Retail Summary
Chapter 1 Retail Marketing ............................................................................................................ 2
1.1 Concept retailing................................................................................................................. 2
1.2 Goods-retailing and retail .................................................................................................... 2
1.3 The changing function of retail ............................................................................................. 2
1.4 Consequences of the change in function in the retail sector .................................................. 2
1.5 The place of retail in economic theory .................................................................................. 3
1.6 Marketing and retail marketing ............................................................................................. 5
Chapter 3 Dynamics in retail ......................................................................................................... 6
3.4 The development of the retail sector as a result of the People Economy Technology (PET)
model ...................................................................................................................................... 6
Chapter 4 Retail marketing strategy in broader perspective............................................................. 7
4.1 Retail marketing strategy ..................................................................................................... 7
Chapter 5 The strategic and tactical retail marketing process - A closer look at the strategic process
in the retail sector ...................................................................................................................... 10
5.1 The target formula in the retail sector ................................................................................. 10
5.2 Frictions ........................................................................................................................... 11
5.3 Scissors ............................................................................................................................ 12
5.4 The break-even mechanism ............................................................................................... 13
Chapter 6 The strategic and tactical retail marketing process - Market segmentation and the
selection of target groups ........................................................................................................... 14
6.1 Choice of target group ....................................................................................................... 14
6.2 Market segmentation......................................................................................................... 14
Chapter 7 The strategic and tactical retail marketing process – Branding and positioning ............... 15
7.1 Definition and functions of a brand .................................................................................... 15
Chapter 8 Channel and format strategy, and the impact on location policy .................................... 18
Chapter 10 External analysis – Competitor Analysis ..................................................................... 24
10.1 Levels of competitor analysis ........................................................................................... 24
10.2 Michael Porter’s theory .................................................................................................... 24
10.8 The loyalty matrix as a positioning tool ............................................................................. 27
Chapter 11 Internal analysis – The concept of sales in the commercial retail function .................... 28
Chapter 12 Sales from the perspective of the shop ...................................................................... 29
12.7 Retail waterfall ................................................................................................................ 30
Chapter 13 Sales from the point of view of product groups ........................................................... 31
Chapter 14 Profitability ............................................................................................................... 31
14.1 The rate of return in the retail sector ................................................................................. 31
Chapter 15 Policy on product range/assortment........................................................................... 33
Chapter 16 Pricing ...................................................................................................................... 35
Chapter 17 Communication Policy .............................................................................................. 36
1
,Chapter 1 Retail Marketing
1.1 Concept retailing
Retailing = all activities that companies and organisation engage in that focus on the direct
delivery of goods, services, and information through all available channels to consumers (end
users), where the goods and services are paid for out of the net income of consumers.
Other companies that use intermediaries, like Unilever, engage in trade marketing.
1.2 Goods-retailing and retail
Goods retailing = the part of total economic activity that is engaged in the sale of goods directly
to consumers.
1.3 The changing function of retail
Transition from a seller’s to a buyer’s market: In the past, retail was considered part of a goods-
producing process (industrial approach) and there were a lot of product speciality shops. Over
time, power has gradually shifted from the suppliers, to retailers, to consumers. It is the wishes
of the consumer and how the retailer responds to them that currently determine whether retail
business will succeed, and no longer just how efficiently products are distributed. In fact, this
change in function corresponds to the general shift from an industrial to a service economy; the
retail sector is no longer a mere order picker working for the benefit of the industry, but a service
provider working for the benefit of the consumer.
The crux of the change is that the function no longer consists primarily of redistributing a product
stream within the value chain, but rather of meeting consumer demand. This new function of
retail, demand generation, requires that distribution is involved, but that is far from being the only
aspect. Physical distribution is still necessary but is no longer a sufficient condition for a
successful business. Retail companies increasingly outsource the physical distribution function.
Enter the elements with which the retailer responds to consumer needs are known as the
marketing mix.
1.4 Consequences of the change in function in the retail sector
The change from being supply-driven to demand-driven has had far reaching consequences for
retailers for example, Success factors no longer consist solely of product knowledge and
distribution skills, rather, they had to be supplemented by knowledge of consumer needs, for
instance through trends, by knowledge of buying, product developments, production, and
communication methods, and of channels and formats.
2
, In the old value chain, comma the retail trade
could be found largely along just one chain, that
of the product line in which it specializes. The
consumer had to go to these separate
specialized shops, but this was quite time
consuming and, because of the low efficiency in
business operations, also rather expensive. The
shops were too small to be able to purchase
goods directly from the producer, and therefore,
there was intermediate trade through
wholesalers. The wholesaler converted the
quantities that came from the producer and that
which an individual retailer could purchase in
one go. The wholesaler was thus also a
distributor. In the new value chain, it is the
retailer's task to combine the products in the
different value chains to create a demand related
product range.
Retailers need to make products available that the customer wants. If necessary, retailers
develop their own retail brands and resale production, also known as private labels or store
brands. If the retailer is unable to meet the requirement set by the new value chain, for example
because it's too small, they can also get assistance from wholesalers or purchasing
organizations. But these wholesalers now have a different function from that of the wholesalers
in the old value chain, they preselect the demand side assortments. Thus, they have a collecting
or curating rather than a distributing function. The ultimate form of such a collecting wholesaler
is the franchisor, a retailer supplier who does not who not only supplies the range or part of it but
also takes over the other parts of the marketing mix.
Hybrid forms that emerged:
• Backward integration: retailers take over production.
o Albert Heijn, HEMA
• Forward integration: manufacturers engage in retail activities themselves
o Benetton, Inditex
From value chain to value web: in light of distribution, the supply chain must be replaced by the
value web. The value web is a network of connections in which the consumer has emerged as the
central demand side, situated among all kinds of providers.
1.5 The place of retail in economic theory
Retail came into existence when the cost of the new intermediate link (retail) was lower than the
economies of scale of the products created on an industrial scale.
The change from a goods-producing to a demand-satisfying process can be explained by the
transaction cost theory; because the shift in power from the producer to the consumer, it is no
longer a matter of minimising costs within the value chain from the producer’s point of view, but
of minimising the consumer’s problems in finding or looking for a product and the transaction
costs associated with it. There are two types of consumer’s transaction costs:
3
, • Costs associated with buying items, searching, finding, buying and transport.
• Pleasure that can be had from shopping and buying products or services. The consumer
will choose the supplier where the balance of costs and revenues is most favourable.
As long as distribution via retail is cheaper we will opt for the intermediary option. Still today this
is one of the most important part of distribution. Retailer is thinking about us as customer and
makes an assortment for us, and creates economies of scales. They make it interesting for us,
and pre-select an assortment.
The consumer will choose the supplier where the balance of costs and revenues is most
favourable. Retail only comes into existence if the transaction costs involved in the
producer’s supplying the consumer directly are higher than the sum of the costs involved
in the producer’s supplying the retailer and the retailer’s supplying the consumer.
Transaction cost matrix
4
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