2. Session 4: Understanding the Retail Environment- II Outline
Social and cultural forces
Technological forces
Micro-environment
Competition in retail markets
Conclusions

3. Social and cultural forces
Three elements under social & cultural forces:
Demographics
Culture
Consumerism

4. Demographics
 Demographic forces concern changes in populations in terms of size & characteristics
This might change consumer spending.

5. Areas of demographics that concern retailers
Age profiles & age distribution affect D for P. Older people tend to have more money to spend
Working patterns affect spending patterns, shopping behavior & employable workforce
Income & expenditure affect spending power Rising incomes increase, more money to spend on non-essential items

6. World population growth is expanding
World population growth is expanding. Growth of world population attract retailers
Household structure. Changes in household structure have significant implications for retailers
Figure 4.1 World population growth (Source: Jobber, 2010, p. 86)

7. Culture
Culture: a set of characteristics that identify socially acceptable patterns of behavior & social relationships within a given social group
Culture sets the rules by which a society operates & applies to all of the members of the given society
Sub-cultures can emerge & can be influenced by age, ethnicity & geography.
Sub-cultures influence consumer demand

8. Consumerism
 Consumerism is organized action against business practices, deemed 'not in the interest of consumer'
Action taken through Consumer movement, an organized collection of interest groups & companies to protect consumer rights
using corporate social responsibility (CSR)

9. Retailers consider impact of CSR: if high ethical behavior towards customers, employees, P, company is regarded in a positive light.
Customers care about CSR when shopping
Unethical Behaviors low profits
Retailers should avoid practices harming interests of consumers, society & environment

10. Retailers involvement in CSR initiatives :
Environmental protection and sustainability
Community initiatives: Donation to charities & good causes
Educational initiatives: Vouchers from Tesco purchases, e.g. sports equipment
Fundraising initiatives. Awarded grants to charities
Sponsorship programmes

11. Technology
Technologies have influenced lives of individuals & success of industries.
'As global competition increase, organization's performance & strategy become dependent upon IT'
Retail industry is known for its use of technology & by that improving profitability ex; distribution, logistics, staff management

12. Two aspects of technology to explore:
Technology & process of retailing
Remote shopping & online retailing.

13. Technology & process of retailing
Customer data is a great source of information
key to satisfy customers' needs & to remain competitive in the industry.
P offered, customers & suppliers means that retailers generate huge amounts of information

14. (IT) developments important to capture & manage data in retailing are
Electronic point-of-sale (EPOS) systems :cash registers & laser scanners can read a universal P code (barcode found at most retailers), attached to a computer can recognize P.
Electronic funds transfer at point of sale (EFTPOS) systems
To pay with credit or debit cards.
To facilitate cashless payment.
Connected to sales, retailer's central computer, to computers of banks & credit card companies

15. Electronic data interchange (EDI) is the electronic exchange of information between retailer's computer & that of its supplier, ex: orders, delivery, invoices
Stockouts means stock not being available for the customer at the time it is required.
Quick-response replenishment systems. When EPOS systems are combined with EDI, retailers are in effect adopting just-in-time replenishment or quick-response (QR) replenishment methods (Fig 4.2).

16. Ordering of merchandise is based on real-time sales data.
Shorter time between an order & its arrival .
Suppliers improved if retailers adopt automatic reordering.
Advantage of QR is reducing stockouts & inventory, hence improving customers S & reducing retailer costs.
Information flow Fig 4.2 A simplified quick-response replenishment system

17. Remote shopping & online retailing
Internet became essential part of future sustainability
Customers shop online & retailers have own websites
Advantages to buying online:
Purchasing decisions can be made at any time
No queues
Don’t carry your shopping home
Disadvantages to buying online:
Not seeing G prior to purchase
Returning G that do not meet your needs,
Potential security risks

18. The remote shopping market
Online retailing.
Fastest growing business sectors.
Dominate home shopping market, previously dominated by catalogue retailing.
Includes pure play retailers who only sell online, high street retailers with online sales operations & mail order sales.
Other sales channels include mail order, agency, direct selling, door-to-door &TV shopping.

19. Catalogue retailing. TV shopping. Popular
Retailers sell to customers in isolated locations
TV shopping.
Interactive television (iTV) is in early Development stage. Viewers have a variety of viewing options
Familiarity of television technology made it widely accepted as a remote shopping channel than internet

20. Micro-environment
Micro-environment: Actors in retailer's immediate environment that can affect business performance.
Customers: Center - Retailers develop added value through understanding needs of customer.
Competitors. Have a major influence on success.

21. Distributors. Retailers, classed as distributors - pass G from a producer to end user. Can reduce profitability of suppliers by putting pressure on profit margins.
Suppliers. Actors can affect profits of retailers. Increases in supply costs can push up prices & make alternative P appear more attractive.
Retailers monitor behavior of actors in micro-environment to identify opportunities & threats.

22. Competition in retail markets
Reasons retailing is becoming competitive:
Mature retail markets Only way that retailers can grow is to take market share away from each other.
A new retail channel (Internet). Raise customer S expectations & enables competitors to enter retail markets.
Globalization Retailers react to & defend market share from domestic & international competitors.

23. Measures of retail competition
 Measure of competitiveness of a market is degree of concentration in the market.
Measuring concentration: % of total market controlled by largest 4 or 5 five retailers in a sector.
In developed countries: market concentration /dominance by a small number of large players

24. Local retailing dominated by few large retailers – thus small independent retailers force to close.
Alternative measure: number of retail outlets of particular type of retailer per thousand of population
If high ratio, high competitive intensity.
Market is overstored-high competition
Low ratio, market is understored, retailers expand & other are attracted into market.

25. A modification to this method:
Measure total amount of retail space occupied by a particular type of retailer per thousand of population.
To be successful, retailers must identify attractive markets
Considering D & competition from other retailers before deciding on type & location of a new store

26. Other influences on size of trading area:
Population density
Socioeconomic status of consumers
Distance/time to travel
Transportation
Competition from neighbouring stores
Presence of complementary retailers
Geographical barriers

27. Retail trading areas are classified as
Primary trade area: designated as area from which store attracts % of its customers.
Secondary trade area generates % of stores' sales.
Tertiary trade area remaining sales

28. Two techniques for determining trade areas:
Spotting techniques used to determine extent of trading areas for existing stores. Identifying where customers live & deduce customers concentrations Ex: customer surveys
Mathematical models used when deciding where to open a new store. Most used models based on physical laws of gravity.

29. Types of competition
Key: P = producer, W = wholesaler, R = retailer, C = consume

30. Intratype competition
Direct competition between similar types of retailers
With similar forms of operation, types of stores &trading styles.
More similar operations, more intense competition
Retail managers need to work out how to differentiate the business from others.
Intertype competition 
Competition between retailers selling same type of P. Ex, two ≠ bookstores

31. Vertical competition Competition for ≠ parts of distribution channel
Other words, between wholesalers & producers that sell directly to the consumer.
The internet has made this much easier
Ex, Dell offer customised computers direct to end consumer and in doing so cut out several intermediaries (agents, wholesalers and retailers).

32. Forward integration is expansion of a business so that it can distribute products directly to consumer.
Backward integration is expansion of a business towards the manufacturer.
In other words, buying up supply chain to control from manufacturer to end consumer.

33. Corporate systems competition
 Most complicated form of competition
Corporate systems are those where retailer or manufacturer controls everything.
In other words, P are manufactured, distributed & sold by the same company.
What makes this type of competition complicated to understand is how the systems are formed.
When possibility of forward integration & backward integration.

34. Strategic groups
Group of stores (competing in similar way) with similar target markets & similar marketing plans
Aim is to help us understand how competing retailers might behave
Intensity of the competition depends on how close groups are to one another.
Fig 4.4 Strategic groups in UK grocery market