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TABLE OF CONTENTS

SECTION I THE WORLD OF RETAILING

CHAPTER 1 INTRODUCTION TO THE WORLD OF RETAILING 4

What Is Retailing? 6 Developing a Retail StrategySection II 17
A Retailers Role in a Supply Chain 7 JCPenney Moves from Main Street to the Mall 19
Retailers Create Value 7 Implementing the Retail StrategySections III and IV 21
Social and Economic Significance of Retailing 9 Whole Foods Market: An Organic and Natural
Social Responsibility 9 Food Supermarket Chain 21
Retail Sales 9 Ethical and Legal Considerations 23
Employment 9 Summary 25
Global Retailers 9 Key Terms 25
Structure of Retailing and Supply Chains around Get Out and Do It! 25
the World 11 Discussion Questions and Problems 26
Opportunities in Retailing 13 Suggested Readings 26
Management Opportunities 13 Appendix 1A: Careers in Retailing 26
Entrepreneurial Opportunities 13 Appendix 1B: Sources of Information about
The Retail Management Decision Process 15 Retailing 30
Understanding the World of RetailingSection I 15
CHAPTER 2 TYPES OF RETAILERS 34

Retailer Characteristics 36 Nonstore Retailers 55

Type of Merchandise 36 Electronic Retailers 55
Variety and Assortment 37 Catalog and Direct-Mail Retailers 55
Services Offered 39 Direct Selling 57
Prices and the Cost of Offering Breadth and Television Home Shopping 57
Depth of Merchandise and Services 39 Vending Machine Retailing 58
Food Retailers 40 Services Retailing 59
Supermarkets 41 Differences between Services and
Supercenters 44 Merchandise Retailers 60
Warehouse Clubs 45 Types of Ownership 62
Convenience Stores 46 Independent, Single-Store Establishments 62
General Merchandise Retailers 47 Corporate Retail Chains 63
Department Stores 47 Franchising 63
Full-Line Discount Stores 49 Summary 65
Specialty Stores 49 Key Terms 65
Drugstores 51 Get Out and Do It! 65
Category Specialists 51 Discussion Questions and Problems 66
Extreme Value Retailers 53 Suggested Readings 67
Off-Price Retailers 53 Appendix 2A: Comparison Shopping 67
CHAPTER 3 MULTICHANNEL RETAILING 70

Retail Channels for Interacting with Customers 72 Which Channel Is the Most
Store Channel 72 Profitable? 88
Catalog Channel 74 Issues in Multichannel Retailing 88
Integrated Shopping Experience 89
Internet Channel 74
Brand Image 89
Evolution toward Multichannel Retailing 83
Overcoming the Limitations of an Existing Format 83 Merchandise Assortment 90

Capabilities Needed for Multichannel Retailing 85 Pricing 91

Who Has These Critical Resources? 86 Shopping in the Future 91
Will Manufacturers Bypass Retailers and Shopping Experience 91
Sell Directly to Consumers? 87 Supporting the Shopping Experience 92
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Summary 93 Discussion Questions and Problems 94

Key Terms 93 Suggested Readings 94
Get Out and Do It! 93

CHAPTER 4 CUSTOMER BUYING BEHAVIOR 96

The Buying Process 98 Market Segmentation 116

Need Recognition 99 Criteria for Evaluating Market Segments 116
Information Search 102 Approaches for Segmenting Markets 117
Evaluation of Alternatives: The Multiattribute Model 105 Composite Segmentation Approaches 123
Purchasing the Merchandise or Service 110 Summary 123
Postpurchase Evaluation 111 Key Terms 124
Types of Buying Decisions 111 Get Out and Do It! 124
Extended Problem Solving 111 Discussion Questions and Problems 125
Limited Problem Solving 111 Suggested Readings 126
Habitual Decision Making 112 Appendix 4A: Customer Buying Behavior and
Social Factors Influencing the Buying Process 113 Fashion 126
Family 113
Reference Groups 114
Culture 114

SECTION II RETAILING STRATEGY

CHAPTER 5 RETAIL MARKET STRATEGY 132

What Is a Retail Strategy? 134 Evaluating Global Growth Opportunities 150
Definition of Retail Market Strategy 134 Entry Strategies 152
Target Market and Retail Format 135 The Strategic Retail Planning Process 153
Building a Sustainable Competitive Advantage 137 Step 1: Define the Business Mission 154
Customer Loyalty 138 Step 2: Conduct a Situation Audit 154
Location 140 Step 3: Identify Strategic Opportunities 159
Human Resource Management 141 Step 4: Evaluate Strategic Opportunities 159
Distribution and Information Systems 141 Step 5: Establish Specific Objectives and
Unique Merchandise 141 Allocate Resources 159
Vendor Relations 142 Step 6: Develop a Retail Mix to Implement Strategy 159
Customer Service 142 Step 7: Evaluate Performance and Make Adjustments 159
Multiple Sources of Advantage 142 Strategic Planning in the Real World 160
Growth Strategies 144 Summary 161
Market Penetration 144 Key Terms 161
Market Expansion 145 Get Out and Do It! 161
Retail Format Development 145 Discussion Questions and Problems 162
Diversification 145 Suggested Readings 162
Strategic Opportunities and Competitive Advantage 146 Appendix 5A: Using the Market Attractiveness/
Global Growth Opportunities 146 Competitive Position Matrix 163
Who Is Successful and Who Isnt? 146
Keys to Success 148

CHAPTER 6 FINANCIAL STRATEGY 166

Objectives and Goals 168 Illustration: Kelly Bradfords Evaluation of the

Financial Objectives 168 Gifts-To-Go.com Growth Opportunity 181
Societal Objectives 168 Setting and Measuring Performance Objectives 184
Personal Objectives 169 Top-Down versus Bottom-Up Process 185

Strategic Profit Model 169 Accountable for Performance 185

Profit Margin Management Path 171 Performance Objectives and Measures 186
Asset Management Path 176 Types of Measures 186
Return on Assets 179 Assessing Performance: The Role of Benchmarks 188
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Summary 190 Discussion Questions and Problems 191

Key Terms 190 Suggested Readings 191
Get Out and Do It! 190

CHAPTER 7 RETAIL LOCATIONS 192

Types of Locations 194 Resorts 210

Unplanned Retail Locations 195 Store within a Store 210
Freestanding Sites 195 Location and Retail Strategy 210
City or Town Locations 196 Shopping Behavior of Consumers in Retailers Target
Shopping Centers 199 Market 210
Neighborhood and Community Shopping Centers 200 Size of Target Market 212
Power Centers 201 Uniqueness of Retail Offering 212
Shopping Malls 201 Legal Considerations 213
Lifestyle Centers 204 Environmental Issues 213
Fashion/Specialty Centers 205 Zoning and Building Codes 213
Outlet Centers 205 Summary 214
Theme/Festival Centers 207 Key Terms 214
Larger, Multiformat DevelopmentsOmnicenters 207 Get Out and Do It! 214
Mixed Use Developments 207 Discussion Questions and
Problems 215
Other Location Opportunities 208
Suggested Readings 215
Airports 209
Temporary Locations 209

CHAPTER 8 RETAIL SITE LOCATION 216

Evaluating Specific Areas for Locations 218 Estimating Potential Sales for a Store Site 235
Economic Conditions 218 Huff Gravity Model 235
Competition 219 Regression Analysis 237
Strategic Fit 220 Analog Approach 238
Operating Costs 220 Illustration of Site Selection:
Number of Stores in an Area 221 Edward Beiner Optical 238
Economies of Scale from Multiple Stores 221 Competitive Analysis 239

Cannibalization 221 Define Present Trade Area 239

Evaluating a Site for Locating a Retail Store 222 Trade Area Characteristics 240
Site Characteristics 222 Match Characteristics of Present
Trade Area with Potential Sites 241
Traffic Flow and Accessibility 223
Negotiating a Lease 241
Location Characteristics 224
Types of Leases 241
Restrictions and Costs 225
Terms of the Lease 242
Locations within a Shopping Center 225
Summary 243
Trade Area Characteristics 227
Key Terms 243
Trade Area Definition 227
Get Out and Do It! 244
Factors Affecting the Size of the Trade Area 228
Discussion Questions and
Measuring the Trade Area for a Retail Site 229
Problems 244
Sources of Information about the Trade Area 230
Suggested Readings 245
Competition in the Trade Area 234

CHAPTER 9 HUMAN RESOURCE MANAGEMENT 246

Gaining Competitive Advantage Through Human
Resource Management 248
Objectives of Human Resource Management 248
The Human Resource Triad 250
Special HR Conditions Facing Retailers
Designing the Organization Structure for a
Retail Firm 252
Matching Organization Structure to Retail Strategy 253
Organization of a Single-Store Retailer 253
Organization of a National Retail Chain 255
Organization Structures of Other Types of Retailers 259
Retail Organization Design Issues 259
Centralization versus Decentralization 259
250 Coordinating Merchandise and Store Management 260
Winning the Talent War 261
Attracting Talent: Employment Marketing 262
Developing Talent: Selection and Training 262
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Motivating Talent: Aligning Goals 263 Summary 273

Keeping Talent: Building Employee Commitment 266 Key Terms 273
Issues in Retail Human Resource Management 269 Get Out and Do It! 274
Managing Diversity 269 Discussion Questions and Problems 275
Legal and Regulatory Issues in Human Suggested Readings 275
Resource Management 270
Use of Technology 273

CHAPTER 10 INFORMATION SYSTEMS AND SUPPLY CHAIN MANAGEMENT 276

Creating Strategic Advantage Through Supply Chain Collaboration Between Retailers and Vendors in
Management and Information Systems 278 Supply Chain Management 295
Improved Product Availability 279 Using EDI 296
Higher Return on Investment 279 Sharing Information 296
Strategic Advantage 280 Vendor-Managed Inventory 297
Information Flows 282 Collaborative Planning, Forecasting,
Data Warehouse 284 and Replenishment 299
Electronic Data Interchange 285 Radio Frequency Identification (RFID) 299
Pull and Push Supply Chains 286 Benefits of RFID 301

The Physical Flow of MerchandiseLogistics 287 Impediments to the Adoption of RFID 301
Distribution Centers versus Direct Store Delivery 287 Summary 302
The Distribution Center 289 Key Terms 302
Reverse Logistics 292 Get Out and Do It! 303
Logistics for Fulfilling Catalog and Internet Orders 292 Discussion Questions and Problems 303
Outsourcing Logistics 293 Suggested Readings 303

CHAPTER 11 CUSTOMER RELATIONSHIP MANAGEMENT 304

The CRM Process 306 Converting Good Customers into Best Customers 321
What Is Loyalty? 306 Dealing with Unprofitable Customers 322
Overview of the CRM Process 308 Implementing CRM Programs 323
Collecting Customer Data 308 Summary 324
Customer Database 308 Key Terms 324
Identifying Information 309 Get Out and Do It! 324
Privacy and CRM Programs 311 Discussion Questions and
Analyzing Customer Data and Identifying Problems 325
Target Customers 313 Suggested Readings 325
Identifying the Best Customers 314
Developing CRM Programs 318
Customer Retention 318

SECTION III MERCHANDISE MANAGEMENT

CHAPTER 12 MANAGING MERCHANDISE ASSORTMENTS 328

Merchandise Management Process Overview 330 Developing an Assortment Plan 349
The Buying Organization 330 Category Variety and Assortment 349
Merchandise CategoryThe Planning Unit 332 Determining Variety and Assortment 349
Evaluating Merchandise Management Setting Inventory and Product
PerformanceGMROI 334 Availability Levels 352
Managing Inventory Turnover 336 Product Availability 352
Merchandise Management Process 337 Summary 353
Types of Merchandise Management Planning Processes 338 Key Terms 354
Forecasting Sales 340 Get Out and Do It! 354
Category Life Cycles 340 Discussion Questions and Problems 354
Forecasting Staple Merchandise 342 Suggested Readings 355
Forecasting Fashion Merchandise Categories 345
Sales Forecasting for Service Retailers 348
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CHAPTER 13 MERCHANDISE PLANNING SYSTEMS 356

Staple Merchandise Management Systems 359 Allocating Merchandise to Stores 369

The Inventory Management Report 360 Amount of Merchandise Allocated to Each Store 370
Fashion Merchandise Management Systems 362 Type of Merchandise Allocated to Stores 370
Monthly Sales Percentage Distribution to Timing of Merchandise Allocations to Stores 371
Season (Line 1) 362
Analyzing Merchandise Management
Monthly Sales (Line 2) 363 Performance 373
Monthly Reductions Percentage Distribution to Sell-Through Analysis Evaluating Merchandise Plan 373
Season (Line 3) 363 Evaluating the Assortment Plan and Vendors 373
Monthly Reductions (Line 4) 364 Summary 377
BOM (Beginning-of-Month) Stock-to-Sales Key Terms 377
Ratio (Line 5) 364
Get Out and Do It! 377
BOM Stock (Line 6) 366
Discussion Questions and
EOM (End-of-Month) Stock (Line 7) 366 Problems 378
Monthly Additions to Stock (Line 8) 367 Suggested Readings 379
Evaluating the Merchandise Budget Plan 367 Appendix 13A: Retailing
Open-to-Buy System 367 Inventory Method 379
Calculating Open-to-Buy for the Current Period 368

CHAPTER 14 BUYING MERCHANDISE 382

Brand Alternatives 384 Negotiating with Vendors 396

National Brands 384 Knowledge Is Power 397
Private-Label Brands 385 Negotiation Issues 398
Buying National Brand Merchandise 390 Tips for Effective Negotiating 399
Meeting National Brand Vendors 390 Strategic Relationships 401
National Brand Buying Process 392 Defining Strategic Relationships 401
Developing and Sourcing Private-Label Maintaining Strategic Relationships 402
Merchandise 392 Building Partnering Relationships 403
Developing Private-Label Merchandise 392 Legal and Ethical Issues for Buying Merchandise 404
Sourcing Merchandise 394
Summary 409
Global Sourcing 394
Key Terms 409
Support Services for Buying Merchandise 395
Get Out and Do It! 410
Resident Buying Offices 395
Discussion Questions and Problems 410
Retail Exchanges 396
Suggested Readings 411

CHAPTER 15 RETAIL PRICING 412

Considerations in Setting Retail Prices 414 Pricing Services 433

Customer Price Sensitivity and Cost 414 Matching Supply and Demand 433
Competition 416 Determining Service Quality 435
Legal and Ethical Pricing Issues 418 Pricing Techniques for Increasing Sales 435
Setting Retail Prices 420 Leader Pricing 435
Setting Prices Based on Costs 420 Price Lining 435
Merchandising Optimization Software 422 Odd Pricing 436
Profit Impact of Setting a Retail Price: The Internet and Price Competition 437
The Use of Break-Even Analysis 422
Summary 437
Price Adjustments 423
Key Terms 438
Markdowns 424
Get Out and Do It! 438
Variable Pricing and Price Discrimination 427
Discussion Questions and
Pricing Strategies 431 Problems 439
High/Low Pricing 431 Suggested Readings 439
Everyday Low Pricing 432
Advantages of the Pricing Strategies 432
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CHAPTER 16 RETAIL COMMUNICATION MIX 440

Using Communication Programs to Develop Brand Determine the Communication Budget 459
Images and Build Customer Loyalty 442 Allocation of the Promotional Budget 463
Value of Brand Image 442 Plan, Implement, and Evaluate Communication
Building Brand Equity 443 ProgramsThree Illustrations 463
Extending the Brand Name 447 Summary 465
Methods of Communicating with Customers 447 Key Terms 465
Paid Impersonal Communications 447 Get Out and Do It! 466
Paid Personal Communications 451 Discussion Questions and Problems 466
Unpaid Impersonal Communications 452 Suggested Readings 467
Unpaid Personal Communications 453 Appendix 16A: Implementing
Strengths and Weaknesses of Retail Advertising Programs 467
Communication Methods 455
Planning the Retail Communication Program 457
Establish Objectives 457

SECTION IV STORE MANAGEMENT

CHAPTER 17 MANAGING THE STORE 474

Store Management Responsibilities 476 Format for Evaluations 491
Recruiting and Selecting Store Employees 477 Evaluation Errors 492
Job Analysis 477 Compensate and Reward Store Employees 492
Job Description 478 Extrinsic Rewards 493
Locating Prospective Employees 478 Intrinsic Rewards 493
Screening Applicants to Interview 479 Compensation Programs 494
Selecting Applicants 480 Designing the Compensation Program 495
Legal Considerations in Selecting and Legal Issues in Compensation 496
Hiring Store Employees 481 Controlling Costs 496
Orientation and Training Programs for Labor Scheduling 497
New Store Employees 482
Green and Energy-Efficient Stores 498
Orientation Programs 482
Store Maintenance 498
Training Store Employees 483
Reducing Inventory Shrinkage 499
Motivating and Managing Store Employees 485
Calculating Shrinkage 499
Leadership 485
Organized and High-Tech Retail Theft 499
Motivating Employees 486
Detecting and Preventing Shoplifting 500
Setting Goals or Quotas 487
Reducing Employee Theft 501
Maintaining Morale 488
Summary 503
Sexual Harassment 489
Key Terms 503
Evaluating Store Employees and
Providing Feedback 490 Get Out and Do It! 504
Who Should Do the Evaluation? 490 Discussion Questions and Problems 504
How Often Should Evaluations Be Done? 490 Suggested Readings 505

CHAPTER 18 STORE LAYOUT, DESIGN, AND VISUAL MERCHANDISING 506

Store Design Objectives 508 Space Management 521

Store Design and Retail Strategy 508 Space Allocated to Merchandise Categories 521
Influence Customer Buying Behavior 509 Location of Merchandise Categories and
Flexibility 510 Design Elements 522

Cost 510 Location of Merchandise within a Category:

The Use of Planograms 525
Legal ConsiderationsAmericans With Disabilities Act 510
Visual Merchandising 527
Design Trade-Offs 511
Fixtures 527
Store Design 512
Presentation Techniques 528
Layouts 512
Atmospherics 530
Signage and Graphics 516
Lighting 530
Feature Areas 518
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Color 531 Prioritize 533

Music 531 Type of Layout 533
Scent 531 Checkout 534
How Exciting Should a Store Be? 532 Summary 535
Web Site Design 532 Key Terms 535
Simplicity Matters 532 Get Out and Do It! 535
Getting Around 533 Discussion Questions and
Let Them See It 533 Problems 536
Blend the Web Site with the Store 533 Suggested Readings 537

CHAPTER 19 CUSTOMER SERVICE 538

Strategic Advantage Through Customer Service 540 Service Recovery 557

Customer Service Strategies 541 Listening to Customers 558
Customer Evaluations of Service Quality 543 Providing a Fair Solution 558
The Gaps Model for Improving Retail Service Resolving Problems Quickly 559
Quality 546 Summary 559
Knowing What Customers Want: Key Terms 559
The Knowledge Gap 547
Get Out and Do It! 560
Setting Service Standards: The Standards Gap 549
Discussion Questions and Problems 560
Meeting and Exceeding Service Standards:
The Delivery Gap 552 Suggested Readings 561

Communicating the Service Promise:

The Communications Gap 556

APPENDIX A STARTING YOUR OWN RETAIL BUSINESS 562

APPENDIX B STARTING A FRANCHISE BUSINESS 570

SECTION V CASES
Overview Grid 575 22 Selling Pens to Wal-Mart 604
1 Tractor Supply CompanyTargeting the Hobby 23 How Much for a Good Smell? 605
Farmer 576 24 Promoting a Sale 606
2 Rainforest Caf: A Wild Place to Shop and Eat 577 25 Macys: A National Department Store Brand 606
3 Providing a Retail Experience: Build-A-Bear 26 Discount Dining Draws a Crowd: Restaurant Weeks
Workshop 578 in Major Cities 608
4 Wal-Mart and Corporate Social Responsibility 579 27 Enterprise Builds on People 609
5 Should Retailers Use Blogs? 580 28 Diamond in the Rough 610
6 Mall Anchors Away! The Franklins Discover 29 Fresh Ideas in Grocery Store Layout 611
Online Shopping 581
30 Sephora 611
7 The Sanchez Family Buys Bicycles 582
31 A Stockout at Discmart: Will Substitution Lead
8 Retailing in India: The Impact of Hypermarkets 583 to Salvation? 612
9 Diamonds: From Mine to Market 584 32 Customer Service and Relationship Management
10 Save-A-Lot 586 at Nordstrom 613
11 Royal Ahold: The Biggest Supermarket Retailer You 33 Lindys Bridal Shoppe 614
Have Never Heard Of 587 34 Is Apple Americas Best Retailer? 616
12 The Competitive Environment in the 18- to 22-Year- 35 Starbucks Coffee Company 618
Old Apparel Market 588
36 New Product Development at Yankee Candle
13 Tiffanys and Blue Nile: Comparing Financial Company 621
Performance 589
37 PetSmart: Where Pets Are Family 623
14 Stephanies Boutique: Selecting a Store Location 591
38 Interviewing for a Management Trainee Position 625
15 Hutch: Locating a New Store 592
16 Home Depot Changes Directions 597
Glossary 629
17 Avon Embraces Diversity 598
Indexes
18 Nordstrom Revamps Its Loyalty Program 599
Name 677
19 Nolans Finest Foods: Category Management 600
Company 683
20 Developing a Buying Plan for Hughes 602
Subject 687
21 McFaddens Department Store: Preparation of a
Merchandise Budget Plan 603
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