Understanding Retail Marketing and Customer Satisfaction at Luxury Clothing Brands - Case Study Example

• Understanding Retail Marketing and Customer Satisfaction

• Introduction

Considered to be one of the oldest professions in the world, selling is the basic form of exchanging goods and services. In the beginning people bartered, which has evolved into the present system of transactions (Dzehtsiarou, 2010).

Retailing is a type of commercial transaction where goods or services are consumed through personal or household use. Retailing industry originated in the US; during the eighteenth century, which was then restricted only to general stores. The speciality stores were started only in places where the population was more than 5000 people (Jain, 2008). Retailing, which has a significant contribution in the world economy, is considered to be one of the fastest growing industries today.

E tailing or Electronic retailing is the latest type of retailing, that refers to the selling of goods or services over the internet(Chandra and Sunitha, 2012). E tailing came into existence in 1991, when the internet was allowed to be used for commercial purpose (Bharathi, 2016). This remarkable step not only revolutionised the way business is done, but also opened up new opportunities and untapped markets to businesses.

In this paper, a detailed analysis of the following will be provided:

• There has been a rise in e-tailing in the last 15 years within the western countries, while the other parts of the world are still at an infancy stage. Evaluating this with respect to the luxury clothing industry.
• Looking into the various aspects of retail internationalisation and determining the responsibilities of businesses, expanding into other markets.
• Generating customer satisfaction and loyalty through store design and visual merchandising. Evaluating this with respect to kids’ clothing retails.
• E-tailing

E-tailing has grown remarkably in the past 15 years, with many big brands adopting the e commerce culture. With the growth in usage internet, more and more people prefer to shop online these days. Unavailability of time and a huge variety of products available online are two other major reasons which have further promoted the growth of online shopping.

The rapid growth of e-tailing can be contributed to the following factors (Chandra and Sunitha, 2012):

• Low investment required, as compared to brick and mortar retail.
• Inventory needs to be placed at a particular location with a particular retailer, without having to worry about the space limitation. More choices can be provided to the consumers.
• Low distribution and transaction cost as compared to physical stores.
• More information provided to the buyers and sellers.
• Greater reach to the target market.
• Easier to locate the business.

There is an immense opportunity available through e-commerce in terms of market penetration, market development, product development and diversification (Hutchinson et al., 2006). With e-tailing, businesses are able to reach new markets and new customers within no time. Also, developing a new product and entering a new market have become much easier for online businesses.

• Growth in E-tailing

E-tailing growth, in the past few days, has been concentrated in and around the western world. Proper connectivity for transportation, stronger broadband network, increased public usage of the internet, availability of suppliers, infrastructure, easy availability of trade license, relaxed trading norms etc. are a few resources and factors that are mandatorily required for e-tailing (Hutchinson et al., 2006). The ease with which these resources can be procured in a country, decides how e-commerce friendly the environment is. Developed countries mostly find it easier to fulfil these requirements; thus, giving a huge boost to companies adapting to the e-commerce culture, whereas the developing and underdeveloped mostly fall behind in this race (Halepete and Park, 2006)..

The Luxury Fashion Industry has recently joined the e-commerce world. Adapting the e-tailing model, most of these luxury brands, prefer to interact with the customers through their online stores and multi-branded e-tailers. The global online sales of luxury fashion for women are expected to grow to a market share of 17%, increasing the market size to $12 Billion (Hutchinson et al., 2006). The following is the forecast of the online sales of Luxury Fashion Brands in the developed countries between 2015- 2018 (Milnes, 2015). The growth is quite remarkable, especially in the Chinese market.

Figure 1: Annual Growth in Online Sales for women’s Luxury Fashion Brand 2015- 2018

Source (Strategic Report, 2015)

The same cannot be said in the case of developing and emerging markets, where e-commerce industry is still at the infancy level. Apart from the basic requirements of broadband connectivity, good transportation system, availability of suppliers and various economic factors also play an important role (Gupta, 2013). These factors decide the level of acceptance of the market towards Luxury Fashion Brands; thus, affecting their sales. Though the emerging markets are said to be the growth beds for the higher end brands for the next 10 years, a number of factors decide how the markets are going to treat these brands (Florenthal, 2007). These markets have a major challenge, which is an unequal distribution of wealth (Ba et al., 2007). While there are a few very rich people in these markets who are willing to pay for the luxury products, most of the people are just happy with the regular products. With the growth of economy, people have more disposable income available in their hands to spend on luxury clothing. At the same time, some have economical mindset too, where they want to get good quality products at lower prices. Also, lack of proper infrastructure, in availability of a wide broadband connectivity and widespread discomfort amongst people about shopping online due to security issue, prove to be huge turnoff for these brands. Though it has been forecasted that the emerging markets will drive the growth of the Luxury Fashion Brands during 2018-2025, these brands have to prepare themselves for the challenges they are going to face in these countries (Schmidt et al., 2015).

• Retail Internationalisation

The reason a brand decides to go international is to expand its existing market share and experience a growth in its revenue, by tapping new markets. Retail internationalisation is the most common strategy used by the brands to achieve this objective (Economy Watch, 2010). Starting retail business in a foreign market is a challenging task. Proper knowledge of the locality, a proven business model and sustainable retail premises are obligatory for achieving growth in the new market (Sahadev and Purani, 2008). Operating in an international market requires the business to have a proper knowledge of the suppliers, competitors, regulations, trading norms etc. Also, knowledge about the investors, realtors and costs involved in acquiring the resources, infrastructure are key requirements prior to retail internationalisation (Evans et al., 2008). Most businesses fail to implement a successful business model, which leads to failure.

• Retail Internationalisation and the influential factors

Expanding into the international market is a huge step for any business. However, internationalising any business is more than just starting retail stores in new markets. Any business, while entering a new market, is getting involved with the economic, geopolitical, demographic, socio-cultural and legal environment where the market functions (Economy Watch, 2010). The growth of economy decides the potential of businesses in new markets. The approach of powerful political parties and support from government decides the ease with which the business can function in a market. Also, the social status and culture of people, the age group, income level, gender etc. of the target market decides how well the products will be accepted in the new market (Dawson, 2007). Having knowledge of these factors and devising a business model considering all these factors is essential for any business to survive in the market. There is also a mutual exchange of resources between the business and the market. The business expects to get resources such as manpower, suppliers, infrastructure, transportation etc., which are essential for it to function in these markets. In return, the business has certain responsibilities towards the locality in which it functions. Working in an international market, businesses are entrusted with the following responsibilities:

• Respecting and adapting the foreign culture
• Providing employment to the local people
• Working for uplifting the community
• Maintaining the legal norms and regulations
• Maintain environmental standards
• Develop business for the investors and the realtors

An example of a luxury brand which has used e-commerce platform successfully is Burberry. The brand not only runs its own website to attain online sales, but also has shown its presence in various social media sites, since the year 2006. The brand has even been involved in exploring new markets of China and Japan, where the luxury brand market is at a growing stage (Milnes, 2015; Strategic Report, 2015).

• Store Design and merchandising: Kids clothing retailer

When it comes to good retail experience, just having a huge stock of products is not enough to influence the buying decision of customers. Store design and merchandising are very important factors that help to create an ambiance in the store (Wigley and Moore, 2007).

The brand communicates with its customers by means of visual merchandising and store design. Lighting, music, aromas and physical elements such as decorations etc. are used to stimulate their senses (Ha and Lennon, 2010). These elements play a part in building a brand, which helps it in differentiating itself from the competitors and creating a brand loyalty. Visual merchandising conveys to the consumers about the brand image and characteristic associated with the brand.

The following are the purpose of store design and visual merchandising (Mehta and Chugan, 2013):

• It helps to introduce and explain new products.
• It helps in the promotion of store image
• It helps the customers to locate merchandise in the store.
• To entice existing and potential customers into the stores.

There are a few challenges, that designers have to face while designing and merchandising a store. They are (KPMG, 2009):

• Financial constraints
• Limited availability of technology
• Limited land and space availability
• Existing features of the store
• Customer Satisfaction and Loyalty: Store design and Visual merchandising

The customers’ needs and expectations have to be kept in mind while designing a store and considering visual merchandising. A kids’ clothing retail store has to consider the fact that children and their parents will be the primary visitors to the store. A colourful and playful environment will help to lure in the customers. Keeping toys in the store will also keep the kids busy, while the parents can shop with a free mind. The few other things that have to be kept in mind like how many customers are expected to be in the store, depending on the location and footfall. Also, how much inventory is to be kept in the store is to be considered. Considering the kids’ clothing retail, shopping has to be a fun experience for the parents as well as the kids. Keeping these factors in mind, the store designing and visual merchandising is done. A very good example of store designing and visual merchandising is the brand ‘Fendi’, which is a kids store in Doha, Qatar (Strategic Report, 2015). The store features soft blue and pink coloured glasses and clear display cases, which creates large, free space around the store. Another such example is the ‘Mamas and Papas’ located in London (Strategic Report, 2015). The store creates an effect of calmness and is designed in such a manner, keeping the key shopping needs of new parents. Such an ambiance, not only turns shopping into a relaxing activity for the buyers, but also helps in locating the merchandise, thus generating a high level of customer satisfaction and loyalty.

• Recommendation:

The following steps can be taken by Luxury Clothing Brands for growth into developing markets though e-tailing:

• The brands must identify growth opportunities in various markets, evaluating where they can concentrate resources to achieve best results.
• They should customise their offers according to the requirements.
• They should have global standards for customer service, offering similar quality to people from different backgrounds.
• They should follow well tested and effective business models while entering a new market.

The following steps can be taken by kids clothing retails in terms of store design and visual merchandising, to improve customer satisfaction and generate customer loyalty:

• Colourful decorations and interiors can be used to make the stores look attractive.
• The stores can be designed and decorated according to different themes.
• Toys and playthings can be kept in the stores for the kids to play with, while their parents are busy shopping.
• Various games can be organised for the kids to keep them busy.
• Conclusion:

Various factors that are responsible for the rapid growth of e-tailing were analysed. Additionally, the factors needed for e-tailing to expand its reach to the developing and emerging markets were studied. Also, a comparison was provided between the past growth trends of e-tailing in the developing and developed markets.

Retail internationalisation is an important step that businesses take to expand and explore the opportunities available in other markets. There are various factors that influence retail internationalisation, such as cooperation from the government, easy availability of resources, manpower, etc. We also understood the various responsibilities that the companies have while functioning in a foreign land.

Store design and visual merchandising are very important factors to generate customer satisfaction and loyalty. The way they convey the brand image to the customers, affect their sales in the longer run.

We also saw the various steps that can be taken by Luxury Clothing Brands stores to grow through e-tailing. Finally, steps were provided to improve kids’ retail clothing business through visual merchandising and store design.

Reference List

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