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Retailing and Selling

1.0 INTRODUCTION

Retailing is the selling of goods to the general public, rather than to businesses. The process usually involves sales of relatively small amounts of finished goods, with purchasers motivated by their own consumption needs.

2.0 RETAILING THEORIES

2.1 CYCLIC THEORIES

Cyclic theories suggest that the competitive practices of retailers will follow a repeating pattern, with clear identifiable stages. The Wheel of Retailing theory suggests that retailers will enter the market using a low-cost strategy, accepting low profit margins in order to acquire customers (McNair, 1958). As the retailer acquires customers and profits they move from this entry phase and can begin to invest in the business to generate higher profits, ‘trading up’ through increased product/service ranges, improved facilities/location(s) and increasing advertising etc. In doing so, they may create market space for other low-cost discounters to follow them. Once they become a mature entity, the may become vulnerable to competition due to issues such as higher overhead costs. During this vulnerability phase, businesses may need to renew their strategy to address any declining investment returns, potentially returning to an entry phase approach.

The Retail Accordion Theory suggests that businesses will cycle from the supply of general goods towards more specific products and then back to general goods again. In the early stages of retail, stores would carry a wide range of products to satisfy different consumer requirements. As the environment develops there is increased specialisation, but this trend can be reversed as consumer preferences for convenience leads them to seek a range of goods/services from one store/location.

The Retail Lifecycle Theory seeks to address weaknesses present in the Wheel of Retail Model (cost focus) and the Accordion Theory (goods/services focus). It considers the product lifecycle, suggesting that retail stores will adopt sales approaches that reflect product development, introduction and growth. Once maturity has been reached, the business may decline, or renew its approaches through the development of new/replacement products and services.

2.2 NON CYCLIC THEORIES

Conflict Theory is founded in Dialectic Theory, which in turn reflects Marx’s Theory of Evolution. For progress to be made there must be conflict, with new ideas taking the place of the older ideas and practices. In a retail environment this that businesses and retail formats will be challenged by emerging competition and that if this proves effective established firms will emulate these concepts. For example, established supermarket entities now possess a significant online retailing presence to challenge the development of new competitors in this sales environment. It is argued that the best features of preceding models are likely to be retained and combined with new competing ideas, creating new retail models.

Environmental Evolution Theory proposes that retailers will evolve and change in response to changes in the microenvironment. Those best able to adapt and take advantage of changes in the environment more likely to survive and thrive. For example, the relatively rapid expansion of discount stores such as Aldi and Lidl following a major UK recession.

3.0 RETAILING FORMATS

3.1 STORE BASED FORMATS

Store based formats use a physical premises which the customer visits to choose goods, which they can then (usually) take away. Chain stores are a number of shops owned by the same firm, selling under the same name. Department stores (which may also be part of a chain) use different departments to sell different categories of goods such as fashion, homewares, food and cosmetics. Some departments may be operated as concessions, with other retailers and suppliers renting space within the larger store.

Supermarkets and hypermarkets are large format grocery stores, selling mainly food and consumable household items with categorised/sectional retailing space (e.g. bakery and fresh fish). The intent is to be able to supply a large and extensive product range to maximise consumer choice. In contrast, convenience stores are usually smaller and located within residential areas to serve the local community by selling essential items. Many larger operates seek to compete in this space by operating their own version e.g. Tesco Metro.

Franchise stores are owned and operated by individuals and businesses that pay fees to use the brand name. They also need to operate to shared standards in order to maintain brand integrity and a standardised shopping experience for consumers. Discount stores focus on low prices, stocking a broad range of different product categories sold at discounted rates. They often appear sparse and functional as operating costs are minimised.

Self-service stores are a relatively new concept, but the dominant trend is to now allow

Costumers to move around the store and select their own purchases with minimal support from retail staff. This helps to minimise overhead costs (in comparison to full service models) and it also provides the retailer with the opportunity to create store layout approaches that encourage increased consumer spending through impulse purchases. However, this model is not particularly suitable for low-volume, high-value sales (such as jewellery) as it increases the risk of stock shrinkage (from theft and damage) and minimises the opportunity for suggestive/aspirational selling approaches by retail staff.

‘Category killer’ refers to the way in which a retailer is able to destroy any competition (particularly smaller more independent stores) by using strategies such as cost discounting or innovative sales approaches to gain and sustain a competitive advantage. The adverse impact of online sales on small music and book retailers provides a clear example of the challenges presented.

3.2 NON-STORE FORMATS

Mail order includes most catalogue sales and is a very broad retail category. Orders may be placed in writing, by phone, or through a web site and although the customer-supplier relationship is a remote one, similar consumer legislative and regulatory protections exist. The addition of secure locker facilities at various locations also allows this model to offer greater collection and delivery options to consumers.

Direct mail order and catalogue sales are now under pressure from internet-based approaches where consumers conduct their own research rather than rely on marketing material posted to them. In response, these entities seek to offer more flexible payment terms or multichannel distribution approaches (such as the Argos catalogue) in order to maintain their competitive positioning.

Internet sales now largely eclipse these mail and catalogue-based methods, particularly as they generally require lower overheads and can offer real time information and transactions. Consumer reviews can be published and marketing efforts quickly linked to social media platforms. Modern keyword search algorithms also help to maximise market penetration, particularly when advertising is linked to popular search engines such as Google.

4.0 STORE LAYOUT AND DESIGN

Effective use of space can increase sales and provide a source of competitive advantage - if customers enjoy the experience, they are more likely to return. Layouts can also help increase consumer purchase levels. Grid based layouts (a logical approach, maximising space utilisation), allow the presentation of competitor or complimentary products and highlight any category ‘offers’ the store wishes to display to encourage impulse purchases. In contrast free-form asymmetric layouts may still guide the customers around the store, but create different ‘islands of interest’ to maximise loiter time in the store and enhance the consumer experience. A less common approach is the ‘racetrack’, which creates a floorplan with independent retail spaces which although distinct may also complement the goods sold in adjacent areas. For example, IKEA creates sales spaces built around specific domestic room requirements (e.g. bedroom, kitchen, lounge etc.).

External design features such as window displays and marketing around store entrances are also used to advertise products/services and entice customers to enter the premises. Some larger stores deliberately keep these areas clear in order to allow the best possible view of the wide range of goods offered. Stores may also place specific goods at or near the entrance of the store to influence both consumer mood and shopping decisions e.g. seasonal displays. Atmospheric factors such as colour, music/sound and smell are also employed to stimulate emotions or create conscious or subconscious associations.

5.0 RETAILING MARKETING MIX

5.1 PRODUCT MIX

The product mix or assortment refers to the breadth, depth and variety the retailer chooses to stock. This will change over time reflecting seasonal demands, opportunities to renew and refresh product offerings and market changes. Product range changes may also be undertaken to encourage consumer to trade up, increase spending or to attract customers from competitors.

5.2 PRICE MIX

The price mix refers to the price ranges applied by the retailer. Pricing will indicate the competitive positioning adopted and the markets being targeted. To avoid consumer confusion and to create a clear market position, pricing approaches should remain relatively consistent. It will reflect the nature of market competition, desired profit margin (and associated cost base) and consumer demand. Such an evaluation may support discriminatory pricing, where stores in different locations offer the same goods/services at different prices.

5.3 PLACEMENT MIX

The aim is to ensure that the right products are in the right place at the right time and in the right quantities. This includes the location of the store itself and access issues such as parking are factors that a retailer must also address.

5.4 PROMOTIONAL MIX

The promotional mix considers the promotion of the retail firm and the products they sell. Many retailers will undertake general branding to establish their market presence and this can be supported by ‘loss leaders’ (discounting one product to attract customers into the store where they are likely to buy other items), targeted loyalty schemes (offers that reflect consumer buying patterns) and in-store promotions.

6.0 CUSTOMER EXPERIENCE

The customer experience results from all of their interactions with the retail firm. The process starts when the customer first becomes aware of the firm/brand, through all later touchpoints including after sales service. The experience is made up of many facets which will include rational thought as well as emotional influences and physical or virtual experiences.

The products sold by the store, layout, design and atmospherics should all combine to give the customer a pleasurable shopping experience. If this is achieved, then they are more likely to spend more time in a store, increase their spending levels and return to the retailer again in the future. 

7.0 SALES THEORIES AND TECHNIQUES

The AIDAS framework (attention, interest, desire action) is a seller orientated theory seeking to address the stages a consumer will go through in making their purchasing decision(s). A sales assistant may gain the customers attention through casual conversation, then create interest in the product or service by allowing the customer to handle the item(s). They will then seek to support the customer in preparing for the purchase by creating desire and overcoming objections by emphasising the features and benefits or the product concerned.  As purchase action takes place, the focus is on maintaining good sales service and engagement to ensure that the customer remains satisfied with their decision.

Situation Response Theory is also seller oriented and draws on psychology. A sale is most likely to occur when circumstances are present which are likely to favour the purchase of the product. These can be external (such as weather) or internal (the attitudes and opinions of consumers).  In contrast, the Buying Formula Theory is customer-centric focussing on the logical process a consumer will go through before making a purchase. This is essentially recognising a need or problem, identifying the solution, acquiring that solution and then being satisfied with the result. In this context, sales personnel aid the consumer in identifying the product or service that meets their need and to support/facilitate the sale. 

Behaviour Equation Theory explains the way the purchase processes are made within the context of buyer behaviour, aligning with the Buying Formula Theory.  This model outlines four main influences on the purchase process; drive (the internal stimuli shaping buyer responses), cues (weaker stimuli which still shape decisions), responses (purchase actions) and reinforcement (influences that support the decision made).

8.0 CONCLUSION

The retail environment is highly competitive with multiple, sometimes conflicting theories explaining how/why retailers succeed or fail. Success will be influenced by interactions with potential customers, store layout, atmospherics and in-store experiences.


9.0 REFERENCES

McNair, M.P. (1958). Significant trends and developments in the post war period. In: A.B. Smith (Ed), Competitive Distribution in a Free High Level Economy and its Implications for the University. Pittsburgh: University of Pittsburgh Press.


10.0 BIBLIOGRAPHY

Berman, B. R. (2012). Retail Management, Harlow: Pearson.

Coopey, R., O’Connell, S., Porter, D. (2005). Mail Order Retailing in Britain: A Business and Social History, Oxford: Oxford University Press.

Goworek, H., McGoldrick. P. (2015). Retail Marketing Management: Principles and Practice, Harlow: Pearson.

Heinemann, G., Schwarzl, C. (2014). New Online Retailing: Innovation and Transformation, Wiesbaden: Gabler Verlag.

Ryle, S. (2013). The Making of Tesco: A Story of British Shopping, London. Bantam Press.

Stone, B. (2013). The Everything Store: Jeff Bezos and the Age of Amazon, London: Transworld Publishers.


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