retail strategy and development.ppt
TRANSCRIPT
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Retail Marketing: Planning &
Development
Strategic marketing for
retailing, knowing your customers
Fundamentals ofMerchandising,
establishing a pricing strategy,
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Strategic marketing for retailing,
The Retail Concept- is a
management orientationthrough which the retailers try to
focus on the needs of their
target market and satisfy theitneeds more effectively than the
compititor
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Strategic marketing for retailing,
Retail Market- Can be defined in terms of
agroup of customers with similer needs
These needs can be worked out in terms of
Geographical locations
Demographics Life style
Buying Situation
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Strategic marketing for retailing,
Retail Strategy- is a statement
worked out to identify
The reletive target market
The specific format to be used to satisfy
the target market Work out the basis on which to build
sustainable compititive advantage
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Strategic marketing for retailing,
Sustainable competitive advantage
can be gained by-
Focus on customer loyelity
Positioning of the retail outlet
Location
Human resourse management Efficient supply chain management
Devlop unique merchendise
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Strategic Retail Planning
Process
Define a business Mission
Conduct a business audit
Identify strategic opportunities
Evaluate strategic opportunities
Establish specific objectives and allocatetesources
Devlop a retail mix to implement strategy
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Knowing your customer:Understanding the retail customer
Understanding how information was sought bythe customer
The process of evaluation of various productand services
How when and where the customer uses theproduct
The payment process
The post purchase behaviour
The competitor and how the customerperceives him
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Understanding the retail
customer Factors influencing the retail customer Range of merchandise
Convenience Time to travel
Socio-economic background and
culture
The stage of the family life cycle
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Understanding the retail
customer The customer decision making
process Identification of a need
Search for information Evaluating alternatives
The purchase decision
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Understanding the retail
customer Factors effecting consumer behaviour
Personality
Lifestyle
Culture
Social class
Family and house hold influence
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MERCHANDISE
MANAGEMENT
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Fundamentals of
MerchandisingMerchandising management involves a
process by which the retailer tries to
offer the right quantity of the right
merchandise in the right place at the
right time along with meeting the
financial goals of the company
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Fundamentals of
MerchandisingMerchandise management is
the planning andimplementation of the
acquisition handeling and
monitoring of merchandise
categories for an identified
retail organisation
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Fundamentals of
MerchandisingKey emphasis
Forward planningMonitoring
handling
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Retail Merchandising is the process of
developing, securing, pricing,
supporting and communicating theretailers merchandise offering.
It means offering the right
product at the right time at
the rightprice with the
right appeal!!
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Fundamentals of
Merchandising Categorising the buying
process
Meaning of Category
A category is an assortment of
items which the customer maypercieve as substitites for eachother
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Fundamentals of
Merchandising Category Management
Category management is theprocess by which a retail
business is managed with the
objective of maximising the salesand profit of a category
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Fundamentals of
Merchandising Categorising Merchendise
Merchendising group Department
Classification SKU
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Fundamentals of
MerchandisingMerchendise Plan-
The ObjectiveDefining the target Market
Establishing performance goals
Which maerchndise needs more
or less emphasis
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Fundamentals of
Merchandising Phases in merchendise Plan
Maketing Consideration Mercchendising strategy option
Types of customer needs
Financial plan
Merchendise assortment search
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Steps In The Retail
Merchandising Process1. Develop the merchandise mix and
establish the merchandise budget.
2. Build the logistic system forprocuring the merchandise mix.
3. Price the merchandise offering.
4. Organize the customer support
service and manage the personal
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Retail merchandising requires management
of the merchandise mix including:
1. Planning Merchandise Variety2. Controlling Merchandise Variety
3. Planning MerchandiseAssortment/Support
4. Controlling Merchandise
Assortment/Support5. Merchandise Mix Strategies
Developing the merchandise mix allows
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Retail merchandising requires management of
the merchandise budget including:
1. Planning And Controlling Retail Sales2. Planning And Controlling Inventory
Levels
3. Planning And Controlling RetailReductions
4. Planning And Controlling Purchases
5. Planning And Controlling ProfitMargins
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THE COMPONENTS OF THE
MERCHANDISE MIXMerchandise Variety
(# of product lines)
Merchandise Assortment
(# of product items)
Merchandise Support
(#of product units)
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Planning Merchandise VarietyInvolves Planning And
Controlling Product Lines
Retailers use MANY factors to
evaluate product lines!!
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FACTORS USED TO EVALUATE
PRODUCT LINES
1. 1.The compatibility amongproduct lines.
Must Consider:
Product substitutes
Product complements
Unrelated products
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FACTORS USED TO EVALUATE
PRODUCT LINES
2.The physical attributes of eachproduct line.
Must Consider:
Product bulk
Product standardization
Product service levels
Product selling methods
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FACTORS USED TO EVALUATE
PRODUCT LINES
The role branding plays in thesuccess of the product line.
Must Consider: How brands can distinguish a retailer from
competitors
How brands can build store loyalty
The advantages and disadvantages of offeringdifferent types of brands no names, vendorbrands, store brands (private labels) and
licensed merchandise
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FACTORS USED TO EVALUATE
PRODUCT LINES1) The market appropriateness of each product line.
Must Consider:
How well the product matchesconsumption patterns and buying needsof targeted consumers
The relative advantage, affinity, trialability,
observability and complexity of newproduct introductions
Market trends provide products the
market wants!!
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FACTORS USED TO EVALUATE
PRODUCT LINES1. The impact of lifestyle on product line
acceptance.
Must Consider:
Targeted customers activities, interests,and opinions
The match between consumers lifestyleand retailers image
Usefulness of trade shows to identifyproduct lines for targeted consumers
lifestyles
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CONTROLLING MERCHANDISE VARIETY
Is an art and a science
No rules for what should be included inthe merchandise mix and what should
be excludedTwo useful management methods
I. Category Management: each productmanaged as a business unit at thestore level
II. ABC Analysis: each product line isrank ordered based on erformance
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PLANNING MERCHANDISE
ASSORTMENT AND SUPPORTMust organize the merchandise mix as to the
number of different product lines carried
Must decide on:
Brands
Sizes
ColoursMaterial
Styles
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PLANNING MERCHANDISE
ASSORTMENT AND SUPPORT Goal is to ensure that product choice meets
targeted consumer needs
Must carefully plan the number of units to have on
hand to meet the expected sales for the brand,size, color combinations
Must develop merchandise lists
1. Basic Stock List (staple items)2. Model Stock List (fashion items)
3. Never Out List (key items and best sellers)
CONTROLLING MERCHANDISE
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CONTROLLING MERCHANDISE
ASSORTMENT AND SUPPORT
Involves monitoring and adjusting thetypes of product lines that are addedand dropped from the merchandise mix
Two widely used methods to controlassortment and support:
1. Inventory turnover: rate at which theretailer depletes and replenishesstock
2. Open-to-buy:amount of new
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Merchandise Mix StrategiesDifferent optimal variety and assortment
strategies possible!! Narrow Variety/Shallow Assortment
Vending machines
Newsstands
Door-to-door
Wide Variety/Shallow Assortment
Variety Stores
General Stores
Discount Stores
Narrow Variet /Dee Assortment
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MERCHANDISE BUDGET
MANAGEMENT
Financial management tool used to planand control the total amount (in dollars)
of inventory carried in stock at any time Determines how much a retailer should
invest in inventory during a specifiedperiod
Remember: Merchandise Budgetcontrols dollars; Merchandise Mixcontrols product units
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Pricing in Retail
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If you get your customers because of
price,
you are going to Loose them becauseof price.
http://images.google.co.in/imgres?imgurl=http://www.furniturelandde.com/images/low-price-image.jpg&imgrefurl=http://www.furniturelandde.com/low_prices.html&usg=__s7X4fri_4pnPHPRSNAcrhiFqlcw=&h=340&w=298&sz=34&hl=en&start=1&tbnid=6NJHoJvpkIqlEM:&tbnh=119&tbnw=104&prev=/images%3Fq%3Dlow%2Bprices%26gbv%3D2%26hl%3Den%26sa%3DG -
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Basic Pricing StrategiesMark-up Pricing
Markup on cost can be calculatedby adding a pre-set (often industrystandard) profit margin, or
percentage, to the cost of themerchandise.
Markup on retail is determined bydividing the dollar markup by retail.
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Manufacturer suggested retail price
(MSRP) is a common strategy used by thesmaller retail shops to avoid price warsand still maintain a decent profit. Bypricing products with the suggested retailprices supplied by the vendor, the retailer
is out of the decision-making process.Another issue with using pre-set prices isthat it doesn't allow a retailer to have anadvantage over the competition.
Vendor Pricing
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Competitive Pricing
Consumers have many choicesand are generally willing to shoparound to receive the best price.Retailers considering acompetitive pricing strategy willneed to provide outstandingcustomer service to stand abovethe competition.
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Pricing below competitionsimply means pricingproducts lower than thecompetitor's price. This
strategy works well if theretailer negotiates the bestprices, reduces costs and
develops a marketingstrategy to focus on pricespecials.
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Prestige pricing, or pricingabove competition, may beconsidered when location,exclusivity or unique customerservice can justify higher prices.Retailers that stock high-qualitymerchandise that isn't availableat any other location may bequite successful in pricing theirproducts above competitors.
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Psychological pricing is used when
prices are set to a certain level wherethe consumer perceives the price to
be fair. The most common method is
odd-pricing using figures that end in5, 7 or 9. It is believed that
consumers tend to round down a
price of $9.95 to $9, rather than $10.
Psychological Pricing
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Other Pricing Strategies
Keystone pricing is not used as oftenas it once was. Doubling the cost paidfor merchandise was once the rule ofpricing products, but very few products
these days allow a retailer to keystonethe product price. Putney Pricingstrategy is being used by someretailers to increase margins.
Multiple pricing is a method whichinvolves selling more than one productfor one price, such as
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three items for $1.00. Not only is thisstrategy great for markdowns or salesevents, but retailers have noticed
consumers tend to purchase in largeramounts where the multiple pricingstrategy is used.
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Discount pricing and pricereductions are a natural part ofretailing. Discounting can include
coupons, rebates, seasonal pricesand other promotional Markdowns.
Merchandise priced below cost is
referred to as loss leaders. Althoughretailers make no profit on thesediscounted items, the hope isconsumers will purchase otherroducts at hi her mar ins durin
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As you develop the best pricing modelfor your retail business, understandthe ideal pricing strategy will depend
on more than costs. It is difficult tosay which component of pricing ismore important than another.
Just keep in mind, the right productprice is the price the consumer iswilling to pay, while providing a profitto the retailer.
Cl ifi ti f R t il
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Classification of Retail
Operations
Classificationof
RetailEstablishments
Ownership
Level of Service
Product Assortment
Price
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Classification of Ownership
IndependentRetailers
Chain Stores
Franchises
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Level of Service
Full ServiceSelf Service
Discount stores Exclusive storesFactory outletsWarehouse clubs
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Mass Merchandising
Retailing strategy using
moderate to low prices on
large quantities ofmerchandise and lower
service to stimulate high
turnover of products.
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Hypermarket and
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Hypermarket and
Supercenter
HypermarketA large retail store combining
a supermarket anda full-line discount store.
SupercenterRetail store combining groceriesand general merchandise goods
with a wide range of services.
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Nonstore Retailing
Major Forms
ofNonstoreRetailing
Automatic Vending
Direct Retailing
Direct Marketing
Electronic Retailing
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Direct Retailing
Door-to-Door
Office-to-Office
Home SalesParties
Direct Retailers
sell products:
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On Line
http://www.avon.com
Direct Marketing
Telemarketing
Catalogs & Mail Order
Direct Mail
Typesof
DirectMarketing
Electronic Retailing
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Electronic Retailing
On-Line Retailing
Shop-at-Home NetworksTypes
ofElectronicRetailing
On Line
http://www.gap.com
http://www.jcrew.com
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Basic Forms of Franchising
Business FormatFranchising
Product and Trade NameFranchising
Basic Formsof
Franchising
On Line
http://www.sylvanlearning.com
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Retail Marketing Strategy
Develop the Six Ps
Define & Selecta Target MarketKey Tasks
inStrategicRetailing
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Defining a Target Market
STEP 1:
Segment the Market
Demographics
Geographics
Psychographics
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Choosing the Retailing Mix
STEP 2:
Choose theRetailing Mix
Product
Price
Promotion
Place
Personnel
Presentation
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The Retailing Mix
TargetMarket
Product
Price
Promotion
Place
Personnel
Presentation
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Product Offering
The mix of products offered to
the consumer by the retailer;
also called the productassortmentormerchandise
mix.
On Line
http://www.kroger.com
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Retail Promotion Strategy
Retail
PromotionStrategy
Advertising
Public Relations
Publicity
Sales Promotion
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Factors to Consider in Site
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Factors to Consider in Site
Selection
Economic growthpotential
Area competition
Geography
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Location Decisions
Freestanding Store
Shopping Center
Tenant
Mall Tenant
On Line
http://www.mallofamerica.com
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Shopping Center and Mall
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Shopping Center and Mall
Locations
Advantages
Design attractsshoppers
Activities and anchor
stores draw customers
Ample parking
Unified image
Disadvantages
Expensive leases
Failure of common
promotion efforts
Lease restrictions
Anchor store
domination
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Price
QualityImage
High PriceLow Price
Good Value
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Presentation of the Retail
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Presentation of the Retail
StoreEmployee Type & Density
Merchandise Type & Density
Fixture Type & Density
Sound
Odors
Visual Factors
Factorsin
CreatingStoresAtmosphere
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Personnel and Customer
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Personnel and Customer
Service
Suggestive Selling
Trading Up
Two CommonSelling
Techniques
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Global Retailing
Spread ofcommunicationand mass media
Lowering of tradebarriers and
tariffs
Growth potentialin underserved
markets
Reasons forGlobal Expansion
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Factors Used to Analyze
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Factors Used to Analyze
Global Retail MarketsMarket Size & Economics
Infrastructure & Distribution
Competition
Operations
Financial & Tax Reporting
Merchandise Acceptability
Partnering Capability
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Global Retailing
Prerequisites forGoing Global
On Line
http://www.walmartstores.com
Secure
Domestic
Position
Long-Te
rm
Perspective
Consistent
Globaland
Corpo
rate
Strate
gies
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Trends in Retailing
Trends inRetailing
Entertainment
Convenienceand Efficiency
Customer Management
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Customer Management
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Customer Management
Strategies
Customer RelationshipMarketing
LoyaltyPrograms
Clienteling
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Importance of location decision:
Requires complex decision making
Costs lots of money Little flexibility once a location has been
chosen
Attributes of location have a strong impacton the retailers strategy
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Type of Retail Stores
The Isolated Store or a free standinglocation
Part of a business district Part of a shopping center'
Why Is It Important To Choose A
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Why Is It Important To Choose A
Store Location Carefully?
Location can differentiate the store andprovide a competitive advantage
Location affects marketing strategyDetermines customer patronage
Impacts store image and personality
Location affects the financial strategy
Determines cost
Affects store volume
C it i t b id d
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Criteria to be considered: Size & characteristics of population
Level of competition
Access to transportation
Availability of parking
Attributes of nearby stores
Property costs
Length of agreement (if lease) Population trends
Legal restrictions
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Site Evaluation
Accessibility
Locational advantages
Terms of occupancy
Legal considerations (e.g. environmental
considerations, zoning restrictions,
building codes, signs, licensing
requirements)
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Checklist for Site Evaluations
Local Demographics
Population and/or household base Population growth potential Lifestyles of consumers Income potential Age makeup Population of nearby special markets,
that is, daytime workers, students,and tourists, if applicable
Occupation mix
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Checklist for Site Evaluations
Traffic Flow and Accessibility
Number and type of vehicles passing location Access of vehicles to location
Number and type of pedestrians passinglocation
Availability of mass transit, if applicable Accessibility of major highway artery
Quality of access streets Level of street congestion Presence of physical barriers that affect
trade area shape
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Checklist for Site Evaluations
Retail Competition
Number and types of stores in area Analysis of key players in general area
Competitiveness of other merchants Number and location of direct competitorsin area
Possibility of joint promotions with localmerchants
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Checklist for Site Evaluations
Site Characteristic Number of parking spaces available Distance of parking areas Ease of access for delivery Visibility of site from street
History of the site Compatibility of neighboring stores Size and shape of lot Condition of existing building
Ease of entrance and exit for traffic Ease of access for handicapped customers Restrictions on sign usage Building safety code restrictions Type of zoning
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Checklist for Site Evaluations
Cost Factors
Terms of lease/rent agreement Basic rent payments Length of lease Local taxes Operations and maintenance cost Restrictive clauses in lease Membership in local merchants
association required Voluntary regulations by local merchants
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Site Selection
Trade area -- contiguous geographic area
that accounts for the majority of a stores
sales and customers Primary trade zone -- Usually 3-5 mile
radius; generates 60-65% of customers
Secondary trade zone -- Usually 3-7 mileradius; generates 20% of customers
Tertiary trade zone -- Usually 15 - 50 mile
Steps involved in choosing a site
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p gStep-1 Market entification
Step- 2 Determining the market potencial
Demographic feature of the population
The charecteristics of the households in ares Compitition and compatibility
Laws and regulations
Trade Area Analysis
Steps involved in choosing a
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Steps involved in choosing a
site
Step3 and 4- Identify Alternate Site and Sselect
the site
Trafic Accsessebility of the market
Existing stores in the area and their type
Amenities avalable
To buy or to lease
Product mix to be offered
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Steps in selecting a site:
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Steps in selecting a site:
Evaluate alternative geographic areas in terms
of the characteristics of residents and existing
retailers (trading-area analysis)
Determine whether to locate as stand-alone,
unplanned business district or planned shopping
center
Make a decision about location type
Analyze alternate sites
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Retail Trading Area
Is the area from which a retailer attracts itscustomers or obtains its business
Clear delineation has several benefits
Demographic and socioeconomic characteristics
of consumers can be determined
Focus of promotional activities can be ascertained
Impact of branch store can be determined
Geographic weaknesses can be highlighted
Size and shape of the trading area
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Size and shape of the trading area
depends on:
Store type
Store size
Location ofcompetitors
Travel time
Traffic barriers
Availability ofproducts
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How To Evaluate A Trading Area
Spotting techniques
License plate surveys
Customer surveysCustomer credit, delivery or service records
Customer participation in contests and
sweepstakes
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How To Evaluate A Trading Area
Quantitative procedure
Converse breakeven point method
Huffs probability model
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Chapter 2
Retail Formats
Faiza Nasir
Merchandises Division
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Merchandise s Division
Product Width
Product Length
Product Depth
SKUs?
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Inventory control count that representsone or more items that will be soldtogether. For example, a retail bed storewould consider one bed frame with fourwheels equal to one SKU (even though
the frame and the wheels come fromdifferent suppliers), because a frame isnever sold without wheels, and wheels are
never sold alone. Conversely, a frame, abox spring, and a mattress would beconsidered three SKUs, because any of
the three items might be sold separately
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Store vs.
Non-Store formats
Store Formats by Location
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Store Formats by Locationa) Chain store
Multi-locational
Operates multiple outlets under common ownership
Engages in some level of centralized or coordinated purchasingand decision making
b) High street format:
A retail chain that seeks to locate itself in busy shopping areas(generally less than 2,000 sft, with no parking facilities and focusedmerchandise categories)
c) Destination format:
Independent retail stores located specifically in an area withalluring propositions (usually large in size, with ample concessions,huge parking space, wide merchandise categories)
Competitive State of Chains
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Competitive State of Chains
Advantages Bargaining power
Cost efficiencies
Efficiency from
computerization, sharingwarehouse and otherfunctions
Defined managementphilosophy
Considerable efforts inlong-run planning
Disadvantages Limited flexibility
Higher investment costs
Complex managerialcontrol
Limited independenceamong personnel
Convenience Store Strategy Mix
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Convenience Store Strategy Mix
Location:
Neighborhood
Merchandise:
Medium width
and low depth
of assortment;average quality
Prices:
Average to
Above average
Atmosphere &Services:
Average
Promotion:Moderate
Store Formats by Ownership
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Store Formats by Ownershipa) Independent
Generally higher level of independent retailers exists
50% of these are run by owners and their families
Why so many? Ease of entry
b) Franchise:
A contractual agreement between a franchisor and a retail
franchisee, which allows the franchisee to conduct businessunder an established name and according to a given pattern
of business
Franchisee pays an initial fee and a monthly percentage of
gross sales in exchange for the exclusive rights to sell
Competitive State of Independents
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Competitive State of Independents
Advantages
Flexibility in formats,locations, and strategy
Control over investmentcosts and personnelfunctions, strategies
Personal image
Consistency andindependence
Strong entrepreneurialleadership
Disadvantages Lack of bargaining
power
Lack of economies of
scale Labor intensive
operations
Over-dependence onowner
Limited long-runplanning
Competitive State of Franchising
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p g
Advantages
small capital required
acquire well-knownnames
operating/managementskills taught
cooperative marketing
possible
exclusive selling rights
less costly per unit
Disadvantages oversaturation could
occur
franchisors mayoverstate potential
locked into contracts
agreements may becancelled or voided
royalties are based
on sales, not profits
From the Franchisors Perspective
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p
Benefits
national or globalpresence possible
qualifications for
franchisee/operations are setand enforced
money obtained at
delivery royalties represent
revenue stream
Potential Problems potential for harm to
reputation
lack of uniformity
may affect customerloyalty
ineffective franchisedunits may damageresale value,
profitability potential limits to
franchisor rules
Store Formats byM h di C t
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Merchandise Category
a) Family store Store dealing in all categories of related item (For e.g. apparel
store offering merchandise to suit the wardrobe of a family)
b) Specialty format:
Narrow product lines with good depth. Specializing in a given type
of merchandise, offering attentive customer services.c) Department store format:
Large in size having several departments working as SBUs
d) Super market format:
Departmentalized, specializing in foodstuff, grocery and limited
non-food categories, free access displays so that customers canpick from shelves.
e) Emporium:
Selling a variety of a particular group of merchandise (sariemporium).
Specialty Store Strategy Mix
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Merchandise:
Very narrow width and
extensive depth of
assortment; average to
good quality
Prices:
Competitive to
Above average
Atmosphere andServices:
Average to excellent
Promotion:Heavy use of displays
Extensive sales force
Specialty Store Strategy Mix
Department Store Strategy Mix
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Department Store Strategy Mix
Location:
Business district, shopping
center or isolated store
Merchandise:
Extensive width and
depth of
assortment; average togood quality
Prices:
Average to
Above average
Atmosphere andServices:
Good to excellent
Promotion:
Heavy ad and catalog
use; direct mail;
personal selling
Conventional Supermarket
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Strategy Mix
Location:
Neighborhood
Merchandise:
Extensive width
and depth
of assortment;
average quality;manufacturer,
private, & generic brands
Prices:
Competitive
Atmosphere andServices:
Average
Promotion:
Heavy use of
newspapers, flyers,
and coupons
Store Formats by Size
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Store Formats by Size
a) Superstore format
Single-level large store, twice the size of a supermarket, offersnon-traditional goods and services like pharmacy, flower shop,bookstore, salad bar, bakery etc.
b) Shopping Mall:
Spread over a large area, arrangement of retail stores and placesfor leisure activities.
c) Shopping Center:
Plaza combining five or more tenant spaces developed under onebuilding.
d) Hypermarket: Wide variety, offering in large quantities in each category selling
huge volumes at low margins.
Store Formats by Price
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y
a) Discount format
Bazaar format, believing in discounts more often.b) EDLP format:
Specialize in a particular merchandise line, assuring consistentlylow prices.
c) Category killer format:
Large specialty store having enormous selection of its productcategory at relatively low prices.
d) Factory-outlet format:
Owned and operated by the manufacturer
e) Warehouse format:
Large sale of discontinued merchandise, has large width anddepth in many categories it retails.
f) Single-price denomination format:
Scrambled merchandise at just one price point, generally at a lowone.
Discount Store Strategy Mix
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Discount Store Strategy Mix
Merchandise:
Extensive width and
depth of
assortment; average to
good quality (overruns,
irregulars, cut-sizes)
Prices:
25% or more below
MRP
Atmosphere/ Services:Slightly below
average to average
Promotion:Heavy on newspapers;
price-oriented; selling
Factory Outlet Strategy Mix
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Factory Outlet Strategy Mix
Merchandise:
Moderate width and
poor depth of
assortment;
low continuity (cancelled
orders, discontinuedmerchandise)
Prices:
Very Low
Atmosphere/ Services:
Very low
Promotion:Little
Warehouse Store Strategy Mix
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Warehouse Store Strategy Mix
Location:
Secondary site, often in
industrial area
Merchandise:
Moderate width and
low depth of
assortment; emphasis on
manufacturer brands
bought at discount
Prices:
Very low
Atmosphere andServices:
Low
Promotion:Little or none
Store Formats by Concessions
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Store Formats by Concessions
a) Stopover store format
Like petrol pump, offers instant use or ready-to-eat categories ofmerchandise.
b) Kiosk:
Small freestanding pavilion
c) Alliances:
With brands that customers trusts
Bazaars?
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Bazaars?
Seasonal
Structured
Un-structured
Thematic