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Dr. Nardi
Welcome to MT- 303Store Management
Introduction to the World of Retailing
Unit 2- SeminarProfessor: Dr. Nardi
………
Seminar Ground Rules Start with person’s name, or Prof, or Dr.
N., if responding to someone’s comment. No name means response is to whole
class. When you have a question, ASK it. Start your Question with // or ?? –
examples: //What’s for Lunch? Or ?? What do you mean?
You are welcome to respond, after the person asked has a chance to answer.
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AgendaReview from last weekTonight:
RetailingDistribution ChannelsMulti-Channel RetailAdd-ValueCareer Opportunities
Wrap Up
Review from Last WeekThe SyllabusOffice HoursExpectations
GeneralAssignments & Seminars
Q & AMarketing in Every Day Life
Unit 1How did it go?
Time management? Questions : Grades Review? Seminar?
QuestionWhat is Retailing?
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.
Distribution Channel
A Retailer’s Role in a Supply ChainRetailers 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.
Manufacturing, Wholesaling and RetailingVertical 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
activitiesEx: 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
QuestionDo Retailers add value?
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
Manufacturer
Vendor
Distributor
Wholesaler
Retailer
$1.00 $1.20 $2.00
$.85 $.15 $.70
Consumer
Price to Distributor
Price to Retailer
Price to Consumer
Why Not Get Rid of the Middlemen?
Better services to customersMore efficient
Why Not Get Rid of the Middlemen?
Multi-Channel Retailing
A retailer sells to consumers through multiple retail formats: Web sites Physical stores
Brooks Brothers and Multi-Channel Retailing
Relationship Management Among Retailers and Suppliers
Disagreements may occur in the following areas:control over channelprofit allocationnumber of competing retailersproduct displayspromotional supportpayment termsoperating flexibility
1-20Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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
1-21Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 1-7: Comparing Distribution Types
How Retailers Add Value■ Provide
AssortmentBuy other products
at the same time■ Break Bulk
Buy it in quantities customers want
■ Hold InventoryBuy it at a
convenient place when you want it
■ Offer ServicesSee it before you
buy; get credit; layaway Ryan McVay/Getty Images
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How Retailers Add Value The value of the product and service increases as the retailer performs functions.
Bicycle is developed at manufacturerBicycle is developed at manufacturer
Bicycle is developed in several styles
Bicycle is developed in several styles
Bicycle is offered in convenient locations in quantities of one
Bicycle is offered in convenient locations in quantities of one
Bicycle is featured on floor display
Bicycle is featured on floor display
Bicycle can be bought on credit or
put on layaway
Bicycle can be bought on credit or
put on layaway
Examples: How Retailers Add Values BagBorrowerSteal.com
jewelry and bag rental; Get (not buy, but borrow) exactly what you want
Home DepotDIYer (Do-it-yourselfer); Learn how to do it yourself with in-
store clinics and online workshops
Social and Economic Significance of Retailing
Retail Sales: Over $4.1 trillion in
annual U.S. sales in 2005Employment:
Employs over 24 million people in 2005
One of the largest sectors for job growth in US
Social responsibilityGlobal player
Social responsibility Corporate social responsibility
The voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations, in addition to the concerns of its stakeholders
Examples: Edun - a fair-trade fashion brand by the U2 lead singer BonoStarbucks: pays its farmers 42%
more than the commodity price of Arabica coffee beans
Target: community giving programs (5% of income, $3 million a week)
Retail companies give away 1.7% of their profits, compared with about 0.9% for companies in other industries
QuestionAre retail operations the same everywhere?
Structure of Retailing and Distribution Channels around the World: The United States
The nature of retailing and distribution channels in the U.S. is unique.
Has the greatest retail densityHas the greatest concentration
of large retail firmsLarge enough to operate their
own warehouses, eliminating the need for wholesaling.
The combination of large stores and large firms result in a very efficient distribution system.
CHINAThe United States
Comparison of Distribution Channels around the World
What have created these differences in distribution systems?
Social & Political Objectives
China, India: To reduce unemployment by protecting small businesses EU: To protect small retailers
To preserve green spaces/town centers
Geography Much lower population density in the US than in India, China, and EU (where less low-cost real estate are available for building large stores)
Market size Large retail markets in US, India, China Countries in EU – distribution channels and retail chains operate in a single country (no economy of scales to be achieved; trade barriers still exist)
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Careers in Retailing
Opportunities in Retailing:Management opportunities
■ People with a wide range of skills and interests needed because retailers’ functions includeFinancePurchaseAccountingManagement information system (MIS)Supply management including warehouse and
distribution managementDesign and new product development
■ Financially rewarding5-year salary of buyers: $50,000 - $60,0005-year salary of store managers: $120,000 -
$160,000
Opportunities in Retailing:Entrepreneurial opportunities
■ Retailing provides opportunities for people who want to start their own business
■ Some of the world’s richest people are retailing entrepreneurs
■ Examples of retailing entrepreneurs Sam Walton (Wal-Mart) Jeff Bezos (Amazon.com) Ingvar Kamprad (IKEA) Anita Roddick (the Body
Shop)
Wal-Mart: Sam Walton
IKEA: Ingvar Kamprad
Career Opportunities in RetailingStart Your Own Business
Walton Family (Wal-Mart) Fisher (The Gap) Wexner (The Limited) Menard (Menard’s) Marcus (The Home Depot) Kellogg (Kohl’s) Schulze (Best Buy) Levine (Family Dollar) Gold (99Cent Only)
List of Retail Entrepreneurs on Forbes 400 Richest Americans
Careers in RetailingCareer Opportunities
Store ManagementMerchandise ManagementCorporate Staff
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Retailers are a Business Like Manufacturers
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
MIS
Real Estate
Operations
Finance
Promotion/Advertising
Human Resources
Loss Prevention
Store Design
Figure 1-8: Special Characteristics Affecting Retailers
Impulse Purchase
Popularityof
Stores
Retailer’sStrategy
Small Average
Sale
Retail Management Decision Process
Strategic Vs Tactical Decisions
■ Doing the Right Thing (direction) vs. Doing Things Right (execution)
■ Strategic Decisions Are: Made Infrequently Long-term Require significant investment Not easily reversed
■ Location, Organization Design, Information and Distribution Systems, Customer Service
Retail Strategy■ Need to identify the
competition intratype competition
(e.g., Dillard’s vs. JCPenney)
intertype competition (e.g., Dillard’s vs. Wal-Mart)
■ Identifying customers What are the significant
demographic and life-style trends
Who are your target customers
Retail Strategy
An overall plan for guiding a retail firm
Influences the firm’s business activities
Influences firm’s response to market forces
Retail Strategy■ A retail strategy should identify
the target marketthe product and service mixa long-term comparative advantage
Six Steps in Strategic Planning1. Define the type of business 2. Set long-run and short-run
objectives3. Determine the customer market4. Devise an overall, long-run plan5. Implement an integrated strategy6. Evaluate and correct
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
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)
Wal-Mart’s Strategic Evolution
Small Town - Discount Store selling hard goods and soft goods limited service, efficient distribution
Enter suburban marketsWarehouse Clubs (Sam’s)Supercenters International ExpansionSupermarkets, neighborhood markets
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
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Macy’s Retail Mix
Retail Strategy
Customer Service Location
Merchandise
Assortment
PricingCommunication Mix
Store Design
and Display
Macy’s Retail Mix
Enclosed Malls
Customer Service
Merchandise
Assortment
PricingCommunication Mix
Store Display
And Design
Location Strategy
Macy’s Retail Mix
Location
Pricing
Communication Mix
Store Design
and Display
Customer Service
Many Items in Apparel
and Soft Home
Assortment Strategy
Macy’s Retail Mix
Location
Communication Mix
Store Design
and Display
Customer Service
Merchandise Assortment
Moderate with
Frequent Sales
Pricing Strategy
Macy’s Retail Mix
Communication Mix
TV, Newspaper Ads and
Special Events
Store Design
And Display Merchandise Assortment
Pricing
Customer ServiceLocation
Macy’s Retail Mix
Store Design and Display
Racetrack with Displays
Customer Service Location
Merchandise Assortments
PricingCommunication Mix
Macy’s Retail Mix
Customer Service
Modest
Location
Merchandise Assortment
Pricing
Communication Mix
Store Design and Display
Figure 1-10: Applying the Retailing Concept
Customer Orientation
Coordinated Effort
Value-driven
Goal Orientation
RetailingConcept
RetailStrategy
Target’s Retail Mix
Retail Strategy
Customer Service Location
Merchandise
Assortment
PricingCommunication Mix
Store Design
and Display
Target’s Retail Mix
Free-standing Stores
Customer Service
Merchandise
Assortment
PricingCommunication Mix
Store Display
And Design
Location Strategy
Target’s Retail Mix
Location
Pricing
Communication Mix
Store Design
and Display
Customer Service
Large Number of Categories
Private Labels
Few Items in Each Category
Assortment Strategy
Target’s Retail Mix
Location
Communication Mix
Store Design
and Display
Customer Service
Merchandise Assortment
Low to Modest
Pricing Strategy
Target’s Retail Mix
Communication Mix
TV and Newspaper
Insert Ads
Store Design
And Display
Customer ServiceLocation
Merchandise Assortment
Pricing
Target’s Retail Mix
Store Design and Display
Colorful, wide aisles displays
for products with a grid layout
Customer Service Location
Merchandise Assortments
PricingCommunication Mix
Target’s Retail Mix
Customer Service
Limited
Location
Merchandise Assortment
Pricing
Communication Mix
Store Design and Display
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
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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?
Checklist for Making Ethical Decisions
You are Faced with an Ethical Decision: What Can You Do?
Ignore your personal values and do what your company asks you to do – you will probably feel dissatisfied with your job .
Take a stand and tell your employer what you think. Work to change the policies.
Refuse to compromise your principles – you could lose your job!
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1-72Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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 hoursParkingShopper-friendlinessCredit acceptanceSalespeople
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?
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 encounterConcentrate on the total retail experienceMonitor satisfaction Stay in touch with customers
Effective Relationship Retailing
Use a “win-win” approachIt is easier to keep existing customers happy
than to gain new onesDevelop a customer database
Ongoing customer contact is improved with information on people’s attributes and shopping behaviors
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
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Retail Discussion:Myths about Careers in Retail
Misconceptions About Careers in Retailing■ College not needed■ Low pay■ Long hours■ Boring■ Dead-end job■ No benefits■ Everyone is part-time■ Unstable environment■ No opportunity for women and minorities
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Why You Should Consider Retailing
■ Entry level management positions:
Department manager or assistant buyer/planner
■ Manage and have P&L responsibility on your first job
■ Starting pay average with great benefits
■ Some retailers pay graduate school
■ No two days are alike
■ Buying and planning for financially analytically oriented
■ Management for people-people
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
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Wrap Up
Key Points Key Terms
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Wrap Up Discussion:
Remember – Minimum requirements: 1 Answer AND 2 Peer to Peer Comments per Question. Post on 3 separate days
and the primary response post by Saturday. Answer all Sub-questions & cover all Points in the Question
Remember you have assignments due this week.Due on Tuesday by 11:59 PM E.T.
Next Seminar Types of Retailers For the next seminar think about:
What are the characteristics of retailers? Identify some similarities and some differences.
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You can contact me: 1) through my email: [email protected] , 2) through AOL Instant Messaging my AOL IM name is nknardi, (put me on your buddy list)3) through Second Life (email me to request my user name if you use SL)4) through the Live Chat Post in the Classroom5) or through the “Instructor’s Office” link under the Course Home page My “Office Hours” for this term are as follow: __________________________
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A T T E N D I N G
SEE YOU IN THE DISCUSSION THREAD QUESTIONS
AND IN NEXT WEEK’S SEMINAR
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