Retail Management

Session: 1

Designing and Managing the

Marketing Channels
 2-2

Marketing Strategy Planning Process

 Distribution Channel System:
Conceptual Framework
• Functions of Distribution System
– Marketing Exchange process
Prospecting Promotion Physical Financing Market
Distribution & Collection Feedback

Transfer of Promotion Physical Money & Risk Feedback

Ownership Flow Flow Flow Flow
Flow
Types of Flows
 2-4
Marketing Strategy Planning Process

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

Basic activities in channel management:

• Push activities: getting channel members to carry and sell
the product.

• Pull activities: motivating customers to ask for your brand

by name.
Alternative Channel Systems for
Consumer Products
Alternative Channel Systems for
Industrial Products
 Channel Dynamics
• Channel structures must adapt to changes in
the environment.
• Innovation in distribution can create new
marketing opportunities. (discussed later)
• The Internet has evolved into a standard
channel option.
• Differential advantage can be obtained by
means of unique channel structure decisions.
 Innovation in Distribution
• Mumbai’s Apna Bazar Co-operative stores chain recently tied up with MetLife
India for the customer base of over 1.5 million in the metropolis and beyond.
• Earlier, the Department of Post tied up with the Oriental Insurance Company for
the same end.
• Till the opening up of the sector, Indian insurers sold risk products using the agents
majorly. The reliance on a single channel limited reach and penetration.
Future Scenario:
• The postman will not only deliver the mail from now on, he will also sell insurance
products.
• You can buy a toothpaste and win a dental insurance or by a home loan product and
get life insurance cover free.
• Banks have themselves gained from such linkages. In the first quarter of fiscal year
2004-05, SBI Life Insurance’s total premium collection was Rs 51 crore.
• Corporate agents — such as the SBI-GE credit cards venture — contributed Rs 11
crore.
• For banks, it’s a win-win deal — it boosts their income, and helps them gain
some free publicity and advertising space.
 Channel Selection
• The selection of distribution channels is one of the
most critical strategic marketing decisions due to
two reasons:
1. It affects all other marketing mix elements:
– Pricing strategy depends on whether distribution is through high-
mark up dealers or mass distribution.
– Promotional strategy depends on whether selling directly / or
through sales persons/ or retailers.
– Product and packaging strategy depends on whether selling
through department stores or discount stores.
2. Channel choice commits the Company to long term
and complex relationships with intermediaries.
 Channel Selection Process
Three major decisions:
• Length of distribution channel: number channel
intermediaries participate in moving the product.
• Breadth of distribution channel: relative intensity of
distribution coverage i.e. number of retail outlets
and number of wholesalers which will distribute to
these outlets. Retail penetration – intensive,
selective and/or exclusive.
• Whether and how to ‘modify’ the current
distribution channel structure to meet new market
opportunities.
 1. Determining Vertical Length of Channel System
Whether to sell directly or through intermediaries.

Selling Directly (Advantages):

• More cost effective in case of high volume business with an account.
• Can exert more control over distribution functions.
• Better satisfy the customer needs like technical services.
• Direct relationship can provide prompt market information.
Through intermediaries (3 options)
• Corporate system: manufacturer owns and operates vertical integrated
system. E.g. ITC buy wheat from farmers to produce Aashirwad atta and Sunfeast biscuits .
• Contractual system: sign contract b/w Co. and intermediaries.
• Conventional system: utilizes the resources of intermediaries to move its
products.
 Vertical Length of Channels: Corporate Systems
Advantages:
• Company can exercise control over its marketing activities e.g. set and
maintain consistent list price.
• Control quality standards.
• Better coordination in executing its promotional campaigns.
• Achieving operating economies by standardization, automation and better
channel operations like inventory and stock management.
• Better in-store services e.g. brand store can do alterations of suits within the
store; Singer provide in-store demonstrations and sewing lessons.
Disadvantages:
• Large investments in financial and human resources, otherwise performed
by independent intermediaries.
• Difficult to adapt to new market opportunities.
• Legal risks due to vertical mergers or acquisitions e.g. competitive issues.
 Vertical Length of Channels: Contractual Systems
• Contractual systems are a form of Franchising arrangement.
Category:
– Product trade name franchising and
– Business format franchising.
• Product trade name franchising: arrangement where franchisee acquires the
marketing rights within a designated area, using franchisor’s trade name. e.g.
automobile and truck dealers and soft drink bottlers.
• Business format franchising: franchisee acquires rights for –
– Utilizing business know-how (i.e. operating manuals, standards, quality control,
information systems and marketing plans)
– Offering franchisor’s product or services in a designated market area. E.g. fast
food chains, hotel etc.
Disadvantages of Franchising:
• Fly-by-night operators.
• Termination of contract.
• Disagreement over strategic issues.
 Vertical Length of Channels : Conventional System
(to achieve coordination and economies of scale)
• Administered programs – administer inventory plan, advertising
plan, or sales training plan. E.g. GE is using programmed
merchandising plan with its appliance retailers. Through this method
Co. try to satisfy its intermediaries i.e. ‘carrot’ approach / reward.

• Sales agreements – bind the dealers to:

– Meet technical requirements
– To have qualified sales staff
– Allow Co. representatives to inspect the store
– Protect name and reputation of Co.
i.e. ‘stick’ approach/ punishment
 Determining the Breadth of Channel System
• Intensive: when share of distribution translates into share of market.
For commodities with low unit value, consumer prefer conveniently
located outlets. Issue of ‘loss leaders’ in mass merchandisers i.e.
product sold below cost to stimulate store sales like milk, egg, rice etc.
alongwith other purchases of store. A kind of sales promotion using
pricing. E.g. soft drinks, impulse products etc.

• Selective: maintain image, full assortments, consistency in prices at

retail level etc. e.g. apparel companies.

• Exclusive: provide sales assistance, good local reputation and

specialists.
 Choice b/w Intensive or Selective Distribution
• Product characteristics:
– Convenience goods: sold frequently, minimum effort –
intensive
– Shopping/ specialty goods: deep involvement in
purchase, rational/ emotional – selective/ exclusive.
• Buying behaviour:
– Selective distribution when: perceived risk is high,
post-purchase services requirements, frequency of
purchase is low, high brand loyalty, high personal selling
effort required.
– Intensive distribution: ….
 Choice b/w Intensive or Selective Distribution cont…
• Degree of Control:

– Selective distribution is appropriate: (a) to control

retail prices, (b) selling assistance required at point-of-
purchase, (c) display standards, (d) maintaining product
image.

– Intensive distribution is appropriate: (a) penetration,

(b) minimum risk and low exit barrier.

• Competitive strategies: Products frequently move from

Selective to intensive distribution over stages of PLC.
 Modifying the Channel System
A company may develop new channel systems
majorly due to:
• Forced to adopt changes due to competitive
reasons. E.g. competitors are opting for VMS.
• To serve a new customer segment. E.g. automobile
Co. start selling through their own sales force to Car
Rental companies.
• To cover new geographical region. E.g. selling in
host country v/s in foreign markets.
 Channel Conflicts
• Role Conflict: Certain members of the channel deviate
from the agreed/ expected role. Horizontal and Vertical
(Bait and Switch tactics) E.g. A car sales showroom puts a basic
car outside with a very low price-tag. Once the customer is interested,
the sales person trades them up to a more expensive model.
• Goal Conflict: goal(s) of one channel member differs
from the other. E.g. manufacturer want volume growth
whereas small retailers may be satisfied with stability or
higher margins of limited products.
• Lack of Communication: relevant strategic or tactical
information not disseminated in advance. E.g. manufacture
often make changes in product design, prices and promotional
strategies.
 Ways of dealing Channel Conflict
• Motivating Channel Members: financially through better
credit terms, higher gross margins, promotional allowances,
trade discounts etc. Non financially like pep rallies, sales
contests and awards etc.
• Communicating the Channel members: proper flow of
information i.e. changes in product design, prices and
promotional strategies with mutual consent.
• Establishing Controls: Control can be build into the
system after mutual understanding, through measures of
performance standards. Explicit agreements regarding:
territorial coverage, exclusive agreement, participation in
promotional programs and treatment of damaged goods etc.
 Channel-Design Decisions
Push strategy: Manufacturer uses the Sales force and trade
promotion to induce intermediaries to carry, promote and
sell the product to the consumers.
– Appropriate when these is low brand loyalty, and impulse
purchase.
Pull strategy : Manufacturer using advertising and promotion
to induce consumers to ask intermediaries for the product.
– Appropriate when these is high brand loyalty, and high
involvement in the product purchase.
– Designing a channel system involves four steps:
• Analyzing customer needs
• Establishing channel objectives
• Identifying major channel alternatives
• Evaluating major channel alternatives
 Channel-Design Decisions
• Analyze Customers’ Desired Service Output Levels:
Channel provides 5 Service outputs -
– Lot size: No. of units channel permits to a customer to
purchase on one occasion.
– Waiting time: The average waiting time of customers for
receiving the product/service from the channel.
– Spatial convenience: degree of convenience provided by
the channel for the customers to shop.
– Product variety: Depth in the choices of a product
category.
– Service backup: Add-on services (credit, home-delivery,
installation, repairs etc).
The Value-Adds versus Costs of Different Channels
 Session – 2

Managing Retailing,
Wholesaling and

Logistic System
 What is Retailing?
• All the activities involved in selling goods or services
directly to final consumers.

• Retailers - businesses whose sales come primarily

from retailing.

• Retailers can be classified as:

– Store retailers such as Sears, Wal-Mart.
– Nonstore retailers such as the telephone & Internet.
 Classification By Product Line
Store Type Length and Breadth of
Product Assortment
Specialty Stores Narrow Product Line, Deep Assortment

Wide Variety of Product Lines i.e. Clothing, Home

Department Stores Furnishings, & Household Items
Wide Variety of Food, Laundry, & Household
Supermarkets Products
Limited Line of High-Turnover Convenience
Convenience Stores Goods
Large Assortment of Routinely Purchased Food &
Superstores Nonfood Products, Plus Services
Giant Specialty Store that Carries a Very Deep
Category Killers Assortment of a Particular Line

Hypermarkets Huge Superstores

 Retail Channel Terminology
• Hyper markets:
Selling areas exceeding 200,000 sq.ft.
• Discount stores:
Selling areas averaging 70,000 sq.ft.
• Super markets:
Selling areas averaging 30,000 to 50,000 sq. ft.
• Superettes:
(a compact food market which often services persons in low-density suburbs – mostly in
New Zealand; similar to ‘convenience stores’ of US; a small form of Super market)

Selling areas averaging 1,000 to 4,000 sq. ft.

 Major Retail Types
• Specialty Stores: Narrow product line with depth. E.g. Haldiram bhujiwala, Music world,
Nokia world, Sony world, Khadims, Adidas, Bata, Raymonds, Apollo pharmacy.
• Department Store: Several product lines, each line operated as a separate department
managed by specialist merchandisers. E.g. Sears, Fabmall in Kerala, Spencer.
• Supermarkets: Relatively large, low-cost, low-margin, high-volume, self service
operation designed to serve diversity of needs. E.g. FoodWorld.
• Convenience Stores: Relatively small stores located near residential areas, open long
hours, 7 days a week, carrying limited line of high-turnover convenience products at
slightly higher prices. E.g. grocery stores.
• Discount Stores: Standard merchandise sold at lower prices, lower margins, higher
volumes. Discount retailing has moved into specialty merchandise stores like discount
sporting-goods stores, electronic stores, and bookstores. E.g. Walmart, Kmart, Future
Group's Brand Factory, Arvind Brands' Megamart, Provogue's Promart and The Loot.
• Off-price retailers: leftover products like Factory outlets.
 Major Retail Types cont…

• 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.

• In India, over 50 percent of goods are transported by

road. The road transport sector is highly fragmented
with vehicle ownership firmly in the hands of
individual trucks owners with 67 percent of the
owners with a fleet of less than five vehicles.
 Indian Logistic Scenario
• Inventory carrying costs account for
approximately 24 percent of the logistics cost.
• Order processing and administrative costs
account for a significant 10 percent of the logistics
costs.
• Stock filing and warehouse management in many cases is
done manually increasing the administrative costs at the
same time adding an element of inefficiency in warehouse
management.
 Indian Logistic Scenario
• Companies in India are slowly moving towards total
outsourcing of logistics that provides access to
logistics services to their production facility,
warehouses, and IT systems.
• A high level of integration is required between the
company and logistics service providers to provide
logistics services that fulfill the strategic objective of
the companies.
 Indian Logistic Structure
• The total logistics market consists of market participants
from the unorganized segment to highly technology savvy
and process driven service providers with high levels of
expertise in the area of logistics management.
• The market participants in this industry can be broadly
classified into three broad segments, namely:
– Pure transporters
– Integrated transporters with warehousing facilities
– Third-party logistics service providers (3PLs)
 Pure & Integrated Transporters
• Transporters are involved only in the physical
movement of goods. They can be classified as
– small, medium and large based on the ownership pattern
of vehicles and their revenue.
• Transporters are considered to be highly
unorganized although many large transporters form
a part of the organized segment of the market.
• Many large transporters are diversifying their
operations to include total logistics management.
 Third Party Logistics (3PLs)
Third-party logistics service providers
• (3PLs) are involved in the complete value chain of
logistics management including inbound logistics,
supply chain management, tracking and data
reporting, warehousing, (JIT) deliveries, and
outbound logistics.
• 3PL companies currently present in India are multi-
national companies with wide experience in
handling international logistics.
 Indian Supply Chain Scenario
Some Facts
• GDP : Rs. 27.55 Lakh Crores*
• Inventory tied up : Rs. 1.17 Lakh Crores
• Logistics Cost : 14% of our GDP
• 1% Reduction in LC : Rs. 27550 Crores
• 2% Reduction in LC : Rs. 55100 Crores

* Economic Survey 2003-04

 Logistics Cost
Country GDP (USD b)* Logistics Cost as % of
GDP

Australia 393.0 10-11

Asian Region

China Mainland 1237.1 14.5

India 460.0 14.0

Japan 3996.2 10.5

Korea 468.7 12.4

Singapore 87.0 12.4

Taiwan 281.5 13.5

* World Competitiveness Year Book 2003

 Logistics Cost cont…
Country GDP (USD b)* Logistics Cost as % of
GDP

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

North American Region

Canada 729.3 11.8

Mexico 637.3 14.4
USA 10445.6 08.7
* World Competitiveness Year Book 2003
 Elements of Logistics cost
• Transportation 35%
• Inventories 25%
• Losses 14%
• Packaging 11%
• Handling and Warehousing 9%
• Customers' shopping 6%
 Ma r k e t O p p o r t u n i t i e s a n d
Forecasts

Figure 1-1 and Chart 1.1 present the revenue

forecast of the Indian logistics industry over

the period 2002 to 2009.

 Figure1-1
Logistics Industry: Revenue Forecasts (India), 2002-2009
Revenues Year ($ Billion)
2002 12.66
2003 13.46
2004 14.31
2005 15.22
2006 16.19
2007 17.24
2008 18.35
2009 19.54
Compound Annual Growth Rate (2003-2009): 6.4%
Note: All figures are rounded; the base year is 2003. Source: Frost & Sullivan
Figure 1-2 and Chart 1.2 present the revenue

forecast of the third-party logistics solutions

market over the period 2002 to 2009.

 End-userDemandAnalysis

Figure 1-3 and Chart 1.3 present the industry wise

revenue contribution to the total Indian logistics

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

Dr. Preshth Bhardwaj Retail Management XIMB

 Questions

⚫What is a retailing strategy?

⚫How can a retailer build a sustainable
competitive advantage?
⚫What steps do retailers go through to develop a
strategy?
⚫What different strategic growth opportunities
can retailers pursue?
⚫What retailers are best positioned to become
global retailers?
Dr. Preshth Bhardwaj Retail Management XIMB
 FLOW OF DISCUSSION

⚫Elements of Retail Strategy

⚪ Target Market(s)
⚪ Retail Format(s)
⚪ Sustainable competitive advantage

⚫Growth options in Retail Formats

⚫Expanding the growth option selected

⚫Strategic Retail Planning Process

Dr. Preshth Bhardwaj Retail Management XIMB

 More attention to long-term strategic
planning than ever before

⚫Due to the emergence

of:
⚪New competitors

⚪New formats

⚪New technologies

⚪Shifts in customer needs

Dr. Preshth Bhardwaj Retail Management XIMB

 Elements in Retail Strategy
⚫Target Market
⚪the market segment(s) toward which the retailer plans to focus its
resources and retail mix
⚫ Retail Format
⚪thenature of the retailer’s operations—its retail mix 🡺
⚪nature of merchandise and services offered, pricing policy, advertising
and promotion programs, approach to store design and visual
merchandising, typical location and customer services.
⚫Sustainable Competitive
Advantage
⚪an advantage over the
competition

Dr. Preshth Bhardwaj Retail Management XIMB

 RETAIL MIX

Dr. Preshth Bhardwaj Retail Management XIMB

 Criteria For Selecting A Target Market

⚫Attractiveness –Large,
Growing, Little
Competition
⚪More Profits

⚫Consistent with Your

Competitive Advantages

Dr. Preshth Bhardwaj Retail Management XIMB

 Target Market Selection

▪ Three techniques
✵ Mass marketing

✵ Concentrated marketing

✵ Differentiated marketing

Dr. Preshth Bhardwaj Retail Management XIMB

Strategic Implications of Target Market
Techniques

✵ Retailer’s location

✵ Goods and service mix

✵ 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:

⚫Dropping the Price of Your Merchandise?

⚫Building a Store at the Best Location?
⚫Deciding to Sell Some Hot Merchandise?
⚫Increasing Your Level of Advertising?
⚫Attracting Better Sales Associates by Paying
Higher Wages?
⚫Providing Better Customer Service?

Dr. Preshth Bhardwaj Retail Management XIMB

 Sources of Competitive Advantage

More Sustainable Less Sustainable

⚫Location ⚫Better Computers
⚫Customer Loyalty
⚫More Employees
⚫Customer Service
⚫More Merchandise
⚫Exclusive Merchandise
⚫Low Cost Supply Chain ⚫Greater Assortments
Management ⚫Lower Prices
⚫Information Systems
⚫More Advertising
⚫Buying Power with
Vendors ⚫More Promotions
⚫Committed Employees

Dr. Preshth Bhardwaj Retail Management XIMB

 Opportunities for retailers to develop sustainable
competitive advantages

■ Customer Loyalty
■ Location
■ Human Resource Management
■ Distribution and Information Systems
■ Vendor Relations

Dr. Preshth Bhardwaj Retail Management XIMB

 Customer Loyalty

⚫More than simply liking one retailer over

another

⚫Customers will be reluctant to patronize

competitive retailers

⚫Retailers build loyalty by:

⚪Developing a strong brand for the store or store brands
⚪Developing clear and precise positioning strategies
⚪Creating an emotional attachment with customers
through loyalty programs
Dr. Preshth Bhardwaj Retail Management XIMB
 Retail Branding

Stores use brand (store’s name and store brands –

private label brands) to build customer loyalty

⚫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

Dr. Preshth Bhardwaj Retail Management XIMB

 Approaches for Building
Customer Loyalty

⚫Brand image

⚫Unique Merchandise

⚫Customer Service

⚫Customer Relationship Management Programs

Dr. Preshth Bhardwaj Retail Management XIMB

 Example of Positioning

Dr. Preshth Bhardwaj Retail Management XIMB

 Target market and retail format:
Retail Market Opportunities for Women’s Apparel

Dr. Preshth Bhardwaj Retail Management XIMB

 Creating Store Loyalty
Mental and Emotional Attachments

⚫Elements in a Strong Brand

⚪ Top of the Mind Awareness
⚪ Associations with Brand/Store Name

⚫Methods Used to Develop a Strong Brand

⚪ Massive Exposure
⚪ Symbols to Reinforce Image
⚪ Consistent Positioning Creating Strong Associations
⚪ Video

Dr. Preshth Bhardwaj Retail Management XIMB

 Unique Merchandise: Private Labels

⚫Sears’ Kenmore -- appliances

⚫Federated’s Inc. – fine apparel

⚫Kmart’s Martha Stewart -- home

⚫JCPenney’s Arizona -- jeans

Dr. Preshth Bhardwaj Retail Management XIMB

 Vendor Relationships

⚫Low Cost - Efficiency Through Coordination

⚪Electronic Data Interchange (EDI)
⚪Collaborative Planning and Forecasting to Reduce
Inventory and Distribution Costs

⚫Exclusive Sale of Desirable Brands

⚫Special Treatment
⚪Early Delivery of New Styles
⚪Shipment of Scare Merchandise

Dr. Preshth Bhardwaj Retail Management XIMB

 Location

⚫What is the most important things in retailing?

“location”

⚫Location is a competitive advantage

⚫A high density of Starbucks stores

⚪Creates a top-of-mind awareness
⚪makes it very difficult for a competitor to enter a
market and find a good locations

Dr. Preshth Bhardwaj Retail Management XIMB

 Human Resources

⚫“Employees are key to build a sustainable

competitive advantage”

⚫Strategies for Recruiting and Retaining

Talented Employees
⚫Employee Branding

⚫Develop positive organizational culture

Dr. Preshth Bhardwaj Retail Management XIMB

 Distribution and Info Systems

Flow of
Information Focus on:
Vendo
r
Distribution
Center

Store
-Better services
-Increase in breadth and depth
-Decrease in prices

Dr. Preshth Bhardwaj Retail Management XIMB

 Growth Strategies

⚫Market Penetration

⚫Market Expansion

⚫Retail Format Development

⚫Diversification
⚪ Related vs. Unrelated

Dr. Preshth Bhardwaj Retail Management XIMB

 Growth Opportunities

Dr. Preshth Bhardwaj Retail Management XIMB

 Market Penetration

⚫Attract customers from target market – Walgreens “on

every corner”

⚫Get current customer to visit store more often or buy on

each visit

Cross Selling – sales associates in one department sell complimentary

merchandise from other departments

Example: Manicurist sells services plus hand lotion or nail polish

Example: Salesperson sells leaf blower directs customer to electrical

department to purchase a 100 foot extension cord.

Dr. Preshth Bhardwaj Retail Management XIMB

 Market Expansion

⚫Market expansion growth opportunity involves

using the existing retail format in new market
segments
⚪Dunkin’ Donuts – new stores (and at gas stations)
outside northeastern
⚪Abercrombie & Fitch (for college students) opens
lower-priced chain Hollister Co. for high school
students

Dr. Preshth Bhardwaj Retail Management XIMB

 Retail Format Development

⚫Develops a new retail format with a different

retail mix for the same target market
⚫Multi-channel retailing
⚫UK based TESCO:
⚪Tesco Express: small stores located close to where
customers live and work
⚪Tesco Metro: bring convenience to city center
location by specializing in ready-to-eat meals
⚪Tesco Superstores: traditional stores
⚪Tesco Extra: one-stop destination with the widest
range of food and non-food products
Dr. Preshth Bhardwaj Retail Management XIMB
 Diversification
⚫Introduces a new retail format toward a market segment that
is not currently served by the retailer
⚫Related diversification – Concentric. E.g. Reliance merging
into value and lifestyle format associations.
⚫Related diversification – Horizontal. E.g. Addidas through
its Omni-channel store selling cycling equipments.
⚫Conglomerate diversification – E.g. General Shopping S.A., a
financial conglomerate headquartered in Luxembourg have
Department stores; food and specialty stores in several
European countries; helps in shopping centre development;
and also operates as a retail management consulting firm.
⚫Vertical integration into wholesaling or manufacturing

Dr. Preshth Bhardwaj Retail Management XIMB

 Global Growth Opportunities

⚫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?

⚫Specialty store retailers with strong brand and unique

merchandise?
⚪ McDonald’s
⚪ Starbucks
⚪ Zara
⚪H & M
⚫Discount and food retailers with deep assortments and
low prices?
⚪ Wal-Mart
⚪ Carrefour
⚪ Royal Ahold
⚪ Metro AG

Dr. Preshth Bhardwaj Retail Management XIMB

 Key to Success in Global Retailing

⚫Globally sustainable competitive advantage

⚪Low cost, efficient operations - Wal-Mart, Carrefour
⚪Strong private label brands: Starbucks, KFC
⚪Fashion Reputation - The Gap, Zara, H&M
⚪Category dominance – Best Buy, IKEA, Toys R Us

⚫Adaptability
⚫Global Culture
⚫Financial Resources

Dr. Preshth Bhardwaj Retail Management XIMB

 IKEA

⚫Operates 254 stores in 35

countries
⚫Unique, well-designed,
functional furniture at low
prices for consumers who have
sophisticated tastes but have
no intention to spend lots of
money

Dr. Preshth Bhardwaj Retail Management XIMB

 International Market Entry Strategies

Direct Investment
Joint Ventures
Strategic Alliances
Franchising

Dr. Preshth Bhardwaj Retail Management XIMB

 Stages in the Strategic
Retail Planning Process

Dr. Preshth Bhardwaj Retail Management XIMB

 Elements in a Situation Audit

Dr. Preshth Bhardwaj Retail Management XIMB

 Market Factors

⚫Market size – large markets attractive to large retail

firms
⚫Growth – typically more attractive than mature or
declining
⚫Seasonality – can be an issue as resources are
necessary during peak season only
⚫Business cycles – retail markets can be affected by
economic conditions – military base towns

Dr. Preshth Bhardwaj Retail Management XIMB

 Competitive Factors

⚫Barriers to entry
⚪Scale economies of big box retailers

⚪Service and unique, high-end products of small retailers

⚫Bargaining power of vendors

⚪Markets are less attractive when only a few vendors control
the merchandise sold within it

Dr. Preshth Bhardwaj Retail Management XIMB

 Competitive Factors

⚫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

Dr. Preshth Bhardwaj Retail Management XIMB

 Additional Concerns for
Global Retailing

✵ In addition to the strategic planning

process:
✵ assess your international potential

✵ get expert advice and counseling

✵ select your countries

✵ develop, implement, and review an international

retailing strategy
 Factors Affecting the Success of a
Global Retailing Strategy

✵ 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

Kelly Bradford – Owner of Gifts To Go

⚪ Two Store Chain in Chicago
⚪ Target Market – Upper Income Men and Women
Looking for Gifts between $50 and $500
⚪ Strong Customer Loyalty Based on Knowing What
Customers Want, Providing Good Customer
Service
⚪ Low Turnover Among Associates
 Mission Statement for Gifts To Go
5-
112

“The mission of Gifts to Go is to be the leading

retailers of higher-priced gifts in the Chicago and
provide a stable income of $100,000 per year for
the owner.”

⚫Define growth opportunities will and won’t

consider
⚫Indicates objective of company
 Situation Analysis of Gifts to Go
5-
113

■ Market Factors

■ Chicago is an attractive market. (+)

■ Relatively expensive gifts are not affected much by the economy. (+)
■ Gifts are highly seasonal. (-)
■ Competitive Factors

■ Many in area. Primary department stores, craft galleries, catalogs, and

Internet retailers (-)
■ Lack of large suppliers, customer (+)
■ Opportunities for differentiation (+)
■ Limited competitive rivalry. (+)
 Situation Analysis of Gifts to Go

⚫Environmental Factors
⚪ Potential Threat - Development of electronic channel by
traditional bricks and mortar retailers (-)

⚫Strengths and Weaknesses

⚪ Management Capability – Limited
⚪ Financial Resources – Good
⚪ Operations – Poor
⚪ Merchandise Capabilities – Good
⚪ Store Management Capabilities – Excellent
⚪ Locations – Excellent
⚪ Customer Loyalty – Good
⚪ Customer Database - Good
 Growth Opportunities for Gifts to Go
5-
115

■ 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

■ Retail Format Development

■ Sell non-gift merchandise to same customers in
present or new stores
■ Sell similar gifts to same customers through an
electronic channel
■ Diversification
■ Manufacture craft gifts

■ Open an apparel store targeting teenagers

■ Open a category killer store selling a broader

assortment of gifts
 Evaluating Growth Opportunities for
Gifts to Go
5-
117

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

■ Retail Format Development

■ Sell non-gift merchandise to same customers in present or
new stores (High)
■ Sell similar gifts to same customers through an electronic
channel (High)
■ Diversification
■ Manufacture craft gifts (High)
■ Open an apparel store targeting teenagers (High)
■ Open a category killer store selling a broader assortment of
gifts (High)
 Evaluating Growth Opportunities for
Gifts5-to Go
119

Competitive Position

■ Market Penetration
■ Increase size of present stores (High)

■ Open additional gifts stores in Chicago area

(Medium)
■ Market Expansion
■ Open gift stores outside Chicago area (Low)

■ Sell lower priced gifts in present stores (low)

 Evaluating Growth Opportunities for
Gifts to Go (continued)
5-
120

Competitive Position

■ Retail Format Development

■ Sell non-gift merchandise to same customers in present or
new stores (Low)
■ Sell similar gifts to same customers through an electronic
channel (Medium)
■ Diversification
■ Manufacture craft gifts (Low)
■ Open an apparel store targeting teenagers (Low)
■ Open a category killer store selling a broader assortment of
gifts (Low)
Market Attractiveness/Competitive
Position Matrix

5-121
 Steps in Using Market Attractiveness -
Competitive Position Matrix
• Define strategic opportunities

• Identify market attractiveness and

competitive
position factors

• Assign weight based on importance of

factors

• Rate opportunities on market attractiveness

and competitive position
Dr. Preshth Bhardwaj Retail Management XIMB
 Questions
 What is the merchandise management process?
 How are merchandise management processes different for
staple and fashion merchandise?
 How do retailers forecast sales for merchandise categories?
 What trade-offs are considered in developing merchandise
assortments?
 How do retailers plan their assortments and determine the
appropriate inventory levels?
 How do multi-store retailers allocate merchandise to stores?
 How do retailers evaluate the performance of their
merchandise management process?

Dr. Preshth Bhardwaj Retail Management XIMB

 Merchandise Management

Process by which a retailer offers the correct

quantity of the right merchandise in the right place
at the right time and meets the company’s financial
goals.

 Sense market trends

 Analyze sales data
 Make appropriate adjustments
in prices and inventory levels

Dr. Preshth Bhardwaj Retail Management XIMB

 Merchandise Management and
Investment Portfolio Management

 Dollars to invest in inventory

 Invest in “hot” merchandise
 Monitor portfolio of
merchandise (stocks)
 Sell losers (markdowns)

Traders on the stock exchange floor manage a

portfolio of stocks, and retail buyers manage a
portfolio of merchandise inventory. Both continuously assess the
risks associated with their purchase decisions.
Dr. Preshth Bhardwaj Retail Management XIMB
 Merchandise Category –
The Planning Unit
 A merchandise category is an assortment of items that
customers see as substitutes for each other.

 Vendors might assign products to different categories

based on differences in product attributes e.g.
Tommy Hilfiger, Polo, or Ralph Lauren. Managing
merchandise within category by brands or managing
brands as category itself.

 Retailers might assign two products to the same

category based upon common consumers and buying
behavior
Dr. Preshth Bhardwaj Retail Management XIMB
 Category Management
 The process of managing a retail business with
the objective of maximizing the sales and profits
of a category
 Objective is to maximize the sales and profits of
the entire category, not just a particular brand

•Breakfast cereal category vs. Kellogg Corn

Flakes
•Men’s knitted shirts vs. Polo shirts
•Diary product category vs. Carnation milk
products
Dr. Preshth Bhardwaj Retail Management XIMB
 Category Captain
Selected vendor responsible for managing a category
 Vendors frequently have more information and analytical
skills about the category in which they compete than retailers
 Helps retailer understand consumer behavior
 Creates assortments that satisfy the customer
 Improves profitability of category

Problem
Vendor category captain may have different goals than retailer
Red Bull (energy drinks), Hershey (confectionary), Frito-Lay
(salty snacks/ cookies), Pepsi-Cola.

Dr. Preshth Bhardwaj Retail Management XIMB

 Evaluating Merchandise
Management Performance

 Merchandise managers have control over

◦ The merchandise they buy

◦ The price at which the merchandise is sold

 Merchandise managers do not have control over

◦ Operating expenses such as human resources, Real estate,
Supply chain management and Information systems

 SO HOW ARE MERCHANTS EVALUATED?

Dr. Preshth Bhardwaj Retail Management XIMB

 Evaluating Merchandise
Management Performance
RETAIL METRICS
(KEY PERFORMANCE INDICATORS)
 Strategic Corporate level:

◦ Return on Assets (ROA)

 Merchandise Management level:
◦ Gross Margin Return on Investment
(GMROI)
Dr. Preshth Bhardwaj Retail Management XIMB
Strategic Corporate level: Return on Assets (ROA)
Return on Assets covers two components:
Asset Turnover and Net Profit Margin percentage
 Not a good measure - no control over retailer’s all assets/ expenses.
 Control variables: what to buy – inventory asset; at a price to sold;
cost of merchandising – GROSS MARGINS
 Uncontrolled variables: Human resource, store operations, real
estate, logistics & information systems – OPERATING
EXPENSES.
====================================
 Return on Assets = Net Profit Margin
Total Assets Turnover
====================================

Dr. Preshth Bhardwaj Retail Management XIMB

 Merchandise Management level: GMROI
Gross Margin Return on Investment
 It measures - how many gross margin $s are
earned on every $ of inventory investment.
 It combined gross margin percentage and the
sales – to – stock ratio (inventory turnover).
 GMROI looks at sales, gross margin and inventory
turnover in one model.
 Companies can compare relative return across
categories and optimize the overall product mix for
better profitability.
Dr. Preshth Bhardwaj Retail Management XIMB
 GMROI
Gross Margin Return on Investment

GMROI = Gross Margin Percent x sales-to-stock ratio

= gross margin x net sales

net sales avg. inventory at cost

= 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

Dr. Preshth Bhardwaj Retail Management XIMB

 Managing Inventory Turnover
 Inventory Turnover helps assess the retailers performance in
managing asset (merchandise inventory)
 But focusing on increasing inventory turnover can actually decrease
GMROI
 Buyers need to consider the trade-offs associated with managing
Inventory Turnover

• Inventory turnover = Cost of good sold

Average inventory at retail

• Average inventory = Month1 + Month2 + Month 3 +…

Number of months

Dr. Preshth Bhardwaj Retail Management XIMB

 Merchandise Planning Process
Forecast Category Sales
Historical Sales data Market Research Syndicated reports Category champions

Develop an assortment plan

Category variety and assortments (breadth and depth) Space allotment to a category

Determine appropriate Inventory level & Product availability

Model stock plan Product availability

Develop plan for Managing Inventory

Control systems Managing the flow

Allocate Merchandise for Stores

Amount and Type Time of allocation

Buy Merchandise
Branding options Issues in buying

Monitors and Evaluate Performances and make adjustments

ABC analysis Multi-attribute method
Dr. Preshth Bhardwaj Retail Management XIMB
 Types of Merchandise Management
Planning Processes
Two distinct types of merchandise management systems for
managing
 Staple (Basic) Merchandise Categories
◦ Continuous demand over an extended time period
◦ Limited number of new product introductions
◦ Hosiery, basic casual apparel
◦ Easy to forecast demand
◦ Continuous replenishment
 Fashion Merchandise Categories
◦ In demand for a relatively short period of time
◦ Continuous introductions of new products, making existing
products obsolete
◦ Athletic shoes, laptop computers, women’s apparel

Dr. Preshth Bhardwaj Retail Management XIMB

 Developing a Sales Forecast
 Understanding the nature of the product life cycle
 Collecting data on sales of product and comparable
products
 Using statistical techniques to project sales
 Work with vendors to coordinate manufacturing
and merchandise delivery with
forecasted demand

Dr. Preshth Bhardwaj Retail Management XIMB

 Types of Merchandise
Staple Merchandise Fashion Merchandise
 Predictable Demand • Unpredictable Demand
 History of Past Sales • Limited Sales History
 Relatively Accurate Forecasts • Difficult to Forecast Sales

Dr. Preshth Bhardwaj Retail Management XIMB

 Staple Merchandise categories
 Use of Historical Sales:
◦ Sales of Staple merchandise are relatively steady and
therefore, it is easy to forecast demand.

◦ Merchandise planning systems for staple categories

often involve continuous replenishment.

 Adjustment of controllable factors.

Dr. Preshth Bhardwaj Retail Management XIMB

 Factors Affecting
Sales Projections
Controllable Uncontrollable

 Promotions  Seasonality
 StoreLocations  Weather
 Merchandise  Competitive Activity
Placement  Product Availability
 Cannibalization
 Economic Conditions

Dr. Preshth Bhardwaj Retail Management XIMB

 Forecasting
Fashion Merchandise Categories

Retailers develop
fashion forecasts by
relying on:

 Previous sales data

 Market research
 Fashion and trend
services
 Vendors

Dr. Preshth Bhardwaj Retail Management XIMB

 Forecasting
Fashion Merchandise Categories
(Continued)
 Previous sales data
◦ Many items in a fashion category are often similar to items
sold in previous years. E.g. Football video games might
change with new versions. There SKUs might be different
each season but total no. of games sold per year remains
constant and predictable.
 Market research
◦ Activities range from informal, qualitative research about
trends affecting the category to more formal experiments
and surveys. E.g. Asda, Supercentre owned by Wal-Mart in
UK, conducts survey regularly among 18,000 panel
customer online, to forecast sales of new launches.
Dr. Preshth Bhardwaj Retail Management XIMB
 Forecasting
Fashion Merchandise Categories
(Continued)
 Fashion and trend services
◦ There are many services that buyers can subscribe to that
forecast the latest fashions, colors, and styles. E.g. Donegar
Creative services, US, offer services related to trends and colour
forecasts for apparels; lifestyle markets for women and men.
 Vendors
◦ Vendors have proprietary information about their marketing
plans and tend to be very knowledgeable about market trends.

Dr. Preshth Bhardwaj Retail Management XIMB

 Forecasting Service Retailers
 Due to the perishable nature of services, service
retailers face more challenges than fashion
retailers.

 Offeringsperishes at the end of the day, not at the

end of the season.

 Must devised approaches for managing demand so

that it meets, but does not exceed capacity.

Dr. Preshth Bhardwaj Retail Management XIMB

 Developing an Assortment Plan
 Assortment plan is a list of the SKUs that a retailer will offer
in a merchandise category and reflects the variety and
assortment range that the retailer plans to offer in a
merchandise category.

 Variety (breadth) is the number of different merchandising

categories within a store or department.

 Assortment (depth) is the number of SKUs within a category.

 Product availability defines the percentage of demand for a

particular SKU that is satisfied.

Dr. Preshth Bhardwaj Retail Management XIMB

 Determining Variety &
Assortment
The process of determining variety and assortment for a
category is called editing the assortment.
Buyers consider following factors while editing:
 Retail strategy
◦ The number of SKUs to offer in a merchandise category is a strategic
decision
 GMROI of the merchandise mix
 Trade-off between too much versus too little assortment
◦ Increasing sales by offering more breadth and depth can potentially
reduce inventory turnover and GMROI by stocking more SKUs
 Physical characteristics of the store
 Complementary Merchandise
Dr. Preshth Bhardwaj Retail Management XIMB
 Devising a Model Stock Plan
Example: A retailer has allocated Rs. 1 lakh for buying of
shirts. Assuming that the purchase price of each shirt is
Rs. 100, he will be able to stock 1000 shirts in the store.
 Step 1: Identify the factors affecting customer’s buying
decision.
Suppose the factors identified are:
Type of shirt
 Size
 Sleeve length
 Collar type
 Color
 Fabric
Dr. Preshth Bhardwaj Retail
Management XIMB
 Devising a Model Stock Plan
Step 2: Identify the number of levels
under each attribute.
Suppose the levels under each attribute are
Sl. No. Factors Attributes

1 Type of Shirt Dress Casual Formal Sport

2 Size Small Medium Large Extra

large
3 Sleeve Length Full Short

4 Collar Type Saville Button

Down

5 Color White Blue Cream Grey

6 Fabric Cotton Cotton

Blend

Dr. Preshth Bhardwaj Retail Management XIMB

 Devising a Model Stock Plan
Suppose the sales forecasts are as follows:
Factors Attribute Levels
Type Dress Casual Formal Sports
% Sales 10 40 20 30
Size Small Medium Large Extra Large
% Sales 25 40 25 10
Sleeve Length Full Short
% Sales 30 70
Collar Type Saville Button Down
% Sales 60 40
Color White Blue Cream Grey
% Sales 40 30 20 10
Fabric Cotton Cotton Blend
% Sales 25 75

Dr. Preshth Bhardwaj Retail Management XIMB

 Devising a Model Stock Plan
 Step 3: Allocate the total units to the respective
item categories
Attribute Levels
% Sales Dress Casuals Formals Sports
(10%) (40%) (20%) (30%)
Total Units 100 400 200 300
Small (25%) Medium (40%) Large (25%) Extra Large (10%)
Total Units 100 160 100 40
Full Sleeve(30%) Half Sleeve(70%)
Total Units 48 112
Button Down (40%) Saville (60%)
Total Units 45 67
White (40%) Blue (30%) Cream (20%) Grey (10%)
Total Units 18 14 9 4
Cotton (25%) Cotton Blend (75%)
Total Units 4 14 Dr. Preshth Bhardwaj Retail
Management XIMB
 Product Availability
 The percentage of demand for a particular SKU
that is satisfied
 Level of support or service level
 The backup (buffer) stock in the model stock plan
determine product availability
 The higher product availability, the higher the
amount of backup stock necessary to ensure that
the retailer won’t be out of stock on a particular
SKU when consumers demand it

Dr. Preshth Bhardwaj Retail Management XIMB

 Importance of Backup (Buffer)
Stock
Choosing an appropriate
amount of backup stock is
critical to successful
assortment planning
 If the backup stock is too low →
loose sales and customers
 If the backup stock is too high →
scare financial resources will be
wasted on needless inventory that
could be more profitably invested in
more variety or assortment

Dr. Preshth Bhardwaj Retail Management XIMB

 Product Availability
Factors considered to determine the appropriate level
of buffer stock and thus the product availability for
each SKU
 ABC Classification of merchandise (inventory)
◦ A – higher product availability
◦ B – medium product availability
◦ C – lower product availability is acceptable
 Fluctuations in demand
 Lead time for deliver from the vendor
 Frequency of store deliveries
Dr. Preshth Bhardwaj Retail Management XIMB
Multi-channel v/s
Omni-channel
Retail strategy

Dr. Preshth Bhardwaj Retail Management XIM Bhubaneswar

 Questions
 What are the unique customer benefits offered by the
three retail channels – stores, catalogs, and the
Internet?
 Why are retailers moving toward using all three
channels?
 How do multichannel retailers provide more value to
their customers?
 What are the key success factors in multichannel
retailing?
 How might technology affect the future shopping
experience?
The Multi-Channel Retailer
A retailer that sells merchandise or service through more than one
channel. By using a combination of channels, retailers can exploit
the unique benefits provided by each channel.

Retailer Steve Cole/Getty Images

Digital Vision / Getty Images

 Why are Retailers Using
Multiple Channels to Interact
with Customers?

 Customer wants to interact in different

ways

 Eachchannel offers a unique set of benefits

for Customers
Why are Retailers Using
Multiple Channels to Interact
with Customers?
Consumers buy what they want,
When they want,
Customer Wherever they want

store kiosk catalog Call center Web/E-mail mobile

Benefits Provided by
Different Channels
 Internet Channel

 Broader Selection

 Moreand Better Information to Evaluate

Merchandise
◦ Drill Down as Much as You Want
◦ Full motion Video
 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

Overcoming the
Limitations of an
Existing Format

Low-Cost, Consistent
Increased Assortments Current Information
Execution
 Benefits of Multichannel
Retailing

 GainingInsights into Consumer Shopping

Behavior

 Expanding Market Presence

 Building a Strategic Advantage

 Why are store-based retailers
evolving into multi-channel
retailers?
 Sales through an electronic
channel are growing at over 20%
per year

 Multi-channel retailers can attract

more customers and satisfy
existing customers better

 The growth of sales in stores is

declining
 Challenges of Effective
Multichannel Retailing
 Integrated
Shopping
Experience
◦ Communicate with customers
anytime, anywhere through
multiple channels
◦ Website, Store, Kiosks,
Handheld Devices
◦ Integrating systems for
seamless customer interface
Dr. Preshth Bhardwaj Retail Management
XIM Bhubaneswar
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XIM Bhubaneswar
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XIM Bhubaneswar
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XIM Bhubaneswar
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XIM Bhubaneswar
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XIM Bhubaneswar
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XIM Bhubaneswar
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XIM Bhubaneswar
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XIM Bhubaneswar
Omni-channel retailers in India: Van Heusen

Dr. Preshth Bhardwaj Retail Management

XIM Bhubaneswar
 Omni-channel retailers in India: Van Heusen
 Van Heusen, recently unveiled its first digitally immersive flagship store, in their
effort to address every customer’s issue of not finding the appropriate fit, size and
style best suited to their personality.
 At the store, shoppers are greeted by a 42 inch, digital display called ‘Today’s
Briefing’ that offers ‘look of the day,’ informs what’s new in-store, provides
styling tips and updates on new fashion trends.
 Next to the display is the ‘Fit Scanner’ enclosure, where the customer is scanned
by an infrared device, after which, measurements, right from the collar
circumference, shoulder width, to the chest, bust, hip etc are generated and are
used to identify the right fit for shirts, trousers, dresses, etc.
 Adding on to that, the store also has a ‘Style Bar’ digital display that helps customers
to identify their style personality by answering a few questions and throwing up
20 different looks that match the shopper’s style.
 Customers can even choose to virtually preview the selected shirts , trousers etc,
on themselves using the Virtual Trial Mirror, without having to step into a physical
trial room. By offering such wide array of digital solutions, the store aims to solve
customer issues of fit and fashion through multiple digital touch-points.
Dr. Preshth Bhardwaj Retail Management
XIM Bhubaneswar
Omni-channel retailers in India: Pepperfry

Dr. Preshth Bhardwaj Retail Management

XIM Bhubaneswar
 Omni-channel retailers in India: Pepperfry
 Shopping for furniture can often end up being a very a complex process especially, for
customers setting-up homes for the first-time. These customers seek the best in terms
of quality.
 In their efforts to allow customers to interact and consult with interior designers and
architects with ease, leading online furniture retailer, Pepperfry, launched its
concept store ‘Studio Pepperfry’.
 The interior design consultants at the studio, equipped with in-depth knowledge
of the Pepperfry furniture portfolio, can easily take customers through the various
designs showcased at the Studio and the extended online Pepperfry range, to help
them choose furniture that suits their individual tastes and preferences.
 The studio also offers customers the advantage of availing services ranging from
customization to advisory related to design and other helpful tips, enabling them
to make the right purchase decision.
 Once a customer zeros-down on a particular piece of furniture at the studio, he
or she can easily place his/her order online.
 As of date, 10-15% of Pepperfry’s sales come through such studios. The online
furniture brand is all set to supplement the current six studios by launching four
more such experience-zones by March next year.

Dr. Preshth Bhardwaj Retail Management

XIM Bhubaneswar
Omni-channel retailers in India: Raymond’s

Dr. Preshth Bhardwaj Retail Management

XIM Bhubaneswar
 Omni-channel retailers in India: Raymond’s
 In their attempt to find a connect with a younger audience, Raymond’s
recently launched a new flagship store in Bangalore that boasts of a
double height ‘live’ façade with LED curtains displaying digital content.

 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

Dr. Preshth Bhardwaj Retail Management

XIM Bhubaneswar
 Omni-channel retailers in India: Adidas
 The Adidas Group, launched their 1st Indian Omni-channel store in New
Delhi last May. This was soon followed up by the introduction of endless-
aisle technology in Chandigarh and the brand currently aims to integrate 200
of its stores with this technology by the end of this month.
 This endless-aisle technology allows consumers to browse, research and
pick up their products with convenience. It also allows the retailer to sell
products that are not available in stores and at the same time service
orders received from the Adidas Web store.
 As a part of their Omni-channel program, the brand recently
launched Adidas Neo which is a brand that is targeted at the
youth segment and is currently only available on the online
platform.
 Through this initiative Adidas aims to grow their product range by
introducing niche products such as cycling equipment. Ideally
these items would take up a lot of space in traditional stores.
Dr. Preshth Bhardwaj Retail Management
XIM Bhubaneswar