Functions , roles of retailing
- 1. Functions of retailing From the customer point of view, the retailer serves him by providing the goods that he needs in the required assortment, at the required place and time. 1. Arranging Assortment:manufacturers usually make one or a variety of products and would like to sell their entire inventory to few buyers to reduce costs. Final consumers, in contrast prefer a large variety of goods and services to choose from and usually buy them in small units. 2. Breaking Bulk: to reduce transportation costs, manufacturer and wholesalers typically ship large cartons of the products, which are then tailored by the retailers into smaller quantities to meet individual consumption needs 3. Holding stock: Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacture to regulate production. 4. Promotional support: small manufacturers can use retailers to provide assistance with transport, storage, advertising, and pre- payment of merchandise. The Retailer also serves the manufacturers by 1. Accomplishing the function of distributing the goods to the end users 2. Creating and Managing a channel of information from manufacturer to the consumer 3. Act as a final link in the distribution chain 4. Recommending products where brand loyalty is not strong or for unbranded products. The Role of the Retailer by Pride Scott Wright while the companies profiled in this journal are all on the manufacturing side, the vast majority of our readership will be retailers. Retailers have an indispensable role to play in terms of advancing the cause of sustainability. They function as both the industry’s interface with the community, and at least potentially, as the consumer conscience of the community. They are positioned to acquaint their customers with those companies doing good on behalf of people and planet, and also to buy conscientiously on behalf of the highest values held by their customers. There are many retailers doing great work on behalf of the environment and their communities, but I don’t think any would be offended if we just declared Mountain Equipment Co-op (MEC) the gold standard. MEC is a ten-store Canadian chain. The adjacent sidebar (adapted from the MEC website) could serve as an industry wide statement of values and purpose. Their green building story is utterly inspiring. And
- 2. perhaps best of all, they are the un-Wal-Mart, endeavoring to use their buying power with high purpose. We’ve all observed the way Wal-Mart’s relentless pursuit of rock bottom prices has had deleterious effects for both people and planet up and down the supply chain. This is the inevitable result of a reductionist, one dimensional approach to both value and wellbeing. To paraphrase Theodore Roszak from the forward to the classic book Small is Beautiful by E.F. Schumacher, “What sort of business is it that must, for the sake of market share, hope and pray that people will never be their better selves, but always be greedy social idiots with nothing finer to do than getting and spending, getting and spending?” MEC offers a classic example of the Wal-Mart ethos turned on its head. Instead of using their buying power to effectively drive down wages and environmental standards across the planet, they are actively engaged in both educating their customers on issues of sustainability and lifting the standards of all business partners. (Check out their Supplier Team Evaluation Process (STEP), not to mention their organic cotton initiative.) Every retailer has the opportunity to engage their customers on issues of sustainability (as well as local environmental and social issues, if desired), in a non-invasive way. The idea is to nurture an upward spiral of values that is good for the environment, good for your community, and what the hell, good for your store! One of the objectives of the Green Steps Association going forward is to develop a magazine similar in format and content to this one, but calibrated for a general readership. The magazine would be provided to interested retailers for free distribution to their customers. Values-oriented in-store signage can be a great tool for this purpose, and it’s our intention to invite companies within the industry to collaborate on materials of this nature. Events, from clean-up days to concerts to composting workshops, can also be a great opportunity to connect with the community and provide tools and resources. As a retailer, perhaps your primary tool in terms of affecting change is your buying power. Wield those dollars with a dual purpose—both to meet the needs of your customers and to support the companies in the industry who are doing positive work on behalf of issues you care about. Communicate your specific concerns about issues that are important to you to the companies you work with. Another objective of the Green Steps Association is to establish a web forum where retailers can share information on companies with compelling enviro and social stories, as well as about what’s checkin’ at retail. (Look for this by Summer Market 2005.) It may not be feasible to change your vendor mix abruptly, so think in terms of gradually redistributing it to better reflect “values of sustainability” over time. The speed with which you can do this probably depends to a degree upon the composition of the community you serve, and each retailer will weight aesthetics, performance, price, and “sustainability” somewhat differently. It’s okay to start small! (The most important thing is to start now.) For the retailer, the primary issues related specifically to energy, chemical and material inputs and outputs are relatively few and readily apparent. Here are a few simple things
- 3. that can be done. Develop an energy conservation strategy. Buy renewable energy when it’s an option (go to www.greenmountain.com, or check with your power utility), and maybe even consider installing solar panels, if you have the right climate and the right exposure. Even if you’re not willing or able to use fluorescent bulbs to illuminate the sales floor, you probably have several bulbs in the bathrooms, back room, storage, and office that could be replaced with fluorescent. Use recycled shopping bags with the highest post consumer recycled content you can find, and then find ways to gently discourage their use. Reuse packing and shipping materials and recycle, including cardboard. If you share a building or a shopping center with other retailers, encourage them to work cooperatively with you to do the same. Your chemical use is probably limited, but consider replacing those conventional cleaning products with their counterparts from Seventh Generation, available at your local natural foods store. Seventh Generation also has you covered for recycled toilet paper (buck up, you get used to it) and trash bags. Need fixtures? There’s a company coming on line that will be producing a wide array of retail fixtures from sustainably harvested small diameter logs. (Stay posted.) Ready to replace a threadbare carpet? Consider bamboo or another highly renewable, long lasting option. Consolidating orders with a given vendor can often save cardboard and energy. Encourage employees to use public transportation, walk, or ride a bike to work, and do so yourself, if possible. Sustainability is a gigantic topic, and we’ve obviously barely scratched the surface here. You no doubt have your own list of resource saving ideas, product tips, and modes of community service, so by all means, send them to info@greensteps.org. Hopefully this is just the beginning of a very long conversation. Retailers’ role in package development: More work to do Published in Packaging World Magazine, October 2009 , p. 54 Written by Jim George, Marketing & Design Editor Do retailers aid innovation? Many survey respondents say yes, but CPG companies are less inclined to agree. Progress will require more collaborative input involving suppliers. Continued market-share gains for private-label products are intensifying the uneasy relationship between retailers and owners of national brands. That development could have potentially unsettling ramifications for packaging innovation, judging from responses to an exclusive Packaging World targeted survey. Notably, more than half of the respondents from consumer packaged goods (CPG) companies said growth in private- label products provides opportunities for their national brands.
- 4. CLICK TO ENLARGE This is a significant change from polls in recent years in which CPG companies generally regarded the growth of private-label brands—some retailers refer to them as “own brands”—as a competitive threat. However, nearly one- third of respondents from CPG companies in the PW survey also believe retailers impede packaging innovation. The question going forward is how well retailers can co-exist alongside CPG companies in their dual roles as store operators and brand owners in their own right, functioning as both an ally and competitor of national brands. Whatever happens, the survey results indicate, packaging suppliers can play a role in package development and innovation by identifying opportunities that drive growth across categories. But optimal supplier input can occur, the survey results indicate, only if suppliers are brought earlier into the picture. For their part, material and service providers expressed a different set of concerns. Those who responded to the CLICK TO ENLARGE survey believe they are somewhat caught in the middle of the tug-of-war between private-label and national brands. They expressed apprehension, for example, in providing innovative packaging ideas for a retailer’s own brand at the risk of upsetting a national-brand customer that markets a competing product. Contract packagers that service both private-label products and national brands offer one snapshot of this quandary as they scramble to enforce confidentiality agreements on their packing lines and in their warehouses. Packaging World conducted its on-line survey in July 2009 with the assistance of Packaging & Technology Integrated Solutions . Responses totaled 209, and they broke down this way: 33% were from CPG companies of different sizes, 27% from suppliers, 10% from retailers and the rest from a variety of areas, such as equipment manufacturers, consultants, and industry educators. Top-line results from the data and the analysis show: • 65% of respondents overall say retailers are very or extremely important in product development (see Fig. 1). The figure rises to 67% for retailer respondents and dips slightly to 60% for CPG company respondents. • Asked about package development, 65% of all respondents agreed retailers are very or extremely important (see Fig. 2). 60% of the CPG company respondents and 57% of the retailer respondents concur.
- 5. CLICK TO ENLARGE • About 60% of respondents on the whole said private-label products present an opportunity for their business (see Fig. 3). The figure was 53% for CPG companies and 52% for retailers. The survey results suggest that this belief gives suppliers approval to work on retailers’ products, as there are plenty of packaging-innovation ideas to go around. • About 24% of respondents overall say retailers hinder product and package innovation (see Fig. 4). Among CPG company respondents, 31% agreed, as did—candidly—14% of the respondents from retailers. • Asked who should foot the bill for “retail-ready” packaging, CPG company respondents were more likely than retailer respondents to agree the costs should be shared universally (see Fig. 5). CLICK TO ENLARGE Retailers can’t leverage the same volumes for their own brands as CPG companies can for their national brands, so retailers already pay a premium for stock packaging. They know their shoppers well and are beginning to understand the important role packaging can play in a marketing strategy. It appears that once retailers resolve upfront design and tooling costs, they probably can afford innovative packaging and are willing to pay a premium for it, says Brian Wagner, vice president at PTIS. “National brands don’t value packaging as much and focus on squeezing costs out of packaging,” Wagner continues. “For both retailers and CPG companies, the ones who wake up and understand packaging’s value as a brand differentiator, and as an investment, will win.” How do CPG companies and their supply chains feel about retailers and innovation? From the product manufacturers’ perspective, product category seems to be a factor driving their angst. The assertion by 31% of the CPG respondents (Fig. 4) that retailers sometimes block packaging innovation may owe in part to a perception held by some package-creation teams that retailer acceptance of innovation correlates with private-label penetration in some categories. One view held in package-design circles is that some categories reward innovative packaging more than others. This usually occurs when one or two national brands dominate high-volume product categories such as soup and soft drinks, and bring in shoppers. Prevailing thought is that retailers, therefore, believe in the need to follow the leader to keep sales high.
- 6. Does approach vary? This perception also holds that retailers are more likely to place cost savings over innovation in categories lacking a dominant national brand. In pet food and elsewhere in the store, private-label products have gained more of a foothold with packaging that showcases much-improved printing and graphics, but often includes stock packaging components to keep costs low. That appears to be the lead that national brands must follow in some categories. “Retailers see some categories as not value-driven on the part of the national brands, so they feel they can be much bolder in seeking price concessions from the big brands, and in questioning any innovation that would drive up price,” observes Anne Bieler, a consultant at PTIS. CLICK TO ENLARGE Despite those concerns, the overall view about the impact of private-label growth on packaging development was positive in the survey (Fig. 3). Own brands are seen as jump-starting some product categories and providing opportunities to lift competing brands. And many respondents held the view that packaging suppliers have plenty of valuable, untapped ideas sitting on their shelves for the benefit of all. Effective communications earlier on in package development between retailers, product manufacturers, and suppliers could bring those ideas to the forefront, the results suggest. But others said that already is happening, at least to some degree. Said one respondent who was representative of those in support of retailers: “Sometimes retailers push for innovation that would not come otherwise.” The pro-retailer segment also said the stores’ role provides the benefits of drawing directly from their intimate understanding of their shoppers’ needs and preferences. And they are helpful with designing for space considerations. But those who believe retailers hinder more than help packaging innovation cited the following reasons: inconsistent packaging requirements and restrictions from store to store, thereby increasing production complexity. In turn, the complexity leads to delays and excessive focus on cost. Respondents who fell into this camp lamented that retailers often set restrictions rather than drive innovation. “They typically do not know what they want and are unrealistic in their timing expectations,” was one typical comment in the written remarks. Another said, simply, “They help, they hinder. Depth of knowledge in retailing is the issue.” And a respondent from a winery that supplies retail stores had this to say: Retailers aid package innovation, but they also could add more value to the innovation process “ by helping packaging companies test their innovations.”
- 7. Besides retailer/CPG company competitive tension and insufficient communication, survey respondents cited cost as another obstacle to packaging innovation. Some of the most noteworthy innovation is seen in “retail-ready” packaging, increasingly a retailer requirement in which products are shipped in shelf-ready cartons to reduce in-store labor costs. But disagreement is strong about who should shoulder the costs for retail-ready packaging. Only 42% of respondents overall agreed that costs for such packaging should be shared universally (Fig. 5). Some of those who disagreed believe retailers should bear the burden when requiring packaging that reduces labor costs, but others believe packaging is a function of getting a national brand to market, and primarily should be a CPG company cost. What the future might hold A small core of CPG companies and retailers understand packaging’s impact on product development and branding. More of them understand there is a wealth of research on what makes consumers buy, although some of the information is shared and some is closely guarded. The next steps toward progress, the survey results suggest, should attempt to bring more of that knowledge together for the greater good. A sustained effort should include finding ways to encourage more retailer and CPG company collaboration. Written comments in the survey support the idea that packaging suppliers should play a key role in the dialogue—and earlier in package development—to identify opportunities that drive growth across categories. However, discussions must get past retailer/product manufacturer tension as competitors and also disagreements about price. “By liaisoning with the (retail) buyers to get the departmental heads and seek definitive feedback from customers at the cash register, it means deep teamwork to achieve the best result for all,” one supplier offered. One possibility, a number of the written comments suggested, could be “innovation sessions” in which retailers, product manufacturers, and suppliers brainstorm ideas. Wagner and Bieler agree such a suggestion has merit, but it also presents another challenge. Supplier input is essential, but who is the supplier’s customer? Some suppliers and service providers are reluctant to work with retailers, lest they feed retailers packaging innovation ideas that could upset their CPG company customers. Some packaging materials and service suppliers avoid that conflict by working with retailers or CPG companies, but not both. One of them is The Visual Pak Companies, which provides contract manufacturing, packaging, and logistics services in Waukegan, IL, and Atlanta, GA. “Retailers come to us all the time, but we’ve promised our CPG customer base we won’t compete against them,” said Tim Koers, Visual Pak’s chief operating officer. “In the end, the retailers respect that. We have to be consistent.” “It is clear from all sides that there is an interest in talking to each other. But how do you bring them together?” Bieler concludes. “The voice of the retailer is the buyer, and you need to have a forum with them to get any collaboration going.”
- 8. Role of retailers in quality retailing The Indian retail industry is thriving today. There is stiff competition among Indian and foreign retailers to attract customers and retain them. In this tug-of-war, quality retailing has emerged as the solution. The retailer who provides quality products and services along with a quality shopping experience succeeds in the long run. The quality of the product offered by the retailer has two aspects � the perceived quality and the actual quality. Perceived quality or point of sale quality refers to the image that the customer has about the product while buying it. The actual quality or the point of use quality is the quality of the product that the consumer experiences while using it. The retailer plays a very important role in building up perceived quality with the use of attractive display. The retailer is in direct contact with the customers and so he can play a significant part in helping the manufacturer reduce the gap between actual and perceived quality. The retailer should also ensure quality at the various stages of the supply chain so that the quality of the product is not affected. Another important factor to be considered for quality retailing is the quality of the services provided to the customer. Today�s customer wants a unique shopping experience. Retailers are striving to help customers enjoy their shopping expedition as much as possible. The difference between shopping in India and shopping abroad is reducing gradually, particularly with several large malls coming up all over India. Customer mentality is different in different countries. Particularly in India, there are huge cultural differences among the people of different states, which in turn affect their buying behavior. In this scenario, it becomes necessary for the retailer to survey the customers� culture and expectations so that he can train his staff to appropriately meet these expectations. Visual merchandising, mystery shopping and due diligence testing are three of the major concepts being embraced by retailers to help in attracting and retaining customers. Visual merchandising is the creation of an attractive visual image to induce the customers to buy from a certain retail outlet. Sometimes, it is mistaken to be the same as window display, but in fact, window display is only a very small part of visual merchandising. It deals with the entire image presented by the retail outlet to the customer. It includes several aspects such as the flooring and lighting used in the store, the color co-ordination in the store, uniforms of the staff, the way in which the staff interacts with the customers, mannequins used, the design of the trial rooms � in short, every thing that creates an image about the store in the mind of the customer. More and more retailers are understanding the importance of visual merchandising in augmenting sales and are indulging in it. Visual merchandising is being considered as an investment and not as an expense. Another trend that is emerging in the retail industry in India is that of mystery shopping. Though it is still in the nascent stage in India, many well-known retailers like Nike, Gap, McDonald and Banana Republic are using mystery shopping as a technique to see whether their customers are actually being delivered the products and services of the desired quality or not. A mystery shopper is a person who is paid by the retailer to shop in his store in order to experience how a customer is served. He then reports his findings to the retailer so that measures can be taken as appropriate. Mystery shopping gives an idea about the current service quality provided by the retailer so that steps for improving on it can be taken. It also helps in comparing the quality of
- 9. the products and services with that of competitors. Another important function of mystery shopping is that it helps in checking whether the service provided by the staff matches the firm�s established policies or not. Some firms make use of mystery shopping to identify the employee who provides the best service and in rewarding them. Suitable training modules can also be developed for the staff to overcome flaws in the service system.