Retail Marketing (Chapters 1-5) – Flashcards
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Retailing
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Set of business activities that adds value to the products and services sold to consumers for their personal or family use. Part of the distribution channel Also involves sale of services
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Retailer
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A business that sells products and/or services to consumers for personal or family use. Kohl's, Macy's, Wendy's, Amazon.com, Jiffy Lube, AMC Theaters, Lands End, Avon, J.Crew
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Firms that are Retailers and Wholesalers
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Sell to other business as well as consumers: Office Depot, Lowes, United Airlines, Bank of America, Costco Large retailers engage in both wholesaling and retailing Ex: Wal-Mart, Safeway, Brown Shoe Company
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Supply Chain
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A set of firms that make and deliver a given set of goods and services to the ultimate consumer.
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Retailer's Role in the Supply Chain
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Retailers are the final business within a supply chain which links manufacturers to consumers. Part of the distribution channel ("Place")
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Logistics
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Storage/transportation Be efficient and save money
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Five Rights
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Right product at the Right price at the Right time at the Right place in the Right quantity Sell the most with the least amount of inventory
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Fast Fashion: Strategic Advantage
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Shorter cycle time from design to production to delivery to stores (3 days versus 3 times per year) Shorter lead time - own production, small quantity production in close proximity, efficient logistics, premium transportation, frequent delivery, "What's hot" No discounts necessary Zara, H and M, TopShop, Forever 21
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Vertical Integration
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Firm performs more than one set of activities in the channel Most supply chains feature this
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Backward Integration
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Retailer performs some distribution and manufacturing activities Ex: JCPenney sells Arizona jeans (Private Label)
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Forward Integration
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Manufacturers undertake retailing activities Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates its own stores
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How Retailers Add Value
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Provide Assortment - Buy other products at the same time Break Bulk - Buy it in quantities customers want Hold Inventory - Buy it at a convenient place when you want it Offer Services -See it before you buy; get credit; layaway
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Wholesalers
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Buy from manufacturers, sell to retailers
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Retail Mix
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Satisfy consumers and influence needs Types of merchandise and services offered Goods/services offered, pricing, advertising, store design, merchandise, location Walmart, Macy's, Target, Whole Foods example
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Corporate Social Responsibility
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The voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations, in addition to the concerns of its stakeholders Examples: Starbucks: pays its farmers 42% more than the commodity price of Arabica coffee beans Target: community giving programs (5% of income, $3 million a week)
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Nature of Retailing and Distribution in the U.S.
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Has the greatest retail density (wealth driven) Has the greatest concentration of large retail firms Large enough to operate their own warehouses, eliminating the need for wholesaling. The combination of large stores and large firms result in a very efficient distribution system. U.S is in the top 1% in the world
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Strategic Decisions
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Made Infrequently Long-term Require significant investment Not easily reversed ex. Store location
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Retail Strategy
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Identify the Competition - intratype competition (e.g., Dillards vs. Macys) -intertype competition (e.g., Dillards vs. Wal-Mart) Identify Potential Customers
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A Retail Strategy Should Identify:
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1. the target market 2. the product and service mix (Retail Mix) 3. a long-term, sustainable competitive advantage ex. Walmart, Whole Foods, FC Barcelona train station
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Characteristics of Retail Strategy
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Customer Service Location Merchandise Assortment Pricing Communication Mix Store Design/Display
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Variety
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Breadth of merchandise Wide vs. Narrow The number of merchandise categories
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Assortment
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Depth of merchandise Deep vs. Shallow The number of items in a category (SKUs)
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Merchandise Offering
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Variety Assortment Scrambled Merchandising (you wouldn't expect) Kayak example
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Supermarkets
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Conventional: 30,000 SKU Limited Assortment (extreme value food retailers) - Only 2,000 SKUs -Offer one or two brands or sizes - Designed to maximize efficiency and reduce costs - Offer merchandise at 40-60% lower prices than conventional - ALDI, Save-A-Lot - Fair trade
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Trends in Supermarkt Retailing
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Competition from Discount Stores - Efficient Distribution - Lower Costs - Lower Prices Changing Consumption Patterns - Time Pressure - Eating Out More - Meal Solutions
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Supermarket Survival
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Emphasize Fresh Perishables ("Power Perimeter") - Provide a Better In-store Experience Offer More Private Label Brands Target Health Conscious and Ethnic Consumers
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Supercenters
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The fastest growing retail category Large stores that combine a supermarket with a full -line discount store One-stop shopping experience WalMart is now the largest food retailer Hypermarkets, Big-box stores
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Warehouse Club
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Offer a limited and irregular assortment of food an general merchandise with little service at low prices Use low cost locations, inexpensive store design, little customer service Low inventory holding costs by carrying a limited assortment of fast selling items. 15% max markup.
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Convenience Stores
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Limited variety and assortment at a convenient location - Higher prices, shorter lines - Need to decrease depending on gas customers - Adding new services
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Types of General Merchandise Retailers
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Department Stores Specialty Stores Category Specialists (Big Box/Category Killer) Home Improvement Centers Discount Stores Drugstores Off-Price Retailers Extreme Value Retailers
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Issues in Department Store Retailing
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Competition -Below....Discount Stores on Price -Above....Specialty Stores Service, Assortment Lowering Costs by Reducing Services - Centralized Checkouts Building better relationships with their key customers (technology based) (Macy's Search and Send) Focus on Apparel and Soft Home Develop Private Labels and Exclusive Brands Undertaking multichannel and social media marketing campaigns to develop strong images for their stores and brands
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Three Tiers of Department Stores
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First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer service - Nordstrom, Neiman Marcus, Saks Second Tier: Retailers sell more modestly priced merchandise with less customer service - Macy's, Dillards Third Tier: Value oriented caters to more price conscious customer - JCPenney, Sears, Kohl's
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Issues in Discount Store Retailing
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Only Big Ones Left - Wal-Mart, Target Remain - Kmart was #1 - Kresge Invented the Category Differentiation Strategy - Walmart Dominates = Low Price and Good Value - Target = More Fashion Forward and Nice Experience Competition from Category Specialists - Toys-R-Us, Best Buy, Sports Authority Dollar Stores (Walmart vacated this space)
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Discount Store Competition
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Amazon Low prices Little service Lower costs
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Issues in Specialty Store Retailing
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Mall-Based Apparel Retailers Decline in Mall Shopping and Apparel Sales -Lack of New Fashions -Less Interest in Fashion ("Business Casual") -Increased Price Consciousness Lifestyle Formats - Urban Outfitters Growth in Resale Shops ("Rent the Runway")
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Category Specialists
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Deep and Narrow Assortments Destination Stores "Category Killers" or "Big Box" Stores Low Price and Service...usually Wholesaling to Business Customers and Retailing to Consumers Incredible Growth....Best ROA - Most store closes, growth in resale shops
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Issues in Extreme Value Retailing
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Focuses on Lower Income Consumers Names mostly imply good value not $1 price points Low Cost Location Limited Services One of the Fastest Growing Retail Segments Adding Food
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Off-Price Retailiers
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Offer an inconsistent assortment of brand name merchandise at low prices - TJX companies (T.J. Maxx, Marshalls, HomeGoods), Ross Stores, Burlington Coat Factory, Big Lots, Tuesday Morning
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Types of Retail Ownership
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Independent, Single Store Establishments Wholesale Supply-sponsored voluntary group (IGA, True Value Hardware) Corporate Retail Chains (Target) Franchises (can often be a combo of company owned and franchised stores)
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Services vs. Merchandise Retailers
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■ Intangibility (Can't Touch or See) Problems in Evaluating Service Quality by the Consumer (pre) and the Provider (post) ■ Simultaneous Production and Delivery Create and Deliver at the Same Time...Quality Control ■ Perishability Cannot Save, Store, or Resell (Airplane Seat) Matching Supply and Demand is Hard (Movie Matinee) ■ Inconsistency of the Offering Performed by People...No Two Services Identical Importance of HR Management
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Retail Channel
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Way a retailer sells and delivers to its customers Most common: store Channel: transaction Medium: communication
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Multi-Channel Retailer
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A retailer that sells merchandise or service through more than one channel. By using a combination of channels, retailers can exploit the unique benefits provided by each channel. (Brick and Mortar, Catalog, Online, and Mobile)
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Catalog Retailers
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Can add an electronic channel easily Ready to take orders Able to pack merchandise Able to deliver Able to handle returned merchandise Already have a database Visual merchandise for catalog is the same for electronic
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Using Multiple Channels to Interact with Customers
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Customers want to interact in different ways Each channel offers a unique set of benefits for customers Increase "Share of Wallet" Increase Sales and Profitability (no kidding!)
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Attribution
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Who gets credit for the sale? Browse on your phone (M-Commerce), you buy on your laptop (E-Commerce), and then pick up at the store because of free shipping (Brick and Mortar)? Digital influences $.64 of every dollar spent in-store Thanksgiving/Black Friday/Cyber Monday
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Amazon
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"Walmart Who?" Of every additional $1 spent by Americans online in 2015, Amazon captured 51 cents Amazon's market capitalization is $366 Billion now which dwarfs Walmart's $213 Billion Years of heavy investment in infrastructure and logistics has blanketed the country with 100 Amazon warehouses. Walmart added 4. Half of all households will be Amazon Prime members by 2020 Walmart.com is one sixth of Amazon sales and growing 10%. Amazon is +20%.
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Mobile Commerce
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Selling & buying of products by means of wireless mobile devices: Conducted via smart-phones & tablets "Mobile commerce is an essential component of a retailer's digital platform." Fastest-growing advertising strategy/tactic Location Based Marketing via GPS (issues?) 87% of U.S. retailers have mobile capability
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Mobile Coupons
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"The future of coupons is mobile" Primary methods: Mobile apps SMS (usable with non-smart phones) Targeting: "Smart" coupons "Geofencing" Loyalty programs
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Mobile Banking and Mobile Payments
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2 billion mobile deposits Mobile payments: Slow growth but large potential (forecast is +30% in 2017) Starbucks is largest mobile payment processor Your phone = browse, make lists, store directory, alerts in stores, coupons, process payment, and loyalty program. All in one.
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Showrooming
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Look at product in store but buy it cheaper online
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Why Multi-Channel Retailing?
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Overcome Limitations of Existing Format (Store Size, Inconsistent Sales Execution, Catalog Updates are Impossible) Expand Market (Geography, Demographics) Provide Services More Cost-Efficiently (Banking) Leverage Existing Assets (Economy of Scale) Develop Customer Shopping Behavior Insights
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Benefits of Stores
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Touching and feeling merchandise Personal service Risk reduction Immediate gratificaiton Entertainment and social interaction Browsing Cash payment
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Benefits of Catalogs
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Safety Convenience Ease of use
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Benefits of Internet
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Safety Convenience Broad and deep assortments Extensive and timely information Personalization
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Internet Channel
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Broader Selection More and Better Information to Evaluate Merchandise Personalization - Information is tailored to individual consumers to help them make quicker and better purchase decisions Information for Solving Problems, Not Just Merchandise Characteristics - Virtual Communities
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E-Commerce Superior Benefits
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GIFTS Saves time Saves effort in packing Saves effort in delivery SERVICES No Shipping Problems Examples Travel websites Banking Newspapers
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Overcoming E-Channel Limitations
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Use technology to convert "touch and feel" information into "look and see" information 3-D Imaging Zoom Technology Live Chat 360 Degree Viewing Virtual Models
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Conversion Rate
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the % of customers who enter a store or access a website and then buy a product from that same store or website. Increased by technology
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Capabilities for Multi-Channel Retailing
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Developing assortments and managing inventory Distribute merchandise efficiently from DCs to stores Present merchandise in catalogs Present merchandise on websites Process orders electronically Efficient distribution of individual orders to/from homes Operate information systems for all channels
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Opportunities to Enhance Multi-Channel Experience
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Order on Internet, Pick-Up in Store Promote Web Site In-store, on Receipts, Shopping Bags Product Availability in Stores Available on Website Kiosk in Stores to Order Merchandise Not Available in Stores Plan Purchases (Shopping Lists) on Website/Mobile In-Store Events Promoted on Website Ad Circular on Website, In store and Online Coupons QR Codes
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Resources Needed to Compete on the Internet
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Interesting, easy to use website Management Information Systems -Order processing and status - Customer database - Personalization software Retailing Skills (Was Initially Overlooked) -Managing inventory -Editing assortment Efficient Fulfillment Systems - Picking, packing, shipping individual orders - Handling returns - reverse distribution
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Market Segmentation
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Avoid wasting time and money Create a retail strategy that delights a viable segment LTCSA
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Viable Target Market
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Actionable - Similar needs/seek similar benefits? Identifiable - Determine segment size/find them? Substantial - Large enough? Reachable - Ways to market to them? Also: Attractiveness - Large or Large Enough. Growing, Little Competition = More Profits Consistent with Your Competitive Advantages
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Methods for Segmenting
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Geographic Geo-demographic Demographic Buying situation Benefit Lifestyle
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Ethical Concerns
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When does targeting become stereotyping? Targeting the vulnerable (children, low income, low education, various ethnic groups) Fast Food retailers are criticized for only targeting urban areas Grocery Store retailers are criticized for not targeting urban areas (food deserts).
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6 Steps in the Buying Process
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1. Need Recognition 2. Information Search (For Both Retailer and the Product) 3. Evaluation 4. Choice (For Both Retailer and the Product) 5. Visit Store/Internet/Catalog to Purchase Merchandise/Service 6. Loyalty (Post-Purchase Evaluation and Patronage Determination) - MOST IMPORTANT
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Utilitarian Needs
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Satisfied when purchases accomplish a specific task. Shopping needs to be easy, and effortless like a grocery or convenience store. (NEED)
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Hedonic Needs
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Satisfied when purchases accomplish a need for entertainment, emotional, and recreational experience as in department stores or specialty stores. (WANT)
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Hedonic Needs That Retailers Can Satisfy
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Stimulation - Background music, visual displays, scents Social experience Learn new trends and fashions Satisfy need for power and status - Upscale health resorts, Massage Envy Self-rewards - Personalized makeovers Adventure - Treasure hunting for bargains
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Cross Shopping
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Buy premium and low value products
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Ways to Stimulate Need Recognition
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• Suggestions by Sales Associates • Advertising and Direct Mail • Visual Merchandise in Store • Special Events in the Store • Signs/Displays • Free Food Sample • Sight/Sound/Smell/Touch/Taste - 5 Senses
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Factors Affecting the Amount of Info Search
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The value of searching versus the cost of searching Product Characteristics • Complexity and cost Customer Characteristics • Past experience • Perceived risk • Time pressure - Characteristics of the consumer and aspects of the market/buying situation Number of Alternative Brands
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Sources of Information
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Internal - Past experiences - Memory External - Consumer Reports - Advertising - Word of mouth - Internet - Social media
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Multi-Attribute Attitude Model
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Customers see a retailer, product, or service as a collection of attributes or characteristics Predict a customer's evaluation of a retailer, product, or service based on • Its performance on relevant attributes • the importance of those attributes to the customer
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Consideration Set
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The set of alternatives the customer evaluates when making a selection
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Top-of-Mind Awareness
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More stores in the same area (e.g., Starbucks) Signs, PR, ads, events, promotions Get exposure on search engines like Google Try to be at the top of the page
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4 Methods to Increase the Chance of a Store Visit
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Increase Performance Beliefs of Your Store - Lowes: "Not for Women" = Brighter Stores Decrease Performance Beliefs About Competitor (See "Political Ads") - Ace: Home Improvement Center = Too Big Increase Importance Weight of Attributes on which You Have an Advantage - Whole Foods: Healthy Food = Healthy Family Add a New Benefit on Which You Excel - Blood Diamond Case: Conflict Free Gems
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3 Approaches to Sustainable CA
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Building strong relationships with customers Building strong relationships with suppliers Achieving efficient internal operations
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Converting Evaluations into Purchases
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Don't stock out of popular merchandise Reduce waiting times at checkout Salesperson Information Extensive assortments Range of services EDLP and Credit Easy navigation and check-out at websites (amazon.com one click purchases) Offer liberal return policies, money back guarantees, refunds, and price matching
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Post-Purchase Evaluation
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Satisfaction - A post-consumption evaluation of how well a store or product meets or exceeds customer expectations Becomes part of the customer's internal information that affects future store and product decisions Builds store and brand loyalty
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Growth Strategies
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Market Penetration - Existing customers/ new consumers from the target/ buy more Market Expansion - New market segments Retail Format Development - Different retail mix for the same target Diversification - New mix, new market
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Extended Problem Solving
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Consumers devote time and effort to analyzing alternatives High risk Financial risks - purchasing expensive products or services Physical risks - purchases that will affect consumer's health and safety Social risks - consumers will believe product will affect how others view them
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Limited Problem Solving
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Most Common Moderate Time and Effort Customers engage in this when they have had some prior experience with products or services Customers rely more upon personal knowledge Majority of customer decisions involve limited problem solving
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Habitual Problem Solving
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Little or no conscious thought For purchases that aren't important to the consumer For merchandise consumers have purchased in the past For consumers loyal to brands or a store
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Engage Consumers in Habitual Decision Making
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If the customer habitually comes to you, reinforce behavior -Make sure merchandise is in stock - Provide good service - Offer rewards to loyal customer If the customer goes to your competitor's store, break the habit - Offer special promotions
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Brand Loyalty
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Committed to a specific brand May switch retailers to buy brand
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Store Loyalty
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Committed to a specific retailer Reluctant to switch retailers
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Encourage Impulse Buying
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Influence by using prominent point-of-sale (POS) display with a sign (24/7/365) Have Salespeople Suggest Add-ons Have Complementary Merchandise Displayed Near Product of Interest Put Merchandise Where Customers Are Waiting
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Family Influences Buying Decisions
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Purchases are for the entire family to use Whole family participates in the decision making process Retailers work to satisfy the needs of all family members Kids in the U.S. spend over $200 billion on personal items. They directly influence the purchase of another $300 billion worth of items such as food and clothing.
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Reference Groups
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One or more people whom a person uses as a basis of comparison for beliefs, feelings and behaviors. Affect buying decisions by: Offering information Providing rewards for specific purchasing behaviors Enhancing a consumer's self-image
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Fashion Life Cycle
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Early Adoption, Spreads to Larger Groups, Saturates, Declines, Obsolescence Time Can Vary Trickle-down Theory Mass Market Theory (Fashion leader in a peer group - horizontal...Camelbak Water Bottle, SmartPhone) Subculture/Trickle-up Theory (Urban Youth, Jeans, Rap)
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More Attention to Long-Term Strategic Planning
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Due to the emergence of New competitors New formats New technologies Shifts in customer needs
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Elements in Retail Strategy
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Target Market - The market segment(s) toward which the retailer plans to focus its resources and retail mix Retail Format - The nature of the retailer's operations—its Retail Mix Sustainable Competitive Advantage (LTSCA) - A long term advantage over the competition
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Chico's Strategy
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Target Market - Women 35 to 55 Who Want Comfortable, Casual, But Stylish Apparel Retail Format - Specialty Apparel Stores in Malls and Strip Centers Selling Private Label, Coordinated Outfits Bases for Building Sustainable Competitive Advantage - Unique Merchandise Sized 0,1,2,3 (Extended Sizes)
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Customer Loyalty
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More than simply liking one retailer over another Loyal customers will be reluctant to patronize competitive retailers Retailers build loyalty by: - Developing a strong brand for the store or store brands (Nordstrom, Sears Craftsmen) - Developing clear/precise positioning strategies (Target) - Creating an economic/emotional attachment with customers through loyalty programs (AA, Charity-ties)
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Retail Branding
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Stores use brand (store's name and store brands - private label brands) to build customer loyalty Can create an emotional tie with customers that build their trust and loyalty Facilitates store loyalty because it stands for a predictable level of quality Kenmore and Craftsmen at Sears
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Location
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Location is a competitive advantage A high density of Starbucks stores • Creates a top-of-mind awareness • Makes it very difficult for a competitor to enter a market and find good locations
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Human Resources
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"Employees are key to building a sustainable competitive advantage" Strategies for Recruiting and Retaining Talented Employees Employee Branding (Target: Red and Khaki, Hollister: Hollister Attire, SWA: Polos and Shorts) Develop Positive Organizational Culture
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Distribution and Info Systems
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By decreasing costs here, we can invest in: -Better services -Increase in breadth and depth -Decrease in prices -More marketing
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Vendor Relationships
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Low Cost - Efficiency Through Coordination -Electronic Data Interchange (EDI) - Collaborative Planning and Forecasting to Reduce Inventory and Distribution Costs Exclusive Sale of Desirable Brands Special Treatment - Early Delivery of New Styles - Shipment of Scarce Merchandise
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Keys to Success in Global Retailing
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Globally sustainable competitive advantage - Low cost, efficient operations - Wal-Mart, Carrefour - Strong private label brands: Starbucks, KFC - Fashion Reputation - The Gap, Zara, H&M - Category dominance - Best Buy, IKEA,Toys R Us Adaptability Global Culture Financial Resources
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7 Stages in the Strategic Retail Planning Process
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1. Define the business mission 2. Conduct a situation audit: Market attractiveness analysis Competitor analysis Self-analysis 3. Identify strategic opportunities 4. Evaluate strategic alternatives 5. Establish specific objectives and allocate resources 6. Develop a retail mix to implement strategy 7. Evaluate performance and make adjustments
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Elements in a Situation Audit
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Market Factors - Size, Growth, Seasonality, Business Factors Competitive Factors - Barriers to entry, Bargaining power of vendors, competitive rivalry Environmental Factors -Technology, economic, regulatory, social Analysis of Strengths and Weaknesses
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Performing a Self-Analysis
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At what is our company good? In which of these areas is our company better than our competitors? In which of these areas does our company's unique capabilities provide a sustainable advantage or a basis for developing one?
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Strengths and Weaknesses Analysis
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Management Capability: -Capabilities and experience of top management -Depth of Management--capabilities of middle management -Management's commitment to firm Financial Resources: -Cash flow from existing business -Ability to raise debt or equity financing Operations: -Overhead cost structure -Quality of operating systems -Distribution capabilities -Management information systems -Loss prevention systems -Inventory control system Merchandising Capabilities: -Knowledge and skills of buyers -Relationships with vendors -Capabilities in developing private capabilities Store Management Capabilities: -Management capabilities -Quality of sales associates -Commitment of sales associates to firm Locations Customers -Loyalty of customers
