MAR 3875 (Retail Management) - Exam 1 Review

Marketing aspects

- managerial

- institutional

Managerial perspective

recommendation to run a business

What does retailer do?

* they take something they buy in relatively large quantities from their supplier (wholesaler). They split up into small units.

Retailing

- French Word (retailler)

- cut into small pieces

What is retailing?

- to sales of goods and/or service to consumer

- final stage of the distribution process

Importance of Retailing for the U.S & Global Economy:

- 2/3 of total GDP comes from CONSUMPTION not production.

* The more you consume; the more of the market there is for things to be sold.

- 50% of the total is generated by means of franchising. ( U.S is the oldest location for franchising).

* Part of franchising is that you can take job task cut them into steps that you can repeatedly performed and teach to another person.

Wal-Mart

* continues to be the largest retailer & company of any kind. Over 2 millions employees & 11,000 stores globally.

* Is Proctor and Gamble (P&G) largest customers and buys twice as much products from P&G as P&G sells to all of China.

Subway

the largest number of stores about 40,000

Wal-Mart Dominance

>$86 millions in sales every hour

>100 millions customer served each week

>480 bllion in overall annual sales served each week equally > 50% more than it 50% more than its 5 closest competitor combines.

Became the largest U.S retailer:

11% of overall U.S sales

21% of grocery

25% toys

Toy R Us, Biggest toy chain in the U.S but walmart kills it why?

The toys are cheaper and one-stop shop

Experience Economy

In recent years, we have seen a trend in retailing toward what has been a ....... also called entertailing.

Experience Economy

- CoCreation part of the process. Interactive & Engaging for consumer/memorable.

CONSUMER PAY MEMORABLE!

Ex. Cake workshop

Retailing “Yesterday”?

Introduction to “self-service” > requires Pre-Packages vs. Made to Order Merchandise.

• Impact on:

  • service

  • merchandise return

  • customer satisfaction

  • browsing

  • Display/merchandise sells by itself

  • task vs enjoyment ( Uliterian vs. Hedonic Shopping)

Distribution Channel (Marketing System)

An organization network of entities that perform all the activities required to link producer with user of products.

• Include various flows:

  • Product (Merchandise, services) - flow “down” the channel

  • Money/Resource - flow “up” the channel

  • “Information” - flow both way (e.g. compliant flow “up” promotion/incentive flow “down”.)

Dual distribution (“Multi-Channel, Omni-Channel, all the same)

• the use of two or more distribution channels to provide the same product to a target market.

Reverse Channel

A distribution channel that goes from end use to producer.

Justification for Intermediary Existence?

What benefit do intermediaries provide to justify their existence?

• The profit shared with the retailer by the final consumer. (Convivence Premium)

Communication Function

such as:

• Feedback

• incentive program

• point for purchase

Facilitating Function

Such as:

• transportation

• insurance

• credit

• gift wrapping

Physical Distribution Function

• Reducing Transaction

• Reducing Bulk

• Accumulating Bulk

• Sorting

• Assorting ( A great skill)

Sorting

identifying and separating the product into quality or size categories

Accumulating Bulk

Buying small quantitative of product from many small producer and assembling larger quantities

Reducing Bulk

Buying in larger quantities and selling in smaller quantities

Assorting

Compiling an assortment of items by buying from many different producers.

Marketing Function Performed by Intermediaries

A company can eliminate one or more intermediaries, but it CANNOT ELIMINATE THE FUNCTION, they can perform.

Conventional Channel

• Consists of loosely aligned, relatively autonomous channel members that conduct their transactions “at arm’s length”, i.e., as needed.

• In the extreme, intermediaries do not rely on relationships or even regular transactions.

Example:

• Local antique dealer who may buy and sell a pieces here and there.

• Snall town who buys his supplies where there are in sale without relying on a regular supplier.

Vertical Marketing System

Tightly organized systems that are typically “governed” by three “governance mechanisms”:

• Power in the Channel (Administered VMS)

• Contracts (Contractual VMS)

• Ownership of more than one channel level by one company (corporate vms)

Contractual- Vertical Marketing Systems

Contract

Administered - Vertical Marketing Systems

Power in the channel

Corporate - Vertical Marketing System

Ownership of more than one channel level by one company

Reward

“A” has power to reward’B”

Coercion

“A” has power to force/punish “B”

Information

“A” has access to information the “B” does not

Expertise

“A” has knowledge/skills that “B” does not

Reference

“B” likes to be affiliated/identified with “A"

Intensive Distributon

• Goal is to obtain maximum expose at retail level.

• Saturate every possible retail outlet with product/brand.

Selective Distribution

• Goal is to restrict sale of product to a limited number of outlets.

• Select suitable outlets that meet company’s image and performance criteria.

Exclusive Distribution

• Goal is to grant the retailer an exclusive trade area.

• Strict contracts stipulatory mutual responsibilities between supplier and retailer. 

there is 2 types of wholesaler

• Merchant

• Agents

Merchant

Who buys and resells; take a title.

Generate a profit through a markup.

Agents

commission of percentage of sale for facility the sale.

Franchisee

• individual or corporation.

• they pay a fee for the franchisee.

• Royalty price; percentage of sale. What they keep is the residual payment.

Locations

geographic area rom which a retailer or a group of retailer draws in customers.

retail gravity theories

suggest that there are underlying consistence in shopping behavior that tend themselves to mathematical prediction based on the concept of gravity.

Problem of Reilly’s Law

1. Assume a straight road between towns.

2. Is population size alone really a goods indication? relevance of stores types, traffic, entertainment options?

3. Distance in miles vs. actual travel time? No consideration of road conditions, congestions, made of transportation used.

4. availability of shopping in between towns?

5. Purpose of shopping trip/merchandise sought.

Problems of Huff’s Law

1. λ (effect on travel time) is difficult to assess takes into account the sensitive of consumers to travel time for a certain product category.

2. Is the square footage alone really good indicator? Relevance of merchandise assortment and/or service intensity?

   • Proxy (Approximation)

3. Distance in travel time - a clear improvement to reilly’s law

4. assuming shopping one primary item-most shopping involves multiple items

5. purpose of shopping trip/merchandise sought.

Saturation theory

examines how demand goods and service of a potentional trading area is being served by current retail establishment

Index of retail saturation

is the ratio of: demand for product (households in the geographical area) multiplied by (annual retail expenditures for a particular line of trade per household).

divide by (available supply the square footage of retail facilities of a particular line of trade in a geographical area)

marketing concept 

philosophy that an organization should try to satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals

extended marketing concept

exceeding customer wants and needs at a profit

relationship marketing

that focuses on building long-lasting relationship with customers

customer service

activities designed to enhance the level of customer satisfaction

customers-centered retailing

approach to retailing that places the customer at the center of all decision

what is difference between gdp and gnp

• GDP (Gross Domestic Product) measures all goods and services produced within a country's geographical borders, regardless of the nationality of the producers.

• GNP (Gross National Product) measures the value of goods and services produced by the citizens and companies of a country, regardless of where they are located.

GDP = location-based (inside the country’s borders)

GNP = people/company-based (belongs to citizens & companies, no matter where they are)

GDP = “What’s made inside the house”🏠

Imagine your country is like a house. GDP counts everything made inside the house, no matter who makes it. Even if a visitor (a foreign company) comes into your house and bakes cookies in your kitchen — those cookies count in GDP, because they were made inside your house.

GNP = “What your family makes, no matter where” 👨‍👩‍👧‍👦

Now imagine you want to count only what your family members make, even if they make it somewhere else. If your brother goes next door and bakes cookies in the neighbor’s kitchen, those cookies still count in GNP, because he’s part of your family. But if the neighbor bakes cookies in your kitchen, that doesn’t count for GNP — because they’re not part of your family.

QSP

Categorization of customer value by quality service, and/or price.

Customer lifetime value

worth of a customer throughout the relationship with the retailer.

Serviceescape

All the variables of the service operation that are visble to consumers, including facilites, personnel, equpiment, and the service’s customer