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Understanding Retailing: A Case Study on Tesco

Understanding Retailing: A Case Study on Tesco

Executive Summary

Selling is an art, and this art is mostly practised in the retail industry, which is one of the major drivers in any economy as it is closer to the people. Therefore, in this report, the retailing industry is the topic that has been chosen.

Firstly, the nature of the retail industry and the basic structures are discussed, along with the types of retailing firms. In the second section, the nature of the distribution systems is discussed, along with the comparison among the distribution systems. In addition to that, the impact of the distribution system of Tesco is also discussed.

In the third section, the idea of customer service, which is nowadays one of the key strengths for the companies that can effectively use it, has been discussed, and the examples and the techniques adopted by Tesco. Finally, in the final section, a discussion has taken place on the external and internal factors, mostly competitive factors, that impact the business before the concluding remark.

Introduction

Retailing business is one of the key drivers of any economy. Firstly, the customers and the manufacturer cannot directly contact each other as the world population grows and many factors are involved. Therefore, the role of retailers and wholesalers evolved. Retailers deal with selling the product to the final customers (Baird, 2012). Therefore, retailers play a major role in the economy in myriad ways.

 

1. The Structure of the Retail Industry
1.1 Structure and the Organization of the Retail Industry

Generally, retailing is selling the products to the final customers. It can also be said that retailing is the function that encompasses the activities involved in selling the products to the end customers for their consumption or use. Retailers are involved in this business as sellers to the customers (Kotler and Keller, 2012). Tesco, Sainsbury’s, etc., are examples of retailing chains. The shop under an apartment that sells commodities is a retail shop too. 

Structure and Organization

There are many types of retailing, and the number of types is growing day by day. However, the basic retailing outlets are the departmental stores, super-shops, supermarkets, speciality stores, independent spars, membership clubs, etc. The supermarkets and the departmental stores are large outlets that usually grade and sort the products and sell them. They have organised management (KOtler and Keller, 2012). Compared to them, the independent spars and the local retail shops are small but very effective in meeting the public demand of the people in the locality. Membership clubs sign some members and give them extra facilities in transactions (Kent and Omar, 2003).

However, there are emerging brick and clicks retailing shops and entirely online-based retailing shops such as Amazon, Alibba.com, etc. these are the new concepts that are making the business of billion dollars (Kotler and Keller, 2012). Therefore, the retail sector in this century is experiencing various organisations and types that it did not experience before.

1.2 The Distribution System of Tesco

Tesco is the largest retail chain in Britain and has been selected to explain a company’s distribution system. Tesco focuses on both the quality and price of the products it distributes. It has more than 3500 stores which have almost 0.31 million employees. This is the basic structure of their distribution system (Tesco, 2016). 

This company has a large network of suppliers from whom it procures desired quality and quantity products at a reasonable price. This network is one of the company’s key strengths to gain cost leadership and uninterrupted supply that ensures uninterrupted distribution. Availability of goods to the customers is a key consideration for choosing a company (Tesco, 2016). 

The strongest point of Tesco is that it has managed to add numerous products to its product line from various brands. Moreover, it distributes the products almost everywhere in the UK at the same price and ensures availability everywhere (BBC, 2016). In addition to that, the marketing strategy of this company to stay closer to the customer is one of the keys to the success of this company that is also a part of the distribution strategy.

1.3 Comparison of Formats and Location of Retailing

Retailing shops are found in inexpensive and inexpensive locations. However, there are high street shopping malls, departmental stores, and local shops. The high street shopping malls are established in busy streets where there is huge traffic. These shops get a large number of customers but have to pay high rent. The same goes for the shops in the shopping malls. Those shops need to rent the expensive spaces in the shopping mall (Kerin, 2006). This kind of shop usually sells appliances, clothes, electronics, etc. 

The supermarkets and the departmental stores usually offer many products with an intensive customer service provision (Baird, 2012). Tesco and Sainsbury’s are such shops. They also have a chain retailing system in most cases. 

Finally, some local shops are open 24/7 and sell a moderate type of groceries to that locality. However, these shops usually are of low investment and low income.

 

2.0 Role of Retailing in Distributing Goods and Services
2.1 Process of Distributing Goods

Goods are distributed to the customers through different channels by different companies. Moreover, the same company can take different channels to reach different customers or regarding the nature of the goods. But, the common system is that goods are first sold to the agents and the wholesalers at a lower price and higher bundle, then to the retailers by the wholesalers, and finally, it reaches the customers. 

Therefore, there can be different channels. A channel can have an intensive number of intermediaries or less num of intermediaries depending on the size of the market and the nature of the products. In personal care and consumer goods, the number of intermediaries is high as many products are produced and sold every day (Kotler and Keller, 2012).

2.2 Comparison of Distribution Methods

Different methods are used for different kinds of businesses. For example, in consumer goods and personal care products, the companies sell the products to the wholesalers who sell them to the retailers. Finally, the products are sold to the people who are the actual consumers and the customers of those products. On the other hand, tech products such as computers and electronics are sold through the company’s authorised dealers to trailers with high street or shopping mall outlets (Kent and Omar, 2003).

 In that case, the dealers just get some commissions of the handsome amount, and the retailer makes a profit. Finally, some products can be sold through multiple channels. For example, in the retail market, a product like Coca-Cola is sold through wholesalers and retailers. But when a lot is ordered for a party, the people usually buy it from the dealers of Coca-Cola (Gyekye, 2011).

2.3 Evaluation of Distribution System of Tesco

Big retailers like Tesco PLC, in most cases, can eradicate the wholesalers as they can buy a large lot from the manufacturer. This allows them to sell the products at a lower price to the customers and gain cost leadership. This strategy tells about a different channel where there is no wholesaler. Therefore, retailers are the most important role players in a system.

Both sourcing from the suppliers and distributing to the customers are important parts of the distribution system.

 

3.0 Sales and Service Function in Retailing
3.1 Focusing on the Customers 

Customer service is one of the key aspects that retailers use to distinguish themselves. This is important for the retail shops to use customer service techniques to ensure that it can gain and retain a good number of customers like the other customer-oriented firms. The customers buy products made by various brands but from the retailers. The retailers also have competition among themselves and need to distinguish themselves. 

 Focusing on the customers helps retailers win the heart of the customers. This allows the companies to retain the customers and generate more sales by increasing the frequency of purchases. Customer service is done by informing the customers, offering them something special, assisting them in making the buying decision, choosing the right thing they need, etc. (Kent and Omar, 2003). Return of merchandise sold and helping them in this is also an important element of customer service.

3.2 Sales Techniques of Tesco

Tesco’s sales techniques are proven to be successful, as the company’s performance shows. One of the most effective techniques of the company is to introduce self-service where it allows the customers to wander freely and choose what they want and read details about the product that is to be sold (Tesco, 2016). In addition to that, the recent thing the company has done is to go online, which allows it to make the transactions easy with the customers. 

Another effective sales technique it uses is to use its database to know the individual customers’ tastes and conduct research on customising its marketing effort. This connects it more to the individual customers, and the customers feel at home with the company. Therefore, this is an effective sales technique for the company.

3.3 Impact of the Sales Techniques

The techniques adopted by Tesco have paid off. The company has been able to generate more sales leads through the online wing it has. In addition to that, the company has also been able to know the taste of the individual customers who frequently come and try to offer them their choices by anticipating the choices that help them retain the leads. Finally, the behaviour of the salespeople and the care they render to the customer is a key to success that has a positive impact on the customers.

 

4.0 Responding to the Internal and External Changes
4.1 Competitions Faced by Tesco

In the retail industry of the UK, Tesco has got strong competitors like Sainsbury’s, WB Morrison’s, etc., which are performing well too. Firstly, there is a price war where all the companies try to sell products at a much lower price than the competitors. Secondly, a major force is the demand for quality. This demand for quality ensures that the price war cannot significantly impact the products’ quality (Quinn, 2015). In addition to that, finding and retaining the trusted and quality suppliers is another field of competition faced by the firms.

Finally, customer service is a saturated field of competition where the firms try to differentiate with new ideas and a more cordial attitude towards the customers. However, all the companies have a huge customer database and spend millions of pounds to know the customer insights, indicating strong competition among the firms (Limmack, 2001). However, Tesco is still the market leader in such a competitive market. 

 

Conclusion

Retailers are one of the key drivers of the economy of a company, as said. People who are engaged in retailing business need to make sure that the goods are available at the best prices, and the customers can get good assistance, service, and behaviour from the retailers. These are the keys to success for a retailer.

 

 

 

 

 

 

 

 

 

 

 

 

References

Baird, M. (2012). Distribution, Retailing, and Wholesaling. New Delhi: World Technologies.

BBC News. (2016). Tesco turns stale as competitors freshen up ideas – BBC News. [online] Available at: http://www.bbc.com/news/business-29310445 [Accessed 20 Apr. 2016].

Gyekye, L. (2011). Coca-Cola invests £50m in its UK manufacturing plants | Packaging News. [online] Packaging News | Jobs | Production | Design | Innovation. Available at: http://www.packagingnews.co.uk/news/coca-cola-invests-50m-in-its-uk-manufacturing-plants-25-11-2011 [Accessed 20 Apr. 2016].

Kent, T. and Omar, O. (2003). Retailing. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.

Kerin, R. (2006). Marketing. New York: McGraw-Hill/Irwin.

Kotler, P., Keller, K. and Manceau, D. (2012). Marketing management. Paris: Pearson France.

Limmack, S. (2001). Takeovers and shareholder returns in the retail industry. The International Review of Retail, Distribution and Consumer Research, 11(1), pp.1-21.

Malhotra, N. (2002). Basic marketing research. Upper Saddle River, NJ: Prentice Hall.

Quinn, J. (2015). Tesco, Sainsbury’s and the like should be afraid – Aldi and Lidl can only get bigger. [online] Telegraph.co.uk. Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/12001679/Tesco-Sainsburys-and-the-like-should-be-afraid-Aldi-and-Lidl-can-only-get-bigger.html [Accessed 20 Apr. 2016].

Tesco plc. (2016). Tesco plc. [online] Available at: http://www.tescoplc.com/index.asp?pageid=6 [Accessed 20 Apr. 2016].



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