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Managing
Retailing Wholesaling and Logistics
What marketing decisions do these marketing
intermediaries make ?
SHUBHAM VERMA ,
IIT GUWAHATI
TARGET MARKET
Until a target market is not defines ,
consistent decisions cannot be made about
product assortment , décor and
advertisements .and service levels .
Fashion and You , the online retail portal has
found success by offering brands at
discounted prices to its customers
Channels
Fabindia reaches individuals
and institutional buyers with its
unique ethnic offerings through
multiple channels.Some of
which includes Internet , stores
and catalogs
Product Assortment
Product assortment is done on
basis of
1)Length
2)Breadth
(a)Narrow and shallow assortment
– Small lunch counters
(b)Narrow and deep assortment-
Delicatessen
(C)Broad and shallow assortment
– Cafeteria
(d) Broad and deep assortment -
Restaurant
(a) (c)
(b)
(d)
Some possibilities of product assortment :
• Feature Exclusive national brands that are not available
at competing retailers – Wills Lifestyle has added Wills
Luxuria , an expensive men’s wear range .
• Feature mostly private labelled merchandise – Benetton
and GAP mostly carry privately labelled clothing in their
stores.
• Feature surprise or ever changing merchandise – Men’s
Wearhouse offers a surprise assortment of export surplus
at heavy discounts .
Feature blockbuster
distinctive merchandise
events
Bloomingdale’s ran a month
– long celebration for the
Barbie doll’s 50th
anniversary
Feature the latest or
newest merchandise
first
ZARA excels in and
profits from being
first to market with
appealing new looks
Offer merchandising
customising services
Harrods of London makes
custom – tailored suits shirts
and ties for customers in
addition to readymade clothes
Procurement
• Use of computers to track inventory , compute economic order
quantities , order goods and analyse money spent on vendors and
products.
• Use of Radio frequency Identification ( RFID ) to monitor inventory and
track goods in real time .
• Use of Direct product profitability ( DPP ) to measure a product’s
handling costs from the time it reaches the warehouse until a
customer buys it in the retail store.
PRICESAll retailers want
HIGH (turns X earns)
But both do not go together
Most of then fall into :
(1) high markup – lower volume
(2) low markup – higher volume
Walmart has abandoned
“sales pricing” in favour of
Everyday Low Pricing (EDLP)
.
EDLP leads to :
• Lower advertising costs
• Greater pricing stability
• Stronger image of fairness
• Higher retail profits
Store Activities and experiences
There has started a fight between Internet and Store shopping.
Stores can use this fact as a plus point .
Customers can first experience the product and then buy which is not possible in online shopping.
Panasonic and Sony create a Home like environment at their stores to let their customers experience
their home theatre
Communications
• Ads in magazines like Vogue ,
Vanity Fair etc
• Discount coupons
• Membership cards
• Special sales on holidays
(1)
(2)
(1)Consumer packaged goods companies (2) Medical Distributors
Decrease in Warehousing
10 to 15 percent
5 to 7 percent
90 percent
45 percent
More stocking
Faster Delivery
But , Higher Cost
To reduce costs :
• Centralize the inventory
• Use faster transport
• Assembly, packaging , and
constructing promotional display in
the plants itself
• INVENTORY COST: cost related to storing, maintaining its inventory over a period of time.
Increases at an accelerating rate.
• ORDER POINT: inventory draws down(at what level to place a new order).
-Should maintain the balance.
-Balance the risks(stock-out against the cost of overstock)
(1) Order processing cost- stable setup costs, running costs(of items).
a. Low setup cost- stable average cost
b. High setup cost- reduce the average cost.
• Larger the quantity ordered, less frequently an order needs to be placed.
INVENTORY
•ORDER-PROCESSING COST, compared with INVENTORY CARRING COSTS.
• Order processing cost and inventory: carrying costs sum up at different
order levels graph.
Inventory-carrying
cost per unit
Order-processing
cost per unit
Order Quantity
Q”
Cost
per
Uni
t(rup
ees)
Total cost per unit
•POSITIONING OF INVENTORY ITEMS- according to risk and opportunity.
-bottleneck items(high risk, low opportunity)
-critical items(high risk, high opportunity)
-Commodities items(low risk, high opportunity)
-Nuisance items(low risk, low opportunity)
• NEAR ZERO INVENTORY STRATEGY- build for order, not for stock also
known as SOMO, “sell one, make one.”
Criteria to keep in mind
while for shipping :
• Speed
• Frequency
• Dependability
• Capability
• Availability
• Traceability
• Cost
Containerization
consists of putting
goods in boxes or
trailers that are
easy to carry
between two
transport modes.
Piggyback
Airtruck
Fishyback
Trainship
To reduce cost :
• some firms are putting items into shelf-ready packaging so they don’t need to unpack from a box.
To reduce damage :
• the size , weight , and fragility of the item must be reflected in creating
"These slides were created by Shubham Verma( IIT Guwahati ) as part of an internship done under the guidance of Prof. Sameer Mathur(www.IIMInternship.com)"