Retail Marketing - Essay Example

Retail marketing Retail Marketing Introduction Modern day manufacturers have realized the necessity of implementing effective retail marketing strategies. Without retail marketing, retail stores miss out on extensive product distribution and exposure. Recently, technological advancements have revolutionised the economic and cultural activities in businesses and have given retailers more power. Currently, through the internet a retailer can track the shopping data of a customer. According to Gilbert (2003), internet retailing has also resulted in situations where anyone can become a global retailer by just creating a web page. This has improved the consumer research process used by manufacturers. The article selected for analysis concerns Skagen. Skagen is a US cross-border company, which deals with accessories brand particularly wristwatch brand, handbags, jewellery, and other durable personal disposals. The selected article concerns Skagen’s endeavours of seeking expansion into the UK retail market. The author of the article is Mark Lewis. Lewis posted the article in Financial Times on February 17, 2013. The reason for choosing the article is that the author highlights critical aspects that I will use to review various theories in retail development, theories of retailing, and principles of retailing. Theories of Retail Development Most authors have begun focusing on retail marketing from a theoretical angle. There is no single theory which is universally acceptable or applicable. The applicability of each theory differs from one market to another. The variations are brought about by the different socioeconomic conditions and the maturity level of the market. These theories basically revolve around laying emphasis on the importance of establishing a viable competitive advantage and developing investments that are within an organization’s capabilities. Varley (2005) notes that for these theories to be effectively implemented strategic plans must be set up by the retail organizations to identify market signals and opportunities that occur dynamically. The theories are environmental, cyclical, and conflictual. Environmental Theory The article recommends that Skagen’s strategy of expansion should be based on quality product rather than brand exposure. In the contemporary market arena, customers have shifted bases of their purchase decision-making from price or brand popularity to specific attributes of the product that meet their requirements. Charles Darwin’s theory on natural selection or the survival for the fittest can also define this theory. Retail organizations are economic entities that deal with an environment that is made up of competitors, customers and ever changing technology. This unpredictable environment can change the profitability of retail centres. The only way any retail form can adjust in any environment is by adjusting to the surrounding before it is squashed by competitors. In many situations, the decline or success of retail enterprises is associated with the business environment. Skagen has stores in several parts of the world, and in the US. For instance, the closure of many departmental stores in western markets is associated with the inability of the retailers to react positively and quickly to environmental changes. Cyclical Theory This theory is also similar to the wheel of retailing theory. Davies (2001) argues that cyclical theory assists in having a deeper understanding of the retail changes. The theory insinuates that retail innovators appear to be low price operators who have low profit margin requirements and low cost structures and who offer eye catching product prices that automatically take away customers from their established retailers. Their prosperity is characterized by acquisition of expensive facilities and the sale of a wide variety of goods. Lewis, in his article, argues that the funds of emerging markets have become fashionable redoubt for investors in the United Kingdom. Regardless of great improvement from 1.8% in 2006 to 13% in 2011, companies offering these funds are undervalued and under-researched. Skagen, therefore, is advised to pick from this rumour and do proper research of these companies and invest in them. Conflict Theory Skagen recognises the presence of widespread competition from companies offering substitute products. Conflicts will always exist either between retailers selling the same product or retailers selling various products. Retail innovation results in the increase of more retail formats (Fill, 2009). Retailing, therefore, develops through dialectic processes whereby two opposites are mixed together to create a brand new format. The steps involved include: Thesis- the retailers are transformed into corner shops all around the country. Antithesis- this also a challenge or a threat to the thesis an example is the department store that develops after a period of time. Synthesis - refers to blending of the antithesis with the thesis. For instance, hypermarkets and super markets thrive. Theories of Retailing These theories mainly indicate how retail formats surface and how they mature. They include; retail accordion, wheel of retailing and retail lifecycle. Wheel of Retailing This theory explains the reason for Skagen expanding its retailing to the United Kingdom. According to this theory, new forms of retailing emerge as narrow profit margin, low cost and price cutting operations. The retailer therefore has to raise advertising expenditure, provide delivery and credit and improve location and displays. Retailers therefore, mature as high price, high costs and conservative operators. This maturity makes the retailers vulnerable to lower and new priced entrants (Jobber, 2010). For a low price retailer to avoid incurring further cost on the existing store, he or she should open up another store with the ability to offer better premium brands and service levels to deal with the up market segment. The two stores should have different operations, names and offerings. Retail Accordion This theory deals with issues of product assortment normally sold by retail stores and has a general specific cycle (McGoldrick, 2002). The cycle begins with retailers selling a wide variety of goods and later on specialisation kicks in and vice-versa. For example, although Skagen is currently dealing with several products such as handbags and wristwatches, the company intends to focus on Kon-Tiki product in the UK as a way of specialisation. Retail Lifecycle Just like products and industries, retail outlets also face the phases of birth, development, maturity and finally decline. A retail outlet that has a competitive advantage over other outlets grows more rapidly. Competitors are also attracted by the growth potential; therefore, they bombard the business at the growth phase, resulting to an intense competition (Manfred, 2006). Players become more ambitious and open up new stores in other new geographical areas. Intense competition is also evident in the maturity stage. For retailers to prevent the demise and decline of retail formats they must learn to perceive changes in their surroundings and adapt to them. Principles of Retail Marketing Any retail business whether online, mortar or bricks must adhere to 5 core principles. The principles are mainly about the four Ps and the customer care. Customers are the most important people in any business Nick Henderson, the UK client advisor, contends that quality product should be the main goal of the company even before brand exposure. Quality is all about considering that customer are the most important business stakeholders. The key to any successful retail operation is held by customers. This principle aims at transforming the businesses into a customer focused entity and achieving a financial prosperity by making the retail business a success (John, 2012). The most important retail principle is the customer and any activity done should revolve around the customer. Businesses should focus and know their customers well. Retail is Detail The challenge lies under this famous principle. There are tricky questions on what details should be focused on and how does a business entity become more detailed. This principle emphasises the need for Skagen understanding and addressing the issues of the customer through maintaining quality. To achieve these, the retailer should ensure that the details and procedures are adhered to most of the time. Mistakes are bound to occur, but retailers must learn from their mistakes and should not repeat them again (Michael, 2013). Customers may overlook some mistakes but if the mistakes increase continuously then the customers might get upset and break their loyalty. Being keen on the details is a skill that anyone in the retail field should master. Understand the four Ps This is an old principle that has still not lost its validity. This principle highlights the foundations of any retail business (Dawson, Sparks& Findlay, 2008). The basic foundations are Product, promotion, place and price. a. Product- a business should be able to offer its customers products that they want to buy and those that will satisfy their desires and needs. The products must also return profits for the business to be successful. Skagen need to concentrate on quality rather than brand popularity. b. Price- the price should meet all the business requirements and should be consistent throughout the marketing mix. For example, Mark Lewis notes that the Brazilian government forced the South American utility to lower prices in December 2012. The business should price the products in such a way that the customers are able to afford the products but at the same time make profits from the products. c. Place- a business should have area where the customers can purchase the products. It may be a catalogue, an e-commerce website or a physical store. Since Skagen wants to have a place for the UK, the company has decided to expand investments into the country. d. Promotion- once a retail business has established a suitable price for a product and suitable location where customers can acquire the products, then the business can begin promoting the products and the business at large. The business should inform its customers that their products are available and at an affordable price. Go an Extra Mile for the Customers An effective customer service is achieved by knowing and understanding the customer. Knowing the customer however, is a just a small aspect and the retail business needs to offer more than the average customer service. A successful business should offer world class customer service (Fernie& Moore, 2003). I definitely agree with this principle, a firm should go an extra mile in order to stand out. This exemplary customer service eventually wins over the customers thus also wining over their loyalty. Location A physical store relies on the principle of location for its success. Product and brand strategies dictate the best location for a store. For example, a supermarket needs a high fashion store, a car park and a high fashion area which will attract the customers. However, the impact of location on retail businesses is reducing as a result of two factors. The first factor is the internet; the second one is the flexibility of the customers. Skagen need to recognise that the internet has definitely changed the shopping habits of many people. The aspect of non-geographic retail has been opened up by E-commerce websites (Kent& Omar, 2003). A new retail world was been established where customers do not need to visit physical stores. The past twenty years have witnessed the revolution of the retail field to the “entail” field. The new technologies such as mobile commerce and iPads have opened up more opportunities in the retail world. Conclusion This article covers exclusively the meaning of the word retail marketing and the marketing mix, which also includes communication tools used to communicate and interact with target customers. In my opinion, the article about Skagen is very informative since it helps readers identify a number of principles and theories that are used and those that make up retailing. Emerging trends in marketing communication such as the social media and the mobile in addition to e-commerce have been mentioned which are also included in the communication model. A theoretical approach has been used to understand this complex field of retail marketing mainly for the purpose of ensuring that the business entity is sharper than the rest to gain a competitive advantage. References Booms, B. H. and Bitner, M. J. 1981. ‘Marketing strategies and organizational structures for service firms’, in Donnelly, J. H and George, W. R (edition) Marketing of Sciences, Chicago, American Marketing Association, pp. 47–51. Davies, M. 2001. ‘Adaptive AHP: a review of marketing applications with extensions’, European Journal of Marketing, vol. 35, no. 7/8, pp. 872–94. Dawson, J., Sparks, L. and Findlay, A. 2008. The Retailing Reader, Routledge, London. Fernie, J, S. and Moore, C. 2003. Principles of Retailing, Butterworth Heinemann, Oxford. Fill C. 2009. Communications; Interactivity, communities and content, New Jersey, Prentice Hall. Gilbert, D. 2003. Retail Marketing Management (2nd edition), Prentice Hall Financial Times, Harlow. Jobber, D. 2010. Principles and Practice of Marketing (6th edition), London, McGraw-Hill. John, V. 2012. Retail in Central Europe. New York: Prentice hall. Kent, T. and Omar, O. 2003. Retailing, Palgrave Macmillan, Basingstoke. Levy, M. and Weitz, B. A. 2007. Retailing Management (6th Edition) McGraw-Hill Irwin, Boston. Manfred, R. 2000. Retailing in the 21st Century: Current and Future Trends. New York: Springer Verlag. McGoldrick, P.J. 2002. Retail Marketing, (2nd edition), McGraw-Hill, London Michael, D. 2013."Exclusive Dealing," Working Papers 96008, Stanford University, Department of Economics. Reynolds, J. and Cuthbertson, C. 2003. Retail Strategy: The View from the Bridge, Butterworth Heinemann, London. Varley, R. 2005. Retail Product Management (2nd edition) Routledge, London. Appendix: The Article Skagen seeks UK retail market expansion By Mark Lewis Skagen Funds will make its four global equity funds available on the UK retail market for the first time this month, giving British consumers access to its flagship emerging markets product, Kon-Tiki. It is awkward timing for the fund whose 10 consecutive years of gangbuster growth went into reverse in 2012 when it was burnt by exposure to state-controlled Eletrobrás, a South American utility that was forced in December to accept lower prices and crippling new terms by the Brazilian government. “We were aware of the political risk in Brazil but we did not expect it to be so bad,” said Harald Espedal, Skagen’s Norway-based chief executive. The company, fearing similar political interference elsewhere, has now begun divesting its shares in Brazil’s state-controlled oil and gas giant Petrobras. But with a strategy based on “quality of product rather than brand exposure”, and “certainly no advertisements on the side of London taxis”, according to UK client adviser, Nick Henderson, the slide down the performance tables risks damaging the visibility of its flagship fund. Skagen currently has around £1bn of UK institutional funds under management, and is seeking to grow its UK retail business to a similar size. Since its 2002 inception, the £5.1bn Kon-Tiki product had beaten the benchmark MSCI Index every year until 2012 and topped S&P Capital IQ’s emerging market database. However, the Eletrobrás debacle, which also damaged Skagen’s £3.8bn Global Fund, pushed Kon-Tiki to the lower end of its competitive table last year. “One bad year out of 11 should not be a problem as long as its explainable. If you are looking purely at the retail market that might be a problem, but if you’re looking at the discretionaries, then arguably this is where they should be adding value by finding these products,” said Ben Yearsley, Charles Stanley’s head of investment research. “The problem only arises if this happens again next year.” Emerging markets funds have become a fashionable redoubt for UK investors over the past decade, growing from 1.8 per cent of total assets in 2006 to 13 per cent in 2011, according to the UK’s Investment Management Association. But Mr Espedal says there are still, “undervalued, unloved and under-researched” companies, which Skagen’s Stavanger-based analysts are able to pick – away from the rumour and noise of London or New York. “We are at that stage now in many emerging markets where these conglomerates are doing well – especially in Turkey. “They are really value-creating. And they’re generally at a really reasonable price because the investor base have all gone to US business school where they learnt that conglomerates are crap.” Read More