Chapter 1 An Introduction to Retailing Retailing encompasses

Chapter 1 - An Introduction to Retailing

Retailing encompasses the business activities involved in selling goods and services to consumers for their personal, family, or household use. It includes every sale to the final consumer. 2

A Typical Channel of Distribution Manufacturer Retailer Wholesaler Final Consumer

How Retailers Add Value • Breaking Bulk -Buy it in quantities customers want • Holding Inventory -Buy it at a convenient place when you want it • Providing Assortment -Buy other products at the same time • Offering Services -See it before you buy, get credit, layaway

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

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

Hot Topic’s Retail Mix Customer Service Store Design And Display Location Retail Strategy Communication Mix Merchandise Assortment Pricing

Manufacturer’s Perspective The Four P’s of Marketing Retailers arepartofofthe Retailers are distribution channel Product Price Distribution Promotion

Issues in Retailing • How can we best serve our customers while earning a fair profit? • How can we stand out in a highly competitive environment where consumers have so many choices? • High unemployment, low consumer confidence, high savings rates have reduced consumer spending. At the same time retail competition has increased through increased format blurring (sales of cameras at office supply stores, carpeting and major appliances at home improvement centers). • How can we grow our business while retaining a core of loyal customers?

The Philosophy Retailers can best address these questions by fully understanding and applying the basic principles of retailing, as well as the elements in a well-structured, systematic, and focused retail strategy. 10

The Framework of Retailing

Top 100 Retailers Walmart, Kroger, Costco, Target, The Home Depot, Walgreen, CVS Caremark, Lowe’s, Amazon. com, Safeway. . . https: //nrf. com/2014/top 100 -table

The Retailing Mix Product Personnel Place Target Market Presentation Promotion Price

The Retailer’s Role in the Sorting Process

Multi-Channel Retailing • A retailer sells to consumers through multiple retail formats: • Web sites • Physical stores

Multi-Channel Retailing • • Cross selling across channels (in-store product availability info on Web site) Consistent pricing in all channels (credibility) Can buy, and return product regardless on channel Role of each channel o Store– try on, ease of return, fast availability (immediacy), compare offerings o Web– 24/7, product information, product reviews by customers, personalization (tailored assortment based on past purchases), most current pricing, closeout sales o Catalog-permanency, true color

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Distribution Types • Exclusive: suppliers make agreements with one or few retailers, designating such retailers as the only ones to carry certain brands or products within a specified geographic area • Intensive: suppliers sell through as many retailers as possible • Selective: suppliers sell through a moderate number of retailers

Exclusive vs Intensive Distribution • Exclusive Distribution– Fate of retailer is tied to manufacturer success, retailer has no “free-rider” concerns, retailer has less price competition, manufacturer is better assured of high levels of customer support • Intensive Distribution- Manufacturer is better assured of maximizing sales (especially for convenience goods), retailers face strong competition for price and service, intratype competition Retail Mgt. 12 e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 19

Figure 1 -7: Comparing Distribution Types

Special Characteristics Affecting Retailers Small Average Sale Impulse Purchase Retailer’s Strategy Popularity of Stores

Retail Strategy • An overall plan for guiding a retail firm • Influences the firm’s business activities • Influences firm’s response to market forces

Six Steps in Strategic Planning 1. Define the type of business (corporate mission) 2. Set long-run and short-run objectives 3. Determine the customer market 4. Devise an overall, long-run plan 5. Implement an integrated strategy 6. Evaluate and correct (fine-tune)

Figure 1 -10: Applying the Retailing Concept Customer Orientation Coordinated Effort Retailing Concept Value-driven Goal Orientation Retail Strategy

The Build-A-Bear Experience: Never Boring

Customer Service • Activities undertaken by a retailer in conjunction with the basic goods and services it sells. This includes: • Store hours • Parking • Shopper-friendliness • Credit acceptance • Salespeople

A Customer Respect Checklist üDo we trust our customers? üDo we stand behind what we sell? üIs keeping commitments to customers important to our company? üDo we value customer time? üDo we communicate with customers respectfully? üDo we treat all customers with respect? üDo we thank customers for their business? üDo we respect employees?

Relationship Retailing • Retailers seek to establish and maintain long-term bonds with customers, rather than act as if each sales transaction is a completely new encounter • Concentrate on the total retail experience • Monitor satisfaction • Stay in touch with customers

Effective Relationship Retailing • Use a “win-win” approach • It is easier to keep existing customers happy than to gain new ones (present value of current customers income stream– cost of keeping existing customers content versus cost of replacing them with new customer • Develop a customer database (loyalty programs) • Ongoing customer contact is improved with information on people’s attributes and shopping behaviors

Types of Loyalty Programs • Additional discounts at register • Not a real loyalty program • 1 free with every “n” items purchased • Easily copied, no customer database • Rebates based on cumulative purchases • Customer maintains records • Can develop “heavy half” programs like Hilton • Targeted offerings and mailing based on purchase history • Tesco example “Market research staff know more about my customers than board chairperson”

Relationship Management Among Retailers and Suppliers • Disagreements may occur in the following areas (channel conflict): • control over channel (private label) • profit allocation (resale price control) • number of competing retailers (exclusive, selective or intensive distribution) • product displays • promotional support (cooperative advertising funds and restrictions) • payment terms (payment on time) • operating flexibility • gray market sales • markdown monies, chargebacks by dominant retailers Retail Mgt. 12 e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 31

Approaches to the Study of Retailing Institutional Functional Strategic

Parts of Retail Management: A Strategic Approach • • • Building relationships and strategic planning Retailing institutions Consumer behavior and information gathering Elements of retailing strategy Integrating, analyzing, and improving retail strategy

• Retailing is a set of functions that adds value to products/services that are sold to end users = functional understanding, • Retailing is a specific institution within a marketing channel that executes retail functions = institutional understanding

End of Week 2, any questions ? ? ?