Essay: Marketing Retail Assignment

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Marketing Retail Assignment

Introduction

The retail industry is generally a very dynamic, fast changing sector. It constitutes one of the main sectors in the economy, in terms of transactions and turnover; as a consequence, it is a highly competitive and sophisticated industry.

Companies have to be constantly monitoring the market, to identify any new trends on a timely fashion and, above all, they have to keep up with the customer’s increasing expectations and changing tastes.

Nowadays, it is becoming more and more difficult and challenging to keep the customer satisfied and loyal – customers’ preferences change quickly.

The lowering of international barriers has led to a considerable increase in the number and type of products available to the consumer.

Consumers have definitely acquired more freedom of choice and this makes them less likely to retain brand loyalty; especially when several substitutes, of equally good quality, are available on the market.

Furthermore technology – the advent of internet – has added a new dimension to the shopping experience. Consumers can easily and fairly quickly compare online, product specifications, price and availability (Deloitte: 2005 Global Powers of Retailing, Jan 2005). Thus, it allows them to gain information faster on the purchase they wish to make.

Consequently, retailers have to be as creative and innovative as possible, in order to be in the position to supply their customers with products, that present new and interesting features, all the time. Retailers have to keep a close watch to demographic changes, in order to better understand and predict consumer behaviour (Deloitte: 2005 Global Powers of Retailing, Jan 2005).

General demographic trends.

The following trends feature mainly in the Western world and provide a useful insight to consumers’ buying behaviour:

• Ageing population
• Higher number of women in the workforce
• Increase in disposable income
• Sedentary lifestyles leading to obesity
• Higher number of ‘home internet users’ – home shopping
• More diverse population: different ethnic origins, calling for multi-cultural marketing
  (Deloitte: 2005 Global Powers of Retailing, Jan 2005).

These are only a few of the trends retailers should take into consideration when developing their product and service offering. As stated in Deloitte’s 2005 Global Retailing Power report:

Most retailers start out using demographics to better understand their current

customers. Grouping or segmenting customers by attributes such as gender, region, generation and ethnic background help retailers in many ways.

Key figures of the UK Retail Market.

In 2004, UK retail sales reached approximately 246 billion (British Retail Consortium). The retail industry, generally, continues to show positive signs of growth.

Major players in the UK.

Currently, UK’s top retailers are: Tesco (1^st in the UK and 2^nd largest in Europe, after France’s Carrefour); (Retail Industry; Marketing Prof) Asda; Waitrose; Morrisons; Sainsbury’s; M&S.

In this essay, apart from Allders Department Stores, we will focus on the marketing strategies of two other major British department stores: Marks & Spencer and Debenhams. This selection was made based on the fact that they have a comparable product base.

In recent years, retailers have been confronted with intense competition from their counterparts and, a few of them have somehow lost momentum; e.g. Marks & Spencer’s market share has dropped in 2004 to 11%, from 0.2% (Annual Report 2004). Mostly affected was their clothing segment.

Marks & Spencer – Overview.

Marks & Spencer is among the top 6 UK retailers. It operates over 300 stores in the UK and is present abroad, in 29 countries. Its international operations consist mainly of franchises but it also owns a number of stores in Hong Kong. M&S has a turnover of over 7.3 billion (www2.marksandspencer.com/thecompany).

Target market.

Marks & Spencer operates in the following segments: clothing; food; furniture and financial services.

Products and services.

• Clothing: Marks & Spencer offers the following product range: womenswear; lingerie; menswear; childrenswear and footwear.
• Food: M&S has a range of fresh foods; ready meals, special-occasion foods and wine.
• Home: they sell designer furniture and have recently launched their first accessories/furniture store, ‘Lifestore’, successfully.
• Financial: they launched the ‘&more’ card which is both a credit card and a loyalty card.
• Online services: through M&S, you can also order and send flowers via the internet.

Competition.

Marks & Spencer’s competitors can be identified as: other department stores; the smaller high street retail shop; furniture shops and supermarkets.

External and Internal factors.

Both external and internal issues influence how the company decides to operate. The external issues will, of course remain the same for all the players in the market.

With regard to Marks & Spencer, we can categorise them as follows:

External	Internal
-Fast changing market and tough trading conditions	-Poor management – failure to recognize and react to changing market trends
-Consumers’ change of taste	-Decentralised marketing function: inconsistent brand image
-War in Iraq – slower economy
-The versus the Euro – imports/exports
-Increased competition locally and from foreign companies

Marks & Spencer – SWOT Analysis.

What follows is M&S’ SWOT Analysis. It highlights the company’s strong and weak points and areas they can improve.

Strengths Reputation/Brand Market position Provides quality products Allows for online shopping	Weaknesses Slow to change Lack of newness Clothing: does not really reflect younger women’s taste
Opportunities Keep renewing their womenswear range Better define target age group (currently, it is not clear: older or younger women?) Stores refurbishment: provide a more upbeat look Use of good CRM systems that can help them keep track of customers’ demands.	Threats Loss of market share as a result of intense competition – competition e.g. in the food sector, is advancing with similar products.

Marks & Spencer have recognised that they haven’t responded quickly enough to consumers’ changing needs and preferences. For instance, their clothing range – especially womenswear – has suffered from lack of novelty. It did not represent the modern woman’s taste for a more casual look. Similarly, in the food section, although they have retained their market position, sales were less significant – this means that competitors are quickly catching up (Interim results presentation 2004).

Currently, Marks & Spencer are planning to inject the business with new, fresh ideas and products, especially in their clothing segment – both women’s and men’s range. Some of the actions being taken, as outlined in their 2004 Annual Report (Chairman’s Statement), are as follows:

• Improving the management team.
• Improving their supply chain.
• Divestment of less profitable businesses.
• Stores refurbishment.
• Plan to make their special foods more available – opening ‘Simply Food’ stores.
• Re-branding of their financial offer – introduced the &more credit and loyalty card.
• Centralisation of their marketing function.

Debenhams – Overview.

Debenhams state that they are, Britain’s favourite department store (Debenhams website). They operate approximately 108 stores across Great Britain and the Republic of Ireland. As far as their international expansion is concerned, they lag behind their competitors. They seem, in fact, to have concentrated their efforts, mostly in the domestic market. Currently, they are present in 15 countries, except Britain, and their strategy for international growth is through franchising only.

Debenhams’ product range includes their own brand as well as international brands. Although, they haven’t really focused on international expansion, like their competitors, they have been doing really well domestically. In fact, it seems they have created the right product mix that appeals to the larger audience.

Recently, they announced their decision to acquire 8 of Allders’ stores (Press Release, 14 February 2005). This is in accordance with their plan of expansion, to open over 200 stores.

Target Market.

They operate in the following segments: clothing; electricals; home & furniture. In addition, they offer ‘wedding services’ and ‘online flowers orders and delivery’.

Products and services.

Their product ranges include: womenswear; lingerie; meanswear; childrenswear; electrical goods (televisions, fridges), furniture and houseware. They also offer wedding services; e.g. they help you maintain a ‘wedding gift list’; through their website you can also order flowers and have them delivered.

Competition.

Their competitors are: other department stores; high street shops; electrical goods shops and furniture stores.

External and Internal factors.

The external issues remain the same as for M&S (please see above). However, the internal issues for Debenhams can be summarised as follows:

Internal Issues

• Strategic focus mainly on domestic growth, slowing down international expansion.
• They’re also undertaking ‘refurbishing actions’ with their stores – newness.

Debenhams – SWOT Analysis.

Strengths Reputation Good product mix and brand selection Young designers – thus better up-to-date with current trends.	Weaknesses They’re ‘less present’ internationally. They’re competing mainly in the domestic saturated market.
Opportunities Further expansion abroad, also possible through some investments, as opposed to franchising.	Threats Competitors in the electrical and furniture sectors: department stores are not always able to provide more competitive prices than specialised shops.

Strategic focus.

Debenhams strategic goals for the next year, are centred around four main topics (Presentation to shareholders, Nov. 2004):

• Space expansion
• Product extention
• Supply chain rationalization
• Cost Control

Allders Department Stores – Overview.

Allders has been around for over 100 years, as one of the largest department stores in the UK. Unfortunately, the company went recently into administration and was put up for sale. During the past few years, Allders incurred major losses, from which it was not able to recover. Currently, 10 Allders shops have been sold to BHS, 6 to Primark and we have already mentioned the 8 stores bought by Debenhams (Allders website/News).

Target market.

Allders operated in the following sectors: clothing; furniture; electrical; toys/games and jewellery.

Products and services.

• Clothing: they were selling top brands – womenswear; menswear; childrenswear and footwear. And also, sports clothes.
• Household goods: those included kitchen and tableware; garden furniture and textiles.
• Appliances: offered a wide range – from electrical goods to white goods. All major brands were supported.
• Children’s department: toys and entertainment.

Competition.

Allders’ competitors were numerous and included: all other major department stores and out of town retail stores. As well as the smaller retail shops and specialized stores.

External and Internal factors.

Obviously, in Allders’ case, external and internal issues contributed greatly to its failure. The company was not able to undercut competition by offering more innovative products and better prices. As stated by Maureen Hinton, Senior Retail Analyst at Verdict Research:

Allders was trying to become a much more fashionable, youth-oriented store, but it inherited a middle-class, middle-aged audience (BBC News).

The external issues are generally adverse trading conditions. The internal issues are listed below:

• Allders didn’t really change its product offer, during the past years.
• Failed to attract younger people
• Perhaps a change in management style was needed.

Allders – SWOT Analysis.

Strengths Long history One of the major department stores Wide range of products and popular brands Well located: both in city centres and in out of town locations	Weaknesses Large debts/losses Not really innovative – offered famous brands but not necessarily what’s in fashion Prices: medium to high
Opportunities Target younger consumers Make prices more accessible to younger consumers Bring new ideas/products into the market Expand to foreign markets, to release local competitive pressure	Threats More innovative competitors with stronger cash flows Specialised shops able to offer better price cuts on their product

Strategic recommendations for Allders.

First of all, it would be fundamental for Allders to adopt a better image, to change it in such a way to appeal to a larger audience.

The image Allders carried was similar to that of an institution’s; it was probably due to its long historical background: Allders had become more like an establishment, among British department stores.

As mentioned above, Allders attracted mainly middle-aged / middle-class groups of people. However, to be able to flourish in the highly competitive retail sector, it had to adopt a fresher, younger and more fashionable look; in order to attract a more diverse audience. It goes without saying, that it is now younger people that, actively participate in the economic activity: they want to have the latest fashionable item and follow new trends closely. On the other hand, older people tend to be more cost conscious and show a marked tendency to choose more carefully, what they will invest their money on. Therefore, Allders firstly had to target younger people more. Secondly, it would have had to adapt their clothing lines to younger people’s tastes: more casual and modern.

Although, Allders did sell famous brands, there were at times one or two seasons old. Additionally, their prices were often slightly higher than high street shops, selling the same brands. As a consequence, especially younger people shopped elsewhere. On the other hand, considering the big losses Allders incurred, it’s not surprise that they would have to maintain higher prices, in order to cover their costs.

Another recommendation to Allders would be to further develop an own brand, and possibly create a special line. Basically, to follow in the steps of Debenhams which hires young designers to produce interesting and innovative designs. Similarly, Marks & Spencer have developed their own brand and have been pretty successful with it. On the contrary, what Allders had to offer was famous brands which are largely available in high street shops, and as we have seen, often at better prices.

Lastly, another strategy, which Allders could have pursued, is that of international expansion, like most retailers. This would have allowed them to tap into new markets and concentrate their resources, perhaps on less competitive markets.

However, once again, for Allders to be able to compete both abroad and domestically, they would have to offer a more unique product mix. As a matter of fact, quite often, designer label clothing is cheaper in other countries.

It is unfortunate that Allders didn’t recognize what needed to be improved in a timely manner. Perhaps due to management’s lack of vision and orientation. They obviously failed to show readiness in revolutionising the organization.

List of references.

1. Marks & Spencer Annual Report 2004
2. Marks & Spencer Interim Results Presentation 2004
3. Debenhams Annual Review 2004
4. Debenhams Shareholders Presentation (November 2004)
5. The Retail Strategy Group Report: Driving Change (April 2004);
6. Department of Trade and Industry
7. Deloitte & Touche, Report: 2005 Global Power of Retailing (January 2005)
8. Marks & Spencer, www2.marksandspencer.com
9. Debenhams, www.debenhams.com
10. BBC News: Allders goes into Administration (26 January 2005)
11. The British Retail Consortium – www.brc.org.uk
12. www.kamcity.com/library
13. Retail Knowledge bank – Source: www.brc.org.uk