Master of Business Administration – MBA

Semester 3

Name: Rohan Fernandes

Roll No.: 520840267

Subject: Marketing Management

Subject code: MK0012

Retail Marketing
 Assignment Set- 1

Q.1 a. What is retailing? What is its importance?

Ans.: Retailing is not only an important aspect of the economic structure but very much a part of
our lies. Although trading of goods has been in existence since human civilization days, it is only
in the recent past that the buying and selling of goods have become more of a formal and brand
dominated activity. In fact, today retailing is evolving into a global, high-tech business.
Nevertheless, the traditional forms of independently owned small businesses co-exist along with
the organized retailers like department stores, specialty stores, shopping malls etc.
Organized retailing has emerged in a big way since 2000 onwards and with it; we are witnessing
the emergence of new forms of retailing. The retailers market can be segmented ion the basis of
various retail formats and led to the development of a very complex retail environment.

Importance of Retailing
The word RETAIL is derived from French word retailer, meaning „to cut a piece off‟ or „to break
bulk‟.
Retail trade may be defined as, “A trade, which consist of selling to ultimate consumers of a
variety of products in small lots”. It is exactly and literally so and is meaningful that retail trade is
that cuts off smaller portions from large lump of goods. From the bulk of products procured by the
wholesaler, small lots are cut and distributed through retailers. Retailers are the last link in the
channel of distribution between the manufacture and the ultimate consumer. The retail shop is
one of the oldest and most widely used business establishments in any country.
Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to
consumers for their personal or family use. It includes all activities directly and indirectly related to
the sale of goods or services to the ultimate consumer. Irrespective of who sells, the distinction of
retailing is normally made on the basis of to whom the products are sold. Retailing is subject to
constant and dramatic changes. Many forces like Social, Economical, Technological, Government
policies etc. influence it.
Following points highlights the importance of retailing.
• Key member in the channel of distribution:
Retailer as the link in the chain of distribution performs good many functions of marketing. The
channel of distribution goes incomplete without his contributions to make the final consumers buy
the products. He acts as a catalyst agent to both the manufacturers as well as to the customers.
• Buying & Assembling:
Retailer assembles products from different manufactures and wholesalers and stock wide variety
of products to meet the varied and small requirements of large number of customers. This
assembling is possible through the process of buying variety of products from different sellers.
• Warehousing:
Retailer is a safety valve for releasing the goods in quantities of different varieties and price
ranges according to the consumer needs. Warehousing makes possible holding the stocks to
match between the consumer demand and supply conditions.
• Selling:
The final aim of a retailer is to sell the products so bought and held by him. Retailer is rightly
called as the buying agent of consumers. He is the means
to dispose the goods to the consumers. Successful retailing needs good deal of salesmanship
tactics.
• Risk-shouldering:
Risk shouldering is the basic responsibility of a retailer arising out of physical deteriorations and
changes in prices. These are unavoidable as he holds sufficient and variety of inventories from
the time they are bought till they sell.
• Grading & Packing:
Retailers undertake second round grading and packing activities left by the manufactures and
wholesalers. As he sells in loose packs and very odd lots, packing assumes a particular
importance.
• Financing:
In successful marketing, the contribution of retailers is really worth emphasizing with consumer
financing. His financing consists of credit granted on liberal terms to the consumers, investment in
stocks, salaries & wages and other trade expenses.
• Advertising:
Retailers are the best agents to advertise the products and ideas. In collaboration with the
wholesaler and producer, retailers do undertake shop display, distribution of sales literature,
introduction of new product etc.,
• Supply of Market Information:
As being in close and constant touch with consumers, he clearly keenly observes, studies the
consumer behaviour, changes in tastes and fashions and therefore demands. This collected
information is passed on to the wholesalers & manufacturers for their perusal.
• Offer Opportunity:
Retailers give the manufacturers and producers the opportunity of presenting their products to the
consumers by providing the necessary vent and access.
• Big Relief:
Manufacturers and the wholesalers are really relieved of the head braking odd jub of retailing to
the individuals in pretty small quantities.
• Provision of Information:
Retailers do provide the wholesalers and manufactures the information about the latest consumer
movements and consumer demand.
Produce the risks of loss:
Being the spokesmen of consumers, they warn the producers as to what goods to produce and in
what quantity at what price. This makes the wholesalers to stock only those goods needed by the
consumers.
• Largest Choice:
Retailers assemble products of different varieties from good many producers enabling the
consumers to have largest choice as the cost, quality, and varieties and so on.
• Relief from storage:
In fact, retailers hold goods on behalf of the consumers. Being at their convenient place,
consumers can have ready access suitable stock at suitable lot. By this he helps them in reducing
their capital lock-up.
• Extra service:
Many retailers grant extra concessions and facilities such as door delivery, telephone orders,
credit sales, return or replacement of goods not found suitable by consumers etc.,
• Supply of Information:
Retailer is an expert adviser to consumer as help them in deciding about the product choice. He
introduces new products that are superior to earlier models thus improving customer satisfaction.
Retailing as one of the important sectors for the growth of economy plays a key role in building a
nation to self-sufficiency state. Following key elements explains the importance of retailing to the
nation.
• Rapid economic growth:
India’s GDP growth of 9.4 per cent in 2006-07 is the highest posted for over 18 years, reflecting
the booming economy of the country. Growing in tandem with the economy is the Indian retail
sector. Retail is one of India’s largest industries, contributing to about 10 per cent of the GDP and
providing employment to 8 per cent of the nation’s workforce. The sector is on a high growth
trajectory and is expected to grow by more than 27 per cent over the next 5 to 6 years.
 • Generates employment opportunities:
It offers maximum employment opportunities for people living in a nation. In India, the youth
population is more interested pursuing their career in this field. Survey shows in India that 60% of
population of age group (15-60) are engaged in this activity.
• Potential untapped Markets:
Growing trend of consumerism in has led to the emergence of cities and small towns add to the
market attractiveness. Pantaloon Retail India Limited, one of India’s retail giants captures a mere
0.3 per cent of total market; compared to Tesco Plc, which captures 14.3per cent of England’s
market and Wal-Mart which captures 20 per cent of USA’s market; giving an insight into the large
untapped market potential.
• Cash & Carry wholesale trading:
Big retail outlets also perform the functions of a wholesaler by selling products both in bulk and in
small quantities. This leads to larger sales transactions which results in large money flow into the
economy. Since these giant retailers have wider assortment and variety, they can cater to the
needs of every customer who visit their shop and also influence them on impulsive buying.
• Indian Retail Sector:
Indian retail business promises to be one of the core sectors of the Indian economy, with
organized retail sector estimated to grow by 400 per cent of its current size by 2007-08.
India is expected to be among the top 5 retail markets in the world in 10 years. The growth and
potential of the sector is being widely acknowledged both in the domestic as well as international
forums. India topped AT Kearney’s Global Retail Development Index 2007 for the third
consecutive year, retaining its position in the global market as the most preferred retail
destination amongst emerging markets.
For the fifth time, India also topped the Global Consumer Confidence Index June – 2007
conducted twice a year by The Nielsen Company. Indians were judged the world’s most optimistic
consumers, with large sections of the population considering “now” a good time to spend. Total
estimated investment opportunity of US$ 5-6 billion in next five yrs.

b. Identify some of the general characteristics of a retail consumer.

Ans.: Consumer buying behaviour refers to the buying behaviour of the ultimate consumer.
Consumer behaviour is the study of how consumers make decisions to use their respective
resources such as time, money and effort for buying, suing and disposing goods and services.
The behaviour of humans is very complex in nature. Marketers understanding of he drivers of
consumers buying behaviour will help them to serve their customers effectively and efficiently and
attract new customers.
In the retailing context, marketers are required to understand customers shopping behavior which
includes decision variables regarding among other things, brand selection, shopping timing, and
choice of retail format and store. Consumers shopping behaviour is understood by analyzing the
factors that affect behaviour. These factors could be demographic, psychological, environmental
or related to the lifestyle of the customer. It is equally important for the retailer to identify the
various stages in the consumer decision-making process and the major influences at each stage.
This would make possible an effective retail marketing strategy.
In the retail context, marketers would be specifically be more interested to know about the
consumers shopping behaviour, which involves an understanding of decision variables regarding
when, where and what to shop i.e. shopping timing, choice of retail format and store etc. such
decision variables are the factors to be considered by the retailer while taking decisions regarding
the understanding consumer behaviour.
For instance, in case of pickle, marketers will be interested in finding out the type of pickle
consumers intend to buy (single vegetable/fruit or mixed, spicy or not, oily or dry, veg. or non-
veg), the brand preference (national, private, generic), the reason for using (to add taste, for food
preparation, to eat along with snacks), the place of purchase (Super bazaar, convenience store,
vendors, home made), and frequency of purchase (weekly, fortnightly, monthly). On the basis of
various alternatives to consumer needs, marketers evolve the best possible marketing mix to
attract the target market. Therefore, shoppers‟ response to retail marketing mix has a great
impact on the forms success in the long run.
Individual consumers consider each element of retail marketing mix in relation to their culture,
attitude, previous learning and personal perception.
Many a times consumers patronize more than one retail outlet for the same product. The
consumer is influenced by both the intrinsic and extrinsic factors. With the understanding of these
elements retailers would be well placed to devise their retail marketing mix in accordance with
their respective target segments.

Q.2 a. Explain the types of store locations and the factors influencing the store location.

Ans.: Site Selection, approaches to site selection

Site selection in retailing refers to the type of building the retailer needs and its affordability.
Retailers’ should decide whether they should own the property, lease the premises on rent or
have a joint venture with the landlord. Site selection depends on the nature of the building, façade
requirements, size requirements and costs. The site selection format is furnished below as a
specimen.

Address of the company

Details of adjacent occupants-North, east, west and south

Can the site be used commercially?

Name & address of the title holder
Is the site free of encumbrance?
Are all relevant taxes paid and currently up to date?
Is the site free of any civil suit?
When was the building constructed?
Total number of floors
Other prominent facilities nearby
Details of facilities space / parking space
Revenue details / rate per sq.ft etc

Site Selection analysis / Approaches to site selection:

With the advent of new retail formats, such as planned shopping centres and malls, emergence of
free-standing department stores, hypermarkets etc., and further development of traditional
business districts and other unplanned shopping locations, a retailer is presented with a wider
choice of locations. Consideration of all the options keeping in view the product mix, customer
profile and overall business model presents an enormous challenge.
A retailer has to consider the following factors while selecting a site:
1. Kind of products sold:
For stores dealing in convenience goods, the quantity of traffic is most important. The corner of
an intersection, which offers two distinct traffic streams and a large window display area, is
usually a better site than the middle of a block. Convenience goods are often purchased on
impulse from easily accessible stores. For stores dealing in shopping goods, the quality of the
traffic is more important. Stores carrying specialty goods that are complementary to certain other
kinds of shopping goods may desire to locate close to the shopping goods stores. In general, the
specialty goods retailer should locate in the type of neighborhood where the adjacent stores and
other establishments are compatible with retailer’s operations.
2. Cost factor:
Location decision on cost considerations alone is risky. Space cost is a combination of rent or
mortgage payment, utilities, leasehold improvements, general decoration, security, insurance and
all related costs of having a place to conduct business operations. Traditionally, the retail
community placed great importance on owning the place since this was considered prestigious in
the business community. With the emergence of new forms of retail formats such as franchising,
malls and department stores, the dependence on rent or lease is increasing.
3. Competitor’s location:
The type and number of competitors is another important factor. The presence of major retail
centers, industrial parks, franchisee chains, and department stores should be noted. Intense
competition in the area shows that new businesses will have to divide the market with existing
businesses. An excellent location may be next or close to parallel or complementary businesses
that will help to attract customers.
4. Ease of traffic flow and accessibility:
These two are the more important factors to some businesses than others. Retailers selling
convenience goods must attract business from the existing flow of traffic. Studying the flow of
traffic, noting one-way streets, street widths and parking lots, is hence important. The flowing
factors like parking availability, distance from residential areas, side of the street, part of the block
etc is to be considered.
5. Parking and major thoroughfares:
Parking is another site characteristic that is especially a cause for concern in densely populated
areas. When evaluating the parking that exists at a retail site, there are two considerations i.e.
parking capacity and parking configuration. The ideal parking ratio for a food store is about 3:1 or
3 sq.ft of the parking space for every square ft of store.
6. Market trends:
Evaluate the community from a broad, futuristic perspective. Local newspapers are a good
source of information. Discussions with business owners and officials in the area can also help.
7. Visibility:
Visibility has a varied impact on a store’s sales potential. It is important when a shopper is trying
to find the store for the first or second time. Once the shopper has become a regular customer,
visibility no longer matters. It follows that of a store cannot readily be seen, new residents of an
area probably will not choose it.

Factors influencing retailers’ choice of location:

Decisions regarding the location of a store are very critical not only to the future performance of
that outlet but also the retailer’s long-term prosperity. Following questions need to be answered
first before selecting the site:
11. Is there a need to be in the middle of traffic flow of customers as they pass between the
stores with the greatest customer pull?
22. Who will be the store’s neighbors?
33. What will be their effect on stores sales?
44. How much space is needed?

Based on experience of the retailer, the amount of space required can be determined to run the
expected level of operations. The amount of space will determine rent and other related
expenses. Many retailers need to rethink their space requirements when locating in a shopping
center. Rents are generally much higher and therefore, space must be used efficiently.
This is compounded by the consideration of certain specific issues such as:
11.Consumers’ choice or preference of a location: The consumer behaviour is most often
guided by their consideration of the ideal location to shop.
22.To gain competitive advantage: the decision on where to locate the retail outlet will be of
strategic importance because if they develop the best location, it will earn them a long-term
competitive advantage.
33.Understanding of structural and social changes or trends: any decision on location will
definitely have to take into consideration the exiting trends and likely social changes. For
instance, the importance of out-of-town shopping centers, the rise in multiple retailers and so on
is an eye opener for retailers to select an ideal location to match the consumer shopping trends.
44.High investment involving long-term financial implications: the retailer has to consider
the investment cost, lead times and long-term financial implications involved in the development
of a retail location and site.
55.Select the final property asset carefully: the retailing firm has to exercise care while
selecting the final property assets for its value can be very high almost as high s the firm’s annual
turnover.
6.Government formalities: there could be many government policy decisions having a binding
on the development of new retail outlets. This implies there could be restrictions on selection of
new location sites for retailing purposes. The retailing firm has to consider the various dimensions
of location decision making right from planning the location site through to the financial analysis
and long term progress of the retailer. Location decisions and analysis involve examination of
different disciplines of strategic marketing, the geography of retailing, town planning, operations
research, consumer behaviour and economics.

b. What do you mean by electronic retailers?

Ans.: Electronic retailers: Many organizations that offer services to consumers such as banks,
hospitals, health spas, doctors, legal clinics, entertainment firms and universities traditionally
haven’t considered themselves as retailers. Due to increased competition, these organizations
are adopting retailing principles to attract customers and satisfy their needs. All retailers provide
goods and services for their customers. Some firms, such as dry cleaners primarily provide
services. Optical centers and restaurants lie somewhere in the middle of the
merchandise/services continuum. Supermarket and warehouse clubs primarily provide goods.

Q.3 How will you advice a retailer regarding different aspects considered in internal and
external store layout design? Do you think a good store layout and design will help in
gaining more customers?

Ans.: Store Layout

Store layout is the term used to refer the interiors and the allocation or the plan in which the
products are displayed in the store .It is quite imperative for the retailers to understand the
customer and prepare a customer friendly layout.
A customer friendly layout gives an impetus to the shopper to spend more time in the store hence
increasing the chances of shoppers buying more merchandise. In the case of India many of the
independent retailers do not have or have limited spaces for customer movement. Especially in
smaller stores, one would find cash counter located at the store entrance. This treatment is
common with so called 'Kinara Stores'.
But on the other hand, many organized retailers provide adequate space within the store for
shoppers and create layouts that facilitate a definite pattern of customer traffic .In other words the
layout creates 'Aisles' so that the shopper can move on a predefined path inside the store. Layout
planning caters to decisions about nature of traffic flow, kinds of product, space available and
maintenance of the space on a daily basis.
Store layout is one of the many facets of Retail Atmospherics and hence it is significant. Store
layout plays a very important part in the cost analysis by the retail firm and also the general brand
communication of the store.
Store layouts generally show the size and location of each department, any permanent
structures, fixture locations and customer traffic patterns. Each floor plan and store layout will
depend on the type of products sold, the building location and how much the business can afford
to put into the overall store design.
Below are a few basic store layouts.
1. Straight Floor plan:

The straight floor plan is an excellent store layout for most any type of retail store. It makes use of
the walls and fixtures to create small spaces within the retail store. The straight floor plan is one
of the most economical store designs.
2. Diagonal Floor plan:

The diagonal floor plan is a good store layout for self-service types of retail stores. It offers
excellent visibility for cashiers and customers. The diagonal floor plan invites movement and
traffic flow to the retail store.
3.Angular Floor plan:

The angular floor plan is best used for high-end specialty stores. The curves and angles of
fixtures and walls make for it a more expensive store design. However, the soft angles create
better traffic flow throughout the retail store.
4. Geometric Floor plan:
The geometric floor plan is a suitable store design for clothing and apparel shops. It uses racks
and fixtures to create an interesting and out-of-the-ordinary type of store design without a high
cost.
5. Mixed Floor plan:

The mixed floor plan incorporates the straight, diagonal and angular floor plans to create the most
functional store design. The layout moves traffic towards the walls and back of the store.

Store Design The store can be said to be a product in its won right. The type of planned store
layout can influence the customer’s product decisions. Typically the store should be designed to
facilitate the free movement of customers, create a planned store experience and also help to
make an optimum presentation of merchandise. The retailer’s goal while designing the store
should be on a proactive basis- reflecting the brand position of the store and also ensuring the
most effective usage of the space. The main objectives of a good store design should be:
1. It must complement the customers’ needs i.e. be consistent with the image and strategy.
2. It should act positively on consumer behaviour.
3. It must consider the costs associated versus the value received in terms of higher sales
and profits.
4. It should be flexible to adopt any changes in the merchandise with its store’s image.
Thus, a proactive planning and atmospherics used in the store layout can act upon the
emotional state of the customers and are more likely to influence them to enter and
purchase merchandise at the stores. Proactive planning is based upon the manipulation
of the in-store experience by acting upon and responding to the data on store layout in
order to influence the consumer’s shopping behaviour and experience. The consumers
are more likely to enter stores which are made attractive by use of space, color, walls,
pillars, floor coverings, lightings, music etc. this planned combination of physical
messages are known as Atmospherics. Atmospherics is referred to as a store’s physical
characteristics that are used to develop the retail unit image and draw customers. It
describes the physical elements inn a store’s design that appeals to consumers and
encourages them to buy. Atmospherics are created by the combination of a whole series
of cues and stimulus i.e. the type of merchandise offered and the way it is displayed can
produce the desired store ambience and emotional response from the target customers.
Retailers have realized that background music can be used as a new tool to reach out to
shoppers and encourage them to spend more. According to Adrian North, a psychology
professor at the University of Leicester, England, there is a quite a lot of evidence that
music can influence the speed with which people shop, their willingness to spend, their
perceptions of value and more”. In India also, retailers have realized that the right kind of
music at the right time.
Q.4 Advise Mr. Robin on how to evaluate and select a site for his retail store location.
Robin should consider what factors in making a final decision regarding the store
location?

Ans.: Site Selection, approaches to site selection

Site selection in retailing refers to the type of building the retailer needs and its affordability.
Retailers’ should decide whether they should own the property, lease the premises on rent or
have a joint venture with the landlord. Site selection depends on the nature of the building, façade
requirements, size requirements and costs. The site selection format is furnished below as a
specimen.

Address of the company

Details of adjacent occupants-North, east, west and south

Can the site be used commercially?

Name & address of the title holder
Is the site free of encumbrance?
Are all relevant taxes paid and currently up to date?
Is the site free of any civil suit?
When was the building constructed?
Total number of floors
Other prominent facilities nearby
Details of facilities space / parking space
Revenue details / rate per sq.ft etc

Site Selection analysis / Approaches to site selection:

With the advent of new retail formats, such as planned shopping centers and malls, emergence of
free-standing department stores, hypermarkets etc., and further development of traditional
business districts and other unplanned shopping locations, a retailer is presented with a wider
choice of locations. Consideration of all the options keeping in view the product mix, customer
profile and overall business model presents an enormous challenge.
A retailer has to consider the following factors while selecting a site:
1. Kind of products sold:
For stores dealing in convenience goods, the quantity of traffic is most important. The corner of
an intersection, which offers two distinct traffic streams and a large window display area, is
usually a better site than the middle of a block. Convenience goods are often purchased on
impulse from easily accessible stores. For stores dealing in shopping goods, the quality of the
traffic is more important. Stores carrying specialty goods that are complementary to certain other
kinds of shopping goods may desire to locate close to the shopping goods stores. In general, the
specialty goods retailer should locate in the type of neighborhood where the adjacent stores and
other establishments are compatible with retailer’s operations.
2. Cost factor:
Location decision on cost considerations alone is risky. Space cost is a combination of rent or
mortgage payment, utilities, leasehold improvements, general decoration, security, insurance and
all related costs of having a place to conduct business operations. Traditionally, the retail
community placed great importance on owning the place since this was considered prestigious in
the business community. With the emergence of new forms of retail formats such as franchising,
malls and department stores, the dependence on rent or lease is increasing.
3. Competitor’s location:
The type and number of competitors is another important factor. The presence of major retail
centers, industrial parks, franchisee chains, and department stores should be noted. Intense
competition in the area shows that new businesses will have to divide the market with existing
businesses. An excellent location may be next or close to parallel or complementary businesses
that will help to attract customers.
4. Ease of traffic flow and accessibility:
These two are the more important factors to some businesses than others. Retailers selling
convenience goods must attract business from the existing flow of traffic. Studying the flow of
traffic, noting one-way streets, street widths and parking lots, is hence important. The flowing
factors like parking availability, distance from residential areas, side of the street, part of the block
etc is to be considered.
5. Parking and major thoroughfares:
Parking is another site characteristic that is especially a cause for concern in densely populated
areas. When evaluating the parking that exists at a retail site, there are two considerations i.e.
parking capacity and parking configuration. The ideal parking ratio for a food store is about 3:1 or
3 sq.ft of the parking space for every square ft of store.
6. Market trends:
Evaluate the community from a broad, futuristic perspective. Local newspapers are a good
source of information. Discussions with business owners and officials in the area can also help.
7. Visibility:
Visibility has a varied impact on a store’s sales potential. It is important when a shopper is trying
to find the store for the first or second time. Once the shopper has become a regular customer,
visibility no longer matters. It follows that of a store cannot readily be seen, new residents of an
area probably will not choose it.

Factors influencing retailers’ choice of location:

Decisions regarding the location of a store are very critical not only to the future performance of
that outlet but also the retailer’s long-term prosperity. Following questions need to be answered
first before selecting the site:
51. Is there a need to be in the middle of traffic flow of customers as they pass between the
stores with the greatest customer pull?
62. Who will be the store’s neighbors?
73. What will be their effect on stores sales?
84. How much space is needed?

Based on experience of the retailer, the amount of space required can be determined to run the
expected level of operations. The amount of space will determine rent and other related
expenses. Many retailers need to rethink their space requirements when locating in a shopping
center. Rents are generally much higher and therefore, space must be used efficiently.
This is compounded by the consideration of certain specific issues such as:
61.Consumers’ choice or preference of a location: The consumer behaviour is most often
guided by their consideration of the ideal location to shop.
72.To gain competitive advantage: the decision on where to locate the retail outlet will be of
strategic importance because if they develop the best location, it will earn them a long-term
competitive advantage.
83.Understanding of structural and social changes or trends: any decision on location will
definitely have to take into consideration the exiting trends and likely social changes. For
instance, the importance of out-of-town shopping centers, the rise in multiple retailers and so on
is an eye opener for retailers to select an ideal location to match the consumer shopping trends.
94.High investment involving long-term financial implications: the retailer has to consider
the investment cost, lead times and long-term financial implications involved in the development
of a retail location and site.
105.Select the final property asset carefully: the retailing firm has to exercise care while
selecting the final property assets for its value can be very high almost as high s the firm’s annual
turnover.
6.Government formalities: there could be many government policy decisions having a binding
on the development of new retail outlets. This implies there could be restrictions on selection of
new location sites for retailing purposes. The retailing firm has to consider the various dimensions
of location decision making right from planning the location site through to the financial analysis
and long term progress of the retailer. Location decisions and analysis involve examination of
different disciplines of strategic marketing, the geography of retailing, town planning, operations
research, consumer behaviour and economics.

Q.5 a. Explain the different gaps in Service quality model.

Ans.: Service Quality Model:

Service quality is a concept that has aroused considerable interest and debate in the research
literature because of the difficulties in both defining it and measuring it with no overall consensus
emerging on either. There are a number of different "definitions" as to what is meant by service
quality. One that is commonly used defines service quality as the extent to which a service meets
Customers’ needs or expectations Asubonteng et al., 1996; Service quality can thus be defined
as the difference between customer expectations of service and perceived service. If
expectations are greater than performance, then perceived quality is less than satisfactory and
hence customer dissatisfaction occurs.
Always there exists an important question: why should service quality be measured?
Measurement allows for comparison before and after changes, for the location of quality related
problems and for the establishment of clear standards for service delivery. Edvardsen et al.
(1994) state that, in their experience, the starting point in developing quality in services is analysis
and measurement. The
SERVQUAL approach, which is studied in this paper, is the most common method for measuring
service quality.

Different Gaps in Service Quality Model:

· Gap1: Customers’ expectations versus management perceptions: as a result of the lack of

a marketing research orientation, inadequate upward communication and too many layers of
management.

· Gap2: Management perceptions versus service specifications: as a result of inadequate

commitment to service quality, a perception of unfeasibility, inadequate tasks standardization and
an absence of goal setting.

· Gap3: Service specifications versus service delivery: as a result of role ambiguity and
conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control
systems, lack of perceived control and lack of teamwork.

· Gap4: Service delivery versus external communication: as a result of inadequate horizontal

communications and propensity to over-promise.

· Gap5: The discrepancy between customer expectations and their perceptions of the
service delivered: as a result of the influences exerted from the customer side and the shortfalls
(gaps) on the part of the service provider. In this case, customer expectations are influenced by
the extent of personal needs, word of mouth recommendation and past service experiences.

· Gap6: The discrepancy between customer expectations and employees’ perceptions: as

a result of the differences in the understanding of customer expectations by front-line service
providers.

· Gap7: The discrepancy between employee’s perceptions and management perceptions:

as a result of the differences in the understanding of customer expectations between managers
and service providers.
b. Mention the 5 differentiation dimensions in retail differentiation strategies.

Ans.: Differentiation strategies:

A retailer’s pricing strategy has to reflect its overall goals and be related to sales and profits.
There must also be specific pricing goals to be achieved with the integration of total retail mix.
Following are the strategies and the most commonly applied practices for retail pricing:
1 Demand oriented pricing
2 Cost oriented pricing
3 Competition oriented pricing

1. Demand oriented pricing:

Under this strategy a retailer sets prices based on consumer desires. It determines the range of
prices acceptable to the target market. Retailer use demand oriented pricing to estimate the
quantities that customers would buy at various prices. In this method seller attempts to set price
at a level intended and buyers willing to pay. This approach studies customer interests and the
psychological implication of pricing.
Two aspects of psychological pricing are the Price quality association and Prestige pricing.
According to Price quality association concept, many consumers feel high prices connote high
quality and low prices connote low quality. This association is especially important if competing
firms or products are hard to judge on the bases other than price, consumer experience, brand
name etc. on the other hand, Prestige pricing assumes that the consumers will not buy goods and
services at prices deemed too low. Consumers may feel too low price means low quality and
status. For example, Shoppers Stop does not keep any low-end items because their customers
may feel they are inferior.
2. Cost oriented pricing:
It refers to setting prices based on the costs incurred by the retailer while purchasing a product or
service for sale to its customers. This could take the form of Cost Plus pricing.
Cost plus pricing method will be in relation to either marginal costs or total costs including
overheads. This approach can be used for selecting the target market, ascertaining the costs of
the goods in the store i.e. storage costs, overheads, selling costs etc, determining the maximum
ceiling price when compared to competitors and determining the initial mark-up from maintained
mark-up and gross margin.
Here, initial mark up is the difference between the retail-selling price initially placed on the
merchandise and the cost of goods sold. Maintained mark up is the difference between the
amount obtained from actual sales of the merchandise and the cost of goods sold. Gross margin
is the net sales minus cost of goods sold.
3.Competition oriented pricing: A retailer can use competitors price as a guide. The firm might
not alter prices in reaction to changes in demand or costs unless competitors alter theirs.
Similarly, it might change prices when competitors do, even if demand or costs remain the same.
A competition-oriented retailer can price below at or above the market. A firm with a strong
location, superior service, good assortment, favorable image and exclusive brands can set prices
above competitors. However, above market pricing is not suitable for a retailer that has an
inconvenient location, relies on self-service, is not innovative and offers no real product
distinctiveness. Pricing at the market level does not disrupt competition and therefore does not
usually lead to retaliation.

Q.6 Discuss the process of strategic retail planning.

Ans.: Situational Analysis:
A firm needs to spot trends early enough to satisfy customers and stay ahead of competitors, yet
not so early that shoppers are not ready for changes or that false trends are perceived.
Merchandising shifts – like stocking fad items – are more quickly enacted than changes in a firm’s
location, price, or promotion strategy. A new retailer can adapt to trends easier than existing firms
with established images, ongoing leases, and space limitations. Small firms that prepare well can
compete in a market with large retailers.
During situation analysis, especially for a new retailer or one thinking about making a major
strategic change, an honest, in-depth self-assessment is vital. It is all right for a person or
company to be ambitious and aggressive, but overestimating one’s abilities and prospects may
be harmful – if the results are entry into the wrong retail business, inadequate resources, or
misjudgment of competitors.
1. Organizational mission
An organizational mission is a retailer’s commitment to a type of business and to a distinctive role
in the marketplace. It is reflected in the firm’s attitude toward consumers, employees, suppliers,
competitors, government, and others. A clear mission lets a firm gain a customer following and
distinguish it from competitors.
2. Ownership and management alternatives
An essential aspect of situation analysis is assessing ownership and management alternatives,
including whether to form a sole proprietorship, partnership, or corporation and whether to start a
new business, buy an existing business, or become a franchisee. Management options include
owner-manager versus professional manager and centralized versus decentralized structures.
Consider that “There is not single best form of ownership. That’s partly because the limitations of
a particular form of ownership can often be compensated for. For instance, a sole proprietor can
often buy insurance coverage to reduce liability exposure, rather than form a limited liability entity.
Even after you have established your business as a particular entity, you may need to re-evaluate
your choice of entity as the business evolves.”
Objectives
1. Sales
Sales objectives are related to the volume of goods and services a retailer sells. Growth, stability,
and market share are the sales goals most often sought.
Some retailers set sales growth as a top priority. They want to expand their business. There may
be less emphasis on short-run profits. The assumption is that investments in the present will yield
future profits. A firm that does well often becomes interested in opening new units and enlarging
revenues. However, management skills and the personal touch are sometimes lost with overly
fast expansion.
2.Profit
With profitability objectives, retailers seek at least a minimum profit level during a designated
period, usually a year. Profit may be expressed in dollars or as a percentage of sales. For a firm
with yearly sales of $5 million and total costs of $4.2 million, pre-tax dollar profit is $800,000 and
profits as a percentage of sales are 16 percent. If the profit goal is equal to or less than $800,000,
or 16 percent, the retailer is satisfied. If the goal is higher, the firm has not attained the minimum
desired profit and is dissatisfied.
3.Satisfaction of Publics
Retailers typically strive to satisfy their publics: stockholders, customers, suppliers, employees,
and government. Stockholder satisfaction is a goal for any publicly owned retailer. Some firms set
policies leading to small annual increases in sales and profits (because these goals can be
sustained over the long run and indicate good management) rather than ones based on
innovative ideas that may lead to peaks and valleys in sales and profits (indicating poor
management). Stable earnings lead to stable dividends.
Image (Positioning)
An image represents how consumers and others perceive a given retailer. A firm may be seen as
innovative or conservative, specialized or broad-based discount-oriented or upscale. The key to
successful image is that consumer’s view the retailer in the manner the firm intends.
Through positioning, a retailer devises its strategy in a way that projects an image relative to its
retail category and its competitors and that elicits a positive consumer response. A firm selling
women’s apparel could generally position itself as an upscale or mid-priced specialty retailer, a
department store, a discount department store, or a discount specialty retailer, and it could
specifically position itself with regard to other retailers carrying women’s apparel.
4.Identification of consumer characteristics and needs
The customer group sought by a retailer is called target market. In selecting its target market, a
firm may use one of three techniques: mass marketing, selling goods and services to a broad
spectrum of consumers; concentrated marketing, zeroing in on one specific group; or
differentiated marketing, aiming at two or more distinct consumer groups, with different retailing
approaches for each group.
4. Overall Strategy: A. Controllable Variables: a. Store location b. Managing business c.
Merchandise management and pricing d. Communicating with the customer B. Uncontrollable
Variables: a. Consumers b. Competition
c. Technology d. Economic conditions e. Seasonality f. Legal restrictions
5.Specific Activities Short-run decisions are now made and enacted for each controllable part of
the strategy. These actions are known as tactics and encompass a retailer’s daily and short-term
operations. They must be responsive to the uncontrollable environment.
6.Control In the control phase, a review takes place, as the strategy and tactics are assessed
against the business mission, objectives, and target market. This procedure is called a retail
audit, which is a systematic process for analyzing the performance of a retailer. The strengths
and weaknesses of a retailer are revealed as performance is reviewed. The aspects of a strategy
that have gone well are continued; those that have gone poorly are revised, consistent with the
mission, goals, and target market. The adjustments are reviewed in the firm’s next retail audit.

Assignment Set- 2

Q.1 a. Examine the role of sales promotions in retail.

Ans.: Role of Sales promotions: Through the years retailing has evolved, competition has
gotten stiff and therefore marketing has become more integral in the direct selling of wares. From
specialty mom-and-pop shop to mass-merchants, the methods by which stores are getting their
products into the hands of customers are evolving. Because customers have more choices,
stores have to reach them with advertising, entice them with promotions, and secure them with
branding—hence the ever growing need for marketing in retail outlets.
1.Advertising: There are two main functions of advertisements: to sell more products, and to
inform the customer. Through newspaper, TV, radio and Internet advertisements, retailers can
inform their customers of the sales, promotions and in-store events. Moreover, since the media is
flooded with advertisements, the ability to create a more eye-catching or attention-grabbing ad
directly influences sales. Stores that advertise--as opposed to those that don’t--are kept at the top
of their potential shoppers’ mind, which can produce sales in the short and long term.
2.In-Store Promotions: Stores use promotions to prompt impulse buying behavior. A shopper
may not intend to buy a product, but if there is a promotion, there is an incentive for immediate
action. For example, a shopper may not need another dress shirt, but might still buy one if it is on
sale. Additionally, promotions can prompt consumers to recall a product and thus instigate a
purchase. Retailers also use promotional periods-- corresponding with national holidays or well-
know sales times--to sell off the previous season’s merchandise. Promotional periods spike sales,
and are a way retailers can reduce the loss of unsold inventory
3.In-Store Atmosphere and Customer Relations: Store design and consumer relationship
marketing (CRM) directly affected the way customers purchase and retain goods. Things like the
atmosphere, music, and store layout, sales help, and post-purchase support can influence things
like shopping time (the longer they shop, the more likely they are to buy), and how gratified they
feel with their purchase. The more content a buyer is with their shopping experience, the more
likely they are to buy merchandise, and the less likely they are to return it.
4.Branding Retail Outlets: It is necessary for retailers to develop their brand in order to stand
out amongst the many other stores. With local boutiques, specialty stores, department stores,
mass-merchants and Internet stores, customers have more choices when it comes to buying.
There is competition within each category, and competition between categories. For example, a
local boutique selling dress shirts is competing with other local boutiques, and also with the mass
merchant who might be selling dress shirts at a cheaper price. It is therefore necessary for the
boutique to create a brand position that a customer can identify with, to keep them loyal.
5.Private Labeling: Solidifying a retail brand’s private label is the apex of the retail marketing
evolution--and the most recent trend in high-end retailing. This is not a new concept for low- to
mid-priced retail outlets, as everything from food to raincoats have been put under their brand's
name. But what are new are stores that build their brand to the point where they can sell
merchandise at a premium price. Doing so is more cost effective: they can reduce the costs
associated with buying other brand names, source cheaper goods from private manufacturers
and reap higher profits. As an added bonus, stores benefit from consumer loyalty to their stores
and their products.

b. What do you mean by brand rejuvenation?

Ans.: Brand Rejuvenation:

Established brands are resilient, elastic and vital. However, continued good health is not a
guaranteed condition.

Commonly, when brands suffer, three key factors are to blame. They are especially lethal when
combined.

1.Declining emotional benefits: Customers seek meaning in their choices. They need their
brands to enable them to ‘sleep better at night' and to ‘broadcast something favourable' about
themselves. When emotional benefits are lacking, customers are forced to expand their
consideration set.

2.Reduced functional benefits: Customers seek relevancy in their choices. They need their
brands to solve a problem and/or to satisfy an immediate need. When the functional benefits are
missing, customers are forced to expand their consideration set.

3.Aggressive competition: Customers are relentlessly introduced to - and tempted by - "new

and improved" brands. When a new brand repositions or replaces an existing brand, customers
are forced to expand their consideration set.

Rejuvenating a declining brand often requires a cohesive "SWAT team" approach. The following
methodology provides a three-dimensional view of a brand's current equity and, if required, a
resuscitation strategy.

Q.2 a. Discuss the importance of segmentation and its limitations.

Ans.: Market segmentation is the process of dividing the heterogeneous total market into small
groups of customers who share a similar set of wants. Each of these small groups possesses
somewhat homogeneous characteristics. As in case of marketers in other businesses, marketers
in the business of retiling may also seek the benefits of market segmentation depending on his
unique market and business context. A retailer may divide women customers into two segments,
working woman and housewife. Segmentation is thus an aggregating process. A segment is a
relatively homogenous group and hence responds to a marketing mix in a similar way. Different
groups or segments require different promotional strategies and marketing mixes because they
have different wants and needs. A niche is a more narrowly defined group seeking a distinctive
mix of benefits. Retailers segment the market to identify specific groups of customers in their
trade area on whom their selling efforts can be concentrated. Such focused selling efforts are
aimed at making the retailer the preferred destination for such identified segments for the
products or services it deals in and to develop a dominant position in the target segments.

Following are the benefits of market segmentation:

1. Development of marketing mix: Segmentation helps a retailer in identifying the target
population and developing a customized marketing program in terms of products and service
offerings, pricing strategy and promotional program.
2.Store location decision:
It also helps a retail chain in deciding locations for its new stores. The retail outlets can be located
where there is a concentration of the target population.
3. Understand customer behaviors:
Segmentation also helps a retailer to gain insight into why the target group acts the way it does.
The buying behavior of the target segment can be understood once the market is segmented.
This can help the development of an effective marketing strategy.
4.Merchandising decisions:
Segmentation helps a retailer in merchandising decisions. Merchandising is essentially the skill
that decides which items will go on the shelves. An understanding of preferences of target
segments is essential for successful merchandising program.
5. Promotional campaigns:
Segmentation helps the retailer on developing more effective and accurate promotional
campaigns.
6. Positioning:
Segmentation helps a retailer on positioning itself in the market. Thus, Shoppers‟ Stop has
targeted the upper income while Westside has targeted the larger base of middle and upper
middle consumers.
In order to achieve the above-mentioned benefits, a retailer can segment his total market on the
basis of the following criteria:
1 Geographic segmentation
2 Psychographics segmentation
3 Lifestyle
4 Demographic segmentation

Following table illustrates the dimensions in Demographic segmentation

Serial No. Segmentation dimensions

1 GENDER
2 AGE
3 MARITAL STATUS
4 INCOME
5 OCCUPATION
6 EDUCATION
7 TYPE OF FAMILY
8 FAMILY SIZE
9 FAMILY LIFE CYCLE
10 RELIGION
11 SOCIAL CLASS
Limitations of Market Segmentation:

1. More expensive than using a non-segmented approach.

2. Difficult to select the best base for segmenting a market.
3. Difficult to know how finely or broadly to segment.
4. Tendency to appeal to markets that are not viable.

b. What is relationship marketing?

Ans.: Relationship Marketing was first defined as a form of marketing developed from direct
response marketing campaigns which emphasizes customer retention and satisfaction, rather
than a dominant focus on sales transactions.

With the growth of the internet and mobile platforms, Relationship Marketing has continued to
evolve and move forward as technology opens more collaborative and social communication
channels. This includes tools for managing relationships with customers that goes beyond simple
demographic and customer service data. Relationship Marketing extends to include Inbound
Marketing efforts (a combination of search optimization and Strategic Content), PR, Social Media
and Application Development.

Just like Customer relationship management(CRM), Relationship Marketing is a broadly

recognized, widely-implemented strategy for managing and nurturing a company’s interactions
with clients and sales prospects. It also involves using technology to, organize, synchronize
business processes (principally sales and marketing activities) and most importantly, automate
those marketing and communication activities on concrete marketing sequences that could run in
autopilot (also known as marketing sequences). The overall goals are to find, attract, and win new
clients, nurture and retain those the company already has, entice former clients back into the fold,
and reduce the costs of marketing and client service.Once simply a label for a category of
software tools, today, it generally denotes a company-wide business strategy embracing all client-
facing departments and even beyond. When an implementation is effective, people, processes,
and technology work in synergy to increase profitability, and reduce operational costs.

Q.3 Mr. Surya has a conservative business attitude. His son Chandrashekar wants to
adopt new styles in their family retail business. But, both of them are a little confused over
the topic of ethics. They would like to be educated on different issues such as ethical
codes, consumerism, profitability and unethical practices in retail business. How will you
help them?

Ans.: Business ethics is a form of the art of applied ethics that examines ethical principles and
moral or ethical problems that can arise in a business environment.
In the increasingly conscience-focused marketplaces of the 21st century, the demand for more
ethical business processes and actions (known as ethicism) is increasing. Simultaneously,
pressure is applied on industry to improve business ethics through new public initiatives and laws.
Business ethics can be both a normative and a descriptive discipline. As a corporate practice and
a career specialization, the field is primarily normative. In academia, descriptive approaches are
also taken. The range and quantity of business ethical issues reflects the degree to which
business is perceived to be at odds with non-economic social values. Historically, interest in
business ethics accelerated dramatically during the 1980s and 1990s, both within major
corporations and within academia. For example, today most major corporate websites lay
emphasis on commitment to promoting non-economic social values under a variety of headings
(e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined
their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum"
environmental tilt).
Marketing ethics is the area of applied ethics, which deals with the moral principles behind the
operation, and regulation of marketing. Some areas of marketing ethics (ethics of advertising and
promotion) overlap with media ethics.
Some of the specific issues in marketing ethics are discussed in the following paragraphs:
Market research
Ethical danger points in market research include:
* Invasion of privacy: Invasion of privacy is a legal term essentially defined as a violation of the
right to be left alone. The right to privacy is the right to control property against search and
seizure, and to control information about oneself. The right to privacy refers to your right to be left
alone. There are several different ways a person's right to privacy can be invaded. The most
common privacy invasions recognized by law are as follows:
1 Intrusion of solitude – physical or electronic intrusion into one's private quarters.
2 Public disclosure of private facts – the dissemination of truthful private information which
a reasonable person would find objectionable
3 False light – the publication of facts, which place a person in a false light, even though
the facts themselves may not be defamatory.
4 Appropriation – the unauthorized use of a person's name or likeness to obtain some
benefit.

* Stereotyping: Stereotyping occurs because any analysis of real populations needs to make
approximations and place individuals into groups. Stereotypes are seen by many as undesirable
beliefs imposed to justify the acts of discrimination and oppression. Other effects are:
Justification of ill-founded prejudices or ignorance
Unwillingness to rethink one's attitudes and behaviour towards stereotyped group
There's usually more than one stereotype for the same group. For example, according to
stereotypes about Black Americans, black men are generally supposed to be good musicians and
basketball players, but at the same time seen as aggressive, prone to lives of crime, and likely to
be on drugs. The effects of stereotypes can have positive and negative effects: In some market
research studies, students who were implicitly made aware of their gender behaved as the
stereotype suggested.
Asian-American women performed better in math tests when being aware of being Asian, and did
worse when being reminded of being women.
The media, showing an incorrect judgment of a culture or place, can also create stereotyping.
Target Market
Ethical danger points include:
* Targeting the vulnerable (e.g. children, the elderly) and
* Excluding potential customers from the market:
Selective marketing is used to discourage demand from undesirable market sectors or
disenfranchise them altogether.
Examples of unethical market exclusion or selective marketing are past industry attitudes to the
gay, ethnic minority and obese ("plus-size") markets. Contrary to the popular myth that ethics and
profits do not mix, the tapping of these markets has proved highly profitable. For example, 20% of
US clothing sales are now plus size. Another example is the selective marketing of health care,
so that unprofitable sectors (i.e. the elderly) will not attempt to take benefits to which they are
entitled. A further example of market exclusion is the pharmaceutical industry's exclusion of
developing countries from AIDS drugs.
In the case of children, the main products are unhealthy food, fashion ware and entertainment
goods. Children are a lucrative market; but are not capable of resisting or understanding
marketing tactics at younger ages. At older ages competitive feelings towards other children are
stronger than financial sense. The practice of extending children's marketing from television to the
school ground is also controversial.
Other vulnerable audiences include emerging markets in developing countries, where the public
may not be sufficiently aware of skilled marketing ploys transferred from developed countries, and
where, conversely, marketers may not be aware how excessively powerful their tactics may be.
For example nestle infant milk formula scandal, which discouraged breast-feeding.
Ethics in RETAILING
Auto Dealers and Ethics: Not an oxymoron
Ethical behavior by auto dealers is increasingly important as consumers become more
knowledgeable due to information on the Web-and as auto retailing becomes a more popular
target of regulators and attorneys. Two ways for car dealers to instill ethical behavior among their
sales personnel involve rethinking sales force compensation and re-examining how car dealers
operate as business leaders.
Traditionally, many salespeople have been paid on the basis of the gross margin of each sale.
That encourages a salesperson to inflate the sales price to an unsuspecting consumer or to push
high-profit, dealer-installed options. Alternative methods are to place fixed prices on cars, to
provide bonuses to sales staff based on customer satisfaction scores, or to link bonuses to
referral and repeat business.
As the leader-manager, the owner of a dealership should set an example for the practices of his
or her employees. The firm’s code of ethics needs to reflect what behavior is unacceptable,
including high-pressure tactics and misrepresentation of price or credit. Salespeople who
continually violate the ethical code should be terminated regardless of their profitability.

Consumerism: "Consumerism" is likely to dominate the Indian market in the current Millennium,
thanks to the economic reforms ushered in and the several agreements signed under the World
Trade Organisation. The transition is from a predominantly "sellers‟ market" to a "buyers‟
market" where the choice exercised by the consumer will be influenced by the level of consumer
awareness achieved. By "consumerism" we mean the process of realizing the rights of the
consumer as envisaged in the Consumer Protection Act (1986) and ensuring right standards for
the goods and services for which one makes a payment. This objective can be achieved in a
reasonable time frame only when all concerned act together and play their role. The players are
the consumers represented by different voluntary non-government consumer organizations, the
government, the regulatory authorities for goods and services in a competitive economy, the
consumer courts, Organisations representing trade, industry and service providers, the law-
makers and those in charge of implementation of the laws and rules.

Q.4 Critically evaluates the different pricing strategies in retail.

Ans.: Pricing strategies and Practices A retailer’s pricing strategy has to reflect its overall goals
and be related to sales and profits. There must also be specific pricing goals to be achieved with
the integration of total retail mix. Following are the strategies and the most commonly applied
practices for retail pricing:  Demand oriented pricing  Cost oriented pricing  Competition
oriented pricing.
1. Demand oriented pricing: Under this strategy a retailer sets prices based on consumer
desires. It determines the range of prices acceptable to the target market. Retailer use demand
oriented pricing to estimate the quantities that customers would buy at various prices. In this
method seller attempts to set price at a level intended and buyers willing to pay. This approach
studies customer interests and the psychological implication of pricing. Two aspects of
psychological pricing are the Price quality association and Prestige pricing. According to Price
quality association concept, many consumers feel high prices connote high quality and low prices
connote low quality. This association is especially important if competing firms or products are
hard to judge on the bases other than price, consumer experience, brand name etc. on the other
hand, Prestige pricing assumes that the consumers will not buy goods and services at prices
deemed too low. Consumers may feel too low price means low quality and status. For example,
Shoppers Stop does not keep any low-end items because their customers may feel they are
inferior.
2. Cost oriented pricing:
It refers to setting prices based on the costs incurred by the retailer while purchasing a product or
service for sale to its customers. This could take the form of Cost Plus pricing.
Cost plus pricing method will be in relation to either marginal costs or total costs including
overheads. This approach can be used for selecting the target market, ascertaining the costs of
the goods in the store i.e. storage costs, overheads, selling costs etc, determining the maximum
ceiling price when compared to competitors and determining the initial mark-up from maintained
mark-up and gross margin.
Here, initial mark up is the difference between the retail-selling price initially placed on the
merchandise and the cost of goods sold. Maintained mark up is the difference between the
amount obtained from actual sales of the merchandise and the cost of goods sold. Gross margin
is the net sales minus cost of goods sold.
EHIBIT 1
AIR DECCAN TO HIKE NUMBER OF FLIGHTS
After having slashed fares when his competitors increased them, low-cost carrier Air Deccan’s
chief G R Gopinath said on Monday the airline would increase the number of flights instead of
fares to meet the passenger demand.
“Our pricing is not in relation to competition. If the demand is more, we will not increase the fares
but the number of flights.” He told a two-day conference on synergizing of air traffic control (ATC),
airports and airlines, organized by the ATC Guild (India).
He said the airline, which recently slashed fares when other carriers raised them were getting rich
dividends from operations on trunk routes where it dropped fares.
This was primarily due to the very high load factor, ranging between 90 and 100 per cent, on
most of the days, he said, adding such load factor had led to case positive results leading the
airline to report profits.
Gopinath made a strong case for urgent revamp and expansion of airport infrastructure in the
country saying, for low cost operations to succeed, a faster turnaround for each aircraft was
required.
“WE need to turn around the aircraft from landing to take off with a quick span of 25 minutes” he
said while pointing out the unprecedented increase in passenger traffic in the next few years
would prove a disaster if speedy action was not taken to expand and improve airport and all
related infrastructure including moiré parking bays for aircraft and additional runways.
Another major initiative taken by Air Deccan was to introduce dedicated automated machines at
airports.
(Source: The Times of India, Bangalore, and 2nd November 2004)
3. Competition oriented pricing:
A retailer can use competitors’ price as a guide. The firm might not alter prices in reaction to
changes in demand or costs unless competitors alter theirs. Similarly, it might change prices
when competitors do, even if demand or costs remain the same. A competition-oriented retailer
can price below at or above the market. A firm with a strong location, superior service, good
assortment, favorable image and exclusive brands can set prices above competitors.
However, above market pricing is not suitable for a retailer that has an inconvenient location,
relies on self-service, is not innovative and offers no real product distinctiveness. Pricing at the
market level does not disrupt competition and therefore does not usually lead to retaliation.
Q.5 The top management of Alpha Retail is seriously considering about changing the
existing distribution channel and the channel intermediaries. Assuming you are a
management consultant, on what specific aspects will you advise Alpha Retail to design
and select an appropriate channel for distribution?

Ans.: Structure and Nature of Retailing Channels:

Retailing is the last stage in the distribution process, which comprises all the business operations
and the people involved in the physical movement and transfer of ownership of goods and
services from the producer to the consumer. A typical distribution channel consists of a
manufacturer, a wholesaler, a retailer and the final consumer. Wholesaling is the intermediate
stage-during which goods are sold not to the final consumers but to the business customers’ for
resale.
In some distribution channels, independent firms perform different activities. But most distribution
channels have a degree of vertical integration- performing more than one activity. For example,
Food World carries out both wholesaling and retailing activities. It buys directly from the
manufacturers, has merchandise shipped to its warehouses and them distributes it to their stores.
Some retailers, especially in the clothing business, even design the merchandise they sell and
contract its production to manufacturers.
The nature of retailing channels offers in various parts of the world. The US has a retail density
that is greater than that of all other countries. A feature of US system is the concentration of large
retail forms- 10% of its food and general merchandise retail firms’ account for over 40% of all
retail sales. Some firms are even able to eliminate wholesalers, as they are large enough to
operate their own warehouses. Large stores-of over 20,000 sq. ft- is popular mediums of sale.
This combination of large retailers and large stores makes the US one of the most efficient users
of the distribution channel.
In Japan, on the other hand, small firms and stores govern the retail sector. The wholesale
channel is relatively much larger and independent. To reach all the stores, almost daily, often
requires the merchandise to pass through as many as three channels of distribution. Therefore,
this reduced efficiency means that in contrast to the 10% of the total labour force employed in this
sector in the US, the Japanese use 20% of their workforce.
The European system falls in between that of the US and Japan. Northern Europe is the closet to
the US in terms of concentration levels-in some national markets, fewer than five firms account
for 80% of the retail sales ion food. In southern Europe, the market is more fragmented with the
traditional farmer’s market retailing still dominant in some sectors along with big-box formats.
Central Europe has seen an increase in retail floor space after the privatization of the retail trade.
Privatization has also resulted in transition from an extremely structured system to one that is
highly fragmented, with kiosks rapidly gaining popularity.
In Indian context, traditionally the small retailers have played a major role in the various sectors
with the unorganized players outnumbering the organized ones. However, the past decade has
witnesses the rise of chains of supermarkets at both regional and national levels. Some of these
stores also have their own line of merchandise, be it clothes, food items, or household articles.
The price consciousness among the large middle class also means that large stores that are able
to offer discounts on bulk purchases have become more important. The growing place of lifestyle
of the urban consumers and the proliferation of technology has helped popularize online
shopping.
In these countries the variance is primarily due to three factors:
1 Social and political objectives
2 Geography
3 Market size.

The primary objective of Japanese or Indian economy is to reduce unemployment- the large
labour force that is available is employed by small labour intensive businesses. Secondly, the
population density in Japan and Europe is much higher than in US. Thus, these countries have
less low cost real estate available for development of large stores. Thirdly, the US market is the
largest in the world and is able to leverage on economies of scale. Indian is still a growing market
and has yet to develop a system as efficient as that of the US.

Store Design :
The store can be said to be a product in its won right. The type of planned store layout can
influence the customer’s product decisions. Typically the store should be designed to facilitate the
free movement of customers, create a planned store experience and also help to make an
optimum presentation of merchandise. The retailer’s goal while designing the store should be on
a proactive basis- reflecting the brand position of the store and also ensuring the most effective
usage of the space.
The main objectives of a good store design should be:
11. It must complement the customers’ needs i.e. be consistent with the image and strategy.
22. It should act positively on consumer behaviour.
33. It must consider the costs associated versus the value received in terms of higher sales and
profits.
44. It should be flexible to adopt any changes in the merchandise with its store’s image.

Thus, a proactive planning and atmospherics used in the store layout can act upon the emotional
state of the customers and are more likely to influence them to enter and purchase merchandise
at the stores. Proactive planning is based upon the manipulation of the in-store experience by
acting upon and responding to the data on store layout in order to influence the consumer’s
shopping behaviour and experience. The consumers are more likely to enter stores which are
made attractive by use of space, color, walls, pillars, floor coverings, lightings, music etc. this
planned combination of physical messages are known as Atmospherics.
Atmospherics is referred to as a store’s physical characteristics that are used to develop the retail
unit image and draw customers. It describes the physical elements inn a store’s design that
appeals to consumers and encourages them to buy. Atmospherics are created by the
combination of a whole series of cues and stimulus i.e. the type of merchandise offered and the
way it is displayed can produce the desired store ambience and emotional response from the
target customers.
Retailers have realized that background music can be used as a new tool to reach out to
shoppers and encourage them to spend more. According to Adrian North, a psychology professor
at the University of Leicester, England, there is a quite a lot of evidence that music can influence
the speed with which people shop, their willingness to spend, their perceptions of value and
more”. In India also, retailers have realized that the right kind of music at the right time.

Q.6 a. Briefly explain the assortment planning process.

Ans.: Assortment Planning Process:

Several types of displays are described here. Most retailers use a combination of them. An
assortment display exhibits a wide range of merchandise. With an open assortment, the customer
is encouraged to feel, look at, and /or tries on products. Greeting cards, books magazines, and
apparel are the kinds of products for which retailers use open assortments. In addition, food
stores have expanded their open displays for fruit, vegetables, and some department stores have
opened up their cosmetics and perfume displays. With a closed assortment, the customer is
encouraged to look at merchandise but not touch it or try it on. Computer software and CDs are
pre-packaged items that cannot be opened before buying. Jewelry is usually kept in closed glass
cases that employees must unlock. A theme-setting display depicts a product offering in a
thematic manner and sets a specific mood. Retailers often vary their displays to reflect seasons
or special events; some even have employees dress for the occasion. All or part of a store may
be adapted to a theme, such as Columbus Day, Valentine’s Day, or another concept. Each
special theme seeks to attract attention and make shopping more fun. With an ensemble display,
a complete product bundle (ensemble) is presented-rather than showing merchandise in separate
categories (such as a shoe department, sock department, plants department, shirt department,
and sports jacket department). Thus, a mannequin may be dressed in a matching combination of
shoes, sock, pants shirt, and sports jacket, and these items would be available in one department
or adjacent departments. Customers like the ease of a purchase and envisioning an entire
product bundle. A rack display has a primarily functional use: to neatly hang or present products.
It is often used by apparel retailers; house wares retailers, and others this display must be
carefully maintained because it may lead to product cutter and shoppers‟ returning items to the
wrong place. Current technology enables retailers to use sliding, disconnecting, contracting/
expanding, lightweight, attractive rack displays. A case display exhibits heavier, bulkier items than
racks hold. Records, books, pre-packaged goods, and sweaters typically appear in case displays.
A cut case is an inexpensive display that leaves merchandise in the original carton. Supermarkets
and discount stores frequently use cut cases, which do not create a warm atmosphere. Neither
does a dump bin-a case that holds piles of sale clothing, marked-down books, or other products.
Dump bins have open assortments of roughly handled items. Both cut cases and dump bins
reduce display costs and project a low-price image. Poster, sign, and cards can dress up all types
of displays, including cut cases and dump bins. They provide information about product locations
and stimulate customers to shop. A mobile, a hanging display with parts that move in response to
air currents, serves the same purpose-but stands out more. Electronic displays are also widely
used today. They can be interactive, be tailored to individual stores, provide product
demonstrations, answer customer questions, and incorporate the latest in multi-media
capabilities. These displays are much easier to reprogram than traditional displays are to
remodel.

b. What is ABC analysis?

Ans.: ABC Analysis:

Here, each product line is rank ordered based on performance levels
The goal of Retail merchandise controlling is
• To ensure that product choice meets targeted consumer needs
• To carefully plan the number of units to have on hand to meet the expected sales for the
brand, size, color combinations
• To develop merchandise lists in the form of
0 1. Basic Stock List (staple items)
1 2. Model Stock List (fashion items)
2 3. Never Out List (key items and best sellers)