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UNIT 6. RETAILING

Pre-reading activities

One of the most important elements of marketing process – placement – involves getting the product to the customer. This takes place through the channels of distribution. A common channel of distribution is:

manufacturer → wholesaler → retailer → customer

Wholesalers generally sell large quantities of a product to retailers, and retailers usually sell smaller quantities to customers.

1. What types of retail outlets do you know? Which of them are there in your city? What are they?

2.What retail outlets do you prefer? Give your reasons for your choice.

3.Are you familiar with some more types of retail outlets such as:

-discount stores (tend to offer a wide array of products and services, but they compete mainly on price);

-general merchandise store (a hybrid between a department store and a discount store);

-variety store (extremely low-cost goods, with limited selection);

-demographic ( retailers that aim at one particular segment, e.g. high-end retailers focusing on wealthy individuals)?

Reading

Read the text and say why the Russian market is so attractive for the development of retail industry.

RUSSIAN RETAIL INDUSTRY

Retail is one of the fastest growing industries of the Russian economy. In recent years, Russia has emerged as a leading name among the countries providing the most conducive retail environment. In fact, Russia is the second most attractive destination for retail after India, thanks to its rapid economic growth and favorable policy framework, which along with other supporting factors resulted in unprecedented

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growth level for the country’s retail industry. Retail sales in Russia grew at the CAGR of almost 25% during 2004-2008.

T. Kearney, the management consulting company, ranked Russia number one in its 2004 Global Retail Development Index among the top 30 emerging markets worldwide, stating “Retailers continue to be attracted not only by the size of the

Russian market, which is home to 143 million people and an estimated $280 billion in annual consumer spending, but also by its potential growth.”

The rapid development of retail trade and high consumer spending has attracted large number of international players to Russia. At present every big name in retail industry from Metro, IKEA, Auchan is operating in the Russian retail market. These foreign chains are now expanding beyond large metropolis like Moscow and St. Petersburg to small tier cities.

However the retail industry witnessed negative growth during 2009 due to after impact of global financial crisis and slowing economy which led to low consumer confidence and contraction in consumer expenditure, but this is expected to be just a short term phenomenon. The industry has started regaining its lost momentum in 2010. As per our findings, retail sales will witness a healthy CAGR of around 18% during 2009-2013 and will surpass US$ 800 Billion by 2013.

The improving economic conditions, government support to push consumer spending and positive consumer outlook will help industry to recover the lost momentum. The expansion plans are anticipated by most of the foreign and local companies to grow rapidly once the Russian economy starts recovering from the aftershock of global financial crisis.

Pharmacy Chain 36.6 is symbolic of Russia’s fast growing retail sector. The company was created six years ago out of a drug manufacturing operation after its founders hired McKinsey & Co and the Santa Catalina Group brand consultancy to evaluate the potential for a network of integrated health and beauty outlets. The result: 36.6 became the first western-style, open-format pharmacy in Russia. It used the capital raised in its IPO to expand its presence throughout Russia.

Today the chain owns more than 230 stores across the country, and boasts offerings of “high-quality, affordable health and beauty products at attractive, convenient, customer-friendly stores”.

Overall, the pharmaceuticals and cosmetics/toiletries sectors in Russia have demonstrated impressive growth over the past three years. The retail pharmaceutical market’s overall value increased by 62 percent from 2000 to 2003;

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Retail Foods – Supermarkets and Hypermarkets

Retail chains that sell a wide assortment of foods and groceries are the largest and most dynamic modern retail format in Russia. Many leading retail companies are planning IPOs in the near future and actively attracting external investors. Supermarket chains first appeared in Moscow in 1994, when the first Sedmoy Kontinent (Seventh Continent) store was opened. By the end of 2002, there were 28 retail food chains comprising a total of 384 supermarkets; and by the end of 2003, the number of stores rose to 550, an annual increase of 45 percent (for 2003). One of the most successful examples of a supermarket chain is Pyaterochka. The company appeared in 1999 in St. Petersburg. Its shareholders are two limited liability companies and the EBRD, which has invested over $40 million in the company and retains a blocking stake.

Today, Pyaterochka is the largest food retail chain in terms of sales and number of stores (260 stores in Moscow, St. Petersburg, and several regional cities). Unlike Seventh Continent and other high-end Russian food retailers, Pyaterochka has geared its focus toward the rapidly emerging Russian middle class.

There is Russian Retail Industry Forecast to 2013 which provides detailed overview on the retail industry in Russia. It covers the past, current and future performance of the industry and identifies the factors responsible for the growth of the industry. The behavior of the Russian consumer has been studied with respect to his purchasing power, spending pattern, and inclination towards domestic and foreign brands. The future growth areas will help players prepare to enter the Russian market, to analyze the emerging market segments to ensure their success.

Vocabulary notes:

shopping mall – a large building with a lot of shops, restaurants, and sometimes a cinema.

upmarket – upmarket services or goods are designed for people who have a lot of money.

refund – a sum of money which is returned to you, for example because you have returned goods to a shop.

framework – 1) a set of rules or ideas that you use when you are forming your decisions and judgments; 2) a system of rules, laws, agreements that establish the way smth. operates in business, politics or society.

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player – a person or organization that influences a situation, especially in business or politics.

metropolis – a big city, especially considered as somewhere that is very busy and exciting.

CAGR – Compound Annual Growth Rate - a business and investing specific term for the smoothed annualized gain of an investment over a given time period. It is not an accounting term, but remains widely used, particularly in growth industries or to compare the growth rates of two investments. It is often used to describe the growth over a period of time of some element of the business, for example revenue, units delivered, registered users, etc.

to anticipate – to think that smth. will probably happen. aftershock – unpleasant results or feelings after smth. bad happens.

IPO – Initial Public Offering – an occasion when shares in a company are first sold to the public.

EBRD – European Bank for Reconstruction and Development; headquartered in London, the EBRD is owned by 61 countries and two international institutions. Despite its public sector shareholders, it invests mainly in private enterprises, usually together with commercial partners.

high-end – more expensive and advanced.

Discussion

1.What are the most attractive markets for retail in the world according to the article? Can you add some more countries to the list?

2.What attracts retailers to the Russian market?

3.What world-famous retailers are operating in the Russian retail market?

4.Describe the influence of the global financial crisis on the Russian retail industry.

5.What can be said about retail pharmaceutical market in Russia? Why is it so popular?

6.Why are the food retail chains so attractive to the consumers? Can smaller retail outlets compete with big stores?

7.Is the forecast of the development of the retail market in Russia positive or negative? Why?

8.Do you agree with the following statements “Higher Education is Important, But a Degree Isn't For Retail Success” or “Retail Can Be Learned in the Streets Without College Books or Classes”? Why?

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Vocabulary

I. Give English equivalents.

Производитель, появляться, розничный торговец, быстрый экономический рост, оптовик, не имеющий прецедентов, доход, потребитель, торговая точка, розничный магазин, участник, расширять, покупать, предвидеть, среднегодовой темп роста стоимости инвестиций, измеренный в сложных процентах, товары для богатой части населения, склад, мировой финансовый кризис, столица (крупный город), доверие потребителя, расходы потребителя, стимулировать траты потребителя, восстанавливать, аптека, предложение, иностранные инвесторы, акционер, компания с ограниченной ответственностью, публичная продажа акций компании, отечественная торговая марка, зарубежная торговая марка, гарантировать успех.

II. Give Russian equivalents.

Retailer, manufacturer, wholesaler, retail outlet, department store, TV shopping channels, mail-order catalogues, self-service shop, reputation for quality, reasonable prices, chain store, door-to-door sales, electronic commerce, to purchase, range of products, sales assistant, retail environment, economic growth, high consumer spending, international players, foreign chains, global financial crisis, low consumer confidence, to push consumer spending, positive consumer outlook, to recover, retail sector, health and beauty outlet, to expand, pharmaceutical sector, overall value, to attract investors, annual increase, shareholder, purchasing power, spending pattern, domestic brand, foreign brand, to ensure success.

III. Fill in a preposition where necessary.

1.There are many advantages … buying … the Internet.

2.Retailers continue to be attracted … the size of the Russian market and … its potential growth.”

3.Russia is the second most attractive destination … retail after India, thanks to its rapid economic growth and favorable policy framework

4.Retailers buy goods directly … the manufacturer or … a wholesaler.

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5.However the retail industry witnessed negative growth during 2009 due … after impact … global financial crisis and slowing economy which led … low consumer confidence and contraction … consumer expenditure.

6.Retailers make their income … the margin … the price they pay … the goods and the price they sell goods … … the consumer.

7.The shareholders of the supermarket chain Pyaterochka. are two limited liability companies and the EBRD, which has invested over $40 million … the company.

8.Retail sales in Russia grew … the CAGR … almost 25% during2004-2008.

9.The rapid development … retail trade and high consumer spending has attracted large number of international players … Russia.

10.The improving economic conditions, government support to push consumer spending and positive consumer outlook will help industry to recover …. the lost momentum.

11.The retail pharmaceutical market’s overall value increased … 62 percent from 2000 to 2003.

12.Russian Retail Industry Forecast to 2013 covers the past, current and future performance … the industry and identifies the factors responsible … the growth of the industry.

IV. Match up these words to make common collocations. Translate them.

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V. Make as many as possible word-combinations with the word “retail”, translate them.

Chain, industry, market, outlet, environment, sector, company, trade, price, to sell, sales.

VI. Fill in the blanks with the most appropriate terms from the list.

The most common ____________ is manufacturer → wholesaler →__________→ consumer. Distribution can, however, ____________ through slightly modified channels. For example, products are sometimes sold directly by the __________ or the manufacturer, rather than by the retailer. Generally, wholesalers __________ lower

__________ than retailers and sell in larger quantities. Together, these channels of distribution play a __________ role in the __________ element of marketing.

VII. Choose the correct answer:

1.Customers can buy products directly from:

a)retailer

b)the manufacturer

c)a wholesaler

2.Retail is …

a)the place where customers can purchase goods

b)the sale of the goods from a fixed location in small or individual lots or for direct consumption

c)the sale of goods to anyone other than a standard consumer.

3.Retail outlet is …

a)a group of shops owned by the same company

b)a very large supermarket

c)the place where customers can purchase goods

4.Specialist retailer is …

a)a shop which only sells one type of product

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b)a large self-service shop selling food and drink

c)a large shop with many departments or sections

5.We have less consumer protection when we buy from:

a)the shop

b)by mail order

c)on the Internet

6.A large number of international companies have been attracted to Russia due to:

a)high consumer spending

b)rapid development of retail trade

c)potential economic growth

7.One of the fast-growing retail sectors in Russia is …

a)the pharmaceutical sector

b)cosmetics/toiletries sectors

c)food industry

d)all of the above

8.The forecast of the development of the retail industry in Russia is …

a)positive

b)unpredicted

c)negative

VIII. Jobs in retail. Here is the list of possible jobs in retail industry. Read it.

a)retail security officer

b)retail stocker

c)retail corporate management

d)retail buyers

e)retail cleaning and maintenance

f)retail sales clerk

g)retail store owner

h)retail warehouse workers

i)retail cashier

j)retail human resources and finance

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k)retail store manager

l)retail loss prevention

m)retail merchandisers

What functions do people working in these fields perform?

Complete the following text using all kinds of retail jobs from the list above.

Retail jobs are not just about unlocking dressing rooms and stocking shelves. Although sales is a huge part of the retail industry, there tons of people working behind the scenes to keep employees, customers and investors happy.

When looking at retail jobs, you can divide them into three categories: store upkeep, product handling, and administration. Within each category there are many jobs. Think about the life of a single product to understand how the jobs come into play: Let’s say the product in question is a vacuum cleaner.

The product is manufactured and then shipped to a warehouse. Thus, the first jobs in the life of the vacuum cleaner are the … … … .

…… constantly review all of the products in the market and sign off on those they think will work for their store. A … , for example, will pick the vacuum cleaner from the warehouse, and the items in bulk will be shipped to the store.

At the store … … look at the vacuum cleaner available, price them and determine the best ways to display each product in the department for maximum sales.

At this point you, the consumer, interact with the product for the first time. … …

…will help you choose the perfect vacuum cleaner, and then a … … will ring up a purchase and take your money. … … … oversee their work and are available for anyone who has additional questions.

At night … … ensure that the shelves are full by replacing the vacuum cleaner you purchased and … … … … crews come through to make sure that the store itself looks nice for customers the next day. in addition, many stores employ … … … to keep the products safe.

…… … employees will review, after a certain period, how the vacuum cleaner is selling. They’ll look at the sales figures and compare them to competitors or like products before making recommendations on whether or not to order more or to change the merchandising.

Of course, there will also be employees to help take care of employees. … … … …

…departments will ensure that paychecks go out on time, benefits are received, schedules are maintained, and so forth.