Marketing Responses to Retailing Challenges - Essay Example

? Retail Marketing number} Purview A number of different industries and segmentscompose the modern economy both in terms of the consumer side and the supply side. Largely the supply side and the demand side are connected by various designs of retail outlets and retail companies. These retail companies and outlets all come together to compose the overall retailing industry. Most retailing businesses rely on the provision of goods, services and commodities although the provision of services need not be a severe commitment in business. Newer brands of retailing industries are also becoming more and more dependent on support activities such as online support sections, manufacturing and supply chain. The vulnerabilities posed by various facets of the retailing industry are myriad although currently the retailing industry in under great pressure due to lowered spending levels. Retailing has evolved and emerged over the years as an essential connection between the modern consumer culture and the supply chain mechanisms used to support the retailing in force. The domain of retail commodities spans all kinds of goods such as cosmetics, food products, homemade ups, textiles, draperies and the like. The size of retail outlets however depends on a number of other factors such as the consumer markets around the retail stores and outlets, the historical image of the retail outlet etc. The various retailing businesses around Great Britain have are also structured accordingly with small, medium and large retail outlets. The history of retailing in Great Britain has historically deep roots with large chains such as Harrods, John Lewis etc. spanning over decades. The drive to diversify and expand the domain of business activities as well as strong fiscal grounds has ensured that these historical businesses have remained strong in terms of performance. The resilience of these businesses has been evident from their dealing with large crises such as the Second World War or the economic depression of the seventies. 2. Chosen Company: John Lewis Partnership The chosen company John Lewis Partnership has also had deep historical roots as well. The company begun as a simple drapery store on Oxford Street, the historical shopping district in London but it soon emerged as a chain of stores around London. The move to obtain more stores around London went through before the First World War providing John Lewis a comprehensive retailing network. The John Lewis Partnership emerged with the novel idea of providing employee led partnership. This idea ensured that after the death of the original owner’s son, the John Lewis Partnership was bequeathed to the employees in 1925. This trend has continued in the same spirit ever since and the John Lewis Partnership has been stewarded by a counsel of employees ever since. Over time the John Lewis partnership has diversified its business interests in order to augment its market standing. The John Lewis brand also supports other business interests such as the Waitrose supermarkets as well as the Greenbee range of products and services. In addition to the above, the John Lewis brand also provided support to the Ocando brand but it later absolved itself of any such business interests. It is evident from the facts presented above that John Lewis represents a major retailing business in the context of the United Kingdom. This contention is further strengthened by the argument that John Lewis Partnership is the third largest retailing business present within the boundaries of the United Kingdom. As mentioned before, the John Lewis Partnership is also distinct from other brands in the retailing industry due to its power sharing structure that stretches from the CEO to the person looking after the aisle in the stores around the United Kingdom. All employees of the John Lewis brand are considered partners of the company. The annual profit is also distributed amongst the partners and recent years have seen the distribution of such profits as bonuses. The overall bonus has ranged from 5% to around 20% of the employee’s annual pays representing the rising and falling profits of the business itself. The movement of bonuses listed above represents the extremes between the years 2000 and 2011 providing a fair picture of the state of business. 2.1. Company Details In terms of the overall ranking in the British retailing market, John Lewis stands at number three in the retailing industry. The company has also been rated in the annual Top Track 100 companies that had been published with The Sunday Times along with sponsorship with Deloitte. The John Lewis Partnership has featured in these rankings along with other household brand names for over a decade signifying the company’s position as a market leader (Fast Track, 2011). The company represented overall revenue of around some 7 billion pounds for the fiscal year 2009 – 2010. Moreover, John Lewis has employed around some 75,000 employees since 2010. The total employment structure varies between employment at John Lewis as well as at the other businesses such as Waitrose, Ocado and Greenbee. Ocado has been removed from the John Lewis label as of February 2011 (BBC, 2011) after which Ocado suffered grievous loss in the stock markets as well. When John Lewis is considered in terms of its appealed or targeted market segment, it becomes clear that John Lewis has been historically based on the upper and middle class of shoppers around United Kingdom. This strategy has been pursued at John Lewis to keep its products and service exclusive and attractive to certain brands of shoppers around the United Kingdom. However of late, the John Lewis partnership has begun to revise its selling strategy in order to survive in the newly emerging market realities. 3. Problems in the Retailing Industry 3.1. Reduction of Purchasing Power of Consumers It is an open fact that the recent economic crises has shaken up the consumer industry overall. All around the globe various kinds of retailers have been feeling the impacts of the global economic crises. The onset of global fiscal problems has meant that more and more people have been pushed out of employment. The rising spectre of unemployment in turn has meant that labour (both skilled and unskilled) has risen in numbers leading to large imbalances in supply and demand. Supply has increased while demand is still low. The decrease in jobs has meant that pay levels have decreased as well leading to significant decreases in purchasing power. This problem has been augmented by the fact that the North American and Western European markets were based largely on consumers from the middle class. The decrease in middle class consumers has meant that the retailing industry has had to suffer lowered profit levels along with other end consumer based industries. The lowered consumer spending and thus lowered profits in the retailing industry mean that retailers have had to look to other alternatives. The unfolding crises have also been augmented by other problems such as recession based sovereign debt crises in the Euro zone. One possible option available to retailers would have been to migrate their businesses to newer markets in other neighbouring nations but the emergence of the Euro zone debt crisis has forced retailers to default on this option. Moreover the emergence of new debt crises that were headed by government spending has made consumers all the more insecure who are holding on to their hard earned buck in order to deal with any slowdowns in the near future. This in turn has also lowered spending levels all the more leading to the lowering of retail business potential. While this effect has been felt throughout the entire world, this effect has been all the more pronounced within the European Union zone. Britain has been one of the countries hit hardest by the unfolding lowered consumption spending levels. In turn this has meant that the retailing sector along with other British companies have had to bear the brunt of economic turn down. 3.2. Reductions in Profit Growth Levels Companies such as John Lewis registered fast and rapid growth in the aftermath of the 2002 to 2007 boom in consumer incomes and spending levels. However the economic meltdown precipitating in late 2008 as meant that profit growth levels have decreased sharply as well. While John Lewis was providing up to 20% profits to its partners in the 2005 to 2007 regime, the profit provision has dropped down to a mere 5% in recent years. This serves as a sharp indicator to the lowering of profit levels and the decrease in their growth levels at the same time. 4. Marketing Responses to Retailing Challenges John Lewis can use a number of strategic marketing responses in order to deal with the rising economic challenges it has to face. Already the company has begun to look into cheaper lineages and price reductions for a large number of its products in order to diversify its consumer base. This diversification has been felt through the creation of the Essential and Value lineages both within the traditional John Lewis Partnership labels and within the Waitrose lineage (John Lewis Partnership, 2007). However the average customer might not really find out about this change because the average consumer is already being supplied by other cheaper stores such as L&D. In order to grab more attention, John Lewis must target its new consumer base by first identifying them through surveys and market studies. Once consumers have been identified, it would be essential for John Lewis to target these consumers using mediums that appeal to them more (Krafft & Mantrala, 2006). In this respect, it is essential to note that John Lewis has had a lowly social networking presence over the years although John Lewis’ competition is already reaping the benefits of using a more vibrant social media campaign. Newer entrants into the retailing market such as Next have had a strong presence too unlike an old market player like John Lewis. In order to deal with an increasing consumer base targeted by rival competition, it is essential for John Lewis to target newer consumers and to target would be consumers using social media. The use of social media as a strategic marketing technique is all the more relevant for people in their younger years now. If John Lewis can capture this market segment using social media, it would solve a number of John Lewis’ problems in the years to come too. 5. Bibliography BBC, 2011. Ocado shares hit after John Lewis sells stake. [Online] Available at: HYPERLINK "http://www.bbc.co.uk/news/business-12428399" http://www.bbc.co.uk/news/business-12428399 [Accessed 16 January 2012]. Fast Track, 2011. Top Track 100 Supplement. [Online] Available at: HYPERLINK "http://www.fasttrack.co.uk/fasttrack/leagues/top100supplement.html" http://www.fasttrack.co.uk/fasttrack/leagues/top100supplement.html [Accessed 16 January 2012]. John Lewis Partnership, 2007. Diversification. [Online] Available at: HYPERLINK "http://www.johnlewispartnership.co.uk/Display.aspx?MasterId=dbfd085b-df14-4605-8547-d947213112b2&NavigationId=549/" http://www.johnlewispartnership.co.uk/Display.aspx?MasterId=dbfd085b-df14-4605-8547-d947213112b2&NavigationId=549/ [Accessed 16 January 2012]. Krafft, M. & Mantrala, M.K., 2006. Retailing in the 21st century: current and future trends. New York: Springer Verlag. Read More