Slides Ch1 3

An Introduction to Retailing
RETAIL MANAGEMENT: A STRATEGIC APPROACH

11th Edition BERMAN EVANS
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Chapter Objectives
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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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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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?
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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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Figure 1-1: Boom Times for Dunkin Donuts
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Figure 1-2: Careers in Retailing
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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
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Table 1-1: The 10 Largest Retailers in the United States

Rank Company Main Emphasis
1 2 3 4 5 6 7 8 9
Wal-Mart Home Depot CVS Caremark Kroger Costco Target Walgreens
Full-line discount stores, supercenters, membership clubs Home centers, design centers Drugstores Supermarkets, convenience stores, jewelry stores Membership clubs Full-line discount stores, supercenters Drugstores
Sears Holdings Department stores, specialty stores Lowes Home centers
10
Safeway
Supermarkets
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Figure 1-4: A Typical Channel of Distribution
Manufacturer Retailer
Wholesaler
Final Consumer
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Figure 1-5: The Retailers Role in the Sorting Process
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Multi-Channel Retailing
retailer sells to consumers through A
multiple retail formats: Web sites Physical stores
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Figure 1-6: Brooks Brothers and Multi-Channel Retailing
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Relationship Management Among Retailers and Suppliers

Disagreements may occur in the following areas: control over channel profit allocation number of competing retailers product displays promotional support payment terms operating flexibility
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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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Figure 1-7: Comparing Distribution Types
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Figure 1-8: Special Characteristics Affecting Retailers

Small Average Sale Retailers Strategy Impulse Purchase
Popularity of Stores
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Retail Strategy
An overall plan for guiding a retail firm Influences the firms business activities
Influences firms response to market forces
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Six Steps in Strategic Planning

1. Define the type of business 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
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Figure 1-9: Expect More. Pay Less at Target
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Aspects of Targets Strategy

Growth objectives Appeal to a prime
market Distinctive image Focus Customer service Multiple points of contact
Employee relations Innovation Commitment to
technology Community involvement Monitoring performance
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Figure 1-10: Applying the Retailing Concept

Customer Orientation
Coordinated Effort
Value-driven Goal Orientation
Retailing Concept
Retail Strategy
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Figure 1-11: The Build-A-Bear Experience: Never Boring
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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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Figure 1-12: 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 Develop a customer database Ongoing customer contact is improved with information on peoples attributes and shopping behaviors
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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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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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Building and Sustaining Relationships in Retailing

11th Edition BERMAN BERMAN EVANS EVANS
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Chapter Objectives
To explain what value really means and to
highlight its pivotal role in retailers building and sustaining relationships To describe how both customer relationships and channel relationships may be nurtured in todays highly competitive marketplace
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Chapter Objectives (cont.)

To examine the differences in relationship
building between goods and services retailers To discuss the impact of technology on relationships in retailing To consider the interplay between retailers ethical performance and relationships in retailing
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What is Value?
The bottom line: Consumers will demand more for less from the shopping experience They will spend less time shopping They will split the commodity-shopping trip from the value-added shopping trip
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What is Value? (cont.)

Channel Perspective Value is a series of activities and processes (the value chain) that provide a certain value for the consumer. Customer Perspective Value is a perception that the shopper has of the value chain. It is the view of all the benefits from a purchase versus the price paid.
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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, retailers in-stock position, shipping, prices, image, and other elements
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Three Aspects of Value-Oriented Retail Strategy

Expected Augmented
Potential
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Potential Pitfalls to Avoid in Planning a ValueOriented Retail Strategy

Planning value solely from a price perspective Providing value-enhanced services that customers
do not want or will not pay extra for Competing in the wrong value/price segment Believing augmented elements alone create value Paying lip service to customer service
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Figure 2-2: A Value-Oriented Retailing Checklist

Is value defined from a consumer perspective? Does the retailer have a clear value/price point? Is the retailers value position competitively defensible? Are channel partners capable of value-enhancing
services? Does the retailer distinguish between expected and augmented value chain elements? Has the retailer identified potential value chain elements? Is the retailers value-oriented approach aimed at a distinct market? Is the retailers value-oriented approach consistent?
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Figure 2-2: A Value-Oriented Retailing Checklist (cont.)

Is the retailers value-oriented approach effectively
communicated? Can the target market clearly identify the retailers positioning? Does the retailers positioning consider sales versus profits? Does the retailer set customer satisfaction goals? Does the retailer measure customer satisfaction levels? Is the retailer careful to avoid the pitfalls in value-oriented retailing? Is the retailer always looking out for new opportunities that will create customer value?
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Figure 2-3: J.C. Penney An Emphasis on Solid Retail Relationships
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Customer Service
Expected customer Augmented customer
service is the service level that customers want to receive from any retailer such as basic employee courtesy.
service includes the activities that enhance the shopping experience and give retailers a competitive advantage.
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Figure 2-4: Classifying Customer Services
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Fundamental Decisions
What customer services are expected and what
customer services are augmented for a particular retailer? What level of customer service is proper to complement a firms image? Should there be a choice of customer services? Should customer services be free? How can a retailer measure the benefits of providing customer services against their costs? How can customer services be terminated?
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Figure 2-5: H-E-B Going Above and Beyond
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Table 2-1a: Typical Customer Services

Credit Delivery Alterations/ Gift certificates Trade-ins Trial purchases
Installations Packaging/gift wrapping Complaints/Return handling
Special sales
Extended store hours Mail/phone orders
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Table 2-1b: Miscellaneous Customer Services

Bridal registry Interior designers Personal shoppers Ticket outlets Parking Water fountains Restrooms Restaurants Babysitting
Fitting rooms
Beauty salons Fur storage
Payphones
Baby strollers
Shopping bags
Information
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Figure 2-6: Turning Around Weak Customer Service

Focus on Customer Concerns Empower Frontline Employees
Show That You Are Listening
Express Sincere Understanding
Apologize and Rectify the Situation

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Principles of Category Management

Retailers listen more to customers
Profitability is improved because inventory more
closely matches demand By being better focused, each department is more desirable for shoppers Retail buyers are given more responsibilities and accountability for category results Retailers and suppliers must share data and be more computerized Retailers and suppliers must plan together
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Figure 2-7: Elements Contributing to Effective Channel Relationships
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Three Kinds of Service Retailing

Rented goods services Owned goods services
Nongoods services
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Four Characteristics of Services Retailing

Intangibility Inseparability Perishability
Variability
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Figure 2-8a: Characteristics of Service Retailing

Intangibility
No patent protection possible Difficult to display/communicate service benefits Service prices difficult to set Quality judgment is subjective Some services involve performances/experiences
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Figure 2-8b: Characteristics of Service Retailing

Inseparability
Consumer may be involved in service production Centralized mass production difficult Consumer loyalty may rest with employees
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Figure 2-8c: Characteristics of Service Retailing

Perishability
Services cannot be inventoried Effects of seasonality can be severe Planning employee schedules can be complex
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Figure 2-8d: 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
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Figure 2-9: Consumer Perceptions of Service Retailing
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Figure 2-10: Innovative Marketing at McDonalds
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Figure 2-11: Eddie Bauer: Strong Ethical Sensibilities
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Figure 2-12: Understanding the Americans with Disabilities Act
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Figure A2-1: Lessons in Service Retailing
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Strategic Planning in Retailing

11th Edition BERMAN EVANS
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Chapter Objectives
To show the value of strategic planning for
all types of retailers To explain the steps in strategic planning for retailers: situation analysis, objectives, identification of consumers, overall strategy, specific activities, control, and feedback
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Chapter Objectives (cont.)

To examine the individual elements of a
retail strategy (both controllable and uncontrollable), and to present strategic planning as a series of integrated steps To demonstrate how a strategic plan can be prepared
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Retail Strategy
The overall plan or framework of action that
guides a retailer
One year in duration
Outlines mission, goals, consumer market, overall
and specific activities, and control mechanisms
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Figure 3-1: Elements of a Retail Strategy
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Benefits of Strategic Retail Planning

Provides thorough analysis of the requirements for doing
business for different types of retailers Outlines retailer goals Allows retailer to determine how to differentiate itself from competitors Allows retailer to develop an offering that appeals to a group of customers Offers an analysis of the legal, economic, and competitive environment Provides for the coordination of firms total efforts Encourages anticipation and avoidance of crises
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Organizational Mission
Retailers commitment to a type of business and to a distinctive role in the marketplace.
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Figure 3-2: The Focused Organizational Mission of Frischs Restaurants
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Ownership and Management Alternatives

Sole proprietorship is an unincorporated retail
firm owned by one person A partnership is an unincorporated retail firm owned by two or more persons, each with a financial interest A corporation is a retail firm that is formally incorporated under state law; it is a legal entity apart from its officers
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Figure 3-3: Checklist to Consider When Starting a New Business
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Figure 3-4: Checklist for Purchasing an Existing Retail Business
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Figure 3-5a: Selected Kinds of Retail Goods and Service Establishments

Durable Goods Stores: Automotive group Furniture and appliances group Lumber, building, and hardware group Jewelry stores
Nondurable Goods Stores: Apparel group Food group General merchandise group Gasoline service stations
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Figure 3-5b: Selected Kinds of Retail Goods and Service Establishments

Service Establishments (Personal): Laundry and dry cleaning Beauty/barber shops Funeral services Health-care services
Service Establishments (Amusement): Movie theaters Bowling alleys Dance halls Golf courses
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Figure 3-5c: Selected Kinds of Retail Goods and Service Establishments

Service Establishments (Repair): Automobile repair Car washes Consumer electronics repair Appliance repairs
Service Establishments (Hotel): Hotels Motels Trailer parks Camps
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Image and Positioning

An image represents how a given retailer is perceived by consumers and others.
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Positioning Approaches
Mass merchandising is a positioning approach
whereby retailers offer a discount or valueoriented image, a wide or deep merchandise selection, and large store facilities. Niche retailing occurs when retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market.
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Figure 3-6: Niche Retailing by Babies R Us
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Figure 3-7: Selected Retail Positioning Strategies
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Target Market Selection

Three techniques
Mass marketing
Concentrated marketing
Differentiated marketing
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Figure 3-8: Jean-Philippe Patisserie: A Shop of Distinction
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Strategic Implications of Target Market Techniques

Retailers location Goods and service mix Promotion efforts Price orientation Strategy
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Figure 3-9: Developing an Overall Retail Strategy

Controllable Variables: Store location Managing business Merchandise management and pricing Communicating with customer Uncontrollable Variables: Consumers Competition Technology Economic conditions Seasonality Legal restrictions
Retail Strategy
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Table 3-4a: Legal Environment and Retailing

Store Location
zoning laws blue laws environmental
Managing the Business

licensing provisions personnel laws antitrust laws franchise agreements business taxes recycling laws
laws direct selling laws local ordinances leases and mortgages
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Table 3-4b: Legal Environment and Retailing

Merchandise Management and Pricing
trademarks merchandise restrictions product liability laws and lemon laws sales taxes unit-pricing laws collusion laws
sale prices
price discrimination laws
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Table 3-4c: Legal Environment and Retailing

Communicating with the Customer
truth-in-advertising and selling laws truth-in-credit laws telemarketing laws bait-and-switch laws inventory laws labeling laws
cooling-off laws
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Table 3-6: Sample Strategic Plan

Sallys is a small, independently owned, high-fashion ladies clothing shop located in a suburban strip mall. It is a full-price, fullservice store for fashion-forward shoppers. Sallys carries sportswear from popular designers, has a personal shopper for busy executives, and has an on-premises tailor. The store is updating its strategic plan as a means of getting additional financing for an anticipated expansion.
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Additional Concerns for Global Retailing

In addition to the strategic planning process: assess your international potential get expert advice and counseling select your countries develop, implement, and review an international retailing strategy
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Factors Affecting the Success of a Global Retailing Strategy

Timing A balanced international program A growing middle class Matching concept to market Solo or partnering Store location and facilities Product selection
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Figure A3-1: Factors to Consider When Engaging in Global Retailing
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An Introduction to Retailing

RETAIL MANAGEMENT: A STRATEGIC APPROACH

Figure 1-1: Boom Times for Dunkin Donuts

Figure 1-2: Careers in Retailing

An Ideal Candidate for a Retailing Career

Must have analytical skills

Table 1-1: The 10 Largest Retailers in the United States

Wal-Mart Home Depot CVS Caremark Kroger Costco Target Walgreens

Sears Holdings Department stores, specialty stores Lowes Home centers

Figure 1-4: A Typical Channel of Distribution

Figure 1-5: The Retailers Role in the Sorting Process

multiple retail formats: Web sites Physical stores

Figure 1-6: Brooks Brothers and Multi-Channel Retailing

Relationship Management Among Retailers and Suppliers

Figure 1-7: Comparing Distribution Types

Figure 1-8: Special Characteristics Affecting Retailers

Influences firms response to market forces

Six Steps in Strategic Planning

Figure 1-9: Expect More. Pay Less at Target

Aspects of Targets Strategy

market Distinctive image Focus Customer service Multiple points of contact

Employee relations Innovation Commitment to

technology Community involvement Monitoring performance

Figure 1-10: Applying the Retailing Concept

Figure 1-11: The Build-A-Bear Experience: Never Boring

Figure 1-12: A Customer Respect Checklist

Effective Relationship Retailing

Approaches to the Study of Retailing

Parts of Retail Management: A Strategic Approach

Building and Sustaining Relationships in Retailing

RETAIL MANAGEMENT: A STRATEGIC APPROACH

Chapter Objectives (cont.)

What is Value? (cont.)

Retail Value Chain

consumers through a channel of distribution

Three Aspects of Value-Oriented Retail Strategy

Potential Pitfalls to Avoid in Planning a ValueOriented Retail Strategy

Figure 2-2: A Value-Oriented Retailing Checklist

Figure 2-2: A Value-Oriented Retailing Checklist (cont.)

Figure 2-3: J.C. Penney An Emphasis on Solid Retail Relationships

Figure 2-4: Classifying Customer Services

Figure 2-5: H-E-B Going Above and Beyond

Table 2-1a: Typical Customer Services

Installations Packaging/gift wrapping Complaints/Return handling

Table 2-1b: Miscellaneous Customer Services

Figure 2-6: Turning Around Weak Customer Service

Show That You Are Listening

Express Sincere Understanding

Apologize and Rectify the Situation

Principles of Category Management

Figure 2-7: Elements Contributing to Effective Channel Relationships

Three Kinds of Service Retailing

Four Characteristics of Services Retailing

Figure 2-8a: Characteristics of Service Retailing

Figure 2-8b: Characteristics of Service Retailing

Figure 2-8c: Characteristics of Service Retailing

Figure 2-8d: Characteristics of Service Retailing

Figure 2-9: Consumer Perceptions of Service Retailing

Figure 2-10: Innovative Marketing at McDonalds

Figure 2-11: Eddie Bauer: Strong Ethical Sensibilities

Figure 2-12: Understanding the Americans with Disabilities Act

Figure A2-1: Lessons in Service Retailing

Strategic Planning in Retailing