Sales and Merchandising: Home Centre - Assignment Example

? Sales and Merchandising: Home Centre Outline Critically evaluate current approaches to merchandising decisions and advise on their improvement 1.1. Employ approaches given below to evaluate the merchandising decisions of Home Centre 1.1.1. Retailing in the distribution channel and other methods 1.1.2. Defined by products sold – like food / household? 1.1.3. Move from stocklist of other manufacturers products to own brand 1.1.4. How has Home Centre adapted to the changing wants and needs of its target markets 1.2. Demonstrate strategies using following concepts to illustrate the home Centre strategies 1.2.1. Product range 1.2.2. Positioning 1.2.3. Branding – sub brands 1.2.4. Price positioning 1.2.5. Merchandising decisions cover:- 1.2.5.1. Selection 1.2.5.2. Allocation of space 1.2.5.3. Management of stock 1.2.5.4. Display 1.2.5.5. Sale 1.2.5.6. Retail Design 1.2.5.7. Visual merchandising 1.3. Recommendations for improvement 2. Advise on an appropriate sourcing and buying strategy in context of Home Centre’s retail management 2.1. Purchasing 2.2. Suppliers – criteria 2.3. DMP & DMU 2.4. Buying strategies 2.5. Local Adaption 2.6. Recommendations for improvement Conclusion Sales and Merchandising: Home Centre Introduction Home Centre has been part of the Landmark Group of companies since 1973, an internationally, diversified retail corporation that encourages entrepreneurship to consistently deliver exceptional value. Home Centre has over 70 retail stores across the MENA region and in India, which offers a variety of home solutions from home furniture, kitchenware, home decor and many more (Home Centre website, 2012). Home Centre has four branches in Dubai Reef Mall, Emirates Mall, Oasis Centre and Mirdif Centre, showing that location in their merchandising strategy has been successful. This report studies the merchandising strategies of the four existing branches and provides recommendations on the required changes to be made in the new outlet. 1.Critically evaluate current approaches to merchandising decisions and advise on their improvement Merchandising is not all about buying and selling. It entails making the right decisions that will ensure survival in the turbulent market. This section discusses the strategies used by Home Centre to remain a market leader in home furnishings in the Middle East. 1.1. Employ approaches given below to evaluate the merchandising decisions of Home Centre 1.1.1 Retailing in the distribution channel and other methods The past decade has witnessed a sea change in the world of retail, of which increasing competition is just one aspect. New and emerging technologies and customer fragmentation have made it even more difficult for retailers to retain consumers who are loyal to their stores. Amidst all these challenges, Home Centre has managed to increase its branches implying that its retail merchandising strategies have delivered. The merchandising challenge of consistently having the right products in the right quantity, available at the right place, at the right time and at the right place becomes increasingly difficult as more and selling and fulfilling locations are added to a distributed retail model (Newman & Cullen, 2002). Home Centre retails mainly through retails stores that are located in different parts of India and the United Arab Emirates. In India, Home Centre has stores in Pune, Mumbai, Mangalore, Noida, Delhi, Bangalore, Chennai, and Hyderabad. In the United Arab Emirates, Home Centre has stores in Dubai Reef Mall, Emirates Mall, Oasis Centre and Midriff Centre (Home Centre website, 2012). This implies that the retail stores are the main distribution channels in which Home Centre as perfected. 1.1.2 Defined by products sold – like food / household Home Centre by Lifestyle retails furniture, furnishings, and home decors that symbolize style, comfort, and independence. All Home Centre stores are designed to represent global retails standards and have sufficient space, as well as browsing through is quite easy. The stores are designed with the idea of ‘Concept Rooms’ in mind. They consist of bed, living and dining rooms. The rooms give the customer concrete touch and sense of private spaces. Home Centre deploys international sourcing to display the fundamentals of home improvement all under one roof. Its products comprise of classic-designed furniture, soft furnishings, cutlery and crockery (Home Centre website, 2012). Others include home decor and gift ideas, all which appeal to various tastes and preferences. Traditionally, the retail industry has used the main type of product sold to determine the sector into which a business would fall, such as the clothing sector, the electrical sector, the furniture sector and so on. This method of classification, however, is becoming less meaningful as many of the larger retailers cannot be classified this way. Their coverage across categories means that no one particular type of product dominates in sales value terms, and whilst the term non-specialist retailers were used for industry reporting, the sector comprising non-specialists has become so dominant that the classification itself has become somewhat redundant (Pradhan, 2003). This is the strategy adopted by Home Centre. Instead of specializing in one particular product, its stores stock a wide variety of products for home improvement. The worldwide dominance of powerful retailers like Waal-Mart, Tesco and Carrefour, suggests that the generalist approach to retailing is a more successful way of retailing. By offering a wide range of products, the needs of a high percentage of the population can be met, with the consumer benefiting from a convenience oriented retail format. For instance, a consumer who goes to a Home Centre retail store to buy kitchenware may be tempted to look at the furniture or furnishings in the store. This may make him, or her to consider buying them in the same store instead of having to go to a different store (Newman & Cullen, 2002). 1.1.3. Move from stock list of other manufacturers products to own brand Home Centre, being a Middle Eastern home furnishings brand, realized that the only way it could respond to competition from US and European home retailers who are hungry to expand market positions overseas was to move from a stock list of other manufacturers to an own brand. The company capitalizes on its comprehension of the local tastes of consumers in order to create brand with strong value position, and which create a home shopping experience that is warm, inspiring, and inviting. Home Centre brands ensure they bring out the personality of the individual consumers (Home Centre, 1st May, 2010). 1.1.4 How has Home Centre adapted to the changing wants and needs of its target markets Home Centre understands the needs of its markets; hence, it retails products that fit to their demands. This is evident from the wide range of products it retails in its stores. A visit to Home Centre retail store does not only give the customer a touch of what to expect in a modern kitchen, but also exposes him or her to the latest styles in interior furnishings, dining sets and decors. As such, product range is a strategy that Home Centre has implemented, and which pays off. The company has managed to adapt to the changing needs of its target markets by understanding their tastes (Home Centre, 1st May 2010). This achieved by incorporating consumers in key decision-making stages of the firm. 1.2. Demonstrate strategies using following concepts to illustrate the home Centre strategies 1.2.1. Product range In every retail store, Home Centre has a wide range of products including furniture, furnishings, decorative, households, and modular kitchens. Under the furniture category, there are different products for various rooms such living, bedroom, dining, shop, and carry. Home Centre’s living room category offers the consumer the latest range of products. The products range from corner sofas, side tables, wall units, curio cabinets, sofa beds, centre tables and recliners. Al these products blend easily with any living room (Home Centre website, 2012). In the bedroom category, Home Centre offers the consumer products ranging from beds, mattresses, nightstands, wardrobes, and dressers with mirrors. The dining sets from Home Centre include chairs, as well as a buffet hutch. The consumer can chose from solid wood or glass top tables (Home Centre website, 2012). 1.2.2. Positioning There are different strategies exist for product positioning or firm positioning. A product may be positioned based on its features or benefits. Despite it being a suitable means of indicating the superiority of a product, customers are fundamentally interested in what ways such characteristics can benefit them. Home Centre products are positioned according to their stylish and international standards (Home Centre website, 2012). This implies that the consumer will be buying a product that will have no dissonance after the purchase. In addition, products from Home Centre are positioned to guarantee comfort and elegance. Product positioning is the creation of a mental image of the product offering and its differentiation features in the kinds of the target market. This mental image can be based on real or perceived differences in among competing offerings. Target marketing fundamentally comprises of various consumer groups in a marketing strategy. Different customers have a different reaction to the marketing mix variables. As such, the marketer should not factor the response from the whole population and use it as a basis for making marketing decisions. The marketer should consider the specific market segments and their needs. In this process, the marketer is not only identifying the essential features of different, attractive segments, but also allotting marketing capital among these segments (Varley, 2006). 1.2.3. Branding – sub brands Home Centre has undergone a holistic revival and repositioning of its brand identity especially following the launch of Mirdif City Centre (Home Centre website, 2012). The new store is characterised by dramatic lighting, display fixtures and creative merchandise groupings, which help in raising Home Centre as a regional style authority and a home-shopping destination. The Home Centre brand creates a home shopping experience that is warm, welcoming, and on trend with the modern generation. Through this brand, the company, therefore, promises to deliver products to its customers that are modern and concur with the consumers’ local tastes (Home Centre, 1st May 2010). In the contemporary, competitive world, firms have to ensure that consumers identify themselves with their products. This can only be achieved by branding. For instance, Coca Cola and Pepsi-Cola are able to dominate the worldwide coal market, not because of the bottling and distribution system, but due to their appeal of the two brands to customers. The strong instantly recognisable names, logos and colours of these two brands symbolise their maker’s promise that consumers’ expectations will be fulfilled, whatever the subtleties of these might be (Clifton & Ahmaad, 2009). Brands enable the consumer to do shopping confidently. It also guides the customer through a confusing variety of choices. For instance, the customer does not need to trouble himself or herself with the sophistication of mobile technology in order select the suitable service provider (Clifton & Ahmaad, 2009). All that is required is for the consumer to know the name of the brand, from where he or she will find his or her way to find the appropriate tariff and mode of payment. This same case applies with competing firms. The brand of each company is the one that makes customers identify which company to make a purchase. The advantage of having a strong brand is that it meets 1.2.4. Price positioning Home Centre has been strategic in the way it prices its products. Although its product cannot be said to be low-priced, they give value for their money. Price positioning has enabled the company sell stylish products at premium prices. This is because the company understands the needs and preferences of its consumers (Home Centre, 1st May 2010). Home Centre has also factored in market fragmentation. This implies that the company knows that the prices of its products will not be a deterrent to its customers since the quality of its products are incontestable. Positioning is concerned with both the questions of where to compete and how to compete. Determining in which product-market combinations a firm wants to be involved is referred to as the issue of competitive advantage (Wuebker, 2008). Finding a way to beat rivals and win over customers for a product offering is the issue of competitive advantage. The two questions are tightly linked, because firms need to develop a specific advantage to be competitive within a specific product-market domain (Ferrell & Hartline, 2010). 1.2.5. Merchandising decisions cover: - 1.2.5.1. Selection The management of Home Centre has succeeded in making the right selection decision for its retail stores. This can be seen from the way it selects the type of merchandise to stock (Home Centre website, 2012). The company stocks stylish products that are elegant, and which give consumers a sense of modernity, comfort and luxury (Varley, 2006). Retail merchandising is not all about selling goods to consumers. It entails making the right decisions in order to ensure survival in the dynamic and competitive market. One of the key merchandising decisions is selection. The selection of products to sell will depend on many factors, including store location, market demand, profit goals, and merchandise planning. To achieve profitability and satisfied customers, there are several key issues that need to be considered in making merchandising decisions – all of which should be based on a solid understanding of customer needs, expectations, and desires (Brennan & Canning, 2010). 1.2.5.2. Allocation of space If a retail business is to provide the merchandise, its customers want it is obliged to carry stock levels of sufficiently levels of sufficient quantity. Accommodating the large volume of items that Home Centre retails requires significant amounts of space in-store. Space management is concerned with placing merchandise within the store in the most profitable manner. The most significant factor in planning merchandise layout is space that varies in value. Some parts are more valuable because customers visit them more frequently. It is easier to make sales along these routes than other travelled routes. As such, Home Centre ensures that is uses space closest to the entrances and exits as it is the most valuable and values decrease further into the store. Height from the ground also affects value; therefore, Home Centre ensures that it stocks items that At Home Centre, all products are placed in such a way that the customer will have a range of convenience products before buying the intended product. For instance, if the customer wanted to buy cutlery, he or she may pass through a room with dining sets (Home Centre website, 2012). This may prompt the customer to create interest in this product and end up buying it or plan to buy it in the next visit. Therefore, the way the merchandiser allocates space to its product offerings can determine its sales. An effective space allocation will ensure that space is not wasted on activities that do not profit the retail store (Loudon, Stevens, & Wrenn, 2004). 1.2.5.3. Management of stock Home Centre stock management ensures that goods with high demand are always in stock. The company stocks an assortment of goods, hence; it is sometimes difficult to determine intervals of replenishing stocks. However, this problem is remedied by keeping of individual product sales to establish those that are running out of stock faster than others are. As such, priority is given to such commodities (Home Centre website, 2012). In addition, the product range of goods from Home Centre consists of products whose demand is not dependent from each other. For instance, the sales of cutlery are not dependent on other items such as decors. This implies that each individual stock of an item should be treated in isolation. Management of stock ensure that the merchandiser does not go out of stock and keep track of sales. Internal and external demand processes influence stock management. The internal demand process comprises of internal requests for replenishment of stock while the external demand process consists of consumer demand. Clearly, the consumer demand process drives the stock replenishment process. In the real world, the consumer demand process is uncertain, to one degree or another, whereas the internal replenishment process unfolds by design. The essential task of the inventory planer is to use information about the consumer demand process to design rules governing the replenishment process (Ferrell & Hartline, 2010). It is relatively simple to devise optimal replenishment procedures for a single item with known demand, provided there are accurate cost estimates (Pradhan, 2003). At the other end of the spectrum, it is a complex to create an optimal inventory system for a group of items with individual demands that are difficult to predict. The crux of the problem is to balance costs from excessive or obsolete inventories against the consequences of running out of inventory prematurely (Newman & Cullen, 2002). 1.2.5.4. Display Home Centre has perfected the art of display It displays its products strategically to gain the attention of customer. For instance, the dining sets are arranged in such an elegant way to create the illusion of a real dining room with the complete set of items(Home Centre, 1st May 2010). This prompts the customer to make a purchase. Retail stores make a display to enhance the shopping experience by making it more comfortable, convenient and customer friendly 1.2.5.5. Sale One of the crucial that faces retail managers is how to sell its products. In making such a decision, a company considers a number of factors. One of them is the profit margin and the revenue it uses in sourcing the product and any cost. This may mean that a firm may price its products higher to realise the costs incurred in the process. In the case of Home Centre, it products are priced in such a way that they give value for a consumer’s money (Home Centre, 1st May 2010). Value is usually the driving force behind the decision ton set the price of a commodity. A customer cannot feel the pinch of paying for a premium-priced commodity if it is international standard. 1.2.5.6. Retail Design Home Centre has recently changed its retail design while still maintaining its heritage. In its opening of the new branch at Mirdif in Dubai, the rooms were characterised by novel merchandise adjacencies, graphics, lighting, visual merchandising, and in-store signage. Home Centre employed retail design expertise from Callison, a retail design company based in Dubai (Home Centre, 1st May 2010). Home Centre’s retail design s meant to instil a sense of warmth and comfort while creating very clear merchandize zones. The stores are designed to reflect the personalities’ of customers’ lifestyles. Home Centre retail designs are created with the notion of a home in mind. As such, the retail designs create spaces within the stores that bring to mind similar experiences as those within the consumers’ homes. 1.2.5.7 Visual merchandising Home Centre incorporates the visual merchandising strategy in every store design process. All the features of the stores are designed with the knowledge that the visual merchandising is crucial in the enhancing a company’s brand. Due to the large size of the stores, the company understands that organisation is very important. Each merchandise zone in Home Centre is designed with the aim of not only showcasing great value but also a means to link with the aspirations of the consumers to improve their lives (Home Centre, 1st May 2010). Visual merchandising starts with the storefront. This is because when well accomplished, the entrance reflects the personality of the store and gives a hint on the merchandise available inside. Home Centre has realised this art as evident in its new store in Mirdif in which the storefront consist of a theatrical room with large-scale frames (Home Centre, 1st May 2010). This creates vignettes that aid in organising and editing merchandise collections. Another consideration that Home Centre has considered in its visual merchandising strategy is its store layout. The store deploys a lifestyle store layout in which different products, which all reflect the same theme, are displayed together in a room setting, for instance, its dining sets (Home Centre, 1st May 2010). This helps consumers visualise how the products will look at their homes. 1.3. Recommendations for improvement Home Centre is a leader in home furnishings and dominates the Middle Eastern market (Home Centre website, 2012). This market share has been achieved by following the above-discussed strategies. If its expansion plans are anything to go by, it can be said that the company is sailing in the right direction. Nevertheless, even if a company is doing well financially, there is always room for improvement. In the case, of Home Centre, the company should make use of the evolving technology to market its products. Its stores are well design, a strategy that attracts even the casual window-shopper. However, the company can benefit by taking advantage of the social media to market its products and link with customers. This will ensure that its customer relations management is improved to realise loyalty. 2.0 Advice on an appropriate sourcing and buying strategy in the context of Home Centre’s retail management and recommendations 2.1. Purchasing Every retailer has to buy stock in a managed and cost-effective manner. Large retailers like Home Centre have a distinct buying department. Home Centre considers several steps in its decision to buy supplies, and in each step, the buyer has a significant influence. In its decision to buy, Home Centre considers the sales volume, gross margins, and stock levels. From these steps, it is evident that Home Centre does a lot of research (Home Centre, 1st May 2010). Home Centre first attempts to locate the right sort of product, which requires knowledge of potential suppliers and good contacts in the industry. A key consideration in the buying decision of Home Centre is the buying cycle. The company has its own way of classifying the buying cycle. This is the number of selling and transition periods that reflect the buying cycles of customers. Given that Home Centre retails home improvement products, its buying cycle is not likely to be affected by certain periods; hence, the company maintains a regular buying cycle (Home Centre website, 2012). 2.2 Suppliers – criteria After a retailer has made the right decision on what to buy and established the right buying cycle, the next step is to identify suppliers. The criterion for selecting suppliers is nothing more than a systematic analysis of characteristics. Retailers can first decide what characteristics are important for suppliers to have. They then can determine which suppliers fulfil their needs. Finally, they should buy from the suppliers who are best qualified and provide the best terms. One of the criterions that Home Centre uses in choosing its suppliers is considering their dependability of quality (Home Centre, 1st May 2010). The company offers world-class quality products, and hence; cannot compromise the quality of its products by choosing a supplier whose products are not up to the company’s standards. Another factor that Home Centre considers its criteria of selecting suppliers is stability. This is necessary to determine whether the supplier is likely to go out of business of discontinue a line of goods. Home Centre needs to be sure that suppliers will still be in business when it is time for goods to be delivered or reordered. The company considers a supplier’s financial strength, ownership, and management in determining the stability of a supplier. 2.3 DMP & DMU Home Centre’s DMU entails all stakeholders who will participate in the decision to buy a product. Home Centre ensures that it incorporates all the stakeholders who will influence the purchasing decision such as buyers, deciders, influencers, and users (Home Centre website, 2012). This is ensured by adopting a marketing mix program that considers the needs of all the participants. The interaction between those making a decision is overall the decision-making process. Home Centre capitalises on this unit to ensure that the company understands whom, how, and when to get an order by a customer (Loudon, Stevens, & Wrenn, 2004). 2.4 Buying strategies The timing of stock purchases is more critical in some sectors than in others. In retailing, and particular with a firm having a broad range of products like Home Centre, the timely purchase of stock to avoid overbuying or wastage is crucial (Home Centre, 1st May 2010). Although the company’s products are not perishable, goods may depreciate in the stores if they stay in the stores for a long time. As such, the company orders goods based on their demand. Those products, which have a shorter shelf life, are given priority in order to capitalize on their sales. 2.5 Local Adaption In local adaption, Home Centre has strived to understand the needs of the local. This evident from the wide range of products concurs with the tastes of its consumers (Home Centre, 1st May 2010). Local adaption ensures that a company does not stock gods that are out tune with the ‘rhythm’ of every day life of the consumers. Such a decision is arrived by integrating customers in the decision-making process in order for them to air their views on ways of improving the company. 2.6 Recommendations for improvement One of the areas that Home Centre needs improvement is in suppliers. Suppliers are crucial in a retailing as they ensure that the company does not run out of stock. Wrong choice of supplier jeopardises a company’, sales. As such, the company needs to choose suppliers whom it trusts and those who deliver goods on time. This can be achieved by changing the criteria of choosing suppliers to ensure only those suppliers who are trustworthy are given priority (Loudon, Stevens, & Wrenn, 2004). In addition, Home Centre needs to improve on its buying strategy. The buying strategy of a company is influenced by many factors such as the company’s expenditure. By so doing, the company can effectively budget its purchases (Ferrell & Hartline, 2010). Home Centre needs to orient its buying strategy to match the costs of its expenditures as well as its revenue. By so doing, the company will minimise any unnecessary purchases that consumer revenues that could have been used in other products. In addition, Home Centre needs to improve on its buying strategy. Conclusion In conclusion, Home Centre has proved to be a market leader in retailing household items such as furniture, decors, and furnishings. The opening of a new branch in Dubai to add on the already existing four will be a milestone in the company’s expansion scheme. This will be accomplished if the company maintains its strategies and incorporates the recommendations discussed in this report. References Brennan, R., & Canning, L., 2010. Business-to-business marketing. London: SAGE. Clifton, R., & Ahmaad, S., 2009. Brands and branding. New York : John Wiley & Sons. Colborne, R., 1996. Visual merchandising: the business of merchandise presentation. New York: Cengage Learning. Ferrell, O. C., & Hartline, M., 2010. Marketing strategy. New York: Cengage Learning. Hasamali, F., Leavitt, P., & Williams, R., 2005. Branding: a guide for your journey to best- practice processes. New York: APQC. Home Centre, (1st May 2012). There is no place like home. [Online]. Available from http://www.homecentrestores.com/pressrelease/there%E2%80%99s-no-place-home (Accessed on 7 February 2012). Home Centre website., 2012. Product range. 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