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World of Retailing

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Introduction to Retailing

Types of Retailers

Multi-Channel Retailing

Customer Buying Behavior

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What is retailing?

What do retailers do?

Why is retailing important in our society? What career and entrepreneurial opportunities

does retailing offer?

What types of decisions do retail managersmake?

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Retailing a set of businessactivities that adds value tothe products and services

sold to consumers for theirpersonal or family use

A retailer is a business that

sells products and/orservices to consumers forpersonal or family use.

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Retailers:Kohls, Macys,

Wendys,Amazon.com, JiffyLube, AMC Theaters,American EagleOutfitter, Avon, J.Crew

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Firms that are retailers and wholesalers - sell toother business as well as consumers:

Office Depot, The Home Depot, United Airlines, Bank ofAmerica, Costco

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The Four Ps of Marketing

Distribution

Retailers are part of the

distribution channel

Retailers are part of the

distribution channel

Product

Price

Promotion

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Typical Supply Chain Network

Suppliers Plants

DistributionCenters

Customers

retailers

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Retailers are the final business within a supplychain which links manufacturers to consumers.

A Supply Chain is a set of firms that make anddeliver a given set of goods and services to theultimate consumer.

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Vertical Integration firm performs more than one set of activities inthe channel

Ex: retailer invests in wholesaling or manufacturing

Backward Integration retailer performs some distribution andmanufacturing activities

Ex: JCPenney sells Arizona jeans (Private Label)

Forward Integration manufacturers undertake retailingactivities

Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates itsown stores

Large retailers engage in both wholesaling and retailing

Ex: Wal-Mart, Lowes, Safeway, Brown Shoe Company

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a box of crackers at a grocery store

costs $1 to manufacturer

sells at a price of $2

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Retailers add significantly to the prices consumers face

Why not buy directly from the manufacturer?

Does that mean that grocery stores are very profitable?

Example

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Manufacturer

Vendor

Distributor

Wholesaler

Retailer

$1.00 $1.20 $2.00

$.85 $.15 $.70

Consumer

Price to

Distributor

Price to

Retailer

Price to

Consumer

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Better services to

customers

More efficient

Why Not Get Rid of the Middlemen?

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Composer

LyricistPublisher

Record

CompanyMusic Retailer

Artist Distributor

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Retailer $5.00

Record Company

Manufacturing .75

Distribution 1.50Marketing 2.00

Coop advertising 1.00

Artist/Repertoire 1.00

Artist royalty 1.25

Lyricist .75Overhead/Profit 2.00

Total 15.25

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4 out of 5 CDs fail tomake a profit

$300,000 cost toprepare a CD forrelease

30,000 recordingartists

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ProvideAssortment

Buy other productsat the same time

Break Bulk

Buy it in quantitiescustomers want

Hold Inventory

Buy it at aconvenient place

when you wantit

Offer Services

See it before youbuy; get credit;layaway

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Ryan McVay/Getty Images

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The value of the product and serviceincreases as the retailer performs functions.

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Bicycle is developed

at manufacturer

Bicycle is

developed in

several styles

Bicycle is offered in

convenient locations

in quantities of one

Bicycle is featured

on floor display

Bicycle can be

bought on credit or

put on layaway

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BagBorrowerSteal.com jewelry and bag rental; Get (not buy, but borrow) exactly what you

want Home Depot

DIYer (Do-it-yourselfer); Learn how to do it yourself with in-storeclinics and online workshops

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Retail Sales:

Over $4.1 trillion in annualU.S. sales in 2005

Employment: Employs over 24 million

people in 2005

One of the largest sectors

for job growth in US Social responsibility

Global player

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Corporate social responsibility The voluntary actions taken by a

company to address the ethical,social, and environmental impactsof its business operations, inaddition to the concerns of itsstakeholders

Examples: Edun - a fair-trade fashionbrand by the U2 lead singer Bono Starbucks: pays its farmers 42%

more than the commodity price ofArabica coffee beans

Target: community givingprograms (5% of income, $3million a week)

Retail companies give away 1.7% oftheir profits, compared with about0.9% for companies in otherindustries

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The nature of retailing anddistribution channels in theU.S. is unique.

Has the greatest retail density Has the greatest concentration

of large retail firms

Large enough to operate theirown warehouses, eliminating

the need for wholesaling. The combination of large stores

and large firms result in a veryefficient distribution system.

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CHINAThe United States

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People with a wide range of skills and interests neededbecause retailers functions include Finance Purchase

Accounting Management information system (MIS) Supply management including warehouse and

distribution management Design and new product development

Financially rewarding 5-year salary of buyers: $50,000 - $60,000 5-year salary of store managers: $120,000 - $160,000

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Mom and Pop Store

To Todays Retailer

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The McGraw-Hill Companies,Inc./Andrew Resek, photographer

MIS

Real Estate

Operations

Finance

Promotion/Advertising

Human Resources

Loss Prevention

Store Design

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Selling Merchandise through the Internet

Using Internet to manage supply chains

Analyze POS data to tailor assortments to stores

Computer systems for merchandise planningand tracking

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Retailing provides opportunitiesfor people who want to start theirown business

Some of the worlds richest

people are retailing entrepreneurs

Examples of retailingentrepreneurs

Sam Walton (Wal-Mart)

Jeff Bezos (Amazon.com)Ingvar Kamprad (IKEA)Anita Roddick (the Body Shop)

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Wal-Mart: Sam Walton

IKEA: Ingvar Kamprad

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Walton Family (Wal-Mart)

Fisher (The Gap)

Wexner (The Limited) Menard (Menards)

Marcus (The Home Depot)

Kellogg (Kohls)

Schulze (Best Buy)

Levine (Family Dollar)

Gold (99Cent Only)

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ist of Retail Entrepreneurs on Forbes 400 Richest Americans

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Doing the Right Thing (direction) vs.

Doing Things Right (execution)

Strategic Decisions Are:

Made Infrequently Long-term

Require significant investment

Not easily reversed

Location, Organization Design, Information andDistribution Systems, Customer Service

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Need to identify thecompetition

intratype competition

(e.g., Dillards vs. JCPenney)

intertype competition(e.g., Dillards vs. Wal-Mart)

Identifying customers

What are the significantdemographic and life-styletrends

Who are your targetcustomers

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A retail strategy should identify the target market

the product and service mix

a long-term comparative advantage

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Main Street (small town) privatelabel, soft goods (apparel, homefurnishings), decentralizedretailer

Changes in environment --increased disposable income,growth of suburbs, interstatehighway program

Emulate Sears in moving toenclosed suburban malls Add hard goods (appliances,

automotive) Diversify drug stores,

insurance, specialty stores Develop catalog channel

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Focus on department store formatand soft goods develop electronicretail channel

Mid-market, mall baseddepartment store, between Wal-Mart/Target and Macys/Dillards

Competition from Target, Kohls Centralization to reduce cost,

increase responsiveness -centralized buying, warehousedelivery

Off the mall stores to increase

customer convenience Improving store atmospherics Upgrading merchandise offering

(e.g., Sephora, American Living byPolo Ralph Lauren)

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Small Town - Discount Store selling hard goodsand soft goods limited service, efficient distribution

Enter suburban markets Warehouse Clubs (Sams)

Supercenters

International Expansion Supermarkets, neighborhood markets

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arge number of merchandise categories --

appliances, hardware, apparel

Malls evolved into places for buying soft goods,

hard goods sold at category killers

The Softer Side of Sears

Refocused on value -- Testing carts in stores

Acquired ands EndAcquired by Kmart

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Strategy - organic and natural foods supermarket chainAssortment beyond organic/natural foods

Private labels - Whole Food, 360 Day Value

ove, trust, and employee empowerment

Equality in compensation

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CustomerService

Store Designand Display

MerchandiseAssortment

CommunicationMix

LocationPricing

Retail

Strategy

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Retail Strategy

CustomerService

Location

MerchandiseAssortment

PricingCommunicationMix

Store DesignAnd Display

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Fr - t i St r

Customer

Service

Merchandise

Assortment

PricingCommunication

Mi

Store is la And esign

ocation Strateg

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ocation

Pricing

Communication

Mi

Store Design

and Display

Customer

Service

Large Numberof Categories

Few Items

in Each Category

Assortment Strategy

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ocation

o nication

ix

Store Designand Display

sto er

Ser iceerchandise

Assort ent

Low, EDLP

Pricing Strategy

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Communication Mi

TV and NewspaperInsert Ads

ocation

Pricing

Store Design

and Display

Customer

Service

Merchandise

Assortment

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Store Design and Display

Basic, SpecialDisplays

for Products

Customer

Service ocation

Merchandise

Assortments

PricingCommunication

Mi

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Customer Service

Limited

ocation

Merchandise

Assortment

Pricing

Communication

Mi

Store Design

and Display

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Retail Strategy

CustomerService Location

Merchandise

Assortment

PricingCommunication Mix

Store Design

and Display

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Enclosed malls

Customer Service

Merchandise

Assortment

PricingCommunication Mi

Store

is

la

And

esign

Location Strategy

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ocation


Store Design

and Display

Customer Service

Jewelry, accessories andcosmetics for tweens and

teens

Assortment Strategy

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ocation

Communication Mi

Store Design

and Display

Customer Service

Merchandise Assortment

Modest with Sales

Pricing Strategy

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Bright, fashionable and fun

boutique layout

Customer Service

ocation

Merchandise Assortments


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CustomerService

Modest

ocation


Pricing

Communication Mi


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Retail Strategy


Merchandise

Assortment


Store Design

and Display

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Enclosed Malls

Customer Service

Merchandise

Assortment


Store

is

la

And

esign

Location Strategy

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ocation

Pricing

Communication Mi

Store Design

and Display

Customer Service

Many Items in Apparel

and Soft Home

Assortment Strategy

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ocation

Communication Mi

Store Design

and Display

Customer Service


Moderate with

Frequent Sales

Pricing Strategy

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Communication Mix

TV, Newspaper Ads and

Special Events

Store Design

And Display Merchandise Assortment

Pricing

Customer Service!

ocation

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Racetrack with Displays

Customer Service"

ocation


PricingCommunication Mi#

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CustomerService

Modest

$

ocation


Pricing

Communication Mi%


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Retail Strategy


Merchandise

Assortment


Store Design

and Display

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Free-standingStores

Customer Service

Merchandise

Assortment


&

Store Display

And Design

Location Strategy

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'

ocation

Pricing

Communication Mi(

Store Design

and Display

Customer Service

Large Number of Categories

Private Labels

Few Items in Each Category

Assortment Strategy

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)

ocation

Communication Mi0

Store Design

and Display

Customer Service


Low to Modest

Pricing Strategy

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Communication Mix

TV and Newspaper

Insert Ads

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Colorful, wide aisles displays

for products with a grid layout

Customer Service1

ocation


PricingCommunication Mi2

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CustomerService

Limited

3

ocation


Pricing

Communication Mi4


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Ignore your personal values and do what yourcompany asks you to do you will probablyfeel dissatisfied with your job .

Take a stand and tell your employer what youthink. Work to change the policies.

Refuse to compromise your principles youcould lose your job!

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Career Opportunities Store Management

Merchandise Management

Corporate Staff

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College not needed

Low pay

Long hours

Boring

Dead-end job

No benefits

Everyone is part-time Unstable environment

No opportunity for women and minorities

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The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Entry level management positions:

Department manager or assistant buyer/planner

Manage and have P& responsibility on your first job

Starting pay average with great benefits

Some retailers pay graduate school

No two days are alike

Buying and planning for financially analytically oriented

Management for people-people

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Most entry level jobs are instore management or buying, but theres

-accounting and finance

-real estate

-human resource management

-supply chain management

-advertising

-public affairs

-information systems

-loss prevention

visual merchandising

ret mgt ch. 1

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