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Retailing
Retail Operation Relations
Developi Impleme Processi
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Organizati Managem hip in
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Human dise Plan dise Plan y
Resource
Establishi Integrating Technolog Manage
Managem
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Maintaini Controlling Automatio
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Retail Strategy Retailing
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In chapter one, we defined retailing is the sales of goods and services to the
ultimate consumers for personals, family or household use. While food retailing
referred to any business activities that sale food related product to the end user.
This chapter places great emphasis on helping students understand the concept
of retailing. To reinforce students’ understanding on retailing concept as an
important foundation of a successful business with an emphasis on the total
experience, customer service, and relationship retailing
What is Retailing
Distribution Channel Relationship among
retailer & their
supplier
Types of Retailing
Special characteristic
of retailing
Retailing concept
Issues related to
retailer’s performance
Learning Objectives
INTRODUCTION TO RETAILING
What is retailing?
We seem to ignore the impact of retailing has on our lifestyle. In fact, retailing is
responsible for matching individual demands of the consumer with vast quantities of
supplies produce by a huge range of manufacturers, has mad a significant contribution
to the economic prosperity that we enjoy so much. There many function of retailing apart
from matching consumer demand. Breaking down merchandise into size that are
suitable for an individual household could not be denied. Just imagine if butcher store
does not exist – and we have to go to the farm to buy cattle for a meat.
Retailing is the sales of goods and services to the ultimate consumers for personals,
family or household use (Cox and Brittain, 2004). In fact, retailing is responsible for
matching the individual demands of consumer with vast quantities of supplies produced
by huge range of manufacturers ( Dunne and Lusch, 2005). It can be concluded that
retailing consists of the final activities and steps needed to place a product in the hands
of the consumer or to provide services to the consumer. Retailing is the last step in the
supply chain that may stretch from as far as the west to east of the world to our own
neighborhood. Therefore any company or a business that sells a product or provides
services to the final consumer is considered performing the retailing function. When we
said any company or business, it means regardless it is selling to consumer in a store,
the mail, through internet, over the phone, door to door, vending machine or any other
way that it can reaches the final consumer is considered as retailing.
While Food Retailing refers to any business activities that offer of sell food related
product to end-user.
Many observers of the world business scene belief that retailing is the most stable and
serious sector of the business. This is hold true seen retailing is said to account under
20% of the worldwide labor force and it effect every living individual as a customer. It is
the largest single industry in most nations and is currently undergoing many changes in
exciting ways (Dunne and Lusch, 2005). There are a lot of changes, for instances many
Ali Mohamad Noor 3
Culinary Arts Department
Faculty of Hotel & Tourism Management
UiTM
traditional supermarket firm are reviewing their pricing and product mix strategies in
response to the growth of nontraditional, proce-oriented retailers, including hypermarket,
discount mass-merchandise store, warehouse club stores, and supercenters. Food
product have become increasingly important to the growth strategies of nontraditional
retailers, as evidenced by the rapid introduction of supercenter or mega shopping store –
a large combination supermarket and discount general merchandise store, with grocery
product accounting for up to 40% of the selling area. Other retailers, such as drugstores,
dollar stores, and discount mass-merchandise stores, have increased food offerings,
including perishable food, in recent year.
• Retailing may not have to involve a store – Mail / phone / direct selling /
web transaction and vending machine fall within the scope of retailing.
Wholesaler Final
Manufacturer Retaile
consumer
r
Retail Types – There are three major retailing. The first is the market, a physical location
where buyers and sellers converge. Usually this is done on town square,
sidewalks or designated areas or streets and may involve the construction
permanent or temporary structures (market stalls). The second form is hop or store
trading. Some shops use counter-service, where goods are out of reach of buyers,
and must be obtained from the seller. This type of retail is common for small
expensive items (e.g. jewelry) and controlled items like medicine and liquor. Self-
service, where goods may be handled and examined prior to purchase, has
become more common since the twentieth century. A thisrd form of retail is virtual
retail, where products are ordered via mail, telephone or online without having
been examined physically but instead in a catalog, on TV or on a website.
Sometimes this kind of retailing replicates existing retail types such as online
shops or virtual marketplaces such as eBay.
Independent retailer – is one who builds his / her business from the ground up.
From the business planning stage to opening day, the independent retail owner
does it all. They may hire consultants, staff and others to assist in the business
endeavor. Family and Individual restaurant ownership is a good example of
independent retailer in food retail business.
Franchise – getting a right to use a name, product, concept and business plan.
The franchisee will receive a proven business model from an established
business. Example of franchising food retail businesses are McDonald, KFC,
A&W, Pizza Hut, Dominos, Ayamas, Chicken Rice Shop and many more.
Chain retail business – sometimes called retail chain are a range of retail outlets
which share a “brand name” and central management, usually standardized
business methods and practices. They are a type of business chain. Unlike
franchise the store may be owned by one company or franchisee. Common
features of all chain retail business are centralized marketing and purchasing,
which often results in economies of scale – meaning lower costs and apparently
high profits. (Tesco, Giants, Carrefour, Econsave, 7 Eleven etc)
Manufactur
er
Brand A Brand A
customer
Wholesaler
Manufactur
er Brand B
Brand B customer
Manufactur Brand C
er customer
Brand C
Wholesaler Retailer
Brand D
Manufactur customer
er
Brand D
Brand E
customer
Manufactur
er
Brand E
Brand F
Wholesaler customer
Manufactur
er
Brand F
Relationships among retailers and suppliers can be complex. This is because retailers
are part of the distribution channel, manufacturers and wholesalers must be
concerned about the caliber of displays, customer service, store hours, and
retailers’ reliabilities as business partners. Retailers are also major customers of
goods and services for resale, store fixtures, computers, management consulting,
and insurance.
Retailers and suppliers have different priorities – the priorities between retailers and
suppliers may be different. These priorities includes – control over the distribution
channel, profit allocation, the number of competing retailers handling suppliers’
Ali Mohamad Noor 6
Culinary Arts Department
Faculty of Hotel & Tourism Management
UiTM
products, product displays, promotion support, payment terms, and operating
flexibility. It is said that due to the growth of this retail chains, retailers have more
power than ever. Unless suppliers know retailers’ needs, they cannot have good
rapport with them; and as long as retailers have a choice of suppliers, they will pick
that offer them more.
Number of retailer
Support from
supplier
(retailer)
Supplier’s sales
Retailer’s brand
selection
Product (retailer)
image
Competitions among
retailers
Lowest
Medium
Highest
There are three factors that distinguish retailing from other types of business. Each
factor imposes unique requirement on retail firms.
Final consumers make many unplanned or impulse purchase: surveys show that a
large percentage of consumers do not look at ads before shopping, do not prepare
lists (or deviate from the lists once in store), and makes fully planned purchases.
The behavior indicates the value of in-store displays, attractive store layouts, and
well-organized stores, catalogues, and Web sites. Because so many purchases
are unplanned, the retailer’s ability to forecast, budget, order merchandise, and
have sufficient personnel on the selling floor is more difficult.
Retail consumers usually visit a store, even though mail, phone, and Web sale
have increased: despite the inroads made by nonstore retailers, most retail
transactions are still conducted in stores – and will continue to be in the future.
Many people like to shop in person; want to touch, smell, and / or on the products;
like to browse for unplanned purchases; feel more comfortable taking a purchase
home with them than waiting for a delivery; and desire privacy while at home. This
store-based shopping orientation has implications for retailers; they must work to
attract choppers to their stores and consider such factors as store location,
transportation, store hours, proximity of competitors, product selection, parking,
and ads.
Retailer’s
strategy
Popularity of sources
1. Define type of business of the goods or services category and the company’s
specific orientation (such as full service or “no frills”).
3. Determine the consumer market to target on the basis of its characteristics (such
as gender and income level) and needs (such as product and brand
preferences).
4. Devise an overall, long-run plan that gives general direction to the firm and its
employees.
• Coordinated effort – the retailer integrates all plans and activities to maximize
efficiency.
• Goal orientation – retailer sets goals and then uses its strategy to attain them.
Applying the Retailing Concept (taken from Berman and Evan, 2004)
Coordinated effort
Retailin
Retail
g
strategy
Concep
t
Value-driven
Goal orientation
It is common to find out that one consumer may shop at a discount store, another at the
neighborhood store, and other at a full-service firm, these diverse customers all
have something crucial in common: They each encounter a total retail experience
(including parking to check-out point) in making a purchase.
Total retail experience – includes all the elements in a retail offering that encourage or
inhibit consumers during their contact with a retailer. Many elements, such as the
number of salespeople, displays, prices, the brand carried, and inventory on hand,
are controllable by a retailer; others, such as the adequacy of on-street parking,
the speed of a consumer’s modem, and sales taxes, are not. Is some part of the
total experience is unsatisfactory, consumers may not make a purchase – they
may even decide not to patronize a retailer again.
In planning its strategy, a retailer must be sure that all strategic element are in place. For
the shopper segment to which it appeals, the total experience must be aimed at
fulfilling that segment’s expectation.
Discussion questions
3. Why some retailer prefers to choose an intensive distribution while others may
choose an exclusive distribution.