Retail Industry Segmentation: Department Stores And Discount Stores Essay.

The changing face of retailing: How department stores and discount stores are evolving. This report should cover the historical development of departrnent 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 custorners. 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 rnarkets? Use examples wherever possible to substantiate your opinions in the report. 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. 

Department Stores

Organisations can be divided into a number of segments based on their operation, some organisation manufacture products; some provide services, some organisations helps other in distribution while some make sure that the products reach the end customer. According to Barry et al. (2017), a retail unit is a format in the marketplace where the buyers and the sellers can meet. One of the main features of retail is the single point of sale directly to the end customer (Varley 2014). The retail units are responsible for reaching out to the customers and helping the companies in building a valuable relation with the customers. There are a number of types of retail units like Department Stores, Merchandise specialized stores, supermarkets, Warehouse Stores, small independent stores in local vicinity (mom and pop stores), malls, dollar stores and the latest addition to the list is the e-tailers. In this assignment the focus is on the discount stores and departments stores (Varley 2014).

This is the concept in retail which phases through a time period of four stages of an institution that operates in the retail industry. The first three stages explain a gradual increment in the performance of the company while the fourth stage is the where there is a new entry in the market.  And the wheel continues similarly for the new organisation. The term wheel of retailing was proposed by Malcom P. McNair (Worrall and Newman 2015).

                                                                             Source: (Worrall and Newman 2015)

This concept is aligned with a product life cycle where an organisation is explained to go through stages of innovation, growth, maturity and decline. The stage of innovation is the point where an organisation with an innovative business idea enters the market (Davidson et al. 2002).

According to Singh (2013), the retail unit in which a plethora of range of products are sold under a roof, these products are segregated in departments thereby undertaking the name department store. These departments have a centralized control and are usually a medium to large scale business organisation.

Discount Stores

As the idea of providing the customers the ease of shopping is the main reason for establishing a department store, therefore a plethora of options for the consumers have been placed on the shelves of any department stores (Chen et al. 2015). These may include: electronics, groceries, clothes, Myer is one of the biggest department store in Australia, there is a wide range of products that are sold in the organisation starting from beauty and skincare to household items like kitchen appliance etc. The company has strategic alliance with a number of organisations whose products are displayed on the store. Various leading organisations like Apple, Dyson, Chanel, Tommy Hilfiger etc distribute their products with the help of the brand (Myer.com.au 2018). The business models of department stores are mostly associated with retail, certain organisations may come out with products of their own line but mostly they are just a link in between the customer and the manufacturing organisation (Chen et al. 2015). The companies that operate in the department store format has the not only deals with the customers but also has to maintain an equally valuable relation with the suppliers in order to keep the suppliers associated with the brand. For example: Taking Shape has been named as the supplier of the year by Myer in 2017 as the company has demonstrated innovative and exceptional product development providing the customers of Myer a better experience. David Jones is the direct competitor in the market and has developed over the years to be on one of the significant players in the market that is backed up by the Woolworths holding limited (Davidjones.com 2018).

Another major department store example in Australia JB Hi-Fi, the company is known as the entertainment retailer, the business model of this company is that of a department store but it specializes in electronic goods. The company has an array of products from a plethora of brands but the basic difference from Myer is that it does not have any apparel or other domestic household items. One of the significant aspects of the strategic management of the company is that the organisation has adapted to the dynamic external environment of the technology and entertainment industry (Ko and Rhee 2014).

Department stores expand their business by opening other stores in other locations and with the help of diversification. For example: setting up a coffee kiosk in the store etc. One of the recent examples of diversification implemented as development strategy is of David Jones (Brook 2018). The CEO has informed that a major change will be made to the Sydney’s flagship store. In this change a major point of focus is the champagne bar that will be overlooking the city and also food. All the examples that are stated above are of established brands that have been in the industry for a long time (Ko and Rhee 2014).

History of Department and Discount Stores

According to Zielke (2014), has described discounted stores as the name suggest offers products in a very low or discounted price than, the range of products are relatively lower than that of a department store and the quality is also something that the company neglects in order to provide the products in such a low price.

Some of the famous discount stores in Australia are subsidiary companies of large organisations that operate in the retail industry like Woolworth and Wesfarmers. The strategy of providing the customers with low price requires the organisation to bear a very low profit margin during the early stages. Therefore back up from big companies help the organisation to function. K Mart and Target is a subsidiary of Wesfarmers, on the other hand, Big W is a subsidiary of Woolworths limited (Kim and Jang 2013).

Kmart has a wide variety of merchandise that range from clothing and footwear to entertainment products, kitchen and hardware items etc.  The price of the items is kept at the minimum and also providing the customers with a better opportunity to select form the wide range as well (Kmart.com.au 2018).

The products are not only listed at a discount there are also seasonal bigger discounts which are a part of the marketing strategy. The major threat in the Australian market for the discounted store market is the international discount supermarket AlDI. ALDI is a German supermarket that provides the customers with very low price and also assures local produce for a number of products. The company has set foot in the Australian retail industry in 2001 and since then the company has successfully established a number of stores all over the country. The format of business is much like a discount store but on a larger scale (Aldi.com.au 2018).  

The development of department stores dates back to 1796 owned by Harding, Howell & Co in London. The humble setup was divided in four departments for making shopping for the customers easy (Bbc.com 2018). During the mid of 19^th century the evolution of department stores have been observed.  The crystal palace in Hyde Park which housed the great exhibition was a pioneering design of the way a department store looks like in today’s market (Bbc.com 2018). In Australia, The Master Retailers’ Association was established in 1903 and the Australian retailers undertook the path that is paved by the American or European organisation. It can be said that David Jones is the first department  store that was established in the country. The format was quickly picked up by other merchants like Coles group, Mayer group, Harris Scarfeetc (McArthur 2013).

Impact of Technology on the Retail Industry

In Australia Aldi, Big W, Kmart, and Target are the major discount store companies. The great depression of 1930s was one of the turning points of the retail industry. The discount stores are developed around this time. E. J. Korvette, established in 1948, is one of the first recorded discount stores. But this format took off from the late 19^th to mid 20^th centuries (McArthur 2013). One of the major examples is the Walmart group whose policy was to provide people with low price product. And this spread development soon spread to Australia as well, globalization and the search of opportunity had led investors to believe in the Australian market and thus marked the advent of discount stores in Australia (McArthur 2013).

The retail industry has been revolutionized in the recent times due to the advancement in technology. E-commerce has made both buyers and sellers reach out to a larger market at just a click. Every organisation now tries to establish one’s online portal or e-commerce portal. Any product under the sky is now available on the internet and this has changed the face of retail industry (Grewal et al. 2017). In Australia, people are technologically advanced and the government of the country also provides the people with the infrastructure to be updated with the changes in the technology. Woolworths, Wesfarmers etc are some of the leading organisation in the retail industry; most of the companies that operate under this parent organisation have their own website through which the customers can choose to buy the products they want to (Grewal et al. 2017). The payment system has also evolved over the years where net banking and online wallets have been introduced. Many third parties associated with these websites to help the customers pay their bills easily.

The companies are focusing more and more on the process by which the convenience of the customers can be improved. Focusing on the trends of the industry the companies are becoming more and more aligned with the technological advances and innovations that help in the sales and thereby reach the desired profit margin. Amazon Inc has been pioneering and setting benchmarks for the retail industry for the past decade. The company has been on the major organisation in the international market to make the customers realize the power of technology and retail. When the company acquired the range of whole foods in America which is a brick and motor department store, retailers all around the world speculated the decision. However, the company is nowhere with the future of retail, Amazon Go.

Amazon Go is the next level of retail experience that the customers with prime membership can enjoy where the company has successfully developed a plan to eliminate the payment through cash and the hassles of standing in a long queue. According to Grewal et al. (2017), People with working internet connectivity can just walk in to the store pick up items and just walk out without hassle. This is what the company has established as the future of retail. The company has launched two such stores in US but has plans for the Australian market as well.

Apart from technical advances the future of the retail industry focus on the trend of customization, the retailers will find that the customers are more inclined to customize products and will encourage personalization of goods and then pay a certain amount for the same. Personalized marketing strategies have to be improved by the retailers in order to retain customers (Grewal et al. 2017).

Companies should also take social media seriously and connect with the customers and gather feedback from the social media platforms that are simultaneously gaining popularity (Kumar et al. 2017).

Merchandising and visualization are some of the major aspects of marketing in retail. However, to be in sync with the trends that have been discussed above the company should invest in Big data collection and managing high velocity data.  This will help the companies to reach out to the target market in a more effective way. With managing big data the companies can ensure they implement decisions to engage their customers on a real time basis. As the changing dynamics of the international retail industry heavily impact the buying decisions of the customers in Australia the companies should be ready to take quick actions to beat the threats in the industry (Grewal et al. 2017).   

Conclusion

It can be concluded form the above discussion that the retail industry in Australia is populated with intense competition. Technology has a great impact on the industry and each of the department or discount stores in the country has aligned the strategies accordingly, the companies have ensured that they have an online presence and also the security of the customers while making online payment is also offered.

Reference list:

Barry, R., Berman, E., Joel, R.C. and Patrali, M., 2017. Retail management. Pearson education limited.

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Brook, B., 2018. Photo that reveals David Jones boss’ big gripe. [online] NewsComAu. Available at: https://www.news.com.au/finance/business/retail/champagne-bars-swanky-shoes-and-smaller-stores-david-jones-plan-to-bring-customers-back-to-department-stores/news-story/8ded5cebd7a2f9f358f2e3d976d84f96 [Accessed 30 Aug. 2018].

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