Marketing bán hàng - Chapter 10: Channel institutions - Retailing

Chapter 10Channel Institutions - Retailing1Learning ObjectivesUnderstand what retailing is all aboutGlobal retail scene and trendsIndian retail scene and trendsTypes of retailersTrade and retail formats, trading areaRetail management strategies and operationsMeasuring retail performanceFranchising and e-tailingFDI in retail in IndiaSDM- Ch 102Tata McGraw Hill PublishingWhat is Retailing? Any business entity selling to consumers directly is retailing – in a shop, in person, by mail, on the internet, telephone or a vending machineRetail also has a life cycle – newer forms of retail come to replace the older ones – the corner grocer may change to a supermarketIncludes all activities involved in selling or renting products or services to consumers for their home or personal consumptionSDM- Ch 103Tata McGraw Hill PublishingRetailing Term retail derived from French word ‘retaillier’ meaning ‘to break bulk’Characteristics: Order sizes tend to be small but manyCaters to a wide variety of customers. Keeps a large assortment of goodsLot of buying in the outlet is ‘impulse’- inventory management is criticalSelling personnel and displays are important elements of the selling processStrengths in ‘availability’ and ‘visibility’Targeted customer mix decides the marketing mix of the retailer SDM- Ch 104Tata McGraw Hill PublishingRetailing Retail stores are independent of the producers – not attached to any of themA survey shows that only 35% of supermarket purchases are pre-planned. The rest are ‘impulse’- greatly influenced by quality of the merchandising efforts SDM- Ch 105Tata McGraw Hill PublishingFunctions of RetailersMarketing functions to provide consumers a wide varietyHelps create time, place and possession utilitiesMay add form utility (alteration of a trouser bought by a customer)Helps create an ‘image’ for the products he sellsSDM- Ch 106Tata McGraw Hill PublishingFunctions of RetailersAdd value through:Additional services – extended store timings, credit, home deliveryPersonnel to identify and solve customer problemsLocation in a bazaar to facilitate comparison shoppingSDM- Ch 107Tata McGraw Hill PublishingHow do Customers Decide on a Retailer?Price LocationProduct selectionFairness in dealingsFriendly sales peopleSpecialized services providedSDM- Ch 108Tata McGraw Hill PublishingKinds of RetailersType of retailerCharacteristicsSpecialty storeNarrow product line with deep assortment – apparel, furniture, booksDepartment storeSeveral product line in different departments – Shoppers Stop, Big BazaarSupermarketLarge, low-cost, low-margin, high volume, self-service operation with a wide offeringConvenience storeSmall stores in residential areas, open long hours all days of the week – limited variety of fast moving products like groceries, foodDiscount storeStandard merchandise sold at lower prices for low margins - SubhikshaSDM- Ch 109Tata McGraw Hill PublishingKinds of RetailersType of retailerCharacteristicsCorporate chainsMore outlets owned and controlled by one firm – Globus Voluntary chainWholesaler sponsored group of independent retailersRetailer co-opsIndependent retailers with centralized buying operations and common promotions Consumer co-opsCo-op societies of groups of consumers operating their own stores – farmers, industrial workers etcFranchise organisationContractual arrangement between the producer and retailers – selling products exclusively – Kemp ToysSDM- Ch 1010Tata McGraw Hill PublishingRetailing Scene - GlobalWell organised in most developing countriesGlobal biz worth about $ 6.6 trillionRetail market size is $2325 bln in the US and $ 280 bln in India.Organised retail is 85% in the US and about 5% in India. China 20% Taiwan 80%Retail sector is part of the service sector and if organised, is a major contributor to a country’s GDP SDM- Ch 1011Tata McGraw Hill PublishingRetailing Scene - GlobalHigh potential for generating employment – 2 mln retail outlets in the US employ about 22 mln peopleRetail sector contributes significantly to the growth of the economyOrganised retail is becoming powerful over its suppliers (who may also be big corporates)Producers of goods taking action to protect their turfSDM- Ch 1012Tata McGraw Hill PublishingRetailers’ StrengthsChoice of merchandise is their prerogative – put pressure on producer suppliersMany new products on offer. Can charge penalty if products do not do wellNew developments in IT help them run operations optimally and keep track of loyal customers. Also helps them identify profitable store locations.SDM- Ch 1013Tata McGraw Hill PublishingThe Indian Retail SceneSDM- Ch 1014Tata McGraw Hill PublishingSalient FeaturesEstimated over 12 mln retail outlets with most of them in the unorganized sector10 outlets per 1000 populationAverage per capita space – 2 sq ft compared to 15 sq ft in the USOrganized retail is estimated between 4 to 7% but growing fastSDM- Ch 1015Tata McGraw Hill PublishingOrganized RetailGrowing trends attracting global playersSome of them like Wal Mart and Tesco have already created buying hubs here.In Jan 2006, GOI has permitted FDI upto 51% in single brand retail outletsWell known brands like Marks & Spencer, Reebok, Levis, Adidas, Nike, Reebok, McDonalds, KFC, Swarowski are already in India. SDM- Ch 1016Tata McGraw Hill PublishingOrganized Retail - FeaturesSponsored by companies or corporate groupsLarge formats like supermarkets, department stores and now hypermarketsRight ambience to make shopping a pleasureUse latest technology for customer care and supply chain management.Large employment potentialEffectively manage operating costsOffer consumers value for moneySDM- Ch 1017Tata McGraw Hill PublishingRetailing Trends - IndiaConsumer wants more benefits without additional costsRising income levels – cheap no longer works, but ‘value for money’Explosion of communication channels influences choices of productsIncreased literacy has made consumer more conscious of his bargaining powerGrowing number of urban nuclear familiesSDM- Ch 1018Tata McGraw Hill PublishingRetailing Trends - IndiaInfluence of retailer increasing – assortment plus other facilities offeredRural consumers want the same things and as their urban counterparts and are willing to pay for itBetter organized supply chains to cater to a large number of outlets in different locationsImproved infrastructure helping the consumersBigger volumes help in economies of scaleSDM- Ch 1019Tata McGraw Hill PublishingFDI in Retail in IndiaMNC players showing interest to operate in IndiaResistance from the existing playersSo far only cash-and-carry permittedFranchisees also allowed – KFC, Tag Heuer, Swatch, McDonaldsJan 2006, 51% FDI permitted in single brand businesses:All products should be under the same brand nameSame brands should be sold internationallyBranding at the time of manufacturing itselfSDM- Ch 1020Tata McGraw Hill PublishingTrade / Retail FormatRange of goods and customer service dimensions determine the ‘format’. Elements distinguish between stores and include:Store ambience. (Kemp Fort)Saving in time for shopping – interiors of practical design – reduce time for search and pick-up of goodsLocation Physical characteristics – external appearance, arrangement of goodsAll these are parts of the positioning strategy and influence the ‘footfalls’ to the store. SDM- Ch 1021Tata McGraw Hill PublishingCategories of Shoppers (1)Identified by Cook & WaltersTask focused shopper – visits the store to buy specific things he has planned for Convenience, minimum time, easily accessible goods, pleasing store formatGrocery shopping is an example Leisure shopper – more interested in the ambience and environment Has plenty of time, wants to have a good time while shoppingLifestyle stores are examplesSDM- Ch 1022Tata McGraw Hill PublishingCategory of Shoppers (2)Convenience goods (low value): probable gain from shopping and making comparisons is small compared to the time, effort and mental discomfort required in the search -toothpasteShopping goods (high value): gain is large - refrigeratorSpecialty goods: clearly distinguished by brand preferences – Maruti Zen car or Tag-Heuer watchTrading areaSDM- Ch 1023Tata McGraw Hill PublishingTrading AreaCatchment area from where most of the customers of a retail store comeCorner grocery store caters to the locality in which it is situatedDiscount stores have a wider area. Subhiksha locations for consumers in 2 km radiusSpecialty stores have a much wider trading area – MTR, Shoppers’ Stop etcTrading area increases with the size of the store and the variety it offersSDM- Ch 1024Tata McGraw Hill PublishingRetail StrategyPositioning of the retailerMerchandising Customer serviceCustomer communication SDM- Ch 1025Tata McGraw Hill PublishingPositioning StrategyWide range with a high value add – Lifestyle brand of storesLimited range but a high value add – Tanishque jewelry storeLimited range with a limited value add – Bata storesWide range of goods but a limited value add – a Food World outletSDM- Ch 1026Tata McGraw Hill PublishingMerchandisingA set of activities involved in acquiring goods and services and making them available at the places, times and prices and the quantity that enable a retailer to reach his goalsThe most critical function in retailDirectly effects the revenue and profitability of the storeAlso takes into account the assortment of goods and their qualitySDM- Ch 1027Tata McGraw Hill PublishingCustomer Service StrategyDeveloped to create ‘stickiness’ in customersPersonal data collected using IT – including purchasing practices and preferencesCustomer loyalty programs plannedCreate ‘customer’ delightLocation strategy to give competitive advantageUnderstanding the buying profile of the customers Communication SDM- Ch 1028Tata McGraw Hill PublishingCustomer CommunicationThe manner in which the retailer makes himself known to his customers. Has two parts to it:The messages which the retailer sends to his customers and prospectsThe word of mouth support which satisfied customers give to the retailer by talking to othersRetailer communicates about:Announcing the opening of a storePromotions running in the storeAdditional facilities introduced by the storesSDM- Ch 1029Tata McGraw Hill PublishingPricing StrategyPremium and indicating high valueReasonable pricing with good valueLow pricing but high value for moneyAll strategies are focused on giving value to the customerProduct differentiation.SDM- Ch 1030Tata McGraw Hill PublishingProduct DifferentiationFeature exclusive national brands not available in competing retailers – unlikelyExclusivity of products – specialty storesMostly private labels – WestsideFeature, big, specially planned merchandising events – Kemp Fashion sowsIntroduce new products before competition - -again unlikelyPerformance measuresSDM- Ch 1031Tata McGraw Hill PublishingRetail Performance MeasuresGross margin return on inventory investment – GMROIGross margin multiplied by ratio of sales to inventory (50%*4= 200%)Gross margin per full time equivalent employeeGross margin per square footSDM- Ch 1032Tata McGraw Hill PublishingFranchising Franchisor is the firm which wants to sell its goods or services Franchisee is the firm or group that are willing to sell the products or services on behalf of the franchisorThe first party gives advice and help to the second to find good locations, blue prints for a store, financial, marketing and management assistance Franchisor benefitsSDM- Ch 1033Tata McGraw Hill PublishingBenefits to FranchisorFaster expansionLocal franchisee pays lower advertising rates than a national firmOwners motivated to work more hours than mere employeesLocal taxes and licenses are responsibility of franchiseesFranchisee benefitsSDM- Ch 1034Tata McGraw Hill PublishingBenefits to FranchiseeQuick recognition among potential customersManagement training provided by principalPrincipal may buy ingredients and supplies and sell to franchisee at lower pricesFinancial assistancePromotional aids, in-store displays etcElectronic channelsSDM- Ch 1035Tata McGraw Hill PublishingRetailing on the InternetUnlimited assortmentItems may not be on hold – someone has to deliver the product – delaysNo product touch or feelMore info makes the customer a better shopperComparison shopping possibleConsumer has to plan purchases aheadNo need to handle cash – payment can be on-lineShopping is 24X7SDM- Ch 1036Tata McGraw Hill PublishingE-tailing IssuesLogistics support to sellingPayment gateway Customer product returnsConflicts with Brick &Mortar – overcome by selling separate productsFDI in retail.SDM- Ch 1037Tata McGraw Hill PublishingKey LearningsAny business selling / renting a product or service to a consumer is retailingA consumer selects a retailer based on price, location, merchandise selection, fairness in dealings, helpful sales people and other servicesOrganized retail is growing strong and negotiating better terms from producer suppliersIn India, upto 51% foreign investment is permitted in single brand businessesSDM- Ch 1038Tata McGraw Hill PublishingKey LearningsFormat defines the physical features of the store and its serviceTrading area is the catchment area from where the customers of store come fromRetail strategy is built on positioning, product offerings, merchandising and communicationRetail performance is measured by utilisation of space, inventory and manpowerE-tailing is buying goods on the Internet SDM- Ch 1039Tata McGraw Hill Publishing