Retail Marketing - Essay Example

Retail Marketing Retailing is the direct sale of services and goods from businesses or individuals to the consumer. Retailers are part of the supply chain, which is an integrated system. Consequently, a retailer usually buys products or goods in large amounts or quantities directly from the manufacturers or wholesalers. The retailer converts the large amounts into smaller amounts or quantities and then sells them to consumers at a profit. Retailing is usually done either in fixed locations such as markets or stores, by delivery, or door-to-door. Retailing also includes subordinated services, for example, delivery (Bhatia, 2008, p. 08). This paper discusses the benefits of a retailer operating multiple formats. It conclusively and elaborately focuses on Tesco supermarkets, which have a variety of multiple formats, Ryan air and The Co-operative Bank in the UK. According to Blythman (2005, p. 24), multiple retailing is mostly known as multi-channel retailing. This encompasses an approach of operating a retail business by offering products to consumers through multiple retail channels. Some of the primary multiple retail channels used by many retailers include the Internet, catalogs, and brick-and-mortar stores. Generally, the retail sector in the UK can be segmented and divided according to the type of products that they deal with. The prime retail groupings are the clothing segment, food retail segment, and non-food segments that include fast moving consumer goods (FMCG) and electronics. Retail businesses range in sizes, ranging from a single proprietorship to multi-national retail companies, which offer standardized services and products on an international basis. Additionally, there are also retail businesses that are not for profits retail segments. They include wide ranges of retailers whose main objective is to generate surplus rather than a profit. This surplus is used to fund the underlying objectives for the non-profit organizations. These organizations are normally associated with a charitable cause and often linked with low-end cost leadership retail models (Bajaj, Arya and Srivastava, 2010, p. 13). The UK supermarket segment has recently embraced various store formats. Among these supermarkets is Tesco supermarket which has embraced these types of formats: the Metro, the traditional supermarket and the extra formats. Every format is designed for a unique target market, which uses Tesco as the brand (Cox and Brittain, 2000, p. 29). Standard format Tesco supermarket is more often situated within an outstanding distance of city centers and towns. These format stores are situated in particular areas that can accommodate an establishment that is bigger in size, even though the space cannot adequately accommodate it. Regarding the consumer’s perspective, the store’s standard format has the capability of offering more varieties of products. Many of the stores’ location in the standard format ensure that the shoppers are not required to have a vehicle to enjoy the benefits of this format (Berman and Evans, 2004, p. 9). Extra is the flagship format for the new Tesco stores. Tesco’s extra stores in this format are large retail establishments that are often built in out of town locations. They are either built as part of a wider out of town retail projects or as a stand-alone operations. Tesco Extra format emphases are on the provision of a wide range of services and goods that are available in the smaller standard supermarket format. Tesco Extra format products are not only the principal non-food and the core food items, but are normally linked within the sector of supermarkets. These Extra format stores stock products include kitchenware, clothing, financial services and products, and electronics. Other auxiliary services and goods that can be bought include petrol and branded food typically sold at petrol stations and in the restaurants located in the stores (Bhatia, 2008, p. 47). Tesco Metro format ensures that the store is in a suitable location that is close to places where residents reside. These stores are located in the city centre and town locations. They target both office workers and local residents who may have made previous purchases from a convenient store (Fernie, Fernie and Moore, 2003, p. 25). The Co-operative Bank is a UK bank that has distinguished itself from the other UK commercial banks. It markets itself as an ethical bank that refuses to invest in various companies involved in fossil fuel extraction, arms trade, genetic engineering, sweated labor and animal testing. It uses this format to market itself and has an edge from the other commercial banks. This ethical policy is the banks marketing format (Brown, 2005, p. 418). According to Brown (2005, p. 419), the co-operative Bank in the UK through its Smile initiative has led the bank to being awarded numerous customers’ satisfaction ratings. This is among its multiple formats that have attracted humongous numbers of customers to the bank. A recent research ranked the bank as the second among 28 banks in customer service ratings - a high score of 79%. The bank has also diversified its expansion strategy by eyeing Britannia which will be the part of the banks multiple formats. This will evidently increase the number of the banks’ branches to nearly 1,000 and the cash machines to 3,250. This means that the bank will be easily accessible from a number of locations and services to the customers will be brought nearer (Brown, 2005, p. 418). The bank’s other multiple formats include its wide range of fixed-term deposit accounts that pay a very high rate in the money market. These are the best-buys - according to Moneyfacts - and the best in the market. This also provides a valuable option for investors seeking for an ethical option (Brown, 2005, p. 420). Though the bank uses the word ‘co-operative’, it is not a true co-operative since it is not directly owned by its members. This is also a differential operating format since the shareholders total to six million in number. Other co-operatives are owned by various co-operatives who come together to form a co-operative bank. For Co-operative Bank in the UK, this is not the case (Brown, 2005, p. 419). Ryan air is the lowest cost airline in Europe. It has thrived successfully from its operating format of a low-cost business model. It has also been renowned for its online check-in that has greatly enhanced its multiple formats. Its no-frills format has enabled the airline save on aircraft costs while also reducing its turn-around times. It does not offer connecting flights which gives it an edge over the other airlines. This format has assisted the airline since it also does not compensate passengers who miss their flights (Creaton, 2004, p. 40). Ryan air also has a format whereby it does not offer free drinks or food onboard. The airline instead sells them and also allows their clients to carry their own while onboard. This is a format that is different from the other airlines. The other format that Ryan air gains revenue is through ancillary revenues. The airline earns this income by earning commissions through deals with Hertz car rental and from various hotels which have deals with the airline (Creaton, 2004, p. 167). Ryan air uses different multiple formats for the pricing of the different seats. The lowest two fares are sold at 70% of all the seats in the plane while 30% of the seats are charged at a higher fare. The highest fare is pegged at 6% of the number of seats. These formats are further enhanced by the airlines lack of travel agents whereby it does not pay agency commissions. The airline applies direct marketing and reduces cost. The format used by the airline is online booking (Creaton, 2004, p. 242). According to Creaton (2004, p. 243), Ryan air ensures it uses the multiple formats of minimal advertising costs. The airline does its advertising in-house and also thrives in providing its passengers with the best service so that it can capitalize on word of mouth advertisement. It largely utilizes controversy in promoting its business by coming up with controversial business strategy, among them - charging passengers for the use of the toilets while on board. Evidently, the retailer also benefits through mergers, acquisitions and industry consolidation as advantages of operating multiple formats. The numbers of retailers in the UK retail segment have continued to decrease due to recent patterns of acquisition, mergers and industry consolidation activities. One of the major drivers of industry consolidation may be recognized as the emergence of the modern form of the supermarket. Previously, the supermarket was associated with the sale of food related and food products within the retail sector (McGoldrick, 2002, p. 59). However, the supermarkets have diversified, and nowadays they sell various products previously obtainable only from alternative retail establishments. These include financial services and products, electronics and clothes. This has been informed by the consumers’ preference of convenience of being able to purchase a multitude of services and goods in a single retail outlet. This has ultimately resulted in a reduction of players in the retail market giving way to few diversified retail businesses (Bajaj, Arya and Srivastava, 2010, p. 33). Consequently, consumers have become cost conscious, and this has lead prices being a key factor for the retailers and Ryan air. Despite the consumer convenience, the price factor is also a driver within the retail and airline industry. This determines the spending habits of the consumers. Consumers thus opt for low cost providers. This naturally creates a preference for a small number of large players by consumers, as opposed to a huge number of small retailers. This evidently creates the benefit of larger economies of scale for the small number therefore creating an inevitable benefit to the retailers operating multiple formats (Davies and Ward, 2002, p. 16). Retailers operating multiple formats have also to invest heavily on technology. These technologies, however, have benefitted the retailers through a huge reduction of wages and salaries. The self-service check out is one of the key structural changes in technology that has aided retailers reduce the overall number of employees. Recent research shows that the implementation of various technologies can reduce the work of five employees to be done by one employee. This eventually benefits the retailers who operate multiple formats as the labor bill gradually reduces significantly (Diamond and Pintel, 2005, p. 28). In conclusion, for a retailer operating multiple formats, the size of a retailer will inevitably determine various factors. This is in relation to corporate level strategies, operations, general business and marketing strategies. Large UK retailers known as the big four, which include Morrison’s, Sainsbury, ASDA and Tesco, have been able to focus on their strategy of building large out of town stores (Berman and Evans, 2004, p. 07). These stores are specifically designed to maximize efficiencies, which are achieved by operating based on economies of scale, which eventually generate a cost leadership strategy. This strategy lowers the unit cost of products since the large retailers buy large volumes of products. Other costs attributed with the logistics channel and the distribution channels are avoided since the large retailers buy products in large quantities (Diamond and Pintel, 2005, p. 17). Therefore, they are able to save costs. Additionally, since they purchase is in large volume, the products are delivered directly into the store directly. This eliminates additional costs associated with multiple stock handlings. Ryan air has thrived through its low prices concept to become the largest and most profitable airline in Europe despite the hard economic times. The airline projections indicate that the profits will continue to increase as other airlines profits take a dip. The Co-operative Bank in the UK through its format of an ethical bank has largely contributed to its admirable growth in the banking sector. The bank has also invested heavily on its customer service format thus ranking the second in the banking sector. These are among the benefits that retailers get for operating multiple formats. References Bajaj, C. Arya, R and Srivastava, N 2010, Retail Management, Second Edition, India: OUP. Berman, B. and Evans, J. 2004 Retail management, 9th Edition, New Jersey: Pearson Education. Bhatia, S.C 2008, Retail management, Atlantic Publishers and Distribution. Blythman, J 2005, Shopped: the shocking truth about British supermarkets, Harper Perennial. Brown, C. S 2005, The sustainable enterprise. London, Kogan Page. Cox, R and Brittain, P 2000, Retail management, 4th Edition, Harlow: Pearson Education. Cox, R. and Brittain, P 2004, Retailing: an introduction, 5th Edition, Harlow: FT/Prentice Hall. Creaton, S 2004, Ryanair: How a small Irish airline conquered Europe. London, Aurum. Davies, B and Ward, P 2002, Managing retail consumption, Chichester: Wiley. 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