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Transcript of Retail formats
Part 2
Retail Management
TopicsPlace of Retailing in marketing mixRetail EnvironmentRetail formatsEvolution of RetailTheories of Retail DevelopmentScalability and shop displays
Place of Retail in mkt mix Mix includes the 6”p”s: product,
price,place,promotion,presentation, people Place: includes the distribution and
availability of products in various locations.Customers introduced to the product at the
store.“Point of Sale” or “Point of Purchase”Channel Power
Last channel in distribution
Manufacturer
Wholesaler
Retailer
Final consumerTypical channel
Retailers role in sorting process
Manufacturer Brand F
Manufacturer Brand B
Manufacturer Brand A
Manufacturer Brand C
Manufacturer Brand D
Manufacturer Brand E
Wholesaler
Wholesaler
Wholesaler
Retailer
Brand A customers
Brand B customers
Brand Ccustomers
Brand D customers
Brand Ecustomers
Retail EnvironmentBreaking bulkAssorting function: evaluates all the
different products available and offers to target the optimum array of products to cvhoose from
Storing function: stocking goods till customers are willing to buy and use them
Contribution of Retailing to Indian Economic Scenario Real estateTourism/outbound shoppingHigher GDPOutsourcing opportunities
Evolution of retail formats
EvolutionSocial developments and their impact: development of rail
road and telegraph-order placementBon Marche- 1852 Paris.Relied on volume,money back
guarantee5 and 10 cent stores- needs of poor classesMontgomery Ward- mail order catalogue for rural marketAtlantic & Pacific- first chain grocery storeThe Industrial Revolution: urnbanization,mass mfgSelf service: Piggly Wiggly, reduce costsSupermarketsSpeciality stores, malls and other formats- first
hypermarket:Carrefour:France, advent of massmerchandisers, barcode, all consumer needs in a single shopping area
The World Wide Web
3 principles of Modern Selling Fixed price before sale, customers
purchased at the set price Prices were determined on basis of stock
turns and the amount of profit that was generated from the product
Products were departmentalized
Considerations in planning a retail strategy mix
Retail Strategy mix Store location: store/non store format,
geographic area, site Operating procedures: Personnel,
management style, store hours. Goods/Services offered: one or many
product categories (low/med/high) Pricing: prestige/competitive/penetration
pricing Store atmosphere/customer services:
physical facilities, personal attention, return policies, deliveries
Promotion: Store displays, advt, personal selling and sales promotion
Theories of retail development
Theories of RetailingEnvironmental theoryCyclical theoryScrambled merchandisingThe Wheel of Retailing
Environmental Theory Change in retail is attributed to change
in environment where the retailers operate
“Survival of the fittest” Retail institutions are economic entities
and retailers confront an environment- customers+competitors+technology
Environmental change- alter the profitability
Retailers which adapt to this change successfully (technological, economic,demographic ) will grow and prosper
Cyclical Theory :Wheel of Retailing
E
ntry phase
Trading up phase
V
ulne
rabi
lity
phas
e
Mature retailer Top heavy Conservative Declining ROI
Innovative retailer Low status and price Minimum service Poor facilities Limited product offering
Traditional retailer Elaborate facilities Higher rent More locations Higher prices Extended product offerings
E
ntry phase
Trading up phase
V
ulne
rabi
lity
phas
e
Mature retailer Top heavy Conservative Declining ROI
Innovative retailer Low status and price Minimum service Poor facilities Limited product offering
Traditional retailer Elaborate facilities Higher rent More locations Higher prices Extended product offerings
Many price sensitive shoppers who will trade
customer services, wide selections and
convenient locations for lower prices
P.S. shoppers not loyal- will switch for lower
prices
New outlets will have lower operating costs
Moving up, retailers try to improve sales, image.
need to decide- low,medium or high end
strategy
Eg- traditional dept. stores- Walmart discount
retailer-prospered, low end- factory outlets,off
price chains etc.
Discount web retailers
Firms should be wary of strategy conversion- loss
of competitive advantage
High vs low end strategy
Low end Strategy High End strategyLow rental location- side
street No services or at addl
feesSpartan fixtures and
displaysPrice emphasis in
promotionSelf service or reduced
staff Crowded interior Most visible merchandise
Shopping centre or business district-high rental
Elaborate services-credit,decorating,wrapping,alterations etc
Elaborate fixtures and displays
No Price emphasis in promotion
Product demo,more sales staffSpacious interior Most merchandise is in the
back room
Scrambled Merchandising Retailer carries width of assortment- many
product linesRetailer adds goods and services which are
unrelated to each other and to the original business
Increase overall revenues- fast moving,profitable goods are added
One stop shopping,impulse shoppers. Eg Crossword
The Retail Life Cycle
Introduction Growth Maturity Decline
Sales Low/growing Rapid/accelerating
High, levelling off
Dropping
Profitability Negative /break even
High yield High/declining
Low to break even
Positioning Concept innovation
Special need Broad market Niche
Competition None Limited Extensive/saturated
Intensive/consolidated
Innovation
Growth
Maturity Decli
ne
Profit
TIME
SA
LES
Growth of Retail Markets
Characteristics:
• Evolving, diffused formats
• Regional presence
• Conjectural presence in each market• Lower market share per market
• Lack of availability of retail real estate space at reasonable cost
• High degree of competition from unorganised players
• Investment stage with high incremental investments
• Mainly promoter and angel investor financing
• Presence in few merchandise categories
• Lack of scientific merchandise planning process
• High bargaining power of vendors• High logistivs and merchandise
acquisition costs• High degree of resistance from
consumers towards organised formats
Characteristics:
• Evolving, diffused formats
• Regional presence• Conjectural presence in each market• Lower market share per market
• Lack of availability of retail real estate space at reasonable cost
• High degree of competition from unorganised players
• Investment stage with high incremental investments
• Mainly promoter and angel investor financing
• Presence in few merchandise categories
• Lack of scientific merchandise planning process
• High bargaining power of vendors• High logistivs and merchandise
acquisition costs• High degree of resistance from
consumers towards organised formats
Characteristics:
• Established format characteristics
• Development of speciality formats• Movement towards national presence
• Rapid expansion phase• Availability of retail space at reasonable
costs• Growth in internal and external
competition
• Larger penetration into individual markets
• Accelerated investments in new projects with lower incremental investments
• Private equity, venture capital, debt and equity market financing accessible
• High cost of financing
• Increase in breadth and depth of merchandise categories
• Introduction of scientific merchandise planning process
• Focus on private label development• Bargaining power with vendor
increases• Consumers start accepting new formats
Characteristics:
• Established format characteristics
• Development of speciality formats• Movement towards national presence
• Rapid expansion phase• Availability of retail space at reasonable
costs• Growth in internal and external
competition
• Larger penetration into individual markets
• Accelerated investments in new projects with lower incremental investments
• Private equity, venture capital, debt and equity market financing accessible
• High cost of financing• Increase in breadth and depth of
merchandise categories• Introduction of scientific merchandise
planning process• Focus on private label development• Bargaining power with vendor
increases• Consumers start accepting new formats
Characteristics:
• Increasing specialisation in formats
• National and international presence• New store expansion tapers• Oversupply of retail space
• Significant competition from other organised players and overlapping formats
• Increasing focus on differentiation strategies
• Peak penetration into individual markets
• Market share stagnates• Low incremental investments required
• Investments funded through internal accruals
• Cost of financing declines
• Customer acquisition costs increase• Substantially large breadth and depth
of merchandise categories
• Private labels assume strategic significance for improving profitability
• Vendors enjoy low bargaining power
• Increasing collaboration with vendors to drive supply chain efficiencies
• Consumers demand higher service levels as awareness increases
Characteristics:
• Increasing specialisation in formats
• National and international presence• New store expansion tapers
• Oversupply of retail space• Significant competition from other
organised players and overlapping formats
• Increasing focus on differentiation strategies
• Peak penetration into individual markets
• Market share stagnates• Low incremental investments required
• Investments funded through internal accruals
• Cost of financing declines
• Customer acquisition costs increase• Substantially large breadth and depth
of merchandise categories
• Private labels assume strategic significance for improving profitability
• Vendors enjoy low bargaining power
• Increasing collaboration with vendors to drive supply chain efficiencies
• Consumers demand higher service levels as awareness increases
Characteristics:
• Consolidation of formats
• National and international presence• New store expansion stagnates or falls• Retail space supply tapers, leading to
higher acquisition costs/lease rentals
• Significant competition from other organised players and alternative formats
• Over penetration into individual markets• Growth decelerates
• Market shares of individual players decline
• Dependence on external finance to fund investments increases
• High cost of financing• Customer retention costs increase
• Consolidation of merchandise categories
• Revamp in private label strategy
• Low bargaining power of vendors –vendors start losing out as competitive pressures lead to squeezing of vendors
• Consumers demand higher service levels as awareness increases
• Consumers shift to alternative formats
Characteristics:
• Consolidation of formats
• National and international presence• New store expansion stagnates or falls• Retail space supply tapers, leading to
higher acquisition costs/lease rentals• Significant competition from other
organised players and alternative formats
• Over penetration into individual markets• Growth decelerates
• Market shares of individual players decline
• Dependence on external finance to fund investments increases
• High cost of financing• Customer retention costs increase
• Consolidation of merchandise categories
• Revamp in private label strategy
• Low bargaining power of vendors –vendors start losing out as competitive pressures lead to squeezing of vendors
• Consumers demand higher service levels as awareness increases
• Consumers shift to alternative formats
• Risks:• Availability of finance• Low fixed cost coverage leading to
high operating leverage• High individual property risk
• Format risk due to lack of stability
• Market risk in terms of acceptability of format by customers
• Risks:
• Availability of finance• Low fixed cost coverage leading to
high operating leverage• High individual property risk• Format risk due to lack of stability
• Market risk in terms of acceptability of format by customers
• Risks:
• Finance availability• Highly geared financial structure
• Private label establishment• IT integration
• Risks:• Finance availability
• Highly geared financial structure
• Private label establishment• IT integration
• Risks:• Market risk due to increase in
competition• Consumer retention risks
• Risks:
• Market risk due to increase in competition
• Consumer retention risks
• Risks:• Business risk increases and payback
periods from new projects increase• Increasing finance risk• New project risks in international
markets• Competition from alternative formats• Consumer retention risks
• Risks:• Business risk increases and payback
periods from new projects increase• Increasing finance risk• New project risks in international
markets• Competition from alternative formats• Consumer retention risks
African markets Indian markets South Asian markets Developed markets
INCEPTION (10 years)
GROWTH (15- 25 years)MATURITY (5 - 10 years)
STAGNATION (5 - 10 years)
TIME
SALES
Characteristics:
• Evolving, diffused formats
• Regional presence
• Conjectural presence in each market• Lower market share per market
• Lack of availability of retail real estate space at reasonable cost
• High degree of competition from unorganised players
• Investment stage with high incremental investments
• Mainly promoter and angel investor financing
• Presence in few merchandise categories
• Lack of scientific merchandise planning process
• High bargaining power of vendors• High logistivs and merchandise
acquisition costs• High degree of resistance from
consumers towards organised formats
Characteristics:
• Evolving, diffused formats
• Regional presence• Conjectural presence in each market• Lower market share per market
• Lack of availability of retail real estate space at reasonable cost
• High degree of competition from unorganised players
• Investment stage with high incremental investments
• Mainly promoter and angel investor financing
• Presence in few merchandise categories
• Lack of scientific merchandise planning process
• High bargaining power of vendors• High logistivs and merchandise
acquisition costs• High degree of resistance from
consumers towards organised formats
Characteristics:
• Established format characteristics
• Development of speciality formats• Movement towards national presence
• Rapid expansion phase• Availability of retail space at reasonable
costs• Growth in internal and external
competition
• Larger penetration into individual markets
• Accelerated investments in new projects with lower incremental investments
• Private equity, venture capital, debt and equity market financing accessible
• High cost of financing
• Increase in breadth and depth of merchandise categories
• Introduction of scientific merchandise planning process
• Focus on private label development• Bargaining power with vendor
increases• Consumers start accepting new formats
Characteristics:
• Established format characteristics
• Development of speciality formats• Movement towards national presence
• Rapid expansion phase• Availability of retail space at reasonable
costs• Growth in internal and external
competition
• Larger penetration into individual markets
• Accelerated investments in new projects with lower incremental investments
• Private equity, venture capital, debt and equity market financing accessible
• High cost of financing• Increase in breadth and depth of
merchandise categories• Introduction of scientific merchandise
planning process• Focus on private label development• Bargaining power with vendor
increases• Consumers start accepting new formats
Characteristics:
• Increasing specialisation in formats
• National and international presence• New store expansion tapers• Oversupply of retail space
• Significant competition from other organised players and overlapping formats
• Increasing focus on differentiation strategies
• Peak penetration into individual markets
• Market share stagnates• Low incremental investments required
• Investments funded through internal accruals
• Cost of financing declines
• Customer acquisition costs increase• Substantially large breadth and depth
of merchandise categories
• Private labels assume strategic significance for improving profitability
• Vendors enjoy low bargaining power
• Increasing collaboration with vendors to drive supply chain efficiencies
• Consumers demand higher service levels as awareness increases
Characteristics:
• Increasing specialisation in formats
• National and international presence• New store expansion tapers
• Oversupply of retail space• Significant competition from other
organised players and overlapping formats
• Increasing focus on differentiation strategies
• Peak penetration into individual markets
• Market share stagnates• Low incremental investments required
• Investments funded through internal accruals
• Cost of financing declines
• Customer acquisition costs increase• Substantially large breadth and depth
of merchandise categories
• Private labels assume strategic significance for improving profitability
• Vendors enjoy low bargaining power
• Increasing collaboration with vendors to drive supply chain efficiencies
• Consumers demand higher service levels as awareness increases
Characteristics:
• Consolidation of formats
• National and international presence• New store expansion stagnates or falls• Retail space supply tapers, leading to
higher acquisition costs/lease rentals
• Significant competition from other organised players and alternative formats
• Over penetration into individual markets• Growth decelerates
• Market shares of individual players decline
• Dependence on external finance to fund investments increases
• High cost of financing• Customer retention costs increase
• Consolidation of merchandise categories
• Revamp in private label strategy
• Low bargaining power of vendors –vendors start losing out as competitive pressures lead to squeezing of vendors
• Consumers demand higher service levels as awareness increases
• Consumers shift to alternative formats
Characteristics:
• Consolidation of formats
• National and international presence• New store expansion stagnates or falls• Retail space supply tapers, leading to
higher acquisition costs/lease rentals• Significant competition from other
organised players and alternative formats
• Over penetration into individual markets• Growth decelerates
• Market shares of individual players decline
• Dependence on external finance to fund investments increases
• High cost of financing• Customer retention costs increase
• Consolidation of merchandise categories
• Revamp in private label strategy
• Low bargaining power of vendors –vendors start losing out as competitive pressures lead to squeezing of vendors
• Consumers demand higher service levels as awareness increases
• Consumers shift to alternative formats
• Risks:• Availability of finance• Low fixed cost coverage leading to
high operating leverage• High individual property risk
• Format risk due to lack of stability
• Market risk in terms of acceptability of format by customers
• Risks:
• Availability of finance• Low fixed cost coverage leading to
high operating leverage• High individual property risk• Format risk due to lack of stability
• Market risk in terms of acceptability of format by customers
• Risks:
• Finance availability• Highly geared financial structure
• Private label establishment• IT integration
• Risks:• Finance availability
• Highly geared financial structure
• Private label establishment• IT integration
• Risks:• Market risk due to increase in
competition• Consumer retention risks
• Risks:
• Market risk due to increase in competition
• Consumer retention risks
• Risks:• Business risk increases and payback
periods from new projects increase• Increasing finance risk• New project risks in international
markets• Competition from alternative formats• Consumer retention risks
• Risks:• Business risk increases and payback
periods from new projects increase• Increasing finance risk• New project risks in international
markets• Competition from alternative formats• Consumer retention risks
African markets Indian markets South Asian markets Developed markets
INCEPTION (10 years)
GROWTH (15- 25 years)MATURITY (5 - 10 years)
STAGNATION (5 - 10 years)
TIME
SALES
RETAIL FORMATS
Conventional Retail formatsProducts available in shantiesSmall mobile retailers: products available
on handcarts, bicycles etcSmall shops which got converted to
bazaars
Contemporary Retail Formats by Customer MediationActivity Elements
In store Catalogue
Cable tV www Telephone
Means of Mediation
Humans in brick and mortar environment
Paper and telephonic
Broadcast and telephonic
Computer and Voip
Telephonic
Customer interface
Face to face sales service
Remote, print ,response voice only
Remote,voice only
Remote, IVR
Remote, voice only
Product Presentation
3 D displays
Photo and text
Tv image and demo
Image and text
Telephonic product and service description
Store formatsCreate a distinct image of store amongst
customers.- By location- By ownership- By layout- By design- By merchandise- By service experience
Store formats by location
Chain Store format
•Multi locational•Owned &operated by single org with signature store design, merchandising plan , cohesive promotional and service strategy. Eg Lifestyle
High Street format
•Busy shopping areas•Less than 2000 sq ft, no parking ,and focused merchandise•Eg Amarsons,Premsons
Destination Format
•Only shopping•Large in size,ample parking,wide merchandise•Phoenix
Convenience store format
•Area of target customers•Quick access and wide range•<5000 sqft,parking,extended hours of operation•D Mart
Store formats by merchandise
Family store
• Apparel for whole family
• Eg Shoppers Stop
Specialty Store
• Narrow product line with good depth
• Attentive customer service
• Eg Park Avenues by Raymonds
Department store
• More than 10000 sq ft,more than 100000 SKU, Several departments,apparel,electronics,cosmetics etc
• Each section functions as a separate SBU
• Eg Shoppers Stop
Super Market
• Food,grocery
• Limited non food items
• >3000 sq ft and 30000 SKUs
• D Mart
Store formats by size
Super store• Large, food
and non food items. Twice the size of supermkt ,offers non traditional goods and services such as pharmacy,florist,bakery under one roof
• Eg Shoprite
Shopping mall• Retail and
leisure• More than
200000 sq ft and runs as an integrated business by a single owner
• Eg Park Avenues by Raymonds
Shopping centre
• More than 5 shops each approx 1000 sq ft
Hyper Market • Food,grocer
y• Pharmacy,fl
orist,photo shop cds etc
• >200000 sq ft ,large qtys in each category at low margins
• Shoprite
Store formats by price
Discount/bazaar format• Discounts at 25% below or prices below MRP.
• MFGS overruns,irregulars,unsold from last season
• Eg Parel
EDLP
• Every day low pricing
• Found more in Western countries
Category killer
• Large specialty store with an enormous selection of its product category at low prices
Warehouse
• large sale of discounted merchandise by an individual or orgnaization in free access ambience of an warehouse
• Both width and depth of retailed merchandise
Single price denomination format
• Scrambled merchandise at a single low price point
• Dollar shops, Rs49/99 shops
Store format by ownershipFranchisee format: owned and operated by
individuals on behalf of and licensed by a large organization
Independent store: owned by a single person or a partner
Store format by concessionsStopover format: piggybacks on other retail
outlet eg crosswords at petrol pumps, In and out at BPCL
Kiosks: placed in mall, airports, etc. used for information, sales and promotion. Eg HT at airports free copies
Impact of scalabilityAchieves profitabilityEnsures an efficient rolloutGreatest shopping opportunity & highest
customer satisfactionStrategic mix of all formats to cater to all
target customersAchieves its positioningCore USP/value proposition for its
customers