MODULE-1

Arun Chandran
Dhanesh.V.D
Sajith Nair
Sudeep.K.M
Vipin.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 firs
t-hand transition with the customer.
Retailing involves a direct interface with the customer and the coordinat
ion of business activities from end to end, right from the concept or design sta
ge of a product or offering, to its delivery and post delivery service to the cu
stomer. The industry has contributed to the economic growth of many countries an
d 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 gasol
ine at a service station, movie tickets at a theater, or clothing at a departmen
t store. Your local hairstyling salon, your favorite restaurant, and The Gap and
Banana Republic stores at the regional shopping center are retailers. Their suc
cess or failure is ultimately determined by how well they serve you and other co
nsumer like you.
Manufactures
Manufactures business whose primary economic role is the production o
f goods.
Wholesaler
Wholesaler, which acts as market intermediaries between producers a
nd end users of products and services, may engage in retailing activities by sel
ling 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 locat
ions.
Customers are first introduced to the product at the retai
l store, Organization sell their products and services through these retail outl
ets and get feedback on the performance of their products and customers expectat
ions about them.
Retail stores serve as communication hubs for customers.
Commonly known as the point of sale or the point of purchase, retail stores tra
nsmit 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 r
equired assortment and at the required place and time. From an economic standpoi
nt, the role of a retailer is to provide real added value or utility to the cust
omer. 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 ma
terials, but rather offers finished goods and services in a form that the custom
ers want.
The retailer performs the function of storing the goods, and prov
iding us with an assortment of products in various categories.
The creates time utility by keeping the store open when the consu
mers 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. Acc
ording 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 a
nd not what we can sell”. The businessman is always in search of such needs of c
ustomers, which are not even known, to them. The need for television, the custom
ers never thought of refrigerators etc. The invention of such items is the resul
t 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 res
ources, 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 pro
duct differentiation.
Figure
The 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 in
terest or needs, the result in integrated marketing
Examples of Integrated Marketing
The marketing Vice President of a major European airline wants to increase the a
irlines traffic share. His strategy is to build up customer satisfaction through
providing better food, cleaner cabins, better-trained cabin crews and lower far
es; yet he has no authority in this matters. The catering department chooses foo
d that keeps down food costs; the maintenance department uses cleaning services
that keep down cleaning costs, the human resource department hires people withou
t 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 t
o achieve their objectives and at the same time satisfy the customer also. Marke
ting concept advocates serving the customer and maximizing profits at the same t
ime. These goals need not conflict, but they can be reconciled, the guaranteed r
oute 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 si
ngle 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 a
round the importance of competitive pressure, the investments in organizational
capabilities and the creation of a sustainable competitive advantage. This re
quires the implementation of strategic planning by retail organisation.Growth in
retail is a result of understanding market signals and responding to the opport
unities 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 chan
ge in the environment in which the retails operate.
2. Cyclical Theory – Where change follows a pattern and phases can have def
inite identifiable attributes associated with them.
3. Conflictual Theory – the competition or conflict between two opposite ty
pes of retail results in a new being developed.
Environmental Theory
Darwin’s theory of natural selection has been popularized by the phrase “surviva
l of the fittest”. Retail institutions are economic entities and retailers confr
ont an environment, which is made up of customers, competitors and changing tech
nology. 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 w
hich react without delay, gain from the changes.
Thus, following the Darwinian approach of survival of the fittest, those retaile
rs that successfully adapt according to the technological, economic, demographic
and legal changes are the ones that are most likely to grow and prosper. The ab
ility 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 understandin
g retail changes. This theory suggests that retail innovators often first appear
as low-priced operators, with a low-cost structure and low profit-margin requir
ements, 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 imp
ortant when they entered the market. Such ‘trading up’ occurs as the retailer be
comes established in his own right. This in turn, leaves room for others to ente
r and repeat the process. They then become vulnerable to new discounters and
lower-cost structures that take their place along. The wheel Scrambled merchandi
sing occurs as the retailer adds goods and services that are unrelated to each o
ther 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 d
eveloped 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 o
rchestra comprised exclusively of accordion players to describe the dynamically
shifting retail structure.
This is so called ‘accordion’ effect describes how general stores moved to speci
alized stores, but then widened their range of merchandise again, as new classes
of product were added. Hollander suggested that the players either have ‘open a
ccordion’, representing general retailers with broad products ranges, or closed
‘accordions’ thus indicating a narrowing of the range, focusing on specific merc
handise. He suggested that at any point in time, one type of retailer would outn
umber the other, but that the situation would continually change the arrival and
departure of different stores. This analogy illustrates the complexity of the r
etail scene, and the way different attitudes to successful retailing will come i
n and go out of fashion at different times. The Accordion theory and the Wheel o
r Retailing is known as the cyclical theories of retail evolution.
Conflict Theory
Conflict s will always exists between operators of similar formats or within bro
ad retail categories. It is believed that retail innovation does not necessarily
reduce the number of formats available to the consumer, but leads to the develo
pment 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 de
velopments 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 ti
me.
These are the department stores. The antithesis is a challenge to the thes
is.
(c) “Synthesis”: There is a blending of the thesis and the antithesis. The resul
t is a
Position between the “thesis” and t he “antithesis”. Supermarkets and hypermarke
ts 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 appl
icable to retail organizations. This is because retail organizations pass throug
h 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 claim
ed that the retail institutions show an “s-shaped” development through their eco
nomic 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 p
rofitability are moderate and this stage can last up to five years, depending up
on the organization.
B: Accelerated Growth
The retail organization faces rapid increases in sales. As the organization move
s to stage two of its growth, which is the stage of development, a few competito
rs 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 a
ppear.
C. Maturity
The organization still grows, but competitive pressures are felt acutely, from n
ewer forms of retailing that tend to arise. Thus, the growth rate tends to decre
ase. Gradually, as markets become more competitive, and direct competition incre
ases, the rate of growth slows down and profits also start declining. This is th
e 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 th
e merchandise mix offered.
D. Decline
The retail organization looses its competitive edge and there is a decline. In t
his 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 ov
erheads are high. The retail business in India has only recently seen the emer
gence of organized, corporate activity. Traditionally, most of the retail busine
ss in India has been done by small owner-managed business. It is hence, difficul
t 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 ind
ependent retailers. For examples, Mumbai had stores like Akbarally’s, Persons, A
marsons and Benzer. Then Shopper’s Stop opened its first outlet in Mumbai, in 19
91. The store initially offered apparel, imitation jewellery, cosmetics, perfume
s and home fashion. It also had a customer loyalty programme in place, which man
y 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 competi
tion in the form of other department stores like Globus, Westside, Lifestyle, et
c. 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. Thu
s, we see that the organization has passed through definite stages of introducti
on 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 fo
ur main reasons which may account for the increasing rele3vance of quality manag
ement.
1. Companies need to find a new ways of creating differential advantages by pro
viding better service levels than their competitors. Retail competition has incr
eased because services and goods are available from wide range of channels and m
anufacturers are creating technically satisfactory goods, which require little a
fter-sales service
2. the increased level of consumerism and the greater media attention on qu
ality have meant that companies have to be more responsive to quality issues. Co
nsumers 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 important
4. Technology is one of the new applications to quality enhancement.
Quali8ty is the totality of relationship between service provides and features o
f retailing which are related to the delivery of the satisfaction. It is there f
or important to create systems of quality control, which are checks and monitori
ng processes to ensure measurement of service delivery is taking place
A good service guaranty is identified as unconditional, it is understand and com
municate meaningful and easy to invoke and obtain recompense.
SERVICES
Service categories include the following elements
1. Tangibles
What can be experienced from personal, company literature and science, and physi
cal 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 de
sign
• Other customers in the service facility
2. Reliability of staffs to deliver the expected or promise services depend
ably and accurately. This involves consistency of performance and dependability.
It means the company should perform the service right the first time and the ow
ner its promises. This factor also demands that the company is able to trust the
employees with the responsibility deliver service which, consistently and accur
ately, meets policy standards, including
• Accuracy in charging
• Keeping the correct records
• Performing the service at the designated time
3. Responsiveness staffs to help customers and provide timely service. This
concerns the willingness or readiness of employees to provide service to help c
ustomers and give time services such as,
• Mailing a transaction slip immediately
• Calling a customer quickly after a query
• Giving prompt service
4. Competence: an assurance of employees ability to convert trust and confi
dence 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
security
5. Empathy: Having an understanding of what customers as individual human r
equire in relation to psychological as well as physical needs. This concern indi
vidualized attention to customers – a caring individual concern attention for ot
hers and emotions:
Recognizing regular customers
Learning the customer specific requirements and anticipating their needs
Being 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 a
nd 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 reco
gnizes that the holistic process of service delivery has to controlled by taki
ng 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 servic
e is good or bad, can be managed. Gronroos is a leading author who has defined t
his concept.
THE GRONROOS MODEL OF PERCEIVED QUALITY MANAGEMENT
Gronroos (1982) developed a model, which is a form of gap analysis to explain wh
at he calls the ‘missing service quality concept.’ The model (Figure) focuses ma
inly on the construct of image which represents the point at which a gap may occ
ur 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 w
e are alerted to the fact that we should not reduce quality to a simplistic desc
ription 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 w
hat 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 i
n what way service quality is influenced. Gronroos defines ‘perceived quality’ o
f the service as dependent on two variables: experienced service and perceived s
ervice, which collectively provide the outcome of the evaluation.
Gronroos distinguishes between technical quality and functional quality as the c
omponents of the service image delivery:
1. Technical quality – refers to what the customer is actually receiving fr
om 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 deli
vered (the style, manner and appearance of the staff or the ambience of the plac
e itself). Figure shows that he management can influence the attitudes, behavior
s 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 ou
tcome of the difference (gap) between expected and perceived service (Fig). The
model highlights the main requirement for a service provider delivery the expect
ed service quality. From the model five gaps may be identified that could lead t
o unsuccessful service delivery. By understanding this model, it is possible to
provide greater management control over retail customer service relationships. T
his should lead to an improved realization of the key points at which the market
er can influence the satisfaction of the consumer. The marketer is then in a bet
ter 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 perceiv
e as being important to consumers is “often different from what consumers themse
lves actually expect. The gap may relate to a lack of communication or feedback
from customers or an unpreparedness to address important changes, which are requ
ired.
In the early 1990s, Sears failed to realize that customer buying habits had chan
ged and the company retained its traditional catalogue when the customers had em
barked upon different modes of shopping. In the modern marketplace there is a ne
ed for responsive and adaptive adjustment to the service provision, based upon f
eedback 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 const
itutes 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 cl
ear, or the quality standards set may be clear but unrealistic. Alternatively, a
lthough the standards are clear and realistic, management may quite simply not b
e committed to enforcing them. The need here is to provide service design standa
rds, which are supported by everyone and form the yardstick against which all se
rvice standards are judged. These standards will then provide the guidelines aga
inst 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. Eve
n where guidelines exit for performing a service well, service delivery may not
be of the appropriate quality owing to poor employee performance. The employee p
lays a pivotal role in determining the quality of the service. This is because r
etail 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 facili
tate the service with adequate technology, the appropriate human resource polici
es or a positive company culture.
Gap 4: In consistency between performance and promises
This is the gap between service delivery and external communication. Consumer ex
pectations are affected by the promise made by the service provider’s promotiona
l message. Marketers must pay close attention to ensure consistency between the
quality image portrait in promotional activity and the actual quality offered. T
he problem is any discrepancy between those who described and promote the servic
e 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. Marke
ting 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 pr
ovision philosophy at every possible opportunity: meetings, training and interna
l marketing programmes, induction programmes and appraisal systems. The human re
source function needs to be aware of marketing so as to ensure that the differen
t levels in service delivery process (see Fig. 4.4) are always clearly understoo
d and reinforced throughout the company - in its culture and in its reward syste
ms. Without good internal company procedures and relationships it is unlikely th
at even the most well conceived of quality programmes will be successful.
. An approach to deconstructing service delivery
IMPLEMENTATION OF SERVICE MANAGEMENT
For the model in Fig. 4.4 to be successful there is a need foe the implementatio
n 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 rele
ase the appropriate resources to create changes and achieve the required results
. Sam Walton, founder of Wal-Mart, adopted the following philosophy to direct hi
s 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 delivery
Within the delivery of services consumers will have different levels of toleranc
e 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 i
s important to realize that there are differences between individual customers
perceptions; similarly each customer may have different expectations of one bran
d 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 consistentl
y 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 th
e following two main strengths.
1. The model presents an entirely dyadic view to the marketing task of deliverin
g 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 creati
on of experiences and expectations.
.Providing promotional methods which lead staff to, achieve high levels of custo
mer care and service quality is becoming increasingly important. One poster targ
eted 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 ha
ve customers from within as well as from outside them. If employees visualize th
e 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 pro
vide 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. Buttl
e 1994 indicated that following research of loyal Jaeger customers a list of 180
service variables was reduced to26 key attributes against which mystery shopper
s 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 Ja
eger 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) p
erceive them to be: costly, needing a lot of management time, difficult to measu
re the intangible benefits, and finally not easy to implement. Given the nature
of retailing (people based with employee performance and interaction being of pa
ramount 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 th
at 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 de
livery. The movement of truth - the impact on
THE INTANGIBLE -TANGIBLE PRODUCT CONTINUUM
All products fall on a continuum between pure services and goods, with most prod
ucts being a combination of the two. A pure service would be consultancy or fina
ncial advice, whereas pure good would be more tangible, such as a can of beans o
r a bottle of lemonade. Very few products are purely intangible or entirely tang
ible; services such as retailing, however, tend to be more intangible than manuf
actured goods. Some products will have more of service content than others and i
f they are assessed as being placed to the left of the center of the continuum t
hey may be termed service products. Retailing falls to the service end of this c
ontinuum, despite being associated with the sale of goods. This is due to the na
ture of transactions involving the interpersonal skills of service providers. Th
e added service element is a core part of the transaction.
Services such as retailing can be characterized as having the following attribut
es
Intangibility
Perishability
Inseparability
Intangibility
This 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 pur
chase 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 utiliz
e printed literature to communicate the benefits of the product. In addition mai
l - order sales offer only limited visual clues as to the. benefits of the produ
ct. Prior to the arrival of the goods potential customer has to make use of inta
ngible clues. However, the clearest example of retailing related to intangibilit
y is telephone banking, where transactions can be carried out by voice mail and
no personal or tangible interface exists. Moreover, the experience of retail pur
chases is not something that can easily be explained or demonstrated away from t
he branch, store or mall.
The marketers of the more intangible services, which make up retailing, face gre
ater difficulty. Because of fixed time and space constraints, they cannot easily
demonstrate the benefits of the retail offer or any merchandise they may be sel
ling. The challenge for the retail service marketer is to overcome intangibility
through the use of selling techniques, the
physical layout of the store or a depiction - by graphical, video or display mea
ns - of the product in use. In addition, the creation of a positive image surrou
nding the service will
enable customer to envision the retail experience benefits. .
Perishability
This 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 fu
lly staffed sales may not occur, for which the revenue can never be recouped. Th
is perishability factor leads to the high-risk nature of the retail industry. Ma
rketers in the retail industry have to devise complex pricing and promotion poli
cies 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 c
apacity with a maximum upper level demanding constraint. In peak periods retaile
rs often have difficulty in coping with demand; therefore they offer only full p
rices or have to resort to queuing systems. In the low periods of demand, howeve
r, there is a need for greater marketing activity.
The challenge for marketers arising from perishability problems is to try to smo
oth out demand curves use of the marketing mix. To achieve this forecast of dema
nd must be relatively accurate to ensure a productive use of staff.
Inseparability
This means retailing delivers a service, which is utilized and produced simultan
eously for each customer. Because there is less opportunity to pre- check each s
ales activity, it may vary in the standard of its service delivery. Theorists so
metimes characterize this as heteroginity, Variance occurs due to the inseparabl
e 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 di
ssatisfaction and secondary problems. There is also a constant, threat of proble
ms being
caused by one set of customers who may upset another. This provides for the pote
ntial for conflict on various levels. Whether it is the young out enjoying thems
elves, perhaps congregating by the tapes and CDs or in the electrical department
by the computer games and annoying older customers, or restaurant users involve
d 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 cu
stomer.
The service aspects of retail are inseparable - service is intrinsic to retailin
g. 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 interperso
nal relationships, where the performance levels of staff are directly related to
the satisfaction experience of the consumer, there is a need for quality assura
nce 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 servi
ce levels are understood and adhered to by everyone. In order to reduce the prob
lems associated with inseparability there is a need to invest in company trainin
g programmes.
The problems discussed above make it clear that there is a need to ensure qualit
y is managed, as a basis of planning to achieve competitive advantage.

MODULE-II

Ajith.P
Jayadeva Krishnan
Pillai Prajith Ramachandran
Ratheesh.R
Vimal Dev.

RETAIL PROMOTION
 Retailers communicate to their customers on a continuous basis through t
he store atmosphere, the products and services, promotional literature, advertis
ing 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 behav
iour in order to increase store loyalty, store visits and product purchase. How
ever, 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 communicatio
n through the media about a product, that has an identified sponsor. The use of
payment differentiates advertising from public relations for which no payment i
s made for the time or space to convey a message. The media may include telepho
ne 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 inc
lude changing attitudes or building image as well as achieving sales. Advertisi
ng is often described as above the line promotion with all other forms of promot
ion being termed below the line. The difference between above and below the li
ne is simply academic now as the emphasis is on both areas, for example sales pr
omotion and advertising, working together to achieve the greatest impact.
Moreover, in decisions over communication plans, it is the cost-effectiv
eness that matters most. The use of different combinations of what has traditio
nally been known as above and below the line has blurred the meaning of the term
s 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 bui
ld 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 th
e 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 comprehende
d properly. The process is then to make the offer credible so that the potentia
l customer can be moved to a favourable attitude to the store or product. The a
ct of purchase may then follow.
Advertising has the potential to affect a large number of people simul
taneously with a single message. The secondary effect of of advertising is pers
onal communication among consumers. This is known as the two-step flow of comm
unication. 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 opi
nion leaders to others (followers). This communication can occur through person
al 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 mu
ch benefit s possible from the two-step model is the requirement to reach and in
fluence opinion leaders.
Types of advertising
Product 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 de
sign as well as creating awareness of complete assortments or special merchandis
e events. It is aimed at creating awareness of the product, its availability an
d benefits.
Markdown event advertising.
This is used to create some excitement about a special period of lower c
ost 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 fa
irly 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 a
ttempts to reinforce the image of one or more of the following: a leader in fash
ion, fair prices, wide merchandise selection, superior service or quality, a lei
sure experience of somewhere to en joy visiting. There is now a trend to a adver
tise a shopping center rather than individual outlets. The communication emphas
is is on the available range of shops, case of parking or other consumer benefit
s. 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 o
wn address to ready prepared printed material and carryout mail drops or other m
ethods of distribution. Alternatively a manufacturer may agree share equally the
costs of an advertiseing campaign. Manufacturers are keen to have their brand
s stocked and sold’ therefore; they often enter into joint advertising schemes w
ith retailers. Co-operative advertising may involve a combination promotions ma
y well extend to agreements to provide joint branded window display material and
point of sale material.
Retail promotion in relation to that of manufacturers
There are differences between retailer and manufacturer advertising stra
tegies. Retail advertising is often based upon short-term objectives with the e
mphasis on value or price of the products on offer. This is unlike manufactu
rers’ approaches; they often attempt to build favourable attitudes to improves t
he image of the brand or organization over in extended period of time, Where
as a manufacturer will need to create awareness of its brand across major market
areas, a retailer may have more geographically concentrated target markets. Th
erefore, a retailer has to take into account local habits, conditions of the mar
ketplace, 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 adv
ertising 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 invo
lves 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 p
roduct marketing as it is the channel service which is promoted. Then pull strat
egy is where marketing promotion activities are targeted to the consumer to indu
ce them to buy the retailer’s merchandise or service (see Fig. 5.9 (b)) Retailer
s may enter third parry agreements for promotion whereby by cost of the promotio
n is shared between the retailer and the manufacturer to encourage more sales of
the manufacturer’s product.
Promotes the benefits of the store and channel
Retailer Customer
(a) Push strategy
(b) Promotes the benefits of produ
cts Customer
(c) Pull strategy
With the growing use of relationship marketing and the compilation of customer d
atabases, retailers have been concentrating more on push rather than pull strate
gies. Companies are increasing their efforts to select the most appropriate tar
get groups to direct offers at. This allows marketing programmes to be more fin
ely targeted, with literature for sale periods, special events or offers being t
ailored to suit the individual customer group.
SALES PROMOTION
Sales promotion involves any paid non-personal marketing communication a
ctivity; other than advertising, which offers an incentive to induce a desired r
esult 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 accompa
ny the product but will typically be offered as mail drope or as coupons to be c
ut 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 use
d in sales promotion campaigns for brands or companies which need to improve dem
and at certain periods. Included in these campaigns are displays, contests, swe
epstakes, coupons, frequent user (loyalty) programmes, prizes, samples, demonstr
ations, referral gifts and other limited duration selling efforts not included i
n the other techniques-see summary of types of sales promotion below. Most inc
entives are planned to be offered on a short-term basis only.
Sales promotion is often used in combination with other promotional too
ls in order to supplement the overall effort. However, it has to be remembered
that it is sometimes difficult to terminate or change special promotions withou
t causing adverse effects. Loyalty programmes are an example of this (see follo
wing section on relationship marketing) A sales promotion for series of promoti
ons) also has to take account of the likely effect it may have on the image of t
he 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 a
ny merchandise, giveaway items or promotional literature’
• the increase i8n sales and profit, or improvement in awareness, based up
on the campaign;
• whether the campaign had secondary effects of switching demand from othe
r 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 p
romotion.
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 improv
ing sales and profits. In order to address these problems retailers are adoptin
g 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 profits
RM has been defined by Gronroos (1990, 1991, 1994) who has consistently argued f
or the importance of ensuring that relationships with customers should be contin
uously 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. Ch
ristopher et al. (1996) have developed the ideal of a ladder whereby relationshi
ps, develop as part of growing custo9mer loyalty (see Fig. 5.10)
The RM process helps to advance relationships to higher levels until adv
ocates 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 s
hould 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 fi
rst 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 bas
ed upon the estimated cost of prospecting, advertising and selling, commission,
product samples, credit checking administration and database management. The tr
ue value of retaining customers is that it enables the costs of conversion of th
e prospect to the set against the revenues earned over the longer term. Sales a
nd 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 competitiv
e position. Acquisition is based upon the traditional approach to marketing wit
h the identification of customer needs, development of a retail offer to satisfy
those needs, and then the targeting of prospects. The movement from acquisitio
n through a retention is checked in the following.
Acquisition:
• current methods used to acquire customers from prospects, which then req
uire effective retention. (Customers must be given an incentive to part with th
eir 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 regular
ly, try different products, etc.
• retain the customer by developing and delivering different forms of loya
lty schemes and rewards;
• higher patronage should provide increased customer value to company, wh
ich 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 the
ir loyalty through the collection of points which entitle them to money oft prod
ucts, 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 reta
iler and leads to a higher than normal proportion of expenditure to be devoted t
o the retailer’s offers.
Relationship marketing or loyalty schemes have a number of benefits for the reta
iler.
1. The retailer can accurately track the purchasing habit of large numbers of lo
yalty 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 b
enefits to visit the retail outer and make purchases.
3. The scheme will act as a promotion for new customers and they’ in turn, can t
ell 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 promot
ions 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 tel
ephone contact between the seller’s representative and those people with whom th
e 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 salesp
ersons either to companies or to private individuals. The importance of persona
l selling differs among retail businesses on the basis of the type of merchandis
e offered. A retailer offering low-risk, low price goods, which are promoted, n
eed only employ sales staff who can complete the transaction and deal with minor
enquiries. The typical information required will be the current policy non red
uctions or special offers, guarantees or possible methods of payment. While the
demanour of the staff in this situation is important, there is little sales neg
otiation skill required to conclude the transaction. However, it should be no
ted the trends is toward retailers reducing the number of sales personnel by off
ering 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 con
sumer 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 o
rder takers but they should be viewed as order procurers. This is because
for higher risk purchases customer, utilize and seek out expert advice and he
lp. 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 exa
mple 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 co
verage could include space given to a press release or favourable editorial comm
ent. Public relations (PR) is important not only in obtaining editorial coverag
e, but also in suppressing potentially bad coverage. A company which has good l
inks with the media is more likely to have the opportunity to stop or moderate n
ews which could be damaging to the company. Consumer affairs television progra
mmes quite often berate retailers for poor service or dangerous products. More
recently, the use of cheap child labour in the production of merchandise for Wes
tern markets has become a newsworthy subject. This all requires sensible public
relations reaction in order to retain a positive image for the retail company a
nd industry.
The major benefit of PR is that it can promote and enhance a company’s i
mage. 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 credi
ble form of communication as people like to read ‘news stories’ and will beli
eve them to be less biased than information provided in advertisements. However
, editorial decisions over what is communicated will mean control over the messa
ge, 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. Wi
th 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 publ
icity will involve sending press releases and photographs to the media (trade p
apers, local and national press, radio and television), organizing press confere
nces 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 is
sues in order to be perceived as a well-informed company. The media are interes
ted 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 mer
chandising. Advertising may encourage consumers to visit the store but the reta
iler’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 reta
il outlets to stimulate sales. Visual merchandising is non-personal in-store pr
esentation and exhibition of merchandise, along with printed forms of communicat
ion. 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 t
he product.
It retailers rely on self-service of items then a selection display such as th
ose found in greetings card or music shops is required. Selection displays are
generally open to facilitate easy browsing and inspection. Retailers use selec
tion displays to exhibit their everyday assortments of convenience or shopping g
oods. Effective use of this approach requires a logical grouping of the merchan
dise by its usage. Ease of selection through uncomplicated, well-organised arr
angements 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 pu
rchase displays are a particular type of special display which will be on the co
unter, in the store window or other relevant places. The visual display may inc
lude banners, counter, in the store window or other relevant places. The visual
display may include banners, counter cards, end-aisle stands, video -screen di
splays, 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) . spons
orship is treated much more seriously today, with sponsors adopting sophisticate
d planning, selection and evaluation procedures for their sponsorship programmes
.
Direct marketing is being used more extensively by a range of direct sel
l companies as a means of utilizing a retailer’s loyalty scheme’s database addr
ess list. The main method is direct mail which a postal communication by an id
entified sponsor. This is being expanded into database marketing based upon rel
ationship 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 b
e made;
• take full advantage of using the information from one department to cros
s sell other aspects of the store or its services’
• build loyalty programmes in order to retain customers and increase reven
ue;
• 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 incr
ease 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 th
e target carefully and provides the correct offer.
CHARACTERISTICS OF PROMOTION
Each 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 peopl
e can be contracted. Therefore, advertising is a better method of reaching a hi
gh number of people at low cost. Public relations is more credible than adverti
sing but there is more control over what is communicated through advertising mes
sages and these messages can be repeated on a regular basis. When it is diffic
ult to raise advertising budgets, public relations is a lower cost alternative b
ut 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 i
s 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. Whil
e this may include the factors of cost, ability to target different groups, and
control, there are other important considerations. Figure 5.12 indicates the re
lative strengths of each of the four form of promotion: advertising, personal se
lling, PR and sales promotion. They are compared on the basis of the level of aw
areness of the communication and its comprehension, as well as whether it can b
uild conviction and succeed in creating action.
PLACE –SUPPLY CHAIN MANAGEMENT
The special characteristics of retail business and the emergence of maj
or retailers in the marketplace have led to specific forms of distribution or ch
annel service. Prior to consumption, the retail product has to be both available
and accessible. This requires a supply chain distribution system. A distribut
ion 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 m
ade major differences to the effectiveness of retailers and their overall profi
tability. (Read chapter 10 in order to understand the way IT has changed the wh
ole field of distribution logistics). With the ever- growing size and dispersal
of retail operations, controlling merchandise as part of store operations has b
een of paramount importance. This goes beyond an administration system ; mode
rn supply chain management can achieve competitive advantage through shorter lea
d times for restocking, reduced inventory size and costs, improved management i
nformation and greater overall control.
Retailing cannot be divorced from an understanding of the supply chain a
s 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 th
e 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 holi
stic view of these activities and an innovative approach to their organization,
in order to meet customer needs with the greatest efficiency.
CHANNELS AND CHANNEL FLOWS
There are different supply chain structures based upon extended, limited
and direct channels. The discussion of supply chain management here will conce
ntrate on the extended channel of retail distribution as this is the most preval
ent. An extended channel is where the manufacturer, wholesaler and retailer pro
vide 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 pr
oducer and, therefore, can eliminate the wholesaler and the extra costs of this
part of the chain. The retailers of furniture, white goods, electrical goods, a
nd so on quite often deal direct with the supplier and create limited supply cha
nnels. The final alternative is the direct channel. In this case the product i
s sold direct by either the producer or retailer. By using different direct sa
les marketing promotions such as direct mailing, Internet services, telephone s
ales techniques etc. The channel is kept direct and the extra charges and commi
ssions 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 o
f that link in the chain have to remain. Even if the retailer were to be dispe
nsed with, some of the retail functions have to remain in order to achieve a tra
nsaction.
Within ay of the different types of channel the flow is not restricted t
o 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 t
he chain to another.
Ownership flow: the transfer of title for ownership/usage from one channel membe
r to another. This is important for legal aspects of delivery, damage and stora
ge 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 produc
t is a service or mainly service based, it is necessary to ensure all the char
acteristics of the services are fully understood;
Information flow”- there is a need for timely and accurate two-way information b
etween 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 mar
keting 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 wareh
ousing’ or, more aptly, as ‘logistics’ and ‘supply chain management’. In the mo
dern competitive marketplace, retailers need to achieve high levels of customer
satisfaction and service but at acceptable costs. This has led to the developme
nt of increasingly sophisticated distribution systems to ensure optimum service
for the supply of goods to the customer. According to Davison (1995), large hig
hly complex and often computerized warehouse facilities may handle several milli
on cases per week (or in excess of 10-15 million worth of stock). Computerise
d stock management and information system (for example Tesco’s Dallas, Sainbury
’s BRS, Safeway’s SM3, etc) which link retailer communications direct to suppli
ers have been developed (for example Tradenet) and transportation is subject to
computerized control systems (for example ‘paragon’). These comprise sophistic
ated 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. Compa
nies which have benefited from such policies are generally those which no longer
consider distribution and warehousing as purely a support function or an operat
ions’ headache. Rather than simply a functional supply line, the use of retail
logistics is now a valued management area with its own operational and strategi
c 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 tr
aditional supply chain channel. Such a chain is an arrangement between paired
links, where the emphasis has to be on controlling and managing the relationshi
ps 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 competitively
As the whole chain is dependent on the way any two of these parts of the chain i
nteract 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 t
he supply chain.

The traditional supply channel for retail products.

The manufacturer
The manufacturer or supplier processes raw materials into the finished c
onsumable article, Suppliers may specialize in the type of products that they pr
ocess (for example Birds Eye) or diversify into a wide product range (for exampl
e Unilever). Suppliers of leading brands will use a high level of marketing, in
cluding sales representatives and advertising campaign in order to ensure that t
heir products are given maximum public exposure. They may even reduce the cost
of their products to encourage retailers to have their producers featured in hi
gh flow locations within their stores.
The intermediary function
The intermediary, the wholesaler, is in effect a distributor of goods fr
om 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 provide
d 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 render
ed the use of wholesalers unnecessary in the supply chain by assuming the funct
ion 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 ob
jective which is to maximize sales and profitability. Additionally, each extra
stage in the supply chain makes it more difficult for the retailer to control t
he service or the quality of the final product. The more links that are involve
d in the distribution chain, the less control there may be. This is allied to t
he risk of conflicts over relationships with each partner attempting to maximize
profit.
The larger retailers have, therefore, sought to extend their control ove
r the supply chain and moved away from the use of the intermediary. This has be
en 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 pro
duct to the customer.
For such companies the traditional supply chain no longer exists. Multip
le retailers- with their clearly defined strategic objectives, extensive nationa
l coverage, centralized organizational structures and highly accurate informatio
n systems – have created logistics networks which supplant the intermediary’s ro
le of the supply in filling gaps between production and consumption.

GROWTH OF CANANEL RELATIONSHIPS AND PARTNERSHIPS

A number of interrelated power relationship characterize the UK grocery
sector. These range from mutual dependence to alliances based upon secondary su
ppliers. The relationships are also affected by the concentration of market sha
re 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 st
rength of retailers has increased, and thus is even more apparent when own –labe
l products are being offered with gross margins higher than manufacturers’ bran
ds. The power that individual retailers now exert is also compounded by the cen
tralization of decision making, with fewer individuals at head office being invo
lved 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 eff
ect of fundamentally restructuring the supply chain. This does not apply only t
o food retailers as the new methods of working have affected all aspects of reta
il.
Driven by competitive pressure to improve efficiency and to deliver add
ed value for customers, major players in the supply chain have been changing th
e way that they do business with each other. Retailers and suppliers have start
ed to recognize the degree of mutuality between each of their own objectives. T
raditionally supply chain relationships have been adversarial, exhibiting a hi
gh degree of conflicts, during the 1990s there has been a recognition that there
are benefits in closer working relationships. However ,there is always a poten
tial problem for the large suppliers, which utilize logistics contractors, utili
zing their power; this may lead to a situation founded on fear rather than mutua
l 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 t
ransaction, with a very minimal requirement for trust between the two parties, t
o a long- term supply chain ‘partnership’ with a very high degree of trust, at t
he other extreme. Conflict imposes additional costs on the trading arrangements
. Therefore, the aim is to move along the continuum, reducing the level of conf
lict and increasing the co-operation so that costs are reduced and quality impro
ves.
In pre-checkout scanning days, the retailer had privileged access to cur
rent sales data and would use this as a weapon to counteract supplier’s bargaini
ng strength. We can contrast this with recent trends of using EFTPOS and EDI te
chnology to delegate the entire replenishment administration activity to supplie
rs. Technology hs had a major impact on distribution. Inventory management i
s 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 sup
plies arrive at retailer distribution centers to replenish outlets.
It is important to recognize that transformation to a partnership arrang
ement represents radical change. The previously prevailing adversarial climate,
with its relatively low levels of trust, will remain deep-seated. It is not re
alistic 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 require
s 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 r
elated to distribution networks, warehouse, systems, information systems and rep
lenishment systems. These policies allow the head office (HO) of a retail organ
ization to be responsive to operational needs, which include general as well as
local patterns of demand, and new market opportunities . Companies that have b
uilt into their corporate strategies the logistics of distribution have created
dramatic improvements in their return on investment whether that investment be f
ixed (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 finan
cial and strategic objectives.
Corporate replenishment policy is a broad policy based upon the organisa
tion’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 s
tockholding 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 t
he pull strategy becomes the leading method to link inventory to actual customer
demand. The channel then becomes a continuous replenishment system triggered b
y accurate electronic information from the use of EPOS and EDI, As such, JTT sy
stems allow forrestocking to occur in relation to customer demand. JTT is a phi
losophy as much as a technique, it is based on the premise that no products shou
ld be made or moved until there is a ‘downstream’ requirement for them based upo
n 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 c
lose 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 ver
tically integrated supply chain so that all means of JIT are triggered based upo
n changes in consumer demand patterns. Quick response is a series of technologi
es which comprise the electronic scanning of product codes, the application of E
DI, 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 A
rcadia (formerly the Burtton Group) developed the system at an early stage (Dapi
ran 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. W
hen 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 line
s in some manual ordering systems. However, across a chain of stores it is unli
kely has all relevant managers will order sufficient stock levels- or indeed pla
ce orders at all-to meet the promotion, product introduction or range change nee
ds, 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 c
arry 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 accur
ate sales information, able to forecast bulk buying requirements more accurately
. This allows the retailer to obtain greater discounts from suppliers, so maki
ng sacuings which can be passed on to the customer.
Store management
Store 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, sto
re management may be completely freed from stock and ordering worries. The mean
s they have more time to manage resources and implement company policies. Under
highly computerized goods receipt systems other duties, associated with shrinka
ge 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, w
hether they or a Head Office buyer is responsible for ordering stock. In EPOS r
eplenishment, 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 manage
rs to ensure that major stockouts are communicated as soon as possible to the he
ad 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 availabi
lity; is achieved. To achieve this, accurate information input by stores on sto
ckholding 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 co
ding articles or merchandise incorrectly.
Company
The 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 disco
ntinuity of buying or ordering by store-based management. The main benefit is t
hat reduced stockholding figures prevent capital from being tied up; it may be f
reed for the expansion and development of the business.
Because of the ability to control stockholding., previously used warehou
sing and store space is no longer required for that purpose. This enables retai
lers 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 war
ehousing, economics of scale can be made through composite transports systems.
Whether it is an agency or own transport network, corporate replenishment enable
s improved utilization of the transport fleets and improvements in service.
Given the constraints of supplier fed deliveries, marketing may also ben
efit from corporate replenishment. It can be assumed that stock will be allocat
ed and received into stores to coincide with advertising, other promotional acti
vities 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. Similarl
y, it is much more desirable to organize this through central distribution ware
housing (CDW), Phoning, faxing or using traditional forms of placing orders is t
ime consuming and often inaccurate. To deal with one electronic system of order
ing is desirable to the supplier as well as to the retailer. However, orders ma
y also be placed by the buyers-professionals who are specialists in their field,
knowing the merchandise and seasonal trends. Therefore, from the supplier’s po
int of view, it is preferable not to deal with store based management who have n
umerous responsibilities to perform and ordering is only one of a list of urgent
priorities
INTERNET AND DIRECT DISTRIBUTION SYSTEMS
In 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 ha
rd to discern. In 1995 J Sainsbury the supermarket group, announced it was offe
ring 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 fo
r further discussion of the possibilities of the Internet.
Compu serve, the US-owned on-line information system, announced is UK Sh
opping Centre in 1995. Subscribers who paid about 7 a month could buy books fro
m WH Smith, CDs from Virgin and cameras from Dixons. Because CompuServe is cons
idered 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-li
ne 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 device
s such as an intelligent agent’ that will search out the best value on the Inter
net have also been developed. Ordering will soon be possible via a number of me
dia- the Internet, private on-line services, interactive television and even spe
cial in home devices. It is the routine business of delivering goods which coul
d 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 ma
y lead the retailers to make alliances with parcel companies, the Post Office, o
r 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 s
ervice, recognizing the additional value of the saving in time.
THE PRODUCT
The effectiveness of planning the marketing mix depends as much on the a
bility to select the right target market as on the skill in devising a retail of
fer 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 combinati
on 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 pivo
tal role in a firm’s existence and long term success or survival. The shopper h
as 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 a
nd functions of merchandise management, which is an important aspect of any disc
ussion of the marketing mix.
A BREAKDOWN OF RETAILINGS AS A PRODUCT
The 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 o
f 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 automa
tic teller midlines (ATMs) at banks attends the availability of the cash retriev
al 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 s
elf-scanning of goods which cut down on the cost of time.
Quality
A decision regarding quality deciding on quality standards and implement
ing 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 off
ered 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 con
sumers. Retail service providers are more likely to be successful. It the can
be depended upon to deliver higher quality service levels than their competitor
s. Success through quality is often seems as for certain product categories, th
e outcome of a relationship between a customer’s prior expectations of serviced
delivery and the perception to the actual service experience. Quality is also u
sed statically: as away of differentiating merchandise and of positioning the of
fer or retail outlet in an exclusive way. However, an exclusive position does b
ring 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 conseq
uence 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 su
ppliers. The depth and width of this range will be depend on the specific strat
egy of each retailer, who must decide how different products will be fir into th
e 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 fin
ancial consideration of the consumer target group. Decisions over merchandise h
ave 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 categorie
s.
National brands
 These are the brands which are heavily promoted by companies, such as Si
msbury, 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 h
ave no exclusivity and are open to price competition from those discounting nati
onal brands.
Own-label
A retailer can offer the advantage of exclusivity and have more control
over the product. They thus need nor enter into heavy advertising, which may gi
ve 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 o
f 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 l
evel imparts an improved image and added value to the product or the store. Thi
s 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-la
bel 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 a
re being used to project a consisted image across countries. Nestlé’s brand p
olicy, for example uses umbrella and sub-umbrella branding; corporate branding t
akes place with Nestle, Carnation, Maggi, C&B, Chambourcy, Buitony, Findus, Fris
keys. 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. I
t 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 w
ith the Debenham’s orga 111 station the individual brand name approach allows th
e retailer to search for the most appropriate brand name; its weakness is that t
he promotional budget for each brand has to be subbocientlyy large to support th
at brand. With individual branding, a company is able to position brands and pr
oducts 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 on
e of the company’s brands. Then the other company brands do no necessarily suff
er..)
With umbrella or family brands there is a spin-off effect for each of th
e 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 th
e other brands. For family branding, careful anemone has to given to the qualit
y control of the product. One of the benefit of family branding is that each pr
oduct brand performance (PBP) can be measured against the overall family brand p
erformance (FBP). That is to say,- when FBP IS divided by PBP and the ground sh
ows an increase over time, without good reason. It may that the product brand n
eeds modification, revitalization or a detailed review.
Features and benefits
-A product includes everything that the customer and this includes the core prod
uct which is made up of the delivery of benefits and features. We know that con
sumers 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 occu
r. 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 adde
d 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 customer
s 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 design
ed to facilities the moment of customers, to create a planned store experience a
nd to allow the optimum presentation of merchandise. This also involves the ful
l 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 en
sures the most effective use of space. It also has to be designed on a proactiv
e rather than a passive basis.
Proactive planning is based upon a manipulation 6f the in-store experience rath
er accepting a passive, totally random experience for customers. Proactive plan
ning accept and repose to the data showing that store layout can influence the c
onsumer5s sopping behavior and perceptions. It is well known that the use of di
fferent layout and aisle design will influence the patterns of traffic flow o pa
ss the principal merchandising group. The correct display of merchandise in a h
ighly 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 re
lax 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 envir
onment h<IS been planned. The use of space, color, walls, pillars, floor coveri
ngs, lighting, music, ascent and so on can be controlled by the retailer. The c
ombination 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 di
splay-down to the style and the poss. of mannequins. Atmospherics are created b
y the combination of a whole series of cusses and stimulants to produce the desi
red ambience and, emotional response from the group of target customers. The em
otional 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 a
nd 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 follo
wing 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 b
e 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 th
e merchandise. This is often achieved by the use of different floor coverings o
r textures which act as dues to the customer. It may also be accomplished (thro
ugh the use of dear and stylist) sign age.
3. Stimulants to the senses to improve sales must also be planned. Music c
an 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 affe
ct 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 countri
es wines. Classical music will need to a sale more expensive wines. Another op
tion 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. Frag
rance and science of perfumes, latherer, house plans and so on may influence cus
tomers o purchase. The aroma of fresh bread, pastrieuecheese, coffee, chocolate
, etc can stimulate sales and some stores on restaurant extract the aroma, pumpi
ng 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 combinati
on 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 ot
her important aspect of lightening should be flattering.
From a strategic marketing stance it is important than in highly competitive ret
ail sectors the layout of the store is planned in order to reflect the desired m
arket 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 comp
etitors. 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 environm
ent;
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 di
rectly
Related to the resultant level of demand over a period of time. With
right
Margins, to the profitability of the enterprise. For the retailer, pricin
g decision
Are critical because without adequate margins the business will not survive fo
r 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 t
he right strategy is growing as battles among retailers to increase market share
are fought on the basis of offering quality, selection and availability at comp
etitive prices. To be successful, retailers are having to forge partnerships w
ith manufactures and introduce technology in order to gain cost advantage withou
t compromising quality. Given this situation it is not surprising that cost, ma
rgin and price comprise the most important element of the marketing mix for most
retailers. This especially the case given the existence of discount store for
mats, 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 situati
on is that in the competitive retail market-place, price is a major strategic we
apon 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 pric
e 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 mea
ns that value for the customer us a complex set of perceptions. This is discuss
ed 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 a
nd channel services have to pay into account the complicity created by seasonabi
lity of demand and the inherent perishability of the product due to factors rela
ted to fashion or being past the sell-by date. Their has also been major influe
nce 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 i
n order to achieve optima over all profit. In conjunction with this, consumers
are now pressurising retailers to change their pricing policies to offer great v
alue 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, pr
ofits, retune on investment, etc or as pricing’s roll in the growth and expansio
n 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 im
portant as they provide the consumer with an image of the retail outlet based up
on its approach to pricing. In addition, pricing has to integrated with our asp
ects of the marketing mix and take account of the target market.
APPROACHING TO PRICING THE RETAIL PRODUCT
Pricing policy has to consider all the potential influences and factors
affecting the market and therefore the scope facing the retailer is remarkably w
ide. 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 pur
chasing a product or service for sale o its customers. Cost oriented pricing re
fers 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 cos
ts 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, s
hrinkage estimate, overheads, etc.
• Determine the ceiling price above which the retailer would be offe
ring expensive prices compared with those of competitors.
Apply the mark-up, given the possible range has been identified, in order to ach
ieve profit objectives. Their may be some discretion for pricing individual ite
ms 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 mar
k–up on cost (£30/£ 60) expressed as a percentage is 50 percent and mark-up on s
elling price(£30/£90) is 33.3 percent. Some minor adjustment may take place, su
ch as bringing the price to £ 89.95-fine –tuning the final price for psychologi
cal 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 tactica
l 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 w
ill 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 provid
es 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 t
he 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 met
hods of pricing are not appropriate for those retail product which have to survi
ve in a highly competitive marketplace.
Demand-oriented pricing
Demand-oriented pricing takes into consideration the factors of demand rath
er 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 ar
e usually raised to take advantage of higher demand and scarcity of supply.
Discrimination pricing
Discrimination pricing, which is sometimes called variable or flexible pric
ing, is often used when products are sold at two or more different prices. Quit
e often students, the unwaged and older people are charged lower prices than oth
er consumer segments at attraction or events. A garage will offer different pri
ces 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 pri
cing is often time-related, for example cheaper drinks charges in “happy hour” p
eriods or cheaper meal prices in the early evening prior to the high demand peri
ods. For price discrimination to be successful it is necessary to be able to ide
ntify those segments which, without the price differentials, would not purchase
the product. To obtain a high flow of business, a DIY retailer will often discou
nt to those customers who offer significant sales demand. This means that small
businesses may benefit form volume discount rates and those individuals customer
s 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 w
hich 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 s
upply. 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 exam
ple of this is exhibited on special celebration dates, such as Mother’s day or V
alentine’s day. When the price of flowers or plants raised.
Backward pricing
This 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. Fir
st 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 nece
ssary an adjustment is made to the quality of the product offer or service to me
et 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 li
nes 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 suc
cessful trader the monetory difference between the price lines has to be large e
nough to reflect a value difference for the consumer. Such steps of change in p
rice 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 o
f 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 UI
1 Its of an item and has 6 price lines would have an assortment of only 30 UI1 I
ts 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 a
t 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 variab
les;
Skimming pricing
Skimming is utilized when there is a shortage of the product or the brand has be
en associated with added value and, there for, demand will not be dampened by ch
arging a premium price. Market skimming policies can only occur houses dealing i
n haute couture or cosmetics companies with strong branding utilize this approac
h.
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 o
ften known as’ loss leaders’ if they are sold below cost but in reality retailer
s 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 brough
t on a frequent basis. The objective would be to price the item low enough to at
tract numerous buyers. In addition, if information is made available as to the v
alue of the offer, the promotion will usually be far more successful The approac
h is often employed by supermarkets which feature leader item on a regular ba
sis. As with all forms of price promotion there in an obvious need for retail
ers 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 oth
er items in the store, the price promotion may need to be revised.

Competitive pricing
Competitive pricing is employed to match the market prices, of competitive reta
ilers. 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 reactiv
e 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 good
s 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 m
ajor market share. It is estimated the petrol price war of 1996 cost Tosco 30 m
illion 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 w
ar subsided in July of the same year. The penetration strategy quickly establi
shed a 21.5 percent share of the petrol market in the UK for the combined super
markets.
Psychological pricing
This is sometimes referred to odd pricing. Retailers will often price prod
ucts below a round figure: changing a price from say 9 to 9.95 or 9.99 to fost
er 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 48
8 may seem more on a 400 level than a 500 level. However, there is no conclusi
ve evidence that such pricing policies make any significant difference of prof
its.
Everyday low pricing
A number of retailers now adopt the strategy of everyday low pricing (EDL
P). 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 disco
unt competitors. The term’ low’ does not mean ‘lowest’; it simply refers to a p
rice 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 lev
el. 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 significan
t 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 skeptic
al about the mark-up and mark-down strategies of retailers. There has been a tr
end by customers to wait for sale periods or to attempt to gent the best bargain
s by shopping around for promotions. EDLP allows retailers to withdraw from sal
e period pricing wars and to concentrate on creating a market position that impa
rts a perceptions of fairness of pricing.
2. Reduced advertising. The stable price policy of EDLPs eliminates the ne
ed 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 relatio
nship marketing schemes.
3. Improved customer service management. If the policy IS set to banish, s
ale period then the demand created is less seasonal and volatile, and sales staf
f 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 hi
gh 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 de
mand 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 custom
ers may feel dissatisfaction with the retailer‘s service. Increased profit marg
ins. If a retailer can import to the customer an image of fair pricing then, al
though 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 al
l 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 com
petitive nature of their business. Also, retailers selling goods which have a s
trong fashion content are more likely to want to set initial prices at a high le
vel as this is good business practice. Fashion goods are often priced different
ly because if a subsequent sale is created for this type of merchandise, if ofte
n creates a high level of excitement. The motivation to purchase created from t
he sale enables the retailer to move a large amount of merchandise in a short pe
riod. 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 strate
gic planning. The main factors when considering retail pricing are listed below
.
Perceived substitutes effect
Buyers are more sensitive the higher the product’s price is in relation
to another product or substitute they could purchase. Therefore, the consumer m
ay choose a substitute or forgo the purchase if they believe the overall value i
s unacceptable. For example, local residents may avoid an area with higher pric
ed shops frequented by tourists who are unaware of the alternatives.
Unique value effect
Buyers are less sensitive to a product’s price the more they value any
of its attributes that differentiate it from competing products. For example, m
ay customers are loyal to Heinz or Nestle products because they perceive them to
offer superior benefits.
Importance of purchase effect
If 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 p
resent or when there is a need to purchase medicines. The greater the importanc
e of the product, the less price sensitive (more inelastic) the purchase will be
.
Difficult comparison effect
Buyers 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 effect
A 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 applie
s 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, eithe
r in absolute money amounts or as a percentage of their income. This is most pr
evalent in low income households in which all expenditure is carefully controlle
d. This effect is also stronger and more likely to occur in times of recession.
Fairness effect
If 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 type
s 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 certa
in times alternatives are not easy to find. Consumers will perceive retailers,
or the brands they stock, to be ripping off’ customers if they exploit situatio
ns of shortage by being greedy. For example, street vendors are often seen to b
e 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 mat
erials into intermediate and finished products, and the distribution of these pr
oducts to the customers.
Supply chain management ensures a smooth and efficient flow, from raw ma
terial to finished goods, into the hands of the consumers. It is a concept whic
h has increasingly replaced the traditional fragmented management approaches to
buying, storing and moving goods. Supply chains exist in both service and manu
facturing organizations, although the complexity of the chain may vary greatly f
rom industry to industry and from firm to firm. It aims to integrate activitie
s across the entire merchandise flow, to achieve quick response in supplying pro
ducts and services to customers who need them. By doing this, production time c
an be set close to selling period, achieving better prediction of selling target
s. Figures 16.1 illustrate the flow of materials right from the stage of procur
ement, 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 co
nsumer, flows back from the retail store to the various intermediaries, to aid t
he creation of the right product. This is the flow of information.

It is difficult to put down the value of the supply chain industry. How
ever , it is estimated that the global market size of the supply chain and logis
tics industry, is U$$3 trillion, which is a significant chunk of the global dom
estic gross product.
The estimated market size for supply chains globally, includes aspects l
ike trucking, warehousing, inventory costs, transaction costs and the administra
tion 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 o
f our GDP, It is estimated that over Rs. 1,00, 000 crore of the toal capital, i
s 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 o
rganization 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 numb
er of products offered by the retailer, also increased. While the number of sup
pliers increased, there was also an increased pressure on margins. Retailers ne
eded 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. A
n extended supply chain is illustrated in Fig. 16.3
Today, retailers operate in a dynamic world. Customers’ buying habits a
re constantly changing and competitors are continually adding and improving thei
r 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 thous
ands, depending on the range of products offered to the consumer. Sourcing, ven
dor management and logistics play a major role in getting the right product to t
he right place, at the right time and in the right condition. The second reaso
n, partially, is the increased national and international competition. Customer
s have multiple source to choose from, to satisfy their demands; locating the pr
oduct throughout the distribution channel for maximum customer accessibility, at
a minimum cost, becomes crucial. The third reason is the increasing pressure o
n the profit margins earned. Companies are becoming aware that they need to loo
k at the whole picture and not at the functional excellence of individual depart
ments, alone.
Lastly, it is a technology driven world today. Advances in technology e
nable companies to get sales, inventory and production data, across various loca
tions, not only within the country, but also internationally. Information is th
e key enabler of supply chain management.
EVOLUTION OF SUPPLY CHAIN MANAGEMENT
In 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 c
ould cut costs. Initially, the focus was on optimizing the levels of raw materia
l, work in progress and finished goods stored. Depending on the industry charac
teristics, 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 opera
tions control and management, such as the Just-In-Time inventory management mode
l, the total quality management (TQM) model, etc. these models focused on vario
us 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, organizati
ons 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 d
iscipline 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 Cr
afted with Pride in the USA council, in 1984. They commissioned a study on supp
ly chain analysis. This study found that the delivery time for the apparel supp
ly chain, from raw material, to the final consumer, was 66 weeks long 40 weeks o
f which were spent in warehouses or in transit. The long supply chain had resul
ted 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) w
as developed. The basic premise of quick response, is to share information. Re
tailers 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 th
e new standard of the industry. The industry also adopted the Universal Product
Code (UPC). QR incorporates marketing information on promotions planned, disco
unts 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 st
ore 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 tran
sportation can thus be eliminated.
The success of the QR initiative prompted a group of grocery industry le
aders in the USA, to create a joint industry task force, called the Efficient co
nsumer Response (ECR) working group. This group primarily, worked on identifyin
g opportunities to make the supply chain more competitive in grocery retailing,
worked on identifying opportunities to make the supply chain more competitive i
n grocery retailing. Studies commissioned by this group revealed that by expedi
ting 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 plann
ing required when large number of troops and their equipment move, to that of th
e moving of large amounts of goods.
Christopher (1992) defined logistics as, Logistics is the process of str
ategically managing the Inocunement, movement and storage of materials, parts a
nd 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 exe
rcises, internationally. The gulf war of 1991 as one of the largest, since Worl
d War II.
An integral part of supply chain management is logistics management. Th
e main objective of logistics management is to reduce inventory-holding costs an
d 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 effect
ively makeup for an empty shelf.
As a customer, the ultimate measure of a retail service is whether the g
oods 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 easi
ly achieved when sales growth is not high; such extra profit has to be gained fr
om improvements in productivity. The achievement of productivity gains is avail
able from a retail logistics system infrastructure which consists of several ele
ments.
RETAIL LOGISTICS
Many 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 fi
nest distribution center and transport capabilities are likely to send the wrong
products the wrong places at the wrong time. Effective logistics therefore, ne
eds 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 b
e built to suit the needs to the organization, keeping in mind the kind of produ
cts 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 d
ifferent.
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 impo
rtant to recognize the interrelationships that exist between the elements. A ho
listic perspective is essential management is to identify the optimal organizati
on 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 wi
ll not be realized if in seeking to pursue efficiency in the supply chain elemen
t under the direct control of the retailer, costs are simply pushed onto supplie
rs. The cost will remain in the system and will ultimately be borne by the cust
omer Managing retail logistics requires a vision of the supply chain ‘big pict
ure’. 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 fac
ilitate 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 c
hain completely.
This holistic approach to retail logistics can be illustrated by the tre
nd 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, Su
ppliers making individual direct deliveries to retail outlets may then the repla
ced by suppliers delivering to the retailer distribution centers by the truckloa
d. The center then breaks the built to create store orders, which are then trans
ported on the retailer’s own vehicle fleet. Lead times are reduced and so are t
he levels of stock held at retail outlets. There are major cost savings and im
proved supply chain efficiently delivers added value for the customer in the sha
pe 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 stor
e staff are more aware of deliveries . stock is less of problem and stock space
is kept to a minimum.
RETAIL LOGISTICS-THE COST STRUCTURE
Many retailers pursuer distribution strategies which explicitly or impli
citly acknowledge the importance of the Total distribution Concept (TDC) which i
s 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 retai
ler, goods are sold through the checkout- as an integrated linear model.
Retail Marketing Management
Total distribution costs (TDC) – TC+FC+CC+IC+HC+PC+MC
Where: 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) mus
t be considered in relation to each other. This will often involve various tra
de-offs, for instance between service levels and quality, or between margins and
investment in systems. As such, optimizing a logistics system is a difficult a
nd demanding task as each component of the system is affected by the level of i
nvestment the company is able to make in it. TDC allows retailers to extend the
ir control over the costs as well as supply of goods to the consumer. This requ
ires an understanding of the interaction of all parts of the logistics process.
These costs are discussed in the following sections.
TRANSPORT
Transport cost structures include substantial fixed cost elements, but p
erhaps include greater scope to adapt capacity to match volume . Centralising r
etails 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 merchandis
e categories requiring different storage regimes, has meant more frequent full-l
oad deliveries to stores. Computer software now supports route planning, using
interative programmes to identify the optimal schedules for each day’s deliverie
s and thereby achieving lower costs. In addition, retailers make use of back ha
ul, 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 w
arehousing, transport, inventory and administration, each with its associated co
st structure. Facilities costs are taken as the capital and running costs assoc
iated with providing warehousing infrastructure and internal systems to store an
d pick stock. Warhousing has a high fixed cost element. The lack of flexibilit
y makes the initial decision to create warehouse capacity crucial. Spare capaci
ty 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 ef
ficiency of the operation. It is the application of technologies such as electr
onic data interchange (EDI) that have facilitated a reduction of stockholding a
t both store and distribution center level. The extent of channeling of supplie
s 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 competiti
ve 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. 1986-96
Retailer 1986 1993 1996
(Argyll) Safeway 40-80 95 95
ASDA 10 78 84
Co-op Retail 40-60 95 95
Co-op Wholesale 40-60 93 93
Wm Low 50 94 --
Morrisons 50 90 90
J Sainsbury 80 95 95
Tesco 40-60 95 95
Wait rosé 80 90 90
Average 1 92 92
Within an RDC, communication between the Warehouse Management system (WNS) and e
ach 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 o
f 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 resour
ce with the volume throughput ‘annualised hours’ contracts are now commonplace.
This is not always a straightward task as warehouse staff are often unionized a
nd the union holds power. Development have to be carefully negotiated and this
has led to local agreements, often producing localized differences in working pr
actices and sometimes less efficiency.
THE COSTS OF INVENTORY
The 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 conc
entration in retailing, means that the end consumer currently expects a wider ra
nge of products in smaller quantities. Irrespective of the type of inventory sy
stem used by the retailer, and regardless of set service levels, attitudes to di
stribution, 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 wel
l beyond inventory control and replenishment. The systems are becoming increasi
ngly important in the competitive environment of multiple retailing.
Sainsbury, Tesco and Safeway have almost 100 per cent of stores with EP
OS 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 c
entral distribution centers at Atherstone and Dundee. Marks and Spencer also ha
ve full EPOS and have implemented a computerized inventory system, ASR (Automati
c 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 replenis
hment (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 EPO
S may serve replenishment. By accurate data capture obtained via EPOS, forecast
ing (for example, on the basis of experimental smoothing) future merchandise re
quirements 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.

MODULE-III

Arif.A.Samad
Christi Jacob
Siyad.A
Deepu.S
Ganesh.S
Hariprasad.

MERCHANDISING MANAGEMENT

Merchandising: activities involved in acquirin

g particular goods and services and making them available at the places, times a
nd prices and in the quantity to enable a retailer to reach its goals.
Developing and implementing a merchandising pl
an is the key success of a retail strategy .A merchandising philosophy sets the
guiding principles for all merchandising decisions that a retailer makes. This p
hilosophy must reflect the desire of the target market, the retailer’s instituti
onal type, its marketplace positioning, its defined value chain supplier capabil
ities, costs, competitor’s product trends, and a host of other factors. To capit
alize on merchandising opportunities, more retailers are now turning to micro me
rchandising and crossed merchandising. With micro merchandising, a retail firm a
djust 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 recreati
onal 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 re

tail sales for a given period .because retailers purchase are based on their sal
es expectations, forecast are the foundations of merchandise plans .they include
these components: over all company projections ,product company projections ,it
em by item projections, and store by store projections
When preparing forecasts, it is essenti
al to distinguish among different type of merchandise. Staple merchandise consis
ts of regular product carried out by a retailer. Assortment merchandise consists
of apparel, furniture, autos, and other products for which the retailer must ca
rry 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 con
sist 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 innovati
veness of its merchandise plan involve a number of factors: target markets ,good
s/services growth potential ,fashion trends and theories , a retailers image com
petition, customer segments ,responsiveness to consumers ,investment costs ,prof
itability ,risk ,constrained decision making, and declining goods and services a
n innovative firm one that carries new goods and services and plans for upcoming
trends faces great opportunity-distinctiveness –and great risk-possibly misread
ing customers and being stuck with large inventories.
Retailer should asses the growth potential fo
r each new good or services they carry. A useful tool for assessing growth poten
tial is the product life cycle, which shows the expected behavior of goods or se
rvices over its life An innovative consumer buy new goods or services and recomm
ended to their friends, sales increases rapidly .In planning innovativeness, a r
etailer should focus is to often on new product additions
• Select items for possible elimination on the basis of declining sales p
rice ,and profits ;the appearance of substitutes ;and loss of
usefulness
• Gather and analyses detailed financial consider and other data about the
se items
• Consider non deletion strategies such as cutting costs ,revising promoti
on systems ,price adjustment and cooperating with other retailers
• After deletion decision is made ,do not over look timing parts and servi
cing ,inventory and holdover demand

Assortment: An assortment is the selection of merchandise a retailer. It include

s 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 assortm
ent. Width assortment refers to the number of distinct goods /services categorie
s with which a retailer is involved. Depth of assortment refers to the variety i
n any goods/services category with which a retailer is involved. A common strate
gy has been to compete by offering a wide variety of items within a category des
igned to appeal to every consumer taste .large assortment strategies can back fi
re, 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 merchandisin
g strategy:
-Risks, merchandise investments damages, and obsolescence may increase dra
matically.
-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 o
ccur.
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 c
arry – a challenge that is becoming more complex with the proliferation of brand
s in each grouping. Manufacturer brands are produced and controlled by manufactu
rers.
Private brands are also known as store brands, contain names design
ated by wholesalers or retailers, are more profitable to retailers, and are bett
er controlled by
retailers ,are not sold by competing retailers ,are less expensive for consume
rs 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 .Th
ey can form of private brands .these items usually receive secondary shelf loca
tions ,have little or no promotion support ,are sometimes of less quality than o
lder brands ,are stocked in limited assortment and have plain brands
The competition between manufacturer and retailers for shelf space and profit ha
s led to phenomenon known as the Battle of brands, where by manufacturers privat
e 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 flo
w during the year ,to properly plan the timing of merchandise, the retailer shou
ld take in to accounts its forecasts and various other factors ; peak seasons ,o
rder nards delivery time ,routine versus special orders ,stock turnover ,discoun
ts and the efficiency of inventory procedures
Planning differs for routine versus orders. Routine orders involv
e restocking staples and other regularly sold items. Deliveries are received wee
kly, monthly, and so on. Planning and problems are thus minimized. Special order
s involve merchandise not sold regularly. These orders need more planning and cl
ose cooperation between retailer and supplier Specific delivery dates are usuall
y arranged, Custom furniture is product requiring special orders.
Allocations: The last part of merchandise plans is allocations of items .a singl
e unit retailer usually must choose how much merchandise to place on the sales f
loor, how much to place in a stock room, and whether to use a ware house .some r
etailers focus entirely on ware houses as a central-or regional-distribution cen
ters .the products are shipped from suppliers to these warehouses, and then allo
tted and then shipped to individual outlets .other retailers ,including many sup
er market chains ,do not rely as much on central or regional ware houses .inst
ead ,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 re
quired .a retailer should gather appropriate data before buying or re buying an
y merchandise, in gathering information for merchandising decisions ,a retailer
has several possible information sources ,the most available is the customer .b
y regularly research the target markets demographics, life styles ,and potential
shopping plans , a retailer can study consumer demand directly .loyalty program
s 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 syst
em is a formal way to record consumers request for un stocked or out stock merch
andise .want books are used in small firms; want slips are used by retailers. Bu
ying personnel can learn about consumer demand by visiting suppliers, talking wi
th sales personnel, and observing customer behavior. Competitors are other sourc
es of information .a conservative retailer may not stock an item until competito
rs do. Comparison shoppers, who look at the offerings and prices of competitors,
may be employed. Other sources may offer useful prices of consume –related info
rmation: 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 acquir
ed, the retailer should feel comfortable that is sufficient for making decisions
as accurately as possible .for routine merchandising decisions, limited informa
tion may be adequate. On the other hand, new car purchase can fluctuate widely a
nd acquire extensive data for sales fore cast
Selecting and interact with merchandise sources: the next step is to select inte
ract 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 reque
st
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 a
nd reliability of the suppliers through firsthand experience
Outside new supplier –this supplier is not owned by the retailer; and retailer h
as 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 ma
ny manufacturers are distressed by what they believe retailers excessive use of
charge backs, where by retailers, at their discretion, make the deductions in th
eir bills for infractions ranging from late shipments to damaged and expired mer
chandise
Evaluating merchandise: there are three forms of evaluations are possible: inspe
ction, sampling, and description .the technique depends up on the items cost, it
s attributes and regularity of purchase .inspections occurs when every single un
its is examined before purchase and after delivery .jewelry and art are two exam
ples of Expensive, relatively unique purchases before which the retailer care fu
lly inspect all items. A retailer uses sampling when it regularly buys a large q
uantity of breakable perishable or expensive items .a retailer engages in descri
ption buying when it buys standardized, non breakable, and non perishable mercha
ndise. 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 sp
ecial 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 ord
er or re order often involves a uniform contract .terms and then standard or ha
ve already been agreed on and order is handled routinely .a number of purchase t
erms are to be specified ,whether a negotiated a uniform contract is involved
.these include the delivery date ,quantity purchased ,price and payment arrangem
ents ,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 o
n 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 c
oncluded automatically .computers are used to complete and process orders and ea
ch purchase is fed in to the computers data bank. Smaller retailers often concl
ude purchases manually .how ever with the rapid advances in computerized orderin
g software, even small retailers can sometimes place orders electronically-espec
ially I they are tied to large wholesalers that supply them with EDI and QR capa
bilities

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 ,whe
n 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 posit
ion and wants to persuade retailers to carry its items retailer to carry its ite
ms. 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 p
aying invoices ,price and inventory making ,setting up displays ,completing tran
sactions ,arranging delivery , processing return goods and damages ,and controll
ing merchandise .Distribution management is the key success
When orders are received, they must be checked for completeness and product cond
ition .invoice must also be checked foe accuracy .prices and inventory informati
on marked on merchandise. Supermarkets are estimate that price marking on indivi
dual 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 re
ceive it from a retailer .this means order taking ,credit or cash transactions ,
packaging ,and delivery or pick up, automation has improved retailer performanc
e in each of these areas merchandise control involves evaluating revenues ,profi
ts ,turn over ,inventory shortages ,seasonality ,and costs for each goods / serv
ices
Category and item carried by a retailer .control is general achieved
by preparing inventory data, and then periodically conducting a physical invent
ory 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 suc
h a plan: order and delivery time, inventory turn over, financial outlays, and i
nventory 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 prod
uct gives a retailer two choices :order a surplus of items and spread out re ord
er 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 or
der period
Finally inventory holing versus ordering costs must be weighed .adv
antages of having a large inventory are customer satisfaction ,quantity discount
in purchase , easier control and handling. Advantages of placing many orders an
d 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 t
hat organization assessing the implementation, the over all procedure as well as
the handling of individual goods and services, should be monitored. Any conclus
ions reached while re evaluating a merchandise plan become a part of the informa
tion 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 diff
erential 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 the
m from those of competitors”-Kotler.
The Global Retail Scenario
Large format retail businesses dominate the retail landscape in the United State
s and across Europe, in terms of retail space, categories, range, brands, and vo
lumes. 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, hy
per-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 l
essons from their style of operations. In retailing, the conventional wisdom use
d to be, that, the critical success factor was location. But precise location no
longer matters and geo-demographics is increasingly becoming irrelevant. The le
ading multiple chain retailers, superstores and malls create their own centers o
f 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 reta
il 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 billi
ons (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 afte
r 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 th
e U.K. have grown by rapid geographic expansion in their own countries. Speciali
sts like Benetton of Italy and IKEA of Sweden and The Body Shop of the UK are in
ternational and the fast food chains like McDonald’s and Pizza Hut are everywher
e. The same products are increasingly available from the same names on every con
tinent. Retailers worldwide have immensely benefited from the sustained growth o
f the disposable income of their global consumers.
Geographic saturation
The end of the nineties has signified a turning tide of retailer power. The limi
t 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 be
ing belied. Many retailers have started postponing their store expansion plans.
The track record of some of their international store expansions is also not pro
mising.
Category killer competition
The threat of saturation is accompanied by a new competition from the low cost c
ategory killers. Specialist competition is eating away at the market share and f
orcing 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 – Hom
e 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 frighte
ning for retailers than for consumers, is the Internet. The potential for on-lin
e 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 character
istics have been catalogued by several researchers on this subject, five charact
eristics deserve mention:
(1) Recognizability: A true brand is instantly recognized and identified. The br
and 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’). In
dian retailers like Shoppers Stop, the RPG Group’s Food World and Music World ha
ve 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 mos
t 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 me
aning. 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 g
ranted by the customers. Lessons can be learned from social organizations like G
reenpeace, Medicins sans frontiers, CRY and Helpage India. In this case, legitim
acy rests on moral authority. In retail businesses it may rest on an Building Su
ccessful Indian Brands by Sundar Bharathidasan Institute of Management, Trichy e
motional authority (a unique shopping experience, a store filled with warmth and
friendliness.)
(4) Consistency, alignment: A brand story should contain no internal contradicti
ons and should be appear to be consistent over time. It should be applicable acr
oss the business and attempt at total brand integration.
(5) Proximity: The brand building process should culminate with assuring the bra
nd’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 building
Product brands make life easier. They make it possible to recognize products, wh
ich 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 co
nstitutes 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 close
r 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 ch
oice of product brand (or store brand, if present) is left to the consumers. Ret
ailers 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 ret
ailer and has good experiences and memories about a store, the foundation has be
en laid for a long-lasting relationship that will ultimately lead to customer lo
yalty. Retail branding creates a brand preference, which goes beyond the product
or servicein itself.
Retail Branding versus Product Branding
A 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 reci
pe 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 lie
s 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 spe
cific target group and then fix it in the minds of consumers. Compare the identi
ties of ‘Five Star’ ‘Perk’, ‘Gems’ and ‘Temptations’: all very different, yet th
ey come from the same manufacturer.
Contrast this with a store like Food World, for example. Because of its direct c
ontact 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 c
ontinually 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 element
s 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 elemen
ts being important. What might it then mean, when branding is applied to retaili
ng? The issue is not of retailers selling brands but branding the retail busines
s 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 compet
itive world cannot afford to rest on its strategic product assortment and pricin
g initiatives to bring in the customers. The retailer must attempt to brand hims
elf differently, especially when today’s product brands are being launched throu
gh 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 tha
t its own brand includes the characteristics of product brands detailed above. R
etailers 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 to
o vague and not actionable. For example the U.K. Virgin brand has the value of c
hallenging conventions and the U.S. retailer Nordstrom has a built a value of cu
stomer 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 o
n issues like whether to develop the retail brand or corporate brand and decisio
ns on one product/one brand that they may be selling in their shop. Retailers ca
n also decide to launch high quality retailer brands (‘own labels’) backed by pr
omotional campaigns, reinforcing clear personalities. Pricing policies, today po
sition 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 la
bels’ targeted at different consumer groups in their outlets. An essential ingre
dient for success, in such cases, must be consumer-relevant added values – not j
ust 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 pr
imarily motivated by low prices. There is scope to attempt a retail segmentation
strategy.For example, DCM Benetton India redesigned its stores as per its inter
national format and also repositioned the brand from a casual wear brand to a wa
rdrobe 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 t
ogether to integrate the whole brand proposal. At this level, marketing, human r
esources, distribution, logistics, administration and sales have to work towards
a common brand value that has to be communicated to the consumer. The retail br
and’s messages must be
Weaved into the every day experiences that the consumer has with the retail bran
d. 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 discernin
g Indian consumer. There is no doubt that the retail business is gravitating fro
m high street towards destination shopping (mall development) with an estimated
10million square feet of mall space expected to hit the metros and mini-metros a
cross the country this year. However, we need not assume that retailing at shopp
ing-malls, is going to be fundamentally different from shopping at the tradition
al shopping areas, except that a mall has a more modern structure and in most ca
ses brings multiple brand outlets under a single roof. The local retailers movin
g 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 com
bination of shopping (International/national brands), Entertainment (Theatre Mul
tiplex) and food (McDonald’s/Pizza Hut/Café Coffee Day) in their malls. It is th
erefore not surprising to note, that many mall visitors come out having no shopp
ing 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 becom
ing a place that youth can ‘hang out’, but if the crowds do troop in, but the ca
sh 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 deve
lopers 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 deve
lopers also have to create distinctive (brand) identities for their specific mal
ls.
It is equally important for the would-be retailer tenants, to realize that merel
y 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 ge
t 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 th
at 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 illu
strated below seem to rely more on novelty and excitement of newer ambiences rat
her than truly investing in brand building.
Gourmet coffee retailing:
The organized coffee retail business is estimated at Rs.250 crores and is showi
ng a growth rate of 40%. Apart from the Quickys, Café Coffee Day and Baristas ch
ains, 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 Bang
alore this year. Reliance is offering gourmet coffee at some of its Reliance Web
World outlets under the brand name ‘Java Green’. There are not more than 350 out
lets in the organised sector today but retail consultancy KSA Technopak opines t
hat India’s potential for coffee retail outlets could be around two thousand. Ho
wever the coffee retailers are already cloning each others’ strategies - by offe
ring that “total experience” — right coffee, food and ambience with Wi-fis and j
ukeboxes — 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 reta
il space devoted to non-grocery or lifestyle retail. The four major lifestyle re
tailers — 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, overa
ll lower cost of operations and accessibility to consumers vis-à-vis other metro
s, have spurned the growth of organized retail at Chennai. But, on the brand bui
lding front, the story is no different. A retail analyst has already observed th
at Chennai is over-retailed in the lifestyle segment, with little differentiatio
n 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 exerci
se. From signage to logos to canopies, clean floors, channel music, lighting, co
nvenience 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 th
e coming private sector competition from Reliance, Essar and Shell. Let’s wait a
nd 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 b
y giant superstores and shopping malls across our country. They should however l
earn quickly to build the retail brand directly and not look to factors like pr
ime location, value pricing or product assortment to build their businesses. Ind
ian retailers, to build a strong retail brand presence, can use the following st
rategies.
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 fre
quent shopper rewards, carry on an interactive communication with them, make spe
cial offers, drive traffic and add value outside the in-store relationship. Reta
il brands get built by developing personal relationships with consumers rather t
han only through product and pricing. For example, staff should be trained to re
cognize their V.I.P customers. ‘Soft’ rewards for V.I.P customers include priori
ty service, free gift wrapping, enhanced guarantees and sales pre-notifications.
‘Hard’ benefits include privileged rewards and extra value offers as well as st
raight discounts. The quality of management of the customer is becoming an incre
asingly important source towards building the retail brand. Education and traini
ng 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 cust
omer behavior can guide store merchandising to match the profile of their custom
ers 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 tr
affic. Retailers have, still not felt the concept of individual customer communi
cation 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 off
ers available and price comparisons across brands that helps its customers to ta
ke more informed decisions.
Motivating the staff to volunteer value : The quality of in-store service is a k
ey 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 salesper
son on their next purchase visit; the ‘yes’ respondents were found to more likel
y give the store a 8-10 rating. On the other hand, shoppers unhappy with the sal
esperson gave the store a very low performance on overall service and performanc
e. 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 o
ffer value will, in future, overshadow all these areas, and emerge as the domina
nt reason for the success of the organized Indian retailer. Indian retailers sho
uld 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 an
d involve their customers. It is the quality and value of the retail brands tha
t they have sought to establish that will determine the loyalty of the retail sh
opper in future.
BRAND LOYALTY
Some consumers use the same retail outlet or purchase the sme brand of product o
n most occasions or on a regular basis. This buyer characteristics is known as s
tore of brand loyalty. In particular, brand or store loyalty will mean that a pe
rson will
• Feel positively disposed to the brand based upon brand attitudes;
• Utilize the store more than other stores or buy the brand more freezer b
ased 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 demons
trate 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 br
and 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 longe
r periods of time.
POSITIONING OF A BRAND
Brand 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 propel
led by either competitive adventure or a firms greed and eventually losing in th
e 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 determin
ed on the basis of price. According to terrorists the focusing on the brand posi
tioning 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 i
n the intellectual ability of the consumers similarly to assess the range of bra
nd available to them. The brand managers, who regularly take a sounding to custo
mer 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 l
ocation must not be underestimated. Location decisions can be complex, costs ca
n 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 serv
ice, every retail company still has to contend with one critical element for su
ccess: location."
In general a good location may let a retailer succeed even if it
s strategy mix is mediocre. On the other hand, a poor location may be such a lia
bility 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 c
riteria considered. These include the size and characteristics of the surroundin
g popula¬tion, the level of competition, access to transportation, the availabil
ity 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 commitme
nt by the retailer .Even a firm seeking to minimize its investment by leasing (r
ather than owning a building and land) can have a major investment. Store locati
on 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 characterist
ics of residents and existing retailers.)
2. Determine whether to locate as an isolated store in an unplanned busines
s district or in a planned shopping center within the geographic area.
3. Select the general isolated store, unplanned business district, or plann
ed 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 descr
ibe and evaluate alternate trading areas and then decide on the most desirable o
ne. A trading area is “a geographical area containing the customers of a particu
lar 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 customer
s to population and the highest per capita sales. The secondary trading area con
tains 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 tradin
g area includes all the remaining customers, and they are the most widely dis¬pe
rsed. For example, a store could have a primary trading area of four miles, a se
condary trading area of five miles, and a fringe trading area of eight miles. Th
e fringe trading area typically includes some out shoppers, who are willing to t
ravel greater distances to patronize certain stores.
The size and shape of a trading area are influenced by such factors as st
ore type, store size, the location of competitors, residential housing patterns,
travel time and traffic barriers (such as toll bridges or poor roads), and med
ia availability. After the size and shape of various alternative trading areas (
existing or proposed) have been determined, the retailer studies the characteris
tics 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¬tio
n size and characteristics, availability of labor, closeness to sources of suppl
y, 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 livi
ng.
After a retailer investigates alternative trading areas the next step is to dete
rmine what type of location is desirable, selects the general location and evalu
ates alternative specific store sites. There are three basic location types to d
istinguish among: the isolated store, the unplanned business district, and the p
lanned shopping center. Each has its own attributes relating to the composition
of competing stores, parking facilities, nearness to nonretail institutions (suc
h 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 st
ore 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 shoppin
g
• 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 groun
ds, 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 wher
e 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 distri
ct, the sec¬ondary business district, the neighborhood business district, and th
e string. A brief descrip¬tion of each follows.
Central Business District: A central business district (CBD) is the hub of retai
ling in a city. It is the largest shopping area in that city and is synonymous w
ith the term downtown. The CBD exists in the part of a town or city with the gre
atest density of office buildings and stores. Both vehicular and pedestrian traf
fic are very high. The core of a CBD is often no more than a square mile, with c
ultural 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, a
nd luck. Here are some strengths that allow CBDs to draw a large number of shopp
ers 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 traditi
onal department store or a full line discount store), a variety store, and/or so
me larger specialty stores—in addition to many smaller stores. This type of loca
tion has grown in importance as cities have increased in population and "sprawle
d" over larger geographic areas.
Neighborhood Business District: A neighborhood business district (NBD) is an
unplanned shopping area that appeals to the convenience shopping and service nee
ds 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 larg
e drugstore, or a variety store. This type of business district is situated on t
he major street(s) of its residential area.
An NBD offers consumers a good location, long store hours, good parking, and a l
ess 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 b
ecause competition is less than in a CBD or SBD.
String: A string is an unplanned shopping area comprising a group of retail stor
es, often with similar or compatible product lines, located along a street or hi
ghway. A string location has many of the advantages of an isolated store site (l
ower rent, more flexibility, better road visibility and parking, and lower opera
ting costs), along with some disadvantages (limited product variety, increased t
ravel for many consumers, higher advertising costs, zoning restrictions, and the
need to build premises). Unlike an isolated store, a string store has competiti
on at its location. This draws more people to the string area and allows for som
e sharing of common costs among firms. It also means less control over prices an
d 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 u
nified commercial establishments built on a site that is centrally owned or mana
ged, 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 sh
opping 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 shop
ping center usually specifies the proportion of total space to be occupied by ea
ch kind of retailer, limits the prod¬uct lines that can be sold by every store t
here, 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 indi
vidual 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, an
d neighborhood. Their characteristics are displayed below
Regional Shopping Center: A regional shopping center is a large, planned shoppin
g 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 fee
t) 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 d
rive from the center. On average, people travel less than 20 minutes.
Community Shopping Center: A community shopping center is a moderate-sized, plan
ned 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 con
sumers. 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 shoppi
ng facility, with the largest store being a supermarket or a drugstore. Other re
tailers in the center often include a bakery, a laundry, a dry cleaner, a statio
nary store, a barber shop or beauty parlor, a hardware store, a restaurant, a li
quor 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 peo
ple 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 aspe
cts 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 vacanc
y rate).
Location and Site Evaluation.
The assessment of general locations and the specific sites contained wit
hin them both require extensive analysis. Site selection is as crucial as the ch
oice of a retail area, especially for stores that rely on customer traffic patte
rns to generate business. Below are some of the factors which should be consider
ed 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 high
est pedestrian traffic is often best.
Because everyone passing a location or site is not necessarily a good prospect f
or all types of stores, many retailers use selective counting procedures, such a
s counting only males and females carrying shopping bags. Otherwise, pedestrian
traffic totals may include too many nonshoppers. For example, it would be improp
er 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 traffi
c 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 elem
ents:
• Separation of the count by age and gender (children under a given age sh
ould not be counted).
• Division of the count by time (this allows the study of peaks, low point
s, 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 sto
res actually visited).
Vehicular Traffic
The quantity and characteristics of vehicular traffic must be examined, especial
ly by retail¬ers appealing to customers who drive there Convenience stores, outl
ets 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 limited
As in the analysis of pedestrian traffic, adjustments to the raw count of vehicu
lar 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 gove
rnments. In planned shopping centers, parking facilities are shared by all store
s there. The number and quality of parking spots, their distances from store sit
es, 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 stor
e, the portion of shoppers using a car, the existence of other parking facilitie
s, 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 sh
opping center normally needs 4 to 5 parking spaces per 1,000 square feet of gros
s floor area, a supermarket usually requires 10 to 15 spaces per 1,000 square fe
et, 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 peo
ple who do not own cars, who commute to work there, or who would not otherwise s
hop in an area with traffic congestion and limited parking. The availability of
buses, taxis, subways, trains, and other kinds of public transit must be investi
gated for any area not readily accessible by vehic¬ular traffic. Because most do
wntown shopping areas are at the hub of a mass transit network, they allow peopl
e from all over a city to shop there.
Locations dependent on vehicular traffic should be rated on the basis of their n
earness to I major thoroughfares. As mentioned in Chapter 9, driving time is a c
rucial 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 deli
very 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 o
f location selected. A retailer interested in an isolated site would want no sto
res nearby; a retailer desiring a neighborhood business district would want to l
ocate 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 retai
ler.
The process of strategic retail planning has several attractive features.
It provides a through analysis of the requirements for doing busine
ss
For different types of retailers.
It outlines retailer goals.
A firm determents how to differentiate itself from competitors and devel
op 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 genera
l 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 opportunit
ies and threats in the chaining business environment .opportunities are marketpl
ace 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, someti
mes, 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 mul
ti screen theaters.
A firm needs to sport trends early enough to satisfy customers and stay a head o
f competitors. A new retailer can adapt to trends more easily than existing firm
s with established images, ongoing leases, and spaces limitations. Small f
irms 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 –asse
ssment is vital. It is all right for person or company to be ambitious and aggre
ssive.
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, governmen
t, 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 impr
ovement 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 i
n 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. o
r on it cold emulate the practices of competitors but do a better job in exec
uting them ,such as a local fast food Mexican restaurant offering five-minute
guaranteed services and a cleanliness pledge. A third basic decision involves m
arket scope. large chains often seek aboard customer base (due their resources
and recognitions ) .it is usually best for small retailers and startups to foc
us on a narrower customer base ,so they can compete with bigger firms that t
end not to adapt strategies as well to local markets .Sam goodly is a mall –b
ased s specialty music retailer offering a board product selection in a youthfu
l, 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 ow
nership and management alternatives, including whether to form a sole proprietor
ship or corporation.
A sole proprietorship is an unincorporated retail firm ow
ned by one person .All benefices , profits, risk s, and costs accrue to that i
ndividual. 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, prof
its ,risks ,and costs .Responsibility and expertise are divided a among mu
ltiple principals ,there is a greater is greater capability for raising funds t
han with proprietorship ,the format is simpler to form than a corporation ,an
d it is subject to single taxation by the government .
A corporation is a retail firm is formally incorpor
ated under state law .it is legal entity a part from individual officers (or s
tock holders).funds can be raised through the sale of stocks, legal claims agai
nst 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 p
rocess when established ,may be viewed as impersonal, and may separate owner
ship from the management.
Goods and services category
Before a prospective retail firm can fully design a strategi
c plan, it selects a goods/services category the line of business –in which t
o operate. It is an advisable to specify both a general goods/services catego
ry and a niche with in that category. Jaguar dealers are luxury auto retailers c
atering 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 chai
n whose forte is inexpensive rooms with few frills.
Personal abilities
Personal abilities deepened on an individual‘s aptitude-the prefer
ence for a type of business and the potential to do well; education –formal lear
ning 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 initiati
ve and has the ability to react quick to competitive developments will be suite
d 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 indepe
ndent operate ,in a dynamic business such as appear l; the second might seek pa
rtners or a franchise and stable business ,such as a stationery store. Some p
eople enjoy customer interaction; they would dislike the impersonality of a se
lf services operation .others enjoy the impersonality of mail-order or web retai
ling.
In certain fields ,education and experience requirement are specific
by law; stockbrokers ,real-estate brokers ,beauticians ,pharmacists, and optic
ians must all satisfy educational or experience standard s to show competency; f
or example ,real – estate brokers are licensed after a review of their knowl
edge of real –estate practices and their ethical character.
Finical resources
Many retail enterprises, especially new, independent ones, fail bec
ause the owners do not adequately project the financial resources need ed to ope
n and operate the firm. Novice retailers tend to underestimated the value of pe
rsonal 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 expendit
ures .in addition ,the costs of renovating an existing facility often are misca
lculated. 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, corporati
on, or franchise agreement will affect the investment.
Time demands
Time demands on retail owners (or managers) differ significantly by goo
ds or services category. They are influenced both by consumer shopping patents a
nd by ability of the owner or manager to automate operations or delegate activit
ies to others.
Many retailers must have regular weekend and evening hours to serve ti
me-pressed shoppers .gift shops, toy stories, and others have extreme seasonal s
hifts in their hour’s .mail –order firms and those selling through the web, whic
h 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 l
essen 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 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 goa
ls for the Kroger.
Sales
Sales objectives are related to the volume of goods and service a retail
er sells. Growth, stability, and market share are the sales goals more often sou
ght.
Some retailer set sales growth as top priority. They want to expand their busin
ess. There may be less emphasis on short-run profits. the assumption is that inv
estments in the present will yield future profits .a firm that does well often b
ecomes interested in opening new units and enlarging revenues. Flower, managem
ent 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 st
able 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 t
he 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 millio
n and total 4.2 million .pre-tax dollar profit is 800.000 and profits as a per
centage 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-def
ined and compared with the actual return at the end of the year or other peri
od .for a retailer with annual sales of 5 million and expenditures of 4 mil
lion ,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 goa
l for any publicly owned retailer .some firms set trained over the long run
and indicate good management rather than ones based on innovative id
eas that may lead to peaks and valleys in sales and profit .
Customer satisfication with the total retail experience is well –en
trenched goal at most firms now good supplier relation is also a key goal .re
tailers must understand and work with their suppliers to secure favorable
purchase terms, new products ,good return policies, prompt shipments ,and coope
ration . Cordial labor relation is another goal that is often critical to retail
er’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 o
thers. A firm may be seen as innovative or conservative, specialized or board –b
ased, 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 im
age relative to its retail category and its competitors and that elects a positi
ve consumer response. A firm setting women’s apparel could generally position it
self as an upscale or a discount specialty retailer, and if could specifically p
osition itself with regard to other retailers carry women’s apparel.
Two opposite positioning philosophies have gainsaid popularity in recent y
ears; mass merchandising and niche retiling .mass merchandising is a positioning
approach whereby retailers offer a wall-mart has a wide, deep merchandise mix w
hereas sports authority has a narrower, deeper assort.
in niche retailing , retailers identify specific customer segments and depl
oy unique strategies to address the desires of those segments rather than the
mass market nicking creates a high level of loyalty and shields retailers fro
m 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 ac
hieve 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 -outl
et pizza chain
Identification of consumer characteristics and needs
The consumer group sought by a retailer is called the target m
arket .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; c
oncentrated marketing ,zeroing in on one specifics group; or differentiated m
arketing ,aiming at two or more distinct consumer groups, with different retai
ling 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 contra
st, a small upscale men’s shoe store appeals to specific consumer group by of
fering a narrow, deep product assortment at above a average prices
Department’s stores are among the retailer seeking multiple ma
rket segments. They cater to several customers groups, with unique goods and ser
vices 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 differen
t market segments. Target
Corporation operates Marshall Fields (traditional department stores) for those i
nterested in low prices.
Overall strategy
The retailer develops an in depth overall strategy. This involves tw
o 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 an
d the latter are called uncontrollable variables.
Controllable variables
The controllable parts of a retail strategy consist of the basic ca
tegories such as store location, managing a business, merchandise management and
pricing, and communicating with the customer.
Uncontrollable variables
The uncontrollable parts of strategy are composed of the factors such as consume
rs, competition, technology, economic condition, seasonality, and legal restrict
ions. 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 facin
g a prospective or existing retailer. It actually means, being guided by an orga
nizational mission, evaluating ownership and management options, and outlining t
he goods and services category to be solved.
Opportunities are marketplace openings that exist because other retailer
s have not yet got capitalized on them.
Threats are environmental and market place factors that can adversely af
fect 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 exis
ting 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 ass
essment is vital .
ORGANISATIONAL MISSION

An organizational mission is a retailer’s commitment to a type of business and t

o a distinctive role in the market place. It just reflects the firm’s attitude t
owards the consumers, employees, suppliers, competitors, government and others.
Major decision is whether to base a business around the goods and servic
es 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 marke
t as a leader or as a follower. It could seek to offer a unique strategy, such a
s 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 focu
s 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 managemen
t alternatives, including whether to form a sole proprietorship, partnership or
corporation and whether to start new business ,by an existing business, or becom
e 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 for
m, fully controlled by the owner, operatiobnally flexible, easy to dissolve and
subject to single taxation by the government. It makes the owner personally liab
le for legal claims from suppliers, creditors and others and it can lead to limi
ted capital and expertise.
A partnership is an unincorporated retail firm owned by two
or more persons each with a financial interest. Partners share benefits, profit
s, risk and cost. Depending on the type of partnership it, too can make owners p
ersonally liable for legal claims, can be dissolved due to partners death or dis
agreement, binds all partners to actions made by any individual partner acting o
n behalf of the firm.
A corporation is retail firm that is formally incorpora
ted under state loan. It is legal entity apart from individual officers(stockhol
ders).funds can be raised through the sale of stock, legal claims against indivi
duals are not usually allowed, ownership transfer is relatively easy, the firm
is assured of long term existence, the use of professional managers is encourage
d and an ambiguous operating authority is outlined.
GOODS OR SERVICE CATEGORY
Under the goods and service category, it is advisable to specify both th
e general goods and services category and niche within that category. Jaguar dea
lers 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 availabil
ity 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 a
nd policies and experience.
An individual who want to run a business, likes to use initiative a
nd hands the ability to react quickly to competitive developments will be suited
to a different type of situation than a person quickly to competive development
s will be suited to a different type of situation than a person who depends on o
thers for advice and does not like to make decisions.
Some skills can be learned and others are inborn.Accordi
ngly, 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. Part
nerships may be best when two or more parties possess complementary skills perso
n 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 on
es ,fail because the owners do not adequately project the financial resource nee
ded to open and operate the firm. Novice retailers tend to underestimate the val
ue of a personal, join account ,which is used for the leaving expenses of the ow
ner and his or her family in the early, unprofitable stage of a business. Becaus
e few new ventures are immediately profitable, the budget must include such expe
nditures. In addition, the cost of renovating are existing facility often are mi
scalculated. Underfunded firms usually invest in only essential renovations. Thi
s 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 ser
vice category. they are influenced both by consumers, shopping pattern and by th
e 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 tim
e- pressed Shoppers .gift shops, toy stalls, and other have extreme seasonal shi
fts in their hours. Mail- order firms and those selling through the web ,which c
an process orders during any part of the day, have more flexible hours. Some bus
iness requires less owner involvement, including gas stations with no repair ser
vices ,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 less
en 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 av
oid 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.

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

MODULE-IV
Anu.R
Archana.V.Nair
Nelson Thomas
Niju.K.George
Nisha Das.

Electronic Retailing
This area is something like electronic mail order, but with extensions for capab
ilities similar to the home shopping networks as seen on television. There are a
small but growing number of electronic shopping malls populated with virtual st
orefronts. These malls are like the home shopping networks (but without the sale
s promotion people), and the storefront is like the product showcase and marketi
ng 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, whi
le the televised home shopping broadcast is presented in only a "linear" what-yo
u-see-now-is-all-that-is-available format. For example, the Internet Shopping Ne
twork mall allows shoppers to browse through directories of electronic stores, s
ervices, 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 arrang
ements), then shoppers are often allowed to interactively try out a demonstratio
n version of the product, much like that is normally done in conventional consum
er electronics stores. Interested customers can then arrange to purchase and "do
wnload" the product from the store over the Internet directly into their compute
r, or to receive a packaged version of the product via courier or postal deliver
y. As such, it is still relatively easy to become a developer of virtual real es
tate 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 awarene
ss and retailer offerings, together with promotional incentives aimed at Interne
t 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 p
rimary retail channel, but also have introduced online offerings.
Catalog merchants
Established companies that have a national offline catalo
g operation that is their largest retail channel, but who have recently develope
d 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 o
nline 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 ar
e designed to cement relationships between the company and its regular buyers. S
ellers can get rid of surplus goods, and business customers can realize deep dis
counts.
Electronic Bartering
Related to auctions and bidding, electronic bartering is
the exchange of goods and/or services without the use of money.
Electronic Data Interchange
EDI has been on the horizon for almost a decade. The ability of businesses to se
nd and receive standardized forms of product data and financial instruments has
long been viewed as a key capability for streamlining business to business trans
actions. However, there is at present very little EDI taking place over the Inte
rnet.
Why is this?
There are many reasons, including the following: First, m
ost 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 Interne
t are insecure (they are), although the technical and administrative aspects of
this are likely to be resolved fairly soon. For example, privacy-assured and sec
ure transaction mechanisms are beginning to appear as products offered by compan
ies such as Netscape Communications Corporation. Third, most of the current EDI
support systems are "closed systems" that cannot be easily interconnected to eit
her existing or new product or financial data systems. For example, there is a g
reat 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 produc
t design and manufacturing systems.
Thus, it seems that EDI of the kind being persued to date w
ill not support significant opportunities for new ventures on the Internet. Simi
larly, investments in current EDI approaches may not have a long period of usefu
lness in businesses that must expand or turnover their customer base with greate
r frequency.
BAR CODE
In 1949, N.J. Woodward filed a patent for a series of cir
cular symbols. These symbols were to be placed on every item in a retail superma
rket for the purpose of improving productivity and automating the checkout proce
ss. But, it was not until more than two decades later (1973) that the grocery in
dustry gathered to settle on some standard form of product identification. The e
nd 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 standar
dize 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 N
umbering) 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 s
ymbology for warehouse inventory and cargo handling. The name comes from the fiv
e bars per character, two of which are wide. Due to its low density, 2 of 5 caus
ed problems for manufacturers of bar code printers. In 1972, an interleaved vari
ation created by Interface Mechanisms (Intermec), resolved this issue by combini
ng two values into the same five bars, using the four spaces in between. This in
terleaving technique meant that a bar code could double the amount of informatio
n 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 wi
ll have ubiquitous storage within the next three years that will help the retail
ers truly drive anywhere-anytime-anything computing, which is very important for
the business. Wireless will continue to be exploited, and at some point cus
tomers will walk into one of the stores and use their own device on the networ
k there to accomplish whatever they want. An infrastructure that will enable suc
h 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 ti
me, 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 workin
g 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 are
as 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 lever
aging information. In the future, the business will be simulated business with
an inductive model versus a deductive model to determine opportunities to max
imize sales before the actual event occurs.
There will also be a strategic initiative going on wit
h self-service. Self-service technology will be provided to all the salesm
en, prospective salesmen, customers and members, and to eliminate paper and pape
r forms. Having an associate portal and devices on sales floors will let custo
mers 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 Informatio
n Technology (IT) spend in the retail sector has increased considerably and play
s 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 g
lobal retail chains—most retail chains were local to countries. This has given w
ay to a globalized set of retailers such as Wal-Mart, Tesco, GAP, IKEA, and othe
rs. With the increase in globalization of retailers both in terms of their point
s-of-sale, as well as their points-of-supply, the Information Technology (IT) sp
end in the retail sector has increased considerably and plays an increasingly im
portant role in managing the complexity of retail operations. The increased IT
spending to be about 13 percent from 2000 through 2004. However, the correspon
ding 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 r
etail 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 COMPLEXITY
RETAIL OPERATIONS ARE EXTREMELY COMPLEX
Much of the retail operations functionality is driven by customized point soluti
ons in areas such as merchandizing, supply chain management, in-store operations
, seasonality and promotions planning. This means the underlying IT systems to d
rive 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 ite
ms, and a lack of standardization of product hierarchies.
b) Supply chain challenges. With so many different outlets and channels, multipl
e hands-offs, and high frequency of replenishment, developing and managing an ef
ficient supply chain remains one of the primary challenges in the retail sector.
c) Scale complexity. Retail operations are executed on an extremely complex scal
e. 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 o
utlets.
d) Process complexity. The business processes that support this environment are
also inherently complex due to the multiple touch points across players in the v
alue chain (manufacturer, distributor, retailer, consumer), the coordination req
uired between the different planning cycles of each of these players, and geogra
phic dispersion. While third-party packages do exist for several functional area
s of the retail world, most retailers find that these packages either do not cov
er a broad enough functional footprint and/or they require a fair amount of cust
omization, as the ‘out of the box’ functionality seldom meets the retailer’s hol
istic 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 i
ntegration challenges, making changes and new functionality development cumberso
me and expensive.
c) High maintenance costs stemming from the high degree of customization and fra
gmentation of point solutions, many of which span different technology platforms
.
d) Poor data integrity, the result of systems fragmentation, point solutions, hi
gh 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 henc
e play a central role in alleviating pressure points in the retail sector. The c
onverse also holds true—retailers who do not manage their IT landscape effective
ly will find that, in time, the IT systems become part of the problem rather tha
n components of the solution. This is particularly true for IT systems in the re
tail sector; for example advanced planning and scheduling systems, inventory man
agement systems and merchandizing systems. Additional systems that share a cruci
al role in retail operations are the promotional and seasonality management syst
ems that, when leveraged effectively, can increase the top-linen revenues for th
e retailer.

There are two critical areas where IT can reduce complexity and improve results:
1. Functional retail areas
2. 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 i
ts top line. To achieve this, retailers need to effectively mine large amounts o
f data and leverage this data to carry out effective forecasting, assortment pla
nning, and collaboration with its suppliers so that promotions and other merchan
dizing 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 produc
t to the right place at the right time—which in turn impacts the inventory level
s 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 effi
ciency of carrying out retail operations is hampered. This becomes particularly
crucial when the retailer is implementing new systems and a large data conversi
on effort is required—it becomes essential that the old data be effectively clea
ned, re-architected and made ready in the new system, so that the business funct
ions can make decisions effectively. .
MODULE-V

Aravind.M
Jayalekshmi.G
Rahul.V.R
Sreejith.K.B
Subhash.J.
INTERNATIONAL RETAILING
International retailing is defined as “all the activities involved in selling pr
oducts and services to final international consumers for their personal consumpt
ion”.
Retail internationalization has been defined as “the management of retail oper
ations in markets which are different from each other in their regulation, econo
mic 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 on
ly in the United States. By 1999, it had greatly increased its global presence o
utside the United States-—including outlets in Argentina, Brazil, Canada, German
y, Mexico, China, and Korea. These stores generated $12.5 billion in annual sale
s. 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 th
e ground up and through a series of acquisitions at the right time and right pla
ce. Both approaches have yielded excellent market penetration and financial grow
th 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, custo
mers recognize that Wal-Mart stands for low cost, best value, and the greatest s
election of quality merchandise. Wal-Mart s highest standards oi customer servic
e have also been exported and adopted by international associates around the glo
be." 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 whi
ch it has well-, established stores are Australia, Canada, France, Germany, Grea
t Britain, Japan, Singapore, Spain, and Sweden. In 1994, it signed its first for
eign franchising agreements, thus entering the United Arab Emirates and other Mi
ddle Eastern nations. During 1996, it entered Indonesia, Italy, South Africa, an
d 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 expert
ise 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 f
oreign 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 int
ernational Blockbuster store opened in London in 1989. The foreign country with
the most Blockbuster stores is Great Britain, with more than 700. The foreign co
untry 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, McDo
nald s also has outlets in such places as Argentina, Australia, Brazil, Brunei,
Canada, China, Costa Rica, Czech Republic, Hungary, India, Japan, Malaysia, Mexi
co, 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 Pennsylvani
a. Since then, it has added stores in such cities as Baltimore, Chicago, Elizabe
th (New Jersey), Hicksville (Long Island, New York)r Houston, Los Angeles, San F
rancisco, Seattle, and Washington, D.C. The firm offers durable, stylish ready-t
o-iisscmble furniture at low prices. Because Ikca positions itself as a dominant
furniture retailer, its stores are large and have enormous selec¬tions. For exa
mple, 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 pe
rcent of its sales from international operations, including about $700 million d
ollars 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 Sta
tes, rather than introducing its own stores, Royal Ahold has acquired several ch
ains, making it the leading supermarket firm along the eastern seaboard. Its mor
e than 1,000 U.S. stores include these chains: Stop & Shop, Giant Food, Tops Mar
kets, 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 O
il, 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, Includ
ing 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 rou
ghly 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 owne
rship in U.S. retailers is highest for general merchandise stores, food stores,
and apparel and accessory stores. Both U.S. retailers operating in foreign marke
ts and foreign firms operating in the U.S. market need to be careful in their ap
proach: Retailers considering operations abroad must carefully study demographic
, economic, and cultural trends; must be flexible in choosing retail formats; an
d must be willing to enter into partnerships with local operators. Retailers als
o must be prepared to commit capital resources to sustain what may be losing ope
rations for several years before con¬sumers accept them. To be sure, overseas ex
pansion is risky and requires a long-term outlook, particularly in countries wit
h a great potential for growth in the next century. The prospective profits in t
hose markets is so large, however, that many retailers can¬not afford to miss th
ese opportunities.7
There 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 als
o many other appealing markets around the globe. 1 hat is why global retailing i
s growing dramatically. It is expected that annual worldwide retailing sales wil
l reach $9.2 trillion by 2009.1 when we talk about the global environment of ret
ailing; we are referring to both U.S. firms operating in foreign markets and for
eign 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 ter
ritories are closely min¬gled with potential quagmires for retailer’s look-in *
to expand beyond their home countries." There are many differences among countri
es despite "the growing similarity of consumer tastes and the development of sop
histicated information systems."
The Strategic Planning Process and Global Retailing
Retailers looking to operate in global markets should follow these four step
s in conjunction with the strategic planning process described in Chapter 3.
! .Assess Your International Potential: "Because international growth requires a
n 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 indu
stry, your domestic position in that industry, the effects that international ac
tivity may have on your current operations, the sta¬tus of your resources, and a
n estimate of your domestic and international sales potential. In general, you s
hould not. get into international retailing unless you have a secure base of ope
r¬ations in the United States. Find out about candidate countries by using resea
rch. 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 reta
iling, 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 distric
t 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 advic
e, the next decision is about which country or countries to enter. You need to p
rioritize information about each country s environment, including economic stren
gth, political stability, regula¬tory environment, tax policy, infrastructure de
velopment, population size, and cultural fac¬tors to reflect influences on the c
andidate countries. For example, the economy of a country is generally considere
d critical to most businesses and is normally ranked high in impor¬tance. Equall
y 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 bey
ond their home-country borders, retailers also can take advantage of cost saving
s and learn from experiences in a way that could further enhance home-country op
erations. Tesco, the British retailer, for example, is using its stores in centr
al and Eastern Europe as a testing ground for ideas that are intended for applic
ation in the home market: the new Tesco Extra in Newcastle, U.K. is based on a T
esco hyper market in Hungary.
Retailers from the United States are expanding in Latin America, Asia, and Eu
rope. Wal-mart, for example, has adopted an aggressive strategy for internation
al penetration.
The top European grocery retailers are expected to command a 40 percent marke
t share by 2005 in Europe, the five leading European retailers- promodes/ Carref
our, 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 cu
rrent trade of consolidation in the food and general merchandise sectors.
Examples of such consolidation are offered by Wal-Marts acquisition of one of th
e 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 m
erger between two medium-sized French Wal-Mart look-alikes promodes and Carrefou
r.

LEVELS OF INVOLVEMENT IN INTERNATIONAL RETAILING

Domestic Comparatively Low potential
Approach Low Risk Global Returns
Global Comparatively High potential
Approach High Risk Global Return

DEVELOPING A STRATEGIC RETAIL MIX

After a retailer has identified the most promising areas for foreign expansio
n 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 Japa
n, the firm has added rice balls and the Teriyaki McBurger to better compete wit
h local fast-food chains.
PRICING
Consumer reactions to pricing policies vary greatly around the world. Discount o
r 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 b
elieve that the sizable price or service reductions typical of discount stores r
eflect poorly on the quality of the store’s products.
FACILITIES
Retailers may also need to modify their stores layouts. Although Kentucky Fried
Chicken, Burger King, and many other retailers have taken steps to standardize t
heir facilities around the world, local considerations sometimes have forced the
m to alter their prototypes.
Rent levels and local retail practices also affect the way merchandise is presen
ted. High rents usually dictate grouping merchandise more closely on special fix
tures to display more merchandise per square foot. Yet in some nations, includin
g Canada and the United States, customers see closely packed merchandise as a si
gn 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 str
ategy that creates an impression of exclusivity.

PROMOTION
Promotion is the component of the retail mix that is most likely to be custom
ized from country to country. At the least, retailers must translate their adver
tising, signage, and sales presentations into the local language. In many instan
ces, however, modifications go far beyond translation. In France, children canno
t be shown in advertisements. In Germany, retailers cannot use the word best in
any advertisement, and comparative advertising of any sort(direct comparisons wi
th other retailers products and pricing) is illegal.
MEASURING RETAIL STRUCTURE
The structure of the retail environment generally refers to the nature and ch
aracteristics for the market.
Eg: The type of retail operation, the variety of retail offers, store location a
nd 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 m
arkets.
The retail industry developed, so multiple organizations begin to take market
share from traditional independent and co-operative retailers: thus a small num
ber of larger organization are taking a greater proportion of the market. Retail
structure development can be measured not just by the number of retail organiza
tion, but also the number of retail organizations, increases. As the market beco
mes more structured begins to decrease due to the fact that the size of the indi
vidual 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 highe
r level of concentration and clearly segmented market. Next are the structured m
arket of France and Netherlands, followed by the intermediary market of Spain an
d 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 in
ternationalization should focus on “globality” rather than “globalization”. Whil
e studies of globalization focus on the processes by which businesses expand int
o markets around the world, globality focuses on what happens afterwards. Global
ity is associated with: general confidence in the pricing and allocation mechan
isms of markets; greater levels of economic integration (EEC in Europe, NAFTA in
North America, and Mercosur in South America) new information and communication
s technologies that knit the world together; and the convergence of technology a
nd economic integration that has turned capital markets into a force unto themse
lves. In Yergen’s view of the world, this means that the control that Government
s 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 i
mplications of a NAFTA dollar zone.
Commercial activities, which include retailing, personal services, entertainm
ent, restaurants, and some financial services, have not been immune from these i
nternationalizing trends. The papers in this collection, which include some Euro
pe, related studies presented at an International Geographical Union workshop on
the “Impact of the Globalization of Commercial Activities on Communities” and a
rticles submitted to CSCA subsequently, address collectively both globalization
and globality.
The restructuring of retailing in the former East Germany consequent to unifi
cation with the former West Germany is examined as an example of the outcome of
globalization processes (Coles). As many international companies locate in Off-c
entre 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 wit
h a general commentary on the relationship between globalization, globality, and
deregulation based on research undertaken at CSCA in metropolitan markets aroun
d the world (yeates).
The Motives and Reasons for Internationalization.
The following are the important motives behind the internationaliza
tion 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 stro
ngly depends upon the countries economic climate. The ability of the customers t
o 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 determini
ng the retail operation in a country. The percapita income, the percapita sales
etc. should be considered before fixing the level of operation. The customers b
uying power in the developing countries increasing day by day, this offers a str
ong market for retail legends.
3. Cost of doing the business is low.
The cost of doing the business includes the rent, transportation, wage rates, wa
rehousing, 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 a
lso 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 i
n the foreign exchange markets are carried on the basis of the global exchange r
ates. 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 bus
iness activities with in a nation such as dependable supply of electricity, adva
nced telecommunication system, etc. Such services comprised of a nations infrast
ructure. The increase in infrastructure will enables to attract more foreign in
vestments.
6. Consumer preferences.
The consumer preference plays a vital role in the success. The preferenc
e of the consumer may vary from one country to another. The culture, social norm
s 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 custom
ers 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 re
gulations are subject to change. The legal environment in the country also plays
a significant role. The rules and regulations prevailing in a country, the atti
tude of the government towards internationalization, the govt policy and regulat
ion etc. remain the motivating factors for foreign investments.
8. The information sources.
The easy availability of information from the government and other agencies faci
litates 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 opportunit
ies and threats in the global retailing;
>OPPURTUNITIES
1. The foreign markets represent better growth opportunities. (Here foreign mar
ket means the developing countries like India, china etc.)
2. A retailer may be able to offer goods, services, or technology not yet avail
able 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 METHOD

Market entry decisions have strategic implications, as the wrong decision can ha
ve a long-term constraining impact on future activities in the chosen overseas m
arket.
The criteria for the initial method of market entry should have been examined du
ring 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. Indirect
2. Direct
3. Overseas production.
The first two involve production in the domestic market, the third production ov
erseas.
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 ro
ute. 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 the
n 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 mov
ing 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 dir
ectory inserts. Other companies will take a more proactive approach to overseas
markets, hopefully resulting in greater: sales, marketing control, marketing inf
ormation 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 a
s an extension of the domestic sales force, although many will have agency contr
acts 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 p
rincipal. This can be achieved through competitive incentives, training, regular
visits, shared marketing expertise and regular evaluation and efficient communi
cation.
Market entry is a strategic issue and sensible practice is to evolve overseas pr
esence if the market conditions are conducive. If the agent distributor route ha
s 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, m
any developing markets e.g. S.E. Asia, may make this a formal requirement to ent
er 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 fa
vorable tax regimes. As with the other methods of market entry there are a numbe
r 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 es
tablished in a foreign market, with targeted sales there or elsewhere, while sti
ll maintaining the responsibility for marketing and distributing its products. S
ome 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 do
es not warrant an investment, while avoiding currency risks and financing proble
ms. Its drawbacks include that profit from manufacturing is transferred to the c
ontractor; it is often difficult to find a satisfactory manufacturer; and like l
icensing, it trains a potential competitor who will have the know how to manufac
ture 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 ent
ity, usually another company, the right to use its individual property (patents,
technical knowledge or trademarks) in return for a royalty or other compensatio
n. 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 mar
ket without the risk of capital loss should the market not be receptive to the m
anufacturer’s product. On the other hand, the greatest disadvantages to the lice
nsor 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 oft
en 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 fran
chise 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 pay
ments often tied in with sales turnover. There may even be further payments to t
he Franchiser or their suppliers for fittings and the supply of raw materials. O
f course the franchiser benefits from a ready made brand name and hopefully less
ens 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 int
ernational company shares in the ownership and control of an enterprise in a for
eign country with the purpose of creating a local business. In other words, an i
nternational 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 internatio
nal company, joint ventures can be classified as majority, minority, or 50-50 ve
ntures.
3. 3.5 Strategic Alliance
Less restrictive and often more short term e.g. Rover and Honda, strategic allia
nces are often sought where no one company can gain the economies of scale, wher
e shared financial, market entry, R&D risks benefit both parties. These firms op
erate not simply by having subsidiaries in other countries but through a network
of relations with other companies to which they subcontract work. Although, the
re is often competition between these firms there is also collaboration. We are
seeing an increasing number of what are called "tri-polar alliances". An allianc
e has been established in the airline industry between British Airways in Europe
, United Airlines in the US and Cathy Pacific. And in telecommunications, an all
iance 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 multinati
onals which have established similar alliances with other multinationals in Japa
n, Europe and North America.
3.6 Wholly owned production
This could be assembly only of components shipped in or full manufacture, althou
gh R&D capability is usually retained in the domestic market. The subsidiary cou
ld be a ‘Green field’ site or an acquisition. As the subsidiary matures it may b
e used to export to other markets in the region or even back to the domestic bas
e.
TYPOLOGIES OF INTERNATIONAL EXPANSION
Introduction
The term ‘ Retail Internationalization’ may seem clear enough, yet a number of c
omplexities underline it. Alexander (1997) has highlighted the varying condition
s that international players operate in, suggesting that retail internationaliza
tion is:
The management of retail operation in markets which are different from each othe
r in their regulation, economic development, social conditions, cultural environ
ment, and retail structures.
It is the process of a retailer transferring its retail operations, concept, man
agement expertise, technology and/or buying function across national borders.
TYPOLOGIES OF INTERNATIONAL EXPANSION
Terms such as global, international, multinational and transitional are often us
ed interchangeably and without much regard for the differences in implications.
While on one level they all suggest the movement of retailer into new markets, t
hey also imply differences in terms of the nature of international activity. Cla
ssifications of retailers have been determined partially by their direction of e
xpansion and market entry method. Salmon and Tordiman (1989) categories three ty
pes 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. At
tainting shares in a foreign company acquiring the entire company allows swift e
xpansion and may allow the transfer of know-how from the indigenous retailer. Un
like 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 str
ong brand such as Marks & Spencer, IKEA and Benetton. The replication of the ret
ail offer implies a standard global marketing strategy, which allows savings fro
m economies and efficiencies of scale due to the replication of factors such as
assortment, store designs and advertising. There is opportunity for vertical int
egration in terms of design production and distribution. However, the lack of au
tonomy 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 pri
marily to efficiencies of operation.
MULTINATIONAL
With the third category, multinational retailers, the basic concept is unchanged
in the international transfer, but the offer is adapted to suit local condition
s, 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 simil
ar throughout the world, while the assortment and advertising are subject to loc
al determinants. The management structure is decentralized, providing operations
within different markets with a significant degree of autonomy. This is an impo
rtant source of the transfer of knowledge from one market to another, but the ph
ilosophy of adapting to local conditions means that there are few savings from e
conomies 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 retail
er 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 loca
l environment and subsequently has a few benefits from integration because it ha
s 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 fo
rm of economies of scale, and example of this is The Body Shop.
DIRECTION OF EXPANSION
The direction of international expansion taken by retailer has received a good d
eal of attention in recent years. Much of the recent research on internationaliz
ations 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.
CONCLUSION
Retailers tend to move into markets that are geographically and culturally close
, and those that are less developed than their own. As they develop into experie
nced 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. T
oday the word is a much smaller place for the retailers. Any retailer that think
s retailing is a local business is, or soon will be, competing against a foreign
retailer that understands retailing is a global business. The internationalizat
ion of retailing is still a relatively recent phenomenon and it is suggested tha
t it is a process likely to continue to increase.