Chapter 1 Introduction to the World of Retailing McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

1-2 Questions ■What is retailing? ■What is a retailer’s role in the supply chain? ■How do retailers add value to product offerings? ■What types of decisions do retail managers make? ■What career and entrepreneurial opportunities does retailing offer?

1-3 What is Retailing? Retailing – a set of business activities that adds value to the products and services sold to consumers for their personal or family use A retailer is a business that sells products and/or services to consumers for personal or family use.

1-4 Examples of Retailers Retailers: Kohl’s, Macy’s,, American Eagle Outfitter, Sam’s, Home Depot, 7-Eleven, Kroger, Amazon.com, Jiffy Lube, AMC Theaters, Avon, L.L Bean, Wendy’s,Pizza Hut, Allstate, Bank- PlusAmazon.com

1-5 What is a Retailer’s Role in a Supply Chain? Retailers are the final business within a supply chain which links manufacturers to consumers. A Supply Chain is a set of firms that make and deliver a given set of goods and services to the ultimate consumer.

Typical Supply Chain Network Suppliers Manufacturers Wholesalers Customers Retailers 1-6

1-7 What are Wholesalers? Businesses that engage in buying, taking title, to, often storing, and physically handling goods in large quantities, then reselling the goods to retailers or industrial or business users. Some retail chains function as both retailers and wholesalers. They sell to consumers and other businesses. Examples include: Costco, Home Depot, Office Depot

1-8 Do Retailers Add Value? a box of crackers at a grocery store costs to retailer: $1 retail selling price : $1.50 Retailers add significantly to the prices consumers face Why not buy directly from the manufacturer? Why not get rid of the middleman? Example

1-9  Better services to customers  More efficient Why Not Get Rid of the Middlemen?

1-10 How Retailers Add Value ■Provide Assortment Buy other products at the same time ■Break Bulk Buy it in quantities customers want ■Hold Inventory Buy it at a convenient place when you want it ■Offer Services See it before you buy; get credit; layaway Ryan McVay/Getty Images

1-11 Retail Management Decision Process

1-12 Understanding the Retail Environment – Section I The retail environment includes factors largely beyond the control of the retailer, but which have an impact on the retailer’s success. Environmental factors include: technological, social, and economic trends, legal/political factors, competitors and customers.

1-13 The Retail Environment ■Identifying the competition  intratype competition (e.g., Dillard’s vs. JCPenney)  intertype competition (e.g., Dillard’s vs. Wal-Mart) ■Identifying customers  Who are your target customers  What are the significant demographic and life-style trends  need to know why customers shop, how they select a store, and how they select merchandise

1-14 Developing the Retail Strategy – Section II ■Indicates how the retailer plans to focus its resources to accomplish its objectives. ■Is based on the results of the environmental analysis.

1-15 Strategic Vs Tactical Decisions ■Strategic: Doing the Right Thing (direction). Tactical: Doing Things Right (execution) ■Strategic Decisions Are:  Made Infrequently  Long-term  Require significant investment  Not easily reversed ■Marketing Strategy, Financial Strategy, Organizational Structure, Supply Chain Organization, Information Systems, Customer Relationship Management Strategies

1-16 The Retail Mix: Sections III and IV Customer Service Store Design and Display Merchandise Assortment Communication Mix LocationPricing Retail Mix

1-17 Wal-Mart’s Retail Mix Retail Mix Customer Service Location Merchandise Assortment Pricing Communication Mix Store Design And Display

1-18 Wal-Mart’s Retail Mix Free-standing Stores Customer Service Merchandise Assortment Pricing Communication Mix Store Display And Design Location Strategy

1-19 Wal-Mart’s Retail Mix Location Pricing Communication Mix Store Design and Display Customer Service Large Number of Categories Few Items in Each Category Assortment Strategy

1-20 Wal-Mart’s Retail Mix Location Communication Mix Store Design and Display Customer Service Merchandise Assortment Low, EDLP Pricing Strategy

1-21 Wal-Mart’s Retail Mix Communication Mix TV and Newspaper Insert Ads Location Pricing Store Design and Display Customer Service Merchandise Assortment

1-22 Wal-Mart’s Retail Mix Store Design and Display Basic, Special Displays for Products Customer Service Location Merchandise Assortments Pricing Communication Mix

1-23 Wal-Mart’s Retail Mix Customer Service Limited Location Merchandise Assortment Pricing Communication Mix Store Design and Display

1-24 Claire’s Retail Mix Retail Mix Customer ServiceLocation Merchandise Assortment Pricing Communication Mix Store Design and Display

1-25 Claire’s Retail Mix Enclosed malls Customer Service Merchandise Assortment Pricing Communication Mix Store Display And Design Location Strategy

1-26 Claire’s Retail Mix Location Pricing Communication Mix Store Design and Display Customer Service Jewelry, accessories and cosmetics for tweens and teens Assortment Strategy

1-27 Claire’s Retail Mix Location Communication Mix Store Design and Display Customer Service Merchandise Assortment Modest with Sales Pricing Strategy

1-28 Claire’s Retail Mix Communication Mix TV and Magazine Ads Store Design And Display Customer Service Location Merchandise Assortment Pricing

1-29 Claire’s Retail Mix Store Design and Display Bright, fashionable and fun boutique layout Customer ServiceLocation Merchandise Assortments PricingCommunication Mix

1-30 Claire’s Retail Mix Customer Service Modest Location Merchandise Assortment Pricing Communication Mix Store Design and Display

1-31 Career Opportunities in Retailing: ■Retailing employs people in: Store Management Merchandise Management Promotion/Advertising Finance, Accounting, Management Information Systems Logistics/Distribution Human Resource Management Store 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

1-32 Entry Level Opportunities Primary entry-level opportunities for a retailing career are in the areas of buying and store management trainees. Store Management - must have the ability to lead and motivate employees. Store management involves all the disciplines necessary to run a successful business. Merchandise Management - Merchandise management attracts people with strong analytical capabilities and an ability to predict what merchandise will appeal to their target markets.

1-33 Entrepreneurial opportunities ■Retailing provides opportunities for people who want to start their own business ■Some of the world’s richest people are retailing entrepreneurs ■Examples of retailing entrepreneurs Sam Walton (Wal-Mart) Jeff Bezos (Amazon.com)Amazon.com Ingvar Kamprad (IKEA) Anita Roddick (the Body Shop) Wal-Mart: Sam Walton IKEA: Ingvar Kamprad