Assignment on Retail Business – AssignmentHero Blog

Task 1
Part A
Definition of Retailing

Retailing is a broad term used for the distribution process of the product or service to the end user. However, the product is sold from the point of view of the purchaser who uses the product (Piron and Young, 2001).
Retailer is a company or an organization that collects its most of the revenues from the retailing process. In the supply chain of any product or service, the retailers provide an essential link between the manufacturers and the final consumers. The retailing process is all about having more and more customers for your product or service by using the best advertising and marketing strategies in the market. The retailing includes all the steps from inventory to storage of the product and collecting the payments from the customers (Troiville, Hair and Cliquet, 2019).
Introduction to Lewis Group

Types of retailers

The retailing business is very diverse and can be classified into many different types of retailers on the base of many structural and organizational terms (Hristov and Reynolds, 2015). The retail stores may vary in their size, the kind of the product or service they offer and the ownership of the store. The basis for classification of the retailers may be the type of product they offer, the size of the stores, the type of the ownership and management of the company. If we talk about the Lewis Group, the types of the retailers in which this company fits in are the single line retailers, the specialty retail stores and the fixed shop retailers. The Lewis group has considerably large corporation structure and has the credibility in the product of the household furniture and the electrical appliances.

Product Strategy

The product strategy of the Lewis Group is to provide the high-end quality of the household furniture, house wares, the electrical appliances in the South African region on credit and cash. The company focuses on the diversification strategy. The company started in 2014 a Beares brand and focused on the diversification in the market by diverting attention to the cash sales instead of the classic credit sales. The Beares brand helped the company acquire the high-end target in the market and is now being retailed from the 127 stores of the company. In 2017, the company started to increase its stores outside South Africa. This act of increasing the number of stores added to the revenues of the company and increased them by 14.47%. Moreover, the working of the company on United furniture outlet (UFO) helped the company attract higher income customers and get the sales of the products on cash. This strategy is also helped to increase the revenues of the company by 14.7% in the respective time span.

Retail outlets of the Company

The company is focused on the diversification strategy and is increasing the size and number of the retail stores in the region. In the recent years, the increase in the number of retail outlets has collected a large proportion of the revenues for the company. Therefore, the company is aimed at the enhancement in the size and number of the retail outlets in the local as well as international market. In the local market, the company has 127 stores and its brand named Beares had earned the huge revenues in all the retail outlets in 2014. After it, the company aimed at increasing the number of outlets more and more and in the same way it added up the revenues.

Trends in the company

The Lewis Group has earned the first place in the household furniture and electrical home appliances in the market. It has a significant name in the 4 to 7 categories of the living standard measurement (LSM). The company has been enabled to capture a large proportion of the customers in the market in the LSM (Beck and Rygl, 2015). United furniture outlet (UFO) has been capturing the high-end customers in the upper income market. Moreover, its brand Beares has been a viral product in 2014 that has collected a large amount of revenues for the company. INspire is a very nominal and outstanding effort of the company to make it stand in the field of online market. It has also added to the enhancement of the company’s revenues and earned a huge mark up.

Summary

There are many changes that have affected the retail outlets’ performance in the region. First of all, the COVID-19 pandemic has adverse effects on the economy and growth of the retail outlets. It has caused the most difficulty in the management of the retail outlets all over the world. Several lock down issues and social distancing has made it very difficult to collect the revenues in these cases (Journal of Retailing Special Issue – Empirical Generalizations in Retailing, 2012). Moreover, the trading conditions in South Africa are comparatively weaker and had a significant impact on the market and retail outlets of the company. Moreover, the capital management and certain financial risks had been affecting the performance of the retail outlets of the company in the region. However, the company has not been unaware of these issues and has acted upon the possible strategies and approaches to overcome these conditions.

Task 2
A retailer “will be able to choose between several strategic alternatives and implement them through different tactics adopted in the day-to-day management of retail operations”. These strategic alternatives are based on in the retail mix that includes definitions of store environment, pricing policy, line of products, advertising and promotion, attendance and services, and location and expansion, which will be analyzed in the subsequent sections.
Store Environment
The store environment is a relevant strategic factor in the purchasing behavior of consumers (TURLEY 2002). According to Donovan and Rossiter (1994, p. 291), “the pleasure induced by the store environment seems to be an important cause for consumers stay longer in the store and spend more money than intended”. For Turley and Chebat (2002), the store’s environment and design can be divided into five categories:
• Exterior: The size and shape of the store, the facade, parking and the neighborhood.
• General Interior: includes lighting, music, colors, smells, temperature and cleaning.
• Layout and Design: It consists of variables such as product grouping, flow of
people and corridors, furniture and layout of check-outs.
• Point of sale decoration and material: includes point of sale displays,
signage, product displays and kiosks.
• Human Factors: Characteristics of employees, uniforms, density and full store.

Distribution and Location Strategies
One of the main questions about location strategy concerns the decision to concentration and geographical dispersion. In the first, the company focuses its stores on geographic region. “By concentrating activities in a region, the retailer becomes more in tune with the market preferences of this area and, thus, is able to attend more fully meet the needs of these consumer segments ” (PARENTE, 2000, p. 326). Also according to Parente (2000), the concentration allows the company to reach some competitive advantages, such as: higher productivity in fixed costs, better adjustment of your marketing effort to the needs of consumers in the region and discourages the installation new competitors in the region. Geographic dispersion consists of the location of stores in different regions seeking to reduce risks associated with concentration in a single city or region

The main objective of distribution of channel is the bridging of the overall gap that exists between the producer or manufacturer as well as the user or customer irrespective of whether the respective parties are located within a specific community or between different countries. This specific channel of distribution is considered as the most effective as well as efficient method through which the specific product is easily placed and transferred into the hands of the customer. This distribution channel comprises of various institutions that provide the facilitation of any transaction or exchange of any physical product. The traditional chain of distribution provides a representation of the chains of either the businesses or intermediaries through which the final goods, products, appliances or services are acquired by the buyers. The different channels of distribution include wholesalers, distributors as well as retailers. Online means are also considered as an effective distribution channel. Other types of distribution channels include direct, indirect as well as dual distribution channels. Whereas among the different strategies of distribution, the major ones include mass distribution, selective distribution as well as exclusive distribution. On the basis of the strategic approach the total number as well as type of intermediaries are selected. The main aim is that the distribution channel that is employed provided a specific value to the consumer. The supply chain model of the Lewis Group Limited is developed on the basis of the merchandise that is delivered by the suppliers to the respective stores. The distribution centers as well as the warehouses are not operated by the group. Every store under the Lewis Group Limited comprises of a storage facility that is located in close proximity with the store location. Most of the storage facilities for the merchandise are also located in areas which possess low level of retails as compared to the retail space. Along with this each store under the Lewis Group Limited possesses vehicles specified for delivery. These stores in turn have a direct effect on the merchandise and equipment that is delivered to the specific customers. This distribution strategy that has been adopted by the group provides various benefits since it provides limitation to the building up of stock that is obsolete as well as provides overall reduction in the markdowns. Along with this it also provides an overall improvement in various levels of service since the stores manage to commence with an average of approximately 90% deliveries within the time sale timeframe of 24 hours. Both the supply chain as well as the distribution strategy of the group are supported through an effective shipping process that is world-class along with logistics suppliers. With these logistics suppliers the Lewis Group Limited has managed to establish effective strategic partnerships that provide the enabling of high as well as efficient levels of services for the customers. The omni-channel retail comprises of an approach towards sales that involves many channels and is focused on the provision of an effective customer experience with regards to whichever way the client shops that is personally from the store or any online mode.
Competitor of Lewis Group:

The supply and distribution chain and strategy for Philips Company is based on the development of effective as well as long term relationships with the strategic suppliers. These relationships with the suppliers play a significant role for the company for fast and efficient marketing. These suppliers are supported by the company in terms of bringing about improvements on a continuous level as well as efficiency in terms of operational functioning. In return these suppliers are expected to comply with the highest standards and specifications laid out and specified by the company in terms of sustainability, quality and ethics.
Philips Company has developed an effective eco-system of innovative partners in the supply chain through which effective collaboration can be established and maintained. The professional relationships that are developed by the company with the suppliers and distributors are based upon the feelings of mutual trust, transparency as well as clear accountability. Along with this in accordance with the requirements of the supply chain security the overall flow and distribution of goods is secured in order to prevent any kind of tampering, any access to the distribution of good that is not authorized as well as preventing any inclusion of goods that are not familiar. In order to develop an effective partnership in terms of supply, Philips Company provides a secure access to both the customers and the suppliers that requires a single sign-on to the processes and tools of the supply management. Thus, the suppliers play a crucial role in the company and carry out delivery services for the products and merchandise of high quality through supply of parts and services, materials and products.

Task 3
The main focus of the Lewis Group Limited is the incorporation of a diversification strategy in its distribution and sales strategy which is why the company is working towards bringing about an increase in the overall size and total number of retail stores that are deployed within the region. In the recent years there has been a significant increase in the total number of retail outlets established in various location points. This has led to the development of a large proportion regarding revenues for the specific company. Each store under the Lewis Group Limited possesses vehicles specified for delivery. These stores in turn have a direct effect on the merchandise and equipment that is delivered to the specific customers. This distribution strategy that has been adopted by the group provides various benefits since it provides limitation to the building up of stock that is obsolete as well as provides overall reduction in the markdowns. The main aim regarding distribution and retails for Lewis Group Limited has been the provision of overall enhancement in overall size and number of the total retail outlets located in both the local as well as international markets. With this aim of bringing about an increase in the total number of outlets, the company has managed to provide additions in the revenues. Philips Company on the other hand work and focus towards the establishment of effective relationships with the suppliers for provision of a safe functional as well as environmentally sound working environment, in order to develop a viable distribution infrastructure for the provision of appliances and merchandise from suppliers to customers. The main belief here is the strategic development of relationships with the suppliers and supporting them in terms of improvement and operational efficiency in order to ensure a faster level of marketing for the recent innovations and products. Philips Company has developed its own distribution channels and networks for all the product lines. These distribution channels have been developed for the supply of domestic appliances and other equipment for personal care. The main focus regarding the establishment of these distribution channels was the exemplification of the development of the overall distribution networks for the company. The major and significant business history for Philips Company has been its distribution chain in China where Philip’s products and appliances were exported. In order to spread its services at a global scale, a large number of people are hired for the sales and services section. Similar to the Lewis Group Limited, Philips Company has also set up different and large-scale plants and warehouses to effectively carry out the sales and distribution activities of their instruments, products and devices. Whereas for the marketing of the products, the company has appointed distributors at a local scale along with scale subsidiaries. Along with commencing with proper dispatch of goods, extra services are provided through the installation of products and servicing. The overall success of the company has been attributed to the effective distribution strategy which includes the setting of goals for each channel leading to the growth in sales figure as well as strengthening the image of the company. Like the Lewis Group Limited, Philips Company has also focused towards the expansion of its service and customer care centers in various locations ranging up to 125 to 190 in number along with the hiring and deployment of approximately 900 technicians that are trained to provide appropriate help wherever necessary along with recording any complaints. Another distribution and sales service that makes the distribution strategy of Philips Company different from the Lewis Group Limited is distribution through the dispatching of products and appliances through the direct strategic sales methodology through online service. The company provides an official website which provides the consumer with the services for purchasing of the goods and products that are desired. Along with this the company has also established effective working relations with other shopping sites regarding sales and distribution through which more items can be easily sent from manufacturers to customers through the portals of these shopping sites. For Philips Company the internet service has proved to be an effective distribution and sales channel along with a service for the collection of relevant information. In order to communicate and reach with the consumers therefore along with internet services the company also partially relies on the distribution centers, departmental stores as well as retailers that are located at various points. Along with these various improvisations have also been made on the distribution policy by the company through allocation of small-scale territories to the distributors.

Task 4
Questionnaire 1 for Lewis Group

How are customers located in the market: centralized or expanded?
Is the company starting operations or does it already have a customer base?
Is the sale direct or does it use distribution channels?
What alternative brand would you use if our product / service was no longer available?
In your opinion, what improvements can be made in the products that the competition currently has?
How likely are you to choose our product / service over competitive products in the market?
To what extent did each of the following aspects influence your decision to break your relationship with us?
Would you be willing to come back with us if we improved areas that you were not satisfied with?
If you have not had a good experience with us, would you improve the following?
Is your relationship with our company currently active or is there no longer a commercial link with us?
Where else would you buy similar products?
In your opinion, what does company offer that other stores do not offer?
What are the points that, in your opinion, should be improved in the store?
Where else would you buy similar products?
In your opinion, what does company offer that other stores do not offer?
What are the points that, in your opinion, should be improved in the store?

Questionnaire 2 for Philips

Does the company know the reasons for customer defection?
The company has actions and or programs to return customers who deserted? Which are?
Where else would you buy similar products?
In your opinion, what does company offer that other stores do not offer?
What are the points that, in your opinion, should be improved in the store?
Is your relationship with our company currently active or is there no longer a commercial link with us?
How is your account manager assisting in your project or has it helped in the past?
Does the company have a customer loyalty program? Which?
Price, product and service level policies are geared to retain customers?
What are the strategies used by the company to customer retention?
Does the company try to get closer to its customers, taking the time to know your needs?
Does the company invest in information technology to maintain customer relationships?
Does the company know the reasons for the defection of customers?
Does the company try to get closer to its customers, taking the time to know your needs?
Does the company differentiate its customers?

Task 5
1- Introduction

Lewis group is the most famous retailing company in the South Africa founded in Cape Town in 1934 for the household furniture, the electrical appliances and the electronics of the domestic use. The Lewis groups had more than 700,000 customers, 8248 permanent staff and 794 stores across all the areas in the country. This large number of customers makes it the number one retailing company that provides the electrical appliances and household furniture on credit. The company decided to launch the online brand in 2017. The focus of the company in the online store was to sell the quality home products and the kitchen wares with the help of the online networks. The retailing business is very diverse and can be classified into many different types of retailers on the base of many structural and organizational terms (Hristov and Reynolds, 2015). The retail stores may vary in their size, the kind of the product or service they offer and the ownership of the store. The basis for classification of the retailers may be the type of product they offer, the size of the stores, the type of the ownership and management of the company. If we talk about the Lewis Group, the types of the retailers in which this company fits in are the single line retailers, the specialty retail stores and the fixed shop retailers. The Lewis group has considerably large corporation structure and has the credibility in the product of the household furniture and the electrical appliances.

2- PESTEL Analysis

A PESTEL analysis is a tool that is used in order to analyze the external factors that have a significant impact on the organization. This analysis helps to find out the weaknesses and threats to the company in the market.
PESTEL stands for:
P – Political factors
E – Economic factors
S – Social factors
T – Technological factors
E – Environmental factors
L – Legal factors

Political
The analysis of the political factors includes the extent to which the government can interfere in the economy of the organization. It covers the policies and laws made by the government and their impact on the economy of the company (Stoel, 2002). The Lewis group is entering the rising African market. The competitors of the company can enter the South African market without any restrictions. The South African government is thinking to reduce the tax rates on the business companies that will add to the economy growth for the company.
Economic

The economic factors have a significant role in the business of the company. They impact the process of profitability of the company and its revenues. The South African sectors is bearing the recession period and is vulnerable to the interest rates. There is a lot of competition in the retailing business in South Africa, due to this the companies are giving the huge incentives to the end users. This will have the significant impact on the economy of the Lewis Group as it has to drop down its prices in order to deal with the situation.

Social

The social factors have a significant role in the economy of any organization. It includes the beliefs, attitudes and behaviors of the people in the particular area (Rutenberg, 2005). The understanding of the lifestyle and needs of the customers provides an opportunity for the business. The ratio of the opportunities that are caused by the society are more intense and outstanding. The Lewis Group should introduce more brands like Beares that will help to attract more customers.

Technological

It is worth mentioning that the technological factors have the most intense impact on the business in this age. The impact of the technological factors is through the innovative methods and their installation in the system. It includes the production of the product, the marketing of the product and communication with the customers. The internet shopping is more prevalent in these days in the retail industry. It helps to manage the paperless processing and controlling it through IT services. INspire is an important online brand of the Lewis group for the handling of technological factors.

Environmental

The environmental factors have become significantly important in the business industry. It is due to the scarcity of the raw materials, the protection of the environment from the pollution, the environmental targets by the governments and many more. Therefore, the retailing companies are facing the restrictions of many environmental factors. The company uses the renewable resources for the manufacturing of its products that is friendly for the environment. These sources include the wood, wool and cotton. There is a lot of emphasis in the South Africa on the large companies in the context of energy efficiency and reducing the carbon footprints. However, every large company in south Africa has to prove that there is no harm to the environment from the processing and business of the company (Lewis, 1989).

Legal

The legal factors are the tricky one for the business companies that trade on the international level. The legal factors include the equal rights, the understanding of the needs of the customers, the laws and rights for the customers, the consideration of the health and safety issues and a lot more. The South African national legislation is strict and decisive for the health and safety issues. There are legal factors both for the customers and the manufacturing of the furniture and the house wares.

3- Competitive Environment

Competitors

In order to compete in the market, an organization has to understand the strategies used by its competitors (L. Lewis and Loker, 2014). In the same way, the Lewis Group has to understand the strategies used by its competitors for the best and effective strategy in the market. There are many competitors in the retail market of house hold furniture and house wares. The prominent competitors of the Lewis Group in the market are ARON’S, HomeGoods, & Rent A Center. These all companies have the net worth in millions of dollars and have a considerable market share. The strategy used by the most of the competitors is the diversification strategy. They diversify and increase their brands in order to serve their customers with the best product. They continuously try to launch a new and better brand in the market for the better revenues.

New products and services

Market Position

The company has been successful in gaining a significant market share. The company has survived in the competitive environment. In the recent years, the merchandise sales of the company have been increased by 18% in the market. On the other hand, the decline in the sale of the house hold furniture has been only 3.5% in the recent six months. It indicates that the merchandise activity of the company has the high-level offerings and promotional activities. The exclusive sale of the company, named Beares, has earned the huge profit rates of 4.4% increase in the market share. Thus, adding it to the total revenues of the company. The Lewis Group retail company is focused on the customer indebtedness in the market and group’s target. This ration has been increased from 38% to 40 % in only one year from 2014 to 2015.

Barriers to entry

The lack of the essentials for the continuous growth of the economy contribute to be the barriers for the organization. There are many barriers that are faced by our company but I will mention two of them here. The first barrier faced by our retail outlets here is the lack of resources. The resources are the raw materials for the production of the products in the pipeline of the company. If the manufacturers are not provided with the resources, either renewable or non-renewable, the innovative and attractive products cannot come into existence. The lack of resources includes the lack of resources as well as the lack of capital and human expertise and skills for the efficient and effecting running of the company. The other barrier for our retail outlets is the regulatory system. There are certain amendments to make in the regulatory system of the company that are essential to make and implement (Ghosh, 2009).

Use of ICT

Information and communication technology (ICT) have become essential and complementary for the retail industry. It has induced significant changes in the retail industry. The retail companies have to be aware of the technological advancements and their uses. The Lewis Group is not behind the scene in this field. It has also used the ICT in its infrastructure. The company has launched an outstanding brand, named INspire by using information and communication technology (ICT). This brand shows the online retailing and paperless processing of the business and control through the IT service.

References

L. Lewis, T. and Loker, S., 2014. Technology usage intent among apparel retail employees. International Journal of Retail & Distribution Management, 42(5), pp.422-440.
Lewis, M., 1989. Retailing and global change. Retail and Distribution Management, 17(6), pp.19-20.
Rutenberg, D., 2005. Dynamics of Industry Structure when Bankrupt Competitors Re-Emerge with Lower Costs. SSRN Electronic Journal,
Stoel, L., 2002. Retail cooperatives: group size, group identification, communication frequency and relationship effectiveness. International Journal of Retail & Distribution Management, 30(1), pp.51-60.
Ghosh, A., 2009. Transition and Transformation: Journal of Retailing 1985–1991. Journal of Retailing, 85(4), pp.506-509.
Beck, N. and Rygl, D., 2015. Categorization of multiple channel retailing in Multi-, Cross-, and Omni‐Channel Retailing for retailers and retailing. Journal of Retailing and Consumer Services, 27, pp.170-178.
Hristov, L. and Reynolds, J., 2015. Perceptions and practices of innovation in retailing. International Journal of Retail & Distribution Management, 43(2), pp.126-147.
Journal of Retailing, 2012. Journal of Retailing Special Issue – Empirical Generalizations in Retailing. 88(3), p.445.
Piron, F. and Young, M., 2001. Retail borrowing: definition and retailing implications. Journal of Retailing and Consumer Services, 8(3), pp.121-125.
Troiville, J., Hair, J. and Cliquet, G., 2019. Definition, conceptualization and measurement of consumer-based retailer brand equity. Journal of Retailing and Consumer Services, 50, pp.73-84.

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