Retail StrategyRetail Strategy

Financial StrategyFinancial Strategy

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Chapter Objectives

Explain target markets.

Discuss market segmentation.

Explain competitive advantage.

Describe the types of retail business expenses.

Explain the importance of business credit.

Explain types of retail business risks.

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Retailing, Products, and the Customer

In this chapter, you will learn:

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How retailers determine which

customer groups they

want to target.

How retailers determine which

products and services to offer.

The financial decisions that

retailers have to make before opening for

business and on every day a

store is open.

What Is Retail Strategy?

Retailers avoid leaving anything to chance by using a retail strategy called retail mixretail mix.

retail mix the combination of decisions retailers make to create and operate a store

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What is Retail Strategy?

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Retail-Mix Decisions

Merchandise and services

Prices to charge Location of store

Advertising Displays Sales associates

Target Market

When retailers begin the decision-making process, they must first determine who their target markettarget market will be.

target market the specific group of people on whom a retailer focuses merchandising and service decisions

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Target Market

A retailer can identify characteristics of the target market by creating a target-market profiletarget-market profile.

Retailers are continually updating their target-market profiles.

target-market profile a description of the target- market customers

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Target Market

Market segmentationMarket segmentation allows retailers to get specific information about customers.

market segmentation a way of analyzing a market by specific characteristics in order to create a target market

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Target Market

The four major categories of market segmentation are:

demographics statistics that describe a population in terms of personal characteristics

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DemographicsDemographics

PsychographicsPsychographics

GeographicsGeographics

psychographics consumer lifestyles as reflected in attitudes, interests, and opinions

geographics information about where customers live

Product benefits

Target Market

Three strategies involved in retail mix are:

product mix the types of merchandise that a retailer offers for sale

Product mixProduct mix

Services mixServices mix

Goods and services mix

services mix the number and kinds of services offered by a retail establishment

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Competitive Advantage

Customer service and attention to detail are two factors that can give retailers a competitive competitive advantageadvantage.

competitive advantage an intangible factor that makes one retail store more desirable to customers than its competitors

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Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses.

Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service.

Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com.

How can online retailers find out who their target markets are when they never see them? Services such as Media Metrix conduct online and offline research to find out and predict the

Who’s on My Site?

behavior of online consumers. They combine demographics with user statistics to determine which sites are used by certain types of people and why. With this information, retailers can tailor their sites to appeal to their customers.

For more information on retailing, go to marketingseries.glencoe.com.

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Why is determining a target market important?

What are the four major categories of market segmentation?

Why is it important for a retailer to develop a competitive advantage?

1.

2.

3.

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Retail Business Expenses

Some of the most important decisions retailers make concern the finances of the business.

Every business generates expenses before it opens its doors.

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Retail Business Expenses

The three major categories of business expenses are:

operating expenses everyday expenses such as office supplies, telephone, salaries, and utilitiesOperating expensesOperating expenses

Interest expensesInterest expenses

Cost of goods soldCost of goods sold

interest expenses expenses paid to finance loans a business obtains

cost of goods sold the price a retailer pays for the merchandise that is for sale

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Retail Loans

Most businesses, at one time or another, have to borrow money.

Banks help retailers by assisting them with loans to support their businesses.

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Types of Retail Loans

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Short-Term

Long-Term

>

>

Repaid over 30 days, 60 days,

or 90 days

Repaid over five to 30 years

Helps retailers purchase seasonal merchandise and pay for unplanned

expenses

Helps retailers with major purchases such as buying

a store or remodeling

>

>

Loan Type Term Use

Business Credit

The “Five Cs of Credit” are:

Capacity—ability to pay

Character—reliability

Credit history—amount of past debt and record of repayment

Capital—assets owned after debt

Collateral—property or valuable owned for security

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Retail Store Profit

ProfitProfit is the retailer’s reward for running an efficient and effective business.

profit the money left after expenses are deducted from sales

sales – expenses = profit

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Retail Business Risk Management

Businesses must deal with riskrisk.

risk a situation or occurrence that can lead to financial loss for a business

Dealing with business risks in a retail setting is called risk managementrisk management.

risk management handling business risks in a way that minimizes negative impact on the business

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Retail Business Risk Management

The three categories of business risks are:

Economic risks

Natural risks

Human risks

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What are the three types of retail business expenses?

Name two types of loans a retailer might use.

What are the three categories of business risks?

1.

2.

3.

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Explain target markets.

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Name four categories used when describing a business's market segmentation.

Discuss how retailers determine their product mix and their services mix.

A target market is the specific group of people to whom a retailer tailors its merchandising and service-offering decisions.

1. Demographics, psychographics, geographics, and product benefits

2. They apply target-market information to product selection.

3.

Checking Concepts

continued

1.

2.

3.

Define competitive advantage.

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Describe the three categories of retail business expenses.

Explain the importance of business credit.

It is an intangible factor that makes one retail store more desirable to customers than its competitors.

4. Operating expenses, interest expenses, and cost of goods sold

5. It allows retailers to purchase merchandise, fixtures, and supplies when they need them, and then pay for them later.

6.

Checking Concepts

continued

4.

5.

6.

Define profit using a mathematical equation.

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Critical Thinking

Name the three types of business risks. Explain why one risk is more common than other risks.

sales – expenses = profit

7. The three types of business risks are economic, natural, and human. Natural risks are most common and frequent because they result from natural occurrences such as hurricanes, floods, tornadoes, earthquakes, and fires.

8.

Checking Concepts

7.

8.

End ofEnd of