Retail Marketing of Tesco - Case Study Example

Running Head: Retail Marketing - Tesco Retail Marketing - Tesco [Institute’s Retail Marketing - Tesco RETAIL MERCHANDISING Definition An inventory is enhanced financially through a planned and tactically controlled and strategic management system, which is referred as retail merchandising. In addition, the retail consumer is considered the central component of such system, as inventory is distributed profitably through different approaches of the system of retail merchandising. Best use of space and layout is one of the enabling characteristics of retailers through merchandising. In other words, advantage points and shelves are displayed through central focus on layout and designs, as well as, through effective communication process with consumers in such system. (Varley, 2005, pp. 180-196) Corporate image and policies of the company is developed efficiently with the implementation of retail merchandising system, as image is promoted and enhanced through attractive displaying of objectives of the organization. A particular retail store tries to attract potential consumers through abovementioned marketing strategies, in order to increase sales of specific inventories, which is one of the primary goals of retail merchandising. Free movement and freedom is provided to consumers, so that they may move from one area to another as per their likes and needs. (Woolf, 2003, pp. 40-41) In other words, purchasing decision-making of consumers becomes easier in the system of retail merchandising. The merchandise mix, store layouts, category management, product assortment, etc. are primarily encompassed in the retail merchandising. (Levy, 2001, pp. 26-27) Category Management Discrete groups of related products are created by retailers during the process of category management in the system of retail merchandising. Such divided groups are referred as product categories that allow the consumers to buy different range of products from different categories. In specific, the process of category management has been divided into eight standardized steps, which are implemented by most of the retailers around the globe. Firstly, a category is defined, and different products are included and excluded from a specific category. Then the retailer analyzes and defines the role of that category in terms of its role in the generation of sales. Thirdly, current performance of that category is assessed at regular intervals, which then results in setting-up of different objectives and targets for that category. (Fernie, 2004, pp. 17-20) An overall strategy and specific tactics are planned during the sixth step of the process. The planned tactics, strategies, and objectives are implemented, which is followed by eighth step of reviewing of implemented steps. Tesco has effectively implemented such retailing concept of category management by offering different categories, such as grocery items, clothing, consumer electronics, financial services, etc. Specific targets of profit are set for each category, and strategies are implemented accordingly. Communication is an important part of category management, which is the basis of sales, unlike traditional retailing concept that requires advertisement for the generation of sales. A two-way process of exchange of information is collaborated through an effective relationship of retailer and supplier. (Adkins, 1999, pp. 23-25) Turnover of the total category is focused during the communication of retailer and supplier in the process of category management, rather than focus on individual products. (Peppers, 2004, pp. 78-80) In most of the cases, the total category is considered while introducing a new product or a promotional campaign, rather than individual products. (Samson, 1993, pp. 50-53) Such concept was initiated and implemented in grocery stores like Tesco; however, book retailers, pharmacies, etc. have also implemented the concept of retail merchandising, and particularly, category management in their stores. In brief, product categories are managed in terms of business units during the process of category management for best-possible satisfaction of consumers. Sales are maximized and inventories are sold through effective trade partnerships. Product Assortment Store managers are provided with a valuable aid of assortment plan that is considered a very useful document for effective management of retail stores. Moreover, buyers and consumers are also relieved by acquiring different assortment plans in a retail outlet. In specific, physical display of different product ranges is decided by the effective implementation of assortment plan. A particular period is usually selected for an assortment plan, which is followed by the implementation of a new assortment plan according to the season. Within a retailer’s outlet, width and depth of different product categories are analyzed by the assortment plan, in order to display the products in an efficient manner. During a particular period, a specific product range is displayed physically in the retail outlets, which is the primary objective of the assortment plan. In some of the retail businesses, a single assortment plan is implemented throughout the year; however, a number of other retailers prefer different assortment plans according to the selling season and store layouts. (Kingaard, 2007, pp. 49-50) In case of Tesco, that has a major variation in store sizes; different assortment plans are issued by the company to cater the needs of consumers. For instance, Tesco Extra is the biggest store outlet of the Tesco Company, and is usually on two floors. In these stores, food is displayed according to the food season, and similarly, clothing department displays the clothing preferable for the ongoing season. In this way, consumers are able to make the buying decision easily, resulting in an increase of sales. Variables relevant to consumer choice are usually considered by the Tesco Company to sub-divide the product category through implementation of the assortment plan. Some of the variables that are considered by Tesco are flavor, colors, price levels, designs, etc. In this way, consumers are offered with a good variety of product range that can be preferred for selection of required products in an easy way. Moreover, Tesco’s assortment plan allows the buyers to maximize their buying opportunities through given flexibility, which is another major strength of Tesco. (Humby, 2007, pp. 25-26) Range Planning Retail merchandising and retail product management give immense importance to the planning of product ranges, as well as, to the selection of products. A balanced product assortment is acquired by the retailers through a combined effect of price level, variety, depth, and availability. In terms of definition, width and depth variables are used to express the total product offering by a retailer, which is referred as a product range, and is an important component of range planning. Different varieties and types of the product are related with the width of a product range. On the other hand, within a product category, brand variations offer an amount of choice to a consumer, which is referred as a depth of the product range. A number of different price levels can be covered by a retailer through increased depth, which is considered during the formulation of overall product strategies in the retail merchandising system. Thousands of single product items can be included in a product range within a large retailer. In this regard, most of the retailers prefer sub-dividing the total product range for effective management of the range. Product features, sales patterns and similar characteristics are used to determine the subdivision of most of the product ranges. A number of experts relate the term of product assortment with product range, as both of them decide the total product offering to consumers in a particular retail outlet. Product similarity is not the only basis that decides the product range in a retail outlet; however, a number of other factors are considered for the sub-division of product ranges, such as end use, price, brand loyalty, etc. It is observed that competitive products are usually grouped together in an outlet; range planning considers the end use factor and groups complementary products with each other, which results in an effective and attractive offering to the consumers. For instance, Tesco groups products to according to food specialties, as well as, according to different clothing, and prefers grouping of complementary products with each other, in order to maximize the sales through convenient offering of product ranges. Through implementation of such approach, convenience driven and busy consumers prefer shopping at retail outlets that offer lifestyle solutions, rather than product ranges based on competitive items. (Seth, 2001, pp. 36-38) In this regard, lifestyle solutions and complementary product ranges are some of the major strengths of Tesco marketing strategy, which have resulted in allowing Tesco to become one of the five largest retailers in the globe. In specific, Tesco’s stores are divided into different formats based on different ranges of its products. Some of its stores are Tesco Extra that offers all the product ranges of the company. A much smaller range of Tesco’s products are offered at Tesco superstores, which are followed by Tesco Metro and Tesco Express that are considered as neighborhood stores stocking essential range of products. Store Layouts Within the store, retail merchandising, and specifically, store layouts process utilize every square foot of the selling space to maximize the sales through effective layout of retail store. Location and size of each department is analyzed during the process of store layout, and traffic patterns of consumers are considered for building of permanent structures in the outlet. Product range and product assortment plays an influencing role in the type of store layout and floor plan chosen by the retailer. In this regard, this paper will discuss some of the standard store layouts that are preferred and implemented by successful retailers around the globe. It is observed that most of the retail stores prefer the straight floor plan, which is considered one of the excellent store layouts available in the retail merchandising system. Small spaces are created by effective utilization of walls and fixtures in the retail store. Moreover, it is the most economical store layout, and therefore, the most implemented one around the globe. Retail stores with concept of self-service usually prefer diagonal floor plan, as it allows cashiers and administrators to keep an eye on consumers. Traffic flow is managed efficiently in the diagonal floor plan, which is used often in retail outlets. Some of the other store layouts and floor plans are angular floor plan, geometric floor plan, mixed floor plan, etc. (Karolefski, 2006, pp. 71-74) In terms of Tesco, two-floor stores are now built by the company in which, food is sold on the ground floor, whereas, electronics and clothing are sold on the first floor of Tesco outlets. COMPETITIVE BENEFITS OF PRIVATE LABELS Private label products and services have dominated rest of the products rapidly since the last decade. In terms of definition, a company manufactures or provides its products or services for merchandising purposes under brand of another company, and such products or services are referred as private label products or services. A wide range of industries offers private label goods and services to retail outlets. (Cheyfitz, 2003, pp. 40-42) Both retailers and consumers benefit from private label products. Some of the major benefits of selling private label products are money and loyalty protection of the consumers. One of the reasons is that attractive profit margins are offered by most of the private label manufacturers, which results in high gross profits by the retailers. In other words, selling of private label goods and services provides a platform for acquiring maximized sales turnover through offering attractive offers for the consumers. It is observed that similar branded products are superseded by private label products due to fifteen percent higher profit margins, as very low prices are charged by private label manufacturers, and in the result, lower prices of private label companies benefit consumers that get similar products of national brands, but at lower prices. In the result, manufacturers of branded products confront a substantial pressure due to such a mutual combination of benefits to retailers, as well as, consumers. Moreover, brand loyalty is easily acquired by retailers due to uniqueness of private label products and services, as compared with products of national brands that are sold and bought all over the country. In this regard, brand loyalty is another imperative benefit of selling private label companies in different retail outlets. (Baker, 2002, pp. 59-63) Recently, a paradigm shift has observed from branded products to private label products, as retailers have been able to increase the quality of such goods to increase the sales and attract more consumers. Retailers are able to expand their offerings to private label manufacturers due to their lower prices, unlike national brand manufacturers that offer higher prices. Nowadays, national brands manufacturers and companies are confronting a serious competition with private label companies that have been able to dominate as acceptable alternatives in the retail market. (King, 2000, pp. 20-25) Presently, private label products are marketed more frequently by retailers, as compared with marketing of branded products by them, which has fostered the brand loyalty of such products. One of the effective examples of selling private label products can be seen in Tesco, which is one of the largest retailers around the globe that sells private label products and services in its retail outlets. Some of the private label products ranges sold by Tesco are electronics, clothing, food, etc. Tesco has been able to plan and implement the abovementioned strategies of retail merchandising system, which has allowed it dominate the retail market around the globe. References Andrew Seth. (2001). the Grocers. Kogan Page Publishers. Clive Humby. (2007). Scoring Points. Kogan Page Publishers. Don Peppers. (2004). Managing Customer Relationships. John Wiley and Sons. Gordon Woolf. (2003). Success in Store. Worsley Press. Harland E. Samson. (1993). Retail Merchandising. Cengage South-Western. Jan Kingaard. (2007). Start Your Own Successful Retail Business. McGraw-Hill Professional. John Fernie. (2004). Logistics and Retail Management. Kogan Page Publishers. John Karolefski. (2006). Consumer-Centric Category Management. John Wiley and Sons. Kirk Cheyfitz. (2003). Thinking Inside the Box. Free Press. Michael John Baker. (2002). the Marketing Book. Butterworth-Heinemann. Michael Levy. (2001). Retailing Management. McGraw-Hill Professional. Rosemary Varley. (2005). Retail Product Management. Routledge (UK). Stephen King. (2000). Tesco King Omnibus. Routledge (UK). Sue Adkins. (1999). Cause Related Marketing. Butterworth-Heinemann. Word Count: 2113 Words Checked by Copyscape.com & Turnitin.com Read More