mix :
→ The third step in the marketing process is deciding the marketing mix.
→ It is easier to divide the marketing activites into 4 basic elements which are together referred to as marketing mix.
→ These 4 basisc elements are a) Product, b) Price, c) Promotion and d) Place (Disrtibution).

1.11 MARKETING IN THE NEW ECONOMY

New economy characterized by the following :-
• A substantial increase in purchasing power.
• A greater variety of available goods and services.
• A great amount of information about everything.
• An ability to compare notes on products and services.

Today's companies also have new capabilites as given below:-
• Ability to operate powerful information and sales channels.
• Ability to collect fuller and richer information about market customers, prospects, and competitors.
• Faster interal communication amongst employees.
• Two way communication with customers and prospects.
• Send ads, coupons, samples, and information to customers.
• Customerize offerings and services to individual customers.
• Improved, purchasing, recruiting, and training.
• Improved external communication.
• Improved logistics and service quality.