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Retail Management - Quiz 1
Retail Management - Quiz 1
Session: 1
1. Place Staples
Objectives Convenience Products Impulse
Place & Development of Product
Channel Systems Class Emergency
Distribution of Customer PLC
Service & Logistics Shopping Products Homogeneous
2. Direct v/s Heterogeneous
Retailers, Wholesalers & Indirect
their strategic planning 3. Channel Specialty Products
Specialists
4. Channel Unsought Products
relationships
5. Market
Exposure
Distribution Channel System:
Conceptual Framework cont…
• Functionaries in the Distribution System
1. Intermediaries who take physical possession and
transfer to others within an industry – Merchants
(Wholesalers, and Retailers)
2. Intermediaries who facilitate the tasks of Merchants –
Agents, Middlemen
(Selling Agents, Purchasing Agents, Commission Agents etc)
3. Intermediaries who serve different industries –
Supplemental Agents
(Transporters, Insurance Companies & Agents etc)
Value-Added Chain of
Distribution Channels
Managing Retailing,
Wholesaling and
Logistic System
What is Retailing?
• All the activities involved in selling goods or services
directly to final consumers.
• Superstores: Huge selling space, routine purchase food and HH items, plus services.
e.g.
– In U.S: IKEA (Furniture, Housewares), (Groceries, General Merchandise), Toys "R" Us
(Toys)
– In Australia: Megamart.
– In Canada: Future Shop.
– In India: Star India Bazaar (owned by the Tata Group), Big Bazaar (owned by the
Pantaloon Group), Reliance Retail, Vishal Megamart.
PARKnSHOP Superstore in
Hong Kong
• Category Killers: Giant specialty stores, deep assortments of particular product line.
E.g. Reliance Retail’s consumer electronics venture Reliance Digital and Tata Group’s Croma.
• Hypermarkets: Huge superstore like Adani Hypermarkets, RPG’s Giant (Ram Prasad Goenka
group), Reliance Mart in Ahmedabad.
Retail Levels of Service
Retailers position w.r.t. four levels of services:
• Self service: discount stores follow this locate-
compare-select process.
• Self selection: customer locate good but can ask for
assistance.
• Limited service: credit, returns, customer assistance.
• Full service: all possible assistance and delivery.
Using RFID in Retail Industry
• RFID, or Radio-frequency identification
technology, enables retailers to do things like
get rid of traditional checkout, track
merchandise, and serve customers more
efficiently.
• JCPenney CEO Ron Johnson announced that
he will get rid of traditional checkout by the
end of 2013 by deploying RFID tags.
Using RFID in Retail Industry
Session:
Supply Chain and
Logistics
Market Logistics
• Physical Distribution starts from the factory.
• Managers chooses a set of (a) Warehouses (stocking
points); and (b) transportation carriers that will
deliver the goods to final destination in the desired
time and at the lowest total cost.
• Physical Distribution has now expanded into a broader
concept of Supply Chain Management (SCM).
• SCM starts from:
– strategically procuring the right inputs (raw materials and
capital equipments);
– converting them efficiently into finished products; and
– dispatching them to the final destination.
Supply Chain for an Individual Firm
Evolution of Supply Chain Management
Integrated Logistics Systems (ILS)
• ILS is used by many firms, with the help of Information
Technology for tracking and coordinating the following
functions effectively:
– Material management
– Material flow systems
– Physical distribution
• Volvo operates their warehouse in Memphis with the
support of third party suppliers, FedEx Logistics
Services, to handle stocks of truck parts. If a Volvo
dealer needed a part in an emergency, phones a toll-free
number and the part is flown out the same day and
delivered that night at either the airport or the dealer’s
office.
Indian Logistic System: Scenario
IndustryOverview
• Logistics functions are currently an in-house activity for
companies that hire discrete services such as transportation and
warehousing while internally performing order processing, distribution,
and logistics planning for inbound and outbound logistics.
• Outsourcing of entire logistics to third-party logistics service
providers in India is highly limited.
• The practice of complete logistics outsourcing is recent in
India with multinational companies being the major users of
this service.
Indian Logistic System: Scenario
• The logistics industry in India is highly fragmented.
This is mainly due to the nature of the transportation
industry.
Asian Region
European Region
France 1419.3 11.7
Germany 1987.0 11.8
Italy 1186.0 12.6
Netherlands 418.8 12.2
Spain 654.0 12.1
UK 1555.2 12.2
industry.
Challenges Facing the Logistics Industry in India
What’s New in Supply Chain?
• Global competition
• Well informed more powerful Customers
• Customer Expectations
• Shorter product life cycle
• New and low-cost distribution channels
• Internet and e-business strategies
Retail Market
Strategy
of:
⚪New competitors
⚪New formats
⚪New technologies
⚫Attractiveness –Large,
Growing, Little
Competition
⚪More Profits
▪ Three techniques
✵ Mass marketing
✵ Concentrated marketing
✵ Differentiated marketing
✵ Retailer’s location
✵ Promotion efforts
✵ Price orientation
✵ Growth Strategy
3-76
76
Developing an Overall Retail Strategy
Controllable Uncontrollable
Variables: Variables:
• Store location • Consumers
• Managing business • Competition
• Merchandise • Technology
management Retail • Economic
and pricing Strategy conditions
• Communicating • Seasonality
with customer • Legal restrictions
Can A Retailer Develop a Sustainable
Competitive Advantage by:
■ Customer Loyalty
■ Location
■ Human Resource Management
■ Distribution and Information Systems
■ Vendor Relations
⚫Retail brand
⚪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
⚫Brand image
⚫Unique Merchandise
⚫Customer Service
⚫Special Treatment
⚪Early Delivery of New Styles
⚪Shipment of Scare Merchandise
Flow of
Information Focus on:
Vendo
r
Distribution
Center
Store
-Better services
-Increase in breadth and depth
-Decrease in prices
⚫Market Penetration
⚫Market Expansion
⚫Diversification
⚪ Related vs. Unrelated
⚫China
⚪Increasing operating
costs
⚪Lack of managerial
talent
⚪Underdeveloped and
inefficient supply chain
⚫India
⚪Prefers small family-
owned stores
⚪Restricts foreign
investment
Dr. Preshth Bhardwaj Retail Management XIMB
Who Is Successful and Who Isn’t?
⚫Adaptability
⚫Global Culture
⚫Financial Resources
Direct Investment
Joint Ventures
Strategic Alliances
Franchising
⚫Barriers to entry
⚪Scale economies of big box retailers
⚫Competitive rivalry
⚪Defines the frequency and intensity of reactions to actions
undertaken by competitors
⚪Conditions leading to intense rivalry: a large number of
same size retailers, slow growth, high fixed costs, a lack of
perceived differences between competing retailers
process:
✵ assess your international potential
✵ Timing
✵ 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 Engaging in Global
Retailing
Illustration of the
Strategic Retail Planning Process
5-
111
■ Market Factors
⚫Environmental Factors
⚪ Potential Threat - Development of electronic channel by
traditional bricks and mortar retailers (-)
■ Market Penetration
■ Increase size of present stores
■ Open additional gifts stores in
Chicago area
■ Market Expansion
■ Open gift stores outside Chicago area
■ Sell lower priced gifts in present Ryan McVay/Getty
Images
stores
Growth Opportunities for Gifts to Go
5-
116
Market Attractiveness
⚫Market Penetration
⚪ Increase size of present stores (low)
⚪ Open additional gifts stores in Chicago area (medium)
⚫Market Expansion
⚪ Open gift stores outside Chicago area – new geographic segment
(medium)
⚪ Sell lower priced gifts in present stores – new benefit segment
(medium)
Evaluating Growth Opportunities for
Gifts to Go 5-(continued)
118
Market Attractiveness
Competitive Position
■ Market Penetration
■ Increase size of present stores (High)
Competitive Position
5-121
Steps in Using Market Attractiveness -
Competitive Position Matrix
• Define strategic opportunities
Problem
Vendor category captain may have different goals than retailer
Red Bull (energy drinks), Hershey (confectionary), Frito-Lay
(salty snacks/ cookies), Pepsi-Cola.
= gross margin
avg. inventory at cost
- Gross margin = Gross profit / Net Sales
Inventory Turnover
= (1 – Gross Margin Percent) x sales-to-stock ratio
Dr. Preshth Bhardwaj Retail Management XIMB
Measuring Sales-to-Stock Ratio
Net Sales/Average Inventory at Cost – Inventory
Turnover
Retailers report on an annual basis
Is high when the popularity of merchandise is
high.
Estimation of average inventory
◦ Use information system: averaging the inventory in
stores and distribution centers at the end of each day
◦ Divide the sum of the end-of-month (EOM) inventories
for several months by the number of months
Buy Merchandise
Branding options Issues in buying
Promotions Seasonality
StoreLocations Weather
Merchandise Competitive Activity
Placement Product Availability
Cannibalization
Economic Conditions
Retailers develop
fashion forecasts by
relying on:
Broader Selection
Overcoming the
Limitations of an
Existing Format
Low-Cost, Consistent
Increased Assortments Current Information
Execution
Benefits of Multichannel
Retailing
Just as in the case of Van Heusen, this store too comes with a unique
fitting room experience which allows a customer to click ‘Trial’ on the
iPad and have his selection appear in the desired size inside the trial
room.
The store is designed to sell apparel only via an iPad. So far, the store has
generated higher than average footfalls.
The store was launched last year and the company plans to open 15-20 more
such stores in the next one year.
Dr. Preshth Bhardwaj Retail Management
XIM Bhubaneswar
Omni-channel retailers in India: Adidas