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DC Project Guidelines (Jan 2011)

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  • 1. MKTG 1058 – Distribution ChannelsDiscussion Points for Project on Location Analysis and Store Environment January 2011 Malls Approved for Location Study: Raffles City, Palais Renaissance or Shaw Leisure GalleryBefore starting your project:  Survey the selected mall and have a broad idea of the kinds of stores and the likely customers those stores are likely to attract. Think of this in terms of segmentation and targeting strategies.  Selection of store: What is appropriate varies from group to group. Some key questions need to be asked. Does the store have a unique retailing concept? Where would it draw its customers from and does location matter? Why do you think it could have a loyal customer base? Does it fit within its overall image and positioning? Are you able to get supporting market information? How does it sit within the overall shopping centre layout? Any unique advantages offered by the shopping centre layout in terms of appearance, accessibility and others?  Nature of the product / service of your selected store: This is vitally important to the successful completion of your project. Many groups fail to do well because their analysis is superficial and textbook based rather than factoring the nature of the product. Product classification will include convenience, shopping and specialty goods- you are expected to have known this in your Principles of Marketing course. The nature of your product will determine shopping behaviors- which is very much related to location analysis since it determines the motivations for buyers to visit your store. Is the store you have selected one that is randomly visited or is it a „destination store‟?  The trading area analysis is the key issue because in your project you will need to argue whether or not there is a clearly demarcated trading area or whether customers may come from further away.  Read Chapter 7 in depth followed by Chapter 13. But take note that other areas of retail management found in the remaining chapters could be of use to your project.Use Exhibit 7.5 as a guide to planning the stages of your analysis. Thismodel reminds us that we are working from macro market data and inwardstoward micro information about the site.Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 1
  • 2. Note: Getting the Right Perspective for the Project:You are reminded that you are NOT going to recommend other better sitesfor your store. Your retail store is already in your selected mall. In fact, youare required to discuss the merits and limitations only. It was mentioned inclass about adopting the correct perspective since so many groups in thepast were penalized because of this mistake.The text chapter 7 is written from the perspective that ‘the retailer has notyet selected a suitable site” and is using a screening approach in order tonarrow down the best choice. In this project, we are already operating fromthe given site. You are to use the content in chapter 7 to select the‘appropriate set of factors’ to comment on the suitability of the site. Thosegroups who merely copy content using the headings of chapter 7 will notsecure a good pass. Instead you are urged to carefully analyze the natureof your store and its products to determine which factors are ‘stronglycorrelated’ to the patronage behavior at your store (notice that the projectbrief often uses the term ‘hypothesis’). You are also encouraged tointroduce factors that may not be found in the chapter. This will showinitiative on you part.Approach to Completing the Project:Break up the instructions into parts. Make sure you address ALL of theparts and don’t leave any area unanswered. The following working notesare only guides and not answers. Use them to work through the differentsections of your reportSections of the Project Brief (in boxes) followed by mycomments:With their specific store the students are to first determine the trading area - thatbeing the geographic area from which that store draws its customers. They mustdo so utilising Reilly‟s law of retail gravitation.In doing this they will have to decide whether the store itself or something else,such as the centre the store is located in, determines this trading area. Pleaseremember that theorists such as Paul Converse have noted that with a shoppingcentre one can use the square metres of retail space rather than the actualpopulation one would use when working with a town.Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 2
  • 3. Comments:After providing some background information about your store (type of business,target customers, competition, etc) proceed to discuss about location specifics ofthe store within the mall and the trading area. The most important aspect oflocation is a clear understanding of the trading area around the mall you haveselected.Discuss the attributes of the trading area-other shopping malls, private residentialor offices. Use maps to show where your store is likely to draw customers from.Use the focal trading area where your store is located as your anchor point(remember to compute Reilly‟s model you need to have a base trading area. Tocompute the statistics you will need to have at least 3-4 other malls from whichto compute the break points.Note that we will be using square feet mall area space of your selected malland the nearly malls or shopping centers as a substitute for populationdata (which is used in the formula in the text book. We use the floor area asa surrogate measure of traffic (shopper) volume; sometimes known as „footfall‟.Commuting distances are estimated from travel on main roads and the MRT (justprovide rough estimates will do).All calculations must be shown in the appendix. After calculating the breakpoints, you must mark off the trading area on an appropriate diagram. Thelecture PowerPoint slides for Lecture 2 should be referred to, especially slidesnumber 2-80 to 2-93.When choosing the other shopping centers or malls try to justify your selection. Inaddition, the other malls should have stores that have similar products orservices that your selected store is offering. The competitor stores in those othermalls will give you some idea of whether the trading area is over or understored.Key issue here: is it the store or something else such as the centre of the storeor factors such as the uniqueness of the product, etc that determines the tradingarea. Bear in mind that the concept of LA must be moderated to fit Singapore‟scontext (we are a city state). The nature of the product and the resultingshopping / search behaviors will give you some indication of how wide or narrowthe trading area is likely to be.Once the trading area for their store is identified the students need to analyse themerits of that trading area in terms of whether it is understored or overstored.Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 3
  • 4. Comments:Look at the definitions of under/ over stored on page 225 of the text. Think backto your own store. Don‟t be limited by a comparison of exact retail store typecomparisons but also consider other equivalent stores or store formats thatmight offer similar but not the same products. Just to consider an example-Harvey Norman store sells furniture as well as electrical products so if your storesells furniture you should count Harvey Norman as one of your directcompetitors. So look wider before you commit to a decision on the trading areabeing over or under-stored. Give evidence of over or under- stored situations byshowing the count of similar stores in your own mall itself as well as similarstores in surrounding malls. You can then comment briefly on the intensity (orlack of) competition for your store‟s brand.Saturation theory describes the concept of „intensity of distribution‟ or „marketcoverage‟ based on the number of retailers, the concentration within a givengeographical market and the types of products offered by those retailers.When you comment on the extent of the trading area being over or understored,support with justifications.They also need to carefully utilise all the other market demand and market supplyfactors which are described in detail in the prescribed text and be in a position toreport on all aspects of that particular trading area.Comments:You can comment on as many relevant factors, but do not feel obliged to force fitevery criteria. Some factors will stand out as having high correlation to theattractiveness of your store. You can even include factors that are not included inthe list shown in the text provided these are relevant. Be selective and pointthese out and elaborate on them. Example high consumer mobility in Singaporemeans that distance is not a barrier in store choice and location. Market demandfactors are those that can sustain demand for the store products over a period oftime. By analyzing the demand factors, you are actually profiling the types ofcustomers that your store attracts. As for supply factors, the square feet issuerelates to the “costs” of operating- rental cost is high depends on the location andlevel within the mall, as well as staffing costs and costs of turnover of staff. If youlook at the nature of your product, you need to examine the expected profitabilityof running that store‟s operations. Is it high value or low value added? Is it highturnover low margin or low turnover high margin? Also you need to comment onthe intensity (or lack of it) of competition around that trading area- how manystores in your existing mall and other surrounding malls, the range of products,types and intensity of promotions used, power of store brand, etc.Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 4
  • 5. In summary, this part of your analysis helps you to profile your trading area-gives a sort of description of who buys and who sells in that vicinity including theshopping mall itself.In doing this admittedly there might be some factors which they cannot fullyascertain. If that is the case they should explain this and then work with areasonable hypothesis after identifying that this is a hypothesisComments:This means those factors not considered in the list of pages 228-231. This whereyour group can excel in the project because you are applying creative and strategicthinking to your understanding of retail management. Hypothesis means showingrelationships between a dependent and independent variable/s.Examples could be written as follows (do NOT copy!)- The number of stores selling similar product lines as ours in the shopping centrein which our store is located does not contribute to the condition of over-storingbecause this situation leads to an overall increase in customer traffic due to thestrong positioning of the mall as being a specialist centre with deep productassortment.- The nature of our product predetermines the condition that there might not be aclearly demarcated trading area (as specified by traditional location analysismodels such as Reilly) because of the ‘specialty nature’ of the brand. Customersare clearly segmented into niche segments and ours represents a small butfocused segment. Therefore customers may come from all corners of Singapore- Technology makes location irrelevant because our products and services areavailable online on the web 24/7After explaining that stores trading area the students should proceed to carefullyevaluate the actual site their store occupies. A checklist for site evaluations is inexhibit 7.13 on page 239 of the prescribed text and the students should attemptto include those factors.Comments:Remember we are now writing about the actual site- don‟t bring in discussion ofthe trading area any more here. The list shown in exhibit 7.13 is very long so youneed to study each one carefully and eliminate those that have no bearing to thestore and its brands.Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 5
  • 6. Be selective about how you choose the factors- better to have more in-depthdiscussion of a fewer number of relevant points rather than to skim over manyfactors in a superficial manner. The factors that you consider are those that bestexplains the merits of your store‟s location at the given site- did it meet therequirements of those factors and if not- why.Note again- in the Dunne text, the factors listed are based on the view that theretailer has not yet selected a site and is looking at prospective sites for a newoutlet. You cannot use that thinking here. Many students failed this section ofthe report because they blindly copied from the text without knowing what theywere writing about! In short, you are summarizing the advantages or constraintsof your location of the store from the point of view of ex-ante or “after-the-fact.”DO NOT make recommendations for changing the current location- just commenton its suitability.In the case of this report, you are reflecting on the suitability of site in terms of itslocation suitability in drawing customers from the trading area or surroundingmalls. Does the checklist factors shown in Exhibit 7.13 support or limit theviability of the store you have selected. Explain why.They should also give some attention to factors such as demand density. Thesame rules as to working hypothesis holds here as in the above paragraph.Incidentally, with the store in a shopping centre pay attention not only to thesurrounding traffic flow and accessibility, but also to the location of that store inthat centre and the actual pros and cons of that location in that shopping centre.Comments:The issue of demand density is that of whether your site meets with multiplechoice criteria. See the example of Exhibit 7.12 in the text. See if you can mapout a similar version of this figure, if not you can just describe this in words. Inshort, given the location of your selected mall, do you think that the area itselfattracts customers that have multiple criteria that support strong patronage of thestore and its products?Hypothesis in this instance means can you prove either as supporting or non-supporting that your current site meets a set of criteria. Some possibleexamples: - the location of the mall is strategically located within the heart of Orchard Road belt which give it greater exposure to the tourist shoppers who comprise of higher end consumers in search of luxury and quality brands - the location of major offices in the main and adjacent buildings help to augment the traffic volume in addition to casual shopper trafficGuidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 6
  • 7. - the site of the underground MRT station brings additional shopper footfall throughout the weekdays - and so on.As for supply density, the text refers to availability of tracts of land for retail sitesand expansion. We are not talking about tracts of land but instead we need tolook within the mall for areas of possible expansion. If a mall is fully subscribedby tenants then there is less scope for a given retailer to change its location or toexpand the floor space.You must be able to show floor plans of your selected mall. From this you mustcomment on: - The suitability of the store location within the mall in terms of visibility and accessibility- does it have a strategic location? - The store size (is it overcrowded or just nice? Scope for expansion?) - The locations of other retailers who offer complementary or competing products. How do these stores add / subtract from the number of customers visiting your store?With regard to the „surrounding traffic flow‟ take into account the movement ofshopper around the vicinity of the mall. For example, how does the commutertraffic from the MRT line contribute to shopper traffic in the mall?Further to that the students are expected to critically comment on the storeimage. Also the floor plan of the store, the store design and the visualcommunications all as explained at length in Chapter 13 of the prescribed text.Comments:Use Figure 13.1 on page 434 to comment on store image. Discuss the strengthsand limitations (but don‟t go into too much commentary on what changes you planto make).Discuss how the store image helps to differentiate the store brand. In the case oflack of store image, critically evaluate how the store loses its competitiveadvantage in terms of customers not noticing it and moving on to other stores.One of the key issues to be brought up is how well the store‟s image clearlycommunicates the “retailing concept” (research on this!). How does the storefront and its visual merchandising „tell a brand story‟ when the shopper enters thestore?Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 7
  • 8. And also how the store layout helps to communicate the brands offered as well asbeing attractive and outstanding compared to other stores.Photos will help- put them in the appendix.But make sure you get the right approvals and don‟t be caught by the security ifyou are unauthorized to take pictures. This can be serious since they might viewyou as „representing competitors‟.We expect to see diagrams showing the store layout and your comments onthe „type of layouts used and its suitability for the given product. Does it facilitatemore impulse buying for example?In short students are looking at a particular store and doing an extensive retaillocation analysis of that store, and then contemplating the store layout anddesign. Students are not defending the location of their store, nor its layout, butcommenting on both the advantages and the disadvantages of the currentlocation and layout.Take note of this final comment closely into consideration and stay on track. Thisis not a difficult project to do provided you start early and answer the sevensections listed in this set of guidelines. This is strictly a retail study using thetechniques of observation and data collection. You are to comment on both thepositive and negative attributes of store location and store design. At all timeskeep your mind focused on the nature of the product or service whencommenting on the suitability of the store location and store design.Essentially we want you to browse the store, contemplate the operation, andthink this out for yourself anonymously. In doing this you can make certainassumptions as long as you identify those assumptions.Important Reminders: The report should incorporate some basic maps ordiagrams so that someone not familiar with this location can very easily ascertainthe circumstances pertaining to it. The actual report is to be handed to the SIMAdministration (NOT directly to the local lecturer) with proper RMIT assignmentcover page. These reports are not to exceed five thousand words and mustaccord with the instructions which follow relating to the presentation of writtenwork. Please do not contact anyone working at or associated with your chosenstore or the shopping centre it is in.Deadline: 1 April 2011. This is week 12 in our lecture schedule; do NOThand over the assignment to lecturer. Please deposit in the BOX.Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 8
  • 9. Administrative Details:Please make sure the names printed on the cover page MATCHES thenames listed in the register. Please list the names in alpha order andcorrect admin numbers.Please note: I also would like a soft copy (CD-ROM) to be attached to yourreport. This should contain the main report and all the accompanyingappendices. The report must have ‘spiral binding.’Here are the suggested outline headings for the project report:You should try to follow this flow; of course if you have additional areas tocomment on, do feel free to add. 1. Introduction (background information of the store and its products, target customers and local competition) 2. Objectives of the study 3. Determination of Trading Area and Commentary 4. Merits of the Trading Area (under and over stored) 5. Market and Supply Factors impacting on Trading Area 6. Additional Hypothesis/es that describe Trading Area 7. Site Evaluation Factors and alternative hypothesis 8. Impact of Location within Mall or Shopping Area 9. Evaluation of Store Image and Design 10. Overall Assessment of Store Location and Design 11. Appendices 12. BibliographyGuidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 9
  • 10. References:** To help you get started here are few possible references. Please use your ownreferences as much as possible. The list below shows some of the leadingacademic references in the field of location analysis in retailing. Be selective.Evaluating Retail Trade Areas for convenience Stores. By: Houston, Franklin S.;Stanton, John. Journal of Retailing, Spring84, Vol. 60 Issue 1, p124Developing a location research methodology. By: Rogers, David S.. Journal ofTargeting, Measurement & Analysis for Marketing, Mar2005, Vol. 13 Issue 3, p201-208A Disaggregate Model for Predicting Shopping Area Market Attraction. By:Weisbrod, Glen E.; Parcells, Robert J.; Kern, Clifford. Journal of Retailing, Spring84, Vol.60 Issue 1, p65The Contribution of Store-Image Characteristics to Store-Type Choice. By:Schiffman, Leon G.; Dash, Joseph F.; Dillon, William R.. Journal of Retailing,Summer77, Vol. 53 Issue 2, p3Specification of Patronage Models for Retail Center Choice. By: Gautschi, DavidA.. Journal of Marketing Research (JMR), May81, Vol. 18 Issue 2, p162-174Shopping-centre attributes affecting male shopping behaviour. By: Sim LooLee; Ibrahim, Muhammad Faishal; Chong Hsueh-Shan. Journal of Retail & LeisureProperty, Oct2005, Vol. 4 Issue 4, p324-340Attitudes to transport modes for shopping purposes in Singapore. By: Ibrahim,Muhammad F.. Transport Reviews, Mar2005, Vol. 25 Issue 2, p221-243E-retailing versus physical retailing: A theoretical model and empirical test ofconsumer choice. By: Lee, Khai Sheang; Tan, Soo Jiuan. Journal of BusinessResearch, Nov2003, Vol. 56 Issue 11, p877Shoppers perceptions of retail developments: Suburban shopping centresand night markets in Singapore. By: Ibrahim, Muhammad Faishal; Soh Kok Leng.Journal of Retail & Leisure Property, Oct2003, Vol. 3 Issue 2, p176-189The Importance of Entertainment in the Shopping Center Experience:Evidence from Singapore. By: Ibrahim, Muhammad F.; Wee, Ng C.. Journal of RealEstate Portfolio Management, Sep-Dec2002, Vol. 8 Issue 3, p239Congruency of scent and music as a driver of in-store evaluations andbehavior. By: Mattila, Anna S.; Wirtz, Jochen. Journal of Retailing, Summer2001, Vol.77 Issue 2, p273Influences on Store Patronage Behavior: A Comparison of Department andDiscount Stores in Singapore. By: Shamdasani, Prem N.; Hean Tat Keh; Lee,Evelyn Z.C.. Journal of Asian Business, 2001, Vol. 17 Issue 2, p63Guidelines for Student Project (MKTG 1058 DC) © Geoffrey da Silva 10