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CHAPTER 1: AN INTRODUCTION TO RETAILING
©2013 Pearson Education 1-2
Chapter Objectives • To define retailing, consider it from different
perspectives, demonstrate its impact, and note its special characteristics
• To introduce the concept of strategic planning and apply it
• To show why the retailing concept is the foundation of a successful business, with an emphasis on the total retail experience, customer service, and relationship retailing
• To indicate the focus and format of the text
©2013 Pearson Education 1-3 3
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.
©2013 Pearson Education 1-4
• The word 'Retail' is derived from a French word with the prefix re and the verb tailer meaning "to cut again".
• Evidently, retail trade is one that cuts off smaller portions from large lumps of goods.
• It is a process through which goods are transported to final consumers.
• In other words, retailing consists of the activities involved in selling directly to the ultimate consumer for personal, non-business use.
• It embraces the direct-to-customer sales activities of the producer, whether through
his own stores by house-to-house canvassing or by mail-order business.
©2013 Pearson Education 1-5
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?
©2013 Pearson Education 1-6 6
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.
©2013 Pearson Education 1-7
Figure 1-1: Subway
©2013 Pearson Education 1-8
An Ideal Candidate for a Retailing Career
• Must be a people person (more important than technical knowledge). Technical skills can be taught more easily than people skills
• Must be flexible • Should be decisive • Must have analytical skills • Must have stamina
©2013 Pearson Education 1-9
Table 1-1: The 10 Largest Retailers in the Namibia (2011)
Rank Company Main Emphasis 1 Woermann
Brock Hyper Full-line discount stores, supercenters, membership clubs
2 P n P Supermarkets, convenience stores, jewelry stores
3 Big Daddy Full-line discount stores, supercenters
4 Geka Drugstores 5 Home Depot Home centers
6 Sneaker Warehouse
Membership warehouse clubs
7 Victoria Pharmacies
8 Nictus Home centers
9 Hi-FI Centre Electronics, major appliances
10 Game Stores
Department store, discount (Jetmart)
©2013 Pearson Education 1-10
Figure 1-4: A Typical Channel of Distribution
Manufacturer
Wholesaler Final Consumer
Retailer
©2013 Pearson Education 1-11
Figure 1-5: The Retailer’s Role in the Sorting Process
©2013 Pearson Education 1-12
Multi-Channel Retailing
•A retailer sells to consumers through multiple retail formats: • Web sites • Physical stores
©2013 Pearson Education 1-13
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
©2013 Pearson Education 1-14
Figure 1-6: Apple
©2013 Pearson Education 1-15
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
©2013 Pearson Education 1-16 16 Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
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
©2013 Pearson Education 1-17
Figure 1-7: Comparing Distribution Types
©2013 Pearson Education 1-18
Figure 1-8: Special Characteristics Affecting Retailers
Impulse Purchase
Popularity of
Stores
Retailer’s Strategy
Small Average
Sale
©2013 Pearson Education 1-19
Retail Strategy
• An overall plan for guiding a retail firm
• Influences the firm’s business activities
• Influences firm’s response to market forces
©2013 Pearson Education 1-20
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)
©2013 Pearson Education 1-21
Figure 1-9: “Expect More. Pay Less” at Target
©2013 Pearson Education 1-22
Aspects of Target’s Strategy • Growth
objectives • Appeal to a
prime market • Distinctive image • Focus • Customer service • Multiple points of
contact
• Employee relations
• Innovation • Commitment
to technology • Community
involvement • Monitoring
performance
©2013 Pearson Education 1-23
Figure 1-10: Applying the Retailing Concept
Customer Orientation
Coordinated Effort
Value-driven
Goal Orientation
Retailing Concept
Retail Strategy
©2013 Pearson Education 1-24
Figure 1-11: The Build-A-Bear Experience: Never Boring
©2013 Pearson Education 1-25
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
©2013 Pearson Education 1-26
Figure 1-12: A Customer Respect Checklist Do we trust our customers? Do we stand behind what we sell? Is keeping commitments to customers
important to our company? Do we value customer time? Do we communicate with customers
respectfully? Do we treat all customers with respect? Do we thank customers for their business? Do we respect employees?
©2013 Pearson Education 1-27
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
©2013 Pearson Education 1-28
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
©2013 Pearson Education 1-29
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”
©2013 Pearson Education 1-30 30 Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
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
©2013 Pearson Education 1-31
©2013 Pearson Education 1-32
Approaches to the Study of Retailing
Institutional Functional
Strategic
©2013 Pearson Education 1-33
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
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the United States of America.