Retail Market Strategy Retail and Financial Strategy

Objectives Explain target markets Discuss market segmentation Explain competitive advantage Describe types of retail business expenses Explain the importance of business credit Explain types of retail business risks

What Is Retail Strategy? Retailers make many critical decisions Merchandise and services to offer Price to charge Store location Advertising Displays Sales associates Retail Mix Retailers target specific customer groups as the primary focus !

Target Market Most important decision Specific group of people on whom a retailer focuses merchandise and service-offering decisions. Most important decision Affects all other decisions that come after it. Must meet the wants and needs of the target market. Use target-market profile to provide information about potential customers

Market Segmentation Retailers compile an analysis by specific characteristics. DEMOGRAPICS GEOGRAPHICS Market Segmentation PSYCHOGRAPHICS PRODUCT BENEFIT

Demographics Statistics that describe a population Age Gender Income Discretionary income – money customers have left after providing for their basic needs in life – food and shelter Occupation Education Ethnic background

Psychographics Study of consumers lifestyles as reflected in attitudes, interests, and opinions What do consumers use their leisure time for?

Geographics Information such as Where customers live Cool or warm climate? What part of town? Example: Area with a large population of families; Children’s clothing store may succeed in such area.

Product Benefits Marketers study consumer’ behaviors, needs and wants regarding specific products Example: A company will make different types of vitamins for different age groups with different needs.

Product Mix Type of merchandise retail store offers. Reflect needs and wants of customers Clothing Store – Age? Type of clothing? Shoes? Accessory? Retailer wants to make store appealing to the consumer What sets retailer apart from others

Service Mix Services offered by the establishment Parking credit cards and checks returns and refunds gift wrapping alterations delivery repairs

Competitive Advantage Intangible factor that makes one retail establishment more desirable to customers than another. Customers can purchase same or similar product at any location however what will make customer choose one over other: Customer Service Attention to Detail Stocking unusual merchandise not found anywhere else Learning customers’ names and preferences Follow up call Customer Loyalty

WORKSHEET 5.1 The following is an example of a simple consumer survey. This information is used by retailers to determine what kind of products to market to you. Mark which category each question falls into: Demographics Psychographics Geographics Product Benefits

Retail Business Expenses Every business generates expenses before it opens its doors. 3 major expenses: Operating Interest Cost of Goods Sold

Operating Expenses Everyday Expenses Rent Office supplies Telephone Internet Access Salaries Utilities

Interest Expenses Retail business can have loans to cover the costs of store fixtures, equipment, merchandise purchases, or store building. Retailer must always pay any outstanding loans the business may have.

Cost of Goods Sold What retailer pays for the merchandise. Price includes merchandise cost and shipping

Retail Loans Revenue from merchandise/services covers most business expenses. Loans to help with other aspects such as repair or purchasing more merchandising. Short Term (30, 60, 90 Days) Long Term (5-30 yrs)

Business Credit Retailers use credit when making purchases. Retailer purchases from Supplier; Supplier agrees to wait 30 or 60 days for payment. “Trade Credit” Business Credit Cards Consider several factors before being given credit Capacity – ability to pay Character – reliability Credit History – amount of past debt and record of payment Capital – assets owned after debt Collateral – property or valuables owned for security

Profit Everyone wants to make PROFIT Sales – Expenses = Profit Businesses must make a profit to stay in business.

Business Risks Risk is everywhere. Businesses have a department to sole concentrate on Risk Management to minimize negative impact on the business. 3 Types of Business Risks

Economic Risks Negative shift in the nation’s economy. Retailers must be on extra alert. Why?

Human Risks Security risk include Internal and External Theft Internal: employee theft What can a retailer do to ensure employee is honest? External: shoplifting Protection – How can retailers protect themselves? Vendors? Safety risk include accidents that take place in store with customers.

Natural Risks Hurricanes, Floods, Tornadoes, Earthquakes, Fires Some other risks, may or may not cover: Riots, Civil unrest, Oil or Chemical Spills, Arson, Terrorism Retailers should always have insurance to cover building, merchandise, equipment, fixtures Very Costly

CHECKING CONCEPTS *HAND IN* EXPLAIN TARGET MARKETS. NAME FOUR CATEGORIES USED WHEN DESCRIBING A BUSINESS’S MARKET SEGMENTATION. DISCUSS HOW RETAILERS DETERMINE THEIR PRODUCT MIX AND THEIR SERVICES MIX. DEFINE COMPETITIVE ADVANTAGE. DESCRIBE THE THREE CATEGORIES OF RETAIL BUSINESS EXPENSES. EXPLAIN THE IMPORTANCE OF BUSINESS CREDIT. DEFINE PROFIT USING A MATHEMATICAL EQUATION. NAME AND EXPLAIN THE THREE TYPES OF BUSINESS RISKS.

MATH *HAND IN* DURING MARCH, TERRIFIC TOYS HAD OPERATING EXPENSES OF $10,000, INTEREST EXPENSES OF $2,000. AND COST OF GOODS SOLD OF $14,000. TO MAKE A $5,000 PROFIT, HOW MUCH DO SALES NEED TO BE? ALITA MAKES SALSA TO SELL AT PERUVIAN CULTURE NIGHT AT HER SCHOOL. SHE BUYS THE SALSA INGREDIENTS FOR $25.09 AND TWO BOXES OF CONTAINERS FOR $3.29 EACH. SHE SELLS EACH CONTAINER OF SALSA FOR $3.75. SHE SELLS 23 SALSA CONTAINERS. HOW MUCH PROFIT HAS SHE MADE?

SPICE UP YOUR MARKET *HAND IN* GUACAMOLE

Group Work *HAND IN* YOU ARE OPENING A BUSINESS IN YOUR COMMUNITY CREATE NAME FOR BUSINESS, WHAT PRODUCT/SERVICE YOU ARE PROVIDING. DEVELOP A TARGET-MARKET PROFILE FOR YOUR BUSINESS.