Strategy Mix & Non-traditional retailing

Store Location & Evaluation

Three Basic Strategic Positions

Low endMediumHigh end

The Wheel of Retailing

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.

Store-Based Retail Strategy Mixes

Convenience Store Strategy Mix(7-Eleven)

Location:Neighborhood

Merchandise:Medium width and low depth of assortment

average quality

Prices:Average to

Above average

Atmosphere andServices:Average

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

Location:Neighborhood

Merchandise:Extensive width and depth of assortment;

average quality;manufacturer, Private brands too

Prices:Competitive

Atmosphere andServices:Average

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

Merchandise:Full assortment plus health

and beauty aids and general merchandise

Prices:Competitive

Atmosphere andServices:

Average

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 USASave-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

Merchandise:Low width and depth of

assortment; fewperishables; few national

brands

Prices:Very low

Atmosphere andServices:

Low

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

Merchandise:Moderate width and

low depth of assortment; emphasis on

manufacturer brandsbought at discount

Prices:Very low

Atmosphere andServices:

Low

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

Merchandise:Very narrow width and

extensive depth of assortment; average to

good quality

Prices:Competitive to Above average

Atmosphere andServices:

Average to excellent

Promotion:Heavy use of displaysExtensive sales force

Traditional Department Store Strategy Mix

Location:Business district, shopping

center or isolated store

Merchandise:Extensive width and depth of assortment; average togood quality With none of category predominating

Prices:Average to

Above average

Atmosphere andServices:

Good to excellent

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

Merchandise:Extensive width and

depth of assortment; average to

good quality

Prices:Competitive

Atmosphere/ Services:Slightly below

average to average

Promotion:Heavy on newspapers;price-oriented selling

Factory Outlet Strategy Mix

Location:Out of the way site

or discount mall

Merchandise:Moderate width and

poor depth of assortment;

low continuity

Prices:Very Low

Atmosphere/ Services:Very low

Promotion:Little

Brooks Brothers: Realizing the Power of the Factory Outlet

Business and casual clothing for men and women , New York city

Flea Market Strategy Mix

Location:Isolated store

Merchandise:Extensive width and

poor depth of assortment;

low continuity; variable quality

Prices:Very Low

Atmosphere/ Services:Very low

Promotion:Limited

Approaches to Retailing Channels

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

Approaches to Retailing Channels

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

Wendy’s and Pilot

Micro Warehouse, UK

Stores Location & Evaluation

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 customersNearest 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 kilometersContain 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 competitionSimilar 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.

FoodWorld came up with FoodExpress

¼ size

Attracting small community customers who tend to buy from neighborhood stores.

Examples:

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.

Thus this was a concept of

Retailer coming closer to expand their customer base

How to Measure & Define Trade Area

Aim is to have highest probability of attracting the customers in the selected area.

Various popular methods are available likeTrend analysis,

Analog models (first compare their 2 stores then potentials in the prospective stores)

Regression model. (relationship betwn potential sales & independent factors)

GIS

Geographic Information System

GIS is a combination of computer hardware and software which is used for spatial analysis.

Atlas GIS by Strategic Mapping Inc & MapInfo by MapInfo Corporation are the two most commonly used packages

In India InfoTech enterprises, Genesys and Tata infotech has a joint venture with MapInfo. COM to develop GIS applications.

Conti.. GIS can be used by a retailer to

Evaluate Market demographics Assess customers Competitive locations Define trade area

GIS Analysis can be categorized in to: Basic Mapping & Report generation Spatial Analysis and customization

With this software retailers can map demographic factors like income & show locations of stores and customers on the map.

It even helps in aggregating sales data, calculating distance and estimating market share for a new store.

GIS is a package for simple & complex level extent of usability depends on the package one can afford.

It is also important that users recognize it as only a tool not an end in itself.

Types of Locations

Isolated stores:

A freestanding retail outlet situated most on a street or highways

This stores have no vicinity of other retail players with whom they to share the customers.

Conti..

Unplanned business district:

A location in which two or more store either stand together or closely but had not planned so.

They came together as it suited them.

All Stores here sell similar or related products

1. Central Business District (CBD)

2. Secondary Business District (SBD)

3. Neighborhood Business District (NBD)

4. Strings (Eg: Car Accessories, Jewelry etc.)

The Planned Shopping center

Is a set of architecturally similar commercial establishments constructed on a site which is owned and managed centrally

Such stores will have one or more anchor stores along with variety of other stores

Best Planned shopping center Sector-18 in Noida

It is in the satellite township of Noida UP and has emerged as the areas biggest landmark.

It has already attracted International Fast Food chain McDonald's.

It has two superstores (Nanz & Giants)

Ebony a Delhi based department store having 40,000 sq. ft. shopping space.

Reasons for success of Sec-18.

Shops got good value of money because of the customer profile

Surrounded by lots of youth and computer literate people (who both work and reside in the same town)

Spending power of these people is quite high

Credit even goes to the Town planners as they developed the area so beautifully shopping + Entertainment (Cineplex and hotels)

Lands are cheaper compared to prime locations in Delhi (Connaught place).

There is no other conveniently located shopping complexes in east Delhi (10 kms. away from Sec-18)

Inflow from Delhi also increased (Multi-lane flyovers connecting Delhi Noida).

Shopping Malls The Mall of America is the largest mall in US In 78 acres of land

It houses 4 department stores 400 other shops 45 restaurants 9 night clubs 14 cinema screens 12,750 on site parking space 7 acre theme park A synthetic rain forest Has 4 themed streets to connect the anchor stores Great combination of upscale and low price retailers

in its tenant mix.

Crossroads

One of the largest mall in India At Haji Ali in south Mumbai Launched by Piramal Enterprises They aimed at introducing the “Shoppertainment” Concept

in India. Spread across 60,000 sq.ft. Offers 250 top Indian as well as International brands in

fashion, jewelry, footwear, watches. It has an entertainment center “Jammin” covering 3 floor In the entrance one can find a big Video Display wall On the other side works of catoonists A piano bar and a china garden

Location & Site Selection Process by Shoppers Stop

Shoppers Stop an Indian department stores promoted by the K Raheja Corp Group started in the year 1991

With its first store in Andheri (Mumbai )

Shopper’s Stop Identified the big metros like (Delhi, Mumbai, Kolkata, Chennai, Bangalore) Class A cities as target cities

Significant factors for selecting them was: Urban population, Average household income levels Sales of other consumer goods Penetration of Credit Cards

They then invited quotations for the lease or selling rates of lands.

Later to estimate the market size they took help of ORG-MARG an independent market research firm.

Then they did a Micro Profile analysis:

Analyzing of different customer profiles at each prospective locations, using data on product sales in various stores.

After the analysis Shopper’s stop was in a position to decide the site suiting it.

It targeted for broader trade area, which usually cover the entire city

Except for Mumbai where it has 3 stores.

Because of its brand it has better drawing power.

Finally Shoppers’ Stop goes for a Wardrobe audit – to ensure that stores size a merchandize mix is a perfect fit.

Multiattribute Weighted Check List

A Model Used For Evaluation of Sites