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Lecture notes, all lectures

Retail Marketing and Distribution 311 (Curtin University of Technology)

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Retail Marketing & Distribution Unit

Info
CONTACTS

Unit Coordinator/Tutor: Aneeshta Gunness

Email: aneeshta.gunness@curtin.edu.au

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CHAPTERS 1 & 2 WEEK 1

CHAPTER 1: Introduction to Retailing

Retailing
Retailing Definition
All activities culminating in selling goods & services to end-user
consumers for their personal, family or household applications.

Opportunities in Retailing
 Starting new retail businesses
 Opening up a franchise
 Tap into globalization phenomena
 Internet & online shopping

Major Retailing Trends in Australia

 Multi-channel retailing
 Private labeling
 Retail technology
 CRM
 Retaining retail staf
 Changing consumers

Typical examples within the retail sector

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 Automotive Sales & Parts

 Banking & Financial Services
 Department & Fashion stores
 Education
 Entertainment & sporting events
 Fast moving consumer goods (FMCG)
 Information technology
 Professional services
 Real Estate Agents

Interesting Facts: Retailing in Australia

 770000 retailers in Australia
 50% Australian population worked in retailing
 Woolworths & Westfarmers big players
 Online retailing: $25 billion
 33-50% buy from overseas sites

Major Challenges Facing Retailers

 Understand the best way to serve customers while earning a fair
profit
 Stand out in a highly competitive environment where consumers
have many choices
 Grow our business while retaining a core of loyal customers (and
staf?)

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 Dealing with a changing retail landscape

Philosophy behind efective retailing

Retailers can best address these challenges by understanding and
applying the basic principles of retailing in the framework of a well-
structured systematic and focused retail strategy.

To do this, retailers can adopt what is known as Retailing Concept.

The Retailing Concept

Channels of Distribution

CHAPTER 2: Building and Sustaining Relationships in

Retailing

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Relationship Retailing
Retailers often seek to establish & maintain long-term bonds with
customers. This means they don’t act if each sale transaction is a
completely new encounter. Therefore must:
 Concentrate of the total retail experience
 Monitor satisfaction
 Stay in touch with customers
 What about customer loyalty programs?

Types of Loyalty Programs

Additional discounts at cash register
 Not a real loyalty program

1 free with every ‘n’ items purchased

 Easily copied – no customer database.

Rebates based on cumulative purchases

 Customer maintains records
 Can develop ‘heavy half’ programs like Hilton

Targeted oferings & mailing based on purchase history

 Tesco example: ‘Market research staf known more about my
customers than board chairperson’

Bonds
Retailers can try develop the following ‘bonds’ with their customers to
attract and hold them:
 Financial Incentives
 Psychological bonds
 Structural bonds

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Multi-channel retailing and social media

Multi-channel Retailing
A retailer potentially sells to consumers through multiple retail
formats. For example:
 Websites
 Physical stores
 Mail catalogues
 Telemarketing

Aspects of Multi-Channel Retailing

Cross selling possible across channels (in-store product availability;
information on website, etc)

Consistent pricing on all channels (credibility)

Can buy and return product regardless on channel

Role/benefits of each channel

 Store: try on, ease of return, fast availability, compare.
 Catalogue: permanency & true colour
 Web: 24/7, product info, reviews, personalization, current pricing
and closeout sales.

Influence of Social Media (US)

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Shoppers seek retailers on social media

 2/5 consumers follow retailers on one or more social media
platforms

For those consumers that have relied upon social media to influence
their sales purchases, then:
 70% used a retail blog to get to Firm’s Website
 68% use YouTube to browse and research products
 59% of those that use Pintrest purchased after they saw item on
this social media site
 33% of Facebook users purchased item after they saw it on their
newsfeed or friend’s wall.

Clearly social media can influence sales, so the challenge facing

retailers is how to use these platforms to advantage.

Sharing Information in Social Media (US)

Influence of Social Media

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Distribution Types
Distribution Types Impacting Retailers
 EXCLUSIVE: Manufactures/suppliers have one or few retailers
designating such retailers as the only ones to carry certain
brands or products within a specified area.
 INTENSIVE: Manufactures/suppliers sell their oferings through as
many retailers as possible.
 SELECTIVE: Manufactures/suppliers sell their oferings through a
moderate number of retailers.

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Strategic Retailing
Retail Management: A strategic approach
 Strategic planning
 Building relationships
 Make the retailing institutions professional
 Consumer behaviour and information gathering
 Implement elements of retailing strategy
 Integrating, analyzing and improving retail strategy

What is Retail Strategy Planning?

 An overall plan for building a retail firm
 Influencer of retailer’s business activities
 Influencer of retailer’s response to market forces

6 Steps in Retail Strategic Planning

1. Define the type of business
2. Set long-run & short-run objectives
3. Determine the customer market
4. Devise an overall, long-run plan
5. Implement an integrated strategy
6. Evaluate and correct

Aspects of Target’s Strategy

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 Growth objectives
 Appeal to a prime market
 Focus
 Distinctive image
 Customer Service
 Multiple points of contact
 Employee relations
 Innovation
 Commitment to technology
 Community involvement
 Monitoring performance

Defining Value
Does value mean consumers:
 Demand more for less from the shopping experience?
 Want to spend less time shopping?
 Split the commodity-shopping trip from the value-added trip?
 Look for entertainment in the shopping experience?
 All of the above & other things in the shopping experience?

Perspectives of Value
CHANNEL VIEWPOINT:
 Series of activities and processes that cater to consumers

CUSTOMER VIEWPOINT:
 View of the shopper’s perception of the value chain
 It is the view of all the benefits vs. the price paid.

Value through the retail Channel

 Value represents the total bundle of benefits ofered to
consumers through a channel of distribution.
 Includes factors such as:
o Store location & parking
o Retailers ambience
o Customer Service

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o Brands/products carried
o Product quality
o Retailer’s in-stock position
o Shipping, prices, image & other elements

Potential major pitfalls to avoid when planning

DO NOT:
 Plan value solely from a price perspective
 Provide value-enhanced services that customers don’t want or
will not pay extra for
 Compete in the wrong value/price segment
 Believe augmented elements alone create value
 Ever pay ‘lip service’ to customer service

A value-orientated checklist for retailers

 Is value defined from a consumer perspective?
 Does the retailer have a clear value/price point?
 Is the retailer’s value position competitively value-enhancing
services?

Fundamental service decisions/Questions

 What customer services are expected/augmented?
 What level of customer service complements image?

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 Should there be a choice of customer services?

 Should customer services be free?
 How can a retailer measure the benefits of providing customer
services against associated costs?
 How can retailers terminate customer services?

Common Loyalty Programs

To be strategic, these must be:
 Useful rewards to customers
 Recognize loyal behaviour
 Be appealing & attainable to customers
 Capable of honoring shopping behaviour
 Unique to participating retailers
 Comprised of personalized communication
 Consistent with the retailer image & oferings

Elements of Efective Channel Relationships

Customer Service
Strategic aspects to consider
Expected Customer Service

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 The service level that customers want to receive from any

retailer such as basic employee courtesy.

Augmented customer service

 The activities that enhance the shopping experience & give
retailers a competitive advantage

Approach to classifying customer services

Turning around weak customer service

Factors impacting perceptions of service retailing

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Examples of Time Value ofered by Service Retailers

Service Retailing
Characteristics
 Intangibility – cannot touch to service
 Inseparability – must be present to experience
 Perishability – cannot store a service
 Variability – difficulty to repeat same quality

Kinds of Service Retailers

 Rented goods services (e.g. DIY equipment)
 Owned goods services (e.g. Motor vehicles)
 Non-goods services (e.g. Haircuts)

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Aspects of retailing that help drive excellence

 Use of technology in retailing
 Ethics in retailing
 Social responsibility in retailing
 Consumerism in retailing
 Increasing customer interactions & services

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CH3: Strategic Planning in Retailing WEEK 2

Retail Strategy
The overall plan or framework of action that guides a retailer in
activities, normally:
 One year in duration
 Outlines mission, goals, consumer market, overall and specific
activities & relevant control mechanisms.
 Provides a structured framework to assist in that planning &
implementation of strategy.

Elements of a Retail Strategy

Benefits of Strategic Retail Planning

 Provides thorough analysis of requirements for doing business for
diferent types of retailers.
 Outlines retailer goals / outcomes.
 Allows retailers to determine how to diferentiate themselves
from the competition competitors.
 Allows retailers to develop an ofering that appeals to a group of
customers.
 Ofers an analysis of the legal, economic, and competitive
environment.
 Provides for the coordination of firm’s total eforts.
 Encourages anticipation and avoidance of crises.

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1. Situational Analysis
Organizational Mission
Retailer’s commitment to a type of business and to a distinctive role
in the chosen marketplace.

Ownership & Management

 Sole proprietorship is an unincorporated retail firm owned by one
person
 A partnership is unincorporated and owned by two or more
persons.
 A corporation is a retail firm incorporated state law

Goods and Services Categories (examples)

Durable goods retailers
 Automotive, furniture & appliances, timber & hardware.

Nondurable good retailers

 Apparel, foods, general merchandise, petrol stations.

Service retailers (personal)

 Laundry & dry cleaning, beauty/barber, health-care services

Service Establishments (hotel)

 Hotel & Motels, caravan parks & camps.

2. Objectives
Retailer Image & Position
An image represents how a given retailer is perceived by consumers
& other stakeholders.

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Two General Approaches to Retail Positioning

Mass Merchandising
Retailers ofer a discount or value-oriented image, a wide or deep
merchandise selection & large store facilities.

Niche Retailing
Retailers identify specific customer segments & deploy unique
strategies to address the desires of those segments rather than the mass

market.

Sales & Profit Outcomes

Sales Outcomes
 Generally function of volume of goods & services sold. Growth,
stability & market share most frequent outcomes.
Profit Outcomes
 Generally retailers look for a minimum level. Usually expressed in
dollar or percentage of a retailer’s sales.

3. Identification of Consumers
Three techniques that also impact positioning:
 Mass marketing (low cost)
 Concentrated marketing
 Diferentiated marketing

Retail Strategy – Low Costs

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 Removal of bad costs

 Use of private label products to reduce cost of
national/manufacturer brands
 Reduce product proliferation
 Obtain best net price not focus upon promotional monies, trade
incentives & forward buying.
 Low promotional expense (everyday low pricing)
 Proper employee utilization

Retail Strategy – Diferentiation

 Well-through out private labels (e.g. Target)
 Hiring right employees (value-profit chain)
 Empowering employees
 Use of a fun atmosphere
 Little things mean a lot
 Money-back guarantees

Strategic Implications of Approach Taken

Selection of target market is likely to impact upon the following
factors:
 Retailer’s location
 Goods & service mix
 Promotion eforts
 Price orientation

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 Overall strategy

4. Overall Strategy

Controllables in a legal environment

Additional Concerns/considerations for Retailing Strategy

Formulation
Strategic planning may need to factor some global retailing
considerations, namely:
 Assessing your international potential
 Getting expert advice and counseling
 Selecting your countries

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 Developing, implementing & reviewing an international retailing

strategy

Factors Afecting Success of a Global Retailing Strategy

 Timing of entry
 A balanced international program
 A growing middle class
 Matching concept to market
 Solo or partnering
 Store location and facilities
 Product selection

Factors to Consider when going Global

Selected factors in global retailing

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CHAPTERS 4 & 5 WEEK 3

CHAPTER 4: Retailers by Ownership

Independent Retailers
Classifications of Retail Institutions
 Ownership
 Store-based retail strategy mix
 Non-store based retail strategy mix (next week’s lecture)

Forms of Ownership
 Independent retailers
 Chain retailers
 Franchises
 Leased departments
 Vertical marketing system
 Consumer Cooperatives

Independent Retailers
 2.2M independent US retailers
 Account for 1/3 of total store sales
 70% of independents operated by owners and their families
 In Perth 32%

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Competitive State of Independents

Advantages
 Flexibility in formats, locations & strategy
 Control over investment costs, personnel functions & strategies
 Strong entrepreneurial leadership
 Personal image
 Consistency & independence

Disadvantages
 Lack of bargaining power
 Lack of economies of scale
 Limited long-run planning
 Over-dependence on owner
 Labour intensive operations

Chain Retailers
 Operate multiple outlets under common ownership structure
 Engage in some level of centralized or coordinating purchasing &
decision making
 In the US, there are roughly 110,000 retail chains operating
about 900,000 establishments.

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Competitive State of Chains

Advantages
 Bargaining power
 Cost efficiencies
 Efficiency maintained by computerization, warehouse sharing &
other functions
 Defined management philosophy
 Considerable efort in long-run planning

Disadvantages
 Limited flexibility
 Higher investment cost
 Complex managerial control
 Limited independence among personnel

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Franchises
Franchising
 A contractual agreement between a franchisor & a retail
franchisee that allows the franchisee to conduct business under
an established name & according to a given pattern of business.
 Franchisee pays an initial fee & a monthly percentage of gross
sales in exchange for the exclusive rights to sell goods & services
in an area

Diferent Franchise Formats

Product/Trademark (e.g. IGA & Bob Jane T-Marts)
 Franchisee acquires the identity of a franchisor by agreeing to
sell products and/or operate under the franchisor name
 Franchisee operates autonomously
 2.3 of retail franchising sales

Business Format
 Franchisee receives assistance, location, quality control,
accounting systems, startup practices & management training
 Common for restaurant or real-estate.

Structural Arrangements in Retail Franchising

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 Voluntary: A wholesaler sets up a franchise system and grants

franchises to individual retailers
 Cooperative: A group of retailers sets up a franchise system and
shares the ownership and operations of a wholesaling
organization

Franchising in Australia
The governing body for franchising in Australia is the Franchising
Council of Australia [FCA]. This is a non-profit body. The major objectives
of the council include:
 To establish standards of international best practice…
 To provide information and education about franchising…
 To lobby state and federal governments…..
 Develop a vital, strong and financial franchising sector.
 Advance the interests of members…
 Foster broad understanding among stakeholders.
 Build value-added services for members.

Competitive State of Franchising

Advantages
 Low capital required

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 Acquisition of well known names

 Operating/management skills taught
 Cooperative marketing possible
 Exclusive rights
 Less costly per unit

Disadvantages
 Over-saturation could occur
 Franchisors may overstate potential
 Contractual confinement
 Agreements may be cancelled or voided
 Royalties are based on sales – not profits.

From the Franchisor’s Perspective

Benefits
 National and/or global presence possible
 Qualifications for franchisee/operations are set & enforced
 Money obtained at delivery
 Royalties represent revenue stream

Potential Problems
 Potential for harm to reputation
 Lack of uniformity may afect customer loyalty
 Inefective franchised units may damage resale value &
profitability
 Potential limits to franchisor rules

Potential Conflicts – Franchisor VS. Franchisee

 High power of franchisor relative to franchisee
 Franchisor obtains profit based on gross sales, not on
franchisee’s profitability

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 Franchisor requires goods & services to be purchased from itself

or approved vendor
 Franchisor can break up territory of existing franchisee, reducing
its sales & profitability.

Leased Departments
A leased department is a department in a retail store that is rented
to an outside party:
 The proprietor is responsible for all aspects of its business and
pays a percentage of sales as rent
 The department store sets operating restrictions to ensure
consistency & coordination

Common Leased Departments for Department Stores

 Cosmetic/fragrances
 Beauty Salon/Spa
 Fine Jewelry/shoes
 Banks
 Photography studios

Competitive State of Leased Departments

Benefits
 Provides one-stop shopping to customers
 Lessees handle management
 Reduces store costs
 Provides a stream of revenue

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Potential Pitfalls
 Lessees may negate store image
 Procedures may conflict with department store
 Problems may be blamed on department store rather than lessee

Vertical Marketing Systems

Independent Channel System

Partially Integrated Channel System

Fully Integrated Channel System

Consumer Cooperatives
Cooperatives
 A cooperative is an organisation of individuals who pursue a
common goal

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 It is run diferently to any typical business

 Focus is on welfare of its members
 Diferent Types: consumer cooperatives, producer cooperatives,
hybrid, credit union, etc.

CHAPTER 5: Retailers by Store-Based Strategy Mix

Retailer Strategy
Retailers Strategy Mix
A strategy mix is the firm’s particular combination of:
 Store location
 Operating procedures
 Goods/services ofered
 Pricing tactics
 Store atmosphere
 Customer services
 Promotional methods

Earning ‘Destination Retailer’ Status

 Must be price-orientated and cost efficient
 Must be upscale
 Must be convenient
 Should ofer a dominant assortment
 Should ofer superior customer service

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 Must be innovative or exclusive

Retail Strategy Parameters

The Wheel of Retailing

Lessons
 Do not lose sight of your prime customer’s price consciousness

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 Beware of the dangers in upgrading target markets– Old segment

gets “sticker shock” and new segment does not accept retailer’s
revised positioning
 Do not create opening for new cost-conscious retailer to emerge
 Employ customer benefit costing to weigh the cost and benefits
of specific service upgrades
 Use unbundled pricing to separately charge for select services
such as delivery, installation etc.

The Retail Life Cycle

Retail institutions pass through identifiable life stages

How retail institutions are evolving

 Merges, diversification & downsizing
 Cost-containment & value-driven retailing

Methods for Cost Containment

 Standardizing procedures, store layouts, store size, and product
oferings
 Using secondary locations
 Placing stores in smaller communities
 Using inexpensive construction materials
 Using plainer fixtures and displays
 Buying refurbished equipment
 Joining cooperative buying and advertising
 Creatively financing inventories

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Retailer Types
Store-based retail strategy mixes

Convenience Store

Conventional Supermarket

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Food-Based Superstore (food based strategy mix)

Combination Store (food based strategy mix)

Box Store (Limited Line) – Food Based Strategy Mix

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Warehouse Store (food based strategy mix)

Mix Retailer Types - General Merchandise Strategy Mix Retailer

Types
Department Store

Specialty Store

Full-Line Discount Store (General Merchandise Strategy Mix)

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Variety Store (General Merchandise Strategy Mix)

Of-Price Chain (General Merchandise Strategy Mix)

Factory Outlet (General Merchandise Strategy Mix)

Membership Club (General Merchandise Strategy Mix)

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Flea Market (General Merchandise Strategy Mix)

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CH6: Web, Non-Store Based &

Non-Traditional Retailing WEEK 4
Overall Classifications of Retail Intuitions
Last Week’s Lecture
 Ownership
 Store-Based Retail Strategy Mix

This Lecture
 Non-store Based Retail Strategy Mix

Approaches to Retailing Channels

Multi-Channel Retailing
Purpose
Seek synergies among formats, for example:
 get product information on Web
 order through catalog then pick-up in store
 use kiosks for out-of-stock merchandise

Views each channel as creating value, for example:

 immediacy of store,
 24/7 of Web,

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 long lasting impression of catalog)

Channels are viewed as complementary, not competitive

Emerging Trends
 Increasing competition [e.g. more airlines in Australia].
 Changing customer lifestyles.
 Increasing usage of dual distribution channels.
 Changing media roles, technological advances, and global
penetration.

Non-traditional Retailing
Nontraditional retailing also includes formats that do not fit into
store and non-store-based categories.

Examples:
 Direct marketing
 Airport retailing
 Vending machines
 Video kiosks
 Online

Direct Marketing

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Customer is initially exposed to a good or service through a non-

personal medium and then orders by mail, phone, fax, or online.

Annual U.S. sales exceed $325BN (including the Web)

Other leading countries include:

 Japan
 Germany
 Great Britain
 France
 Italy
 Australia??

Characteristics of DM Customers
 Married
 Upper middle class
 35-50 years old
 Desire convenience, unique items, good prices

Advantages of DM
 Ability to pinpoint customer segments.
 Reduced costs and thus lower prices.

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 Large geographic coverage.

 Convenient to customers.
 Ability to eliminate some sales taxes.
 Supplements regular business without additional outlets.

Limitations of DM
 Products often cannot be examined prior to purchase.
 Costs may be underestimated.
 Response rates to catalogs under 10%.
 Long lead time required.
 Industry reputation sometimes negative.
 Clutter in the market will exist.

Data-base Retailing
Database marketing can also help underpin direct marketing and
comprises the collection, storage & usage of customer information
 Name and address
 Background of the consumer
 shopping interests
 purchase behavior

Observation of 80-20 rule.

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Involves data mining.

Factors customers use to select a DM firm

 Company reputation and image.
 Ability to shop whenever consumer wants.
 Types of goods and services.
 Availability of toll-free number or web site for ordering.
 Credit card acceptance.
 Speed of promised delivery time.
 Satisfaction with past purchases and good return policy.
 Competitive prices – comparative webpages??

Direct Marketing Media Selection

 Printed catalogs
 Direct-mail ads & brochures
 Inserts with monthly credit card and other bills (statement
stufers)
 Freestanding displays
 Ads or programs in mass media
 Banner ads or hot links on the Web
 Video kiosks

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Executing a Direct Marketing Strategy

Direct Selling
Direct selling includes personal contact with consumers in their
homes, other non-store locations and phone solicitations initiated by
retailer.
 Annual sales of $31 billion in the U.S., where 15 million people
are employed (more than 80 percent part-time).
 Annual foreign revenues of $85BN generated by 48 million
salespeople (United States).

Direct Selling Industry – Global/Australia

 55 million people involved globally.
 Annual sales $140BN [Globally] & $1.6BN [Australia]
 Approx. 500,000 people involved Australia
 2 million home visits per month.
 81% women sales persons, 5% work full-time.
 Key areas – skin care (15% m/s) and complimentary medicines
(23% m/s).

Vending Machines
 Vending machines are a cash- or card-operated retailing format
that sells goods and services.
 Eliminates sales personnel & allows 24-hour sales.
 Machines placed wherever convenient for consumers.

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 95 percent of the $50 billion in annual U.S. vending machine

sales involve hot/cold beverages & food items.

Emergence of WWW (online)

 The WWW way to access information on the Internet.
 People work with easy-to-use Web addresses (sites) and pages.
This can be search engine driven.
 Web users see words, charts, pictures, and video while hearing
audio.
 Both “Internet” and “World Wide” Web convey the same central
theme: online interactive retailing.

Why do Retailers use the web?

 Projects a retail presence in cyberspace.
 Enhances image of current oferings.
 Generates additional sales.
 Reaches geographically-dispersed customers.
 Provides information to customers.
 Promotes new products.
 Demonstrates new product benefits.
 Support other elements in the retail mix.

Role of the Web

 Provides customer service (e.g. e-mail).
 Can be more “personal” with consumers.

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 Conducts a retail business efficiently.

 Helps obtain customer feedback.
 Can promote special ofers.
 Describes employment opportunities.
 Presents information to potential investors, franchisees, and the
media.

Some Statistics Regards Retails Web Users

Five Stages of Developing Retail Web Presence

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Web & Online Strengths

Using the Web and online shopping has a number of distinct
advantages, namely:
 Wide variety of information
 Source of entertainment and fun
 Helps with interactive communications
 Wider selection of items
 Allows quick access to prices
 More convent [24/7]

Reasons customers DON’T stop online

 Lack of trust
 Fear of purchases
 Lack of security
 Lack of personal communication

Recommendations for Web Retailers

 Develop/exploit a well-known, trustworthy retailer.
 Tailor the product assortment for Web shoppers.
 Enable the shopper to “click” as little as possible.
 Provide a solid search engine.
 Use customer information.

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Video Kiosks
These are freestanding, interactive, electronic terminal that displays
products and related information.
 Some kiosks are located in stores to enhance customer service;
others let consumers place orders.
 There are 2.2 million video kiosks in use globally, nearly 1 million
of which are Internet-connected.

Airport Retailing
Some Issues
 Large group of prospective shoppers.
 Captive audience.
 Strong sales-per-square-foot of retail space.
 Strong sales of gift and travel items.
 Difficulty in replenishment.
 Longer operating hours.
 Duty-free shopping possible.

Multi-Channel Retailing
Principles
 Use same product identification in all channels.
 Price to give the “same value” in all channels.
 Assess infrastructure economies.
 Direct marketer data base and delivery system.
 Cross promote goods across channels.
 Use suitable partners (Amazon to sell, Fed Ex to deliver)

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CHAPTERS 7 & 8 WEEK 5

CHAPTER 7: Identifying & Understanding Consumers

Retailer-Customer Linkage

What Makes Retail Shoppers Tick

Demographic & Lifestyles

Demographics
Consumer data that is objective, quantifiable, easily identifiable &
measureable.
 Size
 Structure
 Distribution

Lifestyles

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Ways in which consumers & families live & spend time/money.

Based on social and physiological factors that are influenced by

demographics

Pepsi Segmentation

Implications of Demographic & Lifestyle on Retailing

Some areas lifestyles likely to impact:
• Gender Roles
• Consumer Sophistication and Confidence
• Poverty of Time

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• Component Lifestyles

Consumer Needs & Desires

• Needs are a person’s basic shopping requirements consistent with
present demographics and lifestyle.
• Desires are discretionary shopping goals that impact upon a
person’s attitudes and behavior.

Three Special Market Segments

In-Home Shoppers
• Shopping is discretionary, not necessary.
• Convenience is important.
• Active, affluent, well-educated.
• Self-confident, younger, adventuresome.
• Time scarcity is not a motivator.

Online Shoppers
• Use of Web for decision- making process as well as buying process.
• Convenience is important
• Above average incomes, well-educated.
• Time scarcity is a motivator.

Out-Shopper
• Out-of-hometown shopping.
• Young, members of a large family, and new to the community.
• Income and education vary.
• Like to travel, enjoy fine food, are active, and read out-of-town
newspapers.

Attitudes Towards Shopping

Examples
• Level of shopping enjoyment.
• Shopping time.
• Shifting feelings about retailing.

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• Why people buy or not on a shopping trip.

• Attitudes by market segment.
• Attitudes toward private brands.

Top Reasons for Leaving An Apparel Store Without Buying

Examples
• Cannot find an appealing style.
• Cannot find the right size.
• Nothing fits.
• No sales help is available.
• Cannot get in and out of the store easily.
• Prices are too high.
• In-store experience is stressful.
• Cannot find a good value.

Cross-Shopping
• Shopping for a product category at more than one retail format
during the year.
• Visiting multiple retailers on one shopping trip.

The Consumer Decision Process

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Key Factors in the Purchase Act

Perceived Risk & Consumers

Types of Consumer Decisions

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Types of Impulse Shopping

 Completely unplanned
o No intention of making a purchase
 Partially unplanned
o Decided to make a purchase but no brand/model decided
upon
 Unplanned substitution
o Decided to make a purchase with brand/model decided
upon but changes mind in-store

Stimulating Impulse Purchases

Devising a Target Marketing Strategy

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Possible Retailer Approaches

Mass Marketing
 Kohl’s Department Stores
Concentrated Marketing
 Foot Locker
Diferentiated Marketing
 Family Dollar

Environmental Factors & Customers

 State of the economy.
 Rate of inflation.
 Infrastructure for shopping.
 Price wars.
 Emergence of new retail formats.
 People working at home.
 Regulations on shopping.
 Changing social values and norms.

CHAPTER 8: Information Gathering & Processing in Retailing

How Information Flows in a Retail Distribution Channel

Suppliers Need to know

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Retailers need to know

Consumers Need to Know

Retail Information System

 Anticipates information needs of retail managers.
 Collects, organizes, and stores relevant data on a continuous
basis.
 Directs the flow of information to the proper decision makers.

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Data-Base Management
 A major element in an RIS.
 System gathers, integrates, applies, and stores information in
related subject areas.

Used for:
 Frequent shopper programs
 Customer analysis
 Promotion evaluation
 Inventory planning
 Trading area analysis

Five Steps
1. Plan the particular data base and its components and determine
information needs.
2. Acquire the necessary information.
3. Retain information in usable & accessible format.
4. Update the data base regularly to reflect changing demographics,
recent purchases, etc..
5. Analyze the data base to determine strengths & weaknesses.

In Action

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Data Warehousing

Components of a Data Warehouse

 Physical storage location for data – the warehouse.

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 Software to copy original databases and transfer them to

warehouse.
 Interactive software to allow processing of inquiries.
 A directory for the categories of information kept in the
warehouse.

Data Mining & Micromarketing

Data mining is the in-depth analysis of information to gain specific
insights about customers, product categories, vendors, etc..

Micromarketing is an application of data mining whereby retailers

use diferentiated marketing and develop focused retail strategy mixes for
specific customer segments.

Applying Universal Product Code Technology to Gain better

info

Marketing Research Process

Marketing Research in Retailing

The collection and analysis of information relating to specific issues
or problems facing a retailer.

Secondary Data

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Sources

Primary Data

Primary Data Decisions

In-house or outsource?

Sampling method?
 Probability
 Non-probability

Data collection method?

 Survey
 Observation
 Experiment

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 Simulation

Survey Methods
 In person
 Over the telephone
 By mail
 Online
 Disguised
 Non-disguised

A Semantic Differential for Two Furniture Stoes

Mystery Shoppers
Retailers hire people to pose as customers in order to evaluate
aspects of the store environment (e.g. sales presentations, display
maintenance, and service calls)

Experiments
An experiment is a research method in which one or more elements
of a retail strategy mix are manipulated under controlled conditions.

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 An element may be a price, a shelf display, store hours, etc.

 If a retailer wants to find out the efects of a price change on a
brand’s sales, only the price of that brand is varied.

Simulation
A simulation is a type of experiment whereby a computer program is
used to manipulate the elements of a retail strategy mix rather than test
them in a real-life setting.

Two simulation types are now being applied in retail settings: those
based on mathematical models and those involving “virtual reality.”

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CHAPTERS 9 & 10 WEEK 6

CHAPTER 9: Trading-Area Analysis

Location
Criteria to consider:
 Population size and traits
 Competition
 Transportation access
 Parking availability
 Nature of nearby stores
 Property costs
 Length of lease agreements
 Legal restrictions

Example – JB HiFi Locations

 Booragoon - Garden City
 Shopping Bunbury - Homemaker Centre
 CanningtonCarousel
 City - Perth Hay St Mall & Piccadilly Arcade
 Claremont Quarter
 Cockburn Gateway Shopping Centre
 Lakeside Joondalup
 Malaga

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 Mandurah
 Midland Central
 Myaree
 Osborne Park
 Rockingham City
 Whitford

Steps for Choosing a Store Location

 Step 1: Evaluate alternate geographic (trading) areas in terms of
residents and existing retailers
 Step 2: Determine whether to locate as an isolated store or in a
planned shopping center
 Step 3: Select the location type
 Step 4: Analyze specific alternate sites contained in the specific
retail location type

Trading-Area Analysis
A trading-area is a geographic area containing the customers of a
particular firm or group of firms for specific goods or services.

Benefits of Trading-Area Analysis

 Discovery of consumer demographics and socioeconomic
characteristics
 Opportunity to determine focus of promotional activities
 Opportunity to view media coverage patterns
 Assessment of efects of trading area overlap

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 Ascertain whether chain’s competitors will open nearby

 Discovery of ideal number of outlets, geographic weaknesses
 Review of other issues (e.g. transportation)

The Trading-Areas of Current & Proposed Outlets

Geographic Information Systems (GIS) Software to help determine

location
Digitized mapping with key location-specific data used to graphically
depict trading-area using:
 Population demographics
 Data on customer purchases
 Current and proposed competitor locations.

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The Segments of a Trading-Area

One Major Consideration in Trading Area

Destination stores (e.g. Bunnings)
 Have a better assortment, promotion, and image.
 They generate trading- areas much larger than competitors.

Parasite stores (e.g. Lottery-West Kiosk)

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 Do not create their own traffic & have no real trading-area of

their own.
 These stores depend on people who are drawn to area for other
reasons.

Trading Areas & Store Types

Computerized Trading-Area Analysis Models

Delineating trading areas for NEW stores
 Gravity Model

Two main types of Gravity models

1. Reilly’s (Based upon distance)
 Law: Establishes a point of indiference between two locations so
the trading-area of each can be determined.

Formula

Example

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Point of Indiference

Limitations of Reilly’s Law

 Distance is only measured by major thoroughfares; some people
travel shorter distances along cross streets.
 Travel time does not reflect distance traveled. Many people more
concerned with travel time than distance.
 Actual distance may not correspond with perceptions of distance.

2. Hufs (Based upon probability)

 Law: Delineates trading-areas on the basis of product assortment
at various locations, travel times from the shopper’s home to
alternative locations, and sensitivity of to travel time

Formula

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Example

Elements in Trading-Area Selection

 Population Characteristics
 Economic Base Characteristics
 Nature & Saturation of Competition

Evaluating Trading-Areas
Population Size & Characteristics Factors:
 Total size and density
 Age distribution
 Average educational level
 Percentage of residents owning homes
 Disposable income
 Per-capita disposable income
 Occupation distribution

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Availability of Labor Factors:

 Management
 Skilled employees
 Management trainees
 Clerical staf

Closeness to Sources of Supply Factors:

 Delivery costs
 Timeliness
 Number of manufacturers
 Number of wholesalers
 Availability of product lines
 Reliability of product lines

Economic Base Factors:

 Dominant industry
 Extent of diversification
 Growth projections
 Freedom from economic & seasonal fluctuations
 Availability of credit and financial facilities

Competitive Situation Factors:

 Number and size of existing competition
 Evaluation of competitor strengths & weaknesses
 Short- and long-run outlook
 Level of saturation

Availability of Store Location Factors:

 Number and type of store locations
 Access to transportation
 Owning versus leasing opportunities
 Zoning restrictions
 Costs

Regulation Factors:
 Taxes
 Licensing

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 Operations
 Minimum wages
 Zoning

CHAPTER 10: Site Selection

Contextual Overview of Site Selection
 Step 1: investigate alternative trading areas (Ch. 9)
 Step 2: determine what type of location is desirable
 Step 3: select the general location
 Step 4: evaluate alternative specific store sites

Note: Chapter 10 discusses steps 2-4.

Three Types of Locations

Which one is desirable to the retailer?
 Isolated Store
 Planned Shopping Center
 Unplanned Business District

Isolated Stores
Advantages
 No competition
 Low rental costs
 Flexibility
 Good for convenience stores
 Better visibility
 Adaptable facilities
 Easy parking

Disadvantages
 Difficulty attracting customers
 Travel distance
 Lack of variety for customers

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 High advertising expenses

 No cost sharing
 Restrictive zoning laws

Examples
 Large-Store Formats: Wal-Mart & Bunnings
 Convenience Stores: 7/11 & BP Select

Unplanned Business Districts

Planning Shopping Centers

Advantages
 Well-rounded assortments
 Strong suburban population
 One-stop, family shopping
 Cost sharing
 Transportation access
 Pedestrian traffic

Disadvantages

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 Limited flexibility
 Higher rent
 Restricted oferings
 Competition
 Requirements for association memberships
 Too many malls
 Domination by anchor stores

Location & Site Evaluation

One-Hundred Percent Location
The optimum site for a particular store

Checklist

1) Pedestrian Traffic
The most crucial measures of a location/site’s value are the number
& type of people passing by.

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Proper pedestrian traffic count should include:

 age and gender (exclude very young children)
 count by time of day
 pedestrian interviews
 spot analysis of shopping trips

2) Vehicular Traffic
Important for:
 Convenience stores
 Outlets in regional shopping centers
 Car washes
 Suburban areas with limited pedestrian traffic

3) Parking Considerations
 Number and quality of spots
 Distance of spots from stores
 Availability of employee parking
 Price to charge customers for parking

How many parking spaces?

Examples of the number of parking bays for various retailer types:
 Shopping centers = 4-5 spaces per 1000 square feet of gross
floor space
 Supermarkets = 10-15 spaces per 1000 square feet of gross floor
space
 Furniture stores = 3-4 spaces per 1000 square feet of gross floor
space

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4) Terms of Occupancy Considerations

 Ownership versus leasing
 Type of lease
o Straight Lease
o Percentage Lease
o Graduated Lease
o Net Lease
o Maintenance-Increase Recoupment Lease
 Operations and maintenance costs
 Taxes
 Zoning restrictions
 Voluntary regulations

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CH11: Retailing Organization & HR Mgmnt

WEEK 7
Planning & Organizing a Retail Firm
Target Market Needs
 Are there sufficient personnel to provide appropriate customer
service?
 As personnel knowledgeable & courteous?
 Are store facilities well maintained?
 Are the specific needs of branch store customers met?
 Are changing needs promptly addressed?

Employee Needs
 Are positions challenging & satisfying enough?
 Is there an orderly promotion program from within?
 Is the employee able to participate in the decision making?
 Are the channels of communication clear & open?
 Is the authority-responsibility relationship clear?
 Is each employee treated fairly?
 Is good performance rewarded?

Management Needs

Value Profit Chain & HRM Link

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Satisfaction Mirror
 Employee satisfaction & loyalty translates into high levels of
customer service & customer loyalty due to fairness of
management, quality of peers in workplace, employee
empowerment & monetary compensation.

Recognizes that employees interact with customers not

management (Jan Carlzon= Moments of Truth)

Process of Organizing a Retail Firm

Examples of Value-Chain Tasks to be Performed

 Buying merchandise for the retailer
 Shipping merchandise to the retailer
 Receiving merchandise & checking incoming shipments
 Setting prices & marking merchandise
 Inventory storage & control
 Preparing merchandise & window displays
 Facilities maintenance (e.g., keeping the store clean).
 Customer research & exchanging information.
 Customer contact (e.g., advertising, personal selling).
 Repairs & alteration of merchandise.
 Customer follow-up & complaint handling.
 Facilitating shopping (e.g., convenient site, short checkout lines).
 Coordination of retail functions.

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 Sales forecasting & budgeting.

Division of Tasks in Distribution Channel

Grouping Tasks into Jobs

Examples

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Job Description for Store Manager

Example

Classifying Jobs
 Functional (what they do)
 Geographic (where they do it)

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 Product classification
 Combination of the above

Principles for Organizing a Retail Firm

 Show interest in employees.
 Empower employees.
 Limit span of control.
 Trace line of authority from top to bottom.
 Delegate authority while maintaining responsibility.
 Acknowledge need for coordination & communication.
 Recognize the power of informal relationships.
 Monitor employee turnover, lateness & absenteeism.

The Basic Mazur Organisation Plan for Department Stores

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Mazur Plan
Revolves around four basic functions, namely:
 Merchandising
o buying/selling, stock planning.
 Publicity
o displays, event planning, advertising research.
 Store Management
o customer service, merchandise protection, receiving.
 Accounting & Control
o Credit, expense budgeting, inventory management.

Chain Retailer Organizations

 Centralized functional divisions - real estate, distribution, human
resources (top management)
 Elaborate information system & management controls
 Centralization of much of buying with room to adapt to local
markets

Department Store Organisation Formats

 Main store control– flagship executives oversee store units.
Extreme centralization
 Separate store organization—each store buys for itself and
maintains sales responsibility
 Equal store organization– buying is centralized; branch stores are
sales units

Organisation Structures for Small Independents

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Human Resource Management in Retailing

Key HRM “Levers”
 Recruiting (internal, external, third-party)
 Selecting
 Training & Development
 Compensating / Remunerating
 Supervising
 Assessing

Checklist of Selected Training Decisions

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Style of Supervising Retail Employees

Three basic approaches - management assumes:
 Employees must be closely supervised & controlled as only
economic inducements motivate
 Employees can be assigned authority & be self- managers;
motivation is intrinsic
 Employees apply a self-management approach

Components of Compensation
 Total compensation
 Salary plus commission
 Profit-sharing
 Bonuses

Employee Behaviour & Motivation

Several attitudes may afect employee behavior:
 Sense of accomplishment
 Enjoyment of work
 Attitude toward supervisors
 Attitude toward physical work conditions
 Confidence in company
 Knowledge of business strategy

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 Recognition of employee role in corporate outcomes

Employee Turnover Costs

Supermarket industry’s annual turnover costs can exceed its entire
profits by over 40 percent (Source: Coca-Cola Retailing Research Council)

Annual employee turnover for Publix, Stew Leonard’s and Wegman’s

is 5-6 percent versus 19 percent overall (Source: Fortune and Coca-Cola
data)

Direct & Indirect Costs of Employee Turnover

Direct Costs
Include: separation costs, exit interviews, replacement costs
(advertising, screening, new employee orientation) and training costs

Indirect costs
Include: customer dissatisfaction, reduced suggestion selling,
pricing errors, reduced morale among co-workers

True Cost of Employee Turnover

 Costs of using fill-in employees.
 Severance pay for exiting employees.
 Costs of hiring new employees.
 Training costs.
 Costs of mistakes and lower productivity while new employees
gain experience.
 Customer dissatisfaction due to the loss of prior employees and
the use of inexperienced workers.
 Lower continuity among co-workers.
 Poor employee morale when turnover is high.

Some key HRM issues

Women in Retailing:
 • Advancement opportunities.
 Flex time: the ability of employees to adapt hours.
 Job sharing.

Minorities in Retailing:

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 Clear policy as to the value of employee diversity

 Zero tolerance for insensitive workplace behavior.

Labour Laws & Retailing

Retailers must not:
 Hire underage workers
 Pay workers “of the books”
 Require workers to engage in illegal acts
 Discriminate in hiring or promoting workers
 Violate worker safety regulations
 Deal with suppliers that disobey labor laws

Final Note on HRM & Retail Employees

Retailers must always:
 Consider employees as an asset to the retail firm.
 Consider employees as a source of competitive advantage.
 Develop a program that rewards good behavior.
 Develop a program that reduces employee turnover.
 Empower employees whenever possible.
 Ensure employees are well-trained.
 Have a succession plan if possible for each role.

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Chapters 12 & 13 WEEK 8

CHAPTER 12: Operations Management – Financial

Dimensions

CHAPTER 13: Operations Management – Operational

Dimensions

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Chapters 14 & 15 WEEK 9

CHAPTER 14: Developing Merchandise Plans

CHAPTER 15: Implementing Merchandise Plans

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Chapters 16 & 17 WEEK 10

CHAPTER 16: Financial Merchandise Management

CHAPTER 17: Pricing in Retailing

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Chapters 18 & 19 WEEK 11

CHAPTER 18: Establishing and Maintaining a Retail Image

CHAPTER 19: Promotional Strategy

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Chapter 20 WEEK 14

CHAPTER 20: Integrating and Controlling the Retail Strategy

Wholesaling & Physical Distribution [Logistics & SCM)

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