2. Retail Strategy
Financial Strategy 2

3. Chapter Objectives Explain target markets.
Discuss market segmentation.
Explain competitive advantage.
Describe the types of retail business expenses.
Explain the importance of business credit.
Explain types of retail business risks. 3

4. Retailing, Products, and the Customer
In this chapter, you will learn:
How retailers determine which customer groups they want to target.
How retailers determine which products and services to offer.
The financial decisions that retailers have to make before opening for business and on every day a store is open. 4

5. What Is Retail Strategy?
Retailers avoid leaving anything to chance by using a retail strategy called retail mix.
retail mix the combination of decisions retailers make to create and operate a store 5

6. What is Retail Strategy?
Merchandise and services
Prices to charge
Location of store
Retail-Mix Decisions
Advertising
Displays
Sales associates 6

7. Target Market
When retailers begin the decision-making process, they must first determine who their target market will be.
target market the specific group of people on whom a retailer focuses merchandising and service decisions 7

8. Target Market
A retailer can identify characteristics of the target market by creating a target-market profile.
Retailers are continually updating their target-market profiles.
target-market profile a description of the target- market customers 8

9. Target Market
Market segmentation allows retailers to get specific information about customers.
market segmentation a way of analyzing a market by specific characteristics in order to create a target market 9

10. Target Market The four major categories of market segmentation are:
demographics statistics that describe a population in terms of personal characteristics
Demographics
psychographics consumer lifestyles as reflected in attitudes, interests, and opinions
Psychographics
Geographics
Product benefits
geographics information about where customers live 10

11. Target Market Three strategies involved in retail mix are: Product mix
product mix the types of merchandise that a retailer offers for sale
Product mix
Services mix
services mix the number and kinds of services offered by a retail establishment
Goods and services mix 11

12. Competitive Advantage
Customer service and attention to detail are two factors that can give retailers a competitive advantage.
competitive advantage an intangible factor that makes one retail store more desirable to customers than its competitors 12

13. Who’s on My Site?
How can online retailers find out who their target markets are when they never see them? Services such as Media Metrix conduct online and offline research to find out and predict the
Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses.
Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service.
Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com.
behavior of online consumers. They combine demographics with user statistics to determine which sites are used by certain types of people and why. With this information, retailers can tailor their sites to appeal to their customers.
For more information on retailing,
go to marketingseries.glencoe.com. 13

14. Why is determining a target market important?1.
Why is determining a target market important?
What are the four major categories of market segmentation?
Why is it important for a retailer to develop a competitive advantage? 2.
Quick Check Answers
Retailers must be focused and make merchandise and service decisions with the wants and needs of the target-market customer in mind.
demographics, psychographics, geographics, and product benefits
It makes one retail establishment more desirable to customers than another that is offering the same merchandise. 3. 14

15. Retail Business Expenses
Some of the most important decisions retailers make concern the finances of the business.
Every business generates expenses before it opens its doors. 15

16. Retail Business Expenses
The three major categories of business expenses are:
operating expenses everyday expenses such as office supplies, telephone, salaries, and utilities
Operating expenses
interest expenses expenses paid to finance loans a business obtains
Interest expenses
Cost of goods sold
cost of goods sold the price a retailer pays for the merchandise that is for sale 16

17. Retail Loans
Most businesses, at one time or another, have to borrow money.
Banks help retailers by assisting them with loans to support their businesses. 17

18. > > Types of Retail Loans Loan Type Term Use Short-Term
Repaid over 30 days, 60 days, or 90 days
Repaid over five to 30 years
Helps retailers purchase seasonal merchandise and pay for unplanned expenses
Helps retailers with major purchases such as buying a store or remodeling
>
Short-Term
Long-Term 18

19. Business Credit The “Five Cs of Credit” are: Capacity—ability to pay
Character—reliability
Credit history—amount of past debt and record of repayment
Capital—assets owned after debt
Collateral—property or valuable owned for security 19

20. Retail Store Profit
Profit is the retailer’s reward for running an efficient and effective business.
profit the money left after expenses are deducted from sales
sales – expenses = profit 20

21. Retail Business Risk Management
Businesses must deal with risk.
risk a situation or occurrence that can lead to financial loss for a business
Dealing with business risks in a retail setting is called risk management.
risk management handling business risks in a way that minimizes negative impact on the business 21

22. Retail Business Risk Management
The three categories of business risks are:
Economic risks
Natural risks
Human risks 22

23. What are the three types of retail business expenses?1.
What are the three types of retail business expenses?
Name two types of loans a retailer might use.
What are the three categories of business risks? 2.
Quick Check Answers
operating expenses, interest expenses, and cost of goods sold
long term and short term
economic, natural, and human 3. 23

24. Checking Concepts Explain target markets. 1. 2.
Demographics, psychographics, geographics, and product benefits 2.
They apply target-market information to product selection. 3.
A target market is the specific group of people to whom a retailer tailors its merchandising and service-offering decisions. 1. 2.
Name four categories used when describing a business's market segmentation.
Checking Concepts Answers
A target market is the specific group of people to whom a retailer tailors its merchandising and service-offering decisions.
Demographics, psychographics, geographics, and product benefits
They apply target-market information to product selection.
Discuss how retailers determine their product mix and their services mix. 3.
continued 24

25. Checking Concepts Define competitive advantage. 4. 5.
Operating expenses, interest expenses, and cost of goods sold 5.
It allows retailers to purchase merchandise, fixtures, and supplies when they need them, and then pay for them later. 6.
It is an intangible factor that makes one retail store more desirable to customers than its competitors. 4. 5.
Describe the three categories of retail business expenses.
Checking Concepts Answers
It is an intangible factor that makes one retail store more desirable to customers than its competitors.
operating expenses, interest expenses, and cost of goods sold
It allows retailers to purchase merchandise, fixtures, and supplies when they need them, and then pay for them later.
Explain the importance of business credit. 6.
continued 25

26. Checking Concepts Critical Thinking 7.
Define profit using a mathematical equation.
The three types of business risks are economic, natural, and human. Natural risks are most common and frequent because they result from natural occurrences such as hurricanes, floods, tornadoes, earthquakes, and fires. 8.
sales – expenses = profit 7.
Critical Thinking
Name the three types of business risks. Explain why one risk is more common than other risks. 8.
Checking Concepts Answers
sales – expenses = profit
The three types of business risks are economic, natural, and human. Natural risks are most common and frequent because they result from natural occurrences such as hurricanes, floods, tornadoes, earthquakes, and fires. 26

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