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M cGraw-Hil l / I rwin

Retail i ng M anagement,



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Computer Source: 44 outlets

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Chapter 1

Introduction to the World of Retailing

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The World of Retailing

Introduction to Retailing

Types of Retailers

Multi-Channel Retailing

Customer Buying Behavior

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Questions

What is retailing?

What do retailers do?

Why is retailing important in our society?

What career and entrepreneurial opportunitiesdoes retailing offer?

What types of decisions do retail managersmake?

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What is Retailing?

Retailing a set of businessactivities that adds value tothe products and servicessold to consumers for theirpersonal or family use

Retailing is a business that

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

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Examples of Retailers

Retailers:Otobi

Aarong

AgoraBata

Singer

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

Bata, Singer, Hatil

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Manufacturers Perspective

The Four Ps of Marketing

Distribution

Retailers are part o f the

distribution channel

Retailers are part of the

distribution c hannel

Product

Price

Promotion

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Distribution Channel

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Typical Supply Chain Network

Suppliers Plants

Distribution

Centers

Customers

retailers

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A Retailers Role in a Supply Chain

Retailers are the final business orgs within asupply chain which links manufacturers toconsumers.

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Manufacturing, Wholesaling and Retailing

Vertical Integration fi rm 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 retail ing activities

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

Vertical Integration

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Do Retailers Add Value?

a box of crackers at a grocery store

costs $1 to manufacturer

sells at a price of $2

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

Why Not Get Rid of the Middlemen?

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The High Costs and Low Profits of

Retailing

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Better services to

customersMore efficient

Why Not Get Rid of the Middlemen?

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How Retailers Add Value

Prov ide Assortment

Buy other productsat the same time

Break Bulk

Buy i t in quantitiescustomers want

Hold Inv entory

Buy it at aconvenient placewhen you want it

Offer ServicesSee i t before you

buy; get credit;layaway

Ryan McVay/Getty Images

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How Retailers Add Value

The value of the product and servi ce

increases as the retailer performs functions .

Bicycle is dev eloped atmanuf acturer

Bicycle isdev eloped insev eral styles

Bicycle is offered inconvenient locationsin quantities of one

Bicycle is f eaturedon f loor display

Bicycle can bebought on credit or

put on layaway

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Examples: How Retailers Add Values

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

want Home Depot

DIYer (Do-it-yoursel fer); Learn how to do it yoursel f with in-storeclinics and online workshops

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Social and Economic Significance of Retailing

Retail Sales:

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

Employment:

Employs over 24 millionpeople in 2005

One of the largest sectorsfor job growth in US

Social responsibility

Global player

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Social responsibility

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 f air-trade fashionbrand by the U2 lead singer Bono Starbucks: pays its farmers 42%

more than the commodity price ofArabica coffee beans

Target: community giv ing programs(5% of income, $3 million a week)

Retail companies give away 1.7% oftheir prof its, compared with about 0.9%f or companies in other industries

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Worlds 10 Largest Retailers in 2011

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Structure of Retailing and Distribution Channels around theWorld: The United States

The nature of retailing anddistribution channels in the U.S.is unique.

Has the greatest retail density

Has the greatest concentration oflarge retail firms

Large enough to operate theirown warehouses, eliminating theneed for wholesaling.

The combination of large storesand large firms result in a veryefficient distribution system.

CHINAThe United States

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Comparison of Distribution Channelsaround the World

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What have created these differences

in distribution systems?

Social &PoliticalObjectives

China, India: To reduce unemployment byprotecting small businesses

EU: To protect small retailers

To preserve green spaces/town centers

Geography Much lower population density in the US than in India,China, and EU (where less low-cost real estate areavailable for building large stores)

Market size Large retail markets in US, India, China

Countries in EU distribution channels and retailchains operate in a single country (no economy of scalesto be achieved; trade barriers sti ll exist)

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Nature of Retail Industry is Changing

Mom and Pop Store

To Todays Retailer

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Retailing is a High Tech Industry

Selling Merchandise through the Internet

Using Internet to manage supply chains

Analyze POS data to tailor assortments to stores

Computer systems for merchandise planning andtracking

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Retailers are a Business LikeManufacturers

The McGraw-Hill C ompan ies,

Inc./AndrewResek, photographer

MIS

Acco untin g

Operations

Finance

Marketing

Human Resources

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Opportunities in Retailing:

Management opportunities

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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Opportunities in Retailing:Entrepreneurial opportunities

Retailing provides opportunities forpeople who want to start their ownbusiness

Some of the worlds richest peopleare retailing entrepreneurs

Examples of retailingentrepreneurs

Sam Walton (Wal-Mart)Jeff Bezos (Amazon.com)Ingvar Kamprad (IKEA)Anita Roddick (the Body Shop)

Wal-Mart: Sam Walton

IKEA: Ingv ar Kamprad

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Career Opportunities in Retailing

Start Your Own Business

Walton Family (Wal-Mart)

Fisher (The Gap)

Wexner (The Lim ited)

Menard (Menards)

Marcus (The Home Depot)

Kellogg (Kohls)

Schulze (Best Buy)

Lev ine (Family Doll ar)

Gold (99Cent Only)

List of Retail Entrepreneurs on Forbes 400 Richest Americans

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Misconceptions About Careers in Retailing

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

The McGraw-Hill C ompan ies , Inc./AndrewResek, pho tographer

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Why You Should Consider Retailing

Entry level management positions:

Department manager or assistant buyer/planner

Manage and have P&L (Profit & Loss) responsibility on your firs t

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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Types of Jobs in Retailing

Most entry level jobs are in

store management or buying, but theres

-acc ounting and finance

-real es tate

-human resource management

-supply chain management

-advertising

-public affairs

-information systems

-loss prevention

-visual merchandising

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Retail Management Decision Process

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Decision Variables for Retailers

Customer Service

Store Design

and Display

Merchandise

Assortment

Communication

Mix

LocationPricing

Retail

Strategy

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Wal-Marts Retail Mix

Retail Strategy

MiX

Customer

ServiceLocation

Merchandise

Assortment

PricingCommunication

Mix

Store Design

And Dis play

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Location: Free-

standing Stores

CustomerService

MerchandiseAss ortment


Mix

Store Display

And Design

Location Strategy

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Location

PricingCommunicationMix

Store Design

and Display

CustomerService

MerchandiseAssortment

Large Numberof

Categories

Few Items

in EachCategory

Assortm ent Strategy

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Location

CommunicationMix

Store Design

and Display

CustomerService

Merchandise

Ass ortment

Pricing : Low, EDLP

Pricing Strategy

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Communication Mix

Comm Mix :TV and NewspaperInser t Ads

Location

Pricing

Store Design

and Display

Customer

Service

Merchandise

Ass ortment

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Store Design and Display

Store Designand Display

Basic, SpecialDisplays

for Products

CustomerService Location

Merchandise

Ass ortments


Mix

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Customer Service

CustomerServ ice

LimitedLocation

Merchandise

Ass ortment

Pricing

CommunicationMix

Store Desi gn

and Display

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Ethical Situations for a Retail Manager

Should a retailer sell merchandise that they suspect utilizedchild labor?

Should it advertise that its prices are the lowest in an areaeven though some items are not?

Should a buyer accept an expensive gift from a vendor?

Should salespeople use high-pressure sales when they knowthe product is not the best for the customers needs?

Should a retailer give preference to minorities when making apromotion decision?

Should a retailer treat some customers better than others?

Documents

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