Retail Sector and Service Marketing - Essay Example

Service Marketing Introduction to the retail sector The retail sector plays a key role in the economy of any country. It not only satiates the customers’ needs, but also influences the consumption pattern of the consumer and improves the product trend. The effect is not only limited to these areas but also affects the government’s policy, technology and a demographic and social change in the society. The retailers are also on a constant lookout to change the sales and marketing methods with multiple options in price, product presentation and range of products. We can also see that the retail sector has moved out of stores and has gone to the living rooms of the consumers through internet, cable TV and mail order. Apart from the consumption part the employment sector is getting a huge boost as many graduates and employable individuals are being recruited in the sector. The salaries are quite impressive and this definitely is improving the economy as a whole. As a matter of fact a few educational institutes have introduced retail management courses which enable the students to get a detailed training in this field. The sector is no longer a matter of buying and selling; it has changed into a thorough research area. Scholars and managers are trying to understand the nuances of this industry and trying to figure out the consumer behavior, the factors affecting the sector, the government regulations, pricing and sales promotions. From the consumers point of view it not only sells their necessities but also provides them a social platform to interact. For some it is the only source of social activity. Globalization of retail sector If we look at the broader spectrum, we will see that the retail industry has crossed the borders and is now part of the global economy. The major retail players have taken full advantage of cross border trades and opening up of economies. This has not only created economies of scale but the marketers can now realign their supply chain management in a global way. They have the advantage of sourcing goods from the developing countries which offer competitive products at a Service Marketing 2 lower cost. In the operations part the sheer volume is making the profits soar high, in spite of price cuts. The advantages apart, there are a few shortcomings which makes retailing not an easy job. When the matter of global trade arises one must understand that the economy, society and political environment of each country will differ. Every country or region has its own economy, which is affected by multiple reasons. It could be political, technological, social or any other external factors. The retailers need to keep in mind all these issues and proceed accordingly. Another aspect that affects the business is the currency. When dealing with multiple currencies, fluctuations is a common phenomenon. The companies must know the way to tackle such financial inconveniences. Another aspect that is now prevailing in the world economy is the environmental issue. With global warming, biodegradation and pollution control, the retailers need to keep a track of the environmental aspect of their offerings and service. Many companies face difficulties while addressing environmental anomalies. Not all are as equipped. Hence, international retailing is a matter of big players, who have the knowledge, skill and understanding of all these global factors. As mentioned earlier the retail sector nowadays is a social platform for many. Keeping this in mind we can see that the big retail stores not only sell commodities but also provides value added service for their customers. Coffee shops, restaurants and children’s play areas are a regular feature in these retail outlets. Another area that has been hugely affected by the boom of the retail sector is the real estate. Shopping malls, retail stores, multiplex buildings are making a beehive any both big and small towns and cities. Retail segments The word retail has now a much broader spectrum. When the concept first originated, it was merely meant for commodities which were used on a day to day basis. The household goods and to a certain extent clothing was retailed in the bygone years. The reach of retailing has now crossed all spheres. Clothing, accessories, furniture, food, medicines, oil and gas, financial Service Marketing 3 services, electrical items, vehicles, every commodity and service can now be retailed. Whatever be your need, you can avail it at your nearby retail stores. The idea of departmental stores has created another niche market. In these stores one can find each and every product under one roof. You just need to pick the product which you prefer. You can also choose between brands. This advantage of choices has engulfed most countries. Hence, manufacturers and retailers are trying to offer the best at the most competitive price. The consumers can now get the benefit of price and product at the same time. Major players have created a niche for themselves in this competition. Wal-Mart, Kroger and Costco in USA are reaping huge profits by this marketing system. In the similar way Tesco and Marks & Spencer in UK, Carrefour in France and METRO Group in Germany have a niche in their respective countries. Another plus point is that the local retailers are also gaining from the globalization. They are exposed to world class retailing concepts and practice. They have also been able to improve their product offering and are benefiting from the economies of scale. Some local retailers have also been able to cross the national marketed and have started to cater to a few upcoming economies. But the advantage is not one way. The multinational retailing companies can gain from the local knowledge of the local retailers. The internet model of Tesco, UK, is now being used widely in the US. Thus it is a manifestation of co-existence. Present retail environment Based on the globalization factor we can very well understand that the present environment in the retail industry is very competitive and growing. With substantial increase in human longevity, self employment and rising salaries we come across a huge population of people within the age group of 40-50 years, who have a good amount of disposable income. Not only that they have an affinity to more choices and usually prefer value for money. Also the young generation nowadays can afford more and will opt for the best buy available in the market. Thus Service Marketing 4 the retailers are having a tough time to meet the demands of this group of customers and also to keep up to their expectations. You will hardly find a dedicated customer who will stick to your brand. They are always on the lookout for the best deal. With local factors playing a major role in the retail industry, the retailers need to keep themselves constantly updated with the changes or introduction of any rules or regulation. The retail environment can also differ from each and every region. The retail sector in Europe has largely benefited from the introduction of the Euro. With a single currency the retailers do not have to worry much about exchange rates and can freely sale their products. Similarly the supply chain can be effectively managed since the costs involved can be easily accounted for. The US also has a few advantages when dealing with its neighboring countries. The US currency is widely used there as well. Moreover, the US economy stands as a directional factor for many economies; stable and emerging alike. If we consider the factors that affect the retail business, we can shortlist a few. These are: 1. Political structure of the country and its stability is a crucial aspect. As with each government the policy differs. Not all government will have the same outlook towards the retail industry. Some of them may anti to this business and some may have a positive outlook to the industry 2. Economy plays another vital role. Based on this the retail industry can survive and flourish. If the economic environment is not healthy the people will have low purchasing power, hence the retailers will not be bale to grow. The best economic environment for any retailer is definitely the emerging economies. It provides umpteen numbers of options to grow in the market. 3. The social and cultural attitude of the consumers is an important aspect for this sector. What the consumers prefer, their likings is an important parameter on deciding the parameter of the choice of products. The clothing and apparels need to be updated based on the current fashion and design trends. The food sector has seen a major change. People Service Marketing 5 now prefer more natural and fresh foods. They have become health conscious and wants to look and feel healthy. Hence the junk foods have been replaced with fresh vegetables and low fat foods. 4. Men and women have different tastes and requirements. The same applies for an aged person and a youngster. This gets reflected in the purchasing of commodities as well. The retailers must keep the statistics at their fingertips to note the changing buying trend. They can also analyze the demographic pattern of the purchase thus able to plan their stocks and products. 5. The technological advancement has created a growing trend of newer products and services. Customers can now have multiple varieties of the same product with value added features and innovation. Both product and process innovation is growing by leaps and bounds. Manufactures are spending a huge amount on research and development. They want to provide more features in the same product. Any product now has a life cycle of about 3 to 4 months. The retailers must be able to stock the products with each changing trend. 6. With environment being a major issue in today’s business community the retailers must keep themselves updated with the environmental issues and follows the guidelines strictly. With such factors coming into the picture retail companies around the world are always on the lookout for opportunities to grab the market. They want to get the niche before anyone else. Some retailers have hence specialized in particular segments. They stick to a particular group of product and capture the maximum market share. Starbucks in coffee, JD Sports in the sports retail arena and Sony in electrical and telecom products. For others it is an overall market to Service Marketing 6 grab. Retailers like Wal-Mart, Tesco and Marks & Spencer have specialized themselves in the area of departmental stores. When we come to the market of departmental stores, which specializes in retailing multiple products under one roof, we can very well mention the name of Marks & Spencer. In the UK retail segment this name is familiar with each individual retail customer. The name has become quite familiar in the global retail arena as well. We can go through the company’s details as given below Past and Present of “Your M&S” The retail sector is at its peak now. Both the multinational players and the local retailers are doing substantial business. Turnover is at its all time high and the profits are soaring. But, when we mention of big retailers, the name that always strikes our mind is that of Marks & Spencer. It all started somewhere in the year 1884 with a small shop at Leeds Kirkgate Market in England. The shop still remains, but is one of the smallest of its 760 stores. Spread now in more than 30 countries, the company has its headquarters at London. It specializes in clothing and food, but has slowly made headway in the areas of furniture, technology household items and most recently into retail coffee shops. Its best years were in the late 1990s. It saw crisis in the first part of the 21st century, but is now again back in the big business of retailing. Its growth now is more steady and rapid. It has taken numerous innovative marketing and sales steps to boost its sales. On top of it has expanded its horizons in multiple markets and areas of retail business. The emerging market is giving it a good thrust, whereas the quality of outsourced products has improved to a great extent. The company has explored beyond the national market and has made its presence felt in the international market. If we look at its growth pattern we will see the company is growing faster in the international market. The international business has grown by Service Marketing 7 16.8% much higher than its core market of clothing & home which grew only by 9.6% in 2007. (Growth is based on the sales figures). The last three years for M&S has been quite astounding. After a few years of slump the company is once again regaining its market share. Its objective for the years ahead is to maintain sustainable growth while generating substantial shareholder value. They have remained focus on the product quality at reasonable prices. It wants to maintain the same for the coming years. Financials It was the first British retail company to make pre-tax profit of more than ₤1 billion. In the year 2001 it was at its weakest position, with a PAT of less than ₤150 million. The reason was very evident. It was becoming a bureaucratic company with lot of archaic business practices. It was loosing the trust of both its customers and shareholders. But, fortunately post 2003 things have changed positively. The future now looks bright under the able chairmanship of Lord Burns. The Net Profit in the year 2006 was more than ₤500 million. It is now geared with experienced and efficient management and a robust vision. With the diverse business interest and products at different price range it can now accommodate customers of various economic strata. Marks & Spencer is no longer the neighborhood store. It has become an up-market store for many and a discount shop for a mass of people. The young and old all are now the ardent fan of this brand. It not only delivers quality products but also gives value for money service. The only thing that might now have changed is its policy for returning goods. Previously it used to accept unwanted items no matter whenever it was sold. The time frame has now been reduced to 90 days. The way ahead For M&S the path ahead needs to be very strategic and sound. It can no longer bear a slump. It must be able to sustain its present growth and also needs to look for growth sectors and markets. Service Marketing 8 Newer markets need to be tapped and explored. The experimentation stage is now over. With its years of experience the company has volumes of historical data which can be utilized to analyze the future markets. While planning for the next 5 years the company needs a four pronged approach. These are as mentioned below: 1. Social responsibility 2. Customer service 3. Product and process innovation 4. Sales and distribution We can identify, analyze and correct these areas in details for M&S in the below mentioned paragraphs. Social Responsibility Like all companies around the world, Marks & Spence, has done its bit too. It is now one of the important aspects of a company after making profit. The campaign it started was launched very recently. The basic objective of this campaign is to make the customers aware of the fair practice that the company undertakes in terms of producing goods. It uses environment friendly and ethical methods to source products. It is now part of Fairtrade products, under which it sells tea and coffee. It also has selective stores which sales Fairtrade Cotton based clothing. Apart from this the company is redesigning the shops to make it more environmentally friendly. It supports a housing charity, the fund for which is gathered from selling a range of foods during the Christmas. In 2007 it launched cotton shopping bags, and also is supporting more than 15,000 children in Western Uganda under the “Save the Children” program. Without supporting such social causes the company can not get highlighted in the social circle. The figures alone will not speak for the company. They need to have some substance behind the numbers. Service Marketing 9 Customer service Customer service is a major ingredient for any service industry and it is more so for the retail sector. The customers will come back to the retailer if the customer service is astounding and can solve their queries. The company has stepped up its effort to train its employees to provide quality customer service. The effect can already be felt at its food section, which has started training a few employees to give advice to customers for buying health foods. They have their Simply Food outlets in Scotland which use “renewable” green energy, thus saving 55000 tonnes of CO2 every year. This is just the beginning for M&S. They need to keep in mind the environmental issues of each every region they operate in and follow the rules accordingly. The company has targeted to use sustainable raw materials in most of its sector, look after the health of the employees and customers by offering quality food and healthy working condition. They have also plans to renew their waste and reduce packaging by 25%. All these are step forward for a giant leap ahead. Product and process innovation M&S is a company which is now poised for huge growth. They need both product and process innovation in order to stay ahead of the competitors and have a larger market share for in the emerging market. The present business can no longer just ignore the challenges. They have already started to make headway in their clothing sector. They have contracted some well known designers to give an edge over their business rivals. In all sections of womenswear, menswear and childrenswear the difference can be felt. They have been successful with the “Autograph” collection of Bryan Adams and “Limited Collection” series. The “Per una” collection is still growing strongly. With newer trends being discovered everyday the company needs a full time group which will make analysis of the current fashion trends, look for the newer food business and make contracts with other manufacturers and service providers to use the M&S name. Service Marketing 10 Moreover the company needs to maintain a standardization factor in all its products so that the customers are at ease when purchasing a product. This can only be done with sustainable supply and product innovation. Sales and distribution In contrast to the previously mentioned areas, sales and distribution is the end part of the product. At this juncture the product gets of the factory premises and lands up in the retail store. But here lies the trick of the retailers. How well they plan the product promotion, in-store display, work on supply chain management and do the pricing makes the product saleable. Some commodities will sell itself by its brand name and quality; some will have the price advantage and for some it will be a combination of both. As mentioned earlier, customers are always looking for the best deals and can shift their preferences if they can avail a better alternative. However, the retailers like M&S has to work on their sales strategy in order to retain the customers. It becomes tougher when they venture into international markets. They do not have the advantage of local preference. They can only rely on some historical data. This can only help them to gauge the market, but they will require a local partnership in order to be successful. It is advisable for M&S to partner with local vendors or retailers in order to gain foothold of the international markets. In the UK market the company already has a strong presence, but need to keep on innovating newer product range and give more options to the customers. It has already started such exercise with its multiple categories of store outlets. Some of them are the normal M&S stores. They also have an online store which is at par with the industry standards and it is showing a good growth for the company. They have also stepped up their supply side with close working with its suppliers. It needs to invest both and time and money for the suppliers and keep its option open for more sourcing points. It should make the same mistake as it did before by relying on a particular Service Marketing 11 supplier. The web-based Supplier Exchange solution is a good step forward in integrating the supply chain. Conclusion When we consider the retail sector in today’s world we can very well use the Six Sigma model which induces quality and efficiency in all aspects of the business. The product quality, service and delivery can have a phenomenal improvement by the usage of this model. Six Sigma is a great initiative to have healthy revenue in the long run and also to satiate customer’s needs at the highest level. It also improves the bottom line of the business helping the company to have a better shareholder satisfaction. This model has already been successfully implemented by big retailers like Sears and Home Depot and it will definitely be a value addition to the business model of Marks & Spencer. In the view of Marks & Spencer’s international market, the Nordic model will be more apt. With this help the company can identify and analyze the international market and opt for the best possible option operational model. The managerial skills are required for using this model effectively. It allows the firm to utilize its human resource properly and effectively in the international arena. As per this model the company’s knowledge of the international market will depend on how effectively and efficiently it can gather the information on the competitors’ international movements. The firm will have its efficiency and managerial skills tested in the international sphere only. The market is almost unknown and the competition is from many; big or small. Service Marketing 12 Based on the above summary and analysis we can very well conclude that the company is very well on the right track, but it requires a foresight to help it grow. This can only happen with able managerial ability and constant up gradation of the company’s market knowledge base. Service Marketing 13 Reference: 1. Annual review and summary financial statements 2007. Marks & Spencer. https://images-na.ssl-images-amazon.com/images/G/02/00/00/00/32/57/90/32579022.pdf?mnSBrand=core 2. Marks & Spencer. 05 January, 2008. Wikipedia. http://en.wikipedia.org/wiki/Marks_%26_Spencer 3. Retail Sector. Sector Briefing 2006. Agcas. http://www.prospects.ac.uk/downloads/sectorBriefings/Retail.pdf 4. Six Sigma and Lean Process Excellence in Retail. Sigma Breakthrough Technologies Inc. http://www.sbtionline.com/YourMarket/SixSigmaForRetail.php 5. Determinants of retail firm’s international involvement. Irena Vida, University of Tennessee. 1997. http://www.sbaer.uca.edu/research/mma/1997/PDF/08.pdf Read More