The Irish Retail Industry - Example

Buyer Behavior AFFILIATION: The Irish Retail Industry The retail industry of Ireland is the country’s most geographically diverse set up providing the highest number of jobs. This sector works as a catalyst to the country’s growth and plays a crucial role in sustaining competitiveness; it contributes to over 10% of the GDP of Ireland (Retail Ireland, 2012). The retail industry has strong competition within the sector which has ensured that prices are kept low consequently contributing to Ireland’s low inflation. This sector influences Irish manufacturers and suppliers to enhance productivity thus contributing to the competitiveness a bit more. The industry keeps on adding new members, a wide range of member services, newer brand identities and a digital communications strategy carefully planned to effectively communicate messages to customers and other stakeholders. The industry sends through a very clear message: creation of plethora of jobs, generation of taxes and help the country to come out of the recessionary cycles. The wholesale and retail sector constitutes are considered the biggest in Ireland providing employment to approximately 15% Irish workforce (Retail Ireland, 2013). According to the same report, there are around 40,000 firms which employ 275,000 people. The owners are mostly Irish and can be divided into two broad categories: specialized stores and non-specialized stores. The food retail industry of Ireland is expected to see a growth in value in the following years. According to Bord Bia (2011), the industry is projected to have a value of £10,823 million. Refer to Appendix 1. This report has an in depth analysis of the Irish retail industry with special emphasis made on the Supermarket Retailing. The company chosen for better understanding is SPAR. Segmentation of Retail Industry The Irish retail industry is divided into two broad categories: 1. Store based retailing: Store based retailing, is a broad category which has further sub categories: contemporary grocery retailers like convenience stores, discounters, chained forecourt retailers, independent forecourt retailers, hyper-marts and supermarkets. The same category also covers traditional grocery retailers like, food/beverages/tobacco experts and independent grocers (Euro Monitor, 2013). Non-grocery retailers include personal care goods like apparel, footwear, beauty products, electronics and health retailers. The third sub category of store based retailing is luxury retailing which included branded apparel, footwear, luxury department stores and ornaments specialists. 2. Non store retailing: The second category of Irish retail Industry is Non store retailing which can be divided into four sub categories: direct selling and home shopping (of apparel, beauty items, consumer appliances, home care products, etc.). Other sub categories include internet retailing and vending of packaged food and drinks. Refer to Appendix 2. Convenience retail which includes, supermarkets, hypermarkets, and superstores generate £ 35.5 bn in sales in the year 2010 and are continuously expanding. The reason behind this expansion is that the number of consumers is growing and they need easy, accessible shops. Moreover, consumers are shifting towards online means of shopping, therefore, e-commerce strategies are also being implemented by Retail sector of Ireland. The fresh foods market which includes grocery, food, drink and personal care items amounts to 56% of the total retail sector (Nielson, 2013). The breakdown statistics of the fresh foods market is given below: Meat, Poultry & Fish equals 21% Produce equals 21% Chilled Cabinet is 38% Bakery Items are 15% Deli is 5% Consumer Trends The Nielson Report (2013) suggests that Ireland comes second when it comes to buying food, grocery and personal care items. In the year 2012, the average consumption rate was 53%. The price fluctuations related to fresh foods are altered by demand and supply, adverse climatic changes, industrial crisis and others. It is highly critical for Irish retailers to understand the demand(s) of the consumers and then linking them to successful strategies. The consumers in Ireland have recently become quite price sensitive. A large population, i.e. more than 60% compares price rates when shopping for groceries. According to the latest Nielsen Shopper Trends Survey 49% of Irish respondent admitted that escalating food prices affect their purchasing of goods from supermarkets (which usually includes fruits, vegetables, meat, poultry and sea food items). The recession in Europe has impacted the consumers who now have to shop around in search of lower prices. According to Euro Monitor Report (2014) the retail industry of Ireland suffered the after effects of recession leading to constrained expenditure by the consumers. Therefore it is critically important to track where customers are going for better prices or where they are willing to pay higher for more perceived value. Another research report states that consumers have become less loyal to brands and sought value- they keep on looking for the cheapest options (Bord Bia, 2011). Introduction to SPAR SPAR is one of the most popular and largest retail food store chain of the country with more than 450convieniently located stores. The supermarket has high quality retail formats of SPAR, SPAR Express and EUROSPAR retailers dealing with a wide range of consumer base. SPAR’s customers can enjoy a food, drinks, breakfast, lunch or just regular shopping experiences for fresh products (SPAR, 2010). The motivation of the company is to enhance continence shopping for the busy consumers so that they can have a healthier lifestyle. SPAR express are stores for people who are always moving and need quick solutions. This format includes all the essential items and is located at prominent locations so that they are accessible by a large target market. EUROSPAR is a supermarket which is equipped with an extensive range of products and it is designed to suit family shopping. SPAR has a famous slogan ‘Under the Tree at SPAR,’ which means that the supermarket is a one-shop stop solution for everyone (SPAR, 2010). Buyer Behavior of SPAR Market Segmentation Market segmentation is a process of categorizing the total consumer base into groups of buyers whose needs and wants are similar to each other. Moreover, these groups of people value things in the same way and have similar perceptions. All consumer markets segment their target market on the basis of demographic, psychographic, geographic and behavioral segmentation. SPAR’s consumers are also segmented in the aforementioned manner. The company has products related to all ages and the supermarket has different areas specified for apparel, footwear and personal care products of females, males and children. The food and drink sections however are not differentiated on the basis of demographics and are offered to all age groups and genders. The supermarket has different priced products suitable for people belonging to different income groups. The stores are located on planned locations so that a large number of target-market can reach it. Therefore, SPAR practices geographic segmentation too. The supermarket also has a coffee shop and Deli area where people can relax if they are tired or are not in the mood of shopping. In this way SPAR is capturing the interests of people and their psychographics. Many people make purchases on the basis of occasions, or festivals. SPAR has a wide range of products specifically made for birthdays, anniversaries and festivals like Christmas- thus it is segmenting on the basis of behavior also. A survey was conducted by Tendai & Crispen (2009) in which they selected a total of three hundred and twenty shoppers all of who were regular shoppers at SPAR, Shoprite and Pick n Pay supermarkets. The survey proved that approximately 47.5% customers belonged to the income group of £0-1500. Approximately 60% of the respondents earned R 3000 or less per month which showed that majority of shoppers are from lower income backgrounds. Refer to Appendix 3. Characteristics of Buyers Literature proves that consumers around the world have changed their buying behavior mainly due to recession and economic crunch. Recent research shows that consumers have become more loyal to perceived value- which means they want more value for money. According to the Annual Report of SPAR (2009) consumers are buying in small portions and making frequent trips to various different stores in search for value. There are more sales of products which are bought on promotions or ‘sales’. Moreover, consumers are finding promotional leaflets more appealing because of the offers they contain. Inside the supermarkets, consumers use a product list to buy weekly or monthly groceries. If the product is not on the list it is avoided because they are reluctant to purchase/try new items. Many customers are also found comparing two substitute products to see which one is cheaper, or have more value for money. These consumer trends have strongly impacted the retail industry (Annual Report of SPAR, 2009). The uniqueness of consumers’ of SPAR is that they are price sensitive and prefer in-store promotions. Furthermore, these consumers want to enjoy their shopping experience and for that they approach the coffee and deli areas. Another characteristic of SPAR’s customers is that they want to do quick shopping which is preferable ‘on-the-go’. These consumers visit SPAR express which is located in prime areas equipped with necessary products. The famous supermarket chain has successfully attracted all types of consumers, families and younger generation who just want to hang out with friends. Everything is available under one roof just like the way SPAR claims it. Buyer Attitudes Consumers exhibit different attitudes while they are shopping for grocery, home products or personal care. Keeping in mind the recent economic pressures, consumers have drastically changed their purchasing behavior keeping it simple and controlled. Consumers have also reduced their shopping items drastically and have limited to limited ones only in order to save money. They are now trying to control spending and look forward to promotional offers like: buy one get one free, free products, discounted range and other trade-offs. The Irish consumers now want deals in all categories of products (premium and non-premium) because they are always in search of good value but fewer prices. Apart from the prices, change in buyer attitude has been observed due to changing lifestyles. Today, consumers opt for convenience shopping and want quick results. In response to this buyer trend, many supermarkets including SPAR Express have positioned themselves as a convenient store format where people can purchase whatever they need and wherever they need it (SPAR, 2010). Some researchers state that consumers have trust and confidence in the Irish retail industry and that their Consumer Sentiment Index has increased between the years 2009-2013. In February, March and April 2013, it read 58.9-60.0, showing that people are little concerned about economic prospects (FitzGerald, 2013). Refer to Appendix 4. Perceived In- Store Characteristics It is important to note that consumers want a healthy and conducive environment to shop in. Shoppers perceive store characteristics differently- some give importance to the general atmosphere of the supermarket, personnel and staff and status of other customers while others want better price offerings such as convenient payment methods (through cards), discounts, promotions etc. A large part of the customers also gives importance to parking spaces, location of supermarkets and opening hours so that they can make purchases while they are on the move (Lehota, Horváth & Gyenge, 2006). These characteristics of the store and its format are highly crucial because on the basis of these unique selling points, customers begin their ‘buyer decision process.’ The supermarket should be able to provide an emotional experience to the customer in the form of pleasure, excitement and dominance so that he or she makes repeat purchases from there. Lehota, Horváth & Gyenge (2006) in their research work have stated a model for the in-store atmosphere. According to this model, there are environmental stimuli inside the supermarkets like for example: babysitting services, staff, parking lots, trolleys, cashier, interior design, labeling of products’ prices, music, room temperature and many other aspects that the consumers can feel and touch. All these tangibles and non-tangibles lead to positive or negative emotional state of the customer. If the environmental stimuli are good the customer will feel happy after shopping and would then accept the store. If the stimuli are unfavorable, the customer’s reaction would be negative too and he/she might try to avoid the store. Refer to Appendix 5. The decision making process begins right after the consumer has perceived the shopping area(s). SPAR is equipped with state of the art technology as well as external stimuli so that it can create a memorable shopping experience. According to Tendai & Crispen (2009), SPAR exhibits in-store marketing activities, point-of purchase displays, good background music and large displays of promotions. The staff present at SPAR’s supermarkets encourages and helps customers to spend more. Congestion and over-crowding of alleys spoils the shopping experience leading to unfavorable experiences. SPAR avoids all this by having store format is big with wide alleys so that shoppers can move freely. It makes sure that products are kept at the level of sight and that customers can view different products in peace. Sales staff is also present at various locations to serve the customers and to answer their queries. Tendai & Crispen (2009) use mall-intercept method to determine the aforementioned factors. According to their search results, 95% respondents chose ‘price’ to be the most influential factor, whereas, 77.5% gave importance to the behavior of staff. Refer to Appendix 5. Buyers’ Decision Making Process In the modern shopping era, the decision process is mostly complete even if the customer is not present inside the supermarket. Abundant product knowledge, product reviews and in-depth details on websites make it easy for customers to make up their mind before making the purchase. Technology has made the end consumer so well-equipped that most of them just enter the store, pick up their desired product and leave. However, it is important to understand the buyers’ decision process for better analyses of the topic. There are five steps in the buyer decision process: The process begins with a need or recognition. At this stage, the person develops a liking or a need for some product for example a smart phone. There may be several reasons for this need: the old one is damaged, there is a new model in the market, more features are required, or you have to gift it to someone. In order to make this need into reality, the person will do some initial research. He or she might look up for reviews on the internet or might ask some close friends/family for advice. This procedure is known as Information Search. One the person has done research work; he/she compares different brands of smart phones and checks their prices. He/she might also compare different features and choose the best one available. Irish customers are mostly prone towards good value for money. This stage is known as Evaluation of alternatives. Once the person is satisfied with all the aspects of the smart phone he or she goes to the supermarket which is most suitable. At this point too, the person might only go to the store which is perceived as best and the one which provides the maximum value in terms of time, convenience or location. Once the Purchase decision is made and the actual purchase has taken place the customer used the product and experiences it. The post purchase stage comes after this in which the customer gives a positive or negative feedback regarding the smart phone. This can be in the form of good/bad word of mouth, posting nice comments online, writing interesting reviews etc. The post purchasing behavior can be quite favorable if the store or supermarket from where it is purchased gives great after sales service as well. On the other hand, if the service is poor, the overall experience of the shopping and the purchase itself would spoil. Influences on Buyers’ Decision Process The overall decision process can be positively or negatively affected by certain groups of people like family, friends and colleagues. If we continue the aforementioned case, the influencing character might be parents, sibling, close friends etc. In other cases for example deciding a school for your child, the influencing bodies can be institutions, teachers, religion people, relatives and friends. These people might directly or indirectly influence one’s decision process by giving their own opinions or by just forcing the person. Culture and values also amend a person buying decision. Like in this study, the Irish people have tremendously altered their buying patterns mainly because of the recession that hit recently. People have shifted to money-saving shopping methods and look forward to promotions. Social class can also influence many people and might force them to choose certain kinds of products. For example a status conscious man may only prefer a Mercedes over Toyota cars. Personal experiences in the past can also alter ones decision making process. For example if I have had a bad experience with Nokia I would prefer a Samsung smart phone for my next purchase. In-store marketing activities like large and attractive displays, digital screens, and attractive looking sales people can change one’s decision to buy a certain brand. Marketing Communication After observing the buyer’s purchasing trends in Ireland, SPAR has launched numerous marketing campaigns to encourage more sales. Value and price are the two most noteworthy factors for SPAR for which it has launched country wide programs in Ireland. The famous supermarket chain has drastically reduced its operational costs and has forwarded these benefits to their customers in the form of lower prices (Annual Report SPAR, 2009). SPAR used extensive marketing media to ensure that the message of price and value reaches the correct audience directly into their homes. Advertising of price was on through leaflets, newspapers, television commercials, and radio to make sure that the potential target market is equipped with all the price related information while sitting at their hoems (Annual Report, 2009). Inside the supermarkets SPAR uses large and attracted displays which differentiate private label brands and their own labeled brands. For example, bread and milk which are two most necessary items will be placed far apart so that the customer has to go through the entire floor in order to get it. In this way SPAR makes sure that customers move around a lot so that they can view all the attractive deals offered to them. Discount ranges have also been merchandised to keep in mind the changing preferences of SPAR’s buyer-profile. In addition to this, trolleys are specially designed to hold babies so that it is convenient for parents to shop around freely. SPAR offers special deals on its website under the heading ‘In-store Promotions.’ These offers are valid for a limited time period so that consumer traffic can be generated at the supermarket. The offers are not only limited to the products but are extended to the coffee area too because those areas are a part of SPAR as well. Refer to Appendix 6. In response to the change in purchase behavior, SPAR Ireland launched an advertising campaign by the name ‘Get your Life Back’ which revolves around the convenience of shopping in the supermarket and promotes the brand’s ability to adapt to busier lifestyles without being heavy on the pockets. The advertisements of this campaign portray customers belonging to different lifestyles embracing their shopping experience at SPAR with ease and convenience so that they can make more time for their leisure activities. Inside the supermarket, SPAR’s advertising campaign is quite visible. In peak seasons such as holidays/vacations of Christmas, SPAR takes the opportunity to launch exciting promotional offers which are displayed in the form of banners and leaflets inside the store. SPAR plays a responsive role to the society and given back to them in the form of sponsorships; the recent one being Kitchen Hero 2014 (SPAR, 2010). Free weekly recipe cards were available in the stores while the episodes of live cooking show played on the television. Refer to Appendix 7 Recommendations SPAR is doing well in Ireland because the Irish people are promoting their own produce. Their own private label especially has received an award of best brand in Ireland therefore the company is trusted well by all stakeholders. However, there is no online shopping option for busy customers. The company should now shift towards online retail so that it can cater to those people who cannot reach the supermarkets. Moreover, the fast paced lifestyle and cost saving habits of people have forced them not to visit the supermarkets much. Therefore the home-shopping option will help in attracting dormant customers. SPAR can add all the items it has on an online portal from where the customer can add them to his or her cart. Once the shopping is complete, the person can make payment through credit card and the items would be delivered to their door step. SPAR can also introduce the option of online booking for products and when they reach the supermarket they can just pick up the bags, pay and leave. This will further attract working people who have minimum time for shopping. References Annual Report, 2009, ‘Winning Strategies for the New Decade,’ Accessed on 27th October, 2014, < http://www.spar-international.com/media/28673/ar_2009.pdf> Bord Bia, 2011, ‘Retail Markets Today & Tomorrow In Ireland & the UK,’ Accessed on 27th October, 2014, EuroMonitor, 2014, ‘Retailing in Ireland,’ Euro Monitor International, Accessed on 27th October, 2014, < http://www.euromonitor.com/retailing-in-ireland/report> FitzGerald. S, 2013, ‘Irish Retail Market Overview,’ Accessed on 26th October, 2014, < https://sherryfitzgerald.files.wordpress.com/2013/01/irish-retail-market-review-june-2013.pdf> Lehota, Horvath & Gyenge, 2006, ‘An empirical research of the factors determining customer behaviour in food retail stores,’ Studies in Agricultural Economics No. 105. p. 39-58, Accessed on 27th October, 2014, Nielson, 2013, ‘Ireland Fresh Report,’ Accessed on 27th October, 2014, Retail Ireland, 2013, ‘Strategy for Retail 2014-2016,’ Accessed on 26th October, 2014, Retail Ireland, 2012, ‘Annual Report,’ Accessed on 26th October, 2014, SPAR, 2010, ‘About SPAR,’ Accessed on 27th October, 2014, Tendai & Crispen, 2009, ‘In-store shopping environment and impulsive buying,’ African Journal of Marketing Management Vol. 1(4) pp. 102-108, Accessed on 27th October, 2014, Appendix 1 Food Retail Sales 2007-2015 Source: Bord Bia (2011) Appendix 2 Segmentation of Irelands’ Retail Industry Source: Euro Monitor (2013) Appendix 3 Income Source: Tendai & Crispen (2009) Appendix 4 Consumer Sentiment Index Source: Appendix 5 A Model of Store Atmosphere Source: Lehota, Horváth & Gyenge (2006) Consumer responses to the influence of In-Store factors Source: Tendai & Crispen (2009) Appendix 6 In-Store Promotions Source: SPAR, 2010 Appendix 7 Marketing Communication Kitchen Heroes 2014 Read More