Marketing: Retail Strategy (Day 3) Challenges facing retailers Consumers are bored with shopping o We are not buying

ing as much as we use to Over-saturation o We have too many stores Price cutting wars & low profit margins o Cost containment o Grocery stores make about 1 cent per dollar High customer service expectations

What do retailers do? Retailers satisfy consumer needs by offering the right product at the right price at the right place at the right time.

Ways Retailers Add Value Breaking bulk o Breaking bulks into numbers customer wants Holding inventory o Holds the left over stock for next time Providing Assortment Offering Services o Self-checkout o Being able to pay with debit or credit card o Water fountains, etc.

Retail Strategy (skip strategy portion in chapter) An overall plan for guiding a retail firm Roadmap for what were going to do and how were going to do it.

Major Shifts in Retailing Mergers, diversification, downsizing Growth of Multi-channel Retailing or is it omni-channel? o Catalogues, film, mobile, internet, direct-selling. Bifurcated Retailing o Low class or upper class (no more middle class) Blurring of formats/ channel blurring o we are playing in each others sandboxes grocery stores have pharmacy, pharmacys have groceries. o Much harder to determine who our competition is.

What will it take to succeed in 2013 Thriftiness is the new high Customers are more prepared Less is more in design and shopping Generational divides within the labor force Staffing cuts Customers are coming in with blinders on Amazon Stalking customers through big data Products will find their way to customers in unconventional places Theres just no time.

Evolution of Retail Entry phase (Innovation retailer) (Dollar General, Aldi) Low status, low price, minimal service, poor facilities, limited offerings

Trading-up phase (Traditional retailer) (Target) Elaborate facilities, extended product offerings, higher-rent locations

Vulnerability Phase (Mature retailer) Top heaviness, conservatism, declining ROI

Scrambled Merchandising Shoe Store You can lower profit margin by bringing in high end merchandise o Same vise verse Is very contagious o Mcdonalds adding healthy foods, then wendys adds food

A retail format is the overall appearance and feel that a retailer presents to customers, primarily its look and layout, the sort of range it stocks and the approach taken to market. Format is distinct from fascia which, strictly speaking, refers solely to external appearance. Fun with formats happen to be the single biggest opportunity not only to improve the shopping experience, but also to establish a clear identity for retailers and brands alike. Michael Shinall also states that one reason so many traditional supermarkets struggle is that they are losing entire categories of their enterprise to other stores What is the retail term for this o Scrambled merchandising o Channel blurring What can supermarkets, or other retail formats that are facing this problem do? o Bring in high end merchandise and lower profit margin

Where is styleliner in product life cycle Introduction (because it is a new format)

Tesco entered the u.s. in 2007, setting up stores in California, Arizona and Nevada, many near new housing developments. The stores featured: 10k square feet British style ready meals

Non-store retail formats Social Media Smallest because we do not buy directly (but fantastic for redirecting people to websites) Mobile o Wal-mart data fencing Electronic Number two in terms of channels (growing very fast) o When we look at websites they are categorized in for ways First type is catalogers (Those retailers who started in catalogues) Second is retail chains (those who started in brick & mortar.

Thirds is consumer goods manufacturers (p&g to selling on the web) Web only (started on web and stayed there - i.e. Amazon)

*Biggest category in online sales is apparel* Stage 1 for websites: Brochure Web Site (Nothing interactive) Stage 2: Selling commerce through website. Stage 3: Web site intergrated w/ existing processes Stage 4: The webified store (were store is linked into their system) Stage 5: Site Integrated w/ manufacturer Systems Catalog o Still successful (more so than mobile) Direct o Door to door and through party systems merchandise is demonstrated in a party atmosphere (best in south) o Multi-level network: Master distributors sell to distributors who sell merchandise o Pyramid Schemes: firm sells to other distributors and little if any merchandise goes to end users Television o Direct tv is still huge (2 trillion dollar worldwide) sell through infomercials, commercials and actual shows. o More people at home with nothing to do, benefitted from recession. Vending o Becoming easier to use, hold a lot more product, ipods

What is multi-channel retailing? Selling through multiple channels. Improves market share

Nowadays we talk about omni-channel Touchpoints If you are a retailer going omni-channel you cannot stick with the same infrastructure from before.

Showrooming Biggest problem for brick & mortar retailers What makes a retailer more susceptible to showrooming? o If its cheaper online How can you combat this o Holding exclusive products o And offering things like setting up the product (since it is high end) o Offering warranties and guarantees not offered elsewhere First step of buying process o Realization of the need o Hedonic Wants bc it gives you pleasure. Candy, coke, xbox. Shopping to make yourself happy. 1. Stimulation (needs where retailer is stimulating senses) senses of smell, sight, hearing. 2. Need for status & power (high end spas) 3. Adventure (looking for the best bargain, thrill of the hunt) 4. Social Experience (through food courts, apps with feedback, areas you can play a game with friends) 5. Shop to learn new trends (Manikin, apple is good at this) 6. Self Reward (shop because they are depressed) o Utilitarian Actual need (have to have it) food, roof, clothes, tires. Shopping simply to accomplish a task.
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Assignment Due Wednesday February 13 (Will have Monday Off) Go shopping in a brick and mortar store Dont buy anything Needs to know about 2 of the 6 hedonic means that the store is catering to. Bring back evidence o If catering through music (record it) o If catering to stimulation through visuals (take a picture) o Through status and power and they are handing out cookies (brink a cookie)

Test: 40-50 questions (bring scantron) 100AS Chapters whether 7 or 8 edition same chapters (1,2,3) No questions on specific stories, names, or people. Worry about definitions and major themes.
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Powerpoints (All on blackboard) week 1-3

Articles Fun with formats Food truck Man article Multi-channel articles (from 2/4/2013) Worry about trends on the largest retailers NO NUMBERS Test 2 Three most important things in retailing? Location, location, location Highly important consideration in where you shop. Reasons o People get married to a location o Difficult to change o Hardest for competition to copy (non copy able advantage) o Location is expensive (especially in Brick & Mortar channel)

If you are a truly unique retailer you can break every rule we cover and you will be ok. When you are deciding location, what kind of shopping is your customer doing? Convenience shopping (shopping you do when you are in a big hurry) Need to have a location that you can turn right into (easy access)

Comparison shopping Customers have good idea of what type of product they want, but dont have a strong preference for brand, model or retailer. Good to have a store near other ones so that people can do comparison shopping If you have a TON of product then you can break this rule.

Specialty shopping Typically happens when you are talking designer products. Customers know what they want. Convenient locations matters less.

Trading-Area Analysis A trading area is a contiguous geographic area containing the customers of a particular firm or group of firms

The segments of a Trading Area Primary trading area o 70 percent Secondary trading area o 20 percent Tertiary trading area o Whoever is left over

Where do I wish to go? Evaluating the potential of specific areas Metropolitan statistical area has two parts City with 50k people or more Evaluate fringe rules around that area Micropolitan statistical areas

Very first decision you have to pick MSA or MISA If target market doesnt fit in are then it is a no go Competition o Depends on business if you want there to be comp. or not Cost of operating stores o Varies a ton by MSA Economic conditions o Taxes etc Logistics o Cost of delivery etc

How many stores? Economy of Scale vs. cannibalization Cannibalization o Store A has a trade radius of 4 miles o Build store B 3 miles away from store A o As a retail chain why would you do this More sales o If you dont have trade areas overlap then you dont give room for competition (thats why you want this) o Build a warehouse or DC right in the middle

Specific Addresses Look at characteristic of site (four things) o Traffic flow o Enough traffic but not too much (ties into ability to access location) Particular location, parking o Cost of location o Restrictions POA Look at characteristics of trading area (varies by site) Estimate sales

Adjacent Tenants Who do I want to be next door to? Complementary or competing? Cumulative Attractiveness?

Bring text book with us on Monday (7th or 8th version)

Case Study Evaluate two trade areas? o Areas typically require 4-5k sq. feet o 350 stores in southeast and midwest o All stores located within 400 miles of distribution center o Hutch express stores are 2-3k sq. feet Typically catered to women who wear a larger size o Combination store that is 6-7k sq. feet Usually located in strip centers and can occasionally be found in malls. o Target market women between ages of 18-40 Lower to middle income Women who like to wear latest fashions Price is perceived as elegant and fashionable but not too expensive. o Located in areas of 10k-50k and a trade area of 50k to 100k o Mall areas must be close to center court of economics o Want to be complement to anchor and feed off of traffic coming to it. Evaluate particular site? o Typically dont give enough details o Put it in bullets o Compare both areas

Customer service Standardized approach o The service level that customers want to receive from any retailer such as basic employee courtesy (McDonalds) Personalized approach o Includes the activities that enhance the shopping experience and gives retailers a competitive advantage Customer delight o How to really build loyalty o When you go above and beyond expectations Customer satisfaction o Service meets or exceeds expectations Dissatisfied customers o Typically dont complain Produce little or no results Service is intangible o Difficult for customers to evaluate service quality o Difficult for firms to evaluate quality of service delivered by employees Inconsistencies of service provided o Employees are not machines

Test 2 Chapters 7 & 8 & 9 &18 9th edition will be chapter 19 (customer service) No charts or graphs Do not have to memorize any formulas

Employee response Decreased motivation and effort Poor customer service Lower job satisfaction Greater turnover

Productivity = sales divided by # of employees Turnover is typically 100% to 200%

Retailers Response Lay offs Freeze on hiring and promotion Reduced training Salary freeze Greater use of part-time employees and more outsourcing

Challenge to retailers Emphasis on expense control Heavy turnover Large numbers of inexperienced workers Managing part-time and minimum-wage earning workforce Long hours Changing employee demographics

True Cost of Employee Turnover Recruiting and hiring new employees Training costs including management time Full pay and benefits during training Costs of mistakes Loss of customers loyal to departing employees Lost or damaged relationships with suppliers Employee morale and customer perceptions of that morale

Structure has to match your strategy What is organizational culture? Environment in which you work in