for retail management course

1. McGraw-Hill/Irwin
Retailing Management,
Chapter 1
Introduction to the World of Retailing

2. 1-2

3. 1-3
The World of Retailing
Content 4: Customer
Buying Behavior
Content 1: Introduction to Retailing
Content 2: Types of Retailers
Content 3: Multi-Channel Retailing
Content 4: Customer Buying Behavior

4. 1-4
Questions
1. What is retailing?
2. What are the roles of retailers in our society?
3. Do retailers add value?
4. What career and entrepreneurial opportunities
does retailing offer?
5. What types of decisions do retail managers
make?

5. 1-5
1. What is Retailing?
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.

6. 1-6
Examples of Retailers
◼ Retailers:
BigC, thegioididong,
Guardian, Target, Macy’s,
Walmart, Amazon.com,
Avon…
◼ 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

7. 1-7
Manufacturer’s Perspective
The Four P’s of Marketing
Distribution
Retailers are part of the
distribution channel
Retailers are part of the
distribution channel
Product
Price
Promotion

8. 1-8
Distribution Channel

9. Typical Supply Chain Network
Suppliers Plants
Distribution
Centers
Customers
retailers

10. 1-10
2. What are the roles of retailers in our
society?
A 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.

11. 1-11
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)
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, Lowe’s, Safeway, Brown Shoe Company

12. 1-12
3. Do Retailers Add Value?
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?
Example

13. 1-13
Manufacturer
Vendor
Distributor
Wholesaler
Retailer
$11 $14 $19.95
$ 10 $ 13 $ 18
Consumer
Price to
Distributor
Price to
Retailer
Price to
Consumer
Why Not Get Rid of the Middlemen?

14. 1-14
▪Better services to
customers
▪More efficient
Why Not Get Rid of the Middlemen?

15. 1-15
Example: Music Industry Channel
Composer
Lyricist
Publisher
Record
Company
Music Retailer
Artist Distributor

16. 1-16
Cost for CD
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

17. 1-17
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;
layaway
Ryan McVay/Getty Images

18. 1-18
How Retailers Add Value?
The value of the product and service
increases as the retailer performs functions.
Bicycle is developed
at manufacturer
Bicycle is
developed in
several styles
Bicycle is offered in
convenient locations
in quantities of one
Bicycle is featured
on floor display
Bicycle can be
bought on credit or
put on layaway

19. 1-19
Examples: How Retailers Add Values
◼ 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

20. 1-20
World’s 20 Largest Retailers in 2015
Rank Company 2015 Retail Sales (000)
1 Wal-Mart Stores $353,108,000
2 The Kroger Co. $103,878,000
3 Costco $83,545,000
4 The Home Depot $79,297,000
5 Walgreens Boots Alliance * $76,604,000
6 Target $73,226,000
7 CVS Health $72,151,000
8 Amazon.com $61,619,000
9 Albertsons $58,443,000
10 Lowe’s Companies $57,486,000
11 McDonald’s $35,837,000
12 Best Buy $35,148,000
13 Apple Stores / iTunes $34,949,000
14 Publix Super Markets $32,633,000
15 Macy’s $27,002,000
Source:
https://nrf.co
m/resources/
annual-
retailer-
lists/top-100-
retailers/stor
es-top-
retailers-
2016

21. 1-21
Nature of Retail Industry is Changing
Mom and Pop Store
To Today’s Retailer

22. 1-22
Retailing is a High Tech Industry
◼ 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

23. 1-23
Retailers are a Business Like
Manufacturers
The McGraw-Hill Companies,
Inc./Andrew Resek, photographer
MIS
Accounting
Operations
Finance
Marketing
Human Resources

24. 1-24
What career and entrepreneurial
opportunities does retailing offer?
■ 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

25. 1-25
Types of Jobs in Retailing
Most entry level jobs are in
store management or buying, but there’s…
-accounting and finance
-real estate
-human resource management
-supply chain management
-advertising
-public affairs
-information systems
-loss prevention
-visual merchandising

26. 1-26
5. What types of decisions do retail
managers make?
Retail Management
Decision Process

27. 1-27
Retail Strategy
■ Need to identify the competition
▪ intratype competition
(competition between the same
type of retailers)
(e.g., Dillard’s vs. JCPenney)
▪ intertype competition
(competition between the same
type of retailers sale similar
merchandise, use different types
of retail outlet)
(e.g., Dillard’s vs. Wal-Mart)
■ Identifying customers
▪ What are the significant
demographic and life-style
trends
▪ Who are your target customers

28. 1-28
Retail Strategy
■ A retail strategy should identify
◼ the target market
◼ the product and service mix
◼ a long-term comparative advantage

29. 1-29
JC Penney’s Strategic Evolution(1)
◼ 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

30. 1-30
JC Penney’s Strategic Evolution(2)
◼ 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
◼ Off the mall stores to increase
customer convenience
◼ Improving store atmospherics
◼ Upgrading merchandise offering
(e.g., Sephora, American Living by
Polo Ralph Lauren)

31. 1-31
Wal-Mart’s Strategic Evolution
◼ Small Town - Discount Store selling hard goods
and soft goods
◼ limited service, efficient distribution
◼ Enter suburban markets
◼ Warehouse Clubs (Sam’s)
◼ Supercenters
◼ International Expansion
◼ Supermarkets, neighborhood markets

32. 1-32
Sears’ Strategic Evolution
◼ Large 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 Lands’ End
◼ Acquired by Kmart

33. 1-33
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

34. 1-34
Decision Variables for Retailers
Customer Service
Store Design
and Display
Merchandise
Assortment
Communication
Mix
Location
Pricing
Retail
Strategy

35. Examples of Retail Mix
1. Walmart
2. Claire
3. Macy
4. Target
1-35

36. 1) Wal-Mart’s Retail Mix
1-36
Retail Strategy
Customer
Service
Location
Merchandise
Assortment
Pricing
Communication
Mix
Store Design
And Display

37. 1) Wal-Mart’s Retail Mix
1-37
Free-standing Stores
Customer
Service
Merchandise
Assortment
Pricing
Communication
Mix
Store Display
And Design
Location Strategy

38. 1) Wal-Mart’s Retail Mix
1-38
Location
Pricing
Communication
Mix
Store Design
and Display
Customer
Service
Large Number
of Categories
Few Items
in Each Category
Assortment Strategy

39. 1) Wal-Mart’s Retail Mix
1-39
Location
Communication
Mix
Store Design
and Display
Customer
Service
Merchandise
Assortment
Low, EDLP
Pricing Strategy

40. 1) Wal-Mart’s Retail Mix
1-40
Communication Mix
TV and Newspaper
Insert Ads
Location
Pricing
Store Design
and Display
Customer
Service
Merchandise
Assortment

41. 1) Wal-Mart’s Retail Mix
1-41
Store Design and Display
Basic, Special
Displays
for Products
Customer
Service Location
Merchandise
Assortments
Pricing
Communication
Mix

42. 1) Wal-Mart’s Retail Mix
1-42
Customer Service
Limited
Location
Merchandise
Assortment
Pricing
Communication
Mix
Store Design
and Display

43. 2) Claire’s Retail Mix
1-43
Retail Strategy
Customer Service Location
Merchandise
Assortment
Pricing
Communication Mix
Store Design
and Display

44. 2) Claire’s Retail Mix
1-44
Enclosed malls
Location Strategy

45. 2) Claire’s Retail Mix
1-45
Jewelry, accessories and
cosmetics for tweens and teens
Assortment Strategy

46. 2) Claire’s Retail Mix
1-46
Location
Communication
Mix
Store Design
and Display
Customer
Service
Merchandise
Assortment
Modest with Sales
Pricing Strategy

47. 2) Claire’s Retail Mix
1-47
Communication Mix
TV and Magazine Ads
Store Design
And Display
Customer
Service Location
Merchandise
Assortment
Pricing

48. 2) Claire’s Retail Mix
1-48
Store Design and Display
Bright, fashionable and fun
boutique layout
Customer
Service Location
Merchandise
Assortments
Pricing
Communication
Mix

49. 2) Claire’s Retail Mix
1-49
Customer Service
Modest
Location
Merchandise
Assortment
Pricing
Communication
Mix
Store Design
& Display

50. 3) Macy’s Retail Mix
1-50
Retail Strategy
Customer Service Location
Merchandise
Assortment
Pricing
Communication Mix
Store Design
and Display

51. 3) Macy’s Retail Mix
1-51
Enclosed Malls
Customer
Service
Merchandise
Assortment
Pricing
Communication
Mix
Store Display
&Design
Location Strategy

52. 3) Macy’s Retail Mix
1-52
Location
Pricing
Communication
Mix
Store Design
& Display
Customer
Service
Many Items in Apparel
and Soft Home
Assortment Strategy

53. 3) Macy’s Retail Mix
1-53
Location
Communication
Mix
Store Design
& Display
Customer
Service
Merchandise
Assortment
Moderate with
Frequent Sales
Pricing Strategy

54. 3) Macy’s Retail Mix
1-54
Communication Mix
TV, Newspaper Ads and
Special Events
Store Design
& Display
Merchandise
Assortment
Pricing
Customer
Service Location

55. 3) Macy’s Retail Mix
1-55
Store Design and Display
Racetrack with Displays
Customer
Service Location
Merchandise
Assortments
Pricing
Communication
Mix

56. 3) Macy’s Retail Mix
1-56
Customer Service
Modest
Location
Merchandise
Assortment
Pricing
Communication
Mix
Store Design
& Display

57. 4) Target’s Retail Mix
1-57
Retail Strategy
Customer Service Location
Merchandise
Assortment
Pricing
Communication Mix
Store Design
and Display

58. 4) Target’s Retail Mix
1-58
Free-standing Stores
Customer
Service
Merchandise
Assortment
Pricing
Store Display
& Design
Location Strategy

59. 4) Target’s Retail Mix
1-59
Location
Pricing
Store Design
& Display
Customer
Service
Large Number of Categories
Private Labels
Few Items in Each Category
Assortment Strategy

60. 4) Target’s Retail Mix
1-60
Location
Communication
Mix
Store Design
& Display
Customer
Service
Merchandise
Assortment
Low to Modest
Pricing Strategy

61. 4) Target’s Retail Mix
1-61
Communication Mix
TV and Newspaper
Insert Ads

62. 4) Target’s Retail Mix
1-62
Store Design and Display
Colorful, wide aisles displays
for products with a grid layout
Customer
Service Location
Merchandise
Assortments
Pricing

63. 4) Target’s Retail Mix
1-63
Customer Service
Limited

64. 1-64
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?
◼ 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?

65. 1-65
Checklist for Making Ethical Decisions