CHAPTER 1: AN

INTRODUCTION
TO RETAILING
 Chapter Objectives
To define retailing, consider it from different
perspectives, demonstrate its impact, and note
its special characteristics
To introduce the concept of strategic planning
and apply it
To show why the retailing concept is the
foundation of a successful business, with an
emphasis on the total retail experience,
customer service, and relationship retailing
To indicate the focus and format of the text

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 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.

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 Issues in Retailing
How can we best serve our customers while earning a fair
profit?
How can we stand out in a highly competitive environment
where consumers have so many choices?
High unemployment, low consumer confidence, high savings
rates have reduced consumer spending. At the same time
retail competition has increased through increased format
blurring (sales of cameras at office supply stores, carpeting
and major appliances at home improvement centers).
How can we grow our business while retaining a core of loyal
customers?

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 The Philosophy
Retailers can best address
these questions by fully
understanding and applying
the basic principles of
retailing, as well as the
elements in a well-
structured, systematic, and
focused retail strategy.

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 Figure 1-1: Subway

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 An Ideal Candidate for a
Retailing Career
Must be a people person (more
important than technical knowledge).
Technical skills can be taught more
easily than people skills
Must be flexible
Should be decisive
Must have analytical skills
Must have stamina

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 Table 1-1: The 10 Largest Retailers in
the United States (2011)
Rank Company Main Emphasis
1 Wal-Mart Full-line discount stores, supercenters,
membership clubs
2 Kroger Supermarkets, convenience stores, jewelry stores
3 Target Full-line discount stores, supercenters
4 Walgreens Drugstores
5 Home Depot Home centers
6 Costco Membership warehouse clubs
7 CVS Caremark Pharmacies
8 Lowes Home centers
9 Best Buy Electronics, major appliances
10 Sears Holdings Department store, discount (Kmart)

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 Manufacturer
Retailer

Final
Wholesaler
Consumer

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 Figure 1-5: The Retailers Role
in the Sorting Process

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 Multi-Channel Retailing
A retailer sells to consumers
through multiple retail formats:
Web sites

Physical stores

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 Multi-Channel Retailing
Cross selling across channels (in-store product availability info on Web site)
Consistent pricing in all channels (credibility)
Can buy, and return product regardless on channel
Role of each channel
o Store try on, ease of return, fast availability (immediacy), compare offerings

o Web 24/7, product information, product reviews by customers,

personalization (tailored assortment based on past purchases), most current

pricing, closeout sales
o Catalog-permanency, true color

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 Figure 1-6: Apple

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 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

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 Exclusive vs Intensive Distribution
Exclusive Distribution Fate of retailer is tied
to manufacturer success, retailer has no free-
rider concerns, retailer has less price
competition, manufacturer is better assured of
high levels of customer support
Intensive Distribution- Manufacturer is better
assured of maximizing sales (especially for
convenience goods), retailers face strong
competition for price and service, intratype
competition

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 Figure 1-7: Comparing
Distribution Types

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 Small Impulse
Average Purchase
Sale

Retailers
Strategy

Popularity
of
Stores

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 Retail Strategy

An overall plan for guiding a retail

firm
Influences the firms business
activities
Influences firms response to
market forces

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 Six Steps in Strategic Planning
1. Define the type of business
(corporate mission)
2. Set long-run and short-run objectives
3. Determine the customer market
4. Devise an overall, long-run plan
5. Implement an integrated strategy
6. Evaluate and correct (fine-tune)

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 Figure 1-9: Expect More. Pay
Less at Target

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 Aspects of Targets Strategy
Growth objectives Employee
Appeal to a prime relations
market Innovation
Distinctive image Commitment to
Focus technology
Community
Customer service
involvement
Multiple points of Monitoring
contact performance

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 Customer Orientation

Coordinated Effort
Retailing Retail
Concept Strategy
Value-driven

Goal Orientation

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 Figure 1-11: The Build-A-Bear Experience:
Never Boring

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 Customer Service
Activities undertaken by a retailer in
conjunction with the basic goods
and services it sells. This includes:
Store hours

Parking

Shopper-friendliness

Credit acceptance

Salespeople

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 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?
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 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 encounter
Concentrate on the total retail experience
Monitor satisfaction
Stay in touch with customers

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 Effective Relationship Retailing
Use a win-win approach
It is easier to keep existing customers happy than to gain
new ones (present value of current customers income
stream cost of keeping existing customers content
versus cost of replacing them with new customer
Develop a customer database (loyalty programs)
Ongoing customer contact is improved with information
on peoples attributes and shopping behaviors

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 Types of Loyalty Programs
Additional discounts at register
Not a real loyalty program

1 free with every n items purchased

Easily copied, no customer database

Rebates based on cumulative purchases

Customer maintains records

Can develop heavy half programs like Hilton

Targeted offerings and mailing based on purchase

history
Tesco example Market research staff know more
about my customers than board chairperson

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 Relationship Management
Among Retailers and Suppliers
Disagreements may occur in the following areas (channel conflict):
control over channel (private label)

profit allocation (resale price control)

number of competing retailers (exclusive, selective or intensive

distribution)
product displays

promotional support (cooperative advertising funds and

restrictions)
payment terms (payment on time)

operating flexibility

gray market sales

markdown monies, chargebacks by dominant retailers

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 Approaches to the
Study of Retailing

Institutional
Functional

Strategic

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 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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