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What is Retailing?
• Retailing-ss activities that add 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.

• Word is of French Origin

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 Role of Retailing
 Countries that have enjoyed the greatest economic
and social progress have been those with a strong
retail sector
 Over the last decade there have been sweeping
changes in the general retailing business

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 Retail industry and economy
 Retail business is the largest private industry
 Retail is ahead of finance and engineering and
contributes over 8 per cent of GDP in the western
countries
 Over 50 of the Fortune 500 and about 25 of the
Asian Top 200 companies are retailers
 Today, in some developed countries, retail
businesses have shares as large as 40 per cent of
the market
 The significance of the retail business has increased
with the fast growth in the service sector

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 Retail industry in India
Retailing in India is one of the pillars of its economy and
accounts for 14 to 15 percent of its GDP. The Indian retail
market is estimated to be US$ 500 billion and one of the top
five retail markets in the world by economic value.
-
- growth of organized retailing in both food and non-food
segments
- Emergence of organized retailing:
-India to have over 700 shopping malls by 2015
(400 operational malls in 2010)
-Presently organized retail has around 7% of the market
share.
Rest is through kirana stores, provision stores, mom and
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pop stores.
 Examples of Retailers
 Organized Retailers:Reliance and its formats,
Big Bazaar, More, Nilgiris, D Mart

• Firms that are retailers and wholesalers - sell to other

business as well as consumers:
Office Depot, The Home Depot, United Airlines,
Bank of America, Costco

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 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?

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 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.

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 Characteristics of retailing
 Direct end-user interaction
 Sole point in the value chain to provide platform for
promotions
 Sales at the retail level is generally in smaller unit sizes
 Location is a critical factor for retail business
 Retail services are as important as core products
 A larger number of retail units as compared to other
members present in the value chain

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 Functions of retailing

 Sorting
 Breaking bulk
 Holding stock
 Additional services
 Channel of communication
 Transport and advertising functions

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 Distribution Channel

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 Multi-Channel Retailing

A retailer sells to consumers through multiple

retail formats:
 Web sites
 Physical stores

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 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.

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 Relationship Management Among Retailers
and Suppliers
 Disagreements may occur in the following areas:
control over channel
profit allocation
number of competing retailers
product displays
promotional support
payment terms
operating flexibility

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 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)

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

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 Do Retailers Add Value?

Retailers add significantly to the prices consumers face

Why not buy directly from the manufacturer? Why

Not Get Rid of the Middlemen?

17 Does that mean that grocery stores are very profitable?

 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, Transportation,
Advertising
Ryan McVay/Getty Images
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 Social and Economic
Significance of Retailing
 Retail Sales:
 Over $4.1 trillion in annual
U.S. sales in 2005
 Employment:
 Employs over 24 million
people in 2005
 One of the largest sectors for
job growth in US
 Social responsibility
 Global player
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The 10 Largest Retailers in the United
States
Rank Company Main Emphasis
1 Wal-Mart Full-line discount stores, supercenters,
membership clubs
2 Home Depot Home centers, design centers
3 CVS Caremark Drugstores
4 Kroger Supermarkets, convenience stores, jewelry stores
5 Costco Membership clubs
6 Target Full-line discount stores, supercenters
7 Walgreens Drugstores
8 Sears Holdings Department stores, specialty stores
9 Lowe’s Home centers
10 Safeway Supermarkets

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 Structure of Retailing and
Distribution Channels around the
World: The United States

 The nature of retailing and distribution channels in

the U.S. is unique.
 Has the greatest retail density
 Has the greatest concentration of large retail firms
 Large enough to operate their own warehouses,
eliminating the need for wholesaling.
 The combination of large stores and large firms
result in a very efficient distribution system.

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 Comparison of Distribution
Channels around the World

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 Opportunities in Retailing:
Management Opportunities
 People with a wide range of skills and interests needed
because retailers’ functions include
 Finance
 Purchase
 Accounting
 Management information system (MIS)
 Supply management including warehouse and
distribution management
 Design and new product development

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 Opportunities in Retailing:
Entrepreneurial
Opportunities

 Retailing provides
opportunities for people who
want to start their own
business
 Some of the world’s richest
people are retailing
entrepreneurs
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 Opportunities in Retailing:
Entrepreneurial Opportunities

 Examples of retailing
entrepreneurs:
 Sam Walton (Wal-Mart)
 Jeff Bezos (www.amazon.com)
 Ingvar Kamprad (IKEA)
 Anita Roddick (the Body Shop)

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 Ikea Founder
 Started by selling matches to neighbours from his bicycle.

 Drove an old Volvo

 Flew economy class

 Encouraged employees to write on both sides of paper

 All this translating into a corporate philosophy of cost cutting to

provide quality furniture with innovative designs at low prices.
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 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
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 Retail Strategy
 Need to identify the competition
 Intratype competition
 (e.g., Reliance Fresh vs More)
 Intertype competition
 (e.g., Big Bazaar vs Reliance Fresh)

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 Retail Strategy

 Identifying customers
 What are the
significant
demographic and life-
style trends
 Who are your target
customers

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 Retail Strategy

 A retail strategy should

identify
 the target market
 the product and service
mix
 a long-term comparative
advantage

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 JC Penney’s Strategic
Evolution
 Main Street (small town) private label,
soft goods (apparel, home furnishings),
decentralized retailer (1902)
 Changes in environment -- increased
disposable income, growth of suburbs,
interstate highway program
 Emulate Sears in moving to enclosed
suburban malls 1960s
 Added hard goods (appliances,
automotive)
 Diversify – drug stores, insurance,
specialty stores
 Develop catalog channel
 Credit Sales
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 JC Penney’s Strategic
Evolution
 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
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 JC Penney’s Strategic
Evolution (1990s)

• Off the mall stores to increase

customer convenience
• Improving store atmospherics
• Upgrading merchandise
offering (e.g., Sephora,
American Living by Polo
Ralph Lauren)
• Centralized buying of
merchandise
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 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

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 Decision Variables for Retailers

Customer
Service

Store
Merchandise
Design and Assortment
Display

Retail
Mix
Pricing Location

Communic
ation Mix

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 Value added 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

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 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?

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 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

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 Effective Relationship Retailing

 Use a “win-win” approach

 It is easier to keep existing customers happy than to gain new ones
 Develop a customer database
 Ongoing customer contact is improved with information on
people’s attributes and shopping behaviors

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 Ethical Situations for a
Retail Manager

 Should a retailer sell merchandise that they suspect

utilized child labor?
 Should it advertise that its prices are the lowest in an
area even though some items are not?
 Should a buyer accept an expensive gift from a vendor?

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 Ethical Situations for a
Retail Manager

 Should salespeople use high-pressure sales when they

know the product is not the best for the customer’s
needs?
 Should a retailer give preference to minorities when
making a promotion decision?
 Should a retailer treat some customers better than
others?

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 You are Faced with an Ethical
Decision: What Can You Do?

 Ignore your personal values and do what your

company asks you to do – you will probably feel
dissatisfied with your job .

 Take a stand and tell your employer what you

think. Work to change the policies.

 Refuse to compromise your principles – you could

lose your job!
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 An Ideal Candidate for a
Retailing Career

Must be a people person

Must be flexible
Should be decisive
Must have analytical skills
Must have stamina

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 THANK YOU

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