Chapter 1 – Introduction to the World of
Retailing
Retailing – a set of business activities that
adds value to the products and services sold to
consumers for their personal or family use.
Retailer – it is a business that sells products
and/or services to consumers for personal of
family use.
Distribution Channel – manufacturing >
wholesaler > retailer > consumer
How Retailers Add Value:
Break Bulk – buy it in quantities customers
want
Hold Inventory – buy it at a convenient place
when you want it
Provide Assortment – but other products at
the same time
Offer Services – see it before you buy, get
credit, layaway
Social and Economic Significance
Retailing
- Support for community
- Retail sales
- Employment
- Management training opportunities
- Entrepreneurial opportunities
Retailers Microenvironment
Competitors
 Intratype competition – competition
between the same type of retailers
 Intertype competition – competition
between retailers that sell similar
merchandise using different formats
Variety – is the number of different
merchandise categories within a store or
department.
Scrambles Merchandising – offering of
merchandise not typically associated with the
store type.
Retail Strategy – indicates how the firm plans
to focus its resources to accomplish its
objectives. It identifies:
 Target markets, or markets, toward
which the retailer will direct its efforts.
 The nature of the merchandise and
services the retailer will offer to satisfy
the needs of the target market; and
 How the retailer will build a long term
advantage over its competitors.
Lists of Filipino Retail Entrepreneurs
1. Alfonso T. Yuchengco – Heads Yuchengco
Group of Companies, Chairman of Rizal
Commercial Banking Corporation (RCBC),
Chairman of the Mapua Institute of
Technology.
2. Alfredo M. Yao – Zest-O Corp. (Zest-O)
3. Amable R. Aguiluz V - AMA Institute of
Computer Studies (AMA)
of
4. Axel Kornerup – Netopia Internet Café
(Netopia)
5. Andrew Gotianun – runs the Filinvest
Development Corporation.
6. Andrew Tan- runs the Alliance Global
Group Inc. (AGI), Megaworld Corporation,
Emperador Distillers, Golden Arches
Development Corporation – Possesses a
franchise of McDonald’s
7. Ben Chan – Bench Apparels (Bench)
8. Ben Colayco – Level Up
9. Bernie H. Liu – owner of Penshoppe
10. Bienvenido Tantoco, Sr – Rustans
Department Stores and Supermarkets
11. Bryan Tiu – owner of Teriyaki Boy
Restautant
12. Betty Ang – President of privately held
Monde Nissin, maker of instant noodles,
biscuits and snack foods (Lucky Me!, Monde
and Bingo)
13 Cecilio Kwok Pedro – founder of Lamoiyan
Corp. (Hapee toothpaste)
14. Dr.Rolando B. Hortaleza and Dra.
Rosalinda Ang – Home Beauty Exclusives
(HBC)
15. Edgar Sia II – Founder of Mang Inasal
(70% share acquired by Jolibee Corporation in
October 2010)
16. Emilio T. Yap – owns Manila Bulletin,
chairman of the Manila Hotel and Chairman
Emeritus of Philtrust Bank
17. Felipe L. Gozon – current chief executive
and chair of GMA Network Inc. (GMA 7)
18. Frederick Dy – chairman of the publicly-
listed universal bank, Security Bank
Corporation
19. George Ty – founder of Metropolitan Bank
and Trust Company (Metrobank)
20. Henry Lim Bon Liong – Sterling Paper
Group of Companies

Misconceptions About Careers in Retailing

- Don’t need college
- Low pay
- Long hours
- Boring
- Dead-end job
- No benefits
- Everyone is part-time
- Unstable environment
- No opportunity for women and minorities
Chapter 2 – Types of Retailer
General Trends in Retailing
- New Types of Retailers
- Increased Globalization
- Globalization
- Growth in Services Retailer
- Demise of Pure Electronic Retailers
(Webvan, eToys, etc)
- Growth in use of multi-channel retailing
by traditional retailers
- Increase use of technology to reduce
cost, increase value delivered
Merchandise Offering
 Variety (breadth of merchandise) –
the number of merchandise categories
 Assortment (depth of merchandise) –
the number of items in a category
(SKUs)
Types of Retailers
Food Retailers
- Mom and Pop Stores
- Convenience Stores
- Supermarkets
- Supercenters
General Merchandise Retailers
- Department Stores
- Specialty Stores
- Discount Stores
- Category Specialists
- Off-Price Retailers
- Warehouse Clubs
Conventional Supermarket Survival Pack
- Emphasize Fresh Perishables
- Target health conscious and ethnic
consumers
- Provide a better in-store experience
- Offer more private label brands
Food Retailers
Supermarkets
- Cars, highways and TV to build brands
- Knowledgeable customers – self service
- Perishable vs. packaged goods
Big Box Retailers
- Warehouse Clubs
- Supercenters
- Hypermarkets
Convenience Stores
Convenience Stores Fight Competition
- Tailors associates to local market
- Stores are more convenient to shop
- Offers fresh food
- Fast, casual restaurants
- Financial services available
- Opening smaller stores closer to
consumers – like airports
Types of General Merchandise Retailers
- Department Stores
- Specialty Stores
- Category Specialists
- Home Improvement Centers
- Discount Stores
- Drugstores
- Off-Price retailers
- Extreme Value Retailers
Three Tiers of Department Stores
- First Tier: upscale, high fashion chains
with exclusive designer merchandise
and excellent customer service.
- Second Tier: Retailers sell more
modestly priced merchandise with less
customer service:
- Third Tier: Value oriented caters to
more price conscious customer
Non-store Retail Formats
- Electronic Retailing
- Catalog and Direct Mail
- Direct Selling
- Television Home Shopping
- Vending Machines
Electronic Retailing

- History of frenzied investments and false

predictions of retail dominance
- Primarily used by traditional retailers to
compliment store and catalog offerings
- Exclusive e-tailers target small and
dispersed niche markets

Services vs. Merchandise Retailers

Intangibility
- Problems in Evaluating Service Quality
- Performance of Service Provider
Simultaneous Production and Delivery
- Importance of Service Provider
Perishability
- No Inventory, Must Fill Capacity
Inconsistency of the Offering
- Importance of HR Management

Types of Retailing Ownership

Independent, Single Store Establishments
- Wholesaler Owned Cooperatives
Corporate Chains
Franchises
Chapter 3 – Multi-Channel Retailing Customization Benefits Offered by
Electronic Channel
- Information tailored to individual
Why are Retailers Using Multiple Channels
consumers to help them make quicker
to Interact with Customers?
and better purchase decisions.
- Customers want to interact in different
What People Buy Over the Internet
ways.
- Each channel offers a unique set of - Travel
benefits for customers. - PC/Electronics/Toys
- Books/Software
Benefits Provided by Different Channels
- Apparel
Stores: - Home and Garden
- Jewelry and Watches
- Browsing
- Touching and feeling products Types of Attributes
- Personal service
- Search: Can be determined prior to
- Cash payment
purchase, consumption. (price, brand)
- Entertainment and social interaction
- Experience: Cannot determine prior to
- Immediate gratification
purchase, consumption. (taste, comfort)
- Risk reduction
- Credence: Cannot be directly
Catalogs: determined by the average consumer.
(health benefits, technical specifications)
- Convenience
- Safety How to Sell Over the Internet
- Portability; easily accessible
- Even when retailers provide “touch and
- Visual presentation
feel information” retailers still experience
Internet: 10% returns of purchases, 20% on the
electronic channel.
- Convenience - National brands provide a consistent
- Safety experience for customers to overcome
- Broad selection not being able to touch and feel.
- Detailed problem-solving information
- Personalization How Can the Electronic Channel Overcome
Limitations?
Problem Solution Benefits Offered by
Electronic Channel - Use technology to convert “touch and
feel information into “look and see”
- Bundling information, services, and information.
products - 3D imaging, Zoom technology, Live
- Examples: iVillage, The Wedding chat, 360 degree viewing, and virtual
Channel, The Knot models.
Virtual Communities Perceived Risks of Electronic Shopping
- People who seek information, products Security of Credit Card Transaction –
and services communicate with each security problems have not arisen in actual
other regarding specific issues. usage.
Potential Privacy Violations – consumers are - Already have a database
concerned about retailers collecting their - Visual merchandise for catalog is the
personal information. same for electronic.
When the Electronic Channel Provides Store-based Retailers vs. Electronic Retail
Superior Benefits Entrepreneur
Gifts - Knowledge of retailing (assorted
planning and distribution systems)
- Saves time
- Reputation
- Saves effort in packing
- Customer Database
- Saves effort in delivery
- Convenient Location for Picking Up,
Services Returning Merchandise, Warranty
Service and Installation
- No shipping problems - Vendor Relationships
- Examples: travel websites, banking,
newspaper Advantages of Retailers vs. Manufacturers

Resources Needed to Compete Effectively - Distribute merchandise directly to

in Internet Retailing customers
- Provide assortments
- Exciting, easy to use website - Collect and use information about
- Management Information Systems customers
 Order processing and status,
customer database, personalization Ecommerce Myths
software
- Lost cost of entry
- Retailing Skills
- Overestimate importance of technology,
 Managing inventory, editing
under estimated need for traditional
assortment
resources
- Efficient Fulfilment System
- First mover wins
 Significant costs – last mile
- Gets rid of the middleman
 Picking and packing individual orders
 Handling returns – reverse Evolution Toward Multi-Channel Retailing
distribution
- Electronic channel gives a way to
- Strong brand name and image
overcome limitations of existing format
 Build traffic
- With electronic channel, retailers can
 Reduce customer perceived risk
reach out to new markets
- Complementary Merchandise
- Builds share of wallet
 One stop shopping
- E-channel enables retailers to give
 Lower shipping costs
insights into customer’s shopping
- Availability of Customer Information
behaviour.
 Tailored presentations -
personalization Issues Confronting a Multi-Channel
Catalog Retailers can Add Electronic - Maintaining brand image across
Channel Easily channels
- Merchandise assortment offered in
- Ready to take orders
channel
- Able to pack merchandise
- Pricing across channels
- Able to deliver
- Able to handle returned merchandise
Chapter 4 – Customer Buying Behavior
Types of Needs
- Utilitarian Needs – satisfied when
purchases accomplish a specific task.
Shopping needs to be easy and
effortless like Sam’s or a grocery store.
- Hedonic Needs – satisfied when
purchases accomplish a need for
entertainment, emotional
recreational experience as
department stores or specialty stores.
Satisfied Hedonic Needs
- Stimulation
- Social experience
- Learn new trends and fashions
- Satisfy need for power and status
- Self-rewards
- Adventure
Stimulating Need Recognition
- Suggestions by sales associates
- Advertising and direct mail
- Visual merchandise in store
- Special events in the store
- Signage
- Displays
Factors Affecting Amount of Information
Search
- Nature of the product – complexity,
cost
- Characteristics of Customer – past
experience, perceived risk, time
pressure
- Aspects of the Market – number of
alternative brands
Sources of Information
- Internal – past experiences, memory
- External – consumer reports,
advertising, word of mouth
How Can Retailers Limit the Information
Search?
- Information from sales associates
- Provide an assortment of services
- Provide good assortments
- Everyday low pricing
- Credit
Information Needed to Use Multi-Attribute
Model
and - Alternative retailers consumer can
in consider
- Characteristics/Benefits Sought in
Making Store and Merchandise Choices
- Ratings of Alternative Performance on
Criteria
- Importance weights that consumers
attach to the merchandise
Getting into the Consideration Set
- Increase performance beliefs of your
store
- Decrease performance beliefs about
competitor
- Increase importance weight of attributes
on which you have an advantage
- Add a new benefit on which you excel
Purchasing Merchandise or Services
Customers do not always purchase a brand
with the highest overall evaluation.
- The high-rated item may not be
available in the store.
- How can a retailer increase the chance
that customers will convert their
merchandise evaluations into purchase?
Converting Merchandise or Service
Evaluations into Purchases
 Don’t stock out of popular merchandise
 Offer liberal return policies, money back
guarantees, and refunds if same
merchandise is available at lower prices
from another retailer
 Offer credit
  Make purchases easy by having - For purchase that aren’t important to the
convenient checkout customers
 Reduce waiting times at checkout - For merchandise consumers have
purchased in the past
- For consumers loyal to brands or a store
Types of Purchase Decisions
Customer Loyalty
Extended Problem Solving
Brand Loyalty
- High financial or social risk
- Committed to a specific brand
Limited Problem Solving - Reluctant to switch to a different brand
- Some prior buying experience - May switch retailers to buy brand

Habitual Decision Making Store Loyalty

- Store brand, loyalty - Committed to a specific retailer

- Reluctant to switch retailers
Factors Influencing the Buying Decision
Extended Problem Solving Process
Consumer devote time and effort analyzing - Beliefs – about performance of retailers
alternatives and products
- Financial risks – purchasing expensive - Values – importance weights
products or services - Attitudes – evaluations of retailers and
- Physical risks – purchases that will products
affect consumer’s health and safety - Family
- Social risks – consumers will believe - Reference Group
product will affect how others view them - Culture

What Retailers Need to Do For Customers Family Influences Buying Decisions

Engaged in Extended Problem Solving - Purchases are for entire family to use
- Provide a lot information – use - Whole family participates in decision
making process
salespeople rather than advertising to
- Retailers work to satisfy needs of all
communication with customers
family members
- Reduce the risks – offer guarantees,
return privileges
Culture
Encouraging Impulse Buying
- Culture is the meaning, beliefs, morals
- Have salespeople suggest add-ons and values shared by most members of
- Have complementary merchandise a society
- Displayed near product of interest - Western culture: individualism
- Use signage in aisle or special displays - Eastern culture: collectivism
- Put merchandise where customers are - Subculture are distinctive groups of
waiting people within a culture
Habitual Problem Solving
Purchase decision process involving little or no
conscious effort
Reference group Mass Market Theory: This theory suggests
that fashions spread across social classes and
- A reference group is one or more people
that each social class has its own fashion
whom a person uses as a basis of
leaders who play a key role in their own social
comparison for beliefs, feelings and
networks.
behaviors.
Subculture Theory: This theory is based on
Reference group affect buying decisions by:
the development of recent fashions. These
- Offering information fashions start with people from lower-income
- Providing rewards for specific groups and “trickled up” to mainstream
purchasing behaviors consumer classes.
- Enhancing a consumer’s self-image
Saturation to Decline
Criteria for Evaluating Segmentation
- When fashion reaches saturation, it
Schemes becomes less appealing to consumers.
- Actionability It no longer provides an opportunity for
- Identifiability people to express their individuality.
- Accessibility
- Stability
- Size
What is Fashion?
- A type of product or way of behaving
that is temporarily adopted by a large
number of consumers because it is
viewed as socially acceptable.
Why Consumers Buy Fashions?
- Communicate with others
- Manage appearance
- Express self-image
- Enhance ego
- Impress others
Stages in the Fashion Life Cycle
- Adoption by fashion leaders
- Spread to larger consumer groups
- Saturation
- Decline in acceptance
- Obsolescence
Theories of Fashion Diffusion
Trickle Down Theory: Fashion leaders are
consumers with the highest social status –
wealthy, well-educated consumers.
After they adopt a fashion, the fashion trickles
down to consumers of lower classes.