MCS Retail Notes PDF

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Course Review   

2019-10-02

Site on Courselink to buy Harvard Cases Groups determined September 16th (Mon/Wed) groups posted after First Case on October 7th (MON) and October 9th (WED)

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Group Project + Written Presentation Written - ? Presentations - Monday Nov 4th/ Wed Nov 6th  shorter presentations allow you to be more precise with ideas Final Component 7% - Profs idea on your interpretation of the course and your

contributions

2019-10-02 

How do Retailers Add Value  Breaking Bulk o Buying it in quantities consumers want  Holding Inventory o Buy it at a convenient place when you want it

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Providing Assortment o Buy other products all at the same time

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Offering Services

Retailer “Operational Tools”  Customer Service  Store design and display  

Communication Mix **Pricing** o Challenge with price is you can imitate it, know what competitors are charging o Easy to change

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Merchandising assortment Location

Why do People Shop?  Purchase merchandise or services

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Take a break from daily routine Social experience

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Satisfy need for power and status Self- Rewards (makes you feel good) o Where is that boundary between to feel good and being addicted

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Stages in the Buying Process  Same as consumer behaviour  From a retailer standpoint, what am I competing on (ex. price) o Retailer can see what they need to change to make it better

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Retail International  Retail is a simple process but we complicate it  Retail should be about the products and services that a consumer needs

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First Practice Case is October Second, everyone is to attend  “Group Leader”

Price 

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2019-10-02 Price  Economic, sociology + psychology  Price applies to economics How much is a t-shirt?  Material  Labour  Shipping and Handling  In-store Costs  Profit Margin  

What other things to think about? Made in o Consumer (perception based on where a product from determines quality) o Taxes + tariffs o “Am I paying too much because its coming from a specific

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country?” Labour practices Demographics o Discriminatory prices between male and women

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Product Use

What does retailer not control

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Taxes o Variations, ex. children’s clothes o Alberta doesn’t do provincial taxes

What is the Role of Price  Maximize profits  Earn a specific target rate of profit  Maximize sales turnover   

Maximize market share Project an image or competitive position Clear out obsolete stock

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Ways to price o Cost method o demand method  see this in shortages, or fads, sell fast o competitive pricing  based on what your competitor sells o skimming  maximize cost in beginning, and slowly decrease (determine greater margin) o penetration  o combined methods

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o value based pricing  time more valuable, buying at a convenience store, more expensive than go to a grocery store and buy for much cheaper Cost must reflect brand o What customers value most

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What is the Role of Price in Retail  Consumers, Governmental Agencies, Supply Chain Partners, Current and Potential Competitors

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Each has a potential impact on the Retail Pricing Strategy Pricing Strategies  Promotional Pricing 

EDLP (Every Day Low Prices) o Very long term strategy o Very expensive way to do business  Cost to make flyers and distributes  Change prices for a limited time 

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Encourages customers to put off purchases waiting for

better price Mixed Strategy Pricing Strategies – Other o Dynamic Pricing o Predatory Pricing o Price Fixing o Bait and Switch

o Wholesale (warehouse) o Bundling o Psychological o Regional/Int’l  The physical product is exactly the same but with exchange to dollar paying more o Price Gouging  When there are incidents when prices sky rocket   

Implication on control in crisis Ex. Spike in water price in Florida because of hurricane

Examples of Retail Pricing  Walmart pricing ending in 97 cents o Pennies don’t get consumers attention, don’t notice a $11.96 price goes up $11.97

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Value of Retail Observation  Many aspects of shopping can only be illuminated through observational methods

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Grocery Store Checkout Line  Process: moving through the line in terms of o A moment by moment basis, accounts of others’ behaviour 

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(ie. Checkout clerk, others in line) Spatially: Observe the line in terms of o Individual people ( particularly physical -------o How do consumers interact with their products

What is the customer thinking about?  Price  Brand  Package size  Conscious vs. unconscious thought 

Trying to understand consumer behaviour in a shopping environment

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What is interesting about a Foot Locker Stores?  One of the first retailers that got into the role of merchandising for 

footwear Foot Locker lead the way of having a wide selection in athletic wear

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Downside of Foot Locker model:

o what inventory can they carry o the more variety of products you have the harder to determine your forecasting o Physical dimensions of the store  Don’t keep as much inventory as we used to “in the back”  

What is Merchandising?  Consists of all activities to relating to goods (services)  Includes: o Acquiring and Making Available o Place o Time

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A Merchandising Philosophy  Guiding principles for all merchandise (product) decisions  Must reflect o Strategy of the retailer o Target Market o Supplier of capabilities o Costs o Competitors o OTHER

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Products and Product Assortments o Breadth of Products – wide or narrow o Depth of Products – deep or shallow o Product Quality o National vs. Private Label Brands

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Ex. of Kraft Dinner Mac&Cheese vs. PC Mac&Cheese o Which is more profitable as a retailer? o Similar packaging

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Category Killer o Downside of big box store  Too much variety overwhelms consumers  Too much selection, worry you made the “wrong choice”  Takes too much time o Swing between departments stores and big box stores, the one resource we all have that is constrained is time

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Merchandise Acquisition  What to Buy o Convenience Products  buy frequently and immediately  low price  many purchase locations (ex. impulse goods, like a chocolate bar)

o Shopping Products  Buy less frequently  Gather product info 

Fewer purchase locations o Speciality Products  Special purchase efforts  Unique characteristics o Unsought products  New innovations  Products consumers don’t want to think about  Require much advertising and personal selling 

How much to Buy?  MINS and MOQS  Type of product  can test products  Size of store/storage  Physical size of the store has limitations  The source has a lot of electronic products,

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and so does best buy, but best buy has a bigger space to sell the same product Source of Products

Where to Buy? o Efficient way to ship products

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Trains  Dedicated track, balancing off capacity, time and

cost Supplier Selection o Other considerations: Political, social, on-time, performance, exclusivity, etc

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Store Design Objectives  Does the shelf presentation meet the needs of the target customer  Is it logical and appealing ?  

Does it help to differentiate the store? Is it consistent with the role, strategies, and evaluation criteria

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What is the potential of out of stocks, and will customers substitute Consistent with retailers’ image and strategy Positive influence on customer satisfaction and purchase behaviour

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Cost effective Flexible

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Meet needs of disabled

Tradeoff in Store Design --- Ease of locating merchandise for planned Types of Store Layout

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Grid o Efficient from the store standpoint

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Racetrack

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Freeform

Grid Layout  Long gondolas in repetitive pattern  Easy to locate merchandise  Doesn’t encourage customers to explore store o Limited site lines to merchandise  Allows more merchandise to be displayed  Cost efficient 

Used in grocery stores, discount, and drug stores o Exposed to more product

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Most stores tend to go to the right

Racetrack Layout --- Loop with a major  Malls are basically racetracks Freeform Layout

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Fixtures and aisles arranged asymmetrically Pleasant relaxing ambiance doesn’t come cheap – small store

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experience Inefficient use of shape o Lots of empty space

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Ex. jewellery store

Prime Locations for Merchandise ---o Highly trafficked areas  Store entrances Special Considerations  Avoid the “butt-brush” effect  Make merchandise accessible  Allow a transition zone o Walmart has greeters, to reduce theft, when you are welcomed by someone and making contact

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Value of Location within Store  Suppliers pay retailers to get their products in specific stores o Ex. mostly grocery stores Creating a Store Environment

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Store Atmosphere o Colour o Scent  Popcorn has a distinct smell o Music o Lighting  All have an effect on shopping behaviour

Merchandise Forecasting  Not always going to be accurate  Category of Life Cycle o Other considerations: seasonal products,  

geographical/weather related issues Forecasting/Ordering Software o Marketing and sales  inbound logistics --Stockouts o People shop with their phones, take a pic and see if they can find it somewhere else or order online o

Promotion 

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2019-10-02

Promotion  What is the promotion?  AIDA o Awareness o Interest o Desire o Action What is a Shopper?  Consumer can be a shopper, but a shopper doesn’t have to be a  

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consumer The activity of shopping A shopper is the person who is doing the buying o They can be the consumer if they are buying it for themselves, but they may be shopping for another person You have to know ---Shopper takes very little time to make their decision, on average they spend 2.5 seconds to loo at each section, meaning they can at

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best only see half of what is available on the shelf Research tells us that 70% of shoppers decide what to purchase at retail – thus marketing to shoppers is critical o In store advertising and promotions, if this percentage is still accurate o The individual retailer has the opportunity to shape the

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behaviour of the consumer when they are in the store Marketing to shoppers means making their shopping experience more valuable – better in some way – easier, less expensive, less time consuming, more problem solving o Promotional activities help to do that

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What is the purpose of Promotion in Retailing?  Provide Shopper Solutions  “Change” Shopper Behaviour o Repeat Behaviour o Change Behaviour o Get shoppers to spend more time in the store o Get shoppers to visit the store more often o Sell more to the shopper whey they are in the store  IKEA, the more time you spend in the store the more 

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you are likely to purchase Malls

Evaluating Space Productivity  Productivity ratios are output/input o Sales per square foot o Sales per linear foot o Gross or contribution margin per square foot In Store Promotion  In store advertising and promotion delivers your message in the convergence zone ---

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At Shelf Promotional Vehicles

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Coupon Machine Shelftake One

Shelf – Advertising Vehicles  Shelftalk  Scented Shelftalk  Freezertalk o Allows for message deliver in the freezer section 

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Shelftalk Banner

Other Advertising Vehicles  Carts o Cart is seen not only by person pushing the cart but people 

passing it Floortalk o Draws consumers to your brand with dynamic billboard sized

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advertising Showcase o Adheres product packaging

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Shelf Video Strip o All established brands o Retailers are hesitant, just because its shiney and new doesn’t mean generate traffic

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Shelf Sample Boxes  Showcase Sampling  Sample Box  Shelftalk Sampling In-Store Examples:  Kraft Philadephia Ad Pad and Baker Card  Herbal Essences Custom Scented Showcase o Can be effective but also discouraging  Not everyone likes smell, smell can linger  Can attract and repel people   

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Gillette Custom Showcase L’Oreal Custom Shelftalk SoftSoap Sample Box

Signage  One of the oldest methods to capture a customers attention, and to 

direct customer behaviour Best way to judge performance of signage is to watch how

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customers actually react to it Generally – less is more as customers are already being exposed to

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many sensory experiences Fewer signs, therefore more attention to them

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Since on average, all customers like to focus on price, therefore in store specials, as communicated through signage is effective

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Coupons in front of the product on promotion Customers are informed, access to a lot more information, people have become cynical

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Activity Zones  Open spaces in the store which influence the movement of  

customers Sampling Stations Unique store/specific features o Provide extra value to the customer coming into your store over competitors

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Check Out Area  The check out process  A great experience here may overcome a less than enjoyable 

shopping trip Minimizing check out delays

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“opening another check out if more than 3 customers in line” – not

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always possible or profitable Encouraging unplanned purchases Customers come to your store, got the product, and want to leave

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what can we do to make this experience more enjoyable or less dreadful Evolving selection of check out items

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Being able to balance the number and type of items – who is doing the vast majority of the purchases

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Flyers and Online Advertising  Flexibility of what you can do online than in store

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Challenges of Measuring Success  Metric, metrics o In store measuring metrics are  Opportunity to see (OTS)   

Exposure, audience, gross rating profits (GRPs) Target rating points (TRPs) In-store rating points (IRP)

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Reach, frequency, CPM Data can be obtained through technologies such as (in store kiosks, in home scanners, intelligent shopping carts and analyzing the data

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Case Review

2019-10-02

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Logo o Clean and simple o Newest logo, uses US flag colours o Logo itself can have an effect on promotions o The color red implies discount, which goes with JCPenny’s “every day low prices” Fair and square o Square all sides are equal, every size First store open in Wyoming  Go from small store to bigger store,  Lower competition, easier entry 

Distribution and supply chain is harder to get or

only selling what you have  Better to fail in a small place than a larger place o Golden Rule  Fairness with customers  

What concepts are in the case  Price  Brand repositioning  Promotion – store 

Management

o Chain o Financial 

Supply-Chain o **Will start every case with this question***  actual concepts 

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start with the 4 Ps

What do we know about the company? o Department store  “one stop shop” 

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kills the speciality stores that focus on one difficult because you are responsible for a variety of products  and each products distribution and imports all require different things  ex. shipping clothes into the store require

different shipment methods compared to dishwashers o American store, and only available within the US  Fairly straightforward, only dealing with one jurisdiction  Physically limited o Who are their shoppers?  Older women, over 40  Price focused customers  Department store customer profile - they are loyal to the brand

o Public company  Department store own a lot more land/property, which is why people get into them Retailing is a lot about real estate, Evaluate the overall effectiveness of the “Fair and Square” Strategy 

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to date o Everyday low prices o Re-merchandising strategy o Went fairly Big strategy, and was implemented to the masses 

Ellen DeGeneres Promos o 4 commercials  Price – price is just price  Coupons – no coupons cause its everyday low prices  Return policy – adds value to the customer,

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convenience, not just making a sale want to cater you  Pleasing the customer Sale – don’t have to wake up early to ensure a good sale, “low prices” are always available + always in stock

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What is your assessment of the strategic fit of the “Fair and

Square” strategy with JC Penny’s “5Cs” customers, competitors, collaborators, context and company)? What would make you confident that these assumptions are correct? o Collaborators?  Name brand products ex. Martha Stewart  Suppliers –  There happy cause everyday low prices works for them o Time, 2012  just coming off recession

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JCPenny’s doesn’t provide necessary products so wont

be shopping their as much o Downsizing to cover costs  

How can the JCPenny brand be “Targetized” or “Apple-ized” ? o Successful repositioning  To some extent you are adding that quality attribute to JCPenny products by providing more designer brands, same way Apple has a perceived quality to those products

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What should Johnson do now? o Positives  Refreshing the store  Ellen DeGeneres to do promotion o Negatives  Alientated the older loyal customers 

Changes were long term, and didn’t give enough time for them to be effective  No short term changes  share prices were going

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down, financial reports continued to show losses Screams arrogance

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** start with the brand history, helps understand

the business better*** Mixed pricing strategy is difficult Amount of Change

What Happen? o He changed too much, too fast w/o consideration for JCP conservative corporate culture and their traditional, discount driven, customer base o “remote CEO” travellin...