Ranging and Merchandising of a Selected Product Category at Tesco - Case Study Example

An Examination of the Ranging and Merchandising Of A Selected Product Category in A Retail Store Table of Contents Table of Contents 2 Step Selection and Justification 3 Step 2a: Description of the Category 3 Step 2b: Description According To Merchandising Issues 5 Step 2c: Description According To Customer Needs 6 Recommendations 7 References 8 Step 1: Selection and Justification Food retail companies have emerged as a competitive force in recent years owing to the use customer-focused business approach. In this regard, Tesco Plc. has been able to achieve a renowned place for itself in this segment. Tesco is replacing the traditional food stores by the supermarkets in the different operational countries. The choice of supermarket as a part of the selected food retail category is relevant as it is one of the major contributors in the growth of the economy. Tesco is the largest supermarket in the United Kingdom, and the food business is one of the key providers of the revenue. The effectiveness of the food retail market of Tesco by supermarkets can be assessed by stating the incidence of Hungary wherein, even during the crisis Tesco displayed its dominance in the food supermarkets. Tesco supermarket has a dominant position in the UK and has rendered services to millions of the customers and increased the level of profit. Tesco, one of the principal retailers, reported a fall in the profit for the first time since 1990s due to the wastage of food in the supermarkets. Thus, Tesco is now facing competition from its key competitors such as Sainsbury’s as the grocery supermarket is alleged to face wastage in the food products. The customers of the supermarket of Tesco have been viewed to express their anger against the quality of the food sold. The study intends to examine and evaluate the food product in the supermarket with reference to Tesco and critically evaluate the strategy of merchandise employed by Tesco to gain its dominance in the market (Coriolis Research, 2004; BBC, 2013). Step 2a: Description of the Category The supermarket of Tesco is a well-designed grocery store with various food products to satisfy the requirements of the people. Supermarket of Tesco is one of the largest and has a large floor space with a variety of food products available. The architecture and the layout create greater convenience for the customers to locate the required food products in Tesco. The supermarket of Tesco is of great relevance because of the different availability of the food products at a reasonable price under one roof. The various food products such as grocery, packaged food, bakery and baby food satisfy the desires of every customer due to the availability of different food items. To meet the customer requirements, Tesco offers different products of a single company based on the food product range. The product line offered by Tesco food include the bakery items, Fruits, vegetables, diary , eggs, meat, fish, poultry, frozen food, ready meals, organic foods, snacks and Sweets. It also offers products of various other brands such as Cadbury and Nestle among others to meet the requirements. Tesco has in excess of 10,000 individual branded products. Tesco values quality and various ranges of food products to attract customers and make the venture profitable (5Tesco, 2013; My Supermarket Limited, 2013). Tesco includes various brands for the food retail sector such as the Tesco Finest which deals with the best quality product, taste and authenticity of the source. Discount Brand is a kind of brand which offers products keeping in mind the budget of the people of various strata. The brands offered under Tesco Organic must be certified by the departments to qualify them as organic. Tesco Light Choice renders low calorie food items for the health conscious people. Tesco Free Form deals with food items which are not allergic in nature. Tesco Disney Kids deals with the food for the kids and Tesco Whole Foods delivers a set of natural food products (1Tesco, 2013). The Stock keeping units (SKU) of Tesco depends on the size of the supermarket of the food division, for example Tesco Express has 2500 SKUs depending on the size of the retail shop which is 2150 square feet (Bay View Village, 2012). The food available in the stores are usually of Tesco but at times they are substituted by the use of other brands such as Nestle, Cadbury, McCain and Schwartz Star among others but the food in the supermarket majorly deals with the Tesco brand products. The Tesco brand food products generate a turnover of £1.4bn a year in respect of other substitute brands. Tesco brand products have greater sales margin and hence are dominant in the market as the consumers get a variety of offerings in the supermarket at a reasonable price. The price being lower than the other branded products, it enables to increase the sales of Tesco. The retailer deals with the farmers directly and hence reduces the cost of the middleman. Therefore, it can be critically evaluated that the direct interaction with the farmers helps in quoting reasonable price as compared to other brands which in turn increases the sales and profit as exhibited in the annual report of Tesco (2Tesco, 2013). The profit of a company depends on their suppliers and the people managing the requirements. Consequently, the category captain entails the individuals, who are engaged with the retail sector to take the charge of the promotion, distribution along with managing the merchandise. They maintain the display, product category and try to build a competitive edge over other competitors. In this regard, the category captain for Tesco China is Sinodis, which helps judge the quality of the product and aims to increase the footfall and sales in Tesco (Sinodis, 2008). It can be critically evaluated that the category captain of Tesco helps in increasing the sales and displays their analytical skill for the success of the company. The category captain is relatively more significant relative to others as they are the ones who work, manage the supermarket space and are in charge of the products. The role of the category captain is to closely monitor the products and to focus on building category. The objective is to make the category grow by creating revenue for Tesco. The role of the category captain is to maintain a cordial relation between the retailer and the supplier for the benefit of the company. The category captain crucially manages both the ends for the success of both the parties. The suppliers are the key element for the successful running of a retail sector. The suppliers of Tesco follow the ethical trading operation which is known as trading fairly in the supply chain. The suppliers provide timely, regular products, ensure quality and follow the values of Tesco. The standard quality of the food product helps in promoting and selling the products as an organic offering. This is possible only when the suppliers follow the transparency and the core value of Tesco (3Tesco, n.d.). Step 2b: Description According To Merchandising Issues The supermarket of Tesco is the largest in its layout as it is one of the leading retail organizations. The supermarket is very spacious and has a good architectural design. Each department is spacious and has a huge area to make the shopping experience comfortable. The supermarket has elevators, escalator and staircase for the convenient movement of the customers. The food section in the supermarket is located in the area which is near to the billing counter and convenient for the customer to locate and shop. The food section is close to the utensil and spices section. The reason for such alignment is that the utensils and spices are the necessary items which are used for the processing of the food. Thus, this planning will lead to the extra selling of the products along with the core items. The food items are displayed in a very convenient manner which will be readily accessible for the customers. The food section has different racking done, buckets are used to keep the vegetables, different section for the bakery products and kids’ products are placed at a lower level for their convenience to operate. The use of Planogram, which depicts the accurate position of the products available helps for easy accessibility. The horizontal and vertical stacking is done in the supermarket to place the food products in a proper manner without hampering its packaging. This facilitates in keeping a track of the products displayed along with offered food products. Food products such as frozen foods and meat are kept in a cold area for proper storage along with maintaining quality of the food (Galleria RTS, 2013). The pricing strategy for the food products are different based on their form. The organic food which insures high quality has greater price compared to other food products. Moreover, the products of Tesco brand are relatively cheaper than the other branded products as they are directly coming to the retailer without ant extra charges. The pricing strategy is done strategically to increase the sales of the product according to the product quality and its availability. To increase the sales and turn a prospect into customer, the supermarket uses the marketing communication method which is Attention, Interest, Desire and Action (A.I.D.A). The model is used to communicate to the people the availability of the resources in a tactical manner to influence the customer. First, the announcement is made using the electronic devices in the supermarket regarding the food product in a surprising way to attract the customer attention. Once, the customers are attracted by gaining their interest, the offer regarding the food product is presented in a lucrative manner to make the customer. To get the desire of the food product, its features are described through the communication media. Subsequently, the purchase of the product is done. The motive of marketing communication strategy is to attract customers and make the sales possible in Tesco, by creating desire and then satisfying the need. The process of communication is a form of stimuli which turns a non-buyer into a prospective customer in the supermarket of Tesco. The person making the announcement has a key role to play to mould the customers to make purchases. Due to the AIDA communication model, the product sale increases and the stocks are refilled by new quality stock from the SKU. The frequency of sales increases the refilling of the stocks and to handle such situations there is always an availability of food products to reduce the situation of being Out of Stock. The supply chain of Tesco is strong and the category captain maintains the information regarding the needs of the products. This situation can be critically evaluated to understand the strong relation between the Tesco and the suppliers as they are readily available with the stocks whenever in need. This depicts that accessibility of quality product from the supplier and a set of standard marketing strategies facilitate Tesco to gain its revenue (4Tesco, 2013). Step 2c: Description According To Customer Needs Customers are the essential constituents of a business and are important aspect for the business research. The customers of Tesco supermarket are based on the demographics and psychographics. Customers who stay near the supermarket will be the regular customers, whereas old age people and women are mainly the prospect customers of Tesco. Moreover, people who have the attitude to buy best quality foods under one roof are the other vital set of customers. These customers can easily access the food section because of a convenient layout of the supermarket with big displays to indicate the direction of the required sections. The products available are labelled by the price and the ingredients which help them to make the purchase and the valuable feedback from the customer help Tesco in improving and understanding the need of the customer. The customers of the food section also buy products from the utensil section as it is near the food section and these products are required for the purpose of cooking the food products. Proper layout of the market and proper positioning of the goods assist in increasing the sales of the product. The customers of the food section usually check the quality of the food by touching, feeling and smelling the items such as vegetables and fruits. The packaged food is checked by the manufacturing date printed to ensure the quality which takes nearly one third of their time in buying such products. The reason for the quick buying behaviour is the low involvement of the product which signifies that customers usually buy such goods on a regular basis with less information or knowledge regarding the product. The customer rarely needs any sales advice for such products as these products meet their daily requirements and the products are known by the customer. A few products such as the food brand for the allergic group require advice and high involvement for the product. Customers of the Tesco are varied, few are health conscious, allergic to few food items and hence various sub-divisions are made to make the buying process easier (Coriolis Research, 2004). Recommendations From the overall evaluation of Tesco’s food retail segment supermarket, it can be recommend that the company needs to precisely focus on reducing the wastage of food items which is creating a nuisance for its customers as well. Moreover, Tesco should also focus on maintaining the quality of its own discounted branded products to avoid any kind of customer grievances. References Bay View Village, 2012. The Village Store. Village Centre, pp. 1-4. BBC, 2013. Tesco Says Almost 30,000 Tonnes Of Food Wasted. News UK. [Online] Available at: http://www.bbc.co.uk/news/uk-24603008 [Accessed November 23, 2013]. Coriolis Research, 2004. TESCO: A Case Study in Supermarket Excellence. Tesco Case Study, pp. 3-53. Galleria RTS, 2013. Tesco - Store Specific Planograms. Tesco. [Online] Available at: http://www.galleria-rts.com/index.php/about-us/case-studies/tesco-store-specific-planograms [Accessed November 23, 2013]. My Supermarket Limited, 2013. Tesco Change Store. Supermarket. [Online] Available at: http://www.mysupermarket.co.uk/shelves/top_offers_in_tesco.html [Accessed November 23, 2013]. Sinodis, 2008. Category Captain for Tesco. About Us. [Online] Available at: http://www.sinodis.com.cn/en/node/9591 [Accessed November 23, 2013]. 1Tesco, 2013. Our Brand. Tesco. [Online] Available at: http://realfood.tesco.com/our-food/our-brands.html [Accessed November 23, 2013]. 2Tesco, 2013. Working To Make What Matters Better, Together. Tesco PLC Annual Report and Financial Statements 2013, pp. 1-141. 3Tesco, n.d. Trading Fairly. Tesco, pp. 1-8. 4Tesco, 2013. Business model. Annual Report 2012. [Online] Available at: http://www.tescoplc.com/files/reports/ar2012/index.asp?pageid=19 [Accessed November 23, 2013]. 5Tesco, 2013. Tesco Own Brand. Our Food. [Online] Available at: http://realfood.tesco.com/our-food/tesco-own-brand.html [Accessed November 23, 2013]. Read More