1. INTRODUCTION TO RETAILING
Nature of Retailing

2. By the end, we should be able to:1
Course Objectives
By the end, we should be able to:
Define Retailing and its various forms.
Describe the functions of each of the factors in a retailing mix strategy
Outline the characteristics of Service Retailers.
Differentiate between store based retailers and Non store retailers.
Apply knowledge of Retail Trading Area (RTA) to design and justify a business plan.
Apply skills for Visual Merchandising and for effective selling

3. THE NATURE OF RETAILING

4. RETAILING: - What comes to mind 1st??
CBZ Bank Ltd.

5. DEFINITIONS RETAILING RETAILER
is the business activity of selling goods and services to the final consumer
all the activities involved in the sale of products to final consumer.
RETAILER
is a business which sells goods and services to consumers for their personal or family use.
is the final business in a Distribution Channel that links manufacturers to consumers.

6. According to Kotler (1996) “ Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non – business use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing”.
retailing is derived from retaillier (a french word), which means to cut off a piece or to break bulk.

7. Manufacturers make products and sell them to retailers or Wholesalers.
Wholesalers buy products from manufacturers & resell these products to retailers while retailers resell them to consumers.
Traditionally:
Manufacturer Wholesaler Retailer Final Consumer

8. RETAIL vs. WHOLESALE OPERATIONs
RETAILERS:
Sell smaller product quantities on a more frequent basis
Store facilities open to the general public
Higher per unit price due to individual unit sale
Ultimate consumers makes initial sales contact
Considerable emphasis placed on store atmosphere

9. While WHOLESALERS…
sell larger product quantities on a less frequent basis
over-the-counter sales seldom made to general public
lower per unit price due to bulk package sale
sales representatives make initial sales contact
little or no emphasis on facility atmospherics

10. RETAILING IS:
educational, exciting
dynamic, demanding
small town, big city
local, regional, national, international
the management of change
the most imp link in the distribution channel
a major economic force
a significant area for career opportunities
Is not limited to supermarkets, chain stores etc but sails thru across most sectors including banking, transport, insurance, telecomms etc.

11. Characteristics of retailing
It offers direct interaction
Sales volume is comparatively large in quantities
Customer service
Has different forms
Location and layout are critical factors
More employment opportunities

12. Economic significance of retailers
Retailing’s economic value is represented by:
1. Employment creation:
Some figures in the U.S:
3.1 million retail establishments
Retail sector accounts for 1 out every 5 jobs
2. The total amount of money exchanged in
retail sales.
Total annual sales:US$3.3 trillion
Nearly US$11,000 per capita

13. Utilities provided by retailers create value for customers.
Retailers attempt to satisfy consumer needs by having the right merchandise, at the right price, at the right place, when the consumer wants it i.e. Offers Time, place, possession, and form utilities

14. Retailing raises the standards of living of people through the sorting process. The sorting process increases variety so that consumers can enjoy from a wider choice of products.
Moreover the products are brought closer to the consumers & one stop shopping is enhanced. All leisure activities are provided by retailers.

15. Retail activities contributes to Gross Domestic Product
Retail activities contributes to Gross Domestic Product. Gross domestic product is the total market value of all goods and services produced in a country in a given year.

16. Retailers help in the regeneration of towns , districts & regions.
They contribute to Government revenue by paying taxes. Such taxes include Value Added Taxes (VAT), Pay As You Earn (PAYE),duty & Corporate tax. Government Revenue is important for Economic Development.
Retailers help in the regeneration of towns , districts & regions.
Growth point - town – city

17. Global Economic Impact of Retailing
Four of the 30 largest businesses in the U.S. are retailers.
In 1997, Wal-Mart’s $119 billion in sales surpassed the gross domestic product of Finland for the same year.
Sears, Wal-Mart, Kmart, and JC Penny together employ more than 1.6 million people.
Wal-Mart has 603 stores outside the U.S., including joint ventures in China and Korea.
** Research FURTHER on the economic significance of RT in Zimbabwe

18. Functions performed by Retailers in the distribution channel
1.PROVIDING AN ASSORTMENT OF GOODS AND SERVICES
-To maximise efficiency , many manufacturers would like make one basic type of item & sell the entire type of item & sell the entire of inventory to as few buyers as possible, yet many final consumers want to choose from a variety of goods & services & purchase a limited quantity.Retailers collect an assortment of goods & services from various sources , buy them in large quantities & offer to sell them in small quantities to consumers. This is the sorting process’

19. -As a result , each manufacturer or wholesaler become more efficient , and final consumers are pleased with the selection available to them.
-This enables buyers to do one stop shopping & also exercise choice from a variety of goods available.

20. 2.Bulk Breaking
-To reduce transportation costs, manufacturers & wholesalers typically ship cases of frozen dinners or cartons of blouses to retailers. -retailers then offer the products in small quantities tailored to individual consumers’ & household consumption patterns. This is called breaking bulk.

21. 3.Inventory Holding
-Retailers keep inventory so that products will be available when consumers want them, & thus consumers can keep as much smaller inventory of products at home because they know the retailers will have the products available when they need more.
-By maintaining an inventory , retailers provide a benefit to consumers by reducing the cost of storing products.
-Consumers can thus use their monies for Investment purposes instead of holding inventory.

22. 4. Providing Services
-Retailers provide services that make it easier for customers to buy and use products. -They offer credit to consumers. -Also, they provide additional information about products to consumers. -Retailers provide customer services such as gift wrapping, delivery, & installation.

23. 6. Communication
-Retailers also have a function of communication both with their manufactures & wholesalers .
-Communication with customers is enhanced via advertisements , salespeople & store displays, where consumers are informed about the availability and characteristics of goods & services , store hours , sales & so on.
-Manufacturers , Wholesalers & others are informed about:
a) sales forecasts
b) delivery delays to retailers
c) Customer complaints
d) Defective items
e) Inventory turnover ( By style, colour , size)

24. 5.Completion of Transaction
Retailers strive to fill orders promptly & accurately
The final link to the consumer / enduser -

25. 7.RT also assist small wholesalers & manufacturers by:
- transportation
-storage facilities
- Branding & brand management
-promotions e.g. through advertising
-Pre-paying for merchandise

26. JOB SKILLS NEEDED IN RETAILING
2. Operations
warehousing
receiving
delivery
security
customer service
store management
1. Merchandising
buying
supplier management
selling
relationship building
advertising & promotion
display building

27. JOB SKILLS NEEDED IN RETAIL
3.Sales Promotion
advertising
display
publicity
sales promotion activities
4.Control
asset management
Credit
auditing
data processing
5.Personnel
recruiting
selecting
training
compensation
union issues

28. RETAIL CHALLENGE: QUIZZ!
You are given the job to head a committee to select a new president (CEO) for a retail chain. Rank the following criteria on a scale of 1- 10(where 10 is high) on the importance of each criteria in evaluating candidates. 1. hard work 6. initiative 2. analytical skills 7. leadership 3. creativity 8. organization 4. decisiveness 9. risk taking 5. flexibility 10. stress tolerance

29. THE RETAILER AS AN IMAGE CREATOR
Retailing is an image creating activity!!
Image is a mental picture that forms in the human mind as a result of many different stimuli
Retail image is the impression, personality, or mental picture that is called to mind when a consumer is asked to describe a particular retail organization
Retail image is created by many components!!

30. THE COMPONENTS OF A RETAIL IMAGE
product factors
service factors
price factors
location factors
atmosphere factors
layout and display factors
communication factors

31. RETAIL IMAGES ARE IMPORTANT BECAUSE
1. Simplify the consumer’s decision making and shopping process. 2. Attract shoppers who have a self image close to the retailer’s image. 3. Help segment consumer markets and improve targeting. 4. Differentiate the retailer from competing retailers and other businesses.

32. THE RETAIL CHALLENGE IS TO OFFER THE RIGHT MERCHANDISING BLEND
the right product
in the right quantities
in the right place
at the right time
at the right price
by the right appeal
with the right service

33. RETAILERS VS. THE MARKETING CONCEPT
Retailers strive to sell customers what they want rather than what the retailer has bought
Retailers who adopt the marketing concept are neither exclusively customer driven or profit driven, they seek a workable balance between these two goals.
Relationship marketing and retention retailing are also important concepts in retailing

34. RETENTION RETAILING IS IMPORTANT
Research shows that:
1. Most customers do not complain
60 – 90% switch stores/brands
2. Cost 5 times more to attract a new customer than it does to retain an existing one
3. Customers become more valuable over time due to:
less wasted retail effort as retailer knows the customer and what s/he wants
greater price advantage as customer is less price sensitive
lower transactional cost
lower communication costs

35. QUOTE FROM SAM WALTON FOUNDER OF WALMART
“For my whole retail career, I have stuck to one guiding principle…give your customers what they want, and customers want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience. You love it when you visit a store that somehow exceeds your expectations, and you hate it when a store inconveniences you, or gives you a hard time, or just pretends you’re invisible.”

36. The Wheel of Retailing
McNair (1958) proposed the Wheel of Retailing theory to explain a retail evolution pattern, which he had observed in European and U.S. retail operations.
Hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current retailers, while maintaining profits through reduction of services
Once established, more services are introduced and prices rise.It then becomes vulnerable to new, lower price competitors

37. THE Wheel of Retailing…
Trading-up Phase
-Moderate to high prices
-Elaborate facilities
-Increase in skills
- service-conscious consumers
Entry Phase
-Low prices
-Limited facilities
-Limited service
- Price-sensitive consumers
Vulnerability Phase
-High prices
-Excellent facilities
-Excellent service
-Declining ROI
- Upscale consumers

38. The Retail Accordion
Hollander (1966) proposed the Retail Accordion theory, which explained retail evolution as a cyclical trend in terms of the number of merchandise categories (i.e., product assortment).
In this theory, at the beginning of operation, a retail institution carries a broad assortment of but does not carry a deep assortment (i.e., various styles within one product classification).

39. At this early stage, the retail institution is a general store
At this early stage, the retail institution is a general store. As time passes, the retail institution becomes specialized by carrying a limited line of merchandise with a deep assortment. At this point, the retail institution is a specialty store.
The accordion theory is unclear about the competitive importance of providing wide assortments for various target customer groups.

40. The Retail marketing mix strategy
Retail marketing mix is the term used to describe the various elements and methods required to formulate and execute retail marketing strategy.
Retail managers must determine the optimum mix of retailing activities and co-ordinate the elements of the mix.
The aim of such coordination is for each store to have a distinct retail image in consumers’ mind.
The mix may vary greatly according to the type of market the retailer is in, and the type of product/services.

41. The mix planning
The retail marketing mix is the vehicle through which a retailer’s marketing strategy is implemented and, in planning the mix, retailers should be guided by three basic principles:
The mix must be consistent with the expectation of target customers;
Elements must be consistent with each other to create synergy; and
The mix must be responsive to competitive strategy.

42. The retailing mix summarizes: 1. Goods and services 2
The retailing mix summarizes: 1. Goods and services 2. Physical distribution 3. Communications tactics chosen by a store. 4. Pricing 5. Customer service 6. Store atmospherics

43. A retailer develops a marketing strategy based on the firm’s goals and strategic plans
Two fundamental steps:
Selecting a target market
Developing a retailing mix to satisfy the chosen target market

44. The retail marketing mix

45. Selecting a Target Market
Retailers analyze demographic, geographic, Behavioural and psychographic profiles to segment and select potential markets
Demographic- Dividing the market according to population structural variables such as age, sex, income distribution, education e.t.c
Geographic-Dividing the market based on location. Can be based on climate, regions, communities, densities e.t.c
Psychograhic- based on life styles and personality characteristics.: Social: Culture, subculture, class A, B, C, Pschographic: Personality, buying patterns, motivation, attitudes and opinions.

46. Behavioural- The key behavioural bases for segmenting consumer markets are benefits sought, purchase behaviour, usage and perception and beliefs.

47. Merchandising Strategy
Planograms: Diagrams of how to exhibit selections of merchandise within a store
Category management: Retailing strategy which views each product category as an individual profit center, and the retailer manages the performance and growth of the entire category

48. When merchandising, products of the same category may be shelved together, closer to each other for easy comparison by customers.

49. The Battle for Shelf Space
results to:
Stock keeping unit (SKU): specific product offering within a product line that is used to identify items within the line
Slotting allowances: fees paid by manufacturers to secure shelf space from retailers for their products

50. Customer Service Strategy
Retailers must decide on the variety of services they make available for shoppers
Examples include gift wrapping, electronic shopping, delivery and installation
Objectives are to enhance shopper comfort and attract and retain customers

51. Pricing Strategy
Markup: The amount a retailer adds to a product’s cost to determine its selling price
Determined by the services the retailer performs and the inventory turnover rate
Markdown: The amount by which a retailer reduces a product’s original selling price.

52. 1. Neighborhood – “strip mall” 2. Community malls 3. Regional Malls
Location/Distribution Strategy
Planned shopping center: A group of retail stores planned, coordinated, and marketed as a single unit
Four types of planned shopping centers:
1. Neighborhood – “strip mall”
2. Community malls
3. Regional Malls
4. Power – stand-alone stores, single trading area
MUCH WILL BE COVERED IN RTA

53. Promotional Strategy
Retailers use a variety of promotional techniques to establish store images and communicate information about their stores
Selling up: retail selling technique in which salespeople try to persuade customers to buy higher-priced items than originally intended.
Suggestive selling: involves salespeople attempting to broaden a customer’s original purchase by adding related items, promotional products, and/or holiday or seasonal merchandise

54. Classifying Retail Outlets

55. Retail outlets can be classified in several ways:
-- Form of ownership. Who owns the
outlet.
-- Level of service. The degree of service
provided to the customer.
-- Merchandise line. How many different
types of products a store carries and in
what assortment.

56. Classifying retail outlets
METHOD OF CLASSIFICATION DESCRIPTION OF RETAIL OUTLET
Form of ownership Independent retailer
Corporate chain
Franchise
Level of service Self-service
Limited service
Full-service
Merchandise line Depth
• Single line
• Limited line
Breadth
• General merchandise
• Scrambled merchandise

57. Forms of retail outlets
Store-based retailers
Non-store based retailers

58. Store-based Retailers operate from a fixed location that requires consumers to travel to the store to view and select merchandise and/or services.
Non-store-based Retailers attempt to reach the consumer at home, work, or any place other than a store where they might be susceptible to purchasing.

59. FORMS Of STORE-BASED Retailers
General Merchandise Retailers
Department Stores
Full-Line Discount Stores
Specialty Stores
Category Specialists
Extreme Value Retailers
Off-Price Retailer
Drugstores
Food Retailers
Supermarkets
Supercenters
Warehouse Clubs
Convenience Stores
Services Retailing
Banks
Insurance firms
Health sector
Warehousing
Transport
Advertising etc

60. ASSIGNMENT….
Research on the various store-based retailers outlined and various others in terms of:
How they operate
Their keys to success
Their Variety, assortment, level of service / customer involvement, location etc
Functions/advantages & disadvantages / costs
Trends / new developments

61. Service Retailing
Firms that primarily sell services rather than merchandise and are a large and growing part of the retail industry.
Examples: banks, hospitals, doctors, legal clinics, entertainment firms, and universities
Service Retailers
All retailers provide goods and services for their customers. However, the emphasis placed on the merchandise versus the services differs across retail formats. Supermarkets and warehouse clubs consist of self-service stores that offer very few services. Optical centers and restaurants lie somewhere in the middle of the merchandise /service continuum. Retailers whose offering is primarily services include airlines and banks.
CBZ Bank Ltd.

62. THE Merchandise/Service Continuum

63. Warehouse club
A warehouse club is a retail store, usually selling a wide variety of merchandise, in which customers are required to buy large, wholesale quantities of the store's products, which makes these clubs attractive to both bargain hunters and small business owners. The clubs are able to keep prices low due to the no-frills( non- essential features are excluded) format of the stores. In addition, customers may be required to pay annual membership fees in order to shop.

64. CHALLENGES IN SERVICES RETAILING…
Major challenge due to characteristics of services:
INTANGIBILITY
INSEPARABILITY
HETEROGINITY
PERISHABILITY

65. Forms of Non-store Retailing
High
Active customer involvement
Direct
selling
Tele-
marketing
On-line
retailing
Television
home
shopping
Direct mail
and
catalogs
Automatic
vending
Low
Low
Active retailer involvement
High

66. Non-store Retailers…

67. Vending Machine Retailing
A merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card.
Sales growth has been declining due to higher prices and healthier eating habits
New technology help sales growth
Trend of placing machines in captive consumer locations
Vending Machine Retailing is a nonstore format in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card. Vending machines are placed at convenient, high-traffic locations such as in the workplace or on university campuses and primarily contain snacks or drinks.
Technological developments in vending machine design may result in long-term sales growth.
Ask students about the types of products they would like to see offered through convenient vending machines. Explore the current limitations (regulatory or technological) due to which such products are not currently offered through vending machines.

68. Automatic Vending … Maintenance and operating costs are high.
Small convenience products are available in vending machines.
Of the 3 million vending machines now in use, 1.8 million are soft drink machines.

69. Direct Mail & Catalogs
Marketing efficiency is improved through segmentation and targeting.
Customer value is enhanced by providing a fast and convenient means of making a purchase.
However, Hard to compete with large well established firms

70. Television Home Shopping
Retail format in which customers watch a TV program demonstrating merchandise and then place orders for the merchandise by telephone.
Consumers watch cable stations, infomercials or direct response ads
Most purchases made by small proportion of viewers
Customers must wait for merchandise to come on
Sells mostly jewelry, apparel, cosmetics, kitchenware, exercise equipment
Television Home Shopping is a retail format in which customers watch a TV program demonstrating merchandise and then place orders for the merchandise by telephone. The three forms of electronic home shopping retailing are: (1) dedicated cable channels, (2) infomercials (TV programs, typically 30 minutes long), and (3) direct-response advertising (advertisements on TV and radio that describe products and provide and opportunity for consumers to order them).
The major advantage of TV home shopping compared to catalog retailing is that consumers can see the merchandise demonstrated on the TV screen.
However, consumers can't examine a particular type of merchandise or a specific item when they want to, as they can with catalogs.
Ask students if they have bought anything in response through cable TV advertisements, infomercials or through direct-response advertisements. What types of merchandise are usually bought through these formats? Why are these formats more appropriate for such merchandise?

71. T.v...
TV home shopping is possible when consumers watch a shopping channel on which products are displayed; orders are placed over the telephone.
RESEARCH SHOWS THAT TV home shopping programs traditionally attract year old females.
Limitations of TV shopping have been the lack of buyer-seller interaction and the inability of consumers to control the items they see.

72. Online Retailing
Online retailing allows consumers to search for, evaluate, and order products through the Internet.
The advantages of online retailing are:
ability to do comparison shopping
privacy
Variety
Convenience
speed

73. Telemarketing
Telemarketing involves using the telephone to interact with and sell directly to consumers.
According to the American Telemarketing Association, telemarketing sales exceed $500 billion.
As the use of telemarketing grows, consumer privacy has become a topic of discussion among consumers, Congresses, Trade Commissions, and businesses.

74. Direct Selling
Direct selling involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office.
Many direct selling retailers are expanding into international markets to offset the decline in domestic sales.

75. Issues in Direct Selling
Providing information and demonstrations is costly
Party plan system
Merchandise is demonstrated in a party atmosphere
Multi-level network
Master distributors sell to distributors who sell merchandise
Pyramid schemes
Firm sells to other distributors and little if any merchandise goes to end users
Direct selling is a highly interactive form of retailing in which considerable information is conveyed to customers through face-to-face discussions with a salesperson. However, providing this high level of information, including extensive demonstration, is costly.
Two types of direct selling are party plan and multilevel selling.
In a party plan system, salespeople encourage customers to act as hosts and invite friends or co-workers to a "party" at which the merchandise is demonstrated in a party-like atmosphere. The host or hostess receives a commission for arranging the meeting.
In a multilevel network, people serve as master distributors, recruiting other people to become distributors in their network. The master distributors either buy merchandise from the firm and resell it to their distributors or receive a commission on all merchandise purchased by the distributors in their network.
Some multilevel direct selling firms are illegal pyramid schemes. A pyramid scheme develops when the firm and its program are designed to sell merchandise and services to other distributors rather than to end users. The founders and initial distributors in pyramid schemes profit from the inventory bought by later participants but little merchandise is sold to consumers who use it.
Ask students if they have experienced direct selling, either the party plan system (e.g., Tupperware) or multilevel selling (e.g., Amway) and have them describe their experiences.

76. Tutorial questions
1. “Retailers are the most important players in the distribution channel.’’ Discuss (20) 2. Research to find out the reasons behind the fast growth of Direct Marketing. (20) 3. Identify and discuss the various forms of non- store retailing. (20) 4.” The characteristics of services make them difficult to market.” Discuss (20) 5.Discuss the relevance of the extended marketing mix in services retailing. (20)`

77. ` b) The wheel of retailing. (10)
6. Critique. a) The Accordion theory (10)
b) The wheel of retailing. (10)