Traditional Retailers Vs Discounters

COM0081-1 Teaching Note Retailing in Britain: Traditional Retailers vs Discounters Prerequisite Conceptual Understanding • Retail formats and their Different Features • Logistics Management (Finished Products) • Britain’s Retail Industry. Synopsis of the Case Study Early 19th century UK usually witnessed small, independent retailers selling a limited variety of products from their shops in various towns across the country. Changing social and income patterns caused by the Industrial Revolution, led to changes in the buying habits of the British. These changes led to innovations in retailing as competition increased, and the emergence of department store chains. Over a period of time, these chains developed their own distribution network system and marketing styles. By the late 20th century, foreign retailers and supermarkets forayed into the retail scenario, offering stiff competition to traditional retailers. Supermarkets, especially, were quite innovative about applying consumer behaviour theories to their marketing strategies. The traditional retailers had inherent weaknesses which reduced their overall profits and exposed them to the threat of being acquired by the bigger players. Market analysts were of the opinion that only those retailers who achieved large product volumes and leveraged on their economies of scale, would survive in such conditions. Teaching Objectives • To discuss the evolution of retailing industry in the UK • To discuss the differences between the marketing strategies of traditional British retailers, foreign retailers and supermarkets. Assignment Questions 1) What are the different retail formats? What are the characteristic features of each of these formats? 2) Discuss the evolution of the British retail industry till the late 19th century. What was the scenario in the British retail industry during the 20th century before the entry of foreign players? 3) How were the strategies of the foreign retailers different from those of the native British retailers? What were the factors responsible for the success of foreign retailers in the UK? This teaching note was written by Chiradeep Chatterjee, under the direction of Souvik Dhar, IBSCDC. It is only an illustrative orchestration of the case study ‘Retailing in Britain: Traditional Retailers vs Discounters’. It is never meant to limit the learning outcomes. © 2007, IBSCDC. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner. COM0081-1 Teaching Note Retailing in Britain: Traditional Retailers vs Discounters 4) “By the 1990s, apart from the specialist foreign retailers, traditional British retailers had to encounter the domestic supermarkets.” (Page 4, para 2 of the case study). What significant shift in strategy did the supermarkets produce, and how did it influence consumer behaviour? Why did consumers favour the supermarkets? 5) The British retailers took a number of steps to meet the increasing competition from foreign players and supermarkets. However, it was opined that they would not be able to make a success of those strategies. What were the factors hindering the success of those strategies? Besides increasing competition from foreign retailers and supermarkets, which other factors contributed towards constant poor performance of the traditional retailers? 6) What was the threat most imminent to the survival of traditional retailers? What, according to most analysts, could be the way out for the traditional retailers? Teaching Plan Both the Teaching Note and the Structured Assignment follow the sequential order as presented in the chart [Annexure (TN)-I]. Case Study Analysis 1) What are the different retail formats? What are the characteristic features of each of these formats? A retail format is a term usually used to describe a common strategy in retailing. Supermarkets or hypermarkets are all retail formats. Such formats usually follow a conventional form of layout, display arrangement of merchandise, and service to customers. For example, megamarts or supermarkets follow a grid layout, display a variety of articles related to day-to-day usage, standard shelving, self-selection and limited service, centralised checkout at the front, and prices kept low through efficient inventory management and economy of scale. There are many common retail formats that exist throughout the world like – Farmer’s market (where farmers can directly sell their produce to consumers, eliminating in the process, various middlemen), Door-to-door, Department stores, Supermarkets, Convenience stores, Specialty stores, Discount stores, Kiosks, Hypermarkets, Superstores, Factory outlets, etc. Following is a brief explanation of some of the commonly found retail formats. • Mom-and-Pop – Represent the small, individually owned and operated retail outlets. In many cases these are family-run businesses catering to the local community. • Mass Discounters – These retailers can be either general or specialty merchandisers, but either way their main focus is on offering discount pricing. Compared to department stores, mass discounters offer fewer services and lower-quality products. • Warehouse Stores – This is a form of mass discounter that often provides lower prices compared to traditional mass discounters. In addition, they often require buyers to make purchases in quantities that are greater than what can be purchased at mass discount stores. These retail outlets provide few services and product selection can be limited. Furthermore, the retail design and layout is as the name suggests, warehouse style, with consumers often selecting products off the ground from the shipping package. Some forms of warehouse stores, called warehouse clubs or wholesale membership clubs, require customers to purchase membership in order to gain access to the outlet. 2 COM0081-1 Teaching Note Retailing in Britain: Traditional Retailers vs Discounters • Category Killers – Many major retail chains have taken over what were previously narrowly focused, small specialty store concepts, and have expanded them to create large specialty stores. These so-called ‘category killers’ have been found in such specialty areas as electronic items (for example, Best Buy), office supplies (for example, Staples) and sporting goods (for example, Sport Authority). • Department Stores – These retailers are general merchandisers offering mid-to-high qualityproducts and strong level of services, though in most cases these retailers do not fall into the full-service category. While department stores are classified as general merchandisers, some carry a more selective product line. For instance, while Sears carries a wide range of products from hardware to cosmetics, Nordstrom focuses on clothing and personal care products. • Boutique – This retail format is best represented by a small store carrying highly specialised and often high-end merchandise. In many cases a boutique is a full-service retailer following a full-pricing strategy. • Catalogue Retailers – Retailers such as Lands’ End and LL Bean have built their businesses by having customers place orders after seeing products that appear in a mailed catalogue. A third-party shipper then delivers orders. • e-tailers – Possibly the most publicised retail model to evolve during the last 50 years is the retailer that principally sells via the Internet. There are thousands of online retail sellers such as Amazon.com or eBay which are very popular. These retailers offer shopping convenience, including being open for business 24 hours. Electronic retailers or e-tailers also have the ability to offer a wide selection of products, since all they need in order to attract customers is a picture and description of the product, that is, they may not need to have the product on-hand the way physical stores do. Instead, an e-tailer can wait until an order is received from its customers before placing its own order with its suppliers. This cuts down significantly on the cost of maintaining products in stock. • Franchise –Afranchise is a form of contractual channel in which one party, the franchiser, controls the business activities of another party, the franchisee. Under such an arrangement, an eligible franchisee agrees to pay for the right to use the franchiser’s business methods and other important business aspects, such as the franchise name. For instance, McDonald’s is a well-known franchiser that allows individuals to use the McDonald’s name and methods to deliver food to consumers. Payment is usually in the form of a one-time, upfront franchise fee and also an on-going percentage of revenue. While the cost to the franchisee may be quite high, this form of retailing offers several advantages, including: (1) allowing the franchisee to open a retail outlet that may already be known to local customers, and (2) being trained in how to operate the business, which may allow the franchisee to be successful much faster than if he/she attempted to start a business on his/her own. For the franchiser, in addition to added revenue, the franchise model allows for faster expansion since funds needed to expand the business (for example, acquiring retail space, local advertising, etc) are often supported by the franchisee’s franchise fee. • Convenience – As the name suggests, these general merchandise retailers offer an easy purchase experience to customers. Convenience is offered in many ways, including through easily accessible store locations, small store size that

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