Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Friday, March 13, 2009

Bell Canada: Expanding its Distribution

We have seen in previous cases that multiple distribution channels can sometimes be difficult to manage, however, they can also provide opportunities for a competitive advantage over rivals. Bell Canada recently made a purchase of The Source from Circuit City, doubling their retail presence across Canada. While this may allow the company to better compete with rivals, this could potentially be an unsuccessful venture for Bell.

This purchase will increase Bell’s presence in the retail market as a majority of Canadians live within 5km of one of the stores purchased. Since Circuit City has filed for bankruptcy, this is a cost effective manor of increasing the different places consumers can purchase Bell products. Furthermore, The Source will be operated as a subsidiary of Bell, maintaining the brand image already developed as a leading retailer of electronics. This will allow Bell to expand its product offerings from what is currently offered in its retail stores, to include audio devices, computing technologies and televisions. The Source also carries Rogers’ products including home phone, wireless and Internet devices; this contract will not be renewed with Rogers when it expires at the end of 2009. This presents an opportunity for Bell to grow its brand presence in Canada and expand into complementary electronic devices. This is without having to obtain additional industry ‘know-how’, as the management team from The Source will remain the same.

While this may appear to be a great opportunity for Bell, there are risks associated with the expansion. It will be difficult to ensure the Bell image is maintained when its products are sold through a practically autonomous entity. Bell will have to put in place internal processes to make sure that all sales people are trained appropriately on Bell products and that they treat customers in a manner that is upheld to Bell standards. In addition, advertising of this new distribution channel needs to be effective. Since The Source is keeping its name and brand, consumers may go to the stores expecting to find Rogers products and be disappointed to find they are no longer available. This could tarnish the image of The Source and prevent these consumers from returning in the future for other electronic devices. Furthermore, the particular Bell products available need to be communicated to consumers so that customers do not go to The Source expecting the service and products of that in a regular Bell retail outlet. While Bell is retaining The Source’s knowledgeable management team, Bell is entering into the sale of new products with very successful competitors during a time where consumers are decreasing their spending. Hopefully Bell will be able to learn from Circuit City’s misfortune and turn this into a profitable venture.

Overall this will give Bell the opportunity to better compete with rivals’ distribution channels and increase sales as Bell products become more readily available. It is vital, however, that Bell considers the above risks and mitigates them appropriately to minimize consumer confusion and to increase profitability.

Courtney Lerman

Sources Used:

Wednesday, March 11, 2009

Extinct Term by 2050: "Mom and Pop Stores"?

Just travel down Fanshawe Road and you can count at least 10 big box stores – Michaels, Loblaw, Best Buy, Wal-Mart, Canadian Tire, Chapters. The main reason for Big-Box stores massive growth is because of their RVP which generally focuses on selection, and generally a low price. Another important aspect of big-boxes RVP is convenience – generally you can find what you’re looking for in the store and not have to drive around town looking for different items.

But you may ask, “Then how are there so many small independent retailers who are still in business?” The answer: relationships. Our class this week with Jill from Jill’s table has an astonishing relationship with her customers – it is the fuel that drives her business. Because of the relationships that Jill’s Table has built they are able to charge a premium price. Customers enjoy shopping there because it is a positive experience, and it is a heart-warming experience as they are supporting a local independent business. As well, relationships are extremely important because it costs between five and seven times more to find a new customer than to retain one.[1] Independents without a strong relationship with their customers will not survive in the ever-increasingly competitive marketplace, especially with the current state of the economy and where it is headed.

Big-Box retailers have more power with their suppliers than Mom and Pop stores as they buy in huge quantities with a price discount and can then lower the price to the end consumer. Although Mom and Pop stores do not receive the attractive price discounts, they have the opportunity to have more power in the relationship with customers.

What I have just previously described is how the competitive market has been in the past but it has begun to change and I predict that it will only change even more in the future. What I mean by this is that Big-Box retailers are smart and want an even bigger piece of the pie. Who do they want to take it from? Mom and Pop of course! But aren’t some Mom and Pop relationships unbreakable, ironclad, unable to be copied? Well of course some are but the Big-Box stores will stop at nothing to break that special bond.

So what are Big-Box retailers doing to break that bond? Create, build and manage their own bond and relationship with customers. One common theme emerging with Big-Box retailers is offering the same services which small independent stores offers. For example, Loblaw near Masonville Mall now offers cooking classes and hands out recipes using their President’s Choice ingredients. Not only is this smart because small retailers such as Jill’s Table offers cooking classes and recipes, Loblaw is also creating loyalty by pairing these recipes with President’s Choice products as they are only found at Loblaw locations. I have also noticed that there has been an influx of sampling stations for customers and while customers try a sample there is an interaction between the customer and employee. A personal experience of mine was when I went to Loblaw a couple weeks ago they had a special day promoting Fair Trade Products with tons of sampling stations. I tried a few different products and while I was doing so the employees were all very informative, friendly and passionate. It reminded me of the personal service that you receive from a small retailer. Although this was a special occasion, Big-Box retailers do have the resources and capabilities to offer this type of service more frequently.

Another thing that almost all Big-Box retailers are doing are introducing their own loyalty program or joining another loyalty program such as Air Miles. All stores are jumping on board because it is an excellent way to grow sales and build customer loyalty. However, one of the most valuable things a loyalty program provides a company is the endless amount of information such as who the customer is, what they are buying, what their purchasing behaviour is, how it has changed over time, etc. A company which has its own loyalty program such as Shoppers Drugmart in comparison to American Express whose loyalty program is Air Miles owns the database of information. With a partnership loyalty program retailers have to pay a fee to be part of it and another continuous fee to get the database information. This past summer I worked as a marketing analyst for Petro-Canada in their Petro-Points department and was able to see firsthand what information and insights the database provides, how that information is used and how it impacts decisions.

Large retailers are trying to create a special bond with customers with certain initiatives such as product sampling, offering similar services as small retailers and introducing loyalty programs. However, it is nearly impossible to have the close relationships with customers like at Jill’s Table. But when you think about our quickly changing world do we really ever have that personal interaction and relationship with a retailer? When the class was asked if they have a relationship with a retailer very few people raised their hands. Other examples of how the relationship has been cut out include our cell phones or home phones. We no longer have a personal representative that we know, we are always told to call the call centre instead of going into the store. Another example is at Universities now (although Ivey is an exception because it is a very small school). At UWO you are just a student number and in classes of 500 first year students the professor probably knows the names of a handful of students which would not have been the case 25 years ago. These are just a few examples of how our world is becoming less personal and relationships are disappearing.

While Big-Box stores are slightly changing their RVP so that experience is more important and thus, trying to create a bond with customers like small retailers, it is still not 100% imitable. But our world is also changing in which we are seeing many relationships disappear. This leaves the job of small independent retailers even more difficult as they have sometimes devoted their entire lives to their business and the relationships they have built. Only time will tell what happens to the Mom and Pop stores but if the past 50 years is any indication of what will happen, the next generation won’t even know the term Mom and Pop store.

[1] “Cultivating Customer Loyalty.” AFSD. http://www.afsd.com.au/article/dsbm/dsbm6a.htm

If The Apple Store Sold Clothing - How Retailers Can Align Their RVP's With Their Retail Format

The “Eco-options” case illustrated retailers who have taken advantage of the opportunity to grow their business and minimize their impact on the environment by offering consumers eco-friendly products. Adapting their strategies to this new demand has been a key source of differentiation. However, straying from their original RVPs requires a retail format that matches. “If the Apple Store Sold Clothing…” is a perfect embodiment of this trend. The article outlines the emergence of a new retail concept and brand, SLVR launched by Adidas. The store showcases an eco-friendly collection in a retail format that mirrors its strategy. “The narrow interior of the store is airy and free of unnecessary décor. Simple chairs and seats have spongy square-cut cushions made of felt. A table near the back is made of wood planks bound together with thick belts. Men’s and women’s apparel is divided cleanly along opposite walls, separated into unobtrusive shades of blue, khaki, black and white, displayed on 100 percent recyclable cardboard hangers.” [1]

According to photographs[2], the store is white, mimicking the clean, simplistic appearance of the Apple store, a retail format admired for its proven success. Essentially, the SLVR store is a rectangle with clothing against either wall and a defined aisle with display cases in the center. When the customer turns right as is characteristic of the typical shopper, they will see shelving units between hanging displays. Clothing on the shelves are well organized and only minimal sizes are available, making the store easy to navigate due to the minimized clutter. On the left, hanging units, followed by cubicles, entrenched into the walls and end at the cash register. The cubicle is unique as clothing is organized by color, creating a neat look. The cash is located in a strategic position, prompting customers to shop, as they are required to walk down at least one aisle before arriving at the check out. The hybrid loop-grid layout allows for enjoyable and convenient shopping and may prove to be a key success factor in a retail environment that is refreshingly unique.

SLVR has also launched an online store, allowing the brand to utilize various channels to reach its consumers. Although class discussion concerning Eddie Bauer proved that synchronizing various channels can be difficult; however, SLVR allows for an easy transition between its channels. The virtual store mimics the retail concept; it is easy to navigate as it is similarly compartmentalized and organized. Comparable to their strategic layout, their online store offers a section displaying their most popular items and is highly valued by consumers. The synergy across the two channels suggests that even minimal attempts to enhance the experience component of the RVP whether online or through physical store format can drastically enhance the entire shopping experience, a critical element of differentiation in these tough economic times. although Mimicing Apple’s proven success may be a promising strategy, can applying this it to clothing afford Adidas the same success?

[1] http://www.nytimes.com/2009/03/05/fashion/05CRITIC.html?_r=1&ref=fashion
[2] http://www.highsnobiety.com/news/?s=SLVR