The Option for the Universe of Consumption and the “Efficient Consumer Response” Philosophy

Journal of Eastern Europe Research in Business and Economics

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Doina I. Popescu and Ion Popa

The Bucharest University of Economic Studies, Bucharest, Romania

Volume 2012 (2012), Article ID 623809, Journal of Eastern Europe Research in Business and Economics, 13 pages, DOI: 10.5171/2012.623809

Received date : ; Accepted date : ; Published date : 11 July 2012

Copyright © 2012 Doina I. Popescu and Ion Popa. This is an open access article distributed under the Creative Commons Attribution License unported 3.0, which permits unrestricted use, distribution, and reproduction in any medium, provided that original work is properly cited.

Abstract

The paper presents new methods of distributing non-food products that undeniably better meet customers’ rationale of purchase than traditional distribution areas. Consequently, the universe of consumption is analysed, a concept that continues to be a vital issue both in the United States and Europe.The analysis was performed through a study that aims to highlight the attempts made in the adoption of innovative retail forms in the apparel industry in Romania and future directions in this field. The need to examine the specific distribution of products in the apparel industry and the state of adoption of the new retail forms in Romania is justified by the increasing number of companies that have developed their own brands without having distribution channels appropriate to the new socio-economic conditions.The study reveals the need for knowledge and awareness of the benefits of marketing the products in the new retail forms, as well as the necessity for consumers to be initiated by distributors in the exploration of the new reinvented sale areas, by designing appropriate consumer universes through the implementation of the ECR philosophy.

Keywords: Creative stores; ECR; Romanian clothing industry.

Introduction

One of the ways through which individuals express their personality and aspirations is   consumption, which, together with their value system, attitudes and activities, reflects their lifestyle. Various specialised centres even address social values and socio-cultural development flows, by creating lifestyle maps, highlighting the latest issued trends, proposing population typologies distributed by mentality and socio-cultural styles, and analysing the greatest collective trends. Clearly, culture profoundly influences the way in which individuals perceive themselves, perceive the limits imposed by society and the place they occupy, and even if these perceptions are often internalised, the behaviour and especially the consumption patterns are relevant.

There is also a ‘common ground’ in terms of consumption. The economic, political and social impact upon the consumption climate is growing (substantial decline of purchasing power, increasing burden of the social contributions with a counterproductive effect on the habits of households). In this context, markets have become saturated and more traditional industries are losing their consumers.

On the other hand, a permanent change in the consumer’s life can be noticed (increasing the importance of self-esteem and self-fulfilment, the trend towards individualisation, the growing influence of media on daily life). The industries focused on lifestyles concerned with beauty, leisure, sport, health and proper nutrition are surpassing the other industries. Consumers behave ‘multidimensionally’ and tend to be divided between leisure, relaxation, fashion and information, being sensitive to prices and changing their choices regularly (Purcarea, Ioan-Franc, 2000).

In the context of a worldwide economic crisis and as competition for a part of the consumer’s shopping budget becomes more global and trans-conventional, it is no longer sufficient only to satisfy the consumer, but their enthusiasm is also needed (the company must surprise the consumer by anticipating or even by creating their unexpressed wishes and needs – unmet needs). Consumer enthusiasm is considered to be the new frontier that allows differentiation of the offer over that of the competition, especially through innovation (Aaker, 2001).

Given that consumers are becoming increasingly more aware of advantages, convenience, service, choice, value creation begins by evaluating the price that the consumer is willing to pay, which involves remodelling the company, product, reinventing service and distribution, overcoming traditional thinking schemes.

For distributors, the basic current concepts in such a framework are: reinventing value, new marketing and proximity to the consumer, thanks to being provided with meticulous information and a thorough knowledge. Gary Hamel, professor of strategic management at London Business School, launched the phrase ‘triple challenge’ to the company that wishes to become competitive (reconfiguring the concept of product, redefining market borders, reshaping the sector structure), an understanding and evaluation of consumer needs being the starting point of the revolutionary approach of the sector (Hamel, 1996).

Initiated in the U.S. by the Food Marketing Institute (Washington DC) and based on the experience of Walmart/Procter & Gamble, ECR (efficient consumer response) is a producers – distributors – consumers partnership strategy. ECR allows the achievement of the common objective of minimising costs, stocks and response time so as to better answer a request from the point of sale.

In the late 90s, certain European retail traders developed the idea of tailoring a shop towards a lifestyle theme, in the form of ‘concept stores’ specialised in cross-selling without using separate departments. One of the first concept stores was 10 Corso Como in Milan, Italy (which includes a café and a library), followed by Colette in Paris (which includes an art gallery and a nightclub), and Quartier 206 in Berlin.

Stephen Ogden-Barnes, of Monash University Centre for Retail Studies, conducted studies on concept stores in North America, Europe and Australia.  He believes that concept stores are sweeping the world and retailers everywhere are experimenting with ways of keeping the customers longer inside the shop (Ogden/Barnes, 2006).

Concept stores are retail models where the buying process has a different meaning, entailing a philosophical twist.

The customer does not only have the opportunity to buy physical products, but is also provided with a full emotional and sensory experience. In practice, those shops offer a mix of items belonging to different designers and brands addressed to particular groups, for example ecologically friendly, luxurious or street wear-oriented customers.
The variety of products usually includes clothes, shoes, accessories, books, cosmetics, food and gadgets. It is important that all items must be united around the concept store’s philosophy, expressed in the unusual layout of the store in order to underline the extraordinary character of products that are sold there.

In addition, the concept stores’ predestination is for them to be trend followers. The assumption is that after all the touching and feeling, customers will be willing to spend more money.

The experience will be associated with the store’s identity and the customer will come back in the future. This kind of retail venture has become a part of many cities’ cultural environment by offering access to art news, fashionable products, food, music and technological solutions.

Pop-up stores are spaces which appear over-night in interesting and unexpected places, make a splash, then disappear before the effect of amazement is through. In fact, it is a form of intelligent marketing, used in a time when capturing the consumer’s attention is increasingly more difficult and it always needs to be fresh and new. These spaces are rented temporarily, so they do not require big investments as a permanent space would. Pop-up stores are the result of a high-speed culture where fashion is moving rapidly and the retail forms become more diverse. Vacant was one of the first to use this concept, and since then there have been a large number of pop-up stores in all retail sectors, whose success has been quite varied.

Also, the message the brand sends must be in harmony with the proposed collections, the store design, the windows, the lighting, the music, and generally with everything related to the atmosphere of the place. Thus, an unusual design of the store can ‘spread the rumour’ and ‘keep consumers’ close. Attention to detail and creativity can turn a shop into a success or a failure. The example of the stores Viktor & Rolf (Milan) and Paul Smith (Los Angeles) demonstrates that creativity can go even further, by making retail an art.

These innovative forms of retail (concept store, pop-up store, shops with creative interior and exterior design) are appropriate for non-food products and respond to the trend identified in the apparel distribution (fast fashion trend – 5-6 collections per year instead of 2, produced in small series and limited to give consumers the feeling of exclusivity, uniqueness, to satisfy their desire to break the ordinary patterns of mass-market).

In terms of consumer behaviour, the concept of irrational or impulsive buying can no longer be discussed.   

Methodology

A review of scholarly journal articles, books and other research materials from the domain of marketing and management is used so as to find evidence of theories and models supporting the use of creative forms of retail that contribute to customer enthusiasm, by placing him in the very centre of the lifestyle store strategy. An overview of the types of creative shops is performed, after which a study is conducted using a questionnaire-based investigation of a number of 322 companies in the Romanian apparel industry with the aim of examining the state of adoption of new retail forms for the products of such companies and whether or not they need to be used. The social impact of these types of stores in Romania is analysed, in order to/not to develop future directions towards the proliferation of these innovative forms of retail. Apart from the conducted study, researchers have collected information from Romanian professionals working in the production and sale of apparels. 

Concept Stores in Romania

At the 2010 edition of the annual Business of Luxury Forum, CPP Luxury Industry Management Consultants Ltd., a company specialised in the luxury industry, pointed out the steps Romania has made in terms of high class products and services.

Thus, Romania has become a more attractive destination for luxury brands due to Romanians’ taste and interest in luxury goods and services and there is a growing social group of the wealthy. In a country where a significant share of the population lacks clean water and sanitation, there are still 500 people who earn over 10 million euros annually. CPP shows that in 2009 Romania had about 10,000 people with revenues of over 1 million euros per year, down with 3,000 from 2008. They are the main target for suppliers of luxury goods and services, among others.

In Romania, concept stores are designed for persons with high and above average income, and host primarily foreign brands.

Victoria 46 is one of the concept store type shops distinguished by the fact that it manages to maintain a relatively stable mix of foreign brands. Despite unfavourable economic conditions for luxury retail, Victoria 46 has an area of 500 sqm, located in Calea Victoriei, one of the major commercial thoroughfares in Bucharest. The store sells women’s clothing and accessories collections of the most sophisticated and popular 28 luxury international brands of the moment, such as Alexander McQueen, Christian Dior, D & G, Givenchy, Stella McCartney and others.
 
The second concept store in size after Victoria 46 is Mengotti, owned by the Italian group Mengotti and also situated in Calea Victoriei. It makes a deep impression on customers with its architecture and interior design. Store performance remained stable during the crisis due to Gucci’s entry into the mix of owned brands (Prada, Giorgio Armani, D & G, Versace among others), which recorded the highest sales. The store sells clothing, footwear, handbags and accessories.

Another major player in the fashion market in Romania is The Place Concept Store that was opened in Bucharest by the Romanian ID Sarrieri brand creator. Since 2008, The Place has introduced an entire portfolio of brands, such as Bottega Veneta, Zac Posen, Marni, Jimmy Choo and Givenchy, and has expanded its product line with Vertu cell phones and luxury laptops. The Place offers the Romanian public a selection renewed every two weeks of ready-to-wear pieces, handbags, shoes, jeans, jewellery, beauty products, books and fashion magazines. The Place hosts each week a mini-exhibition focused on the sale of creations belonging to the hottest artists (photography, graphics, posters, decorative arts).
 
Jolie Ville Gallery is the first concept store which opened in Romania in 2004. It belongs to the HKS Holding, known for its wide-ranging ITS business in the Gulf Area, Asia and Western Europe. This concept store type shop, although it benefits from an excellent location in the residential area in northern Bucharest, has failed to attract the wealthy people of the place, according to specialists from CPP Luxury Industry Management Consultants Ltd. The reasons may be, in the vision of certain specialists, the fact that the products marketed belonged to old collections, in addition to the excessively frequent changes in the list of brands offered. Currently, the following brands can be found: GF Ferre, Emilio Pucci, Versace Jeans, Just Cavalli, John Galliano and Moschino Jeans. Recently opened in the Jolie Ville is a World Class brand health club, which is an attempt to attract local residents.

Entrance is a store opened in 2010 dedicated to the unconventional, functioning as a ‘door to sophisticated universal signatures’. It is, in fact, a reinvented shop located in one of the most beautiful buildings in the old city. They had been selling fashion there since 2008, but both the logo and the concept were changed. Entrance presently benefits from a new and larger space, with a more spectacular design, appropriate to the new brands that have been brought in. Thus, the portfolio of brands has been increased from two to ten, and the prices are slightly lower or equal to the prices from the major European capitals. Beside the two brands that started in 2008 (Marithe et Francois Girbaud and Ivan Grundahl), the store portfolio was filled with cutting edge brands from Japan, Sweden, France, Italy, England and Spain. Also present are two brands of exclusive handmade jewellery, the collections of two footwear designers and two brands of perfume.

Casa Frumoasă has opened in 2009, in downtown Bucharest. Casa Frumoasă has become a Luxury Living Concept that sells among the most exclusive men’s brands, namely Scabal, Brioni, Loro Piana, Santoni and Lorenzini. Also in 2009, the only “Champagne & Caviar Bar” was inaugurated within Casa Frumoasă in Romania. This exclusive, stylish and discreet room seats 20 people. The menu includes specialties such as Iranian Beluga caviar & Oscietra Premium Selection. The very rare champagnes complete the Luxury Living Concept.

Moreover, there are concept stores selling products that target middle-income people, such as KSH AUT, La Galeria and others.

KSH AUT is a concept store launched in late 2008 in Bucharest’s old city, whose stated aim is to offer fashion creative solutions in order to overcome the financial crisis with style.

Cocor store, also located in downtown Bucharest, was re-launched on October 1, 2010, after a two-year renovation period, which required an investment of 25 million euros. The restoration has led to an extension of the rentable area to 10,000 sqm, a parking arrangement and a spectacular interior and exterior design. Following an investment of 4 million, Cocor opened the largest media façade in a single building in Continental Europe in December 2008. Thus, the place of the old department store that was there once was taken by the largest concept store in Romania.

Throughout Cocor, over 50 Romanian and foreign brands are displayed for sale. This is the only concept store hosting so many brands in Romania, namely brands of companies producing women’s and men’s clothing and one of undergarment. Also in the Romanian Designers Gallery, there are collections and / or products of young Romanian designers and spaces dedicated to the collections of five renowned Romanian designers.

In addition to women’s and men’s clothing brands, the store hosts collections for teens and children, outfits for special occasions, shoes, handbags, jewellery galleries, antiques, cosmetics, perfumes, Beauty and Spa centres, playgrounds for children, bars and restaurants. Regular events are organised with lounge bar, boutique, nightclub and restaurant. On the media façade of the store, shows, movies, sport events are projected.

Among the best known concept stores in Romania is La Galeria, opened in 2011 in Oradea, NW Region. This store brings together a mix of Romanian brands of apparel, along with shoes, accessories and organic cosmetics.

Study on Examining the Distribution Channels Used and the State of Adoption of the New Retail Forms by Romanian Apparel Companies

The apparel industry is an industrial branch with a prolonged tradition that has a high share in the total exports of Romania.

The purpose of this research is to bring an important contribution, in terms of both theoretic and pragmatic aspects, in the studied domain. The need to examine the specific distribution of products in the apparel industry and the state of adoption of the new retail forms in Romania is justified by the increasing number of companies that have developed and continue to develop their own brands without having distribution channels appropriate to the new socio-economic conditions. Thus, since 2006 the number of Romanian companies processing in lohn system decreased significantly. Amidst the economic crisis, their number continued to decline, leading them to design and produce their own brands and to market them respectively.

Research in the social field aims to provide answers through verifiable and empirical data collection and analysis (Creswell, 2010). They may result from experience, existing research or social theory. Issues to be considered when seeking to initiate a social research must answer three major questions (King, Keohane, Verba, 1994):

  • Can the research be completed taking into account the available resources and allocated time?
  • Will the research provide answers that will contribute to the improvement of social life, even if it covers only the understanding of the analysed problem?
  • Does the research allow solving the problem of existing conflicting data in the social theory?

Based on this approach, the answer to the three questions is affirmative; therefore, our research is confirmed to be feasible, relevant and socially important.

In order to obtain the necessary valid information regarding the distribution channels used and the state of adoption of the new retail forms by the Romanian apparel companies, a survey of opinion was performed among them. The survey was based on a questionnaire distributed to the managers of the analysed companies.

The present research follows four major objectives:

Objective 1: Identification of the features of production and distribution according to the retail peculiarities of the apparel companies in Romania;

Objective 2: Identification of the currently used distribution channels in the analysed companies, for the marketing of their own brands;

Objective 3: Identification of the current state of adoption of the new retail forms by the analysed companies;

Objective 4: Substantiating future directions for proliferation of the new retail forms of the products of the Romanian apparel companies.

During the investigation, a series of major obstacles in achieving the objectives of the research have been identified:

  • Lack of significant research in Romania and abroad;
  • Lack of adequate knowledge in the surveyed organisations which could have supported the research;
  • Reluctance among representatives of the analysed companies to provide data related to them.

The questions were structured into three sections:

I.    General information about the analysed companies

This section contains general questions of identification, address, development area which the company belongs to, establishing its size by number of employees, its classification by nature of capital and by the destination of the products.

II. Information about currently used distribution channels in the analysed companies, for the marketing of their own brands

The set of questions used in this section serve the direct purpose of research, being aimed to identify the opinions of the respondents on the importance of using retail forms suitable to the current socio-economic context, the links between the processing form and the distribution channel used, issues focusing on client, identifying specific used forms of retail and their correlation with the firm’s size, the development area it belongs to and the difficulty of adopting new retail forms.

III. Future directions for the proliferation of the new retail forms of Romanian apparel companies’ products

This section is very important because it shows the main future means to increase the number of apparel firms which adopt new retail forms. 

The research was designed, conducted and analysed by the authors.

The Sample of Researched Companies

The questionnaire-based study (see Appendix) was conducted on a number of 322 apparel companies (men and women’s clothing) from all development regions in Romania and it refers to the year 2011. Details of the territorial structure of the sample of firms investigated are presented in Table 1.

 

Table 1. Distribution of the Sample by Development Regions

623809-tab-1 

 

Presentation of the General Information about the Companies in the Sample

With regards to capital type, of the 322 firms, 45 are joint ventures with foreign capital, and 277 are local capital ventures (fig. 1).

623809-fig-1

 

 

A structure of the companies by number of employees is presented in table 2 below.

Table 2. Structure of the Companies by Number of Employees

623809-tab-2

 

It is noted that the share of micro firms in the sample analysed is 66.77%, 21.12% for the small, 10.25% for the medium and 1.86% for the large companies (Figure 2).

623809-fig-2

 

 

By product destination, of the 322 companies, 194 export products, whilst the other 128 are addressing to the local market with their own brands. Of the 194 export companies, 113 companies export their entire production in lohn system, 81 companies export full-product, but also primarily support full-product export by processing in lohn system as well (figure 3).

623809-fig-3

 

 

  1. II. With regards to the client focus of the analysed companies’ management, the responses revealed a very low interest for marketing their products in innovative spaces and a high interest for strengthening the marketing in a single point of sale.

    It is clear that, in order to increase their sales volume in the context of the global economic crisis, managers and owners (shareholders) should be aware of the need to turn to new retail forms in place of the traditional ones, new forms that will capture the interest of the consumers who are increasingly sophisticated, reserved and cost apprehensive. The extent to which they expressed agreement with the understanding that ‘adoption of new retail forms is one of the factors that ensures success of the company’ is given below.

    The results reveal the following (fig. 4):

  • 31 % of respondents agree with the above statement, in more or less clear categorical terms (total or partial agreement);
  • 66% disagree with the statement made (strongly disagree or in part);
  • 3% do not express an opinion.

 

From the replies one can observe that most of the investigated managers do not appreciate the role and importance of adopting new retail forms for their organisations.

623809-fig-4

 

 

Table 3. Comparative Analysis of the Awareness of the Need to Adopt New Retail Forms, Grouped by Company Size

 623809-tab-3

The need to know the concepts of the new retail forms and their advantages is clearly distinguished.

With respect to the distribution channels used by the surveyed companies which export full-products, of the 81 firms, 79 use intermediaries, and the other two also use intermediaries, but have their own stores abroad. The latter two are an undergarment company in the North-West area and a menswear company from the Centre area (fig. 5). None of these companies sell in a concept type store or in a pop-up store.

623809-fig-5

 

 

With respect to the distribution channels used by the companies analysed, which address the internal market, of the 128 firms, 81 use their own distribution (the manufacturer is at the same time the sales agent), 18 companies use authorised dealers for Romania, 6 sell their products at fairs in the country, 11 companies have their own stores, 10 companies sell in supermarkets, and two firms sell online (Fig. 6).

623809-fig-6

 

 

Of the 11 companies that have their own shops and are addressing the national market, 8 have stores in the same city as their headquarters, and three companies have them in other cities as well.

Three of the companies that have stores both in the city where they are based and in other cities in Romania sell their products in concept store type shops. These are companies with successful brands and with financial strength. The three companies are present in concept store Cocor, one of them is selling undergarments and is located in the North-West development area (Jolidon), and the other two are selling clothing for women, one in the North-East area (Sofiaman) and the other in the Bucharest-Ilfov development area (Yokko).  Two of the three companies are small, the other is medium-sized; by capital type they are companies with Romanian capital, located in the North-West, North-East and Bucharest-Ilfov development areas.

In the first quarter of 2011, Cocor Concept store had a total income of 2,064,000 euros and a net profit of 344,000 euros, increasing significantly from only 917,500 euros in total revenues and 114,700 euros in net profit during the first quarter of 2010.

No company sells in the pop-up store format.

Consequently, an extremely low percentage of companies choosing to sell their products in concept stores is observed and there are no companies in the pop-up store format. (Besides, the majority of companies choose to be their own sales agent).

The identified reasons are:

  • A lack of knowledge related to the new retail forms, mainly not knowing the marketing advantages of these forms;
  • A lack of financial resources needed to lease and arrange the space in the concept store or pop-up store format shops;
  • Aggravated financial problems due to high costs for raw materials purchased from abroad, the textile industry in Romania covering the demand in a very low proportion (most textile companies have been closed);
  • A large delay in the adoption of design and production strategies of their own labels due to a long processing in lohn system, which makes it difficult, under crisis conditions, to promote and to present the brands in the new retail forms.

III. The future proliferation of the new retail forms for Romanian apparel companies’ products depends on:

  • Knowledge and awareness of the benefits of marketing the products in the new retail forms by attending courses, seminars, specialised workshops;
  • Consumers being initiated by distributors in the exploration of the new reinvented sale areas, by designing appropriate consumer universes through the implementation of the ECR philosophy;
  • Initiating a cooperation between firms to jointly participate in the new retail forms;
  • Initiating a collaboration with companies belonging to the two clusters from the textile-clothing manufacturing field in Romania (North-East ASTRICO cluster and the Romanian Textile Concept cluster from the Bucharest-Ilfov region) in order to market and promote products, especially since the study revealed a larger financial and logistic potential for the companies in the two development regions.

 

Conclusions

The remodelling or reinvention of sales areas does in fact exist. Although there is no specific theory or model of employer branding, the concept draws on existing theories and practices across varying fields: marketing, management, behaviour sciences. The study identifies the future proliferation of new retail forms for the clothing manufacturing Romanian companies’ products. The study reveals that the few concept stores in Romania are located mainly in the capital, because the few Romanian companies that sell their products in concept stores are the companies that have successful brands in their portfolio and are mainly located in the North-East, North-West and Bucharest-Ilfov development areas. The article shows that the reinvention of distribution actually consists in practicing a true ‘category management’, whilst buyers become ‘category managers’.

Appendix:  Questionnaire

Section 1 – General information

1. Organisation Name:

2. Phone, fax, e-mail:

3. Capital Type:

    a)    Local capital

    b)    Joint venture with foreign capital

4. Number of engaged persons (employees):

5. What is the destination of your company’s products?

   a) Export in lohn system;

   b) Full-product export;

   c) Internal market.

6. Your position (function) within the company:

Section 2 – Information about the Distribution Channels Used in the Company for the Selling of its Own Brands

7. How would you describe the following aspects referring to customer focus in your organisation, in terms of importance (1 = not very important, 5 = very important)?

623809-tab-4

 

  1. Rate the following sentence “the adoption of new retail formats is one of the factors that ensures the success of the company” by choosing one of the following:

     a). Partially agree;

     b). Totally agree;

       c). I do not know / I am not sure;

       d). Partially disagree;

       e). Strongly disagree.

    9. What distribution channels do you use?

       a). Intermediaries;

       b). Authorised intermediaries;

       c). Specialised fairs;

       d). Hypermarket;

       e). Online sales;

       f). You are your own sales agent;

       g). Your own shop;

       h). Concept store;

       i). Pop-up store.

    10. If the company has its own shop, specify their number and in what city / cities it is /they are located.

    Comments (if you want to add additional elements).

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