Chapter 1 Perspectives on Retailing Retailing, 6 th Edition. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved

Chapter 1

Perspectives on Retailing

Retailing, 6th Edition. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved.

Learning Objectives

1. Explain what retailing is.2. Explain why retailing is undergoing so

much change today.3. Describe the five methods used to

categorize retailers.4. Understand what is involved in a retail

career and be able to list the prerequisites necessary for success in retailing.

5. Be able to explain the different methods for the study and practice of retailing.

What is Retailing?

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.

LO 1

Wal-Mart’s Retail Focus

Work with manufacturers to help produce goods at the lowest possible cost.

Manage the supply chain bringing goods from manufacturers to stores at lowest possible cost.

Use cutting edge technology to manage inventory.

LO 1

The Nature of Change in Retailing

E-Tailing Price Competition Demographic Shifts Store Size

LO 2

E-tailing

Unknown for retail mangers is what the ultimate roll of the Internet will be.

Observers recognize the value of online shopping for travel, clothing, cosmetics, and music.

It is unclear if online shopping will reach its projections for “everyday” needs.

LO 2

E-tailing

E-tailing now accounts for about three percent of total retail sales.

E-tailing has caused a shift in power between retailers and consumers.

LO 2

E-tailing

E-tailers provide the consumer with detailed pricing and product information, making better informed consumers which increases the consumers’ transaction power and negotiations with retailers.

LO 2

Price Competition

Sam Walton forever changed the retail environment by computerizing his operations resulting in lower costs allowing him to lower prices.

LO 2

Price Competition

• Costco seeks to boost store traffic by getting shoppers to come in for a “super, low price” on key products.

LO 2

Demographic Shifts

Fluctuating birth rate, the increasing number of immigrants, the growing importance of Generation Y consumers, Generation X starting to reach middle age, and baby boomers retiring are all demographic shifts in the United States that shape the retailing environment.

LO 2

Demographic Shifts

Same-Store Sales:

Compares an individual store’s sales to its sales for the same month in the previous year.

LO 2

Demographic Shifts

Market Share:

Is the retailer’s total sales divided by total market sales.

LO 2

Store Size

As stores increase in size they often employ a scrambled merchandising strategy.

LO 2

Store Size

Scrambled Merchandising:

Exists when a retailer handles many different and unrelated items.

LO 2

Store Size

Convenience stores use a scrambled merchandising approach.

LO 2

Store Size

Category Killer:

Is a 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 2

Categorizing Retailers

Census Bureau Number of Outlets Margin Versus Turnover Location Size

LO 3

External Environmental Forces Confronting Retail Firms

Exhibit 1.1 LO 3

Categorizing Retailers

Exhibit 1.2 LO 3

Using NAICS Codes

Exhibit 1.3 LO 3

Number of Outlets

Chain Stores:

Normally refers to operations having 11 or more units.

LO 3

Number of Outlets

Standard Stock List:

Is a merchandising method in which all stores in a retail chain stock the same merchandise.

LO 3

Number of Outlets

Optimal Stock List:

Is a merchandising method in which each store in a retail chain is given flexibility to adjust its merchandise mix to local tastes and demands.

LO 3

Number of Outlets

Channel Advisor or Channel Captain:

Is the institution (manufacturer, wholesaler, broker, or retailer) 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. Large store retailers are often able to perform the role of channel captain.

LO 3

Number of Outlets

Private Label Branding (Store Branding):

Also called store branding, occurs when a retailer develops its own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name.

LO 3

Private Labels by Country

LO 3

Number of Outlets

Bricks & Mortar Retailers:

Retailers that operate out of a physical building.

LO 3

Margins Versus Turnover

Gross Margin Percentage:

Is the gross margin divided by net sales or what percent of each sales dollar is gross margin.

LO 3


Gross Margin:

Is net sales minus the cost of goods sold.

LO 3


Operating Expenses:

Are the expenses the retailer incurs in running the business other than the cost of the merchandise.

LO 3


Inventory Turnover:

Refers to the number of times per year, on average, that a retailer sells its inventory.

LO 3


High-Performance Retailers:

Are those retailers that produce financial results substantially superior to the industry average.

LO 3


Low Margin/Low Turnover:

Is one that operates on a low gross margin percentage and a low rate on inventory turnover.

LO 3


Low Margin/High Turnover:

Is one that operates on a low gross margin percentage and a high rate of inventory turnover.

LO 3


High Margin/Low Turnover:

Is one that operates on a high gross margin percentage and a low rate on inventory turnover.

LO 3

Margin Versus Turnover

Clicks & Mortar Retailers:

Retailers that sell both online and via physical stores.

LO 3


High Margin/High Turnover:

Is one that operates on a high gross margin percentage and high rate of inventory turnover.

LO 3

Retailers Classified by Margin & Turnover

LowTurnover

HighTurnover

High Margin

Low Margin

High-Margin/Low-Turnover

Retailers

High-Margin/High-Turnover

Retailers

Low-Margin/Low-Turnover

Retailers

Low-Margin/High-Turnover

Retailers

LO 3

LowTurnover

HighTurnover

High Margin

Low Margin

Excellent positionto withstand a

competitive attack

Least able towithstand a

competitive attack

Margin & Turnover

Competitiveness: Retailers Classified

LO 3

Location

Retailers have long been classified according to their location within a metropolitan area, be it the central business district, a regional shopping center or neighborhood shopping center, or as a freestanding unit.

Location is an area that retailing may undergo significant changes in the decade to come.

LO 3

Size

The reason for classifying by size is that the operating performance of retailers tends to vary according to size.

Larger firms generally have lower operating costs per sales dollar than smaller firms do.

With advances in technology using classification of size is unclear.

LO 3

A Retailing Career

Career Path Common Questions About a Retailing Career Prerequisites for Success

LO 4

Career Path

Store Management:

The retailing career path that involves responsibility for selecting, training, and evaluating personnel, as well as in-store promotions, displays, customer service, building maintenance, and security.

LO 4

Career Path

Buying:

The retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the store’s merchandise lines.

LO 4

Retailing-Two Career Paths

Exhibit 1.4 LO 4

Common Questions About A Retailing Career

Salary Career Progression Geographic Mobility Women in Retailing Societal Perspective

LO 4

Prerequisites for Success

Hard Work Analytical Skills Creativity Decisiveness Flexibility Initiative

Leadership Organization Risk Taking Stress Tolerance Perseverance Enthusiasm

LO 4


Hard Work:

A willingness to work extra hours,

evenings and weekends often

pays off through career advancement.

LO 4


Analytical Skills:

An ability to interpret the facts

and data that are related to the

past and present performance of a

store, merchandise lines, and

departments.

LO 4


Creativity:

An ability to develop and

capitalize on unique ideas and

opportunities.

LO 4


Decisiveness:

The ability to make rapid decisions,

render judgments, take action and

commit oneself to a course of

action until completion.


LO 4


Flexibility:

A willingness and enthusiasm to do

whatever is necessary (although not

planned) to complete the job.

LO 4


Initiative:

The ability to originate action.

LO 4


Leadership:

The ability to inspire others to

trust and respect your judgment

and an aptitude for delegating,

guiding and persuading others.

LO 4


Organization:

The ability to establish priorities and

courses of action and to plan and

follow up to achieve results.

LO 4


Risk Taking:

The willingness to take calculated

risks and to accept responsibility

for the results.

LO 4


Stress Tolerance:

The retailing leaders of the 21st Century must be able to perform consistently under pressure and to thrive on constant

change and challenge.

LO 4


Perseverance:

Individuals that have the ability to persevere and take marketplace

changes in stride will find an increasing

number of career advancement

opportunities.

LO 4


Enthusiasm:

Successful retailers must have a strong

warmth of feeling for their job, otherwise

they will convey the wrong image to their

customers and associates in their

department.

LO 4

The Study and Practice of Retailing

Analytical Method Creative Method A Two-Pronged Approach A Proposed Orientation

LO 5

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 5

A Proposed Orientation

Environmental Management Planning Profit Decision Making

LO 5

The Importance of Proactive Planning

Exhibit 1.5 LO 5

Additional Slides

A Retailing Career

Retail Career

Salary

CareerProgression

GeographicMobility

Women inRetailing

SocietalPerspective

LO 4


Success

Hard WorkAnalytical Skills

Creativity

Decisiveness

Flexibility

Initiative

Leadership

Organization

Risk Taking Stress Tolerance

Perseverance

Enthusiasm

LO 4

Documents

Chapter 1 Perspectives on Retailing Retailing, 6 th Edition. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved