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LOG 561 Retail Management An Introduction to Retailing.

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2 LOG 561 Retail Management An Introduction to Retailing

3 2 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 Retailing – a set of business activities that adds value to the products and services sold to consumers for their personal or family use. A retailer is a business that sells products and/or services to consumers for personal or family use. What is Retailing?

5 Examples of Retailers Retailers: -Holiday Inn, McDonalds, Firms that are retailers and wholesalers that sell to other business as well as consumers: -The Home Depot, United Airlines, Bank of America..

6 How Retailers Add Value Breaking Bulk -Buy it in quantities customers want Holding Inventory -Buy it at a convenient place when you want it Providing Assortment -Buy other products at the same time Offering Services -See it before you buy, get credit, layaway

7 Doll can be bought on credit or put on layaway Doll is featured on floor display Doll is offered in convenient locations in quantities of one Doll is developed in several styles How Retailers Add Value Doll is developed at manufacturer The value of the product and service increases as the retailer performs functions.

8 Manufacturer’s Perspective The Four P’s of Marketing Distribution Retailers are part of the distribution channel Retailers are part of the distribution channel Product Price Promotion

9 Distribution Channel

10 Accounting Finance MIS Operations Marketing Human Resources Retailers are a Business Like Manufacturers

11 Decision Variables for Retailers Customer Service Store Design and Display Merchandise Assortment Communication Mix LocationPricing Retail Strategy

12 Hot Topic’s Retail Mix Retail Strategy Customer ServiceLocation Merchandise Assortment Pricing Communication Mix Store Design And Display

13 STRATEGIC IMPLICATIONS: RETAIL MARKETING STRATEGY A retailer develops a marketing strategy based on the firm’s goals and strategic plans Two fundamental steps: 1.Picking a target market: size and profit potential. POSITION. 2.Developing a retailing mix to satisfy the chosen target market 1.4Ps + Personnel & Presentation used to create a retail image

14 Target Market Product Price Place Promotion Personnel Presentation The Retailing Mix

15 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?

16 15 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.

17 Top 100 Retailers Walmart, Kroger, Costco, Target, The Home Depot, Walgreen, CVS Caremark, Lowe’s,, Safeway...

18 A Typical Channel of Distribution Manufacturer Wholesaler Final Consumer Retailer

19 The Retailer’s Role in the Sorting Process

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

21 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 o Store– try on, ease of return, fast availability (immediacy), compare offerings o Web– 24/7, product information, product reviews by customers, personalization (tailored assortment based on past purchases), most current pricing, closeout sales o Catalog-permanency, true color

22 Non-Store Retailing Vending: hi costs; hi prices (flat sales) Vending is a $40 billion U.S. market Cashless vending=wave of future Direct Marketing (Mail, Catalog, Telemarketing) E-tailing (TV shopping, online) M-commerce: buy from mobile devices (e.g., cell phones)

23 Apple

24 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

25 24 Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 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

26 Comparing Distribution Types

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

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

29 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)

30 Applying the Retailing Concept Customer Orientation Coordinated Effort Value-driven Goal Orientation Retailing Concept Retail Strategy

31 The Build-A-Bear Experience: Never Boring

32 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

33 A Customer Respect Checklist Do we trust our customers? Do we stand behind what we sell? Is keeping commitments to customers important to our company? Do we value customer time? Do we communicate with customers respectfully? Do we treat all customers with respect? Do we thank customers for their business? Do we respect employees?

34 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

35 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

36 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”

37 36 Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall Relationship Management Among Retailers and Suppliers Disagreements may occur in the following areas (channel conflict): control over channel (private label) profit allocation (resale price control) number of competing retailers (exclusive, selective or intensive distribution) product displays promotional support (cooperative advertising funds and restrictions) payment terms (payment on time) operating flexibility gray market sales markdown monies, chargebacks by dominant retailers

38 Approaches to the Study of Retailing Institutional Functional Strategic

39 Parts of Retail Management: A Strategic Approach Building relationships and strategic planning Retailing institutions Consumer behavior and information gathering Elements of retailing strategy Integrating, analyzing, and improving retail strategy

40 Retailing is a set of functions that adds value to products/services that are sold to end users = functional understanding, Retailing is a specific institution within a marketing channel that executes retail functions = institutional understanding

41 End of Week 2, any questions???

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