RETAILERS MARKETING DECISIONS

RETAILERS MARKETING DECISIONS

The basic framework for deciding retail marketing strategy cannot be over emphasized. We will examine retailers marketing decisions in the areas of retail positioning, store location, product assortment and services, price, communication and store atmosphere.

RETAIL POSITIONING

Retail positioning involves the choice of target market and differential advantage. Targeting allows retailers to tailor their marketing mix, which includes product assortment, service levels, store location, prices and promotion, to the needs of their chosen customer segment. Differentiation provides a reason to shop at one store rather than another. A useful framework for creating a differential advantage has been proposed by Davies, who suggests that innovation in retailing can come only when novelty in the process offered to the shoppers, or from novelty in the product or product assortment offered to the shopper.

STORE LOCATION

Convenience is an important issue for many shoppers, and so store location can have a major bearing on sales performance. Retailers have to decide on regional coverage, the town and cities to target within regions and the precise location within a give town or city. Many retailers begin life as regional suppliers, and grow by expanding geographically. In the UK, for example, the Asda supermarket chain expanded from the north of England, while Sainsbury’s original base was in the South of England.

The choice of town or city will depend upon such factors as correspondence with the retailer’s chosen target market, the level of disposable income in the catchments area, the availability of suitable site, and the level of competition. The choice of a particular site may depend on the level of existing traffic (Pedestrian and / or vehicular) passing the site, parking provision, access to the outlet for delivery vehicles, the presence of competition, planning restrictions, and the opportunity to form new retailing centers with other outlets.

PRODUCT ASSORTMENT AND SERVICES

Retailers have to decide upon the breadth of their product assortment and its depth. A supermarket, for example, may decide to widen its product assortment from food, drink and toiletries to include clothes and toys, this is called scrambled merchandising. Within each product line it can choose to stock a deep or shallow product range. Department stores, however, offer a much broader range of products including toys, cosmetics, jewelry, clothes, electrical goods and household accessories. Some retailers begin with one product line and gradually broaden their product assortment to maximize revenue for customers.

The choice of product assortment will be dependent on the positioning strategy of the retailer, customer expectations, and ultimately on the profitability of each product line. Slow moving unprofitable lines should be dropped unless they are necessary to conform with the range of products expected by customers. For example, customers expect a full range of food products in a supermarket.

Another product decision concerns own-label branding. Large retailers may decide to sell a range of own-label products to complement national brands. Often the purchasing power of large retail chains means that prices can be lower and yet profit margins higher than for competing national brands. This makes the activity an attractive proposition for many retailers.

Finally, retailers need to consider the nature and degree of customer service. Discount stores traditionally provided little services but as price differentials have narrowed some have sought differentiation through service. For example many electrical goods retailers provide a comprehensive after-sales service package for their customers. Superior customer service may make customers more tolerant of higher prices and even where the product is standardized (as in fast food restaurants) training employees to give individual attention to each customer can arise loyalty to the outlet.

PRICE

Price is a key positioning factor and must be decided in relation to the target market, the product – and – service assortment mix, and the competition. All retailers would like to achieve high volumes and high gross margins. They would like high turns x Earns, but the two usually do not go together. Most retailers fall into the high-markup, lower-volume group (fine specialty stores) or the low-markup – volume group (mass merchandisers and discount stores).

Retailers must also pay attention to pricing tactics. Most retailers will put low prices on some items to serve as traffic builders or loss leaders. They will run storewide sales. They will plan markdowns on slower-moving merchandise.

COMMUNICATION

Retailers use a wide range of communication tools to generate traffic and purchases. They place ads, run special sales, issue money-saving coupons, and run frequent shopper-reward programs. in-store food sampling, and coupons on shelves or at checkout points. Each retailer must use communications that support and reinforce its image positioning. Fine stores will place tasteful, full-page ads in magazines such as vogue, Vanity Fair or Esquire. They will carefully train sales people to greet customers, interpret their needs, and handle complaints. Off-price retailers will arrange their merchandise to promote the idea of bargains and large savings, while conserving on service and sales assistance.

STORE ATMOSPHERE

This is created by the design, colour and layout of a store. Both exterior and interior design affect atmosphere. External factors include architectural design, signs, window display and use of colour that create an identity for a welcoming rather than an intimidating mood. The image which is projected should be consonant with the ethos of the shop.

Interior design also has a major impact on atmosphere. Store lighting, fixtures and fittings, and layout are important considerations. Supermarkets that have narrow aisles that contribute to congestion can project a negative image, and poorly lit showrooms can feel intimidating. Colour, sound and smell can affect mood. Colour has meaning and can be used to create the desired atmosphere in a store. Supermarkets often use music to create a relaxed atmosphere, whereas some boutiques use pop music to attract their target customers. Departmental stores often plan perfume counters near the entrance, and supermarkets may use the smell of baking bread to attract their customers.