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155 Cards in this Set
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retailing |
a set of business activities that adds value to the products and services sold to consumers for their personal or family use |
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Retailer |
is a business that sells products and/or services to consumers for personal or family use cater to direct consumers EX: macy, target, dullards, gap, khols |
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nature |
business actives (profit driven) |
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Functions |
add value to products and services |
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target |
consumers for end-use (personal and family use) |
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What about retailers that perform wholesaling and production activities? |
Warhouse club EX. office depot, the home depot, costco, walmart |
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wholesaler |
caters to other businesses EX: Booker Cash N Carry |
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Warehouse club |
caters to both end consumers as well as other businesses EX: office depot, home depot, united airlines, bank of america, costco |
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Supply chain |
manufacturing -> wholesaler -> Retailer -> consumer |
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What is a supply chain? |
is a set of firms that make and deliver a given set of goods and services to the ultimate consumer |
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who is the final business in a supply chain? |
retailers |
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retailer's role in a supply chain |
Are a key component that links manufacturers to supply chain. Retailers buy products from wholesalers and/or manufacturers and resell them to consumers Retailers add value to products more efficiently tan manufacturers and wholesalers |
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vertical integration |
firm performs more than one set of actives in the channel EX: retailer invests in wholesaling or manufacturing |
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Backward integration |
retailer performs some distortion and manufacturing activities EX: Jcpenny sells Arizona jeans (private label) |
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Forward integration |
manufactures undertake retailing activités EX: Ralph Lauren operates its own stores |
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How do retailers add value? |
provide assortment, break bulk (buy in quantities you want), hold inventory (buy at convenient place when you want), offer services |
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Cost of channel activities |
the value of the product increases as the functions increase |
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Sweat shirt manufacturer cost |
cost includes: Raw materials labor equipment transportation Manufacturing cost: $10 sells to wholesaler at: $12 |
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wholesaler of sweatshirt |
functions: distribution, transportation sells to retailer at: $15 |
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Retailer of sweatshirt |
functions: fold and display product, put tags, store, advertise, customer service sells to consumers: $30 |
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what are the reasons behind these differences in distribution systems? |
social and political objectives geography market size |
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social and political objectives |
China, India: to reduce unemployment by protecting small businesses EU: to protect small retailers |
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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) |
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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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social and economic significance of retailing
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Retail sales: over $4.3 trillion more than 8% of the US GDP comes from retailing Employment: employs over 14 million people in 2012 ( 11% workforce) |
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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 |
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information systems |
facilitating growth of larger retail firms POS system feeds information to distribution center and then manufacturer inventory drops below a certain level-more are shipped communication with factories looking at sales compared to last year |
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jobs in retailing |
buy/planner (retailing strategy, merchandise management) store manager (store management) sales associates (customer service, consumer behaviors) |
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Retail mix |
retailing mix refers to the various features of retail strategy planning. Also often called "the 4ps" Product, price, place and promotion |
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product |
classifications assortment brands |
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promotion |
publicity advertising marketing |
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place |
location space operating hours |
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price |
competition margins customer |
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different components of retail mix |
merchandise(product): variety, stock keeping unit services (service) location(place) pricing(price) advertising and promotion, store design, visual merchandising (promotion) |
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type of merchandise and/or service offered is identified by ______ |
the NAICS code |
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variety |
breadth of merchandise number of merchandise category |
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assortment |
depth of merchandise number of different items within a category |
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SKU: Stock Keeping Unit |
each different item of merchandise is called SKU: the smallest unit for retailer to identify a merchandise EX: 2 pieces of the same phone: 2 SKUs |
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How many SKUs do we have? 3 colors, 5 sizes |
15 SKUs |
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service and price |
more service = higher price |
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stocking a deep and broad assortment |
is costly for retailers because the retailer must have backup stock for each SKU in addition to holding the inventory |
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food retailers |
mom and pop stores convenience stores supermarkets supercenters warehouse clubs |
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General Merchandise Retailers |
department stores discount stores specialty stores Category specialists off-price retailers value retailers |
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convenient stores |
Tailors assortments to local market, Makes more convenient to shop, offers fresh and healthy foods, Fast and casual restaurants, Financial services available, opening smaller stores closer to consumers (like airports) EX: 7 eleven |
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two types of supermarkets |
conventional, limited assortment supermarkets |
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conventional supermarkets |
30,000 SKU food and household merchandise smaller and more limited in the range of merchandise than a super center or hypermarket |
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Limited assortment Supermarkets (extreme value food retailers) |
2000 SKU offer one or two brands and sizes designed to maximize efficiency and reduce costs offer merchandise at 40-60% lower prices than conventional supermarkets Save-A-Lot, ALDI (germans Walmart) |
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ALDI |
provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses |
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ALDI's Strategy |
stores sell less products, ALDI exclusive label, High quality of products at cheaper prices Cheap...EX: only two brands of toilet paper and one brand of pickles |
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how will ALDI's strategy work? |
strong control over quality and price, simplify shipping and handling, reduce labor costs by keeping limited store staff, etc. |
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Supercenter (hypermart) |
satisfy one-trip shopping combination of supermarket + department store Very large retail facility which carries an enormous range of products from groceries to general merchandises Fasted growing retail category EX: Walmart |
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Warehouse Club |
offer a limited and irregular assortment of food and general merchandise with little service at low prices use low-locations, inexpensive store design, little customer service low inventory holding costs by carrying a limited assortment of fast selling items |
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department stores |
broad variety deep assortment pleasing ambiance attentive service store arranged into departments |
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first tier of department stores |
Upscale, high fashion chains with exclusive designer merchandise and excellent customer service EX: Nordstrom, SAKs |
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Second tier department stores |
retailers sell more modestly priced merchandise with less customer service EX: Macy's |
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Third tier department stores |
Value oriented caters to more price conscious customer EX: JCPenney, sears Kohls |
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specialty store retailers |
limited number of complementary merchandise categories high level of service relatively small stores deep but narrow product assortment EX: victoria's secret, Gap, Game stop |
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Category specialists |
deep and narrow assortments category killers low price wholesaling to business customers and retaining to consumers EX: Bass-pro shops |
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Full-line Discount stores |
Broad variety of merchandise limited service low prices EX: target, Wal-mart |
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Drugstores |
health and personal grooming merchandise starting to offer expanded product line with food items and even clothing offer services like pharmaceutical advice and online refills EX: walgreens, CVS |
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Outlet store |
manufacturers sell their stock directly to the public high-quality merchandise at bargain-basement prices |
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Extreme Value Retailers |
focuses on lower income consumers Names mostly imply good value not $1 price points low cost location limited services one of the fastest growing retail segments EX: dollar tree, Family dollar, Dollar general, 99 cents only stores |
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services retailing
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primarily sell services rather than merchandise intangibility: problems in evaluating service quality and performance of service provider simultaneous production and delivery perishability inconsistency of the offering |
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types of retail ownership |
independent, single store establishment (boutique) corporate chain stores franchises |
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corporate retail chain |
a company that operates multiple retail units under common ownership and usually has centralized decision making for defining and implement its strategy |
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franchising |
franchisee uses franchiser's business model based on contract (different from chain store) account for 30-40% of US retail sales Franchisee pays fixed fee plus % of sales |
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franchisor advantage |
rapid expansion, highly motivated franchisees do a good job, additional profits by selling franchisees products and services |
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disadvantages of franchisor |
company-owned units may be more profitable, less control than independent retailers over advertising, pricing, personnel practices, etc. |
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Multichannel retailer (omniretailer) |
a retailer that sells merchandise or service through more than one channel. By using a combination of channels, retailers can exploit the unique benefits proved by each channel |
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different types of multichannel |
store, kiosk, catalog, call center, we/email, mobile |
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internet retailing |
internet channels allow retailers to offer a great assortment of products and provide more information to customers the internet allows retailers to collect information about consumer shopping habits. the internet allows the retailer to enter new markets economically |
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internet channel |
deeper and broader selection more tools for evaluating merchandise personalization (virtual try on) information for solving problems,not merchandise characteristics |
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benefits of online shopping |
broader selection convenience to evaluate more and better information to evaluate merchandise Personalization Mobile retailing |
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catalog channel |
1/2 of Us consumers shop through catalog each year merchandise categories declining sales role is shifting safety and convenience |
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TV home shopping channel |
many touch points with customers US annual sales $20 billion |
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Direct selling channel |
highly interactive
personalized information US annual sales $30 billion |
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Automated Retailing channel |
80% from cold beverages,prepared food services, candy and snacks US annual sales $40 billion |
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store channel |
touching and feeling merchandise personal service risk reduction immediate gratification entertainment and social interaction browsing cash payment |
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challenges of effective multichannel retailing |
multichannel supply chains and information systems integrated shopping experience merchandise assortment pricing strategies channel migration |
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integrated shopping experience |
communicate with customers anytime, anywhere through multiple channels websites, stores, kiosks, handheld devices, integrating legacy systems for seamless customer interface |
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evolution toward multichannel retailing |
overcome limitations of an existing format expand market presence increase share of wallet give insights into consumers' behaviors |
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limitations of store |
limited space limited choices high cost of comparison crowded |
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capabilities required for multichannel retailing |
retailing skills, management skills, technology skills |
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retailing skills |
developing assortments and managing inventory present merchandise in catalogs |
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management skills |
managing employees in distant location distribute merchandise efficiently from distribution centers to stores |
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technology skills |
present merchandise in websites process orders electronically efficient distribution of individual orders to homes operate information system for all channels |
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Customers' Buying process |
Information -> Evaluate -> Buy |
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Need recognition |
Utilitarian needs hedonic needs |
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utilitarian needs |
satisfied when purchases accomplish specific task |
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hedonic needs |
satisfied when purchases accomplish a need for pleasure (entertainment, emotional, and recreational experience as in department stores or specialty stores). |
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utilitarian shopper |
shop in a deliberate and efficient manner shopping experience should be easy and effortless desired merchandise easy to locate and purchase |
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Hedonic Needs that retailers can satisfy |
stimulation: background musi social experience: lifestyle centers learn new trends and fashions: the body shop satisfy need for power and status:upscale health resorts self-rewards: personalized makeovers adventure: treasure hunting for bargains |
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retailers encourage customers to spend time in stores |
the more time customers spend shopping, the more they will buy stores use food and personal service websites provide enjoyable experiences with technologies |
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information search |
amount of information search depends on value from searching versus the cost of searching |
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factors affecting amount of information search |
product characteristics customer characteristics market characteristics |
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sources of information |
Internal: past experiences and memory external: consumer reports, advertising, word of mouth |
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should retailer limit consumers information search? |
YES! because retailers want consumers to make purchase decision as soon as possible |
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how can retailers limit the information search? |
information from sales associates provide an assortment of services provide good assortments everyday low pricing build credit/reputation/ brand image DO NOT rely on customer reviews |
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Multiattribute model |
customers see a retailer, product, or service as a collection of attributes or characteristics Predict a customer's evaluation of a retailer product , or service based on: its performance on relevant attributes, and the importance of those attributes to the customer |
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Implications for retailers |
Information needed to use multi-attribute model alternative consumer considering characteristic/benefits sought in making store and merchandise choices ratings of alternative performance on criteria importune of criteria consumer |
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consideration set |
increase beliefs about performance change customers' importance weights add a new benefit |
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purchasing merchandise or service |
customers do not always purchase a brand with the highest overall evaluation |
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postpurchase evaluation |
satisfaction post purchase evaluation becomes part of the customer's internal information that affects future store and product decisions build store and brand loyalty |
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types of buying decisions |
routine response behavior limited problem solving Extensive problem solving |
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extended problem solving |
consumers devote time and effort analyzing alternatives financial risks physical risks social risks |
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Limited problem solving |
purchase decisions process involving moderate amount of effort and time customers engage in this when they have had prior experience with products or services customers rely more upon personal knowledge majority of customer decisions involve limited problem solving |
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encouraging impulse buying |
influence by using prominent point of purchase(POP) or point of sale (POS) salespeople suggest add-ons have complementary merchandise displayed near product of interest use signage in aisle put merchandise where customers are waiting |
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habitual problem solving |
purchase decision process involving little or no conscious effort for purchases that aren't important to the consumer for merchandise consumers have purchased in the past for consumers loyal to brands or a store |
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loyalty |
brand and retailer |
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brand loyalty |
consumer liked and repeatedly buys a particular brand |
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retailer loyalty |
consumer likes and repeatedly buys from a particular retailer |
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social factors influencing the buying decision process |
family, culture, reference group |
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family influences buying decisions |
purchases are for entire family to use whole family participates in decision making process retailers work to satisfy needs of all family members |
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reference groups |
a reference group is one or more people whom a person uses as a basis of comparison for beliefs feelings and behaviors reference groups affect buying decision by: offering information providing rewards for specific purchasing be haviors enhancing a consumers self image |
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culture
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is the meaning, beliefs, morals and values shared by the most members of a society |
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retail market segment |
a group of customers who are attracted to the same retail mix because they have similar needs |
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Criteria for evaluating market segment |
actionable, identifiable, substantial, reachable |
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actionable |
retailer should know what to do to satisfy needs for the customers are in the segment |
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identifiable |
retailer is able to determine which customers are in the segment |
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substantial |
market segment must be larger enough or its buying power significant to generate sufficient profits |
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reachable |
retailer can target promotions and other elements of the retail mix to customers in the segment |
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approaches for segmenting markets |
geo-demographic demographic geographic lifestyle benefits buying situations |
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strategy |
is a long term plan of action designed to achieve a particular goal |
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retail market strategy |
is a long term plan of action designed to achieve a particular retailing goal in the market |
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elements in retail strategy |
competitive advantage: strengths retail format: what to offer customers, merchandise Target market: who is our customer |
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retailers target market |
geographic segmentation: local, regional, national price segmentation: low, middle, high class retail format segmentation - department store, specialty store, discount store, etc. |
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retail mix |
the combination of factors used by retailers to satisfy customers need component product: merchandise or service price: how to set price place: retail channel, location choice promotion: communication with customers |
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more sustainable sources of competitive advantage |
location customer loyalty customer service exclusive merchandise low cost supply chain management information systems buying power with vendors committed employees |
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less sustainable sources of competitive advantage |
better computers more employees more merchandise greater assortment lower prices more advertising more promotions cleaner stores |
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customer loyalty |
customers are committed to buying merchandise and services from a particular store customers are reluctant to patronize competitive retailers |
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ways to build loyalty |
develop strong brand image clear positioning strategies loyalty programs outstanding customer service unique merchandise |
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private label |
exclusive brand nowhere else |
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relationships with suppliers |
low cost - efficiency through coordination electronic data interchange (EDI) collaborative planning and forecasting to reduce inventory and distribution costs exclusive sale of desirable brands special treatment early delivery of new styles shipmen of scare merchandise |
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efficiency fo internal operations |
distribution and info systems by decreasing costs in vendor, distribution center and store, there is more money available to invest in better services, increase in breadth and depth, decrease in prices. |
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growth strategies |
market penetration market expansion retail format development diversification related vs. unrelated |
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market penetration |
attract customers form target market get current customer to visit store more often or buy on each visit |
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cross selling |
sales associates in one department sell complimentary merchandise from other departments |
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market expansion |
involves using the existing retail format in new market segments EX: Abercrombie and Fitch (for college students) opens lower-priced chain Hollister for high school students |
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format development |
develops a new retail format with a different retail mix for the same target market multi-channel retailing |
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diversification |
introduces new retail format for market segment not currently served by the retailer |
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Three factors to determine global growth |
potential size of the retail market in the country degree in which the country does and can support the entry of foreign retailers engaged in modern retail practice risks or uncertainties in sales and profit |
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key success in global retailing |
sustain competitive advantage: low cost, strong private label brands, fashion reputation, category dominance adaptability global culture financial resources |
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stages in the strategic retail planning process |
1. define the business 2. conduct situation audit 3. identify strategic opportunities 4. evaluate strategic alternatives 5. establish specific objective and allocate resources 6. develop a retail mix to implement strategy 7. evaluate performance and make adjustments |
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Step 1: define business mission |
broad description of a retailers objectives and scope of activities it plan to undertake What business are we in? who are our customers? what are our capabilities? what do we want to accomplish? |
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step 2: conduct a situational audit |
strengths, weakness, opportunity, threat |
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SWOT analysis |
draw conclusions-some principles take advantage of strengths avoid weakness grasp opportunities adjust to threat |
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market factors |
market size growth seasonality business cyles |
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market size |
large markets attractive to large retail firms |
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growth |
typically more attractive than mature and declingin |
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seasonality |
can be an issue as resources are necessary during peak season only |
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business cycle |
retail markets can be affected by economic conditions - military base towns |
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competitive factors |
barriers to entry bargain gin power of vendors competitive rivalry |
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barriers to entry |
scale economies of big box retailers service and unique, high end products of small retailers |
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bargaining power of vendors |
markets are less attractive when only a few vendors control the merchandise sold within it EX: cosmetics |
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competitive rivarly |
defines the frequency and intensity of reactions to actions undertakes by competitors conditions leading to intense rivalry: a large number of same size retailers, slow growth, high fixed costs, a lack of perceived differences between competing retailers |
