the impact of the Retailing Revolution
The Impact of the Retailing Revolution
Retail is the process of goods sales to the consumer. It does not matter how the goods or services are sold, either by private sale, by mail, by telephone or via the Internet, as well as where they are sold - in the store, on the street or at home. Subjects of retail process are the seller and the buyer. In retail, only the strongest survive. Small private shops have fallen victims to department stores, department stores, in turn, gave a way to shopping malls and discounters. But no concept of trade was as destructive as the concept of big boxes, specialty stores like Barnes & Noble, PETsMART and Circuit City. Journalist Robert Spector says that the giants not only dramatically affected the experiences of customers, but they cleverly rewrote the rules of retailing and changed the cultural and economic landscape of civilization. Critics argue that the mega vendors lead in the decline of the city and ruthlessly destroy their competitors. At the same time, these companies certainly democratized consumption, and thanks to them all kinds of goods are available to buyers.
In carrying out the tasks of exchange and communication, initiative, until recently, belonged to suppliers who developed dynamic branding strategy and aimed at end-users powerful communication strategy attraction. Branding has always been a key factor in the marketing strategies of suppliers (Jaffee, 1998). During the last ten years in this area, both in Europe and in the U.S. there are significant changes in the increase of the market power of retailers. From passive intermediaries in the process of movement of goods traders market actors became active, promoting new concept stores and their own brands, designed for well-defined segments. Currently, private brand retailers compete directly with brand manufacturers; stores can dictate terms to its suppliers and abandon the implementation of their products, if it is not among the leaders in the product category (Jaffee, 1998).
High concentration of retailers, particularly in Great Britain, the Netherlands, Belgium and Germany, about 50 % of the market is divided among the 10 largest traders.
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Wal-Mart is a giant department store that offers almost all kinds of goods needed in everyday life. This is one of the largest companies on the planet - it bypasses all criteria of giants such as ExxonMobil, General Motors and General Electric. Wal-Mart has no competitors in retailing. Its main rival in the U.S. is Home Depot that specializes in the sale of goods for the construction, repair and home and sells for the year as much as Wal-Mart sells for three months. The share of Wal-Mart accounts for about 10% of all retail sales in the United States.
U.S. researchers say that talking about Wal-Mart revolution makes sense. Walton sought to sell goods at lower prices, but in larger quantities. The brainchild of Sam Walton dramatically changed the retail industry - it increased productivity record. Most retailers have become more aware of their pricing policy, seeking for the ways of making the goods available to the widest possible range of customers. In addition, Wal-Mart made a bet on innovation, which can serve both the consumer and the seller. In the mid-1990s, Wal-Mart stores have created the largest and probably the most effective logistics and goods records, used new methods for predicting and shaping consumer demand. According to consulting firm McKinsey and Co. in the period from 1995 to 1999, Wal-Mart had 25% of productivity growth.
Development of computer systems, including sales on the cash register that not only gives merchants complete market information, but also has a large logistics value in terms of optimizing food supply chains, minimizing inventory and ensuring the availability of necessary goods for sale.
Implementation of branding by shops traders aimed at segments, remaining out of sight of the manufacturer, as well as an increase in the number of private brands. This provoked the emergence of a new kind of retailers - discounters, warehouse type stores, where products under private labels were sold at very low prices, and manufacturers products were not sold.
While it is enough to say that they lead to a significant change in the European retail and relationships between traders and suppliers, they were also taking place in the area of trade in favor of the changes indicating an in-depth strategic analysis on both the suppliers and distributors on the side. In recent years in industrialized countries, there are significant socio-demographic changes, caused by revolution in retail. These include: the decline in fertility; an increase in life expectancy; increase in the number of working women; marrying at a later age; increase in the number of divorces; increase the number of families with one adult; increase in the number of households with two sources of income; increase in the number of unemployed or early retired citizens; increase the number of ethnic groups (Thakor & Deliya, 2012). All of these changes directly affect the structure of demand and purchasing behavior. They create new market segments and develop new requirements in segments that already exist. For example, the segment of the elderly people that are over 65 years and using banking services, entertainment, health care, etc.; the segment of households with one adult unmarried or single, divorced, widowed or alone people raising children; households with two sources of income, having a large discretionary income, known as double income for kids - supposing two incomes but no children. They also include segment of working women who use all kinds of time-saving goods and services, such as microwave ovens, trade directories, fast food restaurants, etc. The identified segments provide new opportunities to be adapted to mass customization of traditional mass marketing approaches (Thakor & Deliya, 2012).
One of the most successful companies in using the retail revolution for the good is Wal-Mart. It is glorified for its low prices as the shops initially used the slogan "Every Day Low Prices" (Soderquist, 2005). Economist Brandon Bosworth conducted a simple experiment: he bought 14 kinds of goods necessary for everyday life of a person including headache tablets, rice, canned minced meat, toilet paper at a local Wal-Mart and small shops in the neighborhood (Soderquist, 2005). As it turned out, buying the same goods with the same packaging and brands at Wal-Mart cost him $92.37, and $149.02 at other shops (Soderquist, 2005).
Low prices are provided, on the one hand, due to bulk purchases from suppliers, and on the other - by maintaining a low level of salaries for employees. For example, Wal-Mart provides health insurance to less than 50% of its employees. It is done in quite an elegant way: the company does not let employees work more than 32 hours a week, which, according to the laws of the United States, makes it unnecessary to provide them with insurance. As a result, 200 employees of Wal-Mart, their children and dependents medical care, local governments are forced to spend an annual $ 420,750, according to data from University of California Berkeley Center for Labor Research and Education (Soderquist, 2005).
Historically, the majority of Americans are not even qualified enough could take low-paid positions and gradually gain experience, move to better paying jobs. Thus, their income increased, and they found themselves on the higher rungs of the social ladder. In the 1970s similar metamorphosis was significantly less than in previous decades. In the 1980s, the situation deteriorated further, primarily because of the globalization process, which has led to the export of jobs mostly in the industrial sector from the United States. In addition, technological advances have allowed employers to increase productivity without increasing wages (Zhen, 2007). Experts suggested that the unprecedented growth of the U.S. economy was going to revitalize the process. However, despite the fact that the vast majority of U.S. residents income increased, the number of people with higher education and the number of homeowners, the American dream did not serve.
One of the main reasons for this is considered Wal-Martization, meaning that the technology works with salaried employees, adopted by Wal-Mart, which affected a huge number of firms (Lichtenstein, 2010). Economist Aaron Bernstein believes that despite the fact that in the 1990s there were many new millionaires who made a fortune through the Internet boom, many companies have cut a lot of jobs, and the reduction was not addressed by the highest paid and the lowest paid employees and middle-level staff (Zhen, 2007). In addition, American employers have succeeded in the fight with the unions, which also allowed them not to raise wages without risking suffers of strikes organized by disturbed employees.
Now about 34 million Americans - nearly one in four working citizens of the country receives less than $ 8.70 per hour, the official poverty line. Even if that person is engaged in full-time position to earn the limited amount of money that is enough for his family got out of the needs. In the book Low-Wage America: How Employers Are Reshaping Opportunity in the Workplace, a collection of articles edited by Professor Eileen Appelbaum concluded that despite the fact that Wal-Martization allows lower prices for consumer goods, it leads to the disappearance of the middle class (Lichtenstein, 2010).
In the 1980s, Wal-Mart has used the slogan Buy American!, but in the 1990s began to actively import goods from cheap countries - now it accounts for about 10 % of Chinese exports to the United States. The emergence of cheap Chinese goods adversely affects the American manufacturers who lose a price war to their Asian competitors and close production in the United States (Zhen, 2007).
Economists at the Pennsylvania State University argue that the global expansion of Wal-Mart supermarkets promotes poverty. According to them, due to the expansion of Wal-Mart in the U.S., 20 thousand families fell below the official poverty line. In the U.S. states where Wal-Mart opened its stores twice as compared to the national level, the number of people turning to the authorities for food aid increased, according to the data from the program of food stamp. Despite the fact that Wal-Mart employs many people to work, many of its employees traditionally receive lower wages (Lichtenstein, 2010). The emergence of Wal-Mart supermarkets, which offer a wide range of products include more than 50 thousand items, lead to the closure of local shops and have a negative impact on the entire business chain that served merchants, including accounting, transport, lawyers, builders and others.
John Dicker, author of "The United States of Wal-Mart", claims that Wal-Mart has become a "global despot" who is able to change the rules of the game, animate or, conversely, to cool the economy of entire countries and create new forms of consumer culture. Effect of Wal-Mart revolution will occur within the decades (Lichtenstein, 2010).
Another bright example of the successful company is presented by Amazon one of the leading Internet shops. The brainchild of Jeffrey Bezos is today the largest online retailer in the world. Amazon is a company that has changed the meaning of trade, selling via the Internet. The company experienced a financial crisis in the beginning of the new century: shares of Amazon.com in 1997 cost $140, and after the dot-com crisis in 2001 fell to a record low price to $6. By todays situation such experience is interesting, revealing and useful for many. Jeffrey Bezos project is currently the biggest online store in the world. But it is not due to online sales only. This company is one of the largest retailers in general. Amazon's main achievement is that they changed the very essence of sales, and popularized online method of purchasing. The story of Amazon.com is one of the most interesting stories of Internet companies.
It is difficult to answer the question why Amazon has become the largest online store in the world. But, on reflection, one can give a few arguments. First, when creating the company, owners looked exclusively for the future. In addition, one of the principles of Amazon was continuous improvement.
Customer focus is what every employee thinks and thinks a lot. The first and the most important innovative thing was the need to introduce the option of Store product reviews first. Jeffrey Bezos even allowed posting negative reviews. While the company was afraid to implement this feature, they thought that it could have a negative impact on sales but Bezos convinced them. Now it is clear that the reviews only have a positive impact on sales. The company has become so popular and successful yet for the reason that did not restrict the sale of books. Today the site helps to purchase many goods, from household appliances to music CDs (Ferrell & Hartline, 2012). The management structure is characterized by simple hierarchy of control. Everything is based on the work of small groups. The candidates for the job are very carefully selected.
Competent marketing is another success factor. The company managed to create a sales system in which the people themselves are promoting Amazon products. It was a partnership agreement which is used successfully throughout the world nowadays. This impressive company can withstand many crises, continuing to develop for others to enjoy.
Thus, concluding the results and consequences of the Retailing Revolution, it is possible to say that like after every revolution, there are losers and winners. The first include people that have lower level of income and those who belonged to middle class. The new system of lower prices and cheaper goods made them spend more time and spend more money they have buying the necessary amount of foods for their everyday life. In this case, the winners are the giant companies like Wal-Mart, Amazon, TjMax and many others that managed to force people to buy more than they need (Soderquist, 2005). The companies also reduced the costs by ordering the goods from the countries with lower salary rates and cheaper costs. Wal-Mart keeps its income high-leveled for the reason of lower salaries and ordering more work with the help of outsourcing (Ferrell & Hartline, 2012). The government is negatively affected by the Retailing Revolution, as they face the problem of the growing number of those who require help with purchasing food. Network marketing and all enterprises that were based on direct sales were negatively affected as well. However, they were inspired by Amazons success and reformed their businesses in the online sphere.
What role does brandingas a communicative and messaging strategy play in the success of Nike and Amazon? How does branding operate on both niche and mass scale for each of the two companies.
Brand creation and promotion or branding is needed for more benefits of a particular product due to penetration into the consciousness of people forming attachments based on feelings and emotions (Finskud, 2009). This leads to a reduction in costs for promotion in the future and increases shareholder value, the intangible asset to its owner, which ensures greater stability in the competition, allows fewer losses even during the most difficult periods (Bedbury, 2003). Reasonable brand building is based on deep market research, publisher joint creative work, implementing organizations and advertising agencies to create a wide area. They work productively using a variety of types, tools, forms and methods of advertising that introduce into the consciousness of the consumer personalized brand image - an image associated with a particular trademark product or family of products. As a communicative and messaging strategy branding is the most important basis of Nikes success and is not so important for Amazon (Bedbury, 2003). Nikes brand is catchy, recognizable and memorable; it is also simple, what makes it easier to be closer to the vast majority of consumers all over the world, not depending on the level of their income. Nike has become a cherished dream for teenagers all over the world and the must-have for grown-ups. As for Amazon, it offers an opportunity of ordering a number of items of different manufacturers but its branding is not that important for the customer (Finskud, 2009). At the same time, the name is memorable and easy recognizable what helps the consumers in making the right decision while choosing the necessary company for purchasing any goods available in the Internet-shop. Branding balances tangibly between the concepts of niche and mass in case of these two companies (Bedbury, 2003). As for Nike, it is more exclusive and has more points to determine niche market segment while its popularity is mass and wide spread. While Amazon uses branding for proving that they are the mass company it keeps being one of the unique niche companies in the sphere of safe online goods purchasing (Shimp & Andrews, 2013).
The next step is brand promotion - an activity that is directed to creation of long-term preference for the product, based on the combined action of the strong consumer trademark, packaging, advertising appeals, sales promotion materials and other elements of advertising, combined by certain idea and easily recognizable design that distinguish the goods of competitors and creating its brand image (Bedbury, 2003).
When promoting brand a marketing agency takes into account the physical properties of the product, senses that it rises in the consumer, and will appeal not only to the mind, but also to the emotions influencing the subconscious. If the product on the market is successful, it has good reputation; it will always be repeating the most popular image. Therefore, promotion of the brand is a constantly evolving activity that helps to promote goods and cut out the competitors.