Overview of Department Stores and Discount Stores

The retail stores business in Australia has evolved over the years. In this retail business both department and discount stores have come up over the past decades. Their nature of business has also changed throughout the world and so is the case in Australia. The numbers of retail stores in Australia have raise at much faster speed (Berg, 2014). With the changing demands of the people they have also evolved. In the coming years their growth is going to fasten up. With the development of online technologies their challenges and opportunities both have increased. In such an environment retail management is not so easy and needs strategic planning to get implemented. This report defines department stores and discount stores. It also describes the types of merchandises they carry. This report also explains the types of market segmentation as well as discusses about merger, diversification and downsizing. In the later section of the report driving forces behind their evolution has been discussed. In the last part of the report, the future of such retail institutions has been discussed.

Department store is a retail establishment that offers a wide range of customer products in different goods categories known as departments. These department stores mainly include furniture, cosmetics, clothing, toys, gardening, sporting goods, home appliances, hardware, paint and toiletries (Jayasankara Prasad and Ramachandra Aryasri, 2011). They also sell other products like Jewellery, stationary, books, electronics, product for pets, baby products.

Discount stores or shops are a retail shop that sells products at lower prices than compared to the typical market stores. There are certain full-line discount shops/stores or mass merchandisers like Lidl and Aldi. It may offer a wide assortment of goods with a focus on price rather than display, services and many other stores. “Single line”, “Category killer” or “Speciality” is three types of discount stores like Staples or Toys “R” Us. They have specialisation in specific merchandise lines (Wang and Ha, 2011). They rely on the efficient distribution and bulk purchase to lower down the costs.

Both these retail institutions follows wheel of retailing concept. In stage one they use penetrative strategies having lower margins. In the period of early 20^th century these institutions were in this phase On the other hand in stage 2 they focus on establishing their business and at the same time they can set higher margins of profits (Das, 2014). The stage two was achieved by the companies after 1930’s. At the third stage of the evolution these stores gets strongly established and sets higher prices or cost. This stage was achieved by these companies after 1970. The last and the fourth stage is when the competitors enter with low margins and penetrative potential. This stage was achieved by the companies after 1990s.

Market Segmentation of Retail Customers

These shops use various types of ways so as to assemble the merchandises. They have healthy relationship with their suppliers. The suppliers help them with finished products. Apart from this they also get it availed from direct companies. In the case of big retailers they use they use their own supply chain management system to assemble the merchandises (Martinelli and Balboni, 2012). Small shops assemble it from the local suppliers or have local manufacturing units that are capable of fulfilling their demands. They also assemble their merchandises from their online units where if the customer orders something they go to their warehouse so as to deliver it on time.

Both the types of retail stores targets their market based on different variables. Their segmentation in the retail customers is as follows:

• Demographic factors: For different demographic markets the ways of doing marketing is different. They take use of different mediums for marketing among different markets as well as bring products at different prices. This helps them in attracting people from different age group (Ferguson and Zhu, 2011).
• Psychographic factors: Companies first collect the data in the market by analysing their behaviour. Then company increase the product whose demand is higher. They also market their products by taking the use of psychological pricing. In their marketing program they focus on adding value to the products.
• Geographic location: Since both these types of stores are of smaller size, hence they are able to target the market in the local area. The merchandises are also available as per the requirement of the local market (Moschis, Ferguson and Zhu, 2011). They take use of the mediums such as radio and newspapers that would help them in doing marketing in the local market.

The development of department store was actually started in the middle of the 19^th century. The first cities that saw its opening was London, New york and Paris. Such stores permanently shaped the shopping habits of the people. In 1970’s such stores came into high pressure from the discounters (Glanz, Bader and Iyer, 2012). These stores are one of the many stores that are opened in the super markets.

In Australia David Jones, a Welsh merchant with the help of Hobart Businessman Charles Appleton of London opened a store in Sydney in the year 1825 and hence the stores where known as Appleton & Jones. In Melbourne the earliest department store was Coles Book Arcade. This store has large numbers of sections selling different types of products. On the other hand discount stores were relatively younger concept. Australia has four major discount stores that include Big W, Target, Target and Kmart. All these discounts are present in the Sydney region only (Bagdare and Jain, 2013). In most part of the world such stores were developed in early 20^th century.

In their expansion process, the major strategies that they have adopted are merger in the case of department stores and acquisition in the case of discount stores. The case of Dean Jones Along with this they have adopted diversification strategy which has helped them in attracting larger customer base towards their business. In their difficult times in order to make cost cuts they have also utilised the strategies like downsizing or cost containment (Wrigley and Lowe, 2014). Such kind of cost saving will helped the firm in raising their profit margins. It was also beneficial for increasing the revenue of the company in then greater context. In the later section of their expansion phase when the competition got high, the only thing that could differentiate their business from others was the value that was added to the products. For this they selected the value driven retailing approach.

Driving Forces Behind the Evolution of Retail Institutions

Over the years there were many factors that acted as a driving force for the evolution of these retail institutions. Along with this there are several factors that will turn them into the future of the retail outlets. Some of the factors are:

• Cost containment: The cost of operations is increasing in the retailing business is increasing. In such an environment these stores help the organisation in reducing their overall expenses at the same time. The discount stores also add value to the products as customers can avail these products of the same quality at the lower prices (Chang and Fang, 2012).
• Increasing reach of the company: These stores not only reduce the overall cost of operations but at the same time they are increasing the reach of the company in the market. This is because bigger companies can open these stores in various parts of the country. The discount shops helps in attracting the new segments in the market (IBIS world, 2018).
• Value driven: Companies in the modern day business environment are facing stiff challenge from the various big players hence value that a company delivers with its product plays a very crucial role in their expansions. Hence organisations also need to ensure that they take use of value driven approach in their business (Carpenter and Brosdahl, 2011). Since there are many substitute products that are available in the retail market hence such values are of greater importance for the company.

As it has been seen that the number of players in the industry is increasing hence future of these stores are uncertain. This is due to the fact that there are many big players in the retail industry like Wesfarmers, Aldi Australia, Coles, and Woolworths that are opting for such kind of retail institutions. Discounts are getting the major content of the modern day marketing (Hamilton, Senauer and Petrovic, 2011). In such an environment discount stores could play a role in attracting customers.

But the business and the changing nature of the retail industry suggests slow growth. This kind of trend in the market explains that these retail institutions after 5 to 10 years will be not being so successful. The major reason for this is the fact that online retail has replaced such institutions. The online stores are effective as well as provide easy reach to the customers (Chevalier and Gutsatz, 2012). Online mediums are making the business process simpler for both retailers and customers hence department stores are getting replaced by online stores. This is justified with the fact that in last few years the profits of Myer, one of the biggest company in Australia has decreased by 80%. On the other hand Dean Jones faced a loss of 25%. Some of the firms that became the household names Foy & Gibson, Farmers, Buckley & Nunn and Anthony Hordern & Sons have all disappeared from the market.

After five years the major base for these institutions will be the customer loyalty which can be ensured through innovative business. Concepts like store cards can be helpful for the customers so that they could make the purchase at that store as well as at its branches (Dunne, Lusch and Carver, 2013). The concepts like mergers might be able to support the business of each other as they will have larger resources to tackle the business environment. The instability in the business environment will make the weakest to fall.

The chances of the discount stores to continue successful business is still more than department stores. This is because the rate of inflation in Australia is high and hence such stores are highly attractive. But in the increasing competition this will be a bigger challenge for the companies to operate with such stores.

Future of Department Stores and Discount Stores

The only thing that could make these types of stores different from the other retail stores is its lower cost of operations and potential to make changes as per the demand of the market (Zielke, 2014). For example a larger supermarket chain needs larger operational resources to deal with. On the other hand these stores will require lesser resources.

Other types of stores that can open in the future in different markets are:

• Warehouse stores: This is a type of store where the limited stock of a product in bulk is present and offers products at lower cost (Lusch, Serpkenci and Orvis, 2015). Since there cost of maintenance is low hence it has a good future in the market.
• Mom and Pop stores: These are the store which is smaller in size and is generally operated by one or two persons. The chances of gaining profits remain high. This type of stores is able to fulfil the daily requirement of the people.
• E-Tailers: With the advancements in technology the most probable and good future of retail business can be seen in the form of E-tailers. The numbers of shops of these kinds is going to increase considerably.

Conclusion

From the above based report it can be concluded that there are many types of retail stores that are operational in Australia. In this Department stores and discount stores had a long history. They have seen many phases in their lifecycle and right now it is facing competition from big and small retailers. Such shops assemble their merchandises from various sources. They segment their market based on several variables. Cost containment, value driven approach to retailing and increasing reach of the retailers are some of the objectives that company wants to achieve from these retail institutions. These also acted as a driver that has helped them in their evolution. The history shows that the future of these institutions is weak and the new type of retail stores such as e-tailers is going to capture the market especially in the technologically advanced countries like Australia.

References

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