Retail Management
Module 1 (Part 2)
Dr. Anupamaa S. Chavan
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Retail Mix/Strategy
◈ The performance of the retailer depends upon the
planning and implementation of retail mix or strategy
◈ The elements of retail mix /strategy depict the
characteristics of the retailer.
Retailer Characteristics
◈ PRICE OF THE MERCHANDISE: Discount Pricing,
Competitive Pricing, Premium Pricing
◈ TYPES OF MERCHANDISE/SERVICES : Food items, Non
Food/General items, Consumer durables, Services
◈ VARIETY & ASSORTMENT: General Merchandising,
Specialty Merchandising
◈ CUSTOMER SERVICES: Self Service, Assorted Service,
Full Service 3
Merchandise Offering
Variety (breadth of merchandise): wide vs. narrow
– The number of merchandise categories
Assortment (depth of merchandise): deep vs. shallow
– The number of items in a category (SKUs)
Retail Mixes
◈ Retailers Use Different Retail Mixes
◈ – Merchandise: variety (breadth) / assortment (depth)
◈ – Location
◈ – Pricing
◈ - Communication Mix
◈ - Services
◈ – Store design, visual merchandising
Types of Ownerships:
Independent/Single Store
Establishments
Chain Stores
Franchising
Consumer Co-operative Stores
Dr. Anupamaa Chavan
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Amazon - Case Study
◈ Founder: Jeff Bezos
◈ Founded: 5 July 1994, Bellevue, Washington, United States
◈ Headquarters: Seattle, Washington, United States
◈ Subsidiaries: Amazon owns over 40 subsidiaries, including Audible, Diapers.com, Goodreads, IMDb, Kiva Systems, Shopbop,
Teachstreet, Twitch and Zappos etc ………
◈ began as an online bookstore
◈ e-commerce products and services, including video and audio streaming, cloud computing, and artificial intelligence
◈ the world's largest online sales company,
◈ the largest Internet company by revenue, and
◈ the world's largest provider of virtual assistants and cloud infrastructure services through its Amazon Web Services (AWS) branch.
◈ founded the aerospace manufacturer and sub-orbital spaceflight services company Blue Origin in 2000
◈ Also purchased the major American newspaper The Washington Post in 2013 for $250 million, and manages many other
investments through his venture capital firm.
Amazon’s Jeff Bezos
◈ Jeffrey Preston Jorgensen was born in Albuquerque, New Mexico, on January 12,
1964,
◈ the son of Jacklyn and Theodore Jorgensen.
◈ After his parents divorced, his mother married Cuban immigrant Miguel "Mike"
Bezos in April 1968. Mike adopted four-year-old Jorgensen, whose surname was
then changed to Bezos.
◈ In 1986, he graduated from Princeton University with a Bachelor of Science in
Engineering (B.S.E.) degree in electrical engineering and computer science;
◈ He first worked at Fitel, a fintech telecommunications start-up, He transitioned
into the banking industry, he worked there from 1988 to 1990. He then joined D.
E. Shaw & Co, a newly founded hedge fund company, In late 1993, Bezos decided
to establish an online bookstore.
◈ He left his job at D. E. Shaw and founded Amazon in his garage on July 5, 1994
With a net worth of more than $200 billion as of June
2021, he was the richest person in the world according 8
to both Forbes and Bloomberg's Billionaires Index
Amazon India
◈ The company took its first steps into the Indian market in February 2012
◈ Third party retailers will sell their goods through Amazon's site using a "marketplace"
model, their retail concept in India
◈ https://www.youtube.com/watch?v=pMl-mAkvYqs
Amazon India MD Amit Agarwal & Jeff Bezos'
Exercise
Early in the morning when you get up and require a cup of
coffee; what do you do? Also mention the alternatives
available for the same.
- Make the coffee at home
- Go to Starbucks
- Get an Automatic Coffee Maker with a timer so that the coffee is ready when you wake up
For all the above options you have to approach a retailer
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Types of
Retailers
Store Non Store
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Store Retailers
• Food Retailers
• Non Food/General Merchandise Retailers
• Service Retailers
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Store Retailers
• 1. Convenience stores
Food Retailers •
•
2. Supermarkets
3. Supercentres
• 4. Warehouse Club
Non • 5. Departmental stores
• 6. Discount stores
Food/General • 7. Speciality stores
• 8. Off-Price Retailers
Merchandise • 9. Membership Club stores
• 10.Factory Outlets, Drug store
Retailers • 11. Cash and Carry
• 12.Personal care- Dry Cleaning, Beauty Salon, Health Centres
• 13. Entertainment/Recreation- Movie theatres, Golf Course, Clubs
Service Retailers
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Discotheques
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• 14. Repair- Automobiles, Electronic goods/Appliances Repair
• Rented Goods services
North American Industry Classification System (NAICS) Codes for
Retailers
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Non Store Retail Formats:
Direct Marketing
Direct Selling
E-Tailing
Catalogue/Mail order
Vending Machines
Kiosks
Tele-shopping
Direct Response retailing
Dr. Anupamaa Chavan Airport retailing 15
Services Retailing
• Intangibility
• Simultaneous Production and Delivery
• Perishability
• Inconsistency of the Offering
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Services Offered
◈ Retailers differ in the services
they offer customers
� EMS offers assistance in
selecting the appropriate kayak
and repairing them
� Vs
� Wal-Mart: doesn’t provide any
services
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Prices and the cost of offering breadth and depth of
merchandise and services
• Stocking a deep and broad assortment (like EMS) is costly for
retailers.
Many SKUs
Because the retailer must have backup stock for each SKU in addition to
holding the inventory
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Characteristics of Food Retailers
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Supermarkets
• Conventional supermarkets
– 30,000 SKU
• Limited Assortment
Supermarkets (extreme
value food retailers)
– 2000 SKU
– Offer one or two brands and sizes
– Designed to maximize efficiency and
reduce costs
– Offer merchandise at 40-60% lower
prices than conventional
supermarkets
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ALDI: German’s Wal-Mart
ALDI provides quality
◈ ALDI provides quality merchandise at low prices by reducing its assortment in order to
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control store operating expenses
Conventional Supermarket
• Emphasize Fresh Perishables
– Wegmans
• Target health conscious and ethnic
consumers
• Offer more private label brands
• Provide a better in-store experience
◈ Chef-crafted meals on the go at
EatZi’s
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Supercenters and Warehouse Clubs
Supercenters Warehouse Clubs
• Also known as Hypermarkets • Offer a limited and irregular assortment of
food and general merchandise with little
• The fastest growing retail service at low prices
category • Use low-locations, inexpensive store design,
• Large stores (185,000 square little customer service
feet) that combine a • Low inventory holding costs by carrying a
supermarket with a full-line limited assortment of fast selling items
discount store
• One-stop shopping experience
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Convenience Store
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Characteristics of
General Merchandise Retailers
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Group No:
Names & Roll
Name of the Retail format Nos.:
Retail Characteristics/Mix:
Two Examples of International Retail Brands Two Examples of Indian Retail Brand
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Types of Competition
◈ Competition between same type of retailer is called Intratype Competition
� Eg: One departmental store competes with another departmental store
◈ Competition between retailers having different formats is Intertype Competition
� Eg: Food items are now provided grocery store, discount store, supercenters and also a
drug store
When retailers offer merchandise not typically associated with their type of store such as
Apparel and Jewelry section added by Walgreens which is a drug store, this result in
Scrambled Merchandising.
Scrambled Merchandising increases intertype competition
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IKEA founded in 1943
Ingvar Kamprad Elmtaryd Agunnaryd
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IKEA INDIA
◈ The furniture giant opened its first
store in India in Hyderabad on August
9, 2018.
◈ IKEA has launched its first online
store in Mumbai offering more than
7,500 products
◈ The global home furnishings retailer
said the online store is part of its new
multichannel approach to reach 100
million customers in the next three
years. IKEA aims to be present in 49
cities by 2030
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Theories of Retailing
Environmental Theory
Cyclical Theory – Wheel of
Retailing
Retail Life Cycle
Environmental Theory
Darwin's Theory of Evolution states that groups of organisms will undergo genetic changes
over time due to the process of natural selection, changing the genetics of a species until
that species is well adapted for its environment. He further says that organisms which are
most fit for their environment survive while unfit organisms die
‘survival of the fittest’
Retail environment :
Economic, Social, Political, Regulatory, Cultural and Demographic
Environmental Theory has taken a “Darwinian” approach and suggest that only retailers with
the most appropriate organizational structure/formats & those who adopt and adapt to
change will survive (Gist, 1968; Davidson et al. 1983; Brown 1987)
The major Environmental Factors:
1. Consumers
2. Competition
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3. Changing Technology
Dr. Anupamaa Chavan
[email protected] Wheel of Retailing
by Professor Malcolm P. McNair in 1958
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Retail Life Cycle
Multi Channel Retailing
A multi-channel retailer is a retailer that sells
merchandise and/or services through more than
one channel. By using a combination of channels,
retailers can exploit the unique benefits provided by
each channel to attract and satisfy more customers.
Multi-Channel
Format
Store Non Store
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Multichannel Retailing
Store: Brick & Mortar
Non Store: Internet, Catalogs and Direct Mail, Direct
Selling, Television Home Shopping & Automated Retailing
Why are Retailers Using Multiple Channels
to Interact with Customers?
Consumers buy
What they want,
When they want,
Wherever they want
Why are Retailers Using Multiple Channels to
Interact with Customers?
Consumers buy what they
want,
Custom
er When they want,
Wherever they want
store kiosk catalog Call center Web/E-mail mobile
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Why are store-based retailers evolving into multi-
channel retailers?
◈ Sales through an electronic channel are growing rapidly
◈ Adding an electronic channel creates immediate
possession utility
◈ Multi-channel retailers can attract more customers and
satisfy existing customers better
◈ The growth of sales in stores is declining
Today’s empowered consumers live in a multi-channel world –
research products online, buy offline, and demand service everywhere
Web & Email
Consumers buy • 24x7
what they want, • Visual
when they want,
Call Center
wherever they want
• Convenient
• Immediate
Brick & Mortar
• Touch/Feel
• Experience driven
Kiosks
• Visual
• Convenient
Custome
Handheld
r
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• Immediate
• 24x7
Benefits Provided by Different Channels
Unique Benefits
Provided by Store Channel
◈ Browse in the Store
◈ Touch & Feel the products
◈ Personal service
◈ Cash and credit payment
(c) Brand X Pictures/PunchStock
◈ Entertainment and social
interaction
◈ Immediate gratification
◈ Risk
[email protected]Dr. Anupamaa Chavan Reduction 44
Benefits Provided by Catalog Channel
Convenience
Information
Safety
Hoby Finn/Getty Images
Internet Channel
▪ Broader Selection
▪ More and Better Information to Evaluate Merchandise
- Browse as Much as You Want
- Full motion Video
• Personalization
– Information is tailored to Individual consumers to help them make quicker and better
purchase decisions
– Customized Information -- Side By Side Comparisons, Full Motion Video
– Try It On Virtually
• Information for Solving Problems, Not Just Merchandise Characteristics
– Virtual Communities 46
Benefits of Multichannel Retailing
◈ Traditional
store-based and catalog retailers are placing more
emphasis on their electronic channels and evolving into multichannel
retailers.
� E-channel gives a way to overcome limitations of existing format
� With electronic channel, retailers can reach out to new markets
� Builds share of wallet
� E-channel enables retailers to give insights into customers’ shopping behaviors
Benefits of Multichannel Retailing
◈ Gaining Insights into Consumer Shopping Behavior
◈ Expanding Market Presence
◈ Building a Strategic Advantage
Benefits of Multichannel Retailing
Overcoming the
Limitations of an Existing
Format
Low-Cost, Consistent
Increased Assortments Current Information
Execution
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Shopping in the Future
Decision Variables for Retailers
Customer
Service
Store Merchandis
Design e Type,
and Variety &
Display Assortment
Retail
Strategy
Pricing Location
Communication
Mix
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Exercise
As a retailer critically evaluate each channel in
Multichannel retailing.
Exercise
Enumerate the economic and social
significance of retailing.
Retail Shopping Behavior
A: Need Recognition: Types of needs
• Associated with work
• Shopping is deliberate and efficient
Utilitarian Needs • Retailers can satisfy these needs by providing
information and making shopping easy and effortless
• Associated with recreation, emotions and entertainment
• Desire for excitement,
Hedonic Needs • Retailers can satisfy these needs by including stimulation,
social experience, adventure, power and status, self-reward,
learning new trends
Conflicting Needs (Hedonic/Utilitarian)
Cross shopping (pattern of buying both premium and low priced merchandise) 55
B. Information Search
• the nature anFactors influencing the amount of information searched for include:
• (1) the use of the product being purchased,
1. Amount • (2) characteristics of the individual customer, and
of
Information • (3) aspects of the market and buying situation in which the purchase is made.
Searched
• Internal sources are information in a customer’s memory such as the names, images, and past
experiences with different stores.
• External sources are information provided by ads and other people. When customers feel
2. Sources that their internal information is inadequate, they turn to external information sources.
of
Information • The Internet
• A good selection of merchandise
• Services provided by retailers can also limit the search.
3. Reducing • Everyday low pricing (EDLP)
the • Credit
Information 56
Search
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C. Evaluation of Alternatives:
The Multi-Attribute Attitude Model
The multi-attribute attitude model provides
•
a useful way for summarizing how
customers use the information they have
about alternative products, evaluate the
alternatives, and select the one that best
satisfies their needs.
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C. Evaluation of Alternatives:
The Multi-Attribute Attitude Model
Customers see a retailer, product, or service as a
collection of attributes or characteristics
Customer’s evaluation of a retailer, product, or service is
based on
- Its performance on relevant attributes
- The importance of those attributes to the customer
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Information about Retailers Selling Groceries
Information about Retailers Selling Groceries
10 8 6
3 5 10
9 7 5
4 4 8
Information about Retailers Selling Groceries
Weightage given for every parameter by
different consumers
◈ 1. Young Single Women
◈ 2. Parents with 4 children
Characteristics Young Single Women Parents with 4 Children
4 10
10 4
5 8
9 2
Information Used in Evaluating Retailers
Information Needed to Use Multi-Attribute Model
Alternative Consumer Considering
Characteristic/Benefits Sought in Making Store and
Merchandise Choices
Ratings of Alternative Performance on Criteria
Importance of Criteria to Consumer 64
Getting into the Consideration Set
• Consideration set: the set of alternatives the
customer evaluates when making a selection
• Retailers develop programs influencing top-of-mind
awareness
– Get exposure on search engines like Google
– Try to be the top of the page
– More stores in the same area (e.g., Starbucks)
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Methods for increasing the chance of store visit after getting
into the Consideration Set
• Increase Performance Beliefs of Your Store
• Decrease Performance Beliefs About Competitor
• Increase the Importance of Weight of Attributes on which You
Have an Advantage
• Add a New Benefit on which You Excel
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Purchasing Merchandise or Services
Post purchase Evaluation
Types of Buying Decisions
Extended Problem Solving:
High financial or Social Risk
Limited Problem Solving:
Some Prior Buying Experience
Habitual Decision Making:
Store Brand, Loyalty 68
Social Factors
Influencing the Buying Decision Process
Family
Reference Groups
Culture
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Criteria for Evaluating Market
Segments
Actionable
• Retailer should
know what to do to
satisfy needs of the
customers in the
segment
Identifiable
• Retailer is able to determine
which customers are in the
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Chavan
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Criteria for Evaluating Market
Segments
Substantial
• Market segment must be larger
enough or its buying power
significant to generate sufficient
profits
Reachable
• Retailer can target promotions
and other elements of the retail
mix to customers in the segment
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Approaches for Segmenting
Markets
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Thank you
Dr. Anupamaa Chavan
