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Research Paper (postgraduate), 2013
15 Pages, Grade: A
This paper aimed at reviewing some retail marketing theories and evaluating its applicability in increasingly narrowing contexts of fashion and fast fashion sectors.
Retail marketing theories focus on attracting customers to different store forms and online sales. The retail mix should be the most suitable one to attract maximum customers to enhance revenue for the firm.
Attracting customers involve efficient customer relationship management to win their trust and loyalty. Companies adopt several methods for this. In online marketing introduction and enhancement of virtual shopping experience will be useful.
Success of retailing depends on service quality which makes customers satisfied. Repeated satisfaction will build loyalty to the firm. This is the aim of all firms. Frequent measurements and monitoring of service quality and customer satisfaction can lead to increasing loyal customers.
Fashion is not a necessity. Its customers are fashion-conscious young generation of modern lifestyles. To be successful, firms need to understand changing fashion tastes and shopping behaviour of customers. Firms use many methods for this.
Fast fashion involves rapid replacement of limited stocks with fresh fashions. The limited stocks are sold out fast resulting in large number of customers going away with unsatisfied demand. This is expected to trigger repeated visits. Unless repeated visits occur in large numbers, fast fashion will fail. Fat fashion firms can use retail marketing theories to achieve this.
Zara is used as a real life example to demonstrate how retail marketing theories can be adapted to the context of fast fashion. Zara’s online sale has not picked up well. Zara needs to be cautious in its store formats to ensure that customers do not go away permanently due to inconvenient formats and layouts. Monitoring customer visits and their conversion into purchases is essential to detect any sign of this at the earliest.
Other aspects of customer relationship are cultural factors, progressing from detection of changing customer tastes to prediction and anticipation, cautious approach on loyalty programmes to avoid micro-targeting, narrowing need-offer gap especially in the case of customers with unsatisfied demand, dealing with unsatisfied customers on one hand and customers dissatisfied with service quality deficits. Zara will get better results if these aspects are implemented. Its current capabilities and decentralised decision-making structure are adequate to solve these issues.
Patil (2012) presented a useful review of retail marketing concepts, theories and issues with special reference to India.
According to the course description of Griffith University, Australia (GriffithUniversity, 2012) retail marketing theory deals with attracting customers to different retail forms and outlets and offers the most suitable retail mix that can facilitate informed choice of customers. The theory is useful for all retailers to develop and sustain their retail brands. Use of the theory includes visual merchandising, store design, price factors and all other aspects of retailer/customer interface.
Theory says that any additional commodity for which marginal revenue exceeds marginal costs should be sold. However, demand response to additional commodities is not easy to measure in retail situation. Joint costs of several commodities are also involved (Balderston, 1956).
In the sections below, retail marketing theories are considered within the progressively narrowing contexts of fashion and fast fashion. Zara is used as a real life example to demonstrate highly context-specific applicability of these theories.
Some dimensions of retail marketing theories are discussed below.
Attracting customers is the main aspect of the theory. This depends on building trust with customers. Retailer’s commitment offering assured quality of goods and services should result in repeated satisfaction of customers. Repeated satisfaction experience builds trust. This commitment-trust theory was proposed by Morgan & Hunt (1994). The relationship is enhanced when assured quality is superior to competitors, when the company follows high standards of corporate culture and ethics, uses effective communications and avoids malevolent intentions. Arguing that current generality claims of relationship theories are invalid, Möller & Halnen (2000) proposed a market-based customer-oriented relationship and network-based inter-organisational relationship. Marketing managers need to anticipate and detect changes in customer behaviour. It will also assist in designing effective promotion campaigns and improve marketing strategies. Data mining of customer behaviour variables, demographic factors and transaction data were used by Chen et al (2005) to develop predictive tools for customer behaviour changes. The authors superimposed monetary spending clusters over BCG customer matrix given in Fig 1. If spending behaviour and its changes are known, products of different prices can be offered as per this behaviour. Thus higher spending customers can be attracted to buying luxury items. However, some negative effects of customer specific retailing (micro-targeting) on competition were pointed out by Ziliani & Bellini (2004). Using loyalty cards for segmentation and targeting small customer sections can affect vertical and horizontal relationships. Most retailers lack the capability required for proper utilisation of the exclusive ownership of such customer information.
The vital role of packaging in protecting the contents, in retailer-customer interface for sales promotion and in putting brand name on it were stressed by Rod (1990). Good packaging strategy depends on understanding target markets, retail and external environment. Social, cultural and technological aspects are relevant external factors. Packaging can affect customer value perception. Although RFID helps to improve customer services (Jones et al 2005), customer privacy and structural concentration are important negative aspects.
Online buying has emerged as a major retail format to break geographical boundaries. However, many people do not prefer online buying as it does not provide the direct social atmosphere of a store and products offered cannot be judged for touch, feel, taste etc. Barlow et al (2004) recognised the need for developing virtual shopping experience of customers using technologies in online marketing.
Service quality and customer satisfaction measurements can be used for comparisons between retail firms as was demonstrated by Chib (2012) comparing KFC and McDonald. These two parameters are major measurement methods of effectiveness of retail marketing strategies.
Yilmaz et al (2012) described a dynamic retail monitoring and control system to analyse the process, time, reliability and cost between producer and consumer. Cost reduction, increased revenue, increased return on investment and improved customer satisfaction is achievable along with efficient inventory control.
In fashion industry, demand is driven by rising personal income, luxury consumption trend and current fashion trends. Profitability is determined by effective merchandising and marketing. Large companies have large range of selections and enjoy scale economies in supply chain. Small firms focus on offering unique products to specific target markets or local markets with better customer service. About 65% of industry revenue is accounted by 50% of the companies at the top. Women’s clothing accounts for 50% industrial revenue, men’s clothing 20% and kid’s clothing 10% and rest by accessories.
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