1 / 43

Chapter 1 Perspectives on Retailing

Chapter 1 Perspectives on Retailing. Learning Objectives. Explain what retailing is and why it is undergoing so much change today. Describe the five methods used to categorize retailers.

ishana
Download Presentation

Chapter 1 Perspectives on Retailing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter 1 Perspectives on Retailing

  2. Learning Objectives • Explain what retailing is and why it is undergoing so much change today. • Describe the five methods used to categorize retailers. • Understand what is involved in a retail career and be able to list the prerequisites necessary for success in retailing. • Explain the different methods for the study and practice of retailing. LO 1

  3. What is Retailing, and Why is it Undergoing so Much Change Today? • Retailing - Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer. • Any firm that sells a product or provides a service to the final consumer is said to be performing the retailing function. • What trends do you see in Retailing? LO 1

  4. What is Retailing, and Why is it Undergoing so Much Change Today? • E-tailing • Price competition • Demographic shifts • Store size • Eco-tailing • SocialMarketing1 LO 1

  5. E-tailing • The great unknown for retail managers will be the ultimate role of the Internet. • Bricks-and-mortar retailers - Operate out of a physical building. • With the growth of the web 2.0, the Internet has become much more interactive and social in nature. This has important implications for retailers. LO 1

  6. E-tailing • To combat e-tailing, bricks-and-mortar retailers must give their customers more control over the shopping experience. LO 1

  7. E-tailing • E-tailing has caused a shift in power between retailers and consumers. • Traditionally, the retailers’ control over pricing information provided them the upper hand in most transactions. • The information dissemination capabilities of the Internet are making consumers better informed and thus increasing their power when transacting and negotiating with retailers. LO 1

  8. E-tailing • Retailers must keep experimenting with various strategies, both in-store and online because the next generation of technology will change the consumers’ expectations of what they demand from their retailers. LO 1

  9. Top on-lineRetailers • Amazon • Netflix • QVC • Apple • Cabelas • Avon • JCP • NewEgg • LLBean • TigerDirect • VictoriasSecret • Which are e-tailers only and which are click and mortar

  10. Price Competition • Sam Walton forever changed the face of retailing by realizing that most of any product’s cost gets added after the item is produced. • Walton made a major commitment to computerizing Wal-Mart as a means to reduce expenses. • Costco, a retailer, seeks to boost store traffic by getting shoppers to come in for a “super, low price” on key products. LO 1

  11. Demographic Shifts • Significant changes in retailing over the past decade have resulted from changing demographic factors such as: • The fluctuating birthrate, the growing importance of the 70 million Generation Y consumers. • The move of Generation X into middle age. • The beginning movement of the baby boomer generation into retirement. • The increasing number of immigrants. LO 1

  12. Demographic Shifts • Successful retailers must: • become more service-oriented • offer better value in price and quality • be more promotion-oriented, and • be better attuned to their customers’ needs. LO 1

  13. Demographic Shifts • Profit growth must come by either: • increasing same-store sales at the expense of the competition’s market share or • by reducing expenses without reducing services to the point of losing customers. LO 1

  14. Demographic Shifts • Same-store sales - Compares an individual store’s sales to its sales for the same month in the previous year. • Market share - Retailer’s total sales divided by total market sales. LO 1

  15. Store Size • As stores increase in size the retailer often employs a scrambled merchandising strategy. • Scrambled merchandising - Exists when a retailer handles many different and unrelated items. • It is the result of the pressure being placed on many retailers to increase profits. LO 1

  16. Store Size • Retailers realized that having supersized stores increased several major costs: • Rent • Inventory costs, and • Labor costs. • Two retail formats that have recently seen a significant decrease in average store size and a decrease in number of stores are: • Department stores and • Category killers. LO 1

  17. Store Size • Category killer - Retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition. LO 1

  18. Exhibit 1.1 - External Environmental Forces Confronting Retail Firms LO 1

  19. Categorizing Retailers • Census bureau • Number of outlets • Margin versus Turnover • Location • Size LO 2

  20. Census Bureau • The U.S. Bureau of the Census, for purposes of conducting the Census of Retail Trade, classifies all retailers using three-digit North American Industry Classification System (NAICS) codes. • Shortcoming of using the NAICS codes is that they do not reflect all retail activity. LO 2

  21. Exhibit 1.2 - The Five Methods Used toCategorize Retailers LO 2

  22. Number of Outlets • Retailers with several units are a stronger competitive threat because they can: • Spread many fixed costs over a larger number of stores. • Achieve economies in purchasing. • Advantages of single-unit retailers: • They have harder-working, more motivated employees. • They can focus and tailor their efforts and merchandise in one trade area. LO 2

  23. Number of Outlets • Standard stock list - Merchandising method in which all stores in a retail chain stock the same merchandise. • Optional stock list - Merchandising method in which each store in a retail chain is given flexibility to adjust its merchandise mix to local tastes and demands. LO 2

  24. Number of Outlets • Channel advisor or Channel captain - Institution in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in. • Examples could be manufacturer, wholesaler, broker, or retailer. • Large store retailers are often able to perform the role of channel captain. LO 2

  25. Number of Outlets • Private label branding - Occurs when a retailer develops its own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name. • Also called store branding. LO 2

  26. Number of Outlets • The major shortcoming of using the number of outlets scheme for classifying retailers is that it addresses only traditional bricks & mortar retailers. LO 2

  27. Margins Versus Turnover • Gross margin percentage - Gross margin divided by net sales or what percent of each sales dollar is gross margin. • Gross margin - Net sales minus the cost of goods sold. • Operating expenses - Expenses the retailer incurs in running the business other than the cost of the merchandise. LO 2

  28. Margins Versus Turnover • Inventory turnover - The number of times per year, on average, that a retailer sells its inventory. • High-performance retailers - Produce financial results substantially superior to the industry average. • Low-margin/low turnover retailer - Operates on a low gross margin percentage and a low rate of inventory turnover. LO 2

  29. Margins Versus Turnover • Low-margin/high turnover retailer - Operates on a low gross margin percentage and a high rate of inventory turnover. • High-margin/low turnover retailer - Operates on a high gross margin percentage and a low rate of inventory turnover. LO 2

  30. Margins Versus Turnover • Clicks & mortar retailers - Sell both online and via physical stores. • High-margin/high turnover retailer - Operates on a high gross margin percentage and a high rate of inventory turnover. LO 2

  31. Margins Versus Turnover High Margin Excellent position to withstand a competitive attack Low Turnover High Turnover Least able to withstand a competitive attack Low Margin LO 2

  32. Location • Retailers are now aware that opportunities exist in new non-traditional retail areas. • Retailers are reaching out for alternative retail sites, rather than simply renovating the existing stores. • Today, the most significant of the new nontraditional shopping locations could be the one which combines culture with entertainment or shopping. LO 2

  33. Size • The reason for classifying by size is that the operating performance of retailers tends to vary according to size. • With advances in technology, using classification of size is unclear. LO 2

  34. A Retailing Career • Career path • Common questions about a retailing career • Prerequisites for success LO 3

  35. Exhibit 1.4 - Retailing-Two Career Paths LO 3

  36. Career Path • Store management - The retailing career path that involves responsibility for: • Selecting • Training • Evaluating personnel • In-store promotions • Displays • Customer service • Building maintenance, and • Security. LO 3

  37. Career Path • Buying - The retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the store’s merchandise lines. LO 3

  38. Common Questions About a Retailing Career • Salary • Career progression • Geographic mobility • Women in retailing • Societal perspective LO 3

  39. Prerequisites for Success • Hard work • Analytical skills • Creativity • Decisiveness • Flexibility • Initiative • Leadership • Organization • Risk taking • Stress tolerance • Perseverance • Enthusiasm LO 3

  40. The Study and Practice of Retailing • Analytical method • Creative method • A two-pronged approach • A proposed orientation LO 4

  41. The Study and Practice of Retailing Analytical Method Manager is finder and investigator of facts. Creative Method Manager is conceptual and very imaginative. Two-Pronged Method Manager who employs both approaches. LO 4

  42. A Proposed Orientation • It has four major orientations: • Environmental - allows the retailers to anticipate and adapt continuously to external forces in the environment. • Management planning - helps the retailers to adapt systematically to a changing environment. • Profit - all retail decisions will have an effect on the firm’s financial performance. • Decision making - allows the retailers to focus on the need to collect and analyze data to make intelligent retail decisions. LO 4

  43. Exhibit 1.5 - The Importance of Proactive Planning LO 4

More Related