Introduction to Retailing

What is
Retailing?
 RETAILING
Retailing
- includes all activities involved in
Selling and providing goods and
services to ultimate consumers for
personal,or household use.
Retailer
 A business whose sales come primarily from
retailing
Examples of Retailers
• Retailers:
-SM, PureGold, Walmart, Holiday Inn,
McDonalds, Amazon.com,
• Firms that are retailers and wholesalers that sell to
other business as well as consumers:
-Office Depot, The Home Depot, United
Airlines, Bank of America,
Distribution Channel
PPT 1-4
Distribution Channel
SUPPLY CHAIN
• Is a set of firms that
make and deliver a
given set of goods
and services to the
ultimate consumers.
MANUFACTURERS
• Typically make products and
sell them to retailer or
wholesalers.
• Nike and Apple sell directly to
consumers, they performing
both production and retailing
business activities.
WHOLESALERS
• Engage in buying, taking
title to, so often storing, and
physically handling goods in
large quantities then
reselling the goods (usually
in small quantities) to
retailers.
• Most large retailer like Wal-Mart
engage both in wholesaling and
retailing activities.
• They buy directly from
manufacturers, have
merchandise shipped to their
warehouses for storage and
then distribute to their stores.
Integrated Supply
Chains
1. Vertical
2. Backward
3. Forward
VERTICAL INTEGRATION

• Means that a firm performs

more than one set of
activities in the supply
chain.
• Such as manufacturing,
wholesaling and retailing.
BACKWARD INTEGRATION
 Retailer performs
some distribution
and manufacturing
activities such as
operating
warehouses or
designing private-
label
merchandise.
FORWARD INTEGRATION
 When
manufacturer
undertakes
retailing activities
such as Disney
Store and Ralph
Lauren operating
its own retail
stores.
Types of Retailing
• Specialty Stores
• Department Stores
• Supermarkets
• Convenience Stores
• Discount Stores
 Value Creating Functions of
Retailers

1. Provide an assortment of products and services –

enables customers to choose from a wide
selection of brands, designs, sizes, colors and
prices in one location.
2. Breaking bulk – provides cost efficiencies for
manufacturers and also gives the consumers
more manageable quantities they prefer.
3. Holding inventory - storage of products
4. Providing services – such as credit options,
display of products, salespeople to manage stores
and websites
 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?
 How can we grow our business while retaining a
core of loyal customers?
The Retailer’s Role in the
Sorting Process

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 An Ideal Candidate for a
Retailing Career

Must be a people person

Must be flexible
Should be decisive
Must have analytical skills
Must have stamina
 Multi-Channel Retailing

A retailer sells to consumers through

multiple retail formats:
 Web sites
 Physical stores
Retail Strategy - is the overall plan guiding a
retail firm. It influences the firm’s business
activities and its response to market forces,
competition and the economy.

1-25
Six Steps in Strategic Planning

1. Define the type of business in terms of the

goods and services category and the
economy
2. Set long-run and short-run objectives for
sales and profit, market share and image
3. Determine the customer market to target
on the basis of its characteristics and needs
Six Steps in Strategic Planning
4. Devise an overall, long-run plan that gives
general directions to the firm and its employee
5. Implement an integrated strategy that combines
such factors as store location, product
assortment, pricing and advertising and displays
to achieve objectives
6. Evaluate performance regularly and correct
weaknesses or problem when observed
Applying the Retailing Concept

Customer Orientation

Coordinated Effort
Retailing Retail
Concept Strategy
Value-driven

Goal Orientation
 Applying the Retailing Concept

 Customer orientation. The retailer determines the attributes

and needs of its customers and endeavors to satisfy these
needs to the fullest.

 Coordinated effort. The retailer integrates all plans and

activities to maximize efficiency

 Value-driven. The retailers offers good value to customers,

whether it be upscale or discount.

 Goal orientation. The retailers sets goals and uses its strategy
to attain them
 Customer Service
refers to the identifiable, but sometimes
intangible, activities undertaken by a retailer in
conjunction with the basic goods and services it
sells. It has a strong impact on the total retail
experience. It includes:

 Store hours
 Parking
 Shopper-friendliness
 Credit acceptance
 Salespeople
Effective Relationship Retailing
• Use a “win-win” approach
– It is easier to keep existing customers happy than to
gain new ones
• Develop a customer database
– Ongoing customer contact is improved with
information on people’s attributes and shopping
behaviors
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?
• “It Costs Five Times More to
Acquire a Customer than to
Retain a Customer” Explain.

Retail Mgt. 11e (c) 2010 Pearson Education, Inc. 1-33

publishing as Prentice Hall
Thank you for listening!
 Building and Sustaining
Relationships in Retailing
 What is Value?

Channel Perspective Customer Perspective

 Value is a series of  It is the view of all the
activities and processes - benefits from a purchase.
the value chain - that
provides a certain value for
 Value is based on the
the consumer.
perceived benefits received
 It is the totality of the versus the price paid.
tangibles and intangibles
product and customer
service attributes offered to
shoppers
 Retail Value Chain
 Represents the total bundle of benefits offered to
consumers through a channel of distribution
 Store location and parking, retailer ambience,
customer service, brands/products carried, product
quality, retailer’s in-stock position, shipping, prices,
image, and other elements

 3 Aspects of Value-Oriented Retail Strategy

Expected
Augmented
Potential
 Retail Value Chain
3 Aspects of Value-Oriented Retail Strategy

 Expected retail strategy –it represents the minimum

value chain elements a given customer segments.
 Expected value chain: store cleanliness, convenient hours, well
inform employees, timely service, popular products in stock
parking and return policy

 Augmented retail strategy- includes the extra elements

in a value chain differentiate one retailer from another
 How SM Malls different to Ayala malls
 Augmented elements : exclusive brands, superior sales people, loyalty
programs, delivery etc.
 Retail Value Chain

3 Aspects of Value-Oriented Retail

Strategy
Potential retail strategy – comprises value
chain elements not yet perfected by a
competing in the retailer’s category
What customer services could a new
upscale apparel chain offer that no other
chain offers?
 Customer Relationship
Management(CRM)
 is an approach to managing a company's interaction
with current and future customers
 Customer Base: retailer must regularly analyzed their
customer base in terms of:
 Population and lifestyle trends
 Attitudes toward and reason for shopping
 Level of loyalty and
 The mix of new versus loyal customers.

 Customer Service: refers to the identifiable, but sometimes

intangible, activities undertaken by a retailer in conjunction
with the basic goods and services it sells.
 Customer Service
 Expected customer
is the service level that customers
want to receive from any retailer.
ex. basic employee courtesy
 Augmented customer
service includes the activities that
enhance the shopping experience and
give retailers a competitive advantage.
Customer Satisfaction
– Occurswhen the value and
customers service provided
through a retailing
experience meet or exceed
consumer satisfaction
Retail Mgt. 11e (c) 2010 Pearson Education, Inc.
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publishing as Prentice Hall
Turning Around Weak
Customer Service
Focus on Empower Frontline
Customer Concerns Employees

Show That You Are Express Sincere

Listening Understanding

Apologize and Rectify

the Situation
Retail Mgt. 11e (c) 2010 Pearson Education, Inc.
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publishing as Prentice Hall
 Why do
shoppers do
not
complain?
Retail Mgt. 11e (c) 2010 Pearson Education, Inc.
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publishing as Prentice Hall
Loyalty program
 is a rewards program offered by a
company to customers who
frequently make purchases.

 Consumer loyalty programs reward

a retailer’s best customers, those
with it wants long-lasting
relationships. (Loyalty card)
Service Retailing
 involves transaction in which consumers do not purchase
or acquire ownership of tangible products.
Three Kinds of Service Retailing
 Rented-goods services
 consumers lease and use goods for specified periods of time. Tangible
goods are leased for a fixed time, but ownership is not obtained and the
good must be returned when the rental period is up.
 Examples : Hertz car rentals, carpet cleaner rentals at a supermarket, and video
rentals.

 Owned-goods services
 goods owned by consumers are repaired, improved, or maintained. In
this grouping, the retailer providing the service never owns the good
involved.
 Ex. Watched repair
Non-goods services
 intangible personal services are offered
to consumers, who then experience the
services rather than possess them. The
seller offers personal expertise for a
specified time in return for a fee; tangible
goods are not involved.
examples are stockbrokers, travel
agents, real-estate brokers, and
personal trainers.
 4 Characteristics of
Services Retailing
Intangibility

Inseparability

Perishability

Variability
Characteristics of Service
Retailing

Intangibility

•You cannot hold or touch a service

•No patent protection possible
•Difficult to display/communicate service benefits
•Service prices difficult to set
•Quality judgment is subjective
•Some services involve performances/experiences
 Characteristics of Service
Retailing

Inseparability

•Services cannot be separated from the service providers.

•Consumer may be involved in service production
•Centralized mass production difficult
•Consumer loyalty may rest with employees

For example in case of a doctor when they provide

their services to the patients but at the same time
patient should also take part in all the process. Same
like that patient should be there at the time of the
 Characteristics of Service
Retailing
Perishability

•Services last a specific time and cannot be stored like a product

for later use
•Services cannot be inventoried
•Planning employee schedules can be complex

An airline, such as Delta Airlines shown in, can only sell seats on an
airplane prior to departure. This service is only available for that definite
time period. An empty seat on a plane never can be utilized and charged
after departure. Once the plane has left for its scheduled flight, that
service cannot be offered for that particular flight. Unsold seats lose their
inherent value.
 Characteristics of Service
Retailing
Variability

•Standardization and quality control hard to achieve

•Services may be delivered in locations
beyond control of management
•Customers may perceive variability
even when it does not actually occur

For example, when there is less number of customer, services are more
polite and specific, when there is a large number of customer, tend to be
busy and might lose some services to the customers.
 Retail Strategy

The overall plan or

framework of action that
guides a retailer
 Ownership and Management
Alternatives
 A sole proprietorship is an unincorporated retail
firm owned by one person
 All benefits, profits, costs accrue to the owner
 Landscaper, computer repair services, catering. Freelance
writer, tutoring
 A partnership is an unincorporated retail firm
owned by two or more persons, each with a
financial interest
 Partners share benefits, profits, risks and cost
 Google, a company founded by Larry Page and Sergey Brin.
A corporation is a retail firm that is
formally incorporated under state law; it
is a legal entity apart from its officers or
shareholders.
 Manila Electric Company, Philippines Shell Petroleum
Corporation Toshiba Information Equipment (Philippines)
Incorporated Smart Communications Incorporated. Caltex
Philippines Incorporated. Philippine Long Distance
Telephone Company, Nestle Philippines Incorporated, Globe
Telecom Incorporated
MAJOR TYPES OF RETAILERS BY
PRODUCT OFFERING

Department Stores

Specialty Stores

Supermarkets

Drugstores

Convenience Stores

Discount Stores

Restaurants
MOM AND POP
• A small, independent, usually family-
owned, controlled, and operated
business that has a minimum amount
of employees, has only a small
amount of business volume, and is
typically not franchised, therefore
open for business only in a single
location.
 CLASSIFYING RETAIL OUTLETS

Ownership-place

Level of Service-promotion

Classification Product Assortment-product

of
Retail
Establishments Price

Retailers manipulate their 4 P’s to get the best position in the

marketplace– in other words, to create a competitive advantage
CLASSIFICATION BY OWNERSHIP

Independent
Retailers-one store
ownership

Chain Stores-many
stores but only one
owner

Franchises-many
owners of many
stores
 BASIC FORMS OF FRANCHISING

Dealer agrees to sell certain

Product and products provided by a
Trade Name manufacturer, but can use any sales
Franchising tactics he chooses.
Ex-Michelin Tires, Avon

Dealer must sell the franchiser’s

Business
product in the exact way the
Format
franchiser prescribes.
Franchising
Ex – McDonalds, Wendy's
 CLASSIFICATION BY LEVEL OF
SERVICE

Self Service Full Service

Discount stores
Factory outlets
Warehouse clubs Exclusive stores
CLASSIFICATION BY PRODUCT
OFFERING

The mix of products offered to the

consumer by the retailer; also called
the product assortment

Deep & narrow-like Starbucks

Or
Shallow & broad like Walmart
PRODUCT
ASSORTMENT
•Number and type of
products displayed
by retailers for
purchase by
consumer.
DEEP AND NARROW
• Retailing strategy under
which a store sells only a
few types of items but
stocks a large variety of
brands within that range.
SHALLOW AND
BROAD
•Offers wide
variety of
assortment
•People are always
going to go shopping.
A lot of our effort is
just: 'How do we
make the retail
experience a great
one?' - Philip Green
EVOLUTION OF RETAILING

• Began with general stores that

stocked a wide variety of
merchandise.
• Rise of supermarkets in the early
1930s.
• Discount stores in the 1950s,
convenience stores in the 1960s,
and off-price retailers in the 1980s
NON-STORE RETAILING
• is the selling of goods and
services outside the confines of a
retail facility. It is a generic term
describing retailing taking place
outside of shops and stores (that
is, off the premises of fixed retail
locations and of markets stands).
Types of Non-store Retailers

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 Electronic Retailing
• Many retailers operate from
virtual storefronts on the
World Wide Web, usually
maintaining little or no
inventory, ordering directly
from vendors to fill customer
orders
What are Amazon and eBay?
• Amazon.com – Merchandise to
consumers. Provides website
development and fulfillment
services to other retailers
• often referred to as simply Amazon, is an
American electronic commerce and cloud
computing company with headquarters in
Seattle, Washington. It is the largest
Internet-based retailer in the United States
2-93
What are Amazon and eBay?
• eBay – Acts as a mall or other
shopping center providing a “place”
for buyers and sellers to meet
• is an American multinational
corporation and e-commerce company,
providing consumer-to-consumer and
business-to-consumer sales services
via the internet. It is headquartered in
San Jose, California. 2-94
2-95
2-96
2-97
 DIRECT MARKETING

Direct Mail
Direct
Marketing needs
no personal Catalogs & Mail Order
interaction
Telemarketing
 DIRECT
MARKETING
• Direct communications, other than
personal sales contacts, between
buyer and seller, designed to
generate sales, information requests,
or store or Web site visits.
• is a form of advertising which
allows businesses to
communicate directly to
customers through a variety of
media including cell phone
text messaging, email,
websites, online adverts,
database marketing, fliers,
catalog distribution,
promotional letters and
 DIRECT MAIL
• A marketing effort that uses a mail
service to deliver a promotional
printed piece to your target audience
 DIRECT MAIL
• Can narrowly target a market, achieve good
coverage, send messages quickly, and personalize
mailing pieces.
• High per-reader cost, requires good quality, and
considered junk mail by some consumers.
DIRECT SELLING
• Manufacturers sell directly to
consumers.
 DIRECT SELLING
• Face to face presentation, demonstration, and sale of
products or services, usually at the home or office of a
prospect by the independent direct sales representatives.
• Employed by firms such as Avon, Mary Kay, and
Tupperware, direct selling differs from network marketing
in that it offers little or no incentives for recruiting ever
increasing number of sales representatives.
DIRECT-RESPONSE
RETAILING
• Customers order
merchandise by mail or
telephone, by visiting
a mail-order desk in a retail
store, or by computer or fax
machine.
• Includes home shopping
aided by television
promotion.
 TELEMARKETING
• Most frequently used
form of direct
marketing.
• is a method of direct
marketing in which a
salesperson solicits
prospective customers
to buy products or
services, either over
the phone
 INTERNET
RETAILING
• Sell directly to
consumers via
storefronts on the
Web.
AUTOMATIC MERCHANDISING

• Selling merchandise through

vending machines. Also called
automatic selling.
 RETAILING
• Activities involved in selling
merchandise to ultimate
consumers.
• Retailers act as both
customers and marketers in
their channels.
RETAILING STRATEGY
• Retailers must select a target market and develop a retailing mix to satisfy
the chosen market.
SELECTING A TARGET MARKET
• Consider size and profit potential of the market and the level of
competition.

MERCHANDISING STRATEGY
• Must decide on general merchandise categories, product lines, items within
the product lines, and the depth and width of its assortments.
• Category management—overseeing an entire product line for both vendors
and retailers and is responsible for the profitability of the product group.
• Proliferation of new products increases the competition for shelf space.
• Major retailers increasingly make demands from manufacturers—such as
pricing and promotional concessions—in exchange for shelf space.
CUSTOMER-SERVICE STRATEGY
• Heightened customer service is one possible retailing
strategy.
• Goal is to attract and retain target customers to
increase sales and profits.
PRICING STRATEGY
• Prices reflect a retailer’s marketing objectives and
policies and affect consumer perceptions.
• Markup Amount that a retailer adds to the cost of a
product to determine its selling price.
• Markdown Amount by which a retailer reduces the original selling price
of a product.
LOCATION/DISTRIBUTION STRATEGY
• Location depends on many factors, including including
the type of merchandise, the retailer’s financial resources,
characteristics of the target market, and site availability.
• Planned shopping center Group of retail stores planned,
coordinated, and marketed as a unit.

PROMOTIONAL STRATEGY
• Promotion informs customers about locations, merchandise selections,
hours of operation, and prices.
• Also help retailers attract shoppers and build customer loyalty.
• Salespeople help promote by selling up and suggestion selling.
STORE ATMOSPHERICS
• Atmospherics Combination of physical characteristics and amenities that
contribute to a store’s image.
• Exterior should identify the store and help attract target market.
• Interior should compliment retailer’s image.
• Welcoming, entertaining environments attract customers who want to do
more than just shop.
CLASSIFICATION OF RETAILERS BY FORM OF
OWNERSHIP
• Chain stores—groups of retail outlets that operate under central ownership
and management and handle the same product lines.
• Independent retailers generate about $3.8 trillion in retail sales every year
and account for about 12 percent of all business establishments in the United
States.

CLASSIFICATION BY SHOPPING EFFORT

• Convenience retailers—focus marketing appeals on accessible locations,
long store hours, rapid checkout service, and adequate parking facilities.
• Shopping stores—consumers usually compare prices, assortments, and
quality levels at competing outlets before making purchase decisions.
• Specialty retailers—combine carefully defined product lines, services, and
reputations to persuade consumers to expend effort to shop at their stores.
CLASSIFICATION BY SERVICES PROVIDED
• Classifications include self-service, self-selection, or
full-service retailers.
CLASSIFICATION BY PRODUCT LINES
• Specialty stores typically handle only part of a single product line that it
stocks in considerable depth or variety.
• Limited-line retailers offer a large assortment of products within one
product line or a few related lines.
• General merchandise retailers carry a wide variety of product lines that are
all stocked in some depth.
• Include variety stores, department stores, and mass merchandisers.
CLASSIFICATION OF RETAIL TRANSACTIONS BY
LOCATION
• Most retail transactions occur in stores.
• Consumer and business-to-business marketers rely on nonstore retailing to
generate orders or requests for more information that may result in future
orders.
RETAIL CONVERGENCE AND SCRAMBLED
MERCHANDISING
• Retail convergence Situation in which similar merchandise is available
from multiple retail outlets, resulting in the blurring of distinctions between
type of retailer and merchandise offered.
• Scrambled merchandising Retailing practice of combining dissimilar
product lines to boost sales volume.
 Retailing Mix
includes the activities related to
managing the store and the
merchandise in the store, which
includes retail pricing, store
location, retail communication, and
merchandise.
 CHOOSING THE RETAIL MIX

Product Place

Choosing the Price Personnel

Retailing Mix

Promotion Presentation
 CHOOSING THE RETAIL MIX

Product

Personnel Promotion

Target
Market

Presentation Place

Price
PRESENTATION (COMMUNICATION) OF
THE RETAIL STORE

Employee Type & Density

Merchandise Type & Density

Fixture Type & Density

Factors Sound
in
Creating Odors
Store’s
Atmosphere Visual Factors
PERSONNEL OF THE RETAIL STORE

How many

How knowledgeable

How helpful / invasive

Factors
in Fit the image of the product
Personnel
decisions Good personal sellers
 Scrambled
Merchandising
involves offering
several unrelated
product lines in a
single store.
 Shrinkage

is the breakage and theft of

merchandise by customers
and employees.
Multichannel Retailers

Utilize and integrate a

combination of traditional store
formats and non-store formats
such as catalogs, television, and
online retailing.
Retail Life Cycle
is the process of growth and
decline that retail outlets, like
products, experience, which
consists of the early growth,
accelerated development, maturity,
and decline stages.
Destination Stores
Stores that generate customers
from larger trading areas than
their neighbors or competitors.

i.e.-Dunkin’ Donuts: “It’s worth

the trip!”
Power Centers

Huge shopping strips

with multiple anchors
and often a supermarket
Anchor Stores
A large store, such as a department
store or supermarket, that is
prominently located in a shopping
mall to attract customers who are
then expected to patronize the
other shops in the mall.
 End 