Synopsis
Principles of Retailing
1. The Retail Environment
Learning Objectives
After studying this module, you should be able to:
 identify major demographic, socio-economic and lifestyle trends and discuss
their influence on consumption of retail goods and services;
 evaluate how retailers have responded to the changing consumer in terms of:
 retail innovation;
 concentration of retail ownership;
 locational shift;
 comment upon the waves of retail decentralisation;
 understand how government influence can shape retail development
through:
 legislation;
 competition policy;
 planning policy.
Sections
1.1
1.2
1.3
1.4
Introduction
The Changing Consumer
The Retail Response
The Role of Government
Learning Summary
The last section on retail planning policy illustrates the complexities of managing
and regulating the retail environment. Consumers are more demanding, affluent and
mobile than ever before, but a sizeable segment of the population is poor and
socially excluded from a range of services, including retailing.
Retailers have to respond to consumers’ needs by providing a retail offer through
appropriate formats. For many ‘big box’ retailers and category killer specialists, this
means large store formats in out-of-town sites. In much of Europe, such developments are viewed by many governments as a threat to the viability of existing town
centres and planning regulations have been developed accordingly. The problem
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here is that the lobbying by retailers and local authorities is geared to maintaining
the rigid status quo hierarchy of shopping centre provision. Is this in the public
interest, or is it a form of protectionism of existing retail structures? The creation of
regeneration partnerships to benefit areas deprived of retail investment is a positive
step to address the issue of ‘food deserts’ and other accusations that large format
developments cater for the wealthier, more mobile segments of the population.
Clearly, to achieve maximum operating efficiencies, these retailers need large sites,
which are unlikely to be available in town centres. Policy makers must therefore
ensure that restrictive policies on large format development do not impede retail
competition, which will lead to higher prices and adverse effects on economies.
2. Theories of Retail Change
Learning Objectives
After studying this module, you should be able to:
 discuss the major theories of retail change:
 cyclical theories;
 environmental theories;
 conflict theory;
 combined theory;
 analyse the response of existing retailers to retail innovation;
 apply the various theories to explain the development of a range of retail
organisations;
 forecast future retail developments from a variety of theoretical perspectives.
Sections
2.1
2.2
2.3
2.4
2.5
Introduction
Cyclical Theories
Environmental Theories
Conflict Theory
Combined Theory
Learning Summary
Theories of retail change have been developed by studying past and current patterns
of retail development, at format, organisation and industry levels. There are three
main categories of theory discussed in this module:
1. cyclical theories;
2. environmental theories;
3. conflict theory.
A combined theory has also been presented which links the three theory categories.
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The cyclical theories include the wheel of retailing, retail life cycle and retail accordion, all based on the thinking that there is a cyclical pattern in the evolution of
retail institutions from which future business scenarios can be built.
Two main environmental theories have been outlined – evolution theory and
institutional theory – both based on the effects of the external, uncontrollable
environment on the retail industry and the organisations operating within it. Where
evolution theory suggests that successful organisations adapt to survive and succeed
in the changing environment, both the ultra-Darwinists and the institutionalists
propose that organisations go beyond tactical adaptation to absorb into their fabric,
design and organisational culture the ‘technologies’ and socio-cultural influences of
the external environment.
Conflict theory is explained as a series of phases which existing retail organisations pass through when challenged by a retail innovation. After the initial shock,
organisations engage in defensive retreat, which may involve an industry initiative to
prevent the success of the innovator, then they pass through a phase of acknowledgement that the innovation is going to succeed, during which they engage various
adaptation strategies. Meanwhile, the innovator is also adapting to survive and grow
until a degree of synthesis exists.
Finally, a combined theory has been described, which integrates the various
branches of retail theory. The main utility of theory is to predict outcomes, and
research has indicated contradictory results for all the various theories presented.
However, they remain useful tools for retailers to build alternative visions for the
future of their organisations and their place within the changing retail industry.
3. Retail Strategy
Learning Objectives
After studying this module, you should be able to:
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outline the strategic planning process;
formulate corporate strategy and objectives;
use a variety of analyses for assessing strategic capability;
discuss generic strategies and expansion strategies;
critically evaluate strategic options;
understand the basic elements of retail location.
Sections
3.1
3.2
3.3
3.4
3.5
Introduction
The Strategic Planning Process
Corporate Strategy and Objectives
Environmental Analysis
Resource Audit and Analyses
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3.6
3.7
Strategic Choice
Location Strategy
Learning Summary
Retail strategy is about corporate survival and prosperity in a changing retail
environment. The strategic direction of most large retail organisations is usually
encapsulated in a mission statement. Corporate objectives expand this into a series
of explicit time-related goals against which organisational progress and achievements can be measured. These form the basis for setting objectives and planning in
other operational areas such as marketing and human resource management.
Scanning the politico-legal, social, economic and technological environment will
throw up a variety of opportunities and threats for retail managers to consider when
developing organisational strategy. The key influences on the organisation can be
summarised in a PEST analysis, which can form the basis for strategic decision
making.
The competitive environment can be analysed using the five forces approach,
which considers the position of the retailer in relation to the threat of entrants to
the market, the relative bargaining power of market suppliers and buyers, threat of
substitutes to format or organisation, and the degree of competitive market rivalry.
Market analyses such as the product-market expansion grid, market positioning and
growth-share matrix also help to assess and summarise the position of the retailer in
the competitive market.
The resource audit is an objective assessment of organisational capability which
will highlight where its core competences (those key strengths which have the
potential to give a competitive edge) lie, and will allow a rational judgement of its
potential to exploit opportunities. As retailers operate increasingly in interdependent
relationships with other retailers and organisations up and down the supply chain, it
is also useful to apply to the results of the resource audit further analyses and
theories such as value chain analysis, resource-based theory of the firm and network
theory. The most common analysis applied is SWOT analysis, which identifies the
main strengths, weaknesses, opportunities and threats for the organisation.
Traditionally, retailers were confronted by three main choices of strategic direction – cost, differentiation or focus. However, all three are pursued by some large
and complex retail organisations in the guise of various formats, and some theorists
propose that the use of lateral thinking in applying core competences to add
business value and build differentiation is the key to revolutionary strategy.
A variety of expansion strategies are highlighted through application of the product-market expansion grid to assess the organisation’s current and future products
and markets. Following a more complex series of growth vectors derived from the
product-market expansion grid, expansion strategy can take a series of directions
related to the existing proposition, new products/services, new segments, geographical development, new channels and new formats. In each direction there is a
continuum of potential development from closely related activity to new activity,
with the risk increasing the further the strategy from the existing operational
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tion, and strategic alliances. The latter includes a range of alliances from loose
networks and partnerships through to contractual arrangements such as franchises
and, indeed, merger.
The strategies which are most likely to succeed are those which fit most closely
with the current organisational direction and capabilities. Strategies can be evaluated
and compared on a range of dimensions, the main three being suitability, feasibility
and acceptability.
Location strategy forms a major strand of corporate retail strategy, which is crucial, due to the importance of location in customer choice, the level of investment in
buying, leasing or building retail units, and the financial consequences of poor
location decisions.
Catchments can be defined using a variety of methods, including subjective/intuitive judgement and customer spot mapping. Two simple methods using
secondary data are based on Reilly’s law and Huff’s model. Catchments can be
profiled and compared in a variety of ways to aid selection. Some, such as checklists
and retail saturation index, are methods which are simplistic and make use of locally
or regionally available secondary data sources. Others, such as cluster/factor analysis
and gravity modelling, make use of computer programs to analyse and interpret
multiple data sources from inside and outside the organisation and to predict the
likely success of new sites. Most retailers rely on more than one technique, but the
more complex analytical techniques are used by a relatively small percentage of
larger retail organisations.
Although there is a variation in the way location options are described, retailers
are faced with a basic choice of locating within an existing retail format (whether it
be in place or new build), within a shopping centre, in a traditional high street, in a
suburban or district centre, or locating on the edge of town or out of town.
Out-of-town locations bring benefits to retailer and customer in terms of parking, car and delivery access, bulk buying and low costs, although planning
permission is more difficult to obtain. In-town location gives better pedestrian
access, access by a variety of means, more options for comparison shopping, and a
greater variety of complementary service and entertainment facilities.
4. The Development of Retail Marketing
Learning Objectives
After studying this module, you should be able to:
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define retail marketing;
analyse the forces shaping the marketing environment;
distinguish between corporate and marketing objectives and strategy;
discuss the main stages of market segmentation;
evaluate the role of retail branding in achieving competitive advantage;
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 critically asses the use of various elements of the service marketing mix in
achieving marketing objectives.
Sections
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Introduction
What is Retail Marketing?
Marketing Environment
Marketing Strategy and Objectives
Market Segmentation
Retail Branding
The Service Marketing Mix
Learning Summary
Retail marketing is the application of marketing concepts theories and actions within
the context of retail organisations. Marketing is a whole-business orientation, which
is customer led, requires fulfilment of the needs of internal and external customers,
and should balance the requirements of the various organisational stakeholders. This
orientation needs to be management facilitated and requires integration of marketing effort across functional activities in order to respond rapidly to the dynamism of
consumer markets in order to achieve profitable outcomes to sustain organisational
success.
It is only relatively recently that retailers have realised the importance of marketing in the maintenance of a successful business in rapidly changing markets, and
indeed have understood their own role in driving the marketing process. Marketingorientated retailers realise that customer focus should underpin corporate decision
making, and that the concepts and tools of marketing can be used as a secure
foundation for innovation and competitive advantage.
The external environment forms the framework for organisational success, and
the results of environmental scanning should inform organisational developments
which exploit environmental and market opportunities. Nevertheless, clear direction
and organisational values, sometimes encapsulated in a mission statement, drive the
path of the organisation, feeding and framing organisational objectives. Recent
theorists believe that organisational objectives and strategy have been too confined
by operational issues in the past (and hence, it could be argued, are not truly market
orientated), and that what is needed is an understanding of the organisation’s core
competences plus the ability to think laterally in applying these to add value and
create differentiation.
Organisational mission and strategy are normally developed as a series of corporate objectives, some of which may incorporate marketing terminology. Marketing
objectives are generally developed as the marketing mechanism for meeting corporate objectives, and marketing strategy entails a series of decisions about products
(or product/services) and markets which will exploit market opportunities in order
to meet marketing objectives. Marketing tactics or action plans specify more exactly
the form marketing activities will take.
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Marketing planning is the period process in which the external and internal marketing environment are reviewed and analysed to establish marketing objectives and
strategy, define the marketing mix and tactics for achieving objectives, and lay down
evaluation and control procedures.
Market segmentation involves finding and profiling the segment or segments of
the market that the organisation can serve profitably, building understanding of
customer values and buying habits. Demographic, geographic, psychographic and
behaviour are four main methods of segmenting markets. Segmentation also
involves positioning against competitors’ offers in the marketplace, and establishing
the position in the mind of target customer groups through building brand identity.
Store branding has become a means of positioning relatively standardised merchandise offerings in the minds of target consumers.
The brand values created by major retailers through private-label branding and
store branding have been strong enough for these organisations to diversify into
other activities, such as financial products and fast food. The relative positions of
competing retail brands change with new market entrants, so that in order to
maintain the brand over time, periodic reviews of marketing positioning are
required. Building brand loyalty is about more than building customer databases and
using loyalty card incentives; it is about creating and meeting customer expectations
in terms of customer care, dealing with complaints, quality of merchandise and the
overall retail ‘experience’ for the customer. Loyalty card schemes and Internet
shopping programmes give organisations important data on customers, and, as the
retailer moves into new markets, brand loyalty offers opportunities for cross-selling.
The marketing mix is the basic range of elements marketers can use in marketing
a product or service. In service marketing, generally seven elements are considered:
1. Product.
2. Price.
3. Place.
4. Promotion.
5. People.
6. Process.
7. Physical evidence.
There are a range of management decisions which can be made regarding each of
the elements, and they provide an extremely useful framework for developing
marketing tactics.
5. Retail Buying in the Twenty-First Century
Learning Objectives
After studying this module, you should be able to:
 understand the role of the retail buyer and the principal buying activities;
 measure the performance of the buying function;
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 analyse three dimensions which currently challenge the role of buyers:
 trend management strategies;
 supplier selection strategies;
 managing development of own-brand products;
 understand developments in international sourcing of merchandise.
Sections
5.1
5.2
5.3
5.4
5.5
The Role of the Retail Buyer
The Principal Buying Activities
Measuring the Performance of the Buying Function
The Defining Issues in Retail Buying
Centralised Buying and Offshore Sourcing Strategies
Learning Summary
This module reviewed the role of buying within retail organisations. Having
recognised the central role that buyers play in the implementation of a retailer’s
positioning strategy, consideration was then given to the principal buying activities.
These were identified as ranging from undertaking an analysis of market opportunity
to the selection of the supply base. The measures that are used in order to measure
the performance of the buying team were also reviewed.
The module sought to identify the defining issues relevant to retail buying in the
twenty-first century.
Consideration was given to the trend management strategies that buyers adopt in
order to appraise market opportunities, and this included a review of their consumer, competitor and product intelligence strategies.
Consideration was then given to the new supplier selection strategies that buyers
adopt. Integral to this review was a full consideration of supplier selection criteria,
supplier identification procedures, supplier evaluation measures, and the methods
that buyers adopt in order to negotiate with their supply base.
In recognition of the importance of own-brand development to the success of
many retailers, the module reviewed the key procedures that buyers adopt for the
creation of these ranges. The five key phases of development were considered, and
these related to: the process of reviewing market opportunities; developing product
concepts; implementing product plans; evaluating new developments; and finally
commercialising product ideas.
The module underlined the key fact that the process of own-brand development
is inherently high risk but is one that provides the retailer with many significant
opportunities. Finally, the trends towards centralisation of buying and development
of the sourcing function were introduced.
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6. Retail Logistics
Learning Objectives
After studying this module, you should be able to:
 understand the changing nature of supply chain management from a variety of
theoretical perspectives;
 discuss ECR and management of supply chain relationships;
 analyse the application of supply chain concepts in international markets;
 discuss future challenges for retail logistics.
Sections
6.1
6.2
6.3
6.4
6.5
6.6
6.7
Introduction
Supply Chain Management: Theoretical Perspectives
Quick Response (QR) and Efficient Consumer Response (ECR)
The Retail Supply Chain
Differences in Logistics ‘Culture’ in International Markets
The Internationalisation of Logistics Practice
Future Challenges
Learning Summary
This module has outlined the theoretical constructs underpinning supply chain
management and their applications to the retail sector. It was shown that the notion
of time as a driver in competitive advantage is reflected in concepts such as just in
time (JIT) in manufacturing, quick response (QR) in fashion and efficient consumer
response (ECR) in the grocery sector. If the aims of ECR are to be realised by
meeting consumer demand better, faster and at less cost, supply chain integration
will be necessary between and within companies.
Considerable progress has been made to realise these objectives in the last 10–15
years. Fashion retailers such as The Limited, Zara and Benetton have gained
competitive advantage through efficient management of their supply chains. The
traditional adversarial approach between grocery retailer and supplier has also
weakened as ECR initiatives were implemented throughout the 1990s/2000s. In the
evolution of grocery logistics in the UK, this has been identified as the relationship
stage since 1995.
What was clear from the discussion on international markets was that collaboration and the implementation of ECR are more advanced in the UK than in other
countries. Differences in logistics networks across markets can be explained by
factors other than the nature of manufacturer–retailer relationships – for example,
the range of retail formats and their spatial distribution, variations in logistics costs
in relation to land, labour and freight costs, and the relative sophistication of the
logistics service provider market.
Nevertheless, the consolidation of retail markets throughout the world and further internationalisation by the retail giants will result in more global sourcing and
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the adoption of logistics best practice principles across international markets, as
illustrated by the cases of Tesco, Walmart and Ahold.
Finally, the main challenge facing retailers in the future is how they unlock the
potential of e-commerce. Module 12 shows how this market was developing, but
most dot.com failures resulted from fulfilment problems. The two models discussed
here outlined the pros and cons of the store-based model compared with the
picking centre model for meeting consumers’ orders. Although the store model is
currently the most successful, it is unlikely that a mix of picking centres and store
delivery will develop as volumes increase over time. Regardless of which model is
adopted, the ‘last mile’ problem remains unsolved. The standard 2-hour delivery
window offered by most retailers does not maximise the utilisation of their vehicle
fleets. Thus, a variety of technical solutions, involving unattended reception boxes,
have been mooted to reduce these costs. The relative success of unattended delivery
options will depend upon their acceptability by customers, who appear to favour
collection points over home reception alternatives.
7. Adding Value through Customer Service
Learning Objectives
After studying this module, you should be able to:
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define customer service in four different ways;
understand the role of customer service in raising service quality;
assess strategic options for managing customer service;
evaluate four key aspects of managing a consumer business;
plan and implement excellent customer service in a retail setting.
Sections
7.1
7.2
7.3
7.4
7.5
7.6
Introduction
Customer Service Defined
Service Characteristics and their Implications for Customer Service
Improving the Quality of Customer Service
Managing Customer Service
Implementing Good Customer Service in Retailing
Learning Summary
In retailing, customer service can be defined in four ways. Firstly, retail organisations
exist in order to provide products to customers, adding value to the products
through bringing them together in one place, providing information about them and
enabling customers to buy. Secondly, the wide range of services that retailers have
put together to add value to the fundamental exchange relationship (money for
products) has become an intrinsic part of customer service. Thirdly, the customer’s
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perception and experience of the service retailers provide affect the level of customer satisfaction. Fourthly, customer service involves post-purchase facilities and
services plus the complaints and returns policies.
The five service characteristics – intangibility, heterogeneity, perishability, ownership and inseparability – inherently frame the customer service experience. By
considering each in turn, retailers can improve the customer service experience.
The intangibility of the service means retailers have to focus on tangibilising the
brand – for example, by giving customers loyalty cards and carrier bags. The
heterogeneity of the retail experience can be overcome through standardisation of
procedures, training and dress – although this can also be exploited through using
new information and communication technologies to customise the retail offering
to individual or small group needs. The perishability of the service has led retailers
to maximise the opportunities for their customers to shop. Ownership is a characteristic which means that retailers have to strive for consistency – in service terms
and in reliable provision of products. Inseparability is the characteristic which
requires retailers to ensure their staff have positive attitudes and behaviour and are
well trained and informed, because the staff–customer interaction is so important in
ensuring customer satisfaction.
The SERVQUAL model is a useful tool which retailers can use to focus on areas
in which their service quality can be improved. By analysing the knowledge, standards, delivery and communication gaps in the service they provide, they can reduce
the gap between what customers expect in terms of service and their perception of
level of service they receive. In this way, they can improve the level of satisfaction
their customers experience.
Customer service strategies range from standardisation to mass customisation –
retailers have to decide which strategy to implement. However, as the costs of
customisation reduce with the convergence of communication and information
technologies, the opportunities for mass customisation will increase.
There are four key aspects in managing a consumer business. Firstly, retail managers should renew the service offering to generate customer interest and build
customer relationships. Retailers do this through service extension and service
enhancement. Secondly, retailers should localise the point-of-service system – that
is, consider ways and means of intercepting customers beyond the confines of their
traditional outlets, and making it easy for them to shop. Leveraging the service
contract is the third factor. Retailers need to consider how to boost both loyalty and
spend – focusing on delivering exceptional service to their key customers is one way
of doing this. Finally, retailers are well positioned to make use of the information
and communication technology advancements in order to manage customer
information to personalise services, develop service extensions/enhancements and
manage service quality.
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8. Retail Selling
Learning Objectives
After studying this module, you should be able to:
 relate the amount and quality of time retail salespeople spend actively selling to:
 product classification;
 types of buying decision;
 stages in the buying process;
 discuss retail sales roles and the activities involved in the retail sales process;
 understand the role of retail selling in the promotional mix.
Sections
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
Introduction
Retail Selling and Product Classification
Retail Selling and Types of Buying Decision
Retail Selling and Shopping Motives
Retail Selling and the Buying Process
Retail Sales Roles
The Retail Sales Process
Retail Selling and the Promotional Mix
Retail Selling and the Internet
Learning Summary
There is a strong relationship between retail selling, customer service and customer
satisfaction. Retailers operating market-focused service businesses need to tailor
their retail selling to customers’ requirements with regard to:
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the type of product being bought;
the type of purchase decision;
customers’ shopping motives;
the stage in the process of making the buying decision.
The nature and depth of retail selling required are related to the type, complexity
and value of the product, the customer’s understanding of its qualities, uses and
attributes, brand loyalty, and the extent to which the customer desires involvement
in the buying process.
Merchandise can be categorised into convenience, preference, shopping, speciality and unsought goods, although the category for any one product may vary
according to the customer’s attributes, such as age, wealth and buying experience.
The role of retail salespeople and the nature of the selling process will vary according to merchandise category and target customer profile.
The nature of retail selling also varies according to the extensiveness of the customer decision-making process. Less involvement is required in selling convenience
items, or those for which a strong brand preference has been established. More
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extensive selling is required for complex and expensive products which engage
customers in extended problem solving.
The role and activities of retail salespeople also depend on the shopping motives
of customers; where shopping is for social reasons, or for fun and entertainment,
salespeople can contribute to a dynamic and changing retail experience.
The customer buying process can be summarised within the Awareness, Interest,
Desire, Action (AIDA) model, or more commonly within the five stages of the
buying process.
The speed at which customers proceed through the stages depends on individual
characteristics such as age and background, merchandise category, and type of
buying decision. The role of retail salespeople as direct communicators with
customers allows them unique capability in rapidly determining, through simple
questioning, which stage any individual customer has reached. The activities of retail
salespeople will vary according to each stage of the buying process, but the most
effective use of salespeople’s time is to contribute to alternative evaluation and
choice.
Most retail salespeople have an order-taking role – processing customers’ orders
once they have selected the merchandise. However, these staff can increase sales
through their own efficiency and by suggesting supplementary and complementary
merchandise to customers. Order getters have a more extensive sales role, usually
associated with more complex and expensive merchandise, and these salespeople
will engage potential customers in the selling process, informing them and helping
them make the decision to buy.
The sales process undertaken by order getters includes seven stages: prospecting,
preparing, approach, presentation, overcoming objections, close, and post-purchase
evaluation and follow-up. These can be linked to the stages of the buying process so
that the salesperson has a more informed basis for the activities to be undertaken
during each stage.
Retail selling is one element of the promotional mix and contributes to the
achievement of promotional objectives. The integration of selling and other
promotional mix elements is required to meet in-store customer expectations built
through promotional activities during the information search stage of the buying
process. The growth of online stores means a reduced role for personal selling;
however, it also affects the selling process in stores, increasing the efficiency of sales
staff who can focus on presentation and facilitate choice, because many customers
have already had the opportunity to find and evaluate information relating to their
purchase before coming into the store to make a final decision.
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9. Retail Security
Learning Objectives
After studying this module, you should be able to:
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define shrinkage and identify the main causes of shrinkage;
evaluate the scale and nature of retail crime in the UK;
discuss the main types of retail crime;
know how to deal with shoplifters;
analyse security issues and develop a strategy for retail crime prevention.
Sections
9.1
9.2
9.3
9.4
9.5
9.6
Introduction
Causes of Shrinkage
The Scale of Retail Crime
Types of Retail Crime
Dealing With Retail Theft – UK
Retail Loss Prevention
Learning Summary
Retail crime has developed as a major issue for the UK retail industry only in the last
decade, during which retailers and associated agencies such as the British Retail
Consortium and the Scottish Grocers’ Federation have developed collaborative
initiatives to combat crime. Retail crime and shrinkage statistics are published
annually, which retailers can use as a benchmark for their own levels of crime and
security.
Customer theft, accounting for about half of retail crime, is the most significant
form of retail crime. Drug use, youth and male gender are three factors closely
associated with customer theft, and most customer theft could be classified under
three headings: organised gang theft, opportunistic theft, and peer-related youth
theft. Staff theft and fraud are the next most important sources of retail crime. Staff
theft, including staff collusion with customer and supplier thieves, is associated with
inadequate management, poor pay, high staff turnover and high rates of part-time
staff – all features of many UK retail organisations. Fraud, and card fraud in
particular, is a fast-developing feature of retail crime. External sources of crime
including burglary, robbery/till snatches, criminal damage, arson and terrorism
constitute a small percentage of overall retail crime.
The British Retail Consortium publishes data on types of crime by retail sector and
size of organisation. Customer crime, for example, constitutes a much higher proportion of retail crime for small retailers than for large multiple retailers, whereas the latter
experience a much higher level of employee crime. Department stores and mixed
retail businesses experience higher than average customer and staff theft, whereas the
furniture, textiles and carpet sector experienced lower than average customer theft but
more than average levels of fraud – particularly cheque fraud. Retailers which diversify
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their merchandise ranges, therefore, have to be aware that the nature and level of retail
crime they experience will also change.
Retail loss deterrents can be classified under three main headings: human, mechanical and electronic. While many security measures are easy and cheap to deploy,
most expenditure on retail security in the UK is directed towards security staff and
cash collections. The published spend on deterrence does not include investment in
most of the other ‘human’ methods of combating crime, although, given the rising
levels of employee crime, retailers should give consideration to measures including
stricter pre-employment screening, management and security training, and boosting
staff loyalty. Collaboration is a growing feature of retail security, both in securing,
publishing and sharing information on retail crime, and in developing a wide variety
of preventative measures.
10. Merchandising in Retailing
Learning Objectives
After studying this module, you should be able to:
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manage the financial performance of product ranges;
understand the principles of space management;
discuss the contribution of merchandising to category management;
comprehend the main dimensions of visual merchandise management.
Sections
10.1
10.2
10.3
10.4
10.5
Introduction
Managing the Financial Performance of the Product Range
Management of Space
The Contribution of Merchandising to Category Management
The Dimensions of Visual Merchandise Management
Learning Summary
This module reviewed the role of the merchandiser within retail organisations and
found that the term may either refer to activities associated with the financial
management and control of the buying function, or refer to the management of the
visual presentation of stock.
In terms of merchandising from a financial management perspective, the module
noted that it is the responsibility of the merchandiser to manage the buying budget
and ensure that the profitability of the buying function is maintained through the
management of gross buying margin. Furthermore, the actions that the merchandiser may suggest in response to poor margin performance were also identified.
The principle of open to buy is important within the procurement process since
it provides the buying team with the opportunity to commit to merchandise as late
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in the day as possible. In sectors such as fashion this is especially important, since it
allows the buyer to respond to trends as they emerge in the market.
The module also considered the issues relevant to the management of space
within retailing, and reviewed the various strategies that retailers may adopt in order
to allocate stock to stores. The drivers of space management were also identified,
and consideration was also given to the relationship between a product’s life cycle
and the amount of space it is allocated in-store.
The principles of category management were also introduced, and the contribution of the merchandiser to the development of a category assortment was
explained.
The module also reviewed the processes inherent to the management of the
visual presentation of goods within retail outlets. Consideration was given to the
relationship between visual merchandising and consumer behaviour, and it was
noted that a sizeable proportion of consumer decisions are made within the store.
The key business objectives of visual merchandising were introduced, as were the
principles relevant to store layout decisions. The module concluded by considering
the most popular methods of managing displays within a retail setting.
11. The Internationalisation of Retailing
Learning Objectives
After studying this module, you should be able to:
 discuss the internationalisation of retail concepts and formats;
 critically discuss four main themes of retail internationalisation:
 motives for internationalisation;
 directions of growth;
 methods of market entry;
 degree of adaptation to new markets;
 analyse the internationalisation strategy of retail organisations using a variety of
conceptual models;
 evaluate the changing nature of the global retail market.
Sections
11.1
11.2
11.3
11.4
11.5
11.6
Introduction
Internationalisation of Concepts
Sourcing of Products and Services
Internationalisation of Store Development
Towards a Conceptual Framework
The Reshaping of the Global Retail Market
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Learning Summary
This module has devoted much time to the new evolving landscape of international
retailing. Largely ignored in the literature until very recently, the aspirations of
Walmart, Carrefour, Ahold and Tesco can be applied to the conceptual context
sketched out in the early part of the module. Here we discussed internationalisation
of concepts, including the transfer of know-how, ideas and best practice as identified in the ‘intelligently federal’ model discussed above. Although most research
focuses upon retail operations, it was pointed out that internationalisation is also
about managing an international supply chain and international labour force. Tesco’s
focused strategy in eastern Europe and Asia is related to managing the supply chain
in these markets. With regard to store development, the four key areas of research
into retail internationalisation were discussed – motives for internationalisation,
direction of growth, method of market entry, and the degree of adaptation to new
markets. Early internationalisation invariably leads to a cautious, near-neighbour
approach as retailers take their format to new markets. Then, with experience, they
become more ambitious in higher-risk, more distant markets where the joint venture
is sometimes the only method of market entry. The degree of adaptation is tied up
with the nature of the retail offer. In differentiated, high brand image formats such
as category killers or niche fashion brands, the format is replicated throughout
global markets. This was illustrated in Box 11.1 with the case of fashion design
retailers, which promote their image with the development of diffusion lines and
franchising of stores in provincial areas.
The next section discussed the conceptual framework within which retail internationalisation research was framed. Much of the early work drew heavily on models
derived from the international management literature, which focused upon the
manufacturing sector with taxonomies of international strategies being produced in
the late 1980s. Although these have been revisited over the last decade or so, the
1990s witnessed a new global retail landscape. The so-called internationalists of the
1980s are either niche players on the global scene or they have reorientated their
strategies to focus upon their domestic market (see Box 11.2 and the case of Marks
& Spencer).
This is why we focused upon the reshaping of the global retail market in the final
section. The meteoric rise of Walmart, with its grandiose international expansion
plans, created change in the markets it entered and redefined the nature of global
competition. Throughout the first decade or so of the new millennium, however, a
restructuring of global operations has occurred, with companies divesting from
markets to focus upon countries offering the best investment potential.
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12. Electronic Commerce and Retailing
Learning Objectives
After studying this module, you should be able to:




discuss the growth of the e-commerce market;
identify the changing nature of the e-consumer;
understand essential attributes of successful online retailers;
evaluate key issues of e-fulfilment.
Sections
12.1
12.2
12.3
12.4
12.5
12.6
12.7
Introduction
The Growth and Development of the E-Commerce Market
The E-Commerce Consumer
E-Tail Store Development
Online Store Attributes
The Online Grocery Market
E-Fulfilment
Learning Summary
This module has charted the major changes that have occurred in e-commerce in
recent years and the impact that these changes have had on the retail sector. The
growth and size of the market were illustrated and the development of e-commerce
introduced. The e-commerce consumer has changed in a relatively short period of
time from the initial adopter, who tended to be a young male professional living in a
middle-class neighbourhood. As the technology became more widely available and
access to online retailing more flexible, the gender and ages biases were removed
and the socio-economic mix changed.
E-tailers had to respond to a more discerning consumer as sales volumes began
to grow. To lure customers away from traditional shopping patterns, these retailers
have had to embrace many of the same attributes evident in store choice models:
convenience, product range, customer service and price. The best pure players, such
as Amazon.com, have built up a reputation for their high levels of customer service
and have therefore achieved a high degree of brand loyalty.
However, the strong, established multichannel retailers capitalised on the failure
of many dot.com companies. An Internet presence allowed them to capitalise on
their existing brand equity in addition to having the required investment to develop
the necessary infrastructure. A clicks-and-mortar approach has proven to be the
most successful model to date in that synergies can be achieved through a multichannel strategy.
The one retail sector that has attracted most interest, despite the fact that its
percentage of online sales is low or even non-existent in most country markets, is
the grocery sector. The potential market is large, but success remains elusive to all
but a few companies. In the US, in particular, the demise of Webvan and Streamline
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shows that you can have the ‘ideal’ online model but that, without sufficient market
demand, losses are inevitable. Tesco is one of the few success stories here, primarily
because it grew the business incrementally and used a store-based delivery model
until demand was sufficient to build picking centres. Even for Tesco, the ‘last mile’
problem still requires a solution. Order processing, picking and delivering groceries
are the ‘killer costs’ of online grocery retailing. Some solutions were discussed, such
as the use of some form of unattended delivery (reception boxes at home or
collection points) or the acceptance by consumers of more flexible delivery times
and ‘click and collect’ schemes.
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