Chapter 2 - The Retail Environment PDF

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Chapter 2 – The Retail Environment The Retail Landscape in South Africa The retailing scenario in South Africa is a dynamic one because:    

New competitors are entering the retail space in the country. Technological advances provide additional methods of doing business and the way retailers start to operate. Spaza shops and factory stores are becoming more and more popular in the environment for convenience purposes. There is growing demand for retail space and retailers to enter the markets in the townships in the country.

Environmental Trends in Retailing  

As the environment changes, both consumer needs, and what retailers should be offering, are affected. The types of change in the requirements from consumers include: o The choice of product in response to income, technology and lifestyle changes. o The choice of retailer as the format of retailers, changes. o The way in which they buy as the internet becomes more accessible. o Shopping times as stores stay open later and new types of convenience stores becomes available.

The Two Forms of the Environment

Demographic Patterns and Trends        

Demographics are statistics about the population that can be measured and have implications for market behavior. It can include items such as race, age group, income and geographical areas. Good retailers must understand their customers, and their needs to satisfy them fully in the retail space. If income increases, so does the spending pattern of consumers, in particular with respect to luxury goods and branded products. Population size: Stores change strategies to satisfy larger, more lucrative markets. Location of the population: Where to locate the stores and distribution centers. Income: Stores will adjust to the income level of perspective clients. Household structure: Number of people who live together in a domestic arrangement as there is a shift in traditional household structures.

Technology Trends The retail industry is certainly one where various new technologies have become useful in streamlining operations and improving the offering to the customer.      

Smartphones allow retailers to make use of location-based advertising. Consumers are making use of multimedia, such as social media and email. The effect of technology is that it boosts retail store performance and undermines the traditional ways of doing business. E-Commerce: Takealot and NetFlorist. EPOS (Electronic POS): At any point in time, retailers can now access stock and sales figures (Yoco). RFID (Radio Frequency identification): Intelligent bar codes and scanners (Snapscan).

Competition Trends   

As retailers evolve and change, competitive threats can come from anywhere in the world thanks to technology and globalization. Scrambled merchandising: this is where retailers sell goods that are not traditionally in their regular domain. Retailers are having to adjust their marketing strategies to cope with the opportunities and threats being presented.

Political and Legal Trends     

The current government in power can have a major impact on business. Issues such as inflation, unemployment, interest rates and foreign competition could be approached in different ways by different governments. The impacts that credit and borrowing, the cost of petrol, importing and exporting and potential arrival of foreign competitors. New laws can have requirements that are costly for business. Retailers are also affected by labor law, health and safety regulations and any other laws that are involved in the running of a business.

Economic Trends    

Retailers have to be very aware now of the current and impending economic conditions that the business will face. These economic conditions can potentially have a dramatic effect on consumer spending habits and patterns. Inflation, recessions, interest rate adjustments and changes in the exchange rate can be some of the economic challenges businesses face. Economic recessions can result in changes in the consumer experience that make retailing unpleasant.

Social and Cultural Trends  

People’s social and cultural needs evolve and tend to change as time goes on in the retail cycle. Retailers have to be very alert to changing lifestyle patterns in the world, such as: o Career and professional women in the workplace. o Gender roles and poverty of time. o The elderly. o Shopping experiences. o Social responsibility. o Conservation and green issues. o Health awareness.

Career and Professional Women

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An increasing number of women have entered the employment sector which has a number of implications for the retail market. The working woman has less time to attend to the shopping and to prepare meals for the family. Changes in attitudes towards the purchasing of clothing and leisure products, as women have to dress for work and also have money available to spend on themselves. In order to accommodate the needs of working people, there has also been a trend towards extended shopping hours.

The Change in Gender Roles and the Poverty of Time   

Women no longer do all of the shopping anymore, due to the involvement of women becoming a part of the working world. Shopping often takes place on weekends now as families (both parents) are working during the week. The responsibility can now fall on husbands in many cases, couples or the only single member of the household.

The Elderly    

Worldwide there is a vast increase in the number of elderly people in the population. There is an improved standard of living for the elderly and a better knowledge of how to remain healthy. The elderly cannot be ignored as they are a very profitable sector within the retailing marketplace. Vitamins, health foods, and cosmetics catering for aging skin and the elderly complexions are increasingly profitable.

The Shopping Experience    

Consumers are now looking for more than just a place to purchase goods and services from. Major shopping centers are beginning to design their spaces to meet this growing customer need. There needs to be a pleasant environment where customers can move around easily with many other facilities for relaxation purposes on offer. Interactive stores have begun to emerge as an entrant into the marketplace, such as Yuppiechef’s new physical location that uses the integrated online platform well.

Social Responsibility    

Consumers are becoming increasingly aware of how the money they spend, impacts on society and firm’s triple bottom lines. Many customers are beginning to only shop at the retailer that they believe is doing the right thing. These customers tend to avoid retailers selling brands that are believed to engage in unethical or exploitative practices. Retailers must take suppliers and their ethical practices into consideration for these reasons.

Conservation, Green Issues and Health Awareness

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There is increasing global awareness of the need to preserve our environment for the future generations. Retailers investing in programs that contribute towards the environment to improve this corporate image. Customers are now far better informed and are spending more money on products that are hormone free, organic, free-range and free of any artificial additives.

Ethics in Retail   

Retailers have to consider ethical implications of any decisions or actions that are taken. Ethics covers the principles that are concerned with the judgement of whether something is right or wrong. Types of issues that need to be considered are: o Selling merchandise produced under disreputable circumstances. o Claiming to have the best price with no supporting proof. o Accepting gifts from suppliers. o Charging fees to suppliers for shelf space. o Pressuring a customer to purchase the product. o Non-disclosure of information. o Advertising a product as marked down when it is not. o Telling customers that a price increase is shortly due. o Selling goods on credit at high interest rates.

Types of Retail Outlet

Forms of Retail Ownership

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Sole proprietorship: This is a business that is owned by one single person. All expenses, profits and losses accrue to the owner. Partnerships: These are businesses that are made up of two or more individuals who have a financial interest and share all expenses, profits and risks. Limited liability companies: These are businesses that are incorporated and set up according to the Companies Act.

Operational Structure of Retail Stores  

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Independent stores: These are stores that are owned by an individual, that are especially found in rural areas. Multiple/Chain stores: These are limited liability companies or organizations with many branches. These are advantageous as they have buying power, skilled and trained staff and established supply chains. Franchises: This is an option in which one is a franchisor (holding company) grants sole rights to an individual called a franchisee to operate the business under the holding companies name in a specific location.

The Retail Mix

The Four Elements of the Retail Mix

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Merchandise type: Retailers need to tend to specialize in certain product types. Merchandise assortment: This is the number of products offered as well as the number of variations. There are two options, the variety or the assortment. Services offered to their customers. Price: Retailing businesses might choose to differentiate themselves in terms of their low prices.

Food Retailers    

Full service supermarkets: These shops are designed to offer an overall one-stop shopping experience. Hypermarkets: These shops stock a large variety of foodstuffs, as well as a number of household items. Warehouse clubs: These shops operate in a big-box format designed to offer customers a low-prices, no frills environment in metropolitan areas. Convenience stores: These shops are the quick and convenient purchasing stores for a quick shop for small items.

General Merchandise Retailers     

Department stores: These are large stores that offer a wide variety of different merchandise. Discount retailers: These stores are ones that offer a wide range of general merchandise at value-based pricing levels. Specialty stores: These stores offer a limited number of products with high levels of customer service and often high prices. Category specialists: These stores are large specialty stores. Off-price retailers: These retail outlets are stores that are characterized by opportunistic buying practices....