The Concept of Retail Management - Case Study Example

 RETAIL MARKETING Introduction: In the recent decades, with the onset of supermarkets and super malls, the concept of retail management or retail marketing has undergone a sea change. There is now a definite distinction between marketing and retailing. While Marketing involves identifying, anticipating and satisfying customer requirements efficiently and profitably, the Retailing activity involves the direct contact with the customers via sale of goods and services to consumers for personal, family or household use. It is also defined as the important link in the marketing distribution system that makes goods & services available to customers. The Retail Marketing thus involves retail strategy, Target market or market segments and the necessary retail mix being used by the retailers. Of these, the retail mix is the most important component and can be defined as the combination of factors retailers use to satisfy customer needs and influence their purchase decisions (Levy and Weitz 1995, p. 22). These factors are (but not limited to) store location, pricing, merchandise variety and assortment, promotion and layout, customer service and personal selling. In the following sections, we will be looking at this concept in more detail with particular reference to House of Fraser – a leading retailer of designer wear in United Kingdom. Background: House of Fraser PLC is one of the United Kingdom's leading retailer of designer brands with nearly 2,000 of them on their shelves, including a number of popular in-house brands featuring the company's own designs. House of Fraser operates 61 department stores (by July 2007) throughout the United Kingdom under a variety of signage, including 15 House of Fraser and six Rack hams stores. The group was founded in Glasgow in 1849. Over the years House of Fraser has purchased a number of famous stores, such as Jenners of Edinburgh, Howells of Cardiff, David Evans of Swansea, the Beatties department stores, and Harrods of Knightsbridge. House of Fraser's average store size stands at around 100,000 square feet, although its largest stores reach more than 300,000 square feet. The company sells a full range of home furnishings in most of its stores (its smaller stores have fewer departments), including furniture, appliances, house wares, beauty, electric, clothes and linens, but clothing--and especially women's clothing--makes up the bulk of its sales. Principal Subsidiaries are House of Fraser (Stores) Ltd.; House of Fraser (Finance) Ltd; BL Fraser Ltd (50%). Its turnover for the 52 weeks ending 28 January 2006 was £701.9 million. Profits were £22.3 million before tax and £18.2 million after tax. Its Principal Competitors are Arcadia Group Plc; Debenhams Plc; Harrods Holdings; James Beattie Plc; Marks and Spencer Plc; N Brown Group Plc; New Look Plc; Next Plc; Otto Versand Gmbh & Co.; Selfridges Plc. (Funding Universe, 2007) Trading Philosophy: House of Fraser intends to be the number one choice of customers and prides itself in giving an overall shopping experience to its customers which focuses on Total Customer Satisfaction. The company looks at mergers and acquisitions as a key strategy in the current challenging retail environment. Analysis of its Retail Mix: Location wise -- House of Fraser always distributes in high street around a lot of shopping malls. It is very striking and attracts many customers. With around 61 stores all over the country, it has stores which are conveniently located at all the major and important areas. Price: The company is working to provide constant price concessions to improve its profit margins and to pass on the benefits to its loyal customers. Recently it signed an agreement with Carpetright to provide an exclusive range on a concession basis in 18 stores from May 2006 on improved terms compared to the previous floor coverings concessionaire. The store offers the finest and very best products at very affordable prices. Regular discount schemes are available to attract the customers specially the price conscious ones or the more commonly called cherry pickers. Merchandise variety and assortment: House of Fraser is a one stop shop for all the needs – everything that is possibly required to make a house a home, from décor and furniture and all the kitchen must-haves from crockery to corkscrews, to the latest and most sought-after designer clothes and accessories. As Britain’s leading retailer of designer brands, the Group frequently refreshes its product proposition with new brands and ranges, encouraging customers to visit them on a regular basis. The Group offers a wide range of products sourced from a number of suppliers, ranging from multi-national brands to niche designers. Fashion conscious customers are treated to an eclectic mix of both classic and contemporary designer names, including Alberta Ferretti, Armani, Gucci, Jimmy Choo, Moschino, Stella McCartney, and Versace, as well as House of Fraser's in-house line Linea, hard-to-find labels such as Punky Fish and Ichi, and up-to-the minute designer denim brand Yanuk. Customer service: They have a very good customer service whose highly trained staff provides the necessary guidance as and when requested. Their personal shopping service is especially invaluable. Specially trained staff (who've undergone rigorous training) patiently listens to the needs of the customers, and advises accordingly. Customers are under no obligation to buy. Target customers: The store targets high end customers who are brand and fashion conscious. It complete range in women and menswear includes all the top brands currently in UK. But during festive seasons, it offers special discounts for its customers. Its season end sales are also immensely popular. Positioning: House of Fraser has developed the “house of Brands” identity to demonstrate to customers that its concession mix is both unique as well as attractive to its shoppers. After the company found sales growth hard to come by in recent years, it took measures to regain its customer base. Like many department stores its affluent customer base is under attack from specialist retailers, especially in fashion area while it significantly increased its commitment to direct mail by cutting down on Press and TV advertising from 2004/05. Much of this pertains to its marketing through its loyalty card (House of Fraser store card). The database of account holders is maintained so as to undertake direct communications with known, high spending shoppers. They have now also launched their online shopping website which helps customers to not only get information regarding various schemes, but also directly shop in many cases. Business and Retail Strategies: The company looks at mergers and acquisitions as a key strategy in the current challenging retail environment. With an experienced management team, solid technology and a clearly defined market space (designer brand and high fashion), House of Fraser is better positioned than many UK retailers. House of Fraser, has an established modern supply chain and strong supplier relationships and is thus seen as an obvious partner for smaller chains that cannot afford to compete in a tougher marketplace. Thus they moved into agreements with such stores to consolidate their position in market. As Britain’s leading retailer of designer brands, its prime strategy is to encourage and attract customers on a regular basis. To achieve this, the Group frequently refreshes its product proposition with new brands and ranges. It offers a wide range of products sourced from a number of suppliers, ranging from multi-national brands to niche designers. Every few months, new brands are introduced and rolled out . Some of the recent introductions include All Saints, Sahara and Lipsy in Womenswear, Bench and Amplified in Menswear, Versace and Cynthia Rowley in Accessories, Urban Decay and Dermaglow in Beauty and Gordon Ramsay and Sophie Conran in Home. As a result, the proportion of total sales represented by concessions increased by 2.7%. This was partly due to certain own bought departments, such as men’s tailoring and eyewear, to a concession basis which enabled it to better meet customers’ needs and increase profits in these areas. Moreover, last year there were more rollouts of successful concessions which were implemented. As its ongoing and future strategy, the House of Fraser is developing and promoting its own private label ranges. In February 2006, they launched Howick, a new private label menswear range which includes both casual and formal merchandise and is the successor to Fraser. The new range has been well received and has seen an uplift in sales of over 20% and gross margin rate of 8 percentage points on its predecessor. In July 2006, the Group re-launched its Linea private label womenswear and menswear ranges, both supported by promotional campaigns and new shop-fits. Its future plans include, a strong pipeline of new stores, with openings in Belfast (160,000 sq ft), High Wycombe (120,000 sq ft) and the Bristol store (140,000 sq ft) scheduled for 2008 and Chester (121,000 sq ft) scheduled to open in 2010. It is extremely important for retailers to have the right product available on the store shelf but this is not easy as consumer demands keep on fluctuating with time. This challenge is particularly prominent for department stores, which must stock everything from cosmetics to cutlery. Thus for House of Fraser --- 61 department stores across the United Kingdom, the merchandise planning becomes a highly skilled and important task. To be able to attract customers on regular basis, House of Fraser has to target its products to all of its specific customer types by offering a broad range of designer brands. With so many stores and so many brands, it became necessary to centralize and standardize its merchandise planning processes. Similarly, with 61 department stores and a wide variety of product lines, managing the purchasing processes with manual methods was highly inefficient for House of Fraser and therefore they moved to consolidate, integrate and centralize the entire merchandise planning function across the company. As a result, House of Fraser was able to reduce stock levels and markdowns, and reported growth in sales margins for seven consecutive seasons. Main criteria expressed by consumers as being important when shopping in departmental stores: For consumers, the main or the important criteria for going to a particular store are its easy location plus the variety of merchandise it is able to offer, the quality of its products, price range and the discount schemes, good ambience and courteous and helpful customer service staff. House of Fraser, as is evident from discussion above, scores positively on almost all accounts. Not only are their different stores located at easy locations, their sheer presence throughout the country make them one of the most visible and popular names in retail sector. Moreover, with hundreds of top-name brands and thousands of high-end products available under one roof, the department store more than caters for all its customers' retail needs. House of Fraser is a brand in itself or a one-stop shop that covers most of the household items. With the best brands available in their stores, the quality is always above average and the finest and very best products are available, at affordable prices. During spring and summer, there is a themed summer accessories area. Similarly sales and discounts are offered at regular periods and during festive seasons such as Christmas, Mother’s Day, Valentine’s Day, Easter period etc. Conclusion: From the above discussion, we can safely conclude that House of Fraser is one of the best retail marketing stores in business. It strategy of mergers and acquisitions seems to be bearing fruit and it is capping it up with good marketing and retail strategies to attract and retain its customer base. With an annul turnover of about £800 million.(by January 2006) and 61 department stores in June 2006, it is one of the biggest retail stores in UK. Most of these stores trade as House of Fraser in a mixture of city centre and regional shopping centre locations. They are generally the largest or second largest department store in their local market. (See appendix for the financial chart) References: Funding Universe (2007) Available at: http://www.fundinguniverse.com/company-histories/House-of-Fraser-PLC-Company-History.html (Accessed: 01 May 2007) Levy, Michael and Barton A. Weitz (1995), Retail Management, 2nd ed., Chicago: Irwin. Appendix : Financial chart The group is now again moving up after a slump for 2-3 years. Read More