Retailing, Retail Strategy, and Retailing Functions

Retail Strategy “Retail competition takes place in a goldfish bowl in the sense that when any new form of retailing emerges those previously in the market can observe what it is doing. Nothing about its new methods can be protected by patent or copyright. Yet, other retailers are slow to follow even though their reluctance may mean failure to survive.”—Wroe Alderson, 1965

Functions and Strategy Consumers dictate what is the efficient performance of a retailing function. Retail strategy is composed of determining what functions the format will perform and what the household will perform. What are the risks of… –Shifting too many functions to the household? –Performing too many functions that aren’t valued?

Demand and Supply Facilitation of Search Adjustment of Assortment Descrepancy Routinization of Transactions Reduction in Number of Contacts

Lot Size n Allocation: breaking bulk – Buying products on pallets. – Buying/selling products in cases. – Selling products in cartons. – Warehouse clubs expect households to do some bulk breaking. n Accumulating: building bulk – Accumulating quantities of like grades/qualities. – Sorting out, done to allow the selling of standardized grades. – Bookstores buying back used textbooks

Waiting time Storing: holding an inventory to meet an uncertain demand -- minimizing stockouts. Uncertainty increases as the product line becomes: more differentiated or specialized. more perishable. Bringing in a line of clothing that may or may not sell. Risk taking: uncertainty of demand makes risk taking an inherent part of inventory. The type of financing available for the transaction can shape the channel.

Spatial Convenience n Transporting n Physical movement of the product from place of production to consumption. n Constructing distribution centers for the retail chain. n Operating a set of vehicles to achieve the distribution. n Operating a network of establishments at convenient locations.

Assorting n Assembling an assortment of complementary products which increase convenience to the customer. n Assortment breadth reduces the number of "stops" or contacts a customer must make to satisfy its needs. n Generally, customers prefer assortment depth, up to the point where it creates confusion -- choice becomes too complicated. n Suppliers prefer their retailers to sell only their product lines.

Eight Marketing Functions Lusch & Dunne Buying Selling Storing Transporting Sorting Financing Information gathering Risk taking

Transaction Facilitating Functions n Buying -- an individual must make a decision, most often this is a salaried position, responsible for acquiring title to the goods. n Selling -- individual, compensated with either salary or commission designed to work with decision maker, permitting trial/information of the product, responsible for transferring title to the buyer. n Financing -- production and consumption are not simultaneous, some financing must be present. n Information gathering -- the sharing of market trends and needs between buyers and seller. Both have competitive information the other craves.

Service Following the Sale Location of technical expertise Availability, convenience, waiting time Breadth, depth (quality) of technical expertise

Primary Institutions n Channel institutions which takes legal title to the goods, i.e., they can set price that the goods will be sold. n Manufacturers n Wholesalers n Retailers n Diverters: "unauthorized" channel member.

Facilitating Institutions n Performing one or two of the marketing functions without taking title to the goods, generally work on commission. n Agents: n Transporters, T/L and L/T/L carriers n Public warehousers n Banks and other financial institutions n Market research firms

What is not in the “Goldfish Bowl?” Gross Margin Turnover Volume

Gross Margin Sales revenue minus cost of goods sold Selling price*quantity - cost*quantity Percent gross margin=gross margin/revenue

Turnover “True” measures of turnover

Sales-to-Stock Ratio

GMROI “Gross margin return on inventory”

Chain Store Age esk/Industry_Data/industry_data.htmhttp:// esk/Industry_Data/industry_data.htm