1. CHAPTER 1: AN INTRODUCTION TO RETAILING

2. Chapter Objectives
To define retailing, consider it from different perspectives, demonstrate its impact, and note its special characteristics
To introduce the concept of strategic planning and apply it
To show why the retailing concept is the foundation of a successful business, with an emphasis on the total retail experience, customer service, and relationship retailing
To indicate the focus and format of the text

3. Retailing
Retailing encompasses the business activities involved in selling goods and services to consumers for their personal, family, or household use. It includes every sale to the final consumer.

4. 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?
High unemployment, low consumer confidence, high savings rates have reduced consumer spending. At the same time retail competition has increased through increased format blurring (sales of cameras at office supply stores, carpeting and major appliances at home improvement centers).
How can we grow our business while retaining a core of loyal customers?

5. The Philosophy
Retailers can best address these questions by fully understanding and applying the basic principles of retailing, as well as the elements in a well-structured, systematic, and focused retail strategy.

6. An Ideal Candidate for a Retailing Career
Must be a people person (more important than technical knowledge). Technical skills can be taught more easily than people skills
Must be flexible
Should be decisive
Must have analytical skills
Must have stamina

7. Table 1-1: The 10 Largest Retailers in the United States (2011)
Rank
Company
Main Emphasis 1
Wal-Mart
Full-line discount stores, supercenters, membership clubs 2
Kroger
Supermarkets, convenience stores, jewelry stores 3
Target
Full-line discount stores, supercenters 4
Walgreens
Drugstores 5
Home Depot
Home centers 6
Costco
Membership warehouse clubs 7
CVS Caremark
Pharmacies 8
Lowe’s 9
Best Buy
Electronics, major appliances 10
Sears Holdings
Department store, discount (Kmart)

8. Figure 1-4: A Typical Channel of Distribution
Retailer
Manufacturer
Wholesaler
Final
Consumer

9. Figure 1-5: The Retailer’s Role in the Sorting Process

10. Multi-Channel Retailing
A retailer sells to consumers through multiple retail formats:
Web sites
Physical stores

11. Multi-Channel Retailing
Cross selling across channels (in-store product availability info on Web site)
Consistent pricing in all channels (credibility)
Can buy, and return product regardless on channel
Role of each channel
Store– try on, ease of return, fast availability (immediacy), compare offerings
Web– 24/7, product information, product reviews by customers, personalization (tailored assortment based on past purchases), most current pricing, closeout sales
Catalog-permanency, true color

12. Distribution Types
Exclusive: suppliers make agreements with one or few retailers, designating such retailers as the only ones to carry certain brands or products within a specified geographic area
Intensive: suppliers sell through as many retailers as possible
Selective: suppliers sell through a moderate number of retailers

13. Exclusive vs Intensive Distribution
Exclusive Distribution– Fate of retailer is tied to manufacturer success, retailer has no “free-rider” concerns, retailer has less price competition, manufacturer is better assured of high levels of customer support
Intensive Distribution- Manufacturer is better assured of maximizing sales (especially for convenience goods), retailers face strong competition for price and service, intratype competition
Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall

14. Figure 1-8: Special Characteristics Affecting Retailers
Impulse
Purchase
Small
Average
Sale
Retailer’s
Strategy
Popularity of
Stores

15. Retail Strategy An overall plan for guiding a retail firm
Influences the firm’s business activities
Influences firm’s response to market forces

16. Six Steps in Strategic Planning
1. Define the type of business (corporate mission) 2. Set long-run and short-run objectives 3. Determine the customer market 4. Devise an overall, long-run plan 5. Implement an integrated strategy 6. Evaluate and correct (fine-tune)

17. Figure 1-10: Applying the Retailing Concept
Customer Orientation
Retailing
Concept
Coordinated Effort
Retail
Strategy
Value-driven
Goal Orientation

18. Customer Service
Activities undertaken by a retailer in conjunction with the basic goods and services it sells. This includes:
Store hours
Parking
Shopper-friendliness
Credit acceptance
Salespeople

19. Relationship Retailing
Retailers seek to establish and maintain long-term bonds with customers, rather than act as if each sales transaction is a completely new encounter
Concentrate on the total retail experience
Monitor satisfaction
Stay in touch with customers

20. Effective Relationship Retailing
Use a “win-win” approach
It is easier to keep existing customers happy than to gain new ones (present value of current customers income stream– cost of keeping existing customers content versus cost of replacing them with new customer
Develop a customer database (loyalty programs)
Ongoing customer contact is improved with information on people’s attributes and shopping behaviors

21. Types of Loyalty Programs
Additional discounts at register
Not a real loyalty program
1 free with every “n” items purchased
Easily copied, no customer database
Rebates based on cumulative purchases
Customer maintains records
Can develop “heavy half” programs like Hilton
Targeted offerings and mailing based on purchase history
Tesco example “Market research staff know more about my customers than board chairperson”