CHAPTER 1

Introduction to the
World of Retailing
CHAPTER 01
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 1-1

What is Retailing? CHAPTER 1
2

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 CHAPTER 1
2

• Retailers:
Kohl’s, Macy’s, Wendy’s,
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 CHAPTER 1
2

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The Retailer’s Role in a Supply Chain CHAPTER 1
2

• 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
CHAPTER 1
2

• 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
• Ex: JCPenney sells Arizona jeans (Private Label)

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Manufacturing, Wholesaling
and Retailing
CHAPTER 1
2

• 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, Lowe’s, Safeway, Brown Shoe Company

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How Retailers Add Value CHAPTER 1
2

■ Provide Assortment
Buy other products at the
same time
■ Break Bulk
Buy it in quantities
customers want
■ Hold Inventory
Buy it at a convenient
place when you want it
■ Offer Services
See it before you buy; get
credit; layaway Ryan McVay/Getty Images

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Social and Economic
Significance of Retailing
CHAPTER 1
2

• Retail Sales:
• Retailing affects every facets
of life
• 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 CHAPTER 1
2

• 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

• http://www.asyousow.org

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Opportunities in Retailing:
Management Opportunities
CHAPTER 1
2

• 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:
Management Opportunities
CHAPTER 1
2

• Financially rewarding
• 5-year salary of buyers: $50,000 - $60,000
• 5-year salary of store managers: $120,000 - $160,000

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Opportunities in Retailing:
1. Entrepreneurial Opportunities
CHAPTER 1
2

• Retailing provides opportunities for Wal-Mart: Sam Walton

people who want to start their own
business
• Some of the world’s richest people
are retailing entrepreneurs
IKEA: Ingvar Kamprad
• Examples of retailing entrepreneurs
• Sam Walton (Wal-Mart)
• Jeff Bezos (www.Amazon.com)
• Ingvar Kamprad (IKEA)
• Anita Roddick (the Body Shop)
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The Retail Management Decision
Process
CHAPTER 1
2

Section I –
Understanding the
world of Retailing
* Retail Managers
need to know the
environment in which
they operate before
they can implement
effective strategies.

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The Retail Management Decision
Process
CHAPTER 1
2

CRITICAL ENVIRONMENT
FACTORS

1.Macroenvironment
2. Microenvironment

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The Retail Management Decision
Process
CHAPTER 1
2

2 TYPES OF
COMPETITION

• INTRATYPE
• INTERTYPE

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The Retail Management Decision
Process
CHAPTER 1
2

Section II – Developing a
Retail Strategy
* focuses on decisions
related to developing a
retail strategy.

* Retail strategy – indicates

how the firm plans to
focus in its resources to
accomplish its objectives

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Retail Strategy CHAPTER 1
2

• A retail strategy should

identify
• the target market
• the product and service
mix
• a long-term
comparative advantage

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Retail Mix CHAPTER 1
2

• The retail mix includes the decision

variables retailers use to satisfy customer
needs and influence their purchase decision

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Decision Variables for Retailers: The
Retail Mix Elements
CHAPTER 1
2

Customer
Service

Store Design Merchandise

and Display Assortment

Retail
Strategy

Pricing Location

Communication
Mix

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Ethics CHAPTER 1
2

Ethics – are the principles governing the

behavior of individuals and companies
to establish appropriate behavior and
indicate what is right and wrong.

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You are Faced with an Ethical Decision:
What Can You Do? CHAPTER 1
2

• Ignore your personal values and do what your company

asks you to do – you will probably feel dissatisfied with
your job .

• Take a stand and tell your employer what you think.

Work to change the policies.

• Refuse to compromise your principles – you could lose

your job!

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Misconceptions About
Careers in Retailing
CHAPTER 1
2

• College not needed

• Low pay
• Long hours
• Boring
• Dead-end job
• No benefits
The McGraw-Hill Companies, Inc./Andrew Resek, photographer

• Everyone is part-time
• Unstable environment
• No opportunity for women and minorities
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Why You Should Consider Retailing CHAPTER 1
2

• Entry level management positions:

• Department manager or assistant buyer/planner
• Manage and have P&L responsibility on your first job
• Starting pay average with great benefits
• Some retailers pay graduate school
• No two days are alike
• Buying and planning for financially analytically oriented
• Management for people-people

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Types of Jobs in Retailing CHAPTER 1
2

• Most entry level jobs are in store management or

buying, but there’s…
• Accounting and finance
• Real estate
• Human resource management
• Supply chain management
• Advertising
• Public affairs
• Information systems
• Loss prevention
• Visual merchandising

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Keywords CHAPTER 1
2

• breaking bulk A function performed by retailers or wholesalers in which they receive

large quantities of merchandise and sell them in smaller quantities.
• ethics A system or code of conduct based on universal moral duties and obligations that
indicate how one should behave.
• holding inventory A major value-providing activity performed by retailers whereby
products will be available when consumers want them.
• intertype competition Competition between retailers that sell similar merchandise
using different formats, such as discount and department stores.
• intratype competition Competition between the same type of retailers (e.g., Kroger
versus Safeway).
• wholesaler A merchant establishment operated by a concern that is primarily engaged
in buying, taking title to, usually storing, and physically handling goods in large
quantities, and reselling the goods (usually in smaller quantities) to retailers or
industrial or business users.

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