Retail Marketing

Lecturer: S. van Renssen

Literature

• Introduction to Retailing, Lusch, Dunne, Carver ISBN 978-0-538-75507-8

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Overview

Introduction to Retail Marketing Ch. 1, 2 Retail Customers and Competition in retail Ch. 3, 4 Managing the supply chain, Legal and ethical behavior Ch. 5, 6 Market selection and location analysis Managing retailers finances Creating the proposition People and organisation Ch. 7 Ch. 8, 9, 10 Ch. 10, 11, 12 Ch. 14

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Learning Objectives

• Explain what retailing is.

• Describe trends in retailing • Describe the five methods used to categorize retailers.

• Explain different methods for the study of retailing

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What is Retailing?

• Retailing Consists of the final activity and steps needed to place a product in the hands of the consumer or to provide services to the consumer.

Modern retailing

• Retailer: Category Management • Manufacturer: Trade Marketing

Distribution Diagram

Your brand

Trade marketing

Competing brand Wholesaler Retailer

Retailmarketing

Consumer

Phases in the cooperation between manufacturer and retailer Manufacturer Consumer marketing (pull) Trade marketing Retailer Push marketing Retail marketing Professional cooperation

Trends in retailing

• Growth of E-tailing • Price competition • Internationalisation • Demographic shift • Store size increasing

Categorizing Retailers

• By industry or branch of activity (type of business) • Number of Outlets • Store Format (margin versus turnover) • Location • Size 10

Classification by industry or branch of activity • The United Nations system (ISIC, rev.4). Classification is by industry or branch of activity (one digit), with further subdivision into classes (two digits) and sub-classes (three digits).

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ISIC Code 471 4711 472 473 474 4719 4721 4722 4723 4730 Formal description Non-specialized retail trade in stores Retail sale in non-specialized stores with food, beverages or tobacco predominating Other retail sale in non-specialized stores Retail sale of food, beverages and tobacco in specialized stores Retail sale of food in specialized stores Common description Supermarkets Department stores This class includes - meat and meat products incl poultry - fish and seafood - fruit and vegetables - bakery products - confectionery and nuts stores - bottled water and soft drink stores - coffee stores - spice stores - other miscellaneous specialty food stores - beer, wine, and liquor stores - health food supplement stores - vitamin stores - tobacco stores Retail sale of beverages in specialized stores Retail sale of tobacco products in specialized stores Retail sale of automotive fuel in specialized stores retail sale of beverages - alcoholic beverages - non-alcoholic beverages retail sale of tobacco and tobacco products Retail sale of automotive fuel in specialized stores Retail sale of information and communications equipment in specialized stores Computers, peripheral units, software and telecommunications equipment in specialized stores

Classification by Number of Outlets

• Single independent store (mum-and-dad store) • Small chains (2-9 outlets) • Medium sized chains (10 – 50 outlets) • Large chains (50+ outlets) Retailers with several outlets are stronger because they can spread fixed costs

Classification by Store Format

• Discount stores • Convenience stores • Specialist stores • Style shops • Branded goods shops • Service shops • Locally specific shops • Non-store retailers • Supermarkets • Hypermarkets • Department stores

Margins Versus Turnover

• Gross Margin Is net sales minus the cost of goods sold.

• Gross Margin Percentage Is the gross margin divided by net sales or what percent of each sales € is gross margin.

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Margins Versus Turnover

• Operating Expenses Are the expenses the retailer incurs in running the business other than the cost of the merchandise.

• Inventory Turnover Refers to the number of times per year, on average, that a retailer sells its inventory.

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Margin versus Turnover

High margin, low tunover (most common) High performance retailers No survival Discount store Turnover

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Classification by Location

• Free Standing Sites • City or Town Locations – Inner City – Main Street • Shopping Centers – Strip Shopping Centers – Shopping Malls • Other Location Opportunities

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Classification by Size

• m 2 Sales Area • Number of employees (f.t.e.) • Sales volume • Larger retailer have lower operating costs per sales € than smaller firms

Assignment 1.

• • • • Go to www.careersinretailing.com

Pick any of the listed retailers. As a manager for your selected retailer, compare your retailer’s web site to that of several other retailers. What changes would you make to your web site? You want to use your web site to make individuals interested in working for your retail enterprise. 20

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A career in retailing

• Hard Work • Analytical Skills • Creativity • Decisiveness • Flexibility • Initiative • Leadership • Organization • Risk Taking • Stress Tolerance • Perseverance • Enthusiasm

The Study and Practice of Retailing

(P. 32) Analytical Method Manager is finder and investigator of facts.

Creative Method Manager is conceptual and very imaginative.

Two-Pronged Method Manager who employs both approaches.

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Strategic Planning in Retail

Mission statement Statement of goals and objectives Financial objectives Productivity objectives Societal objectives Personal objectives Strategies SWOT analysis

Elements of a Mission Statement

• • • How the retailer uses or intends to use its resources How it expects to relate to the ever-changing environment The kinds of values it intends to provide in order to serve the needs and wants of the consumer 24

Components of Strategic Planning

• Goals and Objectives are the performance results intended to be brought about through the execution of a strategy.

• • Market performance objectives Financial performance objectives 25

Market Performance Objectives

• • • Sales Volume Market Share (sales) Market share (sales volume) 26

Financial Performance Objectives

• • • • • Net Profit Margin Asset Turnover Return on Assets Financial Leverage Return on Net Worth 27

Strategic Profit Model

Net Profit Margin Net Profit*  Total Sales x Asset Turnover Total Sales  Total Assets = *Net profit after taxes 28 Return on Assets Net Profit*  Total Assets x Financial Leverage Total Assets  Net Worth = Return on Net Worth Net Profit*  Net Worth

Retail Objectives

29 Sales Volume Profitability Market Share Self Gratification Market Performance Objectives Retail Mission Financial Performance Objectives Personal Objectives Societal Objectives Productivity Employment Taxes Power and Authority Status and Respect Benefactor Equity Consumer Choice

Strategy

• Strategy Is a carefully designed plan for achieving the retailer’s goals and objectives.

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Retail Strategies

• Get shoppers into your store.

• Convert these consumers into customers by having them purchase merchandise.

• Do this at the lowest operating cost possible that is consistent with the level of service that your customers expect.

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Environmental analysis

• SWOT Analysis Is the identification and analysis of a retailer’s strengths and weaknesses and the opportunities and threats the firm faces.

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Strategy

• Retail mix Is the combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer.

• Brand mix Is the combination of brands (manufacturer brands, retailer brands) of the retailer.

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Retail Strategic Planning and Operations Management Model

Competitive Environment: Behavior of Consumers, Competition and Channel Members Strategic Planning Mission Goals and Objectives SWOT Strengths Weaknesses Opportunities Threats 34 Social and Legal Environment: Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior

Retail Strategic Planning and Operations Management Model

Competitive Environment: Behavior of Consumers, Competition and Channel Members Retail Marketing Strategy Target Market(s) Location(s) Retail Mix Brand mix Merchandise Pricing Advertising & Promotion Customer Service & Selling Store Layout & Design Operations Management Buying & Handling Merchandise Pricing Advertising & Promotion Customer Services & Selling Facilities High-Profit Performance Retailing 35 Social and Legal Environment: Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior