Interdisciplinary Management Research V
NEW APPROACHES TO THE MODERN RETAIL
MANAGEMENT
Zdenko Segetlija1
1
Full Professor Faculty of Economics in Osijek, Croatia, segetlija@efos.hr
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Abstract
A concentrational retail development has effectuated further changes in its structure and,
accordingly, the changes in the retail economic entity management. In that respect, altered is
also a heretofore retail marketing paradigm, as the assortment formation, based upon category
management and other vertical marketing types, becomes preponderant. On the other hand, in
addition to the cognizance of developmental legalities of the new business unit types, new
technologies, and human resources, the knowledge of retail-oriented buyer interconnection
modalities becomes ever so pronounced in the new circumstances. Of course, it is harmonized
with the newest marketing development phase, based upon an orientation toward buyers and
processes.
Such an approach is in a direct function of creation of presuppositions for the achievement of a
more efficacious and effective eceonomic growth and development in the reatil sector.
JEL classification: L81, M31,
Keywords: retail sale, management, category management, marketing, Republic of Croatia
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1. Introduction
This paper provides for a short retrospection to the modern trends in a retail-
company management. The purpose of the paper would be to provide for a
basis for further research in the corporate retail management in the Republic of
Croatia in the modern circumstances of large foreign retail chains’ penetration
into the Croatian market.
2. From marketing to the commercial corporate management
Up to the 1980s, it was interesting to discuss the emancipation of a store-oriented
marketing with regard to that of a producer, as well as an individual store
marketing (Theis;1999,30–42). However, many scientific papers on commercial
business transactions, i.e., on commercial management, have been already
recorded nowadays (Foscht et al.;2008,22). The formation of small-sized but
transportationally strong commercial concerns and consolidational tendencies (of
the small-sized toward the large-sized stores) has significantly modified reatil
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structure. Modern commercial management is being developed in these
circumstances.
Namely, it has been perennially emphasized that the knowledge of commerce
gains its importance, and an increasing power of commercial companies in a
distributional process between production and consumption is adduced as a reason
for this phenomenon (Rudolph;2005,9).
In that respect, H. Liebmann has paid his attention while focusing on the
purchaser-oriented benefit as a key task in commercial management already in
1988 (Foscht et al.;2008,22). This is in conformity with the newest phase in the
post-1980 marketing development (characterized by a special market orientation).
It is therefore emphasized that the most significant strategic mistakes in many
contemporary commercial companies consist not of an ignorance of business
units’ formal developmental legality, new technologies, and personnel and other
cooperants cognizance but of a knowledge how to be interconnected with the
reatil customers, related to a retail business unit’s location.
Thus, the very commercial marketing is nowadays more an abstract model, for
essential is the assortment formation, related to an increased category management
(CM) program and other vertical marketing forms’ introduction. It pertains to the
large-sized commercial companies and their cooperation with the suppliers.
On the other hand, it has been established already in the 1980s that an enforced
orientation toward customers may prove successful only if the realistic logistics
solutions are found, e.g., a supply-chain management (SCM). In that respect, one
should emphasize that nowadays the just-in-time (JIT) strategies gained
significance in commerce as well, and vertical cooperation emerges as a
supposition of reengineering. This pertains to the optimization of partnership
concerning a creation of values between commerce and industry.
Based upon contemporary practice favoring customers and logistics, new concepts
have been developed in retail business with regard to the participants’ cooperation
within a distribution channel. These new concepts are predominantly an efficient
consumer response (ECR), quick response (QR), continuous replenishment (CR)
and the aforementioned category management (CM). In this correlation, we may
accept that a just-in-time (JIT) orientation has determined the first generation of
modern retail logistics, while an orientation toward the creation of value chains
has provided for the second commercial logistics generation.
Naturally, a confrontation between various strategic issues within a commercial
company has been intensified by an increasing size of many commercial retail
companies. One may differentiate between the strategic business units (especially
regarding the product categories and store lines, i.e., the business unit types) in the
commercial retail companies as well, what improves an excogitation of portfilio
theory, so that the forms for the strategic planning phases, strictly connected to a
general phase planning form, have been developed. Based upon these
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excogitations, the contributions to a commercial retail company’s strategic
planning have also been created.
3. Various theoretical approaches to a commercial comapany´s strategy
One may analyze the following as strategic decisions ina commercial company
(Müller-Hagedorn&Toporowski;2007,49–51): a) selection of a business unit
type; b) internationalization-related decisions; c) diversification direction and
scope; d) scope of cooperation between commerce and industry; e) decisions on
the formation of central resources, especially the IT and logistics systems, as
well as on the formation of informational structures, predominantly related to
centralization and decentralization.
According to some sources, the contributions related to the business units’ type
selection pertain to the concrete business units, e.g., to discounting, department
stores, etc., or to their combination, i.e., to the multichannel systems, according
to other authors. In the center of attention are frequently the theories that
explicate the consumer purchase site selection. Provided hereby are economic
models. In any case, dominant are the setups based on an attitudinal theory,
emanating from the fact that a consumer selects a business unit type based upon
his or her attitudes.
Finally, the theoretical approaches, based upon an access to emotions, are also
being applied in addition to the exclusively cognitively-oriented models. In this
context, an orientation to an experience as a strategic concept has gained its
importance.
In the discussions on the internationalization of distributive commerce business
activities, one may predominantly find the application of general attitudes
pertaining to distributive commerce, theming both the basic internationalization
decisions and internationalization types. Hereby, a series of theories have been
interpolated. A supposition based on resources and a new institutional
economics gains special importance herein.
When debating over the distributive commerce internationalization, especially
great attention is paid to the issue of market penetration type and thus to the
issue of coordination between the domestic and foreign activities. How much
the theoretical suppositions may explain certain developmental
internationalization trends is equally critically tested. Additionally, themed are
also the decisions pertaining to the target countries’ selection, market entrance
time selection, as well as the issue whether a market-political toolbox should be
standardized or differentiated.
Empirically, an approach to the commerce involves both the companies that
limit their service offer to a single unique business unit form and the companies
that encompass a spectrum of business unit types or even expand their activities
to other vocations and economic activities. An issue of concentration or
entrepreneurial activity diversification stands behind this decision.
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Namely, both the companies that concentrate their activity on a single business
unit type and the concerns with multiple business unit types exist in commerce.
They can be direceted to one or more vocations, can be exclusively stationary
or nonstationary, or can incorporate both commerce types and be affiliated with
only a wholesale or a retail level or with both tiers.
A theisis that rationalization possibilities can be detected via economic cross-
level cooperation effectuates the fact that commercial companies increasingly
have to deal with the issue how important is a strict coordination or even
cooperation with the upstream-located productional levels. The concepts such
as the aforesaid efficient consumer response (ECR), category management
(CM), or the so-called “collaborative planning, forecasting, and replenishment”
(CPFR) exist in practice as a visible result of such debates. They are an instant
follow-up to the question of how useful is a coordination of various functional
areas, especially marketing and logistics. Both hypotheses—a crossing of
economic levels and crossing the boundaries of individual business functions
within a company—are reflected exactly in the supply chain management
(SCM) concept, whereby this concept should not be solely reduced to the
physical distribution tasks.
Approximately ever since 1994, the efficient consumer response (ECR) idea
has initiated many activities between commerce and industry. According to the
ECR idea, efficacy may be increased if certain cooperation between industry
and commerce is effectuated while planning the market-political instruments.
Collaborative planning, forecasting, and replenishment (CPFR) presents a setup
whereby commercial and production companies are cooperating in order to
develop planning and prognostic data pertaining to the demand for the products
sold by these companies. The jointly retrieved data are fisrtly used to modify
the product stocks at the terminal point of sale (POS) within a store as to avoid
the out-of-stock (OOS) cases, provided that it is economically justified, as well
as to optimize the entire supply chain. A basis for CPFR is provided by data
interchange between participating companies, whereby historical data (sales
amounts) and specially processed plan data are especially relevant.
Within the efficient consumer response (ECR), category management (CM) is
also being developed, whereby the assortment should be divided in categories
that correspond to the consumer desires and needs, and correspondent strategies
and tacticts should be developed for these categories. Hereby, category is
defined as a “group of products that can be extracted and managed individually
… and is recognized as different and/or replacable by the consumers in the
satisfaction of their needs.” (Müller-Hagedorn&Toporowski;2007,50) The
handling of formed product categories is located into one process scheme, the
CM process, which also involves the creation of strategies and tactics, as well
as an introduction of a procedure-control plan, in addition to a category
analysis. An ECR idea, i.e., a CM idea, was later transferred to certain market-
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political and marketing instruments, e.g., to the sales improvement, commercial
branding, or price strategy.
We may purport that efficient consumer response (ECR) and collaborative
planning, forecasting, and replenishment (CPFR) imply an interconnection
between marketing and commercial logistics. The decisions within these
conceptions relate to the construction of warehouse network, structural
conditions of a warehouse or a transit terminal, and current operations, whereby
prognoses, orders, stocks and processes are lead. Of course, efficient logistics
gains its significance for a commercial company predominantly due to a
competitive pressure. In order to raise efficiency, certain value-creative stages
are interconnected. Hereby, one should emphasize the creation of an integrated
supply management, creation of adjusted warehouse structures, vendor
managing inventory (VDI), as well as standardization and automation of further
data transfer, up to the concentrated commerce and industry procedures for the
application of product-oriented radio frequency identification (RFID)
technology as a consequence of an integrated supply chain managemnt (SCM).
Through a narrower collaboration between individual value-creative stages, a
debate on the creation of certain supply condition system is reopened.
4. New distribution channel forms
In addition to the “classical” distribution channel types, it has been opined that
some new forms, especially in the consumables sector, have been recently
developed, based upon the adduced new managemental conceptions. Thus, with
regard to the new managemental conceptions, one should again mention the
new distribution channel forms:
(a) the appearance of new commerce centers, e.g., factory outlet centers (FOC);
(b) a quick response (QR) concept;
(c) an efficinet consumer response (ECR) concept;
(d) e-retail within e-commerce (Ehrmann;2003,466–467).
As a rule, the FOCs are created by virtue of multiple producers’ collaboration.
Their commodities are oferred without the stores involved. Frequently,
arranged is an “experience purchase.” The buyers should be attracted by
catering facilities, motion picture theaters, natatoriums or ceratin entertaining
performances.
The QR system was developed in the US as a strategy concept as to shorten the
the current time in an overall logistics channel (supply chain). It can be defined
as a “partner delivery system harmonized with demand of all companies
participating in a logistics channel, based upon constant data interchange”
(Ehrmann;2003,467). Known are the QR system in the textile industry. They
pertain to data interchange systems that cross the boundaries of a company and
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effectuate a pronounced reaction and delivery time reduction. The concept can
be observed as a specific just-in-time (JIT) retail delivery type .
Although the ECR concept was introduced already in 1992, there is no unified
definition thereof so far. One should emphasize that ECR is practically
predominantly concentrated on retail sale and wholesale, i.e., almost
exclusively on consumables.
The ECR concept actually represents a follow-up to the QR concept and can be
translated as a “successful reaction to consumer demand.” As a strategic
concept of an interorganizational collaboration between producers, wholesalers,
and retailers within a distribution channel, ECR is especially significant, for the
objective of an increase in the market-change reactional capacity, i.e., a reaction
to customer desires, should be achieved through an integrated management at
the level of an overall supply chain, while simultaneously optimizing the costs
and effects in the commodity assortment, supply, stocks and advertising areas
and introducing the products into an overall distribution channel. In that
respect, the ECR setup is based on a CM idea regarding a supply-oriented
management and SCM, i.e., on an interorganizational supply-oriented logistics
chain management.
In any case, ECR may be also observed as an expression of SCM in the
consumables niche. In SCM, the cooperation beween companies is also
extended both to the supply and to the demand side, so that marketing, product,
and logistics are being controlled. A data warehouse and the aforementioned
CM are of special importance for the introduction of ECR, and thereby the
observation of a supply chain from a marketing point of view as well
(Zschom;2004).
This means that consumer behavior while purchasing serves as an impuls to the
production and logistics processes. Thus, an overall observation presupposes
that collaboration of all distributional degrees is necessary for the realization of
ECR as to optimize merchandise and information flows. A fundament for
corporate cooperation is a rapid electronic data interchange (EDI).
The ECR is a method for an efficacious value chain formation focused on a
consumer-oriented benefit (Corsten&Pötzl;2004,7). A value chain is an
analytical strategic planning toolset (Porter) and was increasingly applied in
many marketing-based papers, expenditure calculations, controlling and
strategic management (Schmickler&Rudolph;2002,19).
E-commerce could be opined of as a further developmental stage of parcel
trade. It is essential that the overall supply, marketing, promotion, customer
service and payment processes are supported by the Internet technology.
Commodity delivery is complemented by complete services.
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5. Some remarks on the situation in the Republic of Croatia
In the Republic of Croatia, the concentrational processes in retail sale were
initiated not sooner than on the occasion of an accelerated entrance of the large-
sized foreign retail chains after 1998. Thus, the problems are nowadays existent
in Croatia especially in the relations between domestic producers and the large
foreign retail chains (Segetlija;2006,1324). The proposals for the development
of cooperation between domestic retail companies and domestic production are
therefore important as a strategy to increase their competitiveness. Equally,
partner relations with foreign suppliers are also being proposed for the
enforcement of competition of Croatian retail companies and for a successful
CM implementation. Therefore, both partnership (with production) and
cooperation within the overall value chain are pronounced for the development
of the Croatian retail sale.
6. Conclusive thoughts
Concentrational processes in economy have also effectuated further changes in
marketing, so that an individualized commercial marketing is already an
obsolete category, because various forms of partnerships and cooperation
between commercial and productional companies are being developed,
including the entire supply chains. In these conditions, new management
concepts pertaining to the large-sized commercial companies, where both the
marketing and logistics elements are equally important, have been created out
of an individual commercial marketing.
Therein, the Croatian companies and retail commerce groups should use the
benefits and advantages brought by partnerships and cooperations with both the
productional and commercial companies on the international market.
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