Retailing

Retailing is the set of business activities that adds value to the products and services sold to consumers for their personal use. The value creating functions are : Providing an assortment of products and services. Breaking bulk (offering the products in smaller quantities). Holding inventory. Providing services.

In retailing variety (breath of merchandise) represents the number of merchandise categories a retailer offers and assortment (depth of merchandise) represents the number of different items in a merchandise category. With an objective of studying the retail marketing strategy we visited company owned stores of United Colors of Benetton and Puma in Vasant Vihar, which gave us valuable insights. Both these stores can be categorized as Department-Speciality Stores. The most critical element in retail strategy is Building a sustainable competitive advantage. The retailer in effect builds a wall around its position in retail market. When the wall is high and thick, it will be hard for the competitors to enter and compete for the retailers target customers. We studied both the retail stores considering the following critical factors: 1. Customer loyalty: Loyalty means that customers will be reluctant to patronize competitive retailers. Loyalty programs. They update their customers about the new arrivals or upcoming sale by sending text messages on their phones. Puma also has customer loyalty program in which customers earn point each time they make a purchase which can redeemed in the next purchase. 2. Location: The classic response to the question What are the three most important things in retailing ? is location, location, location. Location is the critical factor in consumers selection of a store. For example, most people shop at the supermarket closest to where they live. A competitive advantage based on location is sustainable because it is not easily duplicated. Benetton has developed a strong competitive advantage with its location selection. It conquers one area of the city at a time and then expands in the region, saturating a major market before entering a new market. The following elements of location were studied to understand its importance: a. Demography & Lifestyle : The area needs to have consumers who are in the retailers target market. Thus the area must have the right demographic and lifestyle profile. Both the stores are located in centre of the Vasant vihar market in South Delhi which is considered urban with people from relatively high income group. It is also near to several colleges and offices attracting youngsters.. The foreign embassies in the area brings some regular African customers in Puma store who account for almost 50% of the sales. b. Economies of Scale : Most of the retail chains open multiple stores in an area because promotion and distribution economies of scale can be achieved. A retailers total promotional costs are the same for a newspaper advertisement for one or ten stores. But the threat of cannibalization cant be disregarded resulting in diminishing

returns associated with locating too many multiple stores in an area. The cannibalization is quite evident in both the stores. In a radius of 3-4 km three shopping malls have come up where UCB and Puma have their stores. The shopping malls have resulted in sharp decrease in the footfalls over the last 3-4 years. The following comparison can be made . UCB Puma Footfall 70-100 50-70 Conversion rate 60-70% 18-20% Average Purchase Rs 3500 Rs 3000 In end of season sale the footfall increases to 120-140 in these stores. The products sold in puma store has an average price of Rs 3000 and it sells 1.57 units per transaction on an average. c. Traffic Flow, Accessibility, Parking and nearby Facilities : One of the most important factors affecting store sales is the number of vehicles and pedestrians that pass by the site. When the traffic is greater, more consumers are likely to shop in and shop at the store. The amount and quality of parking facilities are also critical for evaluating a retail store. In Vasant Vihar Market parking facilities are easily accessible. The market has a movie theatre, PVR which also helps in increasing the sales. A movie which is doing good brings more customers to the market. However due to its single screen the it drops sharply for movies doing poor. The market also has leading outlets like Dominos, Pizzahut, Mcdonalds, RPM etc. and a 5 star hotel all leading to traffic flow of customers in the area. The upcoming metro station in Vasant Vihar is also expected to increase the customer traffic. 3. Merchandise Assortment and visual Merchandising: The number of SKUs to offer in a merchandise category is a strategic decision. In general, retailers need to offer enough SKUs to satisfy customers needs and maintain their brand image with respect to the merchandise category. Selecting the right assortment is reffered to as editing the assortment. UCB Puma 1. Stock gets changed every 1. For each store is same and is decided by 6 months. merchandising team of the company. 2. Lots of designs and colors 2. The Left-Right Division: The left side of the with low inventory. store is for women and right side for men Product displayed and merchandise. Inventory kept is on 3. Vertical Display System Focus/Promotional average 1: 2.5 ratio. section: The new designs, new entries of 3. Types of products season and costly products are kept in this offered: Apart from area to promote their sales. For eg. Lifestyle apparels, Bags, Shoes, products like Ferrari and BMW shoes (costly) Slippers, Wallets, Belts, shelf is in front of shoe section, same for Undergarments. caps, T-shirts and jackets. 4. Inventory is expected to Sports section: This is a performance section be 60% sold before the dedicated to sports eg sports shoes, sports season ends. jackets etc.

Both the stores use a unique 360 degree display system in which a customer can see all the product categories like apparel, shoes, watches, belts and other accessories at a single place.

4. Store Layout, Design and Display : Both the stores have a free-form layout also known as boutique layout which arranges fixtures and aisles in an asymmetric pattern. It provides an intimate, relaxing environment that facilitates shopping and browsing. UCB store has typical posters promoting equality among races. The men section is kept at ground floor or first floor due to the higher sales and also because the buying behavior of men is quite specific when compared to women. Since kids are accompanied with their parents so it is kept at top floor. The reason behind this is that by the time a customer reaches the top floor he/she goes through the product ranges of his/her category. Puma follows its own Retail 2.0 guidelines for layout and merchandising. The lighting and music played also adds to the positive mood of customer. 5. Human Resource Management: Retailing is labor intensive business, in which employees play a major role in providing services for customers and building customer loyalty. Knowledgeable and skilled employees committed to the retailers objectives are critical assets that support the success o companies . Both the stores keep a large emphasis on training their employees with product information and how to please their customers with quality service experience. 6. Customer Service : Retailers can build a sustainable competitive advantage by offering excellent customer service. The quality of service can vary from person to person and from day to day. Retailers that offer good customer service instill its importance in their employees over a long period of time through training. It takes a considerable time and effort to build a tradition and reputation for customer service, but good service a valuable strategic asset. Recommendation on Layout and Merchandise Assortment: The standard conversion rate of a retail store in a market area is 38%. However, in Puma store is 18% which is very low. The lifestyle products in its store are gaining huge popularity among youngsters because of the names like Ferrari and BMW embossed in them. This segment also has a more margin as compared to sports products. The store can keep a separate section for promoting the sales of these products. In UCB stores inventory build up is high. The store is not able to sell 60% of the seasons stock, which is the industry standard. This is partly because of store layout. UCB store is designed in a way that while in store the desired product can be easily located. To keep customers shopping, the retailer can design its store in a way that confronts shoppers with items that pique their interest and keep them browsing. One of the things that really keeps people in stores longer are new and unexpected discoveries. "This is what transforms shopping into an experience, and not just a transaction."