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 Researchers simplify tiny structures' construction drip by drip
12.11.2018 | Princeton University, Engineering School

nachricht Mandibular movement monitoring may help improve oral sleep apnea devices
06.11.2018 | Elsevier

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: UNH scientists help provide first-ever views of elusive energy explosion

Researchers at the University of New Hampshire have captured a difficult-to-view singular event involving "magnetic reconnection"--the process by which sparse particles and energy around Earth collide producing a quick but mighty explosion--in the Earth's magnetotail, the magnetic environment that trails behind the planet.

Magnetic reconnection has remained a bit of a mystery to scientists. They know it exists and have documented the effects that the energy explosions can...

Im Focus: A Chip with Blood Vessels

Biochips have been developed at TU Wien (Vienna), on which tissue can be produced and examined. This allows supplying the tissue with different substances in a very controlled way.

Cultivating human cells in the Petri dish is not a big challenge today. Producing artificial tissue, however, permeated by fine blood vessels, is a much more...

Im Focus: A Leap Into Quantum Technology

Faster and secure data communication: This is the goal of a new joint project involving physicists from the University of Würzburg. The German Federal Ministry of Education and Research funds the project with 14.8 million euro.

In our digital world data security and secure communication are becoming more and more important. Quantum communication is a promising approach to achieve...

Im Focus: Research icebreaker Polarstern begins the Antarctic season

What does it look like below the ice shelf of the calved massive iceberg A68?

On Saturday, 10 November 2018, the research icebreaker Polarstern will leave its homeport of Bremerhaven, bound for Cape Town, South Africa.

Im Focus: Penn engineers develop ultrathin, ultralight 'nanocardboard'

When choosing materials to make something, trade-offs need to be made between a host of properties, such as thickness, stiffness and weight. Depending on the application in question, finding just the right balance is the difference between success and failure

Now, a team of Penn Engineers has demonstrated a new material they call "nanocardboard," an ultrathin equivalent of corrugated paper cardboard. A square...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

“3rd Conference on Laser Polishing – LaP 2018” Attracts International Experts and Users

09.11.2018 | Event News

On the brain’s ability to find the right direction

06.11.2018 | Event News

European Space Talks: Weltraumschrott – eine Gefahr für die Gesellschaft?

23.10.2018 | Event News

 
Latest News

UNH scientists help provide first-ever views of elusive energy explosion

16.11.2018 | Physics and Astronomy

How the gut ‘talks’ to brown fat

16.11.2018 | Life Sciences

Massive impact crater from a kilometer-wide iron meteorite discovered in Greenland

15.11.2018 | Earth Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>