World of Retailing

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Introduction to Retailing Types of Retailers Multi-Channel Retailing Customer Buying Behavior

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What is retailing? What do retailers do? Why is retailing important in our society? What career and entrepreneurial opportunities does retailing offer? What types of decisions do retail managers make?

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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.

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Retailers:
Kohls, Macys, Wendys, Amazon.com, Jiffy Lube, AMC Theaters, American Eagle Outfitter, Avon, J.Crew

 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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The Four Ps of Marketing

Retailers are part of the Retailers are part of the distributionchannel distribution channel Product

Distribution

Price

Promotion

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Typical Supply Chain Network

Customers

Suppliers

Plants Distribution Centers retailers

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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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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) Forward Integration manufacturers undertake retailing activities Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates its own stores Large retailers engage in both wholesaling and retailing Ex: Wal-Mart, Lowes, Safeway, Brown Shoe Company
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Example

a box of crackers at a grocery store costs $1 to manufacturer sells at a price of $2

Retailers add significantly to the prices consumers face Why not buy directly from the manufacturer? Does that mean that grocery stores are very profitable?

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Price to Distributor $1.00

Price to Retailer $1.20

Price to Consumer $2.00

$.85

$.15

$.70

Manufacturer Vendor

Distributor Wholesaler

Retailer

Consumer
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Why Not Get Rid of the Middlemen?

Better services to customers More efficient

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Composer Lyricist

Publisher

Record Company

Music Retailer

Artist

Distributor

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Retailer $5.00 Record Company Manufacturing .75 Distribution 1.50 Marketing 2.00 Coop advertising 1.00 Artist/Repertoire 1.00 Artist royalty 1.25 Lyricist .75 Overhead/Profit 2.00 Total 15.25

4 out of 5 CDs fail to make a profit $300,000 cost to prepare a CD for release 30,000 recording artists

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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; layaway

Ryan McVay/Getty Images

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The value of the product and service increases as the retailer performs functions.

Bicycle can be bought on credit or put on layaway

Bicycle is featured on floor display Bicycle is offered in convenient locations in quantities of one Bicycle is developed in several styles Bicycle is developed at manufacturer
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BagBorrowerSteal.com jewelry and bag rental; Get (not buy, but borrow) exactly what you want Home Depot DIYer (Do-it-yourselfer); Learn how to do it yourself with in-store clinics and online workshops

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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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Corporate social responsibility The voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations, in addition to the concerns of its stakeholders Examples: Edun - a fair-trade fashion brand by the U2 lead singer Bono Starbucks: pays its farmers 42% more than the commodity price of Arabica coffee beans Target: community giving programs (5% of income, $3 million a week) Retail companies give away 1.7% of their profits, compared with about 0.9% for companies in other industries
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The United States

CHINA

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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Social & Political Objectives Geography

 China, India: To reduce unemployment by protecting small businesses  EU: To protect small retailers To preserve green spaces/town centers Much lower population density in the US than in India, China, and EU (where less low-cost real estate are available for building large stores)  Large retail mar ets in US, India, China  Countries in EU distribution channels and retail chains operate in a single country (no economy of scales to be achieved; trade barriers still exist)

Mar et size

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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 Financially rewarding 5-year salary of buyers: $50,000 - $60,000 5-year salary of store managers: $120,000 - $160,000

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To Todays Retailer

Mom and Pop Store

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Real Estate

Finance

Store Design Promotion/Advertising MIS Loss Prevention Operations

Human Resources

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Selling Merchandise through the Internet Using Internet to manage supply chains Analyze POS data to tailor assortments to stores Computer systems for merchandise planning and tracking
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Wal-Mart: Sam Walton

Retailing provides opportunities for people who want to start their own business Some of the worlds richest people are retailing entrepreneurs Examples of retailing entrepreneurs Sam Walton (Wal-Mart) Jeff Bezos (Amazon.com) Ingvar Kamprad (IKEA) Anita Roddick (the Body Shop)
IKEA: Ingvar Kamprad

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ist of Retail Entrepreneurs on Forbes 400 Richest Americans

Walton Family (Wal-Mart) Fisher (The Gap) Wexner (The Limited) Menard (Menards) Marcus (The Home Depot) Kellogg (Kohls) Schulze (Best Buy) Levine (Family Dollar) Gold (99Cent Only)

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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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Need to identify the competition  intratype competition (e.g., Dillards vs. JCPenney)  intertype competition (e.g., Dillards vs. Wal-Mart) Identifying customers  What are the significant demographic and life-style trends  Who are your target customers

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A retail strategy should identify

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

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Main Street (small town) private label, soft goods (apparel, home furnishings), decentralized retailer Changes in environment -increased disposable income, growth of suburbs, interstate highway program Emulate Sears in moving to enclosed suburban malls Add hard goods (appliances, automotive) Diversify drug stores, insurance, specialty stores Develop catalog channel
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Focus on department store format and soft goods develop electronic retail channel Mid-market, mall based department store, between WalMart/Target and Macys/Dillards Competition from Target, Kohls Centralization to reduce cost, increase responsiveness centralized buying, warehouse delivery Off the mall stores to increase customer convenience Improving store atmospherics Upgrading merchandise offering (e.g., Sephora, American Living by Polo Ralph Lauren)
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Small Town - Discount Store selling hard goods and soft goods

limited service, efficient distribution

Enter suburban markets Warehouse Clubs (Sams) Supercenters International Expansion Supermarkets, neighborhood markets

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 arge number of merchandise categories -appliances, hardware, apparel  Malls evolved into places for buying soft goods, hard goods sold at category killers  The Softer Side of Sears  Refocused on value -- Testing carts in stores  Acquired ands End  Acquired by Kmart

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Strategy - organic and natural foods supermarket chain Assortment beyond organic/natural foods Private labels - Whole Food, 360 Day Value ove, trust, and employee empowerment Equality in compensation

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Customer Service Store Design and Display Merchandise Assortment

Retail Strategy

Pricing

Location

Communication Mix
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Customer Service

Location

Store Design And Display

Retail Strategy

Merchandise Assortment

Communication Mix

Pricing

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ocation Strateg

Fr

- t

St r

Customer Service Store is la And esign

Merchandise Assortment

Communication Mi

Pricing
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Assortment Strategy

Customer Service

ocation

Store Design and Display

Large Number of Categories Few Items in Each Category

Communication Mi

Pricing

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ocation sto er Ser ice erchandise Assort ent

Pricing Strategy

Store Design and Display

nication ix

Low, EDLP

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Customer Service

ocation

Communication Mi
Store Design and Display Merchandise Assortment

Pricing

TV and Newspaper Insert Ads

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Store Design and Display

Customer Service

ocation

Basic, Special Displays for Products

Communication Mi

Merchandise Assortments

Pricing

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Customer Service
Limited
ocation Merchandise Assortment Store Design and Display Communication Mi
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Pricing

Customer Service

Location

Store Design and Display Retail Strategy

Merchandise Assortment

Communication Mix

Pricing

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Location Strategy

Enclosed malls

Customer Service

Store And

Communication Mi

is la esign Merchandise Assortment Pricing

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Assortment Strategy

Customer Service Store Design and Display Communication Mi ocation

Jewelry, accessories and cosmetics for tweens and teens

Pricing

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Customer Service Merchandise Assortment

Store Design and Display

Communication Mi

ocation

Pricing Strategy

Modest with Sales

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Communication Mix

Store Design And Display Merchandise Assortment

Pricing

TV and Magazine Ads

Customer Service

ocation

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Store Design and Display

Customer Service

Bright, fashionable and fun boutique layout

Communication Mi 

Merchandise Assortments

Pricing

ocation

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Customer Service
Modest
 Store Design and Display Pricing ocation

Merchandise Assortment

Communication Mi

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Customer Service

Location

Store Design and Display Retail Strategy

Merchandise Assortment

Communication Mix

Pricing

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Location Strategy

Enclosed Malls

Customer Service

Store And

Communication Mi

   is la esign Merchandise Assortment Pricing

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Assortment Strategy

Customer Service  Store Design and Display Communication Mi  ocation

Many Items in Apparel and Soft Home

Pricing

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Customer Service Merchandise Assortment

Store Design and Display

Communication Mi

ocation

Pricing Strategy

Moderate with Frequent Sales

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Communication Mix

Store Design And Display Merchandise Assortment

Pricing

TV, Newspaper Ads and Special Events

Customer Service

ocation

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Store Design and Display

Customer Service

Racetrack with Displays

Merchandise Assortments

Communication Mi

Pricing

"

ocation

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Customer Service

Modest
$ Store Design and Display Pricing ocation

Merchandise Assortment

Communication Mi

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Customer Service

Location

Store Design and Display Retail Strategy

Merchandise Assortment

Communication Mix

Pricing

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Location Strategy
Free-standing Stores

Customer Service

Store Display And Design Merchandise Assortment

Communication Mi

&

Pricing

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Assortment Strategy

Customer Service ' Store Design and Display Communication Mi ( ocation

Large Number of Categories Private Labels Few Items in Each Category

Pricing

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Customer Service Merchandise Assortment

Store Design and Display

Communication Mi

ocation

Pricing Strategy

Low to Modest

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Communication Mix

TV and Newspaper Insert Ads

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Store Design and Display

Customer Service

Colorful, wide aisles displays for products with a grid layout

Merchandise Assortments

Communication Mi

Pricing

ocation

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Customer Service

Limited
3 Store Design and Display Pricing ocation

Merchandise Assortment

Communication Mi

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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? Should salespeople use high-pressure sales when they know the product is not the best for the customers 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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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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Career Opportunities

Store Management Merchandise Management Corporate Staff

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College not needed Low pay Long hours Boring Dead-end job No benefits Everyone is part-time Unstable environment No opportunity for women and minorities

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

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Entry level management positions: Department manager or assistant buyer/planner Manage and have P& responsibility on your first job Starting pay average with great benefits Some retailers pay graduate school No two days are alike Buying and planning for financially analytically oriented Management for people-people
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Most entry level jobs are in store management or buying, but theres -accounting and finance
-real estate -human resource management -supply chain management -advertising -public affairs -information systems -loss prevention -visual merchandising
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