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CHAPTER 1

Introduction to the
World of Retailing
CHAPTER 01
McGraw-Hill/Irwin

Retailing Management 8e

Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

The McGraw-Hill Companies, All rights reserved.

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What is Retailing?

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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
A retailer is a business
that sells products and/or
services to consumers for
personal or family use.
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Examples of Retailers

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Retailers:
Kohls, Macys,
Wendys,
www.Amazon.com, Jiffy
Lube, AMC Theaters,
American Eagle
Outfitter, Avon, J.Crew

Firms that are retailers and wholesalers sell to other business as well as consumers:
Office Depot, The Home Depot, United
Airlines, Bank of America, Costco
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Distribution Channel

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The Retailers Role in a Supply


Chain

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Retailers 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.

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Manufacturing, Wholesaling
and Retailing

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Vertical 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, such as operating warehouses or
designing private label merchandise.
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Manufacturing, Wholesaling
and Retailing

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Forward Integration manufacturers


undertake retailing activities
Ex: Ralph Lauren (New York Jones, Liz
Claiborne) operates its own stores
Large retailers engage in both wholesaling
and retailing
Ex: Wal-Mart, Lowes, Safeway, Brown Shoe
Company
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Do Retailers Add Value?

Example

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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?

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How Retailers Add Value

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Provide Assortment
Buy other products at
the same time (brands,
designs, sizes, etc.)
Break Bulk
Buy it in quantities
customers want
Hold Inventory
Buy it at a convenient
place when you want it
Offer Services
Increasing value of
products and services
Ryan McVay/Getty Images

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Social and Economic


Significance of Retailing

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Retail Sales:
Over $4.1 trillion in
annual U.S. sales in 2005

Employment:
Employs over 24 million
people in 2005
One of the largest sectors
for job growth in US

Social responsibility
Global player
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Social Responsibility

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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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Structure of Retailing and Distribution


Channels around the World: The United
States
The United States

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CHINA

The nature of retailing and


distribution channels in the U.S.
is unique.
Has the greatest retail density
Has the greatest concentration
of large retail firms
Large 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.

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Opportunities in Retailing:
Management Opportunities

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People with a wide range of skills and interests


needed because retailers functions include
Finance
Purchase
Accounting
Management information system (MIS)
Supply management including warehouse
and distribution management
Design and new product development
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Opportunities in Retailing:
Entrepreneurial Opportunities

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Retailing provides opportunities


for people who want to start their
own business
Some of the worlds richest
people are retailing entrepreneurs

Wal-Mart: Sam Walton

Examples of retailing
entrepreneurs
Sam Walton (Wal-Mart)
Jeff Bezos (www.Amazon.com)
Ingvar Kamprad (IKEA)
Anita Roddick (the Body Shop)

IKEA: Ingvar Kamprad

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Career Opportunities in
Retailing
Start Your Own Business

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List of Retail Entrepreneurs on Forbes 400


Richest Americans

Walton Family (Wal-Mart)


Fisher (The Gap)
Wexner (The Limited)
Menard (Menards)
Marcus (The Home Depot)
Kellogg (Kohls)
Schulze (Best Buy)
Levine (Family Dollar)
Gold (99Cent Only)
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Retail Strategy

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A retail strategy
should identify
the target market
the product and
service mix
a long-term
comparative
advantage

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Special Characteristics
Affecting Retailers
Small
Average
Sale

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Impulse
Purchase

Retailers
Strategy

Popularity
of
Stores

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Retail Strategy

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Need to identify the


competition
Intratype competition
Competition among
firms in the same type of
business.
Intertype competition
Competition among
firms in different types of
businesses but which sell
the same product.

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Retail Strategy

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Identifying
customers
What are the
significant
demographic and
life-style trends
Who are your
target customers

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Aspects of Targets Strategy

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Growth-oriented Multiple points of


contact
objectives
Employee relations
Appeal to a prime
Innovation
market
Commitment to
Distinctive
technology
company image
Community
Focus
involvement
Strong customer Constantly
monitoring
service
performance
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Decision Variables for Retailers

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Customer Service

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Activities undertaken by a retailer in


conjunction with the basic goods and
services it sells.
Store hours
Parking
Shopper-friendliness
Credit acceptance
Salespeople
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A Customer
Respect Checklist

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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?

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Relationship Retailing

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Seek to establish and maintain longterm 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

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Effective Relationship Retailing

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Use a win-win approach


It is harder to get new customers than to
keep existing ones happy
Develop a customer database
Ongoing customer contact is improved with
information on peoples attributes and
shopping behavior

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Misconceptions About
Careers in Retailing

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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, photograph

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