Strategy Mix & Non-traditional retailingStore Location & Evaluation
Three Basic Strategic Positions • Low end • Medium • High end
How Retail Institutions are Evolving • Mergers, Diversification, Downsizing • Cost-Containment and Value-Driven Retailing
Mergers, Diversification, and Downsizing • Mergers: combination of separately owned firms (e.g., Sears (departmental) Store and Lands’ End (Apparels) • Diversification: retailers become active in businesses outside their normal operations (e.g., Limited Brands shift from apparels to beauty products) • Downsizing: unprofitable stores are closed or divisions are sold off (e.g., Kmart, Australian department store)
J.C. Penney’s Eckerd (growing Drugstore through acquisition)
Methods for Cost Containment • Standardizing procedures, store layouts, store size, and product offerings • Using secondary locations • Placing stores in smaller communities • Using inexpensive construction materials • Using plainer fixtures/Furniture and displays • Buying refurbish (second quality) equipment • Joining cooperative buying and advertising groups
Retail technology buying made simple
The Co-operative Retail Trading Group (CRTG) • Was set up in 1993 to centralize the buying power for member Co-operative Societies. • In 2002 for the first time in its 158 year history, all Co-op food buying is controlled through a single buying point based in Manchester. • CRTG is now controlling 100% of Co-op food buying in the UK. • Over 3,200 Food Stores, which are sited in every UK television area.
Convenience Store Strategy Mix(7-Eleven) Location: Neighborhood Prices: Average to Above average Atmosphere and Services: Average Merchandise: Medium width and low depth of assortment average quality Promotion: Moderate
Conventional Supermarket Strategy Mix Is a Departmentalized food store with a wide range of food and related products. Here sales of general merchandise is rather limited. Eg: Wegmans Rochester, New York RPG’s FoodWorld
Conventional Supermarket Strategy Mix Prices: Competitive Location: Neighborhood Atmosphere and Services: Average Merchandise: Extensive width and depth of assortment; average quality; manufacturer, Private brands too Promotion: Heavy use of newspapers, flyers, and coupons
Combination Store Strategy Mix Are the stores that unite the supermarket and general store in one facility Otherwise known as Combos Where General Merchandise of 25-40 % Example: Fred Meyer’s, which combines a grocery supermarket and a department store.
Combination Store Strategy Mix Location: Community shopping center or isolated site Prices: Competitive Atmosphere and Services: Average Merchandise: Full assortment plus health and beauty aids and general merchandise Promotion: Heavy use of newspapers, flyers
Box Store Strategy Mix • Otherwise known as limited-line store. • A food-based discounter that focuses on a small selection of items • Moderate working hours • Carries less than 2000 items, few refrigerated perishables. • Rely more on low-priced private label brands • Example: Save-A-Lot, Maryland USA Save-A-Lot's store format is a limited-selection store, also known as an "edited assortment carries about 90% of customer's every day food needs.
Box Store Strategy Mix Location: Neighborhood Prices: Very low Atmosphere and Services: Low Merchandise: Low width and depth of assortment; few perishables; few national brands Promotion: Little or none
Membership club Stores • Are discount food retailers with size of 1,00,000 Sq. feet. • Example: Sam’s Warehouse stores
Warehouse Store Strategy Mix Location: Secondary site, often in industrial area Prices: Very low Atmosphere and Services: Low Merchandise: Moderate width and low depth of assortment; emphasis on manufacturer brands bought at discount Promotion: Little or none Or through direct mails
Specialty Store Strategy Mix • A category Killer: Toys “R” Us, • Is a Kids store for toys, videogames, baby products etc.
Home DepotAmerican retailer of home improvement and construction products and services
Specialty Store Strategy Mix Location: Business district (main / Cross roads) or shopping center Prices: Competitive to Above average Atmosphere and Services: Average to excellent Merchandise: Very narrow width and extensive depth of assortment; average to good quality Promotion: Heavy use of displays Extensive sales force
Traditional Department Store Strategy Mix Location: Business district, shopping center or isolated store Prices: Average to Above average Atmosphere and Services: Good to excellent • Merchandise: • Extensive width and • depth of • assortment; average to • good quality • With none of category • predominating Promotion: Heavy ad and catalog use; direct mail; personal selling
Full-line Discount Store • All that expected at department store along with it additonals like • Electronics, furniture's, appliances, auto accessories, gardening tools
Full-line Discount Store Strategy Mix Location: Business district, shopping center or isolated store Prices: Competitive Atmosphere/ Services: Slightly below average to average Merchandise: Extensive width and depth of assortment; average to good quality Promotion: Heavy on newspapers; price-oriented selling
Factory Outlet Strategy Mix Location: Out of the way site or discount mall Prices: Very Low Atmosphere/ Services: Very low Merchandise: Moderate width and poor depth of assortment; low continuity Promotion: Little
Brooks Brothers: Realizing the Power of the Factory OutletBusiness and casual clothing for men and women , New York city
Flea Market Strategy Mix Location: Isolated store Prices: Very Low Merchandise: Extensive width and poor depth of assortment; low continuity; variable quality Atmosphere/ Services: Very low Promotion: Limited
Single-channel Retailing: Sell to consumer through one store format Like Corner shoe shop or E-bay online only • Multi-channel Retailing: Sells through multiple channels Like Wal-Mart selling through Wal-Mart stores, Sam’s Club. Helps the firms: To reach different customer groups Share cost among various Formats Diversify its supplier base
Direct Marketing • Customer is first exposed to a good or service through a non-personal medium and then orders by mail, phone, fax, or computer • Annual U.S. sales exceed $235 billion • Other leading countries include • Japan • Germany • Great Britain • France • Italy
Newer Roles for Catalogs & TV • Specialog: smaller version of general catalog, product wise customized • TV Retailing has two components • Networks: (Gharvakhri furniture : presentation through cables) • Informecials: TVC shopping (30-minutes serial type)
Non-store Retailing • Retailing strategy that is not store-based • It exceeds $300 billion annually • 78% comes from direct marketing • Web-based retailing is fastest growing area
Nontraditional Retailing • Nontraditional retailing also includes formats that do not fit into the store and non-store based categories: • Video kiosks • Airport retailing
Trade Area Analysis • Trade area analysis provides retailer with vital information like • Store patronage • Local market opportunity • Competing businesses • Study of all those barriers that can stop consumers from visiting the site
Every Trade Area consist of three parts • Primary Trading Area: Contributes 50-80 % of the stores customers Nearest Area Within 2-3 kilometers of stores location • Secondary Trading Area: Contributes 15-25 % of the stores customers Customers are comparatively dispersed. Area near to 7 kilometers • Fringe (extreme) Trading Area: Highly dispersed people Spreaded over 9 kilometers Contain shoppers who travel distance to patronize a store.
The greater the Primary and fringe areas the better it is for the retailer. • This is an overall idea about a trade area but there is no format which decides a trade area for a store • Size and shape of trade areas varies upon certain factors
Factors Determining Size & Shape of the Trade Areas • Store Type: • Some have their own trading area (as higher the assortment and promotion and attraction higher would be its trade area). • Some don't have there own trading area nor their own traffic Eg: Florists in lobby, restaurants at the malls • Store Size: Higher the stores size ( in variety and assortment) larger would be its trading area and vise versa Examples: Hypermarket like Giant Supermarket like FoodWorld.
Merchandise Type: • If convinience goods: purchased from Kirana stores Thus small trading area But If other types of convinience goods Like rice, dal, require bit planning Thus would be from supermarkets and trading area of supermarkets are larger.
If shopping goods: like clothing & electronics they are purchased less frequently Customers would spend more time Thus trading area of such retail outlet would be higher • For Specialty goods and Luxury goods Like car High pre-search and huge time investment Thus trading area in this the largest
Location of Competition Intra-store competition Similar merchandise (Subhiksha & FoodWorld) Customer to prefer one Trade area shrinks Inter-store competition Dissimilar merchandise (shopper’s stop, Titan, Archie’s & Barista) Pulled to such areas thus increased trade area
Housing Patterns In urban: Primary trading area would be high (as located nearby) In suburban areas secondary & Fringe trading areas would be high
Travel Time: The greater the distance between the Point-of-origin to the store greater would be the trade area But this is applicable to all those successful branded outlets who has drawing power.
Once through with the describing and analysis of the trade areas on a grass root level. One should not stop there need to keep analyzing to have a shift in stores location strategies.
Examples: • FoodWorld came up with FoodExpress • ¼ size • Attracting small community customers who tend to buy from neighborhood stores.
Examples: • The Piramal Groups bookstore chain Crossword. • Which came up with its shrinking strategies • Earlier crossword was (5000-10,000 sq.) Spreaded over 8 cities. • For which to survive they required 50,000 households in that trade area • Was difficult due to intensive competition as well as heavy traffic problems. • Thus had to shrink to Crossword Corners (now in multiplex, Malls, High streets) • The response was too good lowered its investments to 5-10lkh Rs.