2-11 Unit 3 BERMAN EVANS 1 RETAIL MANAGEMENT: A STRATEGIC APPROACH 11th Edition BERMAN EVANS

4-2 Objectives  Review Concepts  To show the ways in which retail institutions can be classified  To study retailers on the basis of ownership type and to examine the characteristics of each  To explore the methods used by manufacturers, wholesalers, and retailers to exert influence in the distribution channel 2

2-Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 4-3 Figure 4-1: A Classification Method for Retail Institutions I Ownership II Store-Based Retail Strategy Mix III Nonstore-Based Retail Strategy Mix 3

5-4 Objectives  To describe the wheel of retailing, scrambled merchandising, and the retail life cycle and to show how they can help explain the performance of retail strategy mixes  To discuss some ways in which retail strategy mixes are evolving  To examine a variety of food-oriented retailers involved with store-based strategy mixes  To study a range of general merchandise firms involved with store-based strategy mixes 4

5-5 Retailer Strategy Mix A strategy mix is the firm’s particular combination of:  store location  operating procedures  goods/services offered  pricing tactics  store atmosphere  customer services  promotional methods 5 Berman and Evans, 2010

5-6 Earning Destination Retailer Status  Must be price-oriented and cost efficient  Must be upscale  Must be convenient  Should offer a dominant assortment  Should offer superior customer service  Must be innovative or exclusive 6 Berman and Evans, 2010

Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall5-7 Figure 5-1: The Wheel of Retailing 7

Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall5-8 Figure 5-2: Retail Strategy Alternatives 8

5-9 Retail Life Cycle Retail institutions pass through identifiable life stages  introduction  growth  maturity  decline 9 Berman and Evans, 2010

4-10 Ownership Forms  Independent  Chain  Franchise  Leased department  Vertical marketing system  Consumer cooperative 10 Berman and Evans, 2010

4-11 Independent Retailers  2.2 million independent U.S. retailers  Account for one-third of total store sales  70% of independents operated by owners and their families  Why so many? Ease of entry 11 Berman and Evans, 2010

4-12 Competitive State of Independents Advantages  Flexibility in formats, locations, and strategy  Control over investment costs, personnel functions, and strategies  Personal image  Consistency and independence  Strong entrepreneurial leadership Disadvantages  Lack of bargaining power  Lack of economies of scale  Labor intensive operations  Over-dependence on owner  Limited long-run planning 12 Berman and Evans, 2010

4-13 Figure 4-2: Useful Online Publications for Small Retailers 13 SBA.gov

4-14 Chain Retailers  Operate multiple outlets under common ownership  Engage in some level of centralized or coordinated purchasing and decision making  In the U.S., there are roughly 110,000 retail chains operating about 900,000 establishments 14 Berman and Evans, 2010

4-15 Competitive State of Chains Advantages  Bargaining power  Cost efficiencies  Efficiency maintained by computerization, warehouse sharing, and other functions  Defined management philosophy  Considerable efforts in long-run planning Disadvantages  Limited flexibility  Higher investment costs  Complex managerial control  Limited independence among personnel 15 Berman and Evans, 2010

Franchising  A contractual agreement between a franchisor and a retail franchisee that allows the franchisee to conduct business under an established name and according to a given pattern of business  Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for the exclusive rights to sell goods and services in an area Berman and Evans, 2010

4-17 Franchise Formats Product/ Trademark  franchisee acquires the identity of a franchisor by agreeing to sell products and/or operate under the franchisor name  franchisee operates autonomously  2/3 of retail franchising sales Business Format  franchisee receives assistance: location, quality control, accounting systems, startup practices, management training  common for restaurants, real- estate 17 Berman and Evans, 2010

5-18 Retailer Strategy Mix A strategy mix is the firm’s particular combination of:  store location  operating procedures  goods/services offered  pricing tactics  store atmosphere  customer services  promotional methods Berman and Evans, 2010

5-19 Earning Destination Retailer Status  Must be price-oriented and cost efficient  Must be upscale  Must be convenient  Should offer a dominant assortment  Should offer superior customer service  Must be innovative or exclusive 19 Berman and Evans, 2010

Current event of the Week 2-20

References Berman, B., Evans, J. (2010). Retail management: A strategic approach. Boston: PrenticeHall. 2-21