IMT-82: Retail Shopper's Behaviour

IMT-82: RETAIL SHOPPER'S BEHAVIOUR

PART - A

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Q1. 'Marketing is not just about selling a product.' Elaborate.

Q2. What are the major hurdles that fashion retailers need to overcome?

Q3. What are health retailers in India doing to woo customers? Give three examples.

Q4. Discuss the various factors that influence lifestyle.

Q5. 'VALS is one of the most popular tools for predicting customer behaviour.' Discuss.

PART - B

Q1. Which of the following factors are important to which type of retailers? A. Travel time and distance B. Range of merchandise and C. Brand.

Q2. What are the various steps in a purchase decision process? Discuss in brief.

Q3. What are the various types of customers?

Q4. What are the factors that need to be looked into in a market and trade area analysis?

Q5. Make a department store plan giving the locations of various types of products.

PART - C

Q1. In what way are lighting, colour and music important to a department store?

Q2. Describe the retail sales process from the point of view of a salesperson.

Q3. Discuss the various phases of customer service in a retail store.

Q4. Why are long-term customers more valuable for a retailer?

Q5. What are the different steps in planning a retail promotional strategy?

CASE STUDY - 1

CARREFOUR

In this case study, we will analyse why and how Carrefour, one of the largest retailers in the world, failed in South Korea. Part of its failure can be attributed to misunderstanding the shopping behaviour of the Koreans.

Several Asian countries, including South Korea, saw their economies booming in the late 1980s. Taking advantage of this boom, Carrefour started its Asian operations in 1989 in Taiwan. It moved on to Malaysia, followed by China and South Korea.

The Korean economy in the 1980s was very similar to the Indian economy in 2007. There was a growing demand from consumers for a modern shopping experience. The government was slowly relaxing its policies to enable foreign retailers enter a market dominated by mom-and-pop stores, which accounted for a large part of the market share. By 1996, most of the old policies were replaced by new reforms. By 2000, Carrefour had more than twenty outlets. By 2002, around 6000 people were employed in its twenty-five stores in Korea. Its trouble started with the Korea Fair Trade Commission (KFTC) charging the retailer penalty for unfair trade practices. KFTC charged that the retailer had reduced its prices unreasonably, thus affecting local retailers. The year 2003 saw more expansion of Carrefour in terms of stores and products. The higher management was already concerned with the time required for getting approval for a new store. By 2004, the company was the fourth largest chain in South Korea. In 2005, it started a loyalty programme and was planning to introduce financial services. In the same year, the Korean government passed a law restricting wholesale trading through retail formats. This meant Carrefour could not sell its products in bulk to other small retailers. As a result, the average purchase size reduced drastically at the Carrefour stores and its operating profit also dropped. By March 2006, Carrefour decided to sell its stores in South Korea.

The company could not grow according to its expectation in South Korea. There was also severe competition from local retailers as well as foreign retailers like Tesco of UK. Considering its long and successful history, what were the reasons for Carrefour's failure?

The company failed to localize its stores enough. The global look and practices did not go well with Korean customers. The simple warehouse like design of the stores was inadequate. South Korean housewives favour a clean, sophisticated atmosphere along with low prices. Local companies like E-mart knew this well and quickly adapted themselves. Whatever innovations Carrefour brought into its stores and operations were quickly copied. Carrefour, however, did not want to go along with a new partner and paid for it dearly.

Carrefour's store layout and ambience were also not up to the mark. Without any style element, pure low pricing was not a good enough incentive for the Korean buyer. The store interiors were almost bare with some even showing the pipes on the ceiling. Globally, Carrefour shelves are 2.2 metres high, which was too high for the average Korean. Open exposed concrete floors were also new to customers who were used decorated ceilings and covered floors. Tastefulness, an integral part of the Korean culture, was missing in the Carrefour design. Large shopping baskets were not liked by shoppers who preferred frequent, smaller value shopping. Most food retailers have a tasting stand in Korea, where vendors and salespersons request shoppers to try their product before buying. Koreans like this very much. Carrefour stores had too few tasting stands. While most products were stacked or piled together, other retailers kept open boxes for the customer to try, see and then buy.

Korean customers prefer fresh fruit, vegetables and meat while Carrefour kept frozen products. Other retailers created the ambience of an outdoor market within their stores making the shopper comfortable. Butchers sold fresh meat and fish within their stores. This element was missing with the French retailer. Many customers also complained that Carrefour employees were rude and ignorant about their own products. They also complained about noise; dirty, broken shopping carts; long waiting time and unsatisfactory customer service.

Overall, customers were not happy with Carrefour. The retailer made mistakes in understanding the Korean shopper's buying behaviour and decision-making process and had to ultimately close their business.

The retailer, however, learnt from its mistakes and rectified them in their Chinese operations, which proved to be more successful. In retailing, it is difficult to be first time right. Most decisions are improved over time if managers are flexible and willing to change.

Questions:

Q1. What factors, other than salesperson's ignorance of a company's product, can have a negative impact on the minds of the consumer? Discuss.

Q2. In retailing, it is difficult to be first time right. What steps should managers take to get it right the first time? Discuss with an example.

CASE STUDY - 2

CONTAINER STORE

As you may have understood, the crux of retail selling is in creating a bunch of happy customers who will keep on buying (more and more) from a store. All the effort that a retailer makes in supply chain and inside the store is geared towards this effort. The question, however, remains: What creates great customer service and makes them happy? Is it the store, its products, services or something else? Most senior professionals in the retail industry believe that while all these are important, it is the employees who are able to communicate and deliver the uniqueness of a retailer to the customer. So, they feel, ensuring happy employees is the most important step towards having happy customers. Keeping this in mind, many retail chains have designed programmes to recruit and retain talented employees for their stores. One of the leading retailers in the USA, Container Store, has set new standards in creating a happy workforce.

The company was established in 1978 as a storage and organization product retailer. It offered storage solutions for homes and offices for optimizing space and time. The company showed impressive growth right from its inception. After the attack on the World Trade Centre in 2001, most retailers reported negative growth. Container Store continued to grow in such tough times, registering above average sales per square foot. While the industry average was $125, the Store had a per square feet sale of $450. This indicated a highly committed and effective sales force. Industry experts felt that the company's marketing strategy and exceptional customer service was responsible for this continued success. An average store is around 25,000 square feet in area and stocks around 10,000 products. Within the store, there are different divisions for 'office' and 'kitchen' products.

Most employees were happy to work for Container Store. The company had an employee turnover of 14 per cent, the lowest in the US retail industry. The management believed that the people orientation of the company was responsible for its success. The company waited to recruit the right candidate. It used employee referrals for its recruitment where existing employees refer future employees. There was also a strong focus on training. New employees had to undergo 240 hours of formal training, which was much higher than the industry average of seven years. Unlike other retailers, the store did not offer a commission-based pay structure to its sales force. It decided each salesperson's package based on his capability, background and contribution to the company's growth. This open work culture was appreciated by the sales force. The company is open about its employee focus: 'Employees are our greatest asset. Whether it's a salesperson in one of our stores, a buyer at the home office or a member of our distribution center team, the Container Store puts the highest level of attention on our employees' (from the Container Store website)

The benefits given to the employees include the following:

Ø Security in a financially strong company

Ø Good pay and exceptional training

Ø A 40 percent merchandise discount

Ø A special 50 per cent discount on Elfa - their best selling product

Ø Casual work attire

Ø 401 (k) Plan with matching company contributions

Ø Medical/Dental/Vision plan for full-time and part-time employees

Ø An opportunity to work with the best customers ever

Ø Everything that puts The Container Store at the top of FORTUNE magazine's list of 'Best Companies To Work For' year after year

Source: Company website

The company believes that its core competence is customer service. Whenever, a customer walks in, he senses excitement in the air because of the sales people who are self-motivated. In fact, one of the main slogans of the company is 'one great person equals three good persons in terms of business productivity; so the company goes all out to hire great persons. To attract such people, it offers a fun filled work atmosphere as well as the benefits already discussed. All corporate plans are shared with the employees. Employees got congratulatory messages and long service award. Sales contests are held regularly and twelve employees are selected from among 1000 nominations to spend time with the founders.

As you can see, the company's effort to attract, recruit and retain great employess have been rewarded handsomely. Only great employees can give great customer service. No wonder the company was one among the '100 best companies to work for' selected by Fortune magazine for nine years in a row. It has been featured in many books on service management and has received many awards for its innovations. Even today, owners Kip Tindell and Garrett Boone are seen in stores dusting shelves, talking to employees and helping customers carry their bags.

Questions:

1. Can any factor other than customer service, be considered as the core competency of a company? Support your answer with suitable examples.

2. Are there any companies in your locality which have customer service as their core competency? If so, were they successful in motivating the salespersons to share their organizational views?

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