Retail management Stores understanding.pptx
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Retail management Stores understanding.pptx
- 1. The Importance of Retailing • Retailing: all activities directly related to the sale of goods and services to the ultimate consumer for personal, non business use • Retailer: a channel intermediary that sells mainly to consumers • Retail industry in India – Comprises mostly small businesses – Dominated by a small number of large companies
- 2. Types of Retailers and Retail Operations • Retail establishments can be classified based on: − Type of ownership − Level of service − Product assortment − Price
- 3. Ownership Arrangement • Independent retailer: a retailer owned by a single person or partnership and not operated as part of a larger retail institution • Chain store: a store that is part of a group of the same stores owned and operated by a single organization • Franchise: a relationship in which business rights to operate and sell a product are granted by the franchisor to the franchisee – Franchisor: The originator of a trade name, product, methods of operation, and the like that grants operating rights to another party to sell its product – Franchisee: an individual or business that is granted the right to sell another party’s product
- 4. Level of Service • Level of service – Ranges from full-service to self-service – Provides alterations, credit, delivery, consulting, liberal return policies, lay-away, gift-wrapping, and personal shopping
- 5. Product Assortment • Product assortment is based on the width and depth of product lines – Width is the assortment of products offered – Depth is the number of different brands offered within each assortment
- 6. Price • Gross margin: the amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted – Prices in any store format might not vary just from day to day, but minute to minute – The rise of mobile devices has added a new layer of complexity to pricing decisions
- 7. Types of In-Store Retailers • Department store: a store housing several departments under one roof • Specialty store: a retail store specializing in a given type of merchandise • Supermarket: a large, departmentalized, self-service retailer that specializes in food and some nonfood items • Drugstore: a retail store that stocks pharmacy-related products and services as its main draw • Convenience store: a miniature supermarket, carrying only a limited line of high-turnover convenience goods
- 8. Types of In-Store Retailers • Discount store: a retailer that competes on the basis of low prices, high turnover, and high volume – Full-line discount store: a discount store that carries a vast depth and breadth of product within a single product category – Supercenter: a large retailer that stocks and sells a wide variety of merchandise including groceries, clothing, household goods, and other general merchandise – Specialty discount store: a retail store that offers a nearly complete selection of single-line merchandise and uses self-service, discount prices, high volume, and high turnover
- 9. Types of In-Store Retailers – Category killer: a large discount store that specializes in a single-line of merchandise and becomes the dominant retailer in its category – Warehouse club: a large, no frills retailer that sells bulk quantities of merchandise to customers at volume discount prices in exchange for a periodic membership fee – Off-price retailer: a retailer that sells at prices 25 percent or more below traditional department store prices because it pays cash for its stock and usually doesn’t ask for return privileges
- 10. Types of In-Store Retailers (slide 4 of 4) – Factory outlet: an off-price retailer that is owned and operated by a manufacturer – Used goods retailer: a retailer whereby items purchased from one of the other types of retailers are resold to different customers • Restaurant: a retailer that provides both tangible products—food and drink—and valuable services—food preparation and presentation
- 11. Exhibit 14.1: Types of Stores and Their Characteristics Type of Retailer Level of Service Product Assortment Price Gross Margin Department Store Moderately high to high Broad Moderate to high Moderately high Specialty store High Narrow Moderate to high High Supermarket Low Broad Moderate Low Drugstore Low to moderate Medium Moderate Low Convenience store Low Medium to narrow Moderately high Moderately high Full-line discount store Moderate to low Medium to broad Moderately low Moderately low Specialty discount store Moderate to low Medium to broad Moderately low to low Moderately low Warehouse club Low Broad Low to very low Low Off-price retailer Low Medium to narrow Low Low Restaurant Low to high Narrow Low to high Low to high
- 12. Discussion Point Types of In-store Retailers • Consider the following stores: – Target – Costco – Home Depot – Hallmark Identify the type of each retailer.
- 13. The Rise Of Non-store Retailing • Non-store retailing: shopping without visiting a store – Automatic vending: the use of machines to offer goods for sale – Self-service technologies (SST): technological interfaces that allow customers to provide themselves with products and/or services without the intervention of a service employee – Direct retailing: the selling of products by representatives who work door-to-door, office-to- office, or at home sales parties
- 14. The Rise Of Non-store Retailing – Direct marketing (DM): techniques used to get consumers to make a purchase from their home, office, or other nonretail setting – Telemarketing: the use of the telephone to sell directly to consumers – Direct mail: the delivery of advertising or marketing material to recipients of postal or electronic mail Microtargeting: the use of direct marketing techniques that employ highly detailed data analytics in order to isolate potential customers with great precision
- 15. The Rise Of Non-store Retailing – Shop-at-home television network: a specialized form of direct response marketing whereby television shows display merchandise, with the retail price to home viewers – Online retailing (e-tailing): a type of shopping available to consumers with personal computers and access to the Internet • Sharing economy: the way connected consumers exchange goods and service with each other through a digital marketplace
- 16. Retail Operations Models • The retail formats covered so far are co-aligned with unique operating models that guide the decisions made by their managers • Floor stock: inventory displayed for sale to customers • Back stock: inventory held in reserve for potential future sale in a retailer’s storeroom or stockroom • Trade-offs inherent to restrictive operating models have led to the emergence of hybrid retail operating models and online-only retailers
- 17. Executing a Retail Marketing Strategy • Retail managers develop marketing strategies based on the goals established by stakeholders and the overall strategic plans developed by company leadership • Strategic tasks that precede tactical decisions – Defining a target market – Choosing the retailing mix
- 18. Defining a Target Market • Process begins with market segmentation – Retailers need to be sensitive to changes in customer preferences – Target markets are defined by demographics, geographic boundaries, and psychographics
- 19. Choosing the Retailing Mix • Entails combining the elements of the retailing mix to come up with a single retailing method to attract the target market • Retailing mix: a combination of the six Ps— product, promotion, place, price, presentation, and personnel • Managers must make sure that the positioning is aligned with target customers’ expectations
- 20. Exhibit 14.2: The Retailing Mix
- 21. Product • The first element in the retailing mix is the product offering, also called the product assortment or merchandise mix • Many online retailers purposely focus on single product line niches that could never attract enough foot traffic to support a traditional brick-and-mortar store
- 22. Promotion • Promotion Strategy includes − Advertising − Public relations and publicity − Sales promotion • Risk – Brand cannibalization: the reduction of sales for one brand as the result of the introduction of a new product or promotion of a current product by another brand
- 23. Place • Factors to be considered while choosing a location – Economic growth potential – Amount of competition – Geography • Destination store: a store that consumers purposely plan to visit prior to shopping
- 24. Price • Ultimate goal is to sell products to consumers, and the right price is critical to sales • Based on the cost of merchandise, so an essential part of pricing is efficient and timely buying • “Value-based pricing”: focuses on the value of the product to the customer • Price is a key element in a retail store’s positioning strategy
- 25. Presentation • Atmosphere: the overall impression conveyed by a store’s physical layout, décor, and surroundings – Employee type and density – Merchandise type and density – Fixture type and density – Sound – Odors – Visual factors • Layout: the internal design and configuration of a store’s fixtures and products
- 26. Personnel • Salespeople are trained in the following selling techniques: – Trading up: persuading customers to buy a higher-priced item than they originally intended to buy – Suggestion selling: seeking to broaden customers’ original purchases with related items • Sales personnel provide their customers with the amount of service prescribed by the retail strategy of the store
- 27. Discussion Point Retailing Mix • What are some stores that students frequent? • Discuss the six Ps of the retailing mix for those stores
- 28. Retailing Decisions for Services • Service industries are customer oriented, and service quality is a priority • Service distribution focuses on: – Minimizing wait times – Managing service capacity – Improving service delivery – Establishing channel-wide network coherence
- 29. Addressing Retail Product/Service Failures • All retailers inevitably disappoint a subset of their customers • The best retailers have plans in place to recover and benefit from lapses in service • Actions that might be taken include: – Notifying customers in advance of stockouts – Implementing liberal return policies – Issuing product recalls in conjunction with promotional offers
- 30. Retailer and Retail Customer Trends and Advancements • Big data analytics: the process of discovering patterns in large data sets for the purposes of extracting knowledge and understanding human behavior • Beacons: a device that sends out connecting signals to customers’ smartphones and tablets in order to bring them into a retail store or improve their shopping experience • RFID (Radio Frequency Identification) • Facial recognition and biometric sensors
- 31. Shopper Marketing and Analytics • Shopper marketing: understanding how one’s target consumers behave as shoppers, in different channels and formats, and leveraging this intelligence to generate sales or other positive outcomes • Shopper analytics: searching for and discovering meaningful patterns in shopper data for the purpose of fine-tuning, developing, or changing market offerings
- 32. Future Developments in Retail Management • Retail channel omnification: the reduction of multiple retail channel systems into a single, unified system for the purpose of creating efficiencies or saving costs • Click-and-collect: the practice of buying something online and then traveling to a physical store location to take delivery of the merchandise • Robots are replacing or augmenting retail employees
- 33. Key Terms • Retailing • Retailer • Independent retailer • Chain store • Franchise • Franchisor • Franchisee • Gross margin • Department store • Specialty store • Supermarket • Drugstore
- 34. Key Terms • Convenient store • Discount store • Full-line discount store • Supercenter • Specialty discount store • Category killer • Warehouse club • Off-price retailer • Factory outlet • Used goods retailer • Restaurant • Nonstore retailing
- 35. Key Terms • Automatic vending • Self-service technologies (SST) • Direct retailing • Direct marketing (DM) • Telemarketing • Direct mail • Microtargeting • Shop-at-home television network • Online retailing (e-tailing) • Floor stock • Back stock • Retailing mix
- 36. Key Terms • Brand cannibalization • Destination store • Atmosphere • Layout • Big data analytics • Beacon • Shopper marketing • Shopper analytics • Retail channel omnification • Click-and-collect
Editor's Notes
- Retailing: all activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use Retailer: a channel intermediary that sells mainly to consumers Retailing has enhanced the quality of our daily lives. It provides millions of goods and services that mirror the needs and styles of U.S. society. The retailing industry is one of the largest employers. It affects all of us directly or indirectly. Discussion/Team Activity Take a poll in class to see how many of the students have worked or are working in the retail industry. How many are pursuing careers in the retail industry?
- Retailers use the latter three variables to position themselves in the competitive marketplace. These variables can be combined in several ways to create distinctly different retail operations.
- Retailers can be broadly classified based on ownership arrangement. The establishment of an independent retailer is not operated as part of a larger retail network. Chain stores are handled by a home office, which ensures consistency across different locations. Franchise: a relationship in which business rights to operate and sell a product are granted by the franchisor to the franchisee Franchisor: The originator of a trade name, product, methods of operation, and the like that grants operating rights to another party to sell its product Franchisee: an individual or business that is granted the right to sell another party’s product
- Level of service Ranges from full-service to self-service Provides alterations, credit, delivery, consulting, liberal return policies, lay-away, gift-wrapping, and personal shopping Extreme low end of service may be a product kiosk or vending machine
- Product assortment is based on the width and depth of product lines Width is the assortment of products offered Depth is the number of different brands offered within each assortment Firms modify their product assortments in order to accommodate factors in the external environment
- Gross margin: the amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted Prices in any store format might not vary just from day to day, but minute to minute The rise of mobile devices has added a new layer of complexity to pricing decisions Consumers can compare prices from dozens of retailers at once
- Department store: a store housing several departments under one roof Specialty store: a retail store specializing in a given type of merchandise Supermarket: a large, departmentalized, self-service retailer that specializes in food and some nonfood items Drugstore: a retail store that stocks pharmacy-related products and services as its main draw Convenience store: a miniature supermarket, carrying only a limited line of high-turnover convenience goods
- Discount store: a retailer that competes on the basis of low prices, high turnover, and high volume Types of discount stores: Full-line discount store: a discount store that carries a vast depth and breadth of product within a single product category Supercenter: a large retailer that stocks and sells a wide variety of merchandise including groceries, clothing, household goods, and other general merchandise Specialty discount store: a retail store that offers a nearly complete selection of single-line merchandise and uses self-service, discount prices, high volume, and high turnover
- Category killer: a large discount store that specializes in a single-line of merchandise and becomes the dominant retailer in its category Warehouse club: a large, no frills retailer that sells bulk quantities of merchandise to customers at volume discount prices in exchange for a periodic membership fee Off-price retailer: a retailer that sells at prices 25 percent or more below traditional department store prices because it pays cash for its stock and usually doesn’t ask for return privileges
- Factory outlet: an off-price retailer that is owned and operated by a manufacturer Used goods retailer: a retailer whereby items purchased from one of the other types of retailers are resold to different customers Restaurant: a retailer that provides both tangible products—food and drink—and valuable services—food preparation and presentation
- This exhibit differentiates retailers by the level of service, product assortment, price, and gross margin. Gross margin is the amount of money a retailer makes as a percentage of sales after the cost of goods sold is subtracted.
- Answers: Full-line discount store Warehouse club Category Killer Specialty store Convenience store Off-price retailer Department store
- Nonstore retailing is growing faster than in-store retailing because of changes in culture and society. It adds a level of convenience for customers who wish to shop from their current locations. Nonstore retailing: shopping without visiting a store Automatic vending: the use of machines to offer goods for sale Self-service technologies (SST): technological interfaces that allow customers to provide themselves with products and/or services without the intervention of a service employee Direct retailing: the selling of products by representatives who work door-to-door, office-to-office, or at home sales parties
- Direct marketing (DM): techniques used to get consumers to make a purchase from their home, office, or other nonretail setting Telemarketing: the use of the telephone to sell directly to consumers Direct mail: the delivery of advertising or marketing material to recipients of postal or electronic mail Microtargeting: the use of direct marketing techniques that employ highly detailed data analytics in order to isolate potential customers with great precision
- Shop-at-home television network: a specialized form of direct response marketing whereby television shows display merchandise, with the retail price to home viewers Online retailing (e-tailing): a type of shopping available to consumers with personal computers and access to the Internet as consumers become more connected, the sharing economy has emerged as a more efficient exchange of resources Sharing economy: the way connected consumers exchange goods and service with each other through a digital marketplace
- An operating model is a set of guiding principles. Specialty shops keep high amounts of floor stock and back stock in order to accommodate a broad range of customer demands. This operating model implies higher prices for customers and does not guarantee stocks. Such tradeoffs have led to the emergence of hybrid retail operating models and online-only retailers. Most decisions taken by retail managers are based on the retailing mix. Trade-offs inherent to restrictive operating models have led to the emergence of hybrid retail operating models and online-only retailers Online-only retailers have low operating costs Showcase their items to potential customers all around the world Most retail stores remain operationally and tactically similar to traditional businesses
- Strategic retailing goals focus on increasing sales, reducing costs of goods sold, and improving financial ratios. Tactical retailing goals include increased store traffic, higher sales of a specific item, developing a more upscale image, and creating heightened public awareness of the retail operation and its products or services. Key strategic tasks that precede these tactical decisions are defining and selecting a target market and developing the retailing mix
- Process begins with market segmentation Retailers need to be sensitive to changes in customer preferences Target markets are defined by demographics, geographic boundaries, and psychographics
- Entails combining the elements of the retailing mix to come up with a single retailing method to attract the target market Retailing mix: a combination of the six Ps—product, promotion, place, price, presentation, and personnel Managers must make sure that the positioning is aligned with target customers’ expectations
- The retailing mix consists of six Ps: the four Ps of the marketing mix (product, price, promotion, and place) plus presentation and personnel. The combination of the 6 Ps projects a store’s image, which influences consumers’ perceptions.
- Product – product offering, or merchandise mix Many online retailers purposely focus on single product line niches that could never attract enough foot traffic to support a traditional brick-and-mortar store.
- The goal of retail promotion strategy is to position the store in consumers’ minds. Ads, special events, promotions, and even grand openings are aimed at specific target markets. Retailers’ advertising is carried out mostly at the local level by providing store information, such as location, merchandise, hours, prices, and sales. In contrast, national retail advertising focuses on image. Brand cannibalization: the reduction of sales for one brand as the result of the introduction of a new product or promotion of a current product by another brand
- The location of a store will affect its future growth and profitability. While choosing a location, the retailer is making a large commitment of resources that can reduce its future flexibility. Factors to be considered when identifying a specific site includes neighborhood socioeconomic characteristics, traffic flows, land costs, zoning regulations, public transportation, visibility of the site, parking, entrance and exit locations, accessibility, and safety and security. Stores in isolated locations must become destination stores Destination store: a store that consumers purposely plan to visit prior to shopping
- Ultimate goal is to sell products to consumers, and the right price is critical to sales Based on the cost of merchandise, so an essential part of pricing is efficient and timely buying “Value-based pricing” — focuses on the value of the product to the customer Price is a key element in a retail store’s positioning strategy
- The presentation of a retail store helps determine the store’s image and positioning in consumers’ minds. For example, positioning as an upscale store would require a lavish or sophisticated presentation. The main element of presentation is its atmosphere (the overall impression conveyed by a store’s physical layout, décor, and surroundings). Employee type and density: general characteristics of employees and number of employees per thousand square feet of selling space Merchandise type and density: brand names and arrangements Fixture type and density: fixtures should be consistent with the general atmosphere the store is trying to create Sound: music can influence customer behavior, control the pace of store traffic, create an image, and attract or direct the shopper’s attention Odors: smell can stimulate or detract from sales Visual factors: colors can create a mood or focus attention Layout: the internal design and configuration of a store’s fixtures and products
- Salespeople are trained in the following selling techniques Trading up: persuading customers to buy a higher-priced item than they originally intended to buy Suggestion selling: seeking to broaden customers’ original purchases with related items Sales personnel provide their customers with the amount of service prescribed by the retail strategy of the store
- Answers will vary
- Service industries are customer oriented, and service quality is a priority Service distribution focuses on: Minimizing wait times: minimizing the amount of time a customer waits in line is a key factor in maintaining the quality of service. Managing service capacity: if they don’t have the capacity to meet demand, they either turn down some customers, let service levels slip, or expand capacity Improving service delivery: choosing the right distribution channel Establishing channel-wide network coherence: service firms must standardize their service quality across different geographic regions to maintain their brand image
- All retailers inevitably disappoint a subset of their customers The best retailers have plans in place to recover and benefit from lapses in service Actions that might be taken include: Notifying customers in advance of stockouts Implementing liberal return policies Issuing product recalls in conjunction with promotional offers
- Retailers are constantly innovating. They are always looking for new products and services (or ways to offer them) that will attract new customers or inspire current ones to buy in greater quantities or more frequently. Big data analytics: the process of discovering patterns in large data sets for the purposes of extracting knowledge and understanding human behavior Beacons: a device that sends out connecting signals to customers’ smartphones and tablets in order to bring them into a retail store or improve their shopping experience RFID (Radio Frequency Identification) Facial recognition and biometric sensors
- Shopper marketing focuses on understanding how a brand’s target consumers behave as shoppers in different channels and formats, and then using this information in business-based strategies and initiatives that are carefully designed to deliver balanced benefits to all stakeholders—brands, retailers, and shoppers. It has increased the need for sophisticated analytics and metrics and forces managers to coordinate better, measure more, think more creatively, and move faster. Shopper analytics: searching for and discovering meaningful patterns in shopper data for the purpose of fine-tuning, developing, or changing market offerings
- Retail channel omnification is the reduction of multiple retail channel systems into a single, unified system for the purpose of creating efficiencies or saving costs. Showrooming and data analytics have led to the development of virtual reality apps and retail channel omnification. Click-and-collect enables customers to buy something online and then pick up the merchandise from a physical store. Robots are replacing or augmenting retail employees.