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The retail sector

The retail sector



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    Retail Retail Presentation Transcript

    • Retail
    • Objectives
      Types of retailing establishments
      Retail location theories
      Assessing performance
    • 3
      Major Retailer Types
      Specialty store
      Department store
      Convenience store
      Discount store
      Off-price retailer
    • Non-store retail
      Direct selling
    • Merchandising
      Merchandising is the planning and control of the buying and selling of gods and services to help the retailer realize its objectives.
    • Merchandising decisions
      • What will be the anticipated sales for the department, division, or store?
      • How much stock on hand will be needed to achieve this sales plan, given the level of inventory turnover expected?
      • What reductions, if any, from the original retail price must be made in order to dispose of all the merchandise brought into the store?
      • What additional purchases must be made during the season?
      • What gross margin ( the difference between sales and cost of goods sold) should the department, division, or store contribute to the overall profitability of the company?
    • 7
      Retail Location Theories
      • Reilly’s Law of Retail Gravitation based on Newtonian gravitational principles, explains how large urbanized areas attract customers from smaller rural communities.
      1 +
      where Dab is the breaking point from city A, measured in miles along the road to city B;
      d is the distance between city A and city B along the major highway;
      Pa is the population of city A; and
      Pb is the population of city B.
    • 8
      Retail Location Theories
      • Index of Retail Saturation (IRS) is the ratio of demand for a product (households in the geographic area multiplied by annual retail expenditures for a particular line of trade per household) divided by available supply (the square footage of retail facilities of a particular line of trade in a geographic area).
      IRS = (H X RE)/RF
      Where IRS is the index of retail saturation for and area;
      H is the number of households in the area;
      RE is the annual retail expenditures for a particular line of trade per household in the area;
      RF is the square footage of retail facilities of a particular line of trade in the area (including square footage of the proposed store).
    • 9
      Retail Location Theories
      • Buying Power Index (BPI) is an indicator of a market’s overall retail potential and is composed of the weighted measures of effective buying income (personal income, including all nontax payments such as social security, minus all taxes), retail sales, and population size.
      BPI = 0.5(the area’s percentage of GDP)
      + 0.3(the area’s percentage of national retail sales)
      + 0.2(the area’s percentage of national population)
    • Performance
      Net Profits & Profit Margin
      Turnover / Asset Turnover
      Return on Assets
      Return on Net Worth
      Space productivity
      Labour productivity
      Merchandise productivity
    • Zara
      Probably the most international of all clothing retailers
      Centralized design and production
      Design to product cycle is 2 weeks – Industry average is 6 months
      10,000 new designs every year – no customization for local tastes
      Pricing is different to reflect costs of transport and management
    • Zara
      Primarily company owned operations
      Franchises & JVs in low volume locations
      Stores in high profile locations
      Advertising costs are 0.2% as opposed to industry average of 2%
      Industry ave markdowns are 30% for 30% of stock. Zara is 10% for 10%.
    • Wegmans
      $5 billion in revenue
      28th largest supermarket chain in US
      37000 employees
      Regularly voted as the best place to work for
      Never had a layoff
      Great ambiance
      Wide selection
      High quality private labels drive profits
      Model is copied by Nugget Market