An Introduction to

Retailing

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Learning Objectives
At the end of this module, the learning outcomes are:
• 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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 An Introduction to Retailing

Suggested readings
• Retail Management
by
Berman, Evans, Chatterjee & Srivastava
13th edition, Chapter 1

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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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RETAIL MANAGEMENT
• RETAILING AND THE ECONOMY
• Retailing is a significant part of the economy.
• It’s a major source of jobs.
• Trends in retailing often represent the trends in the economy.
• Sear’s Roebuck, Walmart,Mcdonalds, Toys”r”us etc are some well known retailers.

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RETAIL MANAGEMENT
• RETAILING AND DISTRIBUTION
• It’s the last stage in a channel of distribution
• It’s role is that of an intermediary between manufacturers, wholesalers, and
other suppliers and final consumers.
• The retailer undertakes “sorting”
• The retailer completes transactions with their customers.

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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?
• Low consumer confidence and high savings rates have
reduced consumer spending. At the same time retail
competition has increased through increased format
blurring (e.g., 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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 RETAIL MANAGEMENT
• RETAILERS AND SUPPLIERS
• The relationship between retailers and suppliers is complex.
• Retailers are both part of the distribution system and also the customer.
• Retailers today have more power than ever before.
• The type of distribution impacts a retailers relationship with the supplier.

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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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The 10 Largest Retailers in the
United States (2016)
The 10 Largest Retailers in the United States (2016)
Rank Company Main Emphasis
1 Wal-Mart Full-line discount stores, supercenters, membership clubs
2 Kroger Supermarkets, convenience stores, jewelry stores
3 Costco Membership clubs
4 Home Depot Home centers
5 Walgreen Boots Alliance Drugstores
6 Target Full-line discount stores, supercenters
7 CVS Health Drugstores
8 Amazon.com Web merchant
9 Albertsons Supermarkets, drugstores
10 Lowe's Home centers

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 A Typical Channel of
Distribution

Manufacturer
Retailer

Final
Wholesaler
Consumer

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 The Retailer’s Role in the Sorting
Process

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 Omnichannel Retailing
• A retailer sells to consumers through multiple retail formats:
• Web sites
• Physical stores
• Smartphone apps
• Social media

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 Omnichannel 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 of channel
• Role of each channel
• Store– try on, ease of return, fast availability (immediacy),
compare offerings
• Web– 24/7, product information, product reviews by
customers, personalization (tailored assortment based on past
purchases), most current pricing, closeout sales
• Catalog-permanency, true color

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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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Comparing Distribution Types

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 RETAIL MANAGEMENT
CHARACTERISTICS OF RETAILING
• The average size of transactions are small.
• Final consumers make many unplanned purchases.
• Customers have to be drawn to a store.
• Inventory management is often difficult.
• Point of purchase displays,attractive store layout,store windows etc play a very vital role.

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Special Characteristics
Affecting Retailers
Small Impulse
Average Purchase
Sale

Retailer’s
Strategy

Popularity
of
Stores
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 Retail Strategy
• An overall plan for guiding a retail firm
• Influences the firm’s business activities
• Influences firm’s 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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Aspects of Home Depot’s
Strategy
• Growth through product • Employee relations
authority
• Innovation
• Targeted appeal to multiple
segments • Commitment to
• Distinctive image technology
• Seamless customer service • Community involvement
• Multiple points of contact • Adaptive to omnichannel
trends

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Applying the Retailing Concept
Customer Orientation

Coordinated Effort
Retailing Retail
Concept Strategy
Value-driven

Goal Orientation

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Creating a Unique Shopping
Experience

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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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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 people’s
attributes and shopping behaviors

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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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