Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Store layout an important variable for retailers

25.01.2013
A retailer’s optimal store layout is the result of balancing the interests of two different types of markets – consumers and suppliers, says new research co-written by a University of Illinois business professor.

According to Yunchuan “Frank” Liu, a retailer’s strategic manipulation of store layout is driven by an incentive to balance the shopping process of “fit-uncertain consumers” and the pricing behavior of upstream suppliers.

“Retailers face two different kinds of markets – the consumers who buy goods, and the manufacturers that supply goods,” he said. “It’s a very important variable for local retailers and marketing managers to play with in this era of increased competition with online retailers, and it has important implications for companies and consumers.”

The study, which will appear in the journal Marketing Science, is the first paper to formally study the significance of store layouts, said Liu, who co-wrote the study with Zheyin (Jane) Gu, a professor of marketing at the State University of New York, Albany.

“If we look at the current retailing environment, local retailers are in intense competition with online retailers, which means real-world retailers really need to think about how they’re going to differentiate themselves,” Liu said.

Although consumers live in an information-rich environment, where they know just about everything – reviews, price and quality – about a product before they handle it, they know virtually nothing about the unique “fit” of the product until they walk into a store and handle the product, Liu says.

“For many products, consumers typically remain uncertain about a product’s fit until physically inspecting it,” he said. “That could mean how a shirt feels when you try it on, or what a certain size tablet feels like in the consumers’ hands. And since the consumer has to travel to the store and compare the products, that is to the local retailer’s advantage, because that’s something that online retailers can’t do.”

Another way retailers can compete with online merchants is by making the physical act of shopping as convenient as possible for consumers. In a market characterized by what the researchers call “consumer-fit uncertainty,” a retailer may design the layout of a store to facilitate the simultaneous inspection of products, Liu says.

“For basic goods like toothbrushes, the fit probability is really high, because to most consumers, a toothbrush is a toothbrush,” he said. “In that case, the retailer should group all toothbrushes together in the same location, forcing the manufacturers to compete on price.”

But making the consumer shopping experience as easy as possible may not be the best retail strategy for certain products, Liu says.

According to the research, sometimes retailers might want manufacturers to compete on location in the store, even if it’s inconvenient for consumers, which may sound counterintuitive to marketing managers.

“Sometimes it’s not in retailers’ interests to make certain things convenient to consumers, because they have to consider the balance between the consumer market and the manufacturer market,” Liu said. “By affecting consumers’ fit inspection processes, the retailer’s store layout design also influences pricing behaviors of upstream manufacturers.”

Not only do marketing managers have to decide whether to group competing firms’ products together or separately, they also must balance that strategy with consumers’ perception of the store.

“Think about Bloomingdale’s versus Sears – high-end luxury items versus basic items,” Liu said. “Sears puts all of a manufacturers’ products together. If you’re looking for a table at Sears, they’re all stocked together. If you go to Bloomingdale’s, you’ll notice that they sell furniture by brands. If you go to this room, it has everything from one manufacturer. If you want to look at another set of table and chairs, you have to go to another room.”

That’s because for basic products, such as the table from Sears, the product’s fit probability is very high, Liu says.

“But if you go to Bloomindale’s, they have the high-end furniture – and for
high-end products, people have different tastes,” he said. “So Sears wants manufacturers to compete on price, while Bloomingdale’s wants manufacturers to compete for the best location in the store.”

It also depends on the product itself, Liu says.

“Even within high-end stores, individual product strategies will be different,” he said. “For some product categories, such as kitchenware, which is quite standard, even a high-end retailer will sell everything together.”

Name-brand clothes, however, are usually sold by the brand.

“Macy’s puts some goods from competing manufacturers together, but if you look at clothing – jeans, shirts, sweaters – they usually sell them by brand,” he said. “Calvin Klein is here, but Ralph Lauren is way over there.”

But for low-fit probability products such as shirts, where each shirt is different, “even if retailers put them all together, like toothbrushes, the price competition is not that intense, because consumers have different preferences for shirts than they do for toothbrushes,” Liu says.

“Even if one shirt manufacturer is running a promotion with a lower price than the competition – if that shirt doesn’t fit me; if its material irritates my skin; if it doesn’t have the color I like, it doesn’t matter how low the price is, because I won’t buy it,” he said.

“In this case, if the retailer sells all of the products together, it doesn’t intensify the competition from the manufacturers. So the retailer should put the products in different locations so the manufacturers have to compete on the locations rather than on prices.”

Although many retailers also offer the price-matching policy with online retailers like Amazon.com, that’s really not the smartest strategy, according to Liu.

“Retailers probably do not want to play the pricing game with online retailers,” he said. “They have certain inherent advantages in their store, in that the consumer has to find the right ‘fit’ for certain products. That’s the frontier on which they have the advantage. So they should not give ground by playing the pricing game.”

Phil Ciciora | University of Illinois
Further information:
http://www.illinois.edu

More articles from Studies and Analyses:

nachricht Real-time feedback helps save energy and water
08.02.2017 | Otto-Friedrich-Universität Bamberg

nachricht The Great Unknown: Risk-Taking Behavior in Adolescents
19.01.2017 | Max-Planck-Institut für Bildungsforschung

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Breakthrough with a chain of gold atoms

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

Im Focus: DNA repair: a new letter in the cell alphabet

Results reveal how discoveries may be hidden in scientific “blind spots”

Cells need to repair damaged DNA in our genes to prevent the development of cancer and other diseases. Our cells therefore activate and send “repair-proteins”...

Im Focus: Dresdner scientists print tomorrow’s world

The Fraunhofer IWS Dresden and Technische Universität Dresden inaugurated their jointly operated Center for Additive Manufacturing Dresden (AMCD) with a festive ceremony on February 7, 2017. Scientists from various disciplines perform research on materials, additive manufacturing processes and innovative technologies, which build up components in a layer by layer process. This technology opens up new horizons for component design and combinations of functions. For example during fabrication, electrical conductors and sensors are already able to be additively manufactured into components. They provide information about stress conditions of a product during operation.

The 3D-printing technology, or additive manufacturing as it is often called, has long made the step out of scientific research laboratories into industrial...

Im Focus: Mimicking nature's cellular architectures via 3-D printing

Research offers new level of control over the structure of 3-D printed materials

Nature does amazing things with limited design materials. Grass, for example, can support its own weight, resist strong wind loads, and recover after being...

Im Focus: Three Magnetic States for Each Hole

Nanometer-scale magnetic perforated grids could create new possibilities for computing. Together with international colleagues, scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) have shown how a cobalt grid can be reliably programmed at room temperature. In addition they discovered that for every hole ("antidot") three magnetic states can be configured. The results have been published in the journal "Scientific Reports".

Physicist Dr. Rantej Bali from the HZDR, together with scientists from Singapore and Australia, designed a special grid structure in a thin layer of cobalt in...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Booth and panel discussion – The Lindau Nobel Laureate Meetings at the AAAS 2017 Annual Meeting

13.02.2017 | Event News

Complex Loading versus Hidden Reserves

10.02.2017 | Event News

International Conference on Crystal Growth in Freiburg

09.02.2017 | Event News

 
Latest News

Impacts of mass coral die-off on Indian Ocean reefs revealed

21.02.2017 | Earth Sciences

Novel breast tomosynthesis technique reduces screening recall rate

21.02.2017 | Medical Engineering

Use your Voice – and Smart Homes will “LISTEN”

21.02.2017 | Trade Fair News

VideoLinks
B2B-VideoLinks
More VideoLinks >>>