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Perspectives on Retailing


Chapter 1 Perspectives on Retailing Learning Objectives Explain what retailing is and why it is undergoing so much change today. Describe the five methods used to ... – PowerPoint PPT presentation

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Title: Perspectives on Retailing

  • Chapter 1
  • Perspectives on Retailing

Learning Objectives
  • Explain what retailing is and why it is
    undergoing so much change today.
  • Describe the five methods used to categorize
  • Understand what is involved in a retail career
    and be able to list the prerequisites necessary
    for success in retailing.
  • Explain the different methods for the study and
    practice of retailing.

LO 1
What is Retailing, and Why is it Undergoing so
Much Change Today?
  • Retailing - Consists of the final activities and
    steps needed to place merchandise made elsewhere
    into the hands of the consumer or to provide
    services to the consumer.
  • Any firm that sells a product or provides a
    service to the final consumer is said to be
    performing the retailing function.

LO 1
What is Retailing, and Why is it Undergoing so
Much Change Today?
  • E-tailing
  • Price competition
  • Demographic shifts
  • Store size

LO 1
  • The great unknown for retail managers will be the
    ultimate role of the Internet.
  • Bricks-and-mortar retailers - Operate out of a
    physical building.
  • With the growth of the web 2.0, the Internet has
    become much more interactive and social in
    nature. This has important implications for

LO 1
  • To combat e-tailing, bricks-and-mortar retailers
    must give their customers more control over the
    shopping experience.

LO 1
  • E-tailing has caused a shift in power between
    retailers and consumers.
  • Traditionally, the retailers control over
    pricing information provided them the upper hand
    in most transactions.
  • The information dissemination capabilities of the
    Internet are making consumers better informed and
    thus increasing their power when transacting and
    negotiating with retailers.

LO 1
  • Retailers must keep experimenting with various
    strategies, both in-store and online because the
    next generation of technology will change the
    consumers expectations of what they demand from
    their retailers.

LO 1
Price Competition
  • Sam Walton forever changed the face of retailing
    by realizing that most of any products cost gets
    added after the item is produced.
  • Walton made a major commitment to computerizing
    Wal-Mart as a means to reduce expenses.
  • Costco, a retailer, seeks to boost store traffic
    by getting shoppers to come in for a super, low
    price on key products.

LO 1
Demographic Shifts
  • Significant changes in retailing over the past
    decade have resulted from changing demographic
    factors such as
  • The fluctuating birthrate, the growing importance
    of the 70 million Generation Y consumers.
  • The move of Generation X into middle age.
  • The beginning movement of the baby boomer
    generation into retirement.
  • The increasing number of immigrants.

LO 1
Demographic Shifts
  • Successful retailers must
  • become more service-oriented
  • offer better value in price and quality
  • be more promotion-oriented, and
  • be better attuned to their customers needs.

LO 1
Demographic Shifts
  • Profit growth must come by either
  • increasing same-store sales at the expense of the
    competitions market share or
  • by reducing expenses without reducing services to
    the point of losing customers.

LO 1
Demographic Shifts
  • Same-store sales - Compares an individual stores
    sales to its sales for the same month in the
    previous year.
  • Market share - Retailers total sales divided by
    total market sales.

LO 1
Store Size
  • As stores increase in size the retailer often
    employs a scrambled merchandising strategy.
  • Scrambled merchandising - Exists when a retailer
    handles many different and unrelated items.
  • It is the result of the pressure being placed on
    many retailers to increase profits.

LO 1
Store Size
  • Retailers realized that having supersized stores
    increased several major costs
  • Rent
  • Inventory costs, and
  • Labor costs.
  • Two retail formats that have recently seen a
    significant decrease in average store size and a
    decrease in number of stores are
  • Department stores and
  • Category killers.

LO 1
Store Size
  • Category killer - Retailer that carries such a
    large amount of merchandise in a single category
    at such good prices that it makes it impossible
    for the customers to walk out without purchasing
    what they need, thus killing the competition.

LO 1
Exhibit 1.1 - External Environmental Forces
Confronting Retail Firms
LO 1
Categorizing Retailers
  • Census bureau
  • Number of outlets
  • Margin versus Turnover
  • Location
  • Size

LO 2
Census Bureau
  • The U.S. Bureau of the Census, for purposes of
    conducting the Census of Retail Trade, classifies
    all retailers using three-digit North American
    Industry Classification System (NAICS) codes.
  • Shortcoming of using the NAICS codes is that they
    do not reflect all retail activity.

LO 2
Exhibit 1.2 - The Five Methods Used to Categorize
LO 2
Number of Outlets
  • Retailers with several units are a stronger
    competitive threat because they can
  • Spread many fixed costs over a larger number of
  • Achieve economies in purchasing.
  • Advantages of single-unit retailers
  • They have harder-working, more motivated
  • They can focus and tailor their efforts and
    merchandise in one trade area.

LO 2
Number of Outlets
  • Standard stock list - Merchandising method in
    which all stores in a retail chain stock the same
  • Optimal stock list - Merchandising method in
    which each store in a retail chain is given
    flexibility to adjust its merchandise mix to
    local tastes and demands.

LO 2
Number of Outlets
  • Channel advisor or Channel captain - Institution
    in the marketing channel who is able to plan for
    and get other channel institutions to engage in
    activities they might not otherwise engage in.
  • Examples could be manufacturer, wholesaler,
    broker, or retailer.
  • Large store retailers are often able to perform
    the role of channel captain.

LO 2
Number of Outlets
  • Private label branding - Occurs when a retailer
    develops its own brand name and contracts with a
    manufacturer to produce the merchandise with the
    retailers brand on it instead of the
    manufacturers name.
  • Also called store branding.

LO 2
Number of Outlets
  • The major shortcoming of using the number of
    outlets scheme for classifying retailers is that
    it addresses only traditional bricks mortar

LO 2
Margins Versus Turnover
  • Gross margin percentage - Gross margin divided by
    net sales or what percent of each sales dollar is
    gross margin.
  • Gross margin - Net sales minus the cost of goods
  • Operating expenses - Expenses the retailer incurs
    in running the business other than the cost of
    the merchandise.

LO 2
Margins Versus Turnover
  • Inventory turnover - The number of times per
    year, on average, that a retailer sells its
  • High-performance retailers - Produce financial
    results substantially superior to the industry
  • Low-margin/low turnover retailer - Operates on a
    low gross margin percentage and a low rate of
    inventory turnover.

LO 2
Margins Versus Turnover
  • Low-margin/high turnover retailer - Operates on a
    low gross margin percentage and a high rate of
    inventory turnover.
  • High-margin/low turnover retailer - Operates on a
    high gross margin percentage and a low rate of
    inventory turnover.

LO 2
Margins Versus Turnover
  • Clicks mortar retailers - Sell both online and
    via physical stores.
  • High-margin/high turnover retailer - Operates on
    a high gross margin percentage and a high rate of
    inventory turnover.

LO 2
Margins Versus Turnover
High Margin
Excellent position to withstand a competitive
Low Turnover
High Turnover
Least able to withstand a competitive attack
Low Margin
LO 2
  • Retailers are now aware that opportunities exist
    in new non-traditional retail areas.
  • Retailers are reaching out for alternative retail
    sites, rather than simply renovating the existing
  • Today, the most significant of the new
    nontraditional shopping locations could be the
    one which combines culture with entertainment or

LO 2
  • The reason for classifying by size is that the
    operating performance of retailers tends to vary
    according to size.
  • With advances in technology, using
    classification of size is unclear.

LO 2
A Retailing Career
  • Career path
  • Common questions about a retailing career
  • Prerequisites for success

LO 3
Exhibit 1.4 - Retailing-Two Career Paths
LO 3
Career Path
  • Store management - The retailing career path that
    involves responsibility for
  • Selecting
  • Training
  • Evaluating personnel
  • In-store promotions
  • Displays
  • Customer service
  • Building maintenance, and
  • Security.

LO 3
Career Path
  • Buying - The retailing career path whereby one
    uses quantitative tools to develop appropriate
    buying plans for the stores merchandise lines.

LO 3
Common Questions About a Retailing Career
  • Salary
  • Career progression
  • Geographic mobility
  • Women in retailing
  • Societal perspective

LO 3
Prerequisites for Success
  • Hard work
  • Analytical skills
  • Creativity
  • Decisiveness
  • Flexibility
  • Initiative
  • Leadership
  • Organization
  • Risk taking
  • Stress tolerance
  • Perseverance
  • Enthusiasm

LO 3
The Study and Practice of Retailing
  • Analytical method
  • Creative method
  • A two-pronged approach
  • A proposed orientation

LO 4
The Study and Practice of Retailing
  • Analytical Method
  • Manager is finder and
  • investigator of facts.
  • Creative Method
  • Manager is conceptual
  • and very imaginative.
  • Two-Pronged Method
  • Manager who employs both
  • approaches.

LO 4
A Proposed Orientation
  • It has four major orientations
  • Environmental - allows the retailers to
    anticipate and adapt continuously to external
    forces in the environment.
  • Management planning - helps the retailers to
    adapt systematically to a changing environment.
  • Profit - all retail decisions will have an effect
    on the firms financial performance.
  • Decision making - allows the retailers to focus
    on the need to collect and analyze data to make
    intelligent retail decisions.

LO 4
Exhibit 1.5 - The Importance of Proactive
LO 4