Concept of Departmental stores
Departmental stores and discount stores form a significant part of retailing. This report will focus on the evolution of the departmental and discount stores in Australia and its future trends. The analysis of the historical background and evolution of department stores and discount stores is necessary to understand the future trend of these in the Australian retail market. In this paper, the importance of various component of retailing is analyzed to focus on many factors that shape the trend of the departmental and discount stores.
Departmental stores are those retail shops that offer a wide and variety range of the consumer goods under different categories of products, which is known as department. In other words, departmental stores offer a broad variety of consumer goods belonging to a wide range of brands, under a single roof (Naik & Srinivasan, 2015). The departments consist of clothing, cosmetics, accessories, perfumes, food, home appliances, furniture, toys, gardening, toiletries, paint and hardware, sports goods, books, stationary, baby products, pet products, electronics and photographic equipment (Hill, Jones & Schilling, 2014). The major departmental stores in Australia are David Jones Limited, Dieys, Myer, Target Australia, Harris Scarfe, and Pollard’s Store.
Discount shops are those that sell bulk of variety of products at a price lower than the average market price. Discount stores differ from the departmental stores in terms of size and variety of brands offered. They keep less number of brands focusing on lower price (Fernie & Sparks, 2014). Due to small distribution size, the prices can be dropped. Four major discount stores are Aldi, Kmart, Big W and Target.
The departmental stores were first emerged in the UK and France around 19th century. According to Hristov & Reynolds (2015), the first departmental store, Le Bon Marche, was established in Paris in 1852. Several marketing and pricing techniques were introduced that still exist, such as, off the rack products, improving the inventories, and setting the prices. In the latter half of the century, many large scale and purpose-built chain stores were introduced in Britain, Australia and North America that met the demands for various types of consumer goods. The first stores were David Jones in Australia, Harrods in London, Marble Palace in New York, and Le Bon Marche in Paris (Varley, 2014). Over time, these types of stores formed a big part of the retail marketing by providing convenience and lower price for large variety of products.
Concept of Discount stores
As stated by Pole (2015), after World War II, to meet the changed economy and changed demand of the price-conscious customers, a huge number of retail stores changed their strategy to offer high volume products at a low-profit margin. Providing large volume of product at a lower price was possible through efficient distribution of the products that keep the cost down. In Australia, Aldi is the biggest discount store operating since 2001.
The departmental and discount stores carry a wide variety of consumer goods, with the discount stores focusing on providing lower price than the market. They majorly follow the scrambled merchandising technique by offering products under different categories (Varley & Rafiq, 2014). All types of consumer goods under a wide range of variety or brands are sold in departmental stores, while, the discount stores offer assortments of products, which are sometimes specialized under a specific category, known as ‘category killers’ (Zarkada-Fraser & Fraser, 2015). For example, Toy’s R Us is a discount store for toys only.
According to Goworek, McGoldrick & McGoldrick (2015), both types of stores offer almost same type of consumer goods, but the number as well as range of brands are lower in the discount stores than in the departmental stores in the Australian market. The departmental stores also house many international brands, especially in the accessories category, such as, handbags, jewelry, perfumes, shoes and attires. Discount stores offer lower price for bulk purchase of product (Hill, Jones & Schilling, 2014). The departmental stores now-a-days have an in-house brand of the consumer goods in each category of products, which are priced slightly lower than the other brands, but the discount stores do not have such in-house brand. While in the departmental stores, both the high priced-highest quality products to lower priced-average quality products are available, the discount stores mainly offer lower priced-average quality products. The departmental and the discount stores also follow the scrambled merchandising technique, as they provide a large assortment of consumer goods that are unrelated to each other.
Departmental stores target mostly price sensitive customers and hence offer mid-priced products. These also have some price insensitive customers, who do not mind paying higher price for better quality products. For majority of the customers, the departmental stores are one-stop solution for consumer goods, such as, clothing, home furnishing, cosmetics, baby products, accessories, electronics etc. However, it is found that, the stores in Australia do not provide scope for additional activity, such as, play area for kids, or food court for the customers. Many times in a year and in various occasions, these stores offer sale, which is a big attraction to the customers. They also provide coupons to the members to avail extra discount. These strategies are undertaken to retain the existing customers as well as gain new market share. the departmental stores follow the Medium strategy of retailing, that provide moderate prices, improved products and facilities to wider base of value and service conscious customers (Varley & Rafiq, 2014). For example, during Christmas, Thanksgiving and New Year, almost all the departmental stores in Australia provide huge amount of sale on all types of products. In the retail life cycle, the departmental store in Australia, Target, falls under the Maturity category as it has achieved a broad and extensive market and aims to sustain in the market for long without declining.
Evolution of retail management
Unlike the departmental stores, the discount stores do not offer sale during various events in the year. They keep almost same low price throughout the year. These stores also provide membership and provide extra discount to the members to retain the existing customers. These stores emphasize on bulk purchase of products and promote many local brands at a lower price, which attracts customers in lower income groups. These stores follow the Low-end strategy of retailing by offering limited products and services at low prices to price sensitive customers (Pole, 2015). For example, Aldi in Australia does not provide sales during Christmas and Thanksgiving, but it provides many offers that attract the customers to buy in bulk. It also falls under the Maturity stage under the retail life cycle and has a goal to sustain in the market as long as possible.
These are important aspects in the business of the retail stores. As stated by Hristov & Reynolds (2015), mergers denote the combination of differently owned retail companies operating in different fields. Diversification denotes the venture of an existing retail firm in a different type of business and expanding categories of products and services, and lastly, downsizing denotes the closing down or selling off unprofitable stores. In the Australian market, the merger between Target (departmental store) and Kmart (discount store) was not successful and Target lost its market share to Big W and Myer. The types of customers are different for these stores and hence, the merging did not meet the expectations of the customers, in terms of price as well as product quality and hence, the merger failed.
The Australian retail market takes a cost containment approach. This indicates that the retailers hold down both the investments and operational costs. It is necessary as the departmental and the discount stores face competitions on the aspect of lower price and they need to have a profit margin to sustain and at the same time, provide good value to the customers (Fernie & Sparks, 2014). Thus, these type stores attempt to accomplish cost containment by adopting some approaches, such as,
- keeping a standard operating layout and size for the stores, and product offerings
- opening stores in the localities where the regulations are lower, labor cost is less and construction cost is also less
- using refurbished equipment
- sometimes using sites abandoned by other company
- using cheaper construction materials
- using cheaper flyers and lower cost displays
Almost all the discount stores and some departmental stores in Australia follow the cost containment approaches more strictly to provide higher value to the customers in terms of price, variety, quality and convenience.
The retail market in Australia is evolving quite rapidly. According to a report by Business.nab.com.au (2017), the business of the departmental and discount stores in the Australian retail market is getting heavily influenced by economic situations, business models, new technology and consumer behavior. The trends that will bring changes in the next 5 or 10 years consist of changes in the above mentioned sectors.
Type of merchandise in departmental and discount stores in Australian market
Among all these, technology played a significant role in changing the retail business and influencing the consumer expectations. It impacted every aspect of the business, from manufacturing to distribution. During the 1990s, the data technology was implemented in the supply chain and logistics. During 2000s, digital advertising started and in the last decade, data technology took over every section of the business and brought about many changes that revolutionized the retail market. Some of the important trends are:
- Smartphone will become the preferred shopping platform
- Omnichannel retailing will continue to be the dominant strategy, that is, the customers will have the access to the retailers through various channels, such as, in store, mobile app, desktop website and they will continue using those (Zahra, 2017).
- The physical stores could go for a downsizing. Since, the customers are becoming more comfortable with e-commerce, the departmental and discount stores could downsize their outlets. That would reduce their cost.
- Retailers will provide more attractive contents and proliferate the adblockers, which are available even in the apps also along with the desktop sites. Hence, the digital content should be more attractive, entertaining as well as valuable.
- Power of social media will rule the retail market as well as the customer expectation and behavior. The stores will increase using social media to promote their products. The reviews and comments in the social media majorly influence the shopping behavior of people followed by the promotional offerings, that is, discounts and advertisements (Rodríguez, Paredes & Yi, 2016).
- The Australian retail market is bringing more convenience and flexibility to the customers. For example, the retail payment innovator Afterpay is enabling the customers to enjoy the facility of ‘buy now, receive now, pay later’. This has increased the popularity of the layby services with immediate take home option as it decreases the burden of immediate payment of the customers (Business.nab.com.au, 2017).
- More personalized services will be demanded from the consumers. As in the stores, there were interactions with the store person, who could attend the customers immediately based on his needs and wants. The retail stores must not ignore this aspect while introducing more digitalised services. Digital payment system will continue to grow.
- Automated customer service and chatbots will be active to provide assistance to the customers with improved artificial intelligence, making the service more efficient. For example, Starbucks allows the customers to order a coffee via a chatbot (Ma, Lin & Zhao, 2016).
- The number of cashiers will become less as more self-checkout systems will be installed and people will assist the customers while shopping only.
Conclusion
By analysing the upcoming trends, it can be concluded that the departmental and discount stores will be more digitalized in the future. With the revolutions in the smartphones, digital technology and internet, the business models of the departmental and discount stores are also getting evolved. These stores will focus on providing more shopping convenience, flexibility and value to the customers and digitalization is the best option to do this.
References
Business.nab.com.au. (2017). The Future of Retail. Retrieved from https://business.nab.com.au/wp-content/uploads/2017/09/The-future-of-retail-September-2017.pdf
Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Goworek, H., McGoldrick, P. J., & McGoldrick, P. J. (2015). Retail marketing management: Principles and practice. Harlow, UK: Pearson.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Hristov, L., & Reynolds, J. (2015). Perceptions and practices of innovation in retailing: Challenges of definition and measurement. International Journal of Retail & Distribution management, 43(2), 126-147.
Ma, S., Lin, J., & Zhao, X. (2016). Online store discount strategy in the presence of consumer loss aversion. International Journal of Production Economics, 171, 1-7.
Naik, K., & Srinivasan, S. R. (2015). An assessment of departmental store service effectiveness using a modified SERVQUAL approach. Journal of Business and Retail Management Research, 9(2).
Pole, K. (2015). Introduction to retail marketing management.
Rodríguez, M., Paredes, F., & Yi, G. (2016). Towards Future Customer Experience: Trends and Innovation in Retail. ???????, 10(3 (eng)).
So, K. K. F., King, C., Sparks, B. A., & Wang, Y. (2016). Enhancing customer relationships with retail service brands: the role of customer engagement. Journal of Service Management, 27(2), 170-193.
Varley, R. (2014). Retail product management: buying and merchandising. Routledge.
Varley, R., & Rafiq, M. (2014). Principles of retailing. Palgrave macmillan.
Zahra, P. (2017). Retail Trends 2017: What is digital’s impact on the retail sector?. Retrieved from https://www.digitalpulse.pwc.com.au/retail-trends-2017-paul-zahra/
Zarkada-Fraser, A., & Fraser, C. (2015). Integrating social and economic orientated marketing: A study of retail management. In Proceedings of the 2000 Academy of Marketing Science (AMS) Annual Conference (pp. 219-223). Springer, Cham.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
