1. Introduction to the World of Retailing
CHAPTER 01
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. The World of Retailing

3. The World of Retailing Introduction to the World of Retailing
Types of Retailers – Chapter 2
Multichannel Retailing – Chapter 3
Customer Buying Behavior – Chapter 4

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

5. Examples of Retailers Retailers:
Kohl’s, Macy’s, Wendy’s, American Eagle Outfitter, Avon, J.Crew
Firms that are retailers and wholesalers - sell to other business as well as consumers:
Office Depot, The Home Depot, Costco

6. Contrast with Services

7. Service Definitions
Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer James Fitzsimmons

8. Examples of Service Industries
Health Care
hospital, medical practice, dentistry, eye care
Professional Services
accounting, legal, architectural
Financial Services
banking, investment advising, insurance
Hospitality
restaurant, hotel/motel, bed & breakfast
ski resort, rafting
Travel
airline, travel agency, theme park
Others
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

9. Back to Retail …

10. What is your favorite retailer?
Why do you like this retailer?
What would a competitive retailer have to do to get your patronage?

11. Distribution Channel

12. The 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.

13. Types of Integration
Vertical
Backward
Forward

14. Manufacturing, Wholesaling and Retailing
Vertical Integration – firm performs more than one set of activities in the channel
Ex: retailer invests in wholesaling or manufacturing
Backward Integration – retailer performs some distribution and manufacturing activities
Ex: JCPenney sells Arizona jeans (Private Label)

15. Manufacturing, Wholesaling and Retailing
Forward Integration – manufacturers undertake retailing activities
Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates its own stores
Large retailers engage in both wholesaling and retailing
Ex: Wal-Mart, Lowe’s, Safeway, Brown Shoe Company

16. Why Not Get Rid of the Middlemen?
Price to Consumer
Price to Distributor
Price to Retailer
$2.00
$1.00
$1.20
$.15
$.85
$.70
Manufacturer
Vendor
Distributor
Wholesaler
Retailer
Consumer

17. From your perspective, what are the benefits and limitations of purchasing a home entertainment system directly from a number of component manufacturers rather than from a retailer?

18. 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

19. Retail Management Decision Process

20. Strategic vs. Tactical Decisions
Doing the Right Thing (direction) vs..
Doing Things Right (execution)
Strategic Decisions Are:
Made Infrequently
Long-term
Require significant investment
Not easily reversed
Location, Organization Design, Information and Distribution Systems, Customer Service

21. Retail Strategy Need to identify the competition Intratype competition
(e.g., Nordstrom’s vs. Macy’s)
Intertype competition
(e.g., Nordstrom’s vs. Wal-Mart)

22. What retailers would be considered INTRAtype competitors for a convenience store chain such as 7-Elelven?
What firms would be INTERtype competitors?

23. Retail Strategy Identifying customers
What are the significant demographic and life-style trends
Who are your target customers

24. Retail Strategy A retail strategy should identify the target market
the product and service mix
a long-term comparative advantage

25. Issues in Retailing
How can we best serve our customers while earning a fair profit?
How can we stand out in a highly competitive environment where consumers have so many choices?
How can we grow our business while retaining a core of loyal customers?

26. Special Characteristics Affecting Retailers
Small
Average
Sale
Impulse
Purchase
Retailer’s
Strategy
Popularity of
Stores

27. “Expect More. Pay Less” at Target

28. Aspects of Target’s Strategy
Growth objectives
Appeal to a prime market
Distinctive image
Focus
Customer service
Multiple points of contact
Employee relations
Innovation
Commitment to technology
Community involvement
Monitoring performance

29. JC Penney’s Strategic Evolution(1)
Main Street (small town) private label, soft goods (apparel, home furnishings), decentralized retailer
Changes in environment -- increased disposable income, growth of suburbs, interstate highway program
Emulate Sears in moving to enclosed suburban malls
Add hard goods (appliances, automotive)
Diversify – drug stores, insurance, specialty stores
Develop catalog channel

30. JC Penney’s Strategic Evolution(2)
Focus on department store format and soft goods develop electronic retail channel
Mid-market, mall based department store, between Wal-Mart/Target and Macy’s/Dillards
Competition from Target, Kohl’s
Centralization to reduce cost, increase responsiveness - centralized buying, warehouse delivery
Off the mall stores to increase customer convenience
Improving store atmospherics
Upgrading merchandise offering (e.g., Sephora, American Living by Polo Ralph Lauren)

31. Whole Foods Implementation
Strategy - organic and natural foods supermarket chain Assortment beyond organic/natural foods
Private labels - Whole Food™, 360 Day Value™
Love, trust, and employee empowerment
Equality in compensation

32. Decision Variables for Retailers
Retail Strategy
Customer Service
Merchandise Assortment
Location
Communication Mix
Pricing
Store Design and Display