RETAIL

MARKETING
MANAGEMENT
PRINCIPLES AND PRACTICE

Helen Goworek
Peter McGoldrick

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 Pearson Education Limited
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ISBN: 978-0-273-75874-7 (print)

978-0-273-75878-5 (PDF)
978-0-273-79481-3 (eText)

British Library Cataloguing-in-Publication Data

A catalogue record for the print edition is available from the British Library

Library of Congress Cataloging-in-Publication Data

Goworek, Helen.
Retail marketing management : principles and practice / Helen Goworek & Peter McGoldrick.
pages cm
ISBN 978-0-273-75874-7 (print) — ISBN 978-0-273-75878-5 (PDF) — ISBN 978-0-273-79481-3 (eText)
1. Marketing—Management. 2. Retail trade. I. McGoldrick, Peter J. II. Title.
HF5415.13.G67 2015
658.8’7—dc23
2015014031

10 9 8 7 6 5 4 3 2 1
19 18 17 16 15

Print edition typeset in 10/12 pt Sabon MT Pro by 71

Print edition printed and bound by L.E.G.O. S.p.A., Italy

NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

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 Brief contents

xiii Preface
xiv About the authors
xv Acknowledgements

1 CHAPTER 1
Introduction to retail marketing management
33 CHAPTER 2
Retail marketing strategy
55 CHAPTER 3
Retail consumer behaviour and market segmentation
83 CHAPTER 4
Retail product and brand management
109 CHAPTER 5
Retail buying and merchandising
136 CHAPTER 6
Retail pricing
161 CHAPTER 7
Retail marketing communications
190 CHAPTER 8
Retail location
216 CHAPTER 9
Retail design and layout
246 CHAPTER 10
Retail customer service
266 CHAPTER 11
Multichannel retailing
289 CHAPTER 12
Legislation and ethics in retailing
311 CHAPTER 13
International retail marketing and emerging markets
331 Glossary
337 Index

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A01_GOWO8747_01_SE_FM.indd 6 11/06/15 4:14 PM
 Contents

xiii Preface
xiv About the authors
xv Acknowledgements

1 CHAPTER 1
Introduction to retail marketing management
2 Introduction
2 Definitions of retailing
4 History and development of retail marketing
9 The development and scope of retail marketing theory and practice
10 Retail industry associations
11 Retailer categories
11 Retail business formats
13 Non-store retailing (home shopping)
13 Retail concepts and theories
14 The retail life cycle
18 Recent developments affecting the retail environment
24 Retailing management
26 The future of retailing
27 Studying retail marketing
27 Exercises and questions
28 References
31 Further reading
32 Case study: Re-evaluating the store

33 CHAPTER 2
Retail marketing strategy
34 Introduction
34 Retail marketing strategy
35 Retail marketing planning
36 Situation analysis
36 SWOT analysis
38 Mission statements
38 Setting goals and objectives
39 Identifying consumers
39 Developing retail strategies
40 Implementation of the marketing plan
43 Internal and external marketing audits
47 Market attractiveness
47 Value chain

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 viii CONTENTS

48 Sources of competitive advantage

48 Market penetration and diversification
49 Portfolio analysis
49 Competitive marketing objectives
50 Marketing strategy in relation to HRM and finance strategy
50 Chapter summary
51 Exercises and questions
51 References
52 Further reading
53 Case study: WH Smith upbeat despite sales doldrums

55 CHAPTER 3
Retail consumer behaviour and market segmentation
56 Introduction
56 Retail consumer behaviour and attitudes
57 Consumer motivation and needs
58 Consumer decision-making
61 Experiential consumer behaviour
61 Influences on consumer purchasing behaviour
66 Customer loyalty
67 Negative consumer behaviour
72 Customer profiles
73 Retail marketing research
76 Chapter summary
76 Exercises and questions
77 References
80 Further reading
81 Case study: Targeting the female consumer

83 CHAPTER 4
Retail product and brand management
84 Introduction
84 New product development
86 The Product Life Cycle
91 Retail product assortment
92 The product/service continuum
93 Brand management
94 Brand names
95 Brand identity and brand image
95 Brand equity
95 Brand extensions
96 Retail brand positioning – perceptual maps
98 Rebranding
98 Branded and own-label merchandise
102 Chapter summary
103 Exercises and questions
104 References
104 Further reading
106 Case study: GLOBAL brands – ups and downs: Consumers luxuriate in shopping
on the web

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 CONTENTS ix

109 CHAPTER 5
Retail buying and merchandising
110 Introduction
110 Buying and merchandising roles
111 Centralised and decentralised buying
112 Organisational buying theories
113 Buying branded and ‘designer’ merchandise
115 Buying own-label merchandise
116 The retail buying cycle
123 Retail buying for online and mail order (home shopping) companies
127 Supply chain management and stock control by retailers
128 Retail space planning and allocation
129 Retail sales forecasting and budget planning
129 Chapter summary
130 Exercises and questions
130 References
132 Further reading
133 Case study: Supply chain – back to the source

136 CHAPTER 6
Retail pricing
137 Introduction
137 Retail market levels – mass market, middle market and luxury
139 Retail pricing – objectives and strategies
141 Implementing demand-based pricing strategies
147 Calculating retail prices
148 Price elasticity
151 The relationship between price and value
152 Markdowns: seasonal sales, reductions and offers
155 Chapter summary
155 Exercises and questions
156 References
158 Further reading
159 Case study: Price Wars threaten to reshape landscape of supermarkets

161 CHAPTER 7
Retail marketing communications
By Helen Goworek and Kristine Pole
162 Introduction
162 Retail marketing communication strategies
162 Retail advertising
172 Public relations
175 Sponsorship
175 Sales promotions
177 Direct marketing
177 Retail marketing communications via digital and social media
181 Word-of-mouth
181 Personal selling
182 Relationship marketing
182 Chapter summary

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 x CONTENTS

183 Exercises and questions

184 References
185 Further reading
187 Case study: Marketing communications at Superdry

190 CHAPTER 8
Retail location
By John Pal
191 Introduction
192 Why are locations important – even in the digital world?
193 A framework for location decision-making
198 What types of locations do retailers use?
203 How do retailers make location decisions?
206 Site-specific issues
209 The planning system
211 Chapter summary
212 Exercises and questions
212 References
214 Case study: Rolling out a new breed of local discount store

216 CHAPTER 9
Retail design and layout
217 Introduction
217 Retail store design
228 Visual merchandising
234 Retail atmosphere
238 The non-store retail selling environment
240 Chapter summary
241 Exercises and questions
242 References
243 Further reading
244 Case study: Anthropologie moves out of London

246 CHAPTER 10
Retail customer service
By Sheilagh Resnick
247 Introduction
248 Characteristics of services
250 Service quality models
253 The service encounter
255 Electronic service delivery
257 Service culture
259 Service recovery
261 Chapter summary
261 Exercises and questions
262 References
263 Further reading
264 Case study 1: Customer service at Boots UK
265 Case study 2: Self-scan checkouts

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 CONTENTS xi

266 CHAPTER 11
Multichannel retailing
By Anthony Kent
267 Introduction
267 Mail order
271 Direct marketing
273 Online retailing
275 Consumer engagement
275 Long tail effect
276 New technology
277 Website design
281 Online communications
281 Fulfilment and delivery systems
282 Multichannel retailing
284 Chapter summary
285 Exercises and questions
285 References
287 Further reading
288 Case study: Asos

289 CHAPTER 12
Legislation and ethics in retailing
290 Introduction
290 Legislation and regulations affecting retailing
292 Pricing
292 Promotion
293 Product
294 Place (location)
295 Legislation and ethics within the extended marketing mix
296 Sustainability and corporate social responsibility
298 Social sustainability
300 Environmental sustainability
302 Chapter summary
302 Exercises and questions
303 References
306 Further reading
307 Case study: Some challenges in product sourcing in global retail supply chains

311 CHAPTER 13
International retail marketing and emerging markets
By Lisa Qixun Siebers
312 Introduction
312 Defining international retailing
314 International retailing and its development
319 The international retail environment: an emerging market perspective
320 Psychic distance
321 Infrastructure and distribution in emerging markets
322 Retail internationalisation strategies
324 Chapter summary

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 xii CONTENTS

325 Exercises and questions

325 References
328 Further reading
329 Case study: Indonesia’s ecommerce industry awakens
331 Glossary
337 Index

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 Preface

Retailing is a dynamic industry in a constant state of evolution, which both reflects and
influences changes in society. As the retail industry is global in terms of the sourcing of
products and their distribution to consumers, it consequently has significant impacts upon
the economy, society and the environment worldwide. Retail marketing is an integral com-
ponent of the retail industry that affects every part of the business. The book explains that
marketing activities are not confined to the marketing department of retailers but take place
throughout the company, with each element of retailing playing a part in brand image to a
greater or lesser extent. There are several other Retail Marketing books available which will
prove useful to studying this subject, but in recent years very few have been published that
concentrate on the European market, which has many different characteristics to US mar-
kets, for example. The content of the book differs from most of its competitors by exploring
in further depth the impact of product development and store design upon retailing.
The main aim of this book is to inform students, academics and practitioners about the
wide range of options that are available in the implementation of Retail Marketing and the
career roles that relate to this discipline, with a view to ultimately optimising retail organis-
ations’ performance and contribution to society. Readers who wish to prepare for a career
in the challenging field of Retail Marketing are encouraged to gain any form of retail experi-
ence they can initially, even if this is not in the same product sector or price bracket that
they would ideally like to work. Jobs that involve direct interaction with customers will pro-
vide a useful grounding as this will help to provide the awareness of consumer needs that is
central to marketing. The book provides a current picture of developments in the arenas of
retailing and marketing, although these are subject to such rapid change that it is important
not to simply read this book in isolation but to also maintain a contemporary perspective
by reading trade journals such as Retail Week and articles about retailing in newspapers.
For this reason, supplementary online materials are available that provide updates on the
topics discussed in the book.
This book is designed with various potential audiences in mind. It can be read inde-
pendently by undergraduate and postgraduate students who are interested in working in
retailing, by academic staff who teach a module or individual lectures on the topic, or by
retail employees who wish to reflect upon current practice in the industry. Those who are
employed in the various stages of the supply chain that provides retailers with its products
may also wish to read it to gain insights into how retailers operate. Each chapter can form
an individual lecture and together they form a comprehensive overview of the key areas
of Retail Marketing from both contemporary and historical perspectives. Examples of both
research and practice feature throughout the book, with interviews and quotes from peo-
ple working in a broad selection of marketing-related roles in the industry, from traditional
customer-facing roles in small enterprises to newer occupations such as Business Intelligence
Manager and Consumer Neuroscientist in large multinational companies. Learning objec-
tives are met through the inclusion of a variety of content including relevant theories, cases
on retailers and research, supported by visual input. Chapters end with a summary of the
key content and retail case studies with questions. The exercises are intended to be used
to provide content for discussion in seminars that are connected to retailing lectures or to
be answered by individual students. Answers to the case study questions and exercises are
available to academics via the book’s online content.

Helen Goworek

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 About the authors

Helen Goworek lectures at the University of Leicester’s School of Management where she
teaches marketing in consumer and business-to-business contexts. Before becoming an
academic she worked in buying for retailers and as a design manager for manufacturers.
She developed the UK’s first Fashion Buying degree course and is currently involved in
research that focuses on retailing and sustainability. Helen has worked on research projects
funded by Defra relating to clothing sustainability and she is a member of the organising
committee for the International Colloquium on Design, Branding and Marketing (ICDBM).

Peter J. McGoldrick is Professor of Retailing at Manchester Business School within the

University of Manchester. He chaired the CRSg then CRIS (Consumer, Retail, Innovation
& Service) Research Centre at MBS from 2007 to 2012 and is the Founder of the Retail
Research Forum, an industry–university collaboration of fifteen years’ standing. His research
has attracted extensive peer-reviewed and industrial funding, including several grants from
the ESRC, EPSRC, DTI, OFT, EU and other funding organisations. Peter has published over
150 books and papers, mainly within the fields of retailing and consumer behaviour.

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 Acknowledgements

Thanks are due to the Retail Marketers from academia and industry who generously
contributed chapters and vignettes or took the time to be interviewed, all of whom are
credited within the book. Many thanks go to Professor Peter McGoldrick for his extremely
valuable input, especially his ability to encapsulate complex systems and relationships into
clear frameworks, and it was an honour to have the opportunity to work with him. From
Pearson I’d like to thank Rachel Gear for instigating the book, as well as Catharine Steers
and Rufus Curnow for their support and patience. In addition, the following people kindly
gave their time to review the book’s content or provided useful information that helped to
enhance it: Dr Ranis Cheng; Dr Andrea Davies; Stuart Harrod; Dr Matthew Higgins; Profes-
sor Peter Lund-Thomsen; Kate Malloy; Lynn Oxborrow; Julia Richards; Dr Julie Rosborough;
Kathy Salisbury; Judy Taft and Professor Paul Whysall. I’d like to thank Christine Gerrard,
Fiona Lambert and Alison Knox for being positive role models at the outset of my retailing
career. I’d also like to thank my family for their support whilst I was writing the book.

Publisher’s acknowledgements
We are grateful to the following for permission to reproduce copyright material:

Figures
Figure 1.3 adapted from Retail Marketing, 2nd edn, Maidenhead: McGraw-Hill (McGoldrick,
P. 2002) p. 294, McGraw-Hill; Figure 1.4 adapted from Retail Marketing, 2nd edn, Maiden-
head: McGraw-Hill (McGoldrick, P. 2002) p. 22, McGraw-Hill; Figure 1.5 after Institutional
change in retailing: a review and synthesis, European Journal of Marketing, 21(6), pp. 5–36
(Brown, S. 1987), Emerald Publishing Group Ltd; Figure  1.6 adapted from Notes on the
retail accordion, Journal of Retailing, 42 (Summer), pp. 29–40, 54 (Hollander, S.C. 1966),
Elsevier; Figure 3.1 adapted from Consumer Behavior, 9th edn, South Western Publishing,
Thomson Learning (Blackwell, R.D, Miniard, P.W. and Engel, J.F. 2000); Figure 4.1 adapted
from Principles and Practice of Marketing, 6th edn, Maidenhead: McGraw-Hill (Jobber, D.
2010) p. 392, McGraw Hill; Figure 4.3 adapted from Principles and Practice of Marketing, 6th
edn, Maidenhead: McGraw-Hill (Jobber, D. 2010) p. 355, McGraw-Hill; Figure 4.7 adapted
from Retail Marketing, Maidenhead: McGraw-Hill (McGoldrick, P. 2002) p. 364, McGraw
Hill; Figure 5.3 adapted from An investigation into retail buying roles and responsibilities
for own-label clothing: A multiple case-study, The Journal of the Textile Institute, 105(7), pp.
760–769 (Goworek, H. 2014), Taylor and Francis; Figure 6.1 adapted from Retail Marketing,
2nd edn, Maidenhead: McGraw-Hill (McGoldrick, P. 2002) p. 378, McGraw-Hill; Figure 6.7
adapted from The strategy of the retail ‘sales’: typology, review and synthesis, International
Review of Retail, Distribution and Consumer Research, 5(3), pp. 303–31 (Betts, E.J. and Mc-
Goldrick, P.J. 1995), Routledge/Taylor and Francis; Figure 7.1 adapted from Berman, B. and
Evans, J.R., Retail Management: A Strategic Approach, 11th edn © 2010. Reprinted and
electronically reproduced by permission of Pearson Education, Inc., New York, New York.;
Figure  8.1 adapted from Toward a contemporary perspective of retail location, Interna-
tional Journal of Retail and Distribution Management, 25(2), pp. 59–69 (Clarke, I., Bennison,
D. and Pal, J. 1997), Emerald Group Publishing; Figure  8.5 adapted from Retail Market-
ing, 2nd edn, McGraw Hill, London (McGoldrick, P. 2002) p. 240, McGraw-Hill; Figure 9.15

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 xvi ACKNOWLEDGEMENTS

adapted from Retail Marketing, 2nd edn, McGraw-Hill, Maidenhead (McGoldrick, P. 2002)
p. 466, McGraw-Hill; Figure 10.2 adapted from A service quality model and its marketing
implications, European Journal of Marketing, 18(4), pp. 36–44 (Grönroos, C 1984), Emerald
Group Publishing Ltd; Figure 10.3 from A multi-item scale for measuring consumer percep-
tions of service, Journal of Retailing, 64(1), pp. 12–37 (Parasuraman, A., Zeithaml, V.A. and
Berry, L.L 1988), Elsevier; Figure 13.1 adapted from Introduction to International Retailing,
in International Retailing: Trends and Strategies, Pitman (P.J. McGoldrick and G. Davies (eds)
1995) London: Pitman/Pearson.

Tables
Table 1.1 from Deloitte Global Powers of Retailing 2015, http://www2.deloitte.com/global/
en/pages/consumer-business/articles/global-powers-of-retailing.html Deloitte Touche Toh-
matsu Limited (DTTL); Table 3.2 from Source of population percentages: NRS, 2014b, http://
www.nrs.co.uk/, National Readership Survey; Table  4.1 with permission from Dr Edmund
O’Callaghan, Head of Department of Retail Management Studies, Dublin Institute of Tech-
nology; Table 5.3 with permission from Rosemary Varley, Subject Director: Fashion Retail
and Marketing at University of the Arts (London College of Fashion), London; Table  8.2
adapted from Toward a contemporary perspective of retail location, International Journal
of Retail and Distribution Management, 25(2), pp. 59–69 (Clarke, I., Bennison, D. and Pal,
J. 1997), Emerald Group Publishing; Table 8.3 adapted from A framework for network plan-
ning, International Journal of Retail & Distribution Management, 22(6), pp. 6–10 (Davies,
M. and Clarke, I 1994), Emerald Group Publishing; Table 8.4 adapted from The importance
of context in store forecasting: The site visit in retail location decision-making, Journal of
Targeting, Measurement and Analysis for Marketing, 2, pp. 139–155 (Wood, S. and Tasker,
A. 2008), Palgrave Macmillan; Table 10.1 adapted from A multi-item scale for measuring
consumer perceptions of service, Journal of Retailing, 64(1), pp. 12–37 (Parasuraman, A.,
Zeithaml, V.A. and Berry, L.L 1988), Elsevier; Table 10.2 from Customer switching behaviour
in service industries: an exploratory study, Journal of Marketing, 59 (April), pp. 71–82 (Keav-
eney, S., 1995), American Marketing Association; Table 13.1 from Retail Marketing Manage-
ment, 2nd ed., Harlow: Pearson Education Ltd. (Gilbert, D. 2003) Pearson Education.

Text
Box on pages 22–24 with permission from Alastair Sneddon, former Business Intelligence
(BI) Manager of Game; Case study on page 32 from Retail Week, 9 September, 2011, www
.retail-week.com, EMAP Publishing Ltd; Box on pages 41–43 with permission from Jonathan
Solomon, Head of CRM & Insights, Vision Express; Case study on pages 53–54 adapted
from WH Smith upbeat despite sales doldrums, Financial Times, 23/01/2014 (Robinson,
D. and Sharman, A.) © The Financial Times Limited. All Rights Reserved; Box on pages
63–65 with permission from Dr Cristina de Balanzó, Consumer Neuroscience Consultant,
Walnut Unlimited; Case study on pages 81–82 from © Mhairi McEwan, Chief executive
and co-founder of Brand Learning, first published in Marketing magazine, March 1, 2014,
http://www.marketingmagazine.co.uk/article/1283341/secret-engaging-women-theres-
no-secret). Reproduced from Marketing magazine with the permission of the copyright
owner, Haymarket Media Group Limited; Box on pages 89–90 with permission from Carol
Cloughton, Senior Lecturer in Marketing, University of Huddersfield; Mini case study on
pages 91–92 with permission from Christina Schmidt, co-founder of Skandium; Box on
pages 99–101 with permission from Dr Edmund O’Callaghan, Head of Department of Retail
Management Studies, Dublin Institute of Technology; Box on pages 101–102 with permis-
sion from Kelly Molson, Marketing Director of Creative Agency Rubber Cheese; Case study
on pages 106–108 adapted from Global Brands – Ups and Downs – Consumers luxuriate in
shopping on the web, Financial Times, 21/05/2013 (Lucas, L.) © The Financial Times Lim-
ited. All Rights Reserved; Box on pages 121–122 with permission from Sarah Deacon; Box
on pages 124–125 with permission from Rosemary Varley, Subject Director, Fashion Retail

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 ACKNOWLEDGEMENTS xvii

and Marketing at University of the Arts (London College of Fashion), London; Case study on
pages 133–134 from Butler, S. ‘Supply chain – Back to the source’ Retail Week, May 2011,
http://retail-week.com, EMAP Publishing Ltd; Box on pages 149–150 with permission from
James Clark, Merchandising Specialist; Case study on page 159 adapted from Grocer price
skirmishes pushed to new level’, Financial Times, 19/03/2014 (Felsted, A. and Sharman, A.)
© The Financial Times Limited. All Rights Reserved; Box on pages 171–172 with permission
from Daniel Dunn of dunnhumby; Box on pages 180–181 with permission from Andrew
Rayner, MD, e-mphasis Internet Marketing, www.e-mphasis.com, Andrew Rayner; Box on
page 206 from http://www.bmstores.co.uk/landlords (date accessed 21 May 2014), B&M
Retail Limited; Box on pages 206–208 with permission from Elina Waehner; Case study
on page 214 adapted from Booker rolls out new breed of local discount store, Financial
Times, 09/07/2014 (Felsted, A.) © The Financial Times Limited. All Rights Reserved; Box on
pages 221–223 with permission from Martin Knox; Box on pages 237–238 adapted from
‘Shop and bop till you drop’, O’Flaherty, M.C., Financial Times, 21 December 2012, http://
www.ft.com/cms/s/2/35fd4fd0-3d86-11e2-9f35-00144feabdc0.html, Financial Times © The
Financial Times Limited. All Rights Reserved; Case study on pages 244–245 from Store
Gallery: Anthropologie moves out of London with new shop in Guildford, Retail Week,
EMAP Publishing Limited; Box on pages 277–280 with permission from Jessica Goudkuil,
www.thebeadboutique.co.uk; Box on pages 297–298 with permission from Christian Smith,
www.inclusi.eu/; Box on pages 317–318 adapted from Business Life – Monday Interview –
Peter Agnefjäll, Chief Executive, IKEA – The self- assembled retail boss, Financial Times,
02/09/2013 (Milne, R.) © The Financial Times Limited. All Rights Reserved; Box on page
318 adapted from Ikea hails recovery in consumer sentiment, Financial Times, 29/01/2014
(Milne, R.) © The Financial Times Limited. All Rights Reserved; Box on page 322 adapted
from Russia customs rules hit online retailers, Financial Times, 24/01/2014 (Hille, K. and
Wright, R.) © The Financial Times Limited. All Rights Reserved; Case study on pages 329–
330 adapted from Indonesia’s ecommerce industry awakens, Financial Times, 21/02/2014
(Bland, B.) © The Financial Times Limited. All Rights Reserved.

Photographs/screenshots
(Key: b-bottom; l-left; t-top)

pp. 4, 5, 88: Christina Goworek; p. 8: Margaret Chaplin; pp.12, 19: courtesy of City Dress-
ing, citydressing.co.uk; p. 21: Alamy Images: © Photos 12; p. 22: Alistair Sneddon; p. 41:
Jonathon Solomon; p. 42: Vision Express; p. 45: Asda Photo; p. 63: Dr Cristina de Bal-
anzó; p. 64: SensoMotoric Instruments GmbH; p. 81: Shutterstock.com: © Art Allianz; p. 85:
Stratasys; pp. 91, 92: Skandium; p. 102: Chaucer Foods Ltd; p. 121: Sarah Deacon; p. 143:
99p Stores; p. 146: Student Lock-In; p. 169: Seven Publishing Group; p. 171: Daniel Dunn;
p. 172: People Tree; pp. 173, 174: Tamsin Brooke-Smith; p. 176: Musgrave Retail Partners
GB; p. 187: SuperGroup Plc; p. 201: Intu Properties plc; p. 202: Aver; p. 205: Matthew
Hopkinson; p. 218: Alamy Images: © Barry Lewis; pp. 221, 222: Martin Knox; p. 225(b):
Fotolia.com: © ostap25; p. 226(t): Morplan Ltd; p. 227(t): Adel Rootstein Ltd; p. 230: Getty
Images: Oli Scarff; p. 232: PlanogramBuilder, © zVisuel SA, www.planogrambuilder.com;
pp. 233, 234: Catwalk Cakes; p. 249: Clare Rayner; p. 253: Rex Features: Paul Grover; p.
258: HappyOrNot Ltd; p. 264: Courtesy of Boots UK; p. 265: Alamy Images: © British Retail
Photography; pp. 278, 279, 280: Jessica Goudkuil; pp. 297: Christian Smith; p. 299(l): Lush;
p. 317: Alamy Images: © epa european pressphoto agency b.v.

Cover image: front: Andrew Meredith

In some instances we have been unable to trace the owners of copyright material, and we
would appreciate any information that would enable us to do so.

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A01_GOWO8747_01_SE_FM.indd 18 11/06/15 4:14 PM
 CHAPTER 1

Introduction to
retail marketing
management
Learning objectives
The objectives of this chapter are to:
● discuss competing definitions of retailing;
● define and categorise store and non-store aspects of
retailing and be able to discuss their similarities and
differences;
● explain the development and scope of retail marketing
theory and practice;
● evaluate theories of retail change.

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 2 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

Introduction
This chapter introduces key themes which will be expanded upon in later sections. It
offers an overview of the history of retailing and the development of retail marketing
theory, then categorises types of retailer and retail business formats before specifying
recent trends which have impacted upon retailing. Retail marketing has achieved an accel-
erated rate of change in recent years, with multichannel retailing and Corporate Social
Responsibility (CSR) at the forefront of this change (Berman and Evans, 2010; Freestone
and McGoldrick, 2008). Additionally, new retail formats are developing, responding to
the demands of increasingly sophisticated consumers in highly segmented markets and
in emerging economies. These factors are counterbalanced by the need for retailers in
various parts of the world to deal with the ongoing repercussions of the global economic
crisis which began in 2008. Retail sales form a significant part of the economy, with the
global retail market being valued at US$10,500 billion in 2010, groceries being worth
63 per cent of the retail sector (Datamonitor, 2011). In recent decades, several large retail-
ers have become more powerful than the manufacturers and brands that supply them
with products (McGoldrick, 2002). Furthermore, the annual financial turnover of the
world’s largest retailer, Walmart, is greater than the gross domestic product (GDP) of
most countries, as it generated revenue worth $476,294 million in 2013 and employs over
two million staff worldwide (Walmart, 2014) (see Table 1.1). Walmart’s financial turnover
is currently close in size to the GDP of Norway at $417 billion and Saudia Arabia at $435
billion in the same year (World Bank, 2012). Although most retailers operate on a small
scale, they form a high proportion of the market and the retail sector is very significant to
the world’s economy. Walmart itself began as a small family store in 1962. Consequently,
it is useful to be aware of the operation of the many small-to-medium enterprises (SMEs),
as they form the majority of the retail sector in most countries and some of them may
become dominant retailers in the future.

Definitions of retailing
Gilbert (2003) defines retail as ‘any business that directs its marketing efforts towards
satisfying the final consumer based upon the organisation of selling goods and services
as a means of distribution’ (p. 6). This typifies the traditional perspective on retailing as
an exclusively business-based enterprise. However, Lusch et al. (2011) offer a slightly dif-
ferent perspective, stating that retailing ‘consists of the final activities and steps needed
either to place a product in the hands of the consumer or to provide a service to the con-
sumer . . . the last step in a supply chain that may stretch from Europe or Asia to your
hometown. Therefore, any firm that sells a product or provides a service to the final
consumer is performing the retailing function’ (p. 4). Both of the definitions offered here
indicate that the scope of retailing incorporates companies selling services directly to
consumers via their businesses. Retailers can be seen to comprise banks and petrol sta-
tions through to firms in the leisure sector, such as restaurants, gyms and hairdressers.
Definitions of retailing have traditionally been reliant on the notion of retailing being
confined to business-to-consumer (B2C) markets. However, retailing is an activity that
is not restricted to taking place within the business sector, as charities and other not-for-
profit organisations also engage in retailing to support their income. The advent of sales
transactions via the internet on websites such as eBay has also resulted in the increasing
power of the consumer-to-consumer (C2C) market. It would be useful to think about this
situation from your own viewpoint, considering to what extent, if at all, you, your friends
and family have moved towards buying in C2C markets in recent years.

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 Table 1.1 Top 20 global retailers

2013 2013
parent parent # 2008–
Retail 2013 company/ company/ countries 2013

M01_GOWO8747_01_SE_C01.indd 3
revenue net retail group group of retail
rank Country revenue revenue net income operation revenue
(FY13) Name of company of origin (US$m) (US$m) (US$m) Dominant operational format 2013 2013 CAGR

1 Wal-Mart Stores, Inc. U.S. 476,294 476,294 16,695 Hypermarket/Supercenter/Superstore 28 3.3%

2 Costco Wholesale Corporation U.S. 105,156 105,156 2,061 Cash & Carry/Warehouse Club 9 7.7%

3 Carrefour S.A. France 98,688 101,844 1,812 Hypermarket/Supercenter/Superstore 33 −3.0%

4 Schwarz Unternehmens Treuhand KG Germany 98,662 98,662 n/a Discount Store 26 6.5%

5 Tesco PLC U.K. 98,631 100,213 1,529 Hypermarket/Supercenter/Superstore 13 2.9%

6 The Kroger Co. U.S. 98,375 98.375 1,531 Supermarket 1 5.3%

7 Metro Ag Germany 86,393 86,393 588 Cash & Carry/Warehouse Club 32 −0.9%

8 Aldi Einkauf GmbH & Co. oHG Germany 81,090 81,090 n/a Discount Store 17 5.5%

9 The Home Depot, Inc. U.S. 78,812 78,812 5,385 Home Improvement 4 2.0%

10 Target Corporation U.S. 72,596 72,596 1,971 Discount Department Store 2 2.9%

11 Walgreen Co. U.S. 72,217 72,217 2,450 Drug Store/Pharmacy 2 4.1%

12 CVS Caremark Corporation U.S. 65,618 126,761 4,592 Drug Store/Pharmacy 3 6.0%

13 Casino Guichard-Perrachon S.A. France 63,468 64,613 2,023 Hypermarket/Supercenter/Superstore 29 11.1%

14 Groupe Auchan SA France 62,444 63,859 1,109 Hypermarket/Supercenter/Superstore 13 4.0%

15 Amazon.com, Inc. U.S. 60,903 74,452 274 Non-Store 14 26.7%

16 Edeka Zentrale AG & Co. KG Germany 59,704 61,399 n/a Supermarket 1 5.9%

17 Aeon Co., Ltd. Japan 57,986 64,271 835 Hypermarket/Supercenter/Superstore 10 3.9%

18 Woolworths Limited Australia 54,457 55,974 2,258 Supermarket 2 4.3%

19 Seven & I Holdings Co., Ltd. Japan 54,258 56,600 1,890 Convenience/Forecourt Store 18 −0.1%

20 Lowe’s Companies, Inc. U.S. 53,417 53,417 2,286 Home Improvement 4 2.1%

3
Source: Deloitte Global Powers of Retailing 2015 (available online at: http://www2.deloitte.com/global/en/pages/consumer-business/articles/global-powers-of-retailing.html)

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 4 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

History and development of retail marketing

Retailing has always been interconnected with consumers’ lifestyles and broader histori-
cal trends. Humans have continually engaged in consumption of different kinds to meet
various needs, including survival and self-esteem, and therefore they have always been
consumers. Retailing is a somewhat recent intervention in consumption. While humans
were initially dependent upon their own small communities for the products they con-
sumed, retailing developed alongside improved communication and transport channels
which helped to connect communities on a wider scale through trading. Consumers both
influence and react to the environmental conditions in which retailing operates by making
purchases which reflect and impact upon the prevailing political, economic, societal and
technological factors of the time.
Retailing has developed from a primarily localised system of providing product and
services, where customers often knew the tradesperson producing the goods personally.
Markets have existed for thousands of years (Evans, 2011) and in mediaeval times they
became widespread, enabling producers to distribute goods regularly across a greater
distance, even across continents in the case of certain products such as spices. For example
in Leicester, the marketplace was established in the late 13th century and it remains in the
same location in the centre of the city over 800 years later (Leicester Market, 2012). By
the 14th century, Britain was dotted with market towns to which many people migrated
for work, often adopting the names of their trade rather than place of birth as surnames,
and retailing therefore had a major impact on society. More than a third of overseas trade
in this period passed through London, reinforcing the significance of the capital city as
a trade centre (Rubin, 2006). Traditional markets remain a central part of the economy
and culture in many cities around the world (see Figure 1.1). The origin of language used
in retailing demonstrates the close relationship between retailing and marketing. Around
1520, the word ‘shopkeeper’ entered the English language, signifying a seller, rather than
a tradesperson, followed by a new verb in the mid-16th century, ‘marketing’, to mean ‘the
act of buying and selling in a central place’ (Byrne Paquet, 2003:19).

Figure 1.1 Valencia indoor market

Source: with permission from Christina Goworek

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 HISTORY AND DEVELOPMENT OF RETAIL MARKETING 5

Figure 1.1 (continued)

Ultimately, traditional methods of selling have developed into a sophisticated, global

network for the exchange of goods and services. The Industrial Revolution began in
the  18th century with the introduction of machinery utilised for mass production.
Additionally, swifter transport via railways in the 19th century led to easier transporta-
tion of goods, helping to facilitate the development of larger-scale retailing. Key retailing
innovations have been introduced in different decades, some of which have proceeded to
dominate the retail market. For example, in the 1940s, the supermarket was an innovative
retail format which was destined to eventually take over from local specialist shops in the
Western world (Blythman, 2004; Byrne Paquet, 2003).
Businesses can adopt either a production orientation or a marketing orientation. A
production orientation tends to have an internal focus, prioritising the technical aspects of
products and manufacturing processes, with marketing being viewed mainly as a way of
divesting the company of the resulting goods, with the emphasis on selling. The develop-
ment of marketing has been entwined with the progress of retailing. Marketing’s origins
lie in the Industrial Revolution, when manufacturing became increasingly productive
due to the widespread use of machinery. This resulted in a higher availability of products
and a wider need for advertising and distribution channels to deliver them to consumers.
Organisations with a marketing orientation take the reverse approach to a production
orientation in that they are outward-looking and consider consumers’ needs first before
seeking potential opportunities to develop products and services to meet those needs. As
Blythe (2009:8) states: ‘The idea of placing customers at the centre of everything the com-
pany does is basic to marketing thought: this idea of customer centrality is the key concept
in marketing’. Retailing is generally far more aligned with a marketing orientation than a
production orientation in that retail organisations very rarely manufacture the products
that they sell and their business is to regularly deal with consumers.
The traditional supply chain starts with manufacturers producing goods then selling
them on to retailers, who in turn sell to consumers. Sometimes intermediaries could be
involved, such as wholesalers who ‘break bulk’ by buying in large quantities and selling
in smaller quantities at a slightly higher price to make it worthwhile for them to offer this
service to small retailers. In effect, brands operate as wholesalers as they mainly have their
products made by manufacturers and then supply it to retailers. However, unlike wholesal-
ers brands provide added value by being responsible for the design and promotion of their

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 6 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

products, thus offering enhanced products and services. Many well-known brands also
have store chains as an opportunity to offer their whole range to customers in a retail envi-
ronment where they have control of the brand identity, with the opportunity to promote
the brand to consumers through their presence on the High Street. Wholesale companies
have become less prevalent in recent years and the dual factors of globalisation and the
internet now challenge the traditional supply chain to create new ways of doing business.
Globalisation and disparities in the cost of living around the world have meant that
much of the manufacture of products sold in the West has moved mainly to the East.
Consequently, companies that used to manufacture in the West have tended to either
close or to become suppliers who still provide a design and product development service
to retailers but arrange their manufacture offshore, rather than being responsible for
production themselves. Suppliers are now more likely to be intermediaries with retailers
than wholesalers are, particularly in the case of medium and large retailers. Furthermore,
the internet has reduced barriers between brands and consumers, so customers can now
quite easily find and order the brands they like online and buy from them directly, without
the intervention of a retailer. Additionally, consumers can now quite easily sell products
to each other that they have made or bought elsewhere, creating a thriving consumer-to-
consumer (C2C) market facilitated by websites such as eBay.

A brief history of retail developments in the UK

A recent history of retail developments is outlined here. The Centre for the History of
Retailing and Distribution provides some useful links on this topic for further investiga-
tion (CHORD, 2014). There is a well-worn phrase that Britain is ‘a nation of shopkeepers’
and the reasons for this are explored by Ugolini and Benson (2002) in their book of this
name, which provides a detailed review of the history of retailing since the 16th century.

1950s In the UK, post-World War II rationing1 was in place at the start of the decade, with growing
economic prosperity towards the end. Retailers were mostly small-scale local stores. Manufacturers
had more power than retailers, owing to the Resale Price Maintenance Act (Gilbert, 2003), allowing
manufacturers to control retail prices. Department stores in urban areas were the major store
groups, selling a broad selection of branded products, targeting the growing groups of consumers
with disposable income.

1960s The Resale Price Maintenance Act was repealed in 1964, allowing retailers to gain more power
in relationships with suppliers. A strong economy allowed consumers to have more disposable
income, thereby increasing discretionary spending power, particularly in the new category of the
‘teenage consumer’. Improved transport systems facilitated the wider distribution of products both
nationally and internationally. Boutique fashion shops gained popularity and several expanded into
store chains.

1970s Supermarkets flourished and own-label retailers opened branches throughout the UK, particularly
in the clothing, homeware and electrical sectors. Mail order catalogues thrived by offering a wide
range of products to consumers on a ‘buy now, pay later’ basis. Stores offered consumers access
to large electrical products such as fridges and colour TVs through conveniently spreading out
payments in rental or hire-purchase arrangements.

1980s Company mergers and acquisitions led to store groups dominating sectors within the UK mass
market, e.g. Kingfisher, Storehouse and the Burton Group. Small-scale retailers declined accordingly
(Blythman, 2004; Gilbert, 2003). Market segmentation became used increasingly by retailers, with
menswear store Hepworth being transformed into Next in 1982, aimed mainly at a demographic of
women in their 30s. Out-of-town retail parks were constructed throughout the UK. Electronic point-
of-sale technology was introduced in stores, speeding up customer queues and the transfer of sales
data to retail head offices.

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 HISTORY AND DEVELOPMENT OF RETAIL MARKETING 7

1990s Supermarkets became more acquisitive, buying up smaller competitors to expand their numbers of
outlets and extending their product ranges. The internet was commercialised in 1990, thus enabling
the introduction of online retailing. A financial recession took place from 1990–1991 in the US
and from 1990–1992 in the UK (Hall, 1993; Taylor and Bradley, 1994), affecting retailers adversely.
Chain stores increasingly dominated the mass market. Store opening times were extended due to
pressure from supermarkets and Sunday opening became legal, although typically limited to six
hours. US retailer Walmart entered the UK market through the acquisition of supermarket chain
Asda in 1999.

2000s Supermarkets expanded into the convenience store sector and small-scale stores continued
to decline. By the end of the decade, the groceries sector was led by ‘the big four’: Tesco,
Asda, Sainsbury’s and Morrisons. Internet retailing became an established distribution channel.
Sustainability became more of a priority for UK retailers, with many companies adopting CSR
policies. Own-label retailers continued to dominate, Marks & Spencer (M&S) being the market
leader in clothing. Low-price ‘value retailers’ expanded, benefitting from the economic downturn
which began in 2008, whereas several long-standing High Street retail chains closed down, e.g.
Woolworth, Dolcis footwear and MFI furniture,2 which had opened in the UK in 1909, 1920 and
1964, respectively.

2010s Social and environmental responsibility have become increasingly significant issues for retailers.
M&S’s wide-ranging CSR policies are influencing competitors to adopt CSR strategies as standard
practice. The economic downturn appears likely to have a longer term impact, resulting in
consumers spending more cautiously and several other well-established retail chains faced closure
in the first half of the decade. Fast-changing digital technology affects the ways in which retailers
acquire, sell and promote their products.
1
Rationing was enforced until 1954 by using coupons to restrict the amount of goods such as food, clothing and fuel that UK citizens could
buy, in order to save the country’s resources.
2
It is notable that MFI was revived in 2011 as an internet-only retailer (Centre for Retail Research, 2012) thereby suggesting that this channel
could be more financially viable for a furniture company than using bricks-and-mortar outlets.

RETAIL MARKETING CAREERS

Margaret Chaplin, owner of an independent retailer

Chaplin’s butcher’s shop has been located in Groby, boy to deliver meat on a bike, until around 1990. When
Leicestershire, since Victorian times. Margaret Chaplin demand reduced and regulations changed so that vans
and her brother now own the shop that was set up by needed to be refrigerated to deliver meat, Chaplin’s
their great-grandfather and grandfather. The shop is stopped offering a delivery service. Margaret says ‘it’s
at the heart of the old village, which has a very long come full circle now that the big supermarkets deliver
and famous heritage, having been the home of two to customers at home’ and she feels that these com-
former queens of England, Elizabeth Woodville (‘The panies ‘have had a massive effect because you can’t
White Queen’) and Lady Jane Grey (‘The Nine Days compete with them on price’. A Co-operative store
Queen’). The building was originally a house rented has also been based in Groby for over 100 years and
by the Chaplins from Lord Stamford, who owned the recently moved into new larger premises next to Chap-
village, until it was bought by the family in the 1920s lin’s, which has impacted upon the butcher’s sales.
for around £500, when it was partially converted into New housing developments have seen the village
a shop. Margaret began working in the business in the grow substantially since the 1980s, along with super-
1970s when it was owned by her father, alongside other markets to cater for the growing population. Margaret
family members. At that time the shop was thriving and has noticed how the changes in women’s lifestyles have
Margaret delivered meat to people in local villages in a affected the way in which they shop over the years. She
van, especially to farms. The business also employed a says ‘women work now and are not in the village during

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 8 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

Chaplin’s shop in the 1920s and the present day

Source: with permission from Margaret Chaplin

the day, whereas my mother didn’t work when she got the meat is and how to cut it the right way’. Margaret
married, except to help my Dad, and that was what the learnt by example from her father, who was trained as
majority of women did. They tend to shop at one place a master butcher and she learnt how to pluck poultry
now rather than walking to different shops and don’t such as partridges and pheasants as a child. Second,
usually take their children into the shop, whereas this she says ‘you’ve got to have something that attracts
used to be commonplace. Our hours are getting less people into the shop, especially if you’re not estab-
and less because there are just not the people around lished there’. Margaret acknowledges the importance
and it’s gradually declined’. of brand heritage when she says ‘we’re lucky that we
Chaplin’s was originally a vertically integrated busi- run on a name that our grandparents started for us
ness in that they raised some of their own animals and and we try to keep up that tradition of being old-
slaughtered meat on the premises until the 1970s. They fashioned. I’m not sure that it’s always worked but we
also sold meat from animals bought from the cattle have tried to alter things slightly, like setting out meat
market in Leicester, as well as making their own sau- on trays in the shop. If we have too much meat cut
sages. However, when regulations about slaughtering though, it starts to go dark and people don’t want it,
meat changed the amount of work needed to alter the even if it’s okay. We can end up wasting it because
premises meant it was no longer viable to do so and it customers have been indoctrinated into expecting
became more economical to buy meat from abattoirs bright red coloured meat in supermarkets, although it
in the area. Things have now changed to the extent isn’t what it would naturally look like’. Third, Margaret
that the meat is bought wholesale from an abattoir in says that ‘a shop needs to have an image and keep
Staffordshire, as it’s now difficult to find in Leicester- it up, especially when it’s in a small community, and
shire. The business also buys cheese from a wholesaler preferably something that’s not already there, or else
in Leicester and used to sell a range of international you can upset all of the other shops. Then the com-
cheeses that were popular because they weren’t avail- munity goes, people don’t talk to each other as much
able at other shops in the village. However, Margaret and a whole way of life seems to disappear. It’s already
has found that the demand has reduced since the NHS happening. If you go in a big supermarket you don’t
began to advise people against eating products such get the personal touch you get in a small shop where
as cheese that are considered to be high in cholesterol. people will say “hello, how are you?”. Customers still
Margaret also cooks fresh pies and pasties in the shop talk a lot to us and you become a person they can
and she required a training certificate to be allowed confide in. You should try and make friends with cus-
to do this. tomers and enjoy what you’re doing, otherwise there’s
For anyone considering setting up a butcher’s shop no point doing this sort of business, or any other sort.
Margaret says there are several different areas to con- Unless you want to work with people in your commu-
sider. First, she says ‘it’s necessary to understand what nity, setting up a shop won’t work’.

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 THE DEVELOPMENT AND SCOPE OF RETAIL MARKETING THEORY AND PRACTICE 9

The development and scope of retail

marketing theory and practice
Retail marketing is defined by Fernie et al. (2003: 105) as ‘the application of marketing
concepts, theories and actions within the context of retail organisations’. Retail mar-
keting has evolved as a discipline alongside the development of marketing theory and it is
possible for marketing principles to be applied throughout the retail sector. Nevertheless,
retailing has some of its own unique systems that differ from marketing in other sectors,
for example in its usage of distribution and logistics. The marketing mix is a classic mar-
keting model, also known as the 4Ps: Product, Price, Promotion, Place. Since the 1960s,
when the model was developed, these four elements have been viewed as the key areas on
which marketers should focus, ensuring that they are blended effectively to communicate
a consistent message to consumers. However, the marketing mix’s dominant position in
marketing theory has been challenged, as the significance of building positive relation-
ships with customers has been at the forefront of marketing theory and practice in recent
years, via Relationship Marketing and Service Dominant Logic, in which services take
priority over products (Vargo and Lusch, 2004).
There is obviously a great deal of emphasis on the ‘place’ element within the retail
marketing mix, since the physical location of stores has long been the focus of retailing.
However, this is beginning to change somewhat since the advent of electronic retailing
(etailing). Consequently, the marketing mix requires adaptation to make it suitable for
the retail sector; for example, the display of products within stores may have a greater
impact than an advertising campaign could. Whereas a high advertising spend is well
suited to manufacturer brands in order for them to communicate a brand image directly
to consumers, advertising is generally utilised less by retailers because the presence of
their stores ensures that customers are frequently reminded of their existence. In 2011,
24 per cent of the UK’s top 100 advertisers were retailers and 6 per cent were banks, with
42 per cent being manufacturer brands (Nielsen Media Research, 2011). In 2013, fast-
moving consumer goods (FMCG) group Procter and Gamble gained second place on the
list with an annual advertising spend of £177 million and the highest spending retailer
was Tesco at £116 million (Nielsen Ad Dynamix, 2013). Retailers that sell manufacturer
brands benefit from the brands conducting their own promotional campaigns to encour-
age sales of their products.
Many authors have argued for an extended marketing mix or 7Ps , developed to
apply more effectively to service organisations. This extended mix adds people, physical
evidence and process and could be said to be more suited to the retail sector than the
traditional 4Ps (Blythe, 2009). Retail marketing theory and practice have been highly
influenced by the widespread development and implementation of marketing strategies
and techniques in the late 20th and early 21st century. In recent years there has been a
drive towards Relationship Marketing, which has been accompanied by increasing criti-
cism of the marketing mix by academics, owing to its product-centred perspective (dis-
cussed further in Chapter 7). The move towards the Relationship Marketing paradigm
potentially lends itself well to retail marketing, since retailing typically consists of numer-
ous and repeated individual customer–retailer transactions (McGoldrick, 2002).
Retail marketing theory is published primarily within marketing and retailing jour-
nals, with a surprisingly limited selection of books being available on this topic, despite
its significance to the global economy. Academic journals are therefore the best locations
in which to find the widest variety of retail marketing literature. The topic of retailing
also extends outside the arena of marketing to be discussed in several other academic
disciplines, sometimes under the guises of consumer culture or shopping, emphasising its
importance as a social and leisure activity. Anthropologists and geographers have taken an
interest in the social impact of shopping centres (Miller et al., 1998) and retailing has also

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 10 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

been discussed from the perspectives of architecture (Luna, 2005), history (Stobart, 2008)
and sociology (Lury, 1996), among others. These subjects relate in particular to retail con-
sumption, architecture and planning, each of which will be covered later within this book.

Retail industry associations

The British Retail Consortium (BRC) is the main trade association for UK retailers, cov-
ering all product sectors, and its mission is ‘to make a positive difference by advancing
vibrant and consumer-focused retail’ (BRC, 2014). Most of the major High Street retailers
are members of the BRC and they fund the organisation by contributing a fee based on
the size and turnover of the company. The BRC runs conferences, roundtable discussions,
webinars and training, as well as producing publications about the sector, many of which
can be accessed for free from their website. Another key function of the BRC is to lobby
government on behalf of the sector.
Retail Trust is another industry-wide body that was founded in 1832. Retail Trust
comprises various charitable initiatives, one of the most well-known being Cottage
Homes, which can support former retail industry workers with accommodation in their
retirement. Other initiatives include retailCORe, which helps people develop careers and
opportunities in retail and retailRIGHT, a project to help develop future retail leaders
with pre-employment training and work experience (see www.retailtrust.org.uk). Rich-
ard Boland, Chief Executive of the Retail Trust, explains how this charity operates and
offers his views on the industry as a whole:
It’s the longest established and largest charity servicing the industry. Our mission is
to improve the lives of all of those involved in retail: yesterday, today and tomorrow,
including all of those supplying retailers, so it’s not just those employed in shops,
it’s also the support services. Retail is the biggest single employment group in the
UK and the nearest equivalent to it would be the National Health Service (NHS).
However, retailing can be quite fragmented and one in four people working in retail
work in small, family-type businesses, so it cuts across the spectrum, ranging from
some of the largest to some of the smallest companies, which makes it unique.
This is an industry with a high element of young workers. A quarter of
16–24-year-olds who are working are employed in retail, so this industry has strong
links with young people. Historically the Retail Trust has been more known for our
retirement homes and now we’re focusing more on younger people. Retail is often
students’ first ever experience of working life and I don’t think we recognise this
enough in the UK and think about how it might affect our views on employment.
We need to think how to make students feel this industry is something worth
staying in, rather than something they just view transiently while they’re being
educated. It’s an industry where you can start as a shelf-stacker when you’re 16
and end up being the CEO. The only way you understand the customer is by being
on the shop floor. Knowing how to serve the customer is more important than
academic prowess, so it’s quite a democratic industry. We can support those who
want to get into retail and can offer benefits such as bursaries and grants. We
could do a lot more of that kind of work if only students would make themselves
known to us. We’re available to support them but they may not even realise that.
Various other industry bodies are available to serve the retail sector. The British Inde-
pendent Retailers’ Association focuses on supporting smaller retailers (see www.bira.
co.uk). The IMRG was set up over 20 years ago to cater for online retailing (see www.
imrg.org). There are also industry bodies concentrating on specific retail sectors, such as
the National Farmers’ Retail and Markets Association (see www.farma.org.uk). As well
as providing useful information and various other forms of support, all of these retail
trade associations can be viewed as potential employers for those interested in a career
that can impact upon many different companies in the retail sector.

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 RETAIL BUSINESS FORMATS 11

Retailer categories
Retail stores can be categorised as described in Table 1.2. Evans (2011) believes that
modern retailing formats such as those listed below have evolved from previous versions,
rather than being completely new innovations. To emphasise this, Evans (2011:9) states
that ‘modern retailing is the accumulation of incremental steps over time’.

Retail business formats

Retailers can be categorised by the business format in which they operate, alongside the
categories of retailers mentioned above. It is viable for a store to fit into more than one
category in Table 1.3. For example, a store could be both a multiple and a specialist, such

Table 1.2 Retailer categories

Retail format Description

Specialist store Offers a narrow line of products, e.g. groceries or electricals

Department store Offers several product lines of mainly manufacturer branded goods,
located in separate departments

Variety chain Sells a variety of product lines, but unlike the department store, these
are mostly under the store’s own label

Supermarket Self-service store selling groceries and household products

Superstore/hypermarket Large self-service store selling groceries and/or other products

Convenience store Small store selling groceries and household products, traditionally
located in residential areas

Catalogue store Offers a wide selection of goods at competitive prices, stocked in a

warehouse and collected by customers from the store

Discount store Offers a discount on standard prices, either by stocking in high

volume or to sell off discontinued products

Outlet store Sells discounted merchandise, usually from previous seasons, outlet
stores are often grouped together in an outlet village

Market trader/stallholder Individual rented stall, usually selling a narrow range of merchandise
at low prices

Table 1.3 Retail business formats

Business format Description

Chain store/multiple Two or more outlets under the same name, product buying usually
centralised

Independent store Individual store or small chain of stores which does not belong to
another company

Retail co-operative A retailer which is owned by its members and has centralised buying

Franchise A franchisee runs a store via a contract to sell the franchisor’s goods
or services, under the name of the franchisor’s company

Concession A retailer which rents a proportion of space within another retailer’s

store

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 12 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

as sports footwear chain ‘Foot Locker’. While chain stores and independent stores are
mutually exclusive, co-operatives are usually chain stores and independent retailers with
a small number of outlets can be chain stores.
A recent development in retailing has been the use of temporary or ‘pop-up’ shops (see
Figure 1.2). This is when a store is rented on a short-term basis, often for the purpose of
promoting a specific brand which does not ordinarily have its own stores. Pop-up shops
became popularised in the mid 2000s and fashion brands in Japan were early adopters of

Figure 1.2 Pop-up store

Source: with permission from City Dressing, www.citydressing.co.uk

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 RETAIL CONCEPTS AND THEORIES 13

this trend. The wider availability of retail premises, owing to the financial climate and
store closures, has made this a viable option to gain brand recognition or as a trial run
for opening a permanent store (Dean, 2012).

Non-store retailing (home shopping)

Non-store retailing via home shopping was heading into decline (Mintel, 2009) until online
retailing began to revive the notion that shopping does not need to be confined to bricks-and-
mortar retailers. Methods of non-store retailing can often fit more conveniently with consum-
ers’ lifestyles and, in the case of party plan, can be combined with the customer’s social life.
Mail order catalogue retailing is based on purchasing products from a catalogue which
is posted to the customer or which is distributed via local agents who make a commission
on sales.
Direct mail is a method of targeting specific customers. Brochures featuring the com-
pany’s products are posted directly to potential customers via a mailing list or products
can be purchased from an advertisement in newspapers or magazines which appeal to
the retailer’s target customers.
Etailing (online retailing) takes place via transactional websites of multichannel retailers
(i.e. those which also have bricks-and-mortar stores and/or catalogues) or pure players
(who only offer their product range online).
TV retailing includes sales via specialist sales channels such as QVC and ‘infomercials’
which sell products directly from advertisements.
Party plan and door-to-door selling involves personal selling via an agent for the
retailer, e.g. Tupperware, Ann Summers, Avon and Amway.
Consumer-to-consumer retailing covers informal methods of retailing, where the
seller and purchaser engage in events including car boot sales, yard sales and jumble sales
or sell via classified advertisements in the press. This can also include informal etailing
such as auctioning products on eBay.
Automatic vending refers to convenience and snack products being sold via vending
machines, often bought by customers on impulse.

Retail concepts and theories

Retailing literature has relatively few academic models in comparison to other elements of
marketing, since its emphasis has been on more practical considerations. The retailing theo-
ries which are widely published are from previous eras and may be less applicable to today’s
dynamic retailing environment, which has been influenced by recent rapid developments
in technology, amongst other factors. These theories are included here largely to illustrate
the historical background and development of the academic study of retailing. However,
as with all models and theories they can offer food for thought to influence your thinking
about retail development and change. There is no one correct answer, theory or interpreta-
tion; some ideas are more persuasive than others. A major impediment in accounting for
retail change is that retailing has not traditionally been a very theoretical area of marketing.
Three cyclical theories are discussed here: the retail life cycle, the wheel of retailing and the
retail accordion, which are then followed by conflict theory. There is much scope for new
models to be introduced in the retailing literature to relate to the ways in which the industry
currently functions and how it will operate in the future. By reviewing established theories
of retailing the opportunity is for you to identify where the models seem less relevant and
could be amended. If possible, you should think about how you would improve and update
the models.

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 14 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

High

Supplier Mutual
dominates interdependence

Retailer
dependence

Figure 1.3 Dependence and

Relative Retailer power in retailer–supplier
independence dominates
relationships
Source: adapted from McGoldrick, P.
Low (2002), Retail Marketing, 2nd edn, based
upon Hogarth-Scott and Parkinson, 1993
and Kumar, 1996. © 2002. Reproduced
Supplier with the kind permission of McGraw-Hill
dependence Education. All rights reserved.

Retailer power
During the 19th and early 20th century manufacturers were usually viewed as being
dominant over retailers, due to the power they achieved through their relatively large scale
in comparison to retailers. This has changed more recently, as retailers have increased in
size, with many being among the largest organisations in the world and the balance has
therefore shifted in some cases. However, the retail industry has companies of a variety of
sizes and this is a key factor that determines the power of the retailer in its relationships
with suppliers. Another important factor is status, so for example a supplier or retailer
that is viewed as particularly innovative or upmarket in its field can be relatively power-
ful without having a high financial turnover, since it may have a high level of influence.
Retailers and suppliers are mutually dependent to differing extents and this is reflected
in the four different quadrants of Figure 1.3 that can vary from the supplier or retailer
dominating the relationship. In between these two extremes, retailers and suppliers can
either be relatively independent of each other or be mutually interdependent.

The retail life cycle

The retail life cycle (RLC) (see Figure 1.4) is similar in style to the product life cycle (see
Chapter 4 Retail product and brand management), based on the theory that retailers
progress through four different stages from introduction to decline.
● Introduction: at this stage, retailers require a unique selling proposition which differ-
entiates them from the competition, such as an exclusive product range or an offering
similar to competitors but sold at lower prices or with better customer service. For
example, Japanese retailer Uniqlo sells a mix of classic and fashionable clothing in
numerous colours, with similar products and store display to its more expensive US
competitor ‘Gap’.
● Growth: this is the stage when retailers increase their sales volume and aim to become
profitable; for example, Amazon.com was in business for several years before it grew
sufficiently to enter this stage and became a profitable enterprise.
● Maturity: after growth, retail sales can level off and reach a plateau. This can be a long
stage for successful retailers which implement effective marketing planning. Originally

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 THE RETAIL LIFE CYCLE 15

Introduction Growth Maturity Decline

Cash flow £/$

Level of
sales
Retail
development

Time

Figure 1.4 The Retail Life Cycle

Source: adapted from McGoldrick, P. (2002), Retail Marketing, 2nd edn © 2002. Reproduced with the kind
permission of McGraw-Hill Education. All rights reserved.

introduced in the 1930s in the US (Byrne Paquet, 2003) self-service supermarkets cur-
rently fall into this category and mobile phone retailers have reached this stage in the
UK within three decades.
● Decline: once retail sales begin to drop and profitability is low, the company heads
into the decline stage. For some retailers, this can be a very sudden process with stores
closing for good, as happened with the Woolworth chain in 2008, despite having
traded in the UK for 99 years. More often, the decline can be gradual, taking place
over a number of years, resulting in branch closures and a reduction of the product
lines on offer.

After retailers reach the decline stage it is possible that they will become popular
again and start again at the introduction stage. For example, the pawnbroker was a very
traditional form of shop, offering consumers loans secured against second-hand goods.
Pawnbrokers had virtually disappeared from the High Street but have now resurfaced in
the UK in a new, updated form, buoyed by the recent recession. Coffee shops were origi-
nally popular during the 1950s but were considered unfashionable from the 1970s until
chains such as Starbucks and Caffè Nero became widespread in the late 1990s. A criti-
cism of the RLC could be that it presumes that retailers will inevitably follow the pattern
within the model. However, retailers in a certain market sector may reduce the number
of outlets they operate during an economic recession and open more a later time, when
conditions are more favourable. Also, there is no indication with the RLC of the time
span for each stage, since this is clearly very difficult to predict. Therefore, if two retail-
ers launch simultaneously, one may reach decline whilst the other remains in the growth
phase. It is also possible for sales to level off or reduce at any phase, then take off again,
resulting in a stepped pattern to the RLC, rather than a smooth curve. Such criticisms
have also been made of the Product Life Cycle model. However, an advantage of using the
RLC can serve the purpose of indicating the current stage at which a retailer finds itself
and to allow it to develop appropriate retail strategies for that stage.

The wheel of retailing

The wheel of retailing (Figure 1.5) is another cyclical theory which proposes that retail-
ers pass through three stages of development after their introduction into the market

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 16 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

Mature Innovative
retailer retailer
Vulnerability Entry phase
phase

Becoming
mainstream
Trading-up phase
Figure 1.5 The wheel of retailing
Source: after McNair, 1958 and Brown, 1988

(McNair, 1958). In the entry phase, the wheel of retailing suggests that the retailer com-
bines low prices with a limited product offering before trading up to become a more
traditional retailer with better services and products at higher price levels. This second
stage has been referred to as the ‘big middle’ (Levy et al., 2005), as many US and European
retailers fit into this category. In the final phase of the wheel, vulnerability, retailers reach
maturity, characterised by conservative attitudes and declining returns on investment
(Brown, 1990).
The wheel of retailing is a logical theory, yet it does not always apply in practice and is
therefore open to criticism. Brown (1990: 143) is one of its major critics, pointing out its
‘lack of universality’ and its limited scope on price and quality, describing the theory as ‘a
marketing enigma, revered and reviled in almost equal measure’. However, there are vari-
ous cases which support this theory. For example, M&S started out as a low-price retailer
on a market stall in Leeds, England in 1884, set up by a Polish refugee named Michael
Marks (Marks & Spencer, 2014). The stall initially had a sign stating ‘Don’t ask the price,
it’s a penny’, and M&S has since traded up to become a traditional retailer which has led
the UK clothing sector for several years (Mintel, 2010). The theory can also be applied
successfully to supermarkets Tesco and Aldi, both of which initially traded at low prices
and have moved into selling more upmarket products in recent years. However, many
other examples contradict the wheel of retailing theory, since upmarket retailers, includ-
ing jewellers, fashion retailers and delicatessens, frequently enter the market as start-up
businesses. Moreover, large traditional stores such as Walmart can sell products at low
prices, with the advantage of economies of scale. It is also possible for retailers to revert
to an earlier stage of the wheel in certain respects. For example, whilst in the trading-up
stage, UK supermarkets Tesco and Waitrose, amongst others, introduced low-price food
ranges (‘Value’ and ‘Essentials’ respectively) which are more representative of the entry
phase in this model.

Retail accordion
The retail accordion theory (see Figure 1.6) was developed in the 1960s by Hollander
(1966) and suggests that retailers alternate their product offering, starting with a wide
range then narrowing it down to a more specialised selection. Like the wheel of retailing
theory, this may have had relevance at the time it was introduced. However, the retail
accordion is rarely useful as a predictive model since many retailers do not follow this

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 THE RETAIL LIFE CYCLE 17

Small generall
storess

U
Urban retail
sspecialists

Generall
department storess

C
Category
kkillers

Discount department stores//

general merchandiserss

Figure 1.6 Retail accordion theory

Source: adapted from Hollander, 1966

pattern of development. For example, Amazon.com started out in 1995 with a narrow
product range, as an online book retailer and has since moved on to stock many different
products, as diverse as electronics and toiletries. While US retailers historically started
as general stores before tending to specialise in certain product types, nowadays many
retailers have never offered a broad range of goods and remain niche retailers, such as joy-
ofsocks.com, which sells only socks and tights. Traditional retailers requiring specialist
skills such as bakeries or confectioners also usually start as niche retailers (see Figure 1.7).
The rise of etailing offers increased opportunities for specialist start-up businesses, since
a niche product range can now cover a wide geographical area at a fraction of the cost
of setting up bricks-and-mortar stores with the same coverage. Etailers can also offer a
broad product range.

Figure 1.7 Sweet shops and bakeries are examples of traditional niche retailers
Source: authors’ own photographs

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 18 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

Conflict theory
There has often been conflict between different types of retail innovations, ranging
from competitive to anti-competitive practices. It is therefore not surprising to find that
much of the terminology used within retailing and marketing is derived from military
terms, such as ‘strategy’ and ‘campaign’. Brown (1987) suggests that innovations in
particular can lead to conflict where existing retailers progress through the four stages
of shock, defensive retreat, acknowledgement and assessment, then adaptation. Despite
appearing to apply only to negative situations, conflict can be credited with generating
new forms of retailing which bridge the gap between one type of retailer and another.
This happens when retailers operating in an established retail format react to the threat
of newcomers in the market by adopting an aspect of the competitors’ advantage over
them. For example, when supermarket chains began to gain market share, traditional
independent grocers formed alliances and voluntary groups to increase their buying
power, as well as adopting the supermarkets’ self-service strategy (Gilbert, 2003). After
German discount supermarket Aldi began to increase its UK market share in 2007
(Hall, 2008), market leader Tesco hit back by copying its competitor’s branding strat-
egy. Instead of using its name on its own-label products, Aldi uses different names
that mimic the presentation of manufacturer brands but are exclusive to its stores, e.g.
‘Oakhurst’ meat and ‘Holly Lane’ cakes. Tesco has adopted a similar approach, selling
products exclusively under brand names such as ‘Nutricat’ pet food, which goes as far
as having its own website (www.nutricat.com) providing veterinary advice in order to
imitate branded catfood.
Some of the retail theories discussed here are potentially compatible with each other
and all have tangible examples of how they can work in practice. However, none of them
can be said to apply to the whole retailing sector, since each one has numerous excep-
tions. It would appear that an overarching retailing theory which can be applied univer-
sally has yet to be devised. Since each of these theories is organisation-centred, this calls
for the introduction of a more consumer-focused retailing model in the future, which
can be applied in various product sectors and in different countries. You are recom-
mended to keep up-to-date with developments in retailing theory in academic journals,
particularly the Journal of Retailing, as newer theories may be introduced by the time
you read this book.

Recent developments affecting the retail environment

Retailing operates within the context of society and the environment in which it takes
place and it is therefore influenced and affected by a variety of trends. Datamonitor (2011)
estimates that by 2015, the global retailing industry will increase in value to more than
$13,000 billion, an increase of around 26 per cent since 2010. This projected increase
can be explained in part by demographic changes, since the world population reached
7 billion in 2011. An additional factor is that ageing populations have been on the rise
in many countries (African Development Bank, 2011; Ashford, 2007; UK National Sta-
tistics, 2012) where average lifespans have been extended by improved living standards
and healthcare. Retailers will need to respond to this ageing demographic, taking a more
inclusive approach to age and reducing the traditional emphasis on appealing mainly to
younger consumers (Lusch et al., 2011).
Developments in technology, particularly the increasingly widespread use of computers,
have had a significant impact on retailing. This impact began when computers started to
be used by retailers for recording sales data using electronic point-of-sale (EPoS) systems

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 RECENT DEVELOPMENTS AFFECTING THE RETAIL ENVIRONMENT 19

and to communicate with suppliers. These technological developments speeded up com-

munication channels from stores to the retail head office and from the retailer to sup-
pliers, enabling companies to respond more quickly to consumer demand. The internet
was initially used by retailers mainly as a promotional tool but retailing via transac-
tional websites has become standard practice for large retailers in the US and Europe.
It also offers small retailers the opportunity to start or expand their businesses, often
at a lower cost than investing in retail premises. Internet retailing was expected to take
off in the late 1990s with the so-called ‘dotcom boom’ but the growth of online sales
stalled temporarily when major internet retailers such as boo.com went out of business.
Despite this initial setback, online retailing has expanded in recent years, accounting for
approximately 70 per cent of home shopping in 2008, overtaking catalogue sales at this
point (Mintel, 2009).
Retail premises vacancies stood at around 14 per cent in the UK in 2013 (BCSC, 2014)
a situation that has led retail landlords to adopt new strategies such as offering initial low
rents or posting images on vacant properties to improve their appearance. For example,
City Dressing produces virtual graphics that make empty outlets more attractive to poten-
tial new tenants and can have an interactive function, using Quick Response (QR) codes
that can be read by digital devices to promote competitions or streaming live music and
local information (see Figure 1.8). Jeremy Rucker, Managing Director of City Dressing,
states that the company aims to make the stores look more animated by using imagery of
local objects, quotes and people.
The expansion of the social networking aspect of the internet is sometimes referred
to as ‘Web 2.0’, comprising websites such as Facebook (launched in 2004) and Twitter
(available since 2006), as well as blogs. Social media have been utilised increasingly

Figure 1.8 Virtual shop windows

Source: with permission from City Dressing, www.citydressing.co.uk

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 20 CHAPTER 1 INTRODUCTION TO RETAIL MARKETING MANAGEMENT

by retailers as novel and cost-effective promotional tools (see Chapter 7 Retail mar-
keting communications). Consumer feedback websites with user-generated content
(e.g. www.tripadvisor.com) and consumer product reviews on retailers’ websites,
along with price comparison websites have enabled consumers to have more power
in their purchase decision-making. This suggests a need for an increased focus on
product quality and customer service, amongst other factors, by retail organisations.
Radio Frequency Identification (RFID) is another form of technology which has been
adopted by retailers, largely to enable tracking of merchandise from a distance using
radio waves. Placing RFID processors on products can reduce labour costs in distribu-
tion, warehousing and stores with the added benefit of reducing theft. However, this
technology is somewhat costly at the present time and has therefore been relatively
slow to take off, though its use is now becoming more widespread in the retail sector,
with Asda adopting it in 2014 to improve the accuracy of its clothing stock (Berman
and Evans, 2010; Thomson, 2014).
The economic downturn, which began in 2008 and led to an almost global reces-
sion, directly affected retailers in various ways, notably being a factor in the closure
of a series of well-established store chains in the UK and a raft of branch closures
amongst surviving retail chains. For example, clothing group Arcadia planned to
close around 10 per cent of its branches between 2011 to 2014 as leases came up for
renewal (Harrison, 2011). Although technically the UK and US economies emerged
from recession in late 2009, consumer confidence has been eroded. Unemployment
figures rose and banks introduced more stringent lending criteria, resulting in greater
restrictions on consumer spending power. Nonetheless, some retailers could be said
to have benefitted from the recession, ‘value retailers’ being ideally placed to cater for
consumers who were trading down and consequently allowing stores such as Pound-
stretcher and the 99p store to expand their outlets in the UK (Holland, 2012; Lalani,
2011). This has led to widespread price competition amongst retailers as a survival
strategy and deflation of prices in certain product sectors. However, the luxury end
of the market appears to have remained largely stable during the economic crisis,
with upmarket stores competing with each other through innovative store design
(see Figure 1.9).
Globalisation relates to retailing in terms of two main dimensions: the expansion of
store chains in overseas markets and offshore sourcing. International retail expansion is
considered to have reached saturation point in the US and Europe and Western retail-
ers have therefore begun to expand into developing markets. The list of the world’s top
10 retailers is dominated by Western companies, with just one company from the East
included, Japanese retailer ‘Seven and i Holdings’ (Badillo, 2009). This scenario is likely
to change during the next decade as emerging economies (often referred to as the ‘BRIC’
countries, i.e. Brazil, Russia, India and China) continue to expand. Globalisation affords
retailers opportunities for retail growth caused by improving economies of scale and buy-
ing power, thus making pricing more competitive (see Figure 1.10). The globalisation of
retailing has another, contrasting side to it. Since consumers have become increasingly
distanced from the sources of the products they buy, many have acquired an interest in
the conditions in which their purchases are manufactured, triggering requests for more
transparent information about sources from retailers. It has become standard practice
for retailers to develop CSR policies, for example H&M and Morrisons (H&M, 2014;
Morrisons, 2014). It is possible that this practice has developed in response to such con-
sumer interest in social and environmental sustainability and to the campaigns of pres-
sure groups which publicise these major issues (see for example: Adbusters, 2012; Clean
Clothes Campaign, 2012).

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