The changing face of retailing: How department stores and discount stores are evolving. This report should cover the historical development of department stores and discount stores in any country of choice. Obviously you would start by defining both of these types of retail institutions and then describe what merchandise they carry and how they market to distinct types or market segments of retail customers. You may like to discuss mergers, diversification and downsizing in your assignment, as well as cost containment and value-driven retailing being driving forces behind the evolution of these institutions into the retail outlets of tomorrow. Do you think retailing will be different in 5 years' time, or in 10 years' time? Why — what do you think will make these types of store different? Do you think there will be other types of stores that will open up in different markets? Use examples wherever possible to substantiate your opinions in the report. WEEK 6 In your answer you also need to refer to the wheel of retailing concept, and the retail life cycle. You will also discuss ways in which shops assemble their merchandise for consumers, such as scrambled merchandising.
History and Evolution of Departmental and Discount Stores
The business institutions which are responsible for selling products to the ultimate consumers are called retailers or retail institutions. There are various types of retail institutions including departmental stores and discount stores. Departmental store can be defined as the retail establishment which performs the function of offering diverse range of goods to the consumers in diverse product categories known as “departments” (Dadhich, Choudhary & Bansal, 2015). On the other hand, discount stores are retail shop which sells the products at lower prices as compared to the typical market price. With the passage of time, the face of retailing has completely changed. This report focuses on the changing face of retailing i.e. how discount stores and departmental stores are evolving.
Departmental stores and discount stores have different history at different countries. The emergence of Departmental stores was first noticed in the 19th century in France and Britain. As far as Australia is concerned, the first departmental store was established by Appleton in the year 1825 in Sydney. The Sydney store was known as Appleton and Jones. David Jones is claimed to be the oldest departmental store of Australia which is still traded under the same name (Richey & Skinner, 2015).
The earliest and largest departmental store in Melbourne was Coles Bool Arcade which existed for the period 1873- 1929. The vast premises of Edward Coles extended south from Bourke Street Mall and included different departments for china and glass, books, tea rooms, a photographic studio, stationary department, toy department, confectionary department, entertainment an circulatory library, etc. the store is still remembered due to Coles Funny Picture Books for children (Knox, 2015).
Until 1970s, the departmental stores were also capable of buying of customer loyalty by way of offering exclusive provisions for credit card. This was possible with the help of store cards that was used by the customers for making purchases at the stores along and its various branches.
In the 20th century, there were a number of departmental stores in Australia, However, many of them disappeared during the period 1980s and 1990s.These days, David Jones, Myer and Harris Scarfe are nationally located and are Australia’s national departmental stores oligopoly. There are own credit card companies of many of the departmental stores of Australia which provides them with different benefits. On the other hand, the discount departmental stores do not possess their own credit card rights (Zielke, 2014).
With the passage of time, they maintained their focus on dealing with the challenges relating to weak consumer sentiment, online competition and influx of international retailers. The departmental stores have started portraying themselves as the retail innovators. They have also learnt how to deal with the changing consumer environment. These days, they bring innovative strategies from time to time in order to attract the customers towards the offers. Now they have a high turnover sales model, improved stock control, off- the rack clothing, prices that disallow haggling and a shift from credit to cash sales (Fernie & Sparks, 2014).
Differences Between Departmental and Discount Stores
The discount stores evolved from a sequence of retailing changes that started taking place in United States in the late 19th century. The development of chain stores , supermarkets along with the predecessors of the discount stores caused a great competition in price in the 1930s. Kresge formed Kmart which got established as the leading chain store of Australia in response to the competition from supermarkets, drugstores and new discount stores. Today, the main discount shops in Australia include Big W, Aldi, Target and Kmart.
The merchandise carried by the departmental stores include furniture, clothing, toys, cosmetics, home appliances, gardening, houseware, sporting goods, toiletries, hardware and paint. Some other lines are products are also offered by departmental stores which include jewelry, books, food, stationery, electronics, baby products, photographic equipment and pet products (van Rompay, Deterink & Fenko, 2016).
On the other hand, discount stores are also known as “mass merchandiser” or full- line discount store/ shop” such as Lidl or Aldi. They may specialize in the particular lines of merchandise, depending on bulk purchase and efficient distribution for the purpose of keeping the costs low. The discount stores are often categorized as the big- box stores (Taillie, Ng & Popkin, 2015). This is due to the fact that they grow to include diverse range of products and sometimes also include a large section for grocery. They are regarded as discount stores but their prices are still high as they have attained a brand reputation with the passage of time. This can be associated with the concept of wheel of retailing in which the market is entered into by the retailers as a low price operator and gradually more elaborate premises and facilities are acquired. It is also called retail wheel where the start- up enters he market as a discount store and then boosts the prices are becoming established (Patton & DeLozier, 2015). For example, Kmart, Aldi. However, when the prices are increased, sometimes the businesses suffer from heavy losses. This can be linked to the theory of retail life cycle which provides that there are four stages in the life cycle of a retail outlets i.e. innovation, accelerated growth, maturity and decline.
Different strategies are adopted by departmental and discount stores from time to time in order to attract the customers. These stores generally keep their outer front attractive as it is checked out by the customers even when they are not interested in visiting the store. These stores market their products by spending heavy amounts on advertising in newspapers, banners, pamphlets and on television. They also inform their present customers by sending them messages and e-mails so that they can have adequate knowledge regarding current offers and discounts on the store. These days almost every departmental and discount store have their e- commerce site where the buyers can easily access the offers and make the required purchases. They also make the use of online marketing and search engine optimization in order to reach the prospective customers. In other words, both online and offline modes are considered by both the retail stores in order to market the product to their target customers (Cameron, Sayers, Sacks & Thornton, 2015).
Marketing and Customer Targeting Strategies
The basic target of discount stores is families and children. The target of departmental stores varies from middle to high income customers. Furthermore, they offer pleasant services to the customers along with providing standard brands to them at average prices. The customers are also allowed the return the product under certain circumstances. They can also try the clothing range for getting a perfect fit (Saxena & Jayswal, 2016).
The acquisition of Coles group by Wesfarmers is the biggest corporate takeover of Australia. It resulted in creation of three new divisions namely Kmart, Coles and Target. With the passage of time, retailers are increasingly adopting the cost- containment approach where operating costs and investments are tried by the retailers. These are used by a number of firms for holding down initial strategies due to the requirement of controlling franchise operations, intense competition from discounters, desire for maximizing productivity and volatility of the economy. In other words, diversification, mergers, downsizing along with cost containment and value- driven approach have acted as a driving force behind the evolution of these institutions into the retail outlets of tomorrow (Anselmsson & Johansson, 2014).
In future, the retailing is expected to be entirely different. The retailers are making increased use of technology for the purpose of engaging the customers. In future, retailers will aim at connecting with the customers by way of offering the targeted information and providing value stand apart and will possess the capability of creating deep customer engagement. The retail sector is expected to integrate all the business operations across channels for the creation of channel- less operating model. In other words, the customers will be able to buy products by using the discount available online. The followers of the business on the social- media sites will get their offers in store. These stores will become different when they will adopt these technological innovations (Aleman, Brown & Griffiths, 2014).
The services of these retail stores in the form of departmental and discount stores may be enhanced in the future as they may offer robot customer service. These services will allow the customers to solve their customers on their own by providing self- service options on their sites. Robots will speak multiple languages which will assist the customers in learning and finding about different items. Some malls have started using robot security guards. Soon sales staff may become a thing of the past. (Piotrowicz & Cuthbertson, 2014)
Future of Retailing: Technology and Automation
In the next 5 to 10 years, there will be other type of stores that will be open up in different markets. Such stores will be places where the customers will not only visit for picking up the mass produced articles but for designing and co creating special things through the personal assistance of the experts. The brick and mortar discount merchants will take a variety of steps in order to automate their store environment for remaining cost competitive. For example, Walmart have already headed in this direction (Laseter & Rabinovich, 2016).
Scrambled merchandising can be defined as the practice undertaken by the retailers that carry a large assortment of merchandise. This takes place when unrelated goods and services are added by the retailers. However, this is not the case in departmental stores and discount stores. Retail stores utilize the advice of experts in order to ensure that the products are assembled in an appropriate way. Products from different manufacturers and brand are assembled by the retailers so that the customers are offered large variety in stock. Moreover, the similar category of goods are assembled together such as household needs. This provides ease to the customers in finding the products they want. For example, Aldi which is one of the biggest discount stores of Australia have well- defined place for every product. The frozen foods are placed at the back of the store, close to the checkouts in order to prevent them from squashing in the trolley. The weekly ‘special buys’ of this discount store are piled high ad lumped in the middle of the store. The placement of confectionery is made above the adult waist for the purpose of reducing ‘vantage point for point children’ (Sachdeva & Goel, 2015).
Therefore, it can be concluded that there are various types of retail institutions including departmental stores and discount stores. Departmental store can be defined as the retail establishment which performs the function of offering diverse range of goods to the consumers in diverse product categories known as “departments”. On the other hand, discount stores are retail shop which sells the products at lower prices as compared to the typical market price. With the passage of time, the face of retailing has completely changed. Moreover, it expected to change further in the future. This report provided the history of departmental and discount stores in the context of Australia. Furthermore, it also provided the way in which merchandise is carried and marketed by these stores. The report also provided on the future of retailing.
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