Chapter 1

Perspectives on Retailing

Retailing, 6th Edition. Copyright 2008 by South-Western, a division of Thomson Learning. All rights reserved.

Learning Objectives
1. Explain what retailing is. 2. Explain why retailing is undergoing so much change today. 3. Describe the five methods used to categorize retailers. 4. Understand what is involved in a retail career and be able to list the prerequisites necessary for success in retailing. 5. Be able to explain the different methods for the study and practice of retailing.

What is Retailing?
Retailing: Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer.

LO 1

Wal-Marts Retail Focus

Work with manufacturers to help produce goods at the lowest possible cost. Manage the supply chain bringing goods from manufacturers to stores at lowest possible cost. Use cutting edge technology to manage inventory.

LO 1

The Nature of Change in Retailing

E-Tailing Price Competition Demographic Shifts Store Size

LO 2

E-tailing
Unknown for retail mangers is what the ultimate roll of the Internet will be. Observers recognize the value of online shopping for travel, clothing, cosmetics, and music. It is unclear if online shopping will reach its projections for everyday needs.
LO 2

E-tailing
E-tailing now accounts for about three percent of total retail sales.

E-tailing has caused a shift in power between retailers and consumers.

LO 2

E-tailing
E-tailers provide the consumer with detailed pricing and product information, making better informed consumers which increases the consumers transaction power and negotiations with retailers.

LO 2

Price Competition
Sam Walton forever changed the retail environment by computerizing his operations resulting in lower costs allowing him to lower prices.

LO 2

Price Competition

Costco seeks to boost store traffic by getting

shoppers to come in for a super, low price on key products.

LO 2

Demographic Shifts
Fluctuating birth rate, the increasing number of immigrants, the growing importance of Generation Y consumers, Generation X starting to reach middle age, and baby boomers retiring are all demographic shifts in the United States that shape the retailing environment.

LO 2

Demographic Shifts
Same-Store Sales: Compares an individual stores sales to its sales for the same month in the previous year.

LO 2

Demographic Shifts
Market Share: Is the retailers total sales divided by total market sales.

LO 2

Store Size
As stores increase in size they often employ a scrambled merchandising strategy.

LO 2

Store Size
Scrambled Merchandising: Exists when a retailer handles many different and unrelated items.

LO 2

Store Size
Convenience stores use a scrambled merchandising approach.

LO 2

Store Size
Category Killer: Is a retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition.

LO 2

Categorizing Retailers
Census Bureau Number of Outlets Margin Versus Turnover Location Size

LO 3

External Environmental Forces Confronting Retail Firms

Exhibit 1.1

LO 3

Categorizing Retailers

Exhibit 1.2

LO 3

Using NAICS Codes

Exhibit 1.3

LO 3

Number of Outlets
Chain Stores: Normally refers to operations having 11 or more units.

LO 3

Number of Outlets
Standard Stock List: Is a merchandising method in which all stores in a retail chain stock the same merchandise.

LO 3

Number of Outlets
Optimal Stock List: Is a merchandising method in which each store in a retail chain is given flexibility to adjust its merchandise mix to local tastes and demands.

LO 3

Number of Outlets
Channel Advisor or Channel Captain: Is the institution (manufacturer, wholesaler, broker, or retailer) in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in. Large store retailers are often able to perform the role of channel captain.

LO 3

Number of Outlets
Private Label Branding (Store Branding): Also called store branding, occurs when a retailer develops its own brand name and contracts with a manufacturer to produce the merchandise with the retailers brand on it instead of the manufacturers name.

LO 3

Private Labels by Country

LO 3

Number of Outlets
Bricks & Mortar Retailers: Retailers that operate out of a physical building.

LO 3

Margins Versus Turnover

Gross Margin Percentage: Is the gross margin divided by net sales or what percent of each sales dollar is gross margin.

LO 3

Margins Versus Turnover

Gross Margin: Is net sales minus the cost of goods sold.

LO 3

Margins Versus Turnover

Operating Expenses: Are the expenses the retailer incurs in running the business other than the cost of the merchandise.

LO 3

Margins Versus Turnover

Inventory Turnover: Refers to the number of times per year, on average, that a retailer sells its inventory.

LO 3

Margins Versus Turnover

High-Performance Retailers: Are those retailers that produce financial results substantially superior to the industry average.

LO 3

Margins Versus Turnover

Low Margin/Low Turnover: Is one that operates on a low gross margin percentage and a low rate on inventory turnover.

LO 3

Margins Versus Turnover

Low Margin/High Turnover: Is one that operates on a low gross margin percentage and a high rate of inventory turnover.

LO 3

Margins Versus Turnover

High Margin/Low Turnover: Is one that operates on a high gross margin percentage and a low rate on inventory turnover.

LO 3

Margin Versus Turnover

Clicks & Mortar Retailers: Retailers that sell both online and via physical stores.

LO 3

Margins Versus Turnover

High Margin/High Turnover: Is one that operates on a high gross margin percentage and high rate of inventory turnover.

LO 3

Retailers Classified by Margin & Turnover

High Margin

Low Turnover

High-Margin/ Low-Turnover Retailers Low-Margin/ Low-Turnover Retailers

High-Margin/ High-Turnover Retailers Low-Margin/ High-Turnover Retailers

High Turnover

Low Margin

LO 3

Competitiveness: Retailers Classified

Margin & Turnover
High Margin

Low Turnover

Excellent position to withstand a competitive attack Least able to withstand a competitive attack
Low Margin

High Turnover

LO 3

Location
Retailers have long been classified according to their location within a metropolitan area, be it the central business district, a regional shopping center or neighborhood shopping center, or as a freestanding unit. Location is an area that retailing may undergo significant changes in the decade to come.

LO 3

Size
The reason for classifying by size is that the operating performance of retailers tends to vary according to size. Larger firms generally have lower operating costs per sales dollar than smaller firms do. With advances in technology using classification of size is unclear.

LO 3

A Retailing Career
Career Path Common Questions About a Retailing Career Prerequisites for Success

LO 4

Career Path
Store Management: The retailing career path that involves responsibility for selecting, training, and evaluating personnel, as well as in-store promotions, displays, customer service, building maintenance, and security.

LO 4

Career Path
Buying: The retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the stores merchandise lines.

LO 4

Retailing-Two Career Paths

Exhibit 1.4

LO 4

Common Questions About A Retailing Career

Salary Career Progression Geographic Mobility Women in Retailing Societal Perspective

LO 4

Prerequisites for Success

Hard Work Analytical Skills Creativity Decisiveness Flexibility Initiative Leadership Organization Risk Taking Stress Tolerance Perseverance Enthusiasm

LO 4

Prerequisites for Success

Hard Work: A willingness to work extra hours, evenings and weekends often pays off through career advancement.

LO 4

Prerequisites for Success

Analytical Skills: An ability to interpret the facts and data that are related to the past and present performance of a store, merchandise lines, and departments.

LO 4

Prerequisites for Success

Creativity: An ability to develop and capitalize on unique ideas and opportunities.

LO 4

Prerequisites for Success

Decisiveness: The ability to make rapid decisions, render judgments, take action and Prerequisites for Success commit oneself to a course of action until completion.

LO 4

Prerequisites for Success

Flexibility: A willingness and enthusiasm to do whatever is necessary (although not planned) to complete the job.

LO 4

Prerequisites for Success

Initiative: The ability to originate action.

LO 4

Prerequisites for Success

Leadership: The ability to inspire others to trust and respect your judgment and an aptitude for delegating, guiding and persuading others.

LO 4

Prerequisites for Success

Organization: The ability to establish priorities and courses of action and to plan and follow up to achieve results.

LO 4

Prerequisites for Success

Risk Taking: The willingness to take calculated risks and to accept responsibility for the results.

LO 4

Prerequisites for Success

Stress Tolerance: The retailing leaders of the 21st Century must be able to perform consistently under pressure and to thrive on constant change and challenge.

LO 4

Prerequisites for Success

Perseverance: Individuals that have the ability to persevere and take marketplace changes in stride will find an increasing number of career advancement opportunities.

LO 4

Prerequisites for Success

Enthusiasm: Successful retailers must have a strong warmth of feeling for their job, otherwise they will convey the wrong image to their customers and associates in their department.

LO 4

The Study and Practice of Retailing

Analytical Method Creative Method A Two-Pronged Approach A Proposed Orientation

LO 5

The Study and Practice of Retailing

Analytical Method Creative Method

Manager is finder and investigator of facts.

Manager is conceptual and very imaginative.

Two-Pronged Method Manager who employs both approaches.

LO 5

A Proposed Orientation
Environmental Management Planning Profit Decision Making

LO 5

The Importance of Proactive Planning

Exhibit 1.5

LO 5

Additional Slides

A Retailing Career
Salary
Societal Perspective Retail Career Geographic Mobility

Women in Retailing

Career Progression
LO 4

Prerequisites for Success

Analytical Skills Leadership

Hard Work
Flexibility

Decisiveness
Organization Success

Perseverance
Enthusiasm

Creativity
Risk Taking

Initiative
Stress Tolerance
LO 4