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INTRODUCTION TO
RETAIL MARKETING
Introduction and Core Concept
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The Functions of Retailing
Retailing in Society Retailer part of supply chain for any product it sells
Supply Chain consist of different stages:Raw material final consumer
Links raw material producers, manufacturer, wholesalers and
transport firms with the retailer and the final consumer
Involves a distribution system that arranges for the
shipment of the product from producer to final consumer
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The Functions of Retailing
The retailer comes at the end of the supply chain and provides thefinal link between producer and consumer.
Modern retailing – link very closely to whole supply chain or evenbe dominant part of the supply process.
Major grocery retailers – TESCO – play a very active role inarranging distribution of products to their stores.
Other retailers own production facilities and some producers of fashion items also operate stores as well as selling to other retailers.
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The Functions of Retailing
Economic Significance – retailing is responsible for about 9 percent of output and employment
Social Institution – important because 30 percent of spending goes on products and services that we buyfrom retailers: Immense changes in the products and services we use, the
way we work, in family life and our leisure activities. Made possible due to changes in retailing – large
supermarket or superstore and advances in distribution thathave significantly reduced the cost of shopping for groceries, electrical goods and many other items.
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The Functions of Retailing
Politically important – large out-of-townshopping centres have been developed alongwith the increase in car ownership.
Modern technology – retailers becomesophisticated users:
E.g. electronic tills are linked to computers to helpcontrol stock and track customer spending andvarious technical devices are increasingly used tocombat retail crime.
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The Retail Industry
Retailing and the Retail Industry Retailing is selling products to consumers
Also sells services – e.g. MacDonald’s
Public house operators and industrial caterers declaredthemselves to be retailers
Medical and health services have also begun to behave as
retailers with the opening of local health centres (but the
government classifies these as belonging to the hospitality and
health industries respectively – it restricts the retailing industryto product retailers)
In the context of our study, retailing will include the selling of
products and services
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The Retail Industry
Measuring the Retail Industry Measure its share of national output using Gross Domestic
Product (GDP)
Standard Industrial Classification system (SIC) divides theeconomy into different major industry groups, one of which is
retailing.
Retail employment in relation to total employment
Monetary contribution of retailing is through the total net
output or value added of all the firms in the industry. Level of retail activity, which is given by gross sales (or
turnover) of retailers and is another indicator of the economic
and social importance of the industry.
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The Retail Industry
Retail Industry Structure Predominantly food stores
Sales of food, drink and tobacco account for more than half
of total sales by value. They are divided into: Non-specialized food stores: include supermarkets, co-
operative stores and convenience store that carry a wide
range of food items and also other non-food lines.
Specialized food stores: include bakers, butchers,
dairies, fishmongers, greengrocers, healthfood shops,delicatessens, and tobacconists
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The Retail Industry
Retail Industry Structure Predominantly non-food stores
Non-specialized non-food stores Mix retailers that sell a wide range of merchandise
Department stores such as Parkson, variety chains such as Woolworthand multi-sector retailers such as Boots.
Textiles, clothing and leather footwear Stores selling fashion, footwear, and leather goods and household
textiles Include department stores such as Debenhams and variety chains such
as Marks & Spencer, where clothing and household textiles are adominant feature of the stores
Household good stores Include china and glass stores, do-it-yourself (DIY) and hardware
stores, electrical household appliances, furniture, lighting, music, radioand television.
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Retail Industry Structure
Other stores Wide collection of stores including antique stores, bookshops
and stationers, carpet and floorcovering stores, catalogue
retailers, computer stores, office supplies, florists, gardencentres, pharmacies, and drugstores, photo/optical, sportsand leisure stores, second-hand shops, toys and gamesstores, wallpaper shops
Non-store retailing and repair
General mail order firms Non-store retailers, including market stalls, door-to-door
retailers, vending machines and mobile shops Repair of personal and household goods
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Retail Business Structure
Retail Outlets by Ownership Owned by independent (1 outlet)
Owned by large independents (2 – 9 outlets)
Owned by multiples (incl. co-ops)
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Retail Business Structure
Retailers take on different forms and sell to us indifferent ways: Sell to us through shops, such as the supermarkets and
the local corner shop Sell to us through mail order catalogue, such as
FREEMANS
Sell to us through television, such as QVC
Sell to us through the Internet, such as amazon.com Sell us services, such as McDonald’s, the local pub and
the local bank
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Definition of Retailing
Retailing is a set of activities that markets
products or services to final consumers for their
own personal or household use. It does this byorganizing their availability on a relatively large
scale and supplying them to consumers on a
relatively small scale.
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Definition of Retailing
1. Retailers sell to the final (non-business) consumer.The final consumer buys final products that do notundergo any further change outside the home or non-
work environment.1. E.g. Timber is a final product when sold to a householder
to build fence. On the other hand, timber is an intermediateproduct when it is sold to a carpenter to build fence for acustomer
2. Retailers buy in large quantities and sell in smallquantities to consumers, who buy for their ownpersonal or household use.
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Definition of Retailing
3. Retailers often buy products from a wide variety
of distant, even global sources.
1. Resell them at nearby store, mail order, televisionor the Internet
2. Organized the required delivery and collection
services
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Definition of Retailing
4. Retailers can sell services
1. Diverse range of activities such as garages,
restaurants and banks.
2. Require additional manual and technical skills or
knowledge
3. Invest substantial amounts in their facilities and
operating systems.
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Definition of Retailing
5. Retailers sell to many different consumers
1. Prepared to sell to whoever will buy their products
2. Restricted to only by legal restraint – alcohol to
minors and by any discriminatory practices they
operate.
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The Functions of Retailing
Retailers meet the needs of their customers by providingthe following essential services: Accessibility of location
Convenience of timing
Convenience of size
Information
Lifestyle support
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Social Role of Retailing
People want to see improvement in the general level of consumption and social cohesion over time.
Retailers that are seen to contribute to the local or nationalcommunity generally receive greater political support that allowsthem to operate more profitably.
Enhance their perceived value to the community by acting as afocal point and through effective public relations and promotionscampaigns including sponsorship. E.g. Teck Kong Trading
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Retail Formats (The Store
Package) Location
Size
Merchandise: Product mix Merchandise assortment
Breadth – measured by the number of different merchandizebrands stocked
Depth – measured by the average number of stock-keepingunits (SKUs) within each brand
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Retail Formats (The Store
Package) Price
Atmosphere and Service
Neighbourhood-based stores: General stores – old fashioned, with low level of self-
services. Variety stores – tend to have mixed or scrambled
merchandise, the range of which will vary with size of store
Convenience grocery stores – open till late evening
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Retail Formats (The Store
Package) One-stop stores:
Supermarkets Department stores
Hypermarkets and superstores
Specialist stores Computer shop, fancy dress hire and hobby shops
Mass merchandisers Discounters
Discount stores Off-price stores
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Successful Retailing
Building Success The retailer established its market position to serve
the needs of a well-defined group or groups of
consumers The retailer supports its market position
It prices the products to maintain perceived value for money relative to competitors
It uses appropriate layout and display to evoke thecustomer’s hidden and perceived needs to enhance theshopping experience and so increase sales
It promotes the products effectively over the period tosell them according to plan
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Successful Retailing
The retailer effectively manages store operations or mail
order, television or internet sales system
The retailer manages behind the scenes operationseffectively: Appropriate administration and personnel management
procedures
Proper financial management and control procedures Take advantage of technology in physical distribution and in
information technology in planning effective distribution
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Successful Retailing
The retailer maintains its business andcommunity standing: Uses appropriate publicity to show that it
understands its local community and deals withconsumers in a socially acceptable manner
Larger businesses pay due regard to environmental
concerns and contribute to wider communityparticipation of events and support communityactivities
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Business Strategy
Senior management has to develop a business
plan based on the most important factors in the
organisation’s success: Identify the strategic forces acting on the firm
Identify direction of change
Develop strategic responses
Ensure that there is an appropriate organisationalstructure through which the strategic response can
be communicated and implemented.
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Type of Business
The major types of business in retailing are: The unincorporated business – sole proprietorship
or partnership
The private company
The public company
Co-operatives
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The Value of the Business
Is the price it would fetch if it were sold as a going
concern in the open market: Depends on how investors view the potential future profits,
taking into account the business’s previous financial history,market growth and potential competition and the state of the
economy.
Value of the property owned plus the goodwill of the business
(the extra value the owners have acquired through building up
customer loyalty, giving it a competitive edge in the market
and therefore higher profits.
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The Value of the Business
The market value of the business is important
because:
It provides long-term wealth for its owners
It provides the asset base on which loans were
made
It affects the price at which firms raise new money
through selling shares
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Questions?