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Chapter 1- An Introduction to Retailing

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Chapter 1- An Introduction to Retailing Chapter 2- Building and Sustaining Relationships in Retailing Chapter 3- Strategic Planning in Retailing – PowerPoint PPT presentation

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Title: Chapter 1- An Introduction to Retailing


1
Chapter 1- An Introduction to Retailing Chapter
2- Building and Sustaining Relationships in
Retailing Chapter 3- Strategic Planning in
Retailing
2
Retailing
  • Retailing encompasses the business activities
    involved in selling goods and services to
    consumers for their personal, family, or
    household use. It includes every sale to the
    final consumer.

3
Issues in Retailing
  • How can we best serve our customers while earning
    a fair profit?
  • How can we stand out in a highly competitive
    environment where consumers have so many choices?
  • High unemployment, low consumer confidence, high
    savings rates have reduced consumer spending. At
    the same time retail competition has increased
    through increased format blurring (sales of
    cameras at office supply stores, carpeting and
    major appliances at home improvement centers).
  • How can we grow our business while retaining a
    core of loyal customers?

4
The Philosophy
  • Retailers can best address these questions by
    fully understanding and applying the basic
    principles of retailing, as well as the elements
    in a well-structured, systematic, and focused
    retail strategy.

5
The Framework of Retailing
6
An Ideal Candidate for a Retailing Career
  • Must be a people person (more important than
    technical knowledge). Technical skills can be
    taught more easily than people skills
  • Must be flexible
  • Should be decisive
  • Must have analytical skills
  • Must have stamina

7
Table 1-1 The 10 Largest Retailers in the United
States (2011)
Rank Company Main Emphasis
1 Wal-Mart Full-line discount stores, supercenters, membership clubs
2 Kroger Supermarkets, convenience stores, jewelry stores
3 Target Full-line discount stores, supercenters
4 Walgreens Drugstores
5 Home Depot Home centers
6 Costco Membership warehouse clubs
7 CVS Caremark Pharmacies
8 Lowes Home centers
9 Best Buy Electronics, major appliances
10 Sears Holdings Department store, discount (Kmart)
8
Figure 1-4 A Typical Channel of Distribution
Retailer
Manufacturer
Wholesaler
Final Consumer
9
Figure 1-5 The Retailers Role in the Sorting
Process
10
Multi-Channel Retailing
  • A retailer sells to consumers through multiple
    retail formats
  • Web sites
  • Physical stores

11
Multi-Channel Retailing
  • Cross selling across channels (in-store product
    availability info on Web site)
  • Consistent pricing in all channels (credibility)
  • Can buy, and return product regardless on channel
  • Role of each channel
  • Store try on, ease of return, fast availability
    (immediacy), compare offerings
  • Web 24/7, product information, product reviews
    by customers, personalization (tailored
    assortment based on past purchases), most current
    pricing, closeout sales
  • Catalog-permanency, true color

12
Figure 1-6 Apple
13
Distribution Types
  • Exclusive suppliers make agreements with one or
    few retailers, designating such retailers as the
    only ones to carry certain brands or products
    within a specified geographic area
  • Intensive suppliers sell through as many
    retailers as possible
  • Selective suppliers sell through a moderate
    number of retailers

14
Exclusive vs Intensive Distribution
  • Exclusive Distribution Fate of retailer is tied
    to manufacturer success, retailer has no
    free-rider concerns, retailer has less price
    competition, manufacturer is better assured of
    high levels of customer support
  • Intensive Distribution- Manufacturer is better
    assured of maximizing sales (especially for
    convenience goods), retailers face strong
    competition for price and service, intratype
    competition

15
Figure 1-7 Comparing Distribution Types
16
Figure 1-8 Special Characteristics Affecting
Retailers
Impulse Purchase
Small Average Sale
Retailers Strategy
Popularity of Stores
17
Retail Strategy
  • An overall plan for guiding a retail firm
  • Influences the firms business activities
  • Influences firms response to market forces

18
Six Steps in Strategic Planning
  • 1. Define the type of business (corporate
    mission)
  • 2. Set long-run and short-run objectives
  • 3. Determine the customer market
  • 4. Devise an overall, long-run plan
  • 5. Implement an integrated strategy
  • 6. Evaluate and correct (fine-tune)

19
Expect More. Pay Less at Target
20
Aspects of Targets Strategy
  • Growth objectives
  • Appeal to a prime market
  • Distinctive image
  • Focus
  • Customer service
  • Multiple points of contact
  • Employee relations
  • Innovation
  • Commitment to technology
  • Community involvement
  • Monitoring performance

21
Figure 1-10 Applying the Retailing Concept
Customer Orientation
Retailing Concept
Coordinated Effort
Retail Strategy
Value-driven
Goal Orientation
22
The Build-A-Bear Experience Never Boring
23
Customer Service
  • Activities undertaken by a retailer in
    conjunction with the basic goods and services it
    sells. This includes
  • Store hours
  • Parking
  • Shopper-friendliness
  • Credit acceptance
  • Salespeople

24
A Customer Respect Checklist
  • Do we trust our customers?
  • Do we stand behind what we sell?
  • Is keeping commitments to customers important to
    our company?
  • Do we value customer time?
  • Do we communicate with customers respectfully?
  • Do we treat all customers with respect?
  • Do we thank customers for their business?
  • Do we respect employees?

25
Relationship Retailing
  • Retailers seek to establish and maintain
    long-term bonds with customers, rather than act
    as if each sales transaction is a completely new
    encounter
  • Concentrate on the total retail experience
  • Monitor satisfaction
  • Stay in touch with customers

26
Effective Relationship Retailing
  • Use a win-win approach
  • It is easier to keep existing customers happy
    than to gain new ones (present value of current
    customers income stream cost of keeping existing
    customers content versus cost of replacing them
    with new customer
  • Develop a customer database (loyalty programs)
  • Ongoing customer contact is improved with
    information on peoples attributes and shopping
    behaviors

27
Types of Loyalty Programs
  • Additional discounts at register
  • Not a real loyalty program
  • 1 free with every n items purchased
  • Easily copied, no customer database
  • Rebates based on cumulative purchases
  • Customer maintains records
  • Can develop heavy half programs like Hilton
  • Targeted offerings and mailing based on purchase
    history
  • Tesco example Market research staff know more
    about my customers than board chairperson

28
Relationship Management Among Retailers and
Suppliers
  • Disagreements may occur in the following areas
    (channel conflict)
  • control over channel (private label)
  • profit allocation (resale price control)
  • number of competing retailers (exclusive,
    selective or intensive distribution)
  • product displays
  • promotional support (cooperative advertising
    funds and restrictions)
  • payment terms (payment on time)
  • operating flexibility
  • gray market sales
  • markdown monies, chargebacks by dominant
    retailers

29
Approaches to the Study of Retailing
Institutional
Functional
Strategic
30
Parts of Retail Management A Strategic Approach
  • Building relationships and strategic planning
  • Retailing institutions
  • Consumer behavior and information gathering
  • Elements of retailing strategy
  • Integrating, analyzing, and improving retail
    strategy

31
CHAPTER 2 STRATEGIC PLANNING IN RETAILING
32
Chapter Objectives
  • To explain what value really means and to
    highlight its pivotal role in retailers building
    and sustaining relationships
  • To describe how both customer relationships and
    channel relationships may be nurtured in todays
    highly competitive marketplace

33
Chapter Objectives (cont.)
  • To examine the differences in relationship
    building between goods and services retailers
  • To discuss the impact of technology on
    relationships in retailing
  • To consider the interplay between retailers
    ethical performance and relationships in retailing

34
Definition of Value
  • Value Results Process Quality
  • Price Customer Access Costs
  • Results Overall quality, instructions, ease of
    assembly, taste/quality/health, warranty, product
    testing by retailer
  • Process Quality Wide aisles, ease of finding,
    high in-stock position, fun experience, short
    waiting times
  • Price Costs delivery assembly credit
  • Customer access costs warehouse club membership
    fees, inconvenient location, poor store hours,
    inadequate parking

35
What is Value? (cont.)
  • Channel
  • Perspective
  • Value is a series of activities and processes
    (the value chain) that provide a certain value
    for the consumer.
  • Customer
  • Perspective
  • Value is a perception that the shopper has of the
    value chain.
  • It is the view of all the benefits from a
    purchase versus the price paid.

36
Retail Value Chain
  • Represents the total bundle of benefits offered
    to consumers through a channel of distribution
  • Store location and parking, retailer ambience,
    customer service, brands/products carried,
    product quality, retailers in-stock position,
    shipping, prices, image, and other elements

37
Potential Pitfalls to Avoid in Planning a
Value-Oriented Retail Strategy
  • Planning value solely from a price perspective
  • Providing value-enhanced services that customers
    do not want or will not pay extra for
  • Competing in the wrong value/price segment
  • Believing augmented elements alone create value
  • Paying lip service to customer service

38
Figure 2-2 A Value-Oriented Retailing Checklist
  • Is value defined from a consumer perspective?
  • Does the retailer have a clear value/price point?
  • Is the retailers value position competitively
    defensible?
  • Are channel partners capable of value-enhancing
    services?
  • Does the retailer distinguish between expected
    and augmented value chain elements?
  • Has the retailer identified potential value chain
    elements?
  • Is the retailers value-oriented approach aimed
    at a distinct market?
  • Is the retailers value-oriented approach
    consistent?

39
Figure 2-2 A Value-Oriented Retailing Checklist
(cont.)
  • Is the retailers value-oriented approach
    effectively communicated?
  • Can the target market clearly identify the
    retailers positioning?
  • Does the retailers positioning consider sales
    versus profits?
  • Does the retailer set customer satisfaction
    goals?
  • Does the retailer measure customer satisfaction
    levels?
  • Is the retailer careful to avoid the pitfalls in
    value-oriented retailing?
  • Is the retailer always looking out for new
    opportunities that will create customer value?

40
Customer Service
  • Expected customer service is the service level
    that customers want to receive from any retailer
    such as basic employee courtesy.
  • Augmented customer service includes the
    activities that enhance the shopping experience
    and give retailers a competitive advantage.

41
Expected Versus Augmented Levels of Customer
Service
  • Expected Must have elements do not
    differentiate retailer. While absence of these
    expected values provides anguish, presence does
    not provide satisfaction
  • AugmentedServices that can provide a competitive
    advantage. Double warranty, special delivery,
    product demonstrations

42
Figure 2-4 Classifying Customer Services
43
Fundamental Decisions
  • What customer services are expected and what
    customer services are augmented for a particular
    retailer?
  • What level of customer service is proper to
    complement a firms image?
  • Should there be a choice of customer services?
  • Should customer services be free?
  • How can a retailer measure the benefits of
    providing customer services against their costs?
  • How can customer services be terminated?

44
Table 2-1 Typical Customer Services
  • Credit
  • Delivery
  • Alterations/ Installations
  • Packaging/gift wrapping
  • Complaints/Returns handling
  • Gift certificates
  • Trade-ins
  • Trial purchases
  • Special sales
  • Extended store hours
  • Mail/phone orders

45
Table 2-1b Miscellaneous Customer Services
  • Bridal registry
  • Interior designers
  • Personal shoppers
  • Ticket outlets
  • Parking
  • Water fountains
  • Pay phones
  • Baby strollers
  • Restrooms
  • Restaurants
  • Babysitting
  • Fitting rooms
  • Beauty salons
  • Fur storage
  • Shopping bags
  • Information

46
Figure 2-6 Turning Around Weak Customer Service
Focus on Customer Concerns
Empower Frontline Employees
Show That You Are Listening
Express Sincere Understanding
Apologize and Rectify the Situation
47
Principles of Category Management
  • Retailers listen more to customers
  • Profitability is improved because inventory more
    closely matches demand
  • By being better focused, each department is more
    desirable for shoppers
  • Retail buyers are given more responsibilities and
    accountability for category results
  • Retailers and suppliers must share data and be
    more computerized
  • Retailers and suppliers must plan together

48
Figure 2-7 Elements Contributing to Effective
Channel Relationships
49
Three Kinds of Service Retailing
  • Rented goods services leased cars, hotel rooms,
    carpet cleaning equipment
  • Owned goods services plumbing, appliance repair,
  • Non-goods services haircut, professional
    services (physician, lawyer)

50
Four Characteristics of Services Retailing
  • Intangibility
  • Inseparability
  • Perishability
  • Variability

51
Figure 2-8a Characteristics of Service Retailing
Intangibility
  • No patent protection possible
  • Difficult to display/communicate
  • service benefits
  • Quality judgment is subjective
  • Some services involve
  • performances/experiences

52
Figure 2-8b Characteristics of Service Retailing
Inseparability
  • Consumer may be involved in
  • service production
  • Centralized mass production difficult
  • Consumer loyalty may rest
  • with employees

53
Figure 2-8c Characteristics of Service Retailing
Perishability
  • Services cannot be inventoried
  • Lost revenues from unsold services are lost
    forever
  • Effects of seasonality can be severe
  • Planning employee schedules can be complex
  • Need to balance supply and demand
  • (yield management pricing)

54
Figure 2-8d Characteristics of Service Retailing
Variability
  • Standardization and quality control hard
  • to achieve
  • Customers may perceive variability even
  • when it does not actually occur
  • Need to industrialize/mechanize/service
  • blueprint services to factor out variability

55
Figure A2-1 Lessons in Service Retailing
56
Technology Icons
57
Examples of Consumerism in Retailing
  • Proper testing of items for safety issues
  • Programming cash registers not to accept payment
    for recalled goods
  • Charging fair prices for goods in short
    supply--Home Depot plywood example in hurricane
  • Age labeling of toys, warning labels on goods
    beyond legal requirements

58
Store Sale
59
Understanding the Americans with Disabilities Act
60
  • CHAPTER 3STRATEGIC PLANNING IN RETAILING

61
Chapter Objectives
  • To show the value of strategic planning for all
    types of retailers
  • To explain the steps in strategic planning for
    retailers situation analysis, objectives,
    identification of consumers, overall strategy,
    specific activities, control, and feedback

62
Chapter Objectives (cont.)
  • To examine the individual elements of a retail
    strategy (both controllable and uncontrollable),
    and to present strategic planning as a series of
    integrated steps
  • To demonstrate how a strategic plan can be
    prepared

63
Retail Strategy
  • The overall plan or framework of action that
    guides a retailer
  • One year in duration
  • Outlines mission, goals, consumer market, overall
    and specific activities, and control mechanisms

64
Elements of a Retail StrategyRetail Strategy
65
Benefits of Strategic Retail Planning
  • Provides thorough analysis of the requirements
    for doing business for different types of
    retailers
  • Outlines retailer goals
  • Allows retailer to determine how to differentiate
    itself from competitors
  • Allows retailer to develop an offering that
    appeals to a group of customers
  • Offers an analysis of the legal, economic, and
    competitive environment
  • Provides for the coordination of firms total
    efforts
  • Encourages anticipation and avoidance of crises

66
Organizational Mission
Retailers commitment to a type of business and
to a distinctive role in the marketplace.
67
Ownership and Management Alternatives
  • Sole proprietorship is an unincorporated retail
    firm owned by one person
  • A partnership is an unincorporated retail firm
    owned by two or more persons, each with a
    financial interest
  • A corporation is a retail firm that is formally
    incorporated under state law it is a legal
    entity apart from its officers

68
Figure 3-3 Checklist to Consider When Starting a
New Business
69
Figure 3-4 Checklist for Purchasing an Existing
Retail Business
70
Figure 3-5a Selected Kinds of Retail Goods and
Service Establishments
Durable Goods Stores Automotive group Furniture
and appliances group Lumber, building, and
hardware group Jewelry stores
Nondurable Goods Stores Apparel group Food
group General merchandise group Gasoline service
stations
71
Figure 3-5b Selected Kinds of Retail Goods and
Service Establishments
Service Establishments (Personal) Laundry and
dry cleaning Beauty/barber shops Funeral
services Health-care services
Service Establishments (Amusement) Movie
theaters Bowling alleys Dance halls Golf courses
72
Figure 3-5c Selected Kinds of Retail Goods and
Service Establishments
Service Establishments (Repair) Automobile
repair Car washes Consumer electronics
repair Appliance repairs
Service Establishments (Hotel) Hotels Motels Trai
ler parks Camps
73
Image and Positioning
An image represents how a given retailer is
perceived by consumers and others.
74
Positioning Approaches
  • Mass merchandising is a positioning approach
    whereby retailers offer a discount or
    value-oriented image, a wide or deep merchandise
    selection, and large store facilities.
  • Niche retailing occurs when retailers identify
    specific customer segments and deploy unique
    strategies to address the desires of those
    segments rather than the mass market.

75
Figure 3-6 Niche Retailing by Babies R Us
76
Selected Retail Positioning Strategies
77
Target Market Selection
  • Three techniques
  • Mass marketing
  • Concentrated marketing
  • Differentiated marketing

78
La Boqueria
79
Strategic Implications of Target Market
Techniques
  • Retailers location
  • Goods and service mix
  • Promotion efforts
  • Price orientation
  • Strategy

80
Developing an Overall Retail Strategy
  • Uncontrollable
  • Variables
  • Consumers
  • Competition
  • Technology
  • Economic
  • conditions
  • Seasonality
  • Legal restrictions
  • Controllable
  • Variables
  • Store location
  • Managing business
  • Merchandise
  • management
  • and pricing
  • Communicating
  • with customer

Retail Strategy
81
Retail Strategy Low Costs
  • Removal of bad costs
  • Use of private label products to reduce costs of
    national/manufacturer brands
  • Reduce product proliferation
  • Obtain best net price instead of focus on
    promotional monies, trade incentives and forward
    buying

82
Retail Strategy Low Costs (cont.)
  • Supply chain initiatives
  • Low promotional expense (everyday low pricing)
  • Proper employee utilization

83
Retail Strategy--Differentiation
  • Well-thought out private labels (Trader Joes,
    Target, King Arthur flour, etc.)
  • Hiring right employees (value-profit chain)
  • Empowering employees
  • Use of a fun atmosphere
  • Little things that mean a lot
  • Money-back guarantees

84
Legal Environment and Retailing
  • Store Location
  • zoning laws
  • blue laws
  • environmental laws
  • direct selling laws
  • local ordinances
  • leases and mortgages
  • Managing the Business
  • licensing provisions
  • personnel laws
  • antitrust laws
  • franchise agreements
  • business taxes
  • recycling laws

85
Legal Environment and Retailing
  • Merchandise Management and Pricing
  • trademarks
  • merchandise restrictions
  • product liability laws and lemon laws
  • sales taxes
  • unit-pricing laws
  • collusion laws
  • sale prices
  • price discrimination laws

86
Legal Environment and Retailing
  • Communicating with the Customer
  • truth-in-advertising and selling laws
  • truth-in-credit laws
  • telemarketing laws
  • bait-and-switch laws
  • inventory laws
  • labeling laws
  • cooling-off laws

87
Sample Strategic Plan
  • Sallys is a small, independently owned,
    high-fashion ladies clothing shop located in a
    suburban strip mall. It is a full-price,
    full-service store for fashion-forward shoppers.
    Sallys carries sportswear from popular
    designers, has a personal shopper for busy
    executives, and has an on-premises tailor. The
    store is updating its strategic plan as a means
    of getting additional financing for an
    anticipated expansion.

87
88
Additional Concerns for Global Retailing
  • In addition to the strategic planning process
  • assess your international potential
  • get expert advice and counseling
  • select your countries
  • develop, implement, and review an international
    retailing strategy

89
Factors Affecting the Success of a Global
Retailing Strategy
  • Timing
  • A balanced international program
  • A growing middle class
  • Matching concept to market
  • Solo or partnering
  • Store location and facilities
  • Product selection

90
Factors to Consider When Engaging in Global
Retailing
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