Retail Management Chapters 1-2

What are some examples of Direct to Consumer Companies?

What are some examples of Direct to Consumer Companies?

• warby parker

• versed

• curology

• ritual

• caspar

What is retailing?

set of business activities that adds value to the products and services sold to consumers for their personal or family use

what is a retailer?

a business that sells products and/or services to consumers for personal or family use

What are some examples of retailers?

Kohls, Wendys, Amazon, Wells Fargo

What are some firms that are retailers and wholesalers?

• office depot

• home depot

• bank of america

• costco

• Nike

• Amazon

• Apple

What are some issues in retailing today?

• how can we best serve our customers while earning a fair profit or just profit?

• How can we stand out in a highly competitive environment where consumers have many choices?

• How can we grow our business, while retaining a core of loyal customers

• How can we evolve and maintain as an Omnichannel retailer?

• How can we survive on increasing global competition and a changing marketing environment

• Evolving Supply Channel Changes

What is vertical integration?

when firms performs in more than one set of activities

What is an example of vertical integration?

Victoria’s Secret, Bath and Body Works, Mast Industries

What is Backward integration?

retailer performs some distribution and manufactering activities

What are some examples of backward integration?

• JCPenney sells Arizona jeans (Private Label)

• Buckle (BKE jeans)

• Harry’s (Razors)

what is forward integration?

manufacturers undertake retailing activities

What are some examples of forward integration?

• Nike

• Apple

• Sherwin Williams

How do retailers add value?

• break bulk (get quantities customers want)

• Hold inventory (hold it at a convenient place when you want it

• Manage risk (buy inventory, easy returns)

• Provide assortment

• other services (get credit, layaway, returns)

What is the social and economic significance of retailing?

• Community Support

• Over $6.5 trillion in annual US Sales

• Employs approx. 15 million people

• Management training opportunities

• Entrepreneurial opportunities

How has retailing become globalized?

• source merchandise from around the world

  • walmart operates in US, China, Mexico, UK, Argentina

• Carrefour has stores in 25 countries

• Retailers from around the world are in the US market physically and digitally

What makes Retailing a high tech industry?

• selling merchandise digitally

• digital marketing

• using internet to manage supply chains

• data analytics for decision making

• merchandise planning and prediction

What are the decision variable for retailers?

• customer service including fulfillment and returns

• merchandise assortment

• physical location and/or digital presence

• communication

• pricing

• store, app, e-commerce design and display

What are some more aspects of retailing?

• retail is creative

• retail is detail

• retail is fast, lack of speed kills

• retail is highly competitive

• retail keeps score everyday

• nothing happens until something gets sold

• reality in retailing is perception

• always dealing with customer expectations

• focus on customer behavior (trends)

What are some perceptions about careers in retailing?

• don’t need college

• low pay

• long hours

• boring

• dead-end job

• no benefits

• everyone is part time

• unstable environment

Why should you consider retailing?

• entry level management positions

  • department manager or assistant buyer/planner

  • manage and have P&L responsibility on your first job

• starting pay average to above average w/ great benefits

  • Some retailers pay graduate school

• no 2 days are alike

• buying for creative/financially oriented people

• management for people who like working with people

• no glass ceiling

What are some of the types of careers found in retailing?

• store management

• data analytics

• accounting and finance

• technology

• real estate

• hr management

• supply chain management

• marketing

• public affairs

• information systems

• loss prevention

• visual and graphic design

How does SWOT Work?

You should leverage strengths and opportunities, understand the constraints of weaknesses when paired with opportunities, Understand the vulnerability of strengths when paired with threats, and Understand how when weaknesses are paired with threats they become a problem.

what are some general trends in retailing?

• growth in digital, omni-channel retailing by new and traditional retailers

• increased use of technology to reduce cost; increase value delivered

• growth in services retailing

• new types of retailers

• new types of retailers

• globalization

How can retailers be different?

• using different retail mixes

• Type of offering

  • Product or Service

  • Industry

  • Merchandise

  • design, visual merchandising

  • location

  • pricing

• infinite variations

What is merchandise?

• variety (breadth)

• assortment (Depth)

• Availability (In Stock)

What is variety or breadth of merchandise?

the number of merchandise categories

• Wide vs. Narrow

What is assortment or depth of merchandise?

the number of items in a category (SKUs)

• deep vs. shallow

What is availability in terms of merchandising?

the percentage of customers who want to buy a product can get it

What does QSP stand for?

• Quality

• Service

• Price

What does SKU stand for?

Stock keeping Units

How does service differ for retailers

• retailers differ in the services they offer customers

  • Cycleworks offers assistance in selecting the appropriate bicycle as well as bicycle repairs

  • Walmart does not have any additional services but you will get a bike at a lower cost

What are some types of food retailers?

• supermarkets

  • cars, highways, and tv to build brands

  • knowledgeable customers - self service

  • perishable vs. packaged goods

• big box retailers

  • Warehouse Clubs

    • Costco

  • Amazon

  • Supercenters (Target and Walmart)

• Convenience Stores

• Limited Assortment Groceries

• Digital Retailers

• Natural/Organic Emphasis Grocers

• Non-Grocer Grocers

Supermarkets

• conventional supermarkets account for less than 45% of food sales

  • Offer Services: pharmacies, health care, banks, coffee

  • Want customers to think of it as a place to “hang out”

  • Online ordering, delivery, pick up at door

Online Grocery Retailers

• Customers willing to pay more to save time

• online retailers continues to expand

  • about 30% of orders are for nonfood items

    • paper products, cleaning items

• slim profit margins continue to be a problem, fulfillment costs are high

• large growth during the pandemic

Differentiate Strategy

• Walmart = low price, huge variety and good value, convenience, and e-commerce

• Target = more fashionable, focus on digital commerce, stores as fulfillment centers, branding

• Costco = low price, unique product mix

Specialty Stores

• concentrate on limited number of complementary merchandise categories

• deep but narrow variety

• sales associate expertise

• DTC

• Slowing down in specialty stores during the pandemic

  • Resale stores

  • thrift stores

  • consignment

Issues in specialty store retailing

• digital stand alone and mall-based retailers: decline in mall shopping and apparel sales

• Lifestyle formats: Banana Republic, American Eagle, Buckle, Foot Locker, Finish Line, Supreme

• Local Boutiques: Specialty Shoe, Jewelry, and Niche Sports (Skater Style Stores) Athletic Equipment

• Omnichannel opportunities

Category Specialists

• Deep and Narrow Assortments - Destination Stores

• Low price and Average Service

• Wholesaling to business customers and retailing to consumers

• Increased Competition with National Expansion and Consolidation

• Huge increase in DIY

Department Store Retailing

• broad variety

• deep assortment

• customer service

• merchandise displayed into distinct departments

• soft goods

• hard goods

Issues in department store retailing

• competition

  • discount stores on price

  • digital on price and assortment

  • specialty stores on service, depth of assortment

• Lower cost by reducing services

  • centralized cash wraps

• More Sales

  • trained customers to wait for sales

Categories of department stores

• discount

• moderate

• luxury

Department Stores are:

• attempting to increase the amount of exclusive merchandise they sell

• increase private-label merchandise, change merchandise mix

• Change pricing model

• expand multichannel and social media presence

What is a challenge of Department stores?

• high end, semi-exclusive brands want to move away from dept. store distribution

What is drug store retailing?

• specialty stores that concentrate on health and beauty care

• consolidation

  • Walgreens, CVS

• Competition

• Evolution to a new format

  • stand alone sites with drive-thru windows

  • offering more frequent purchase food items

  • convenience stores

• improved systems provide personalized service

What are off-price retailers?

• inconsistent assortment of brand-name merchandise

• significant price discounts (20-60% lower than suggested retail price)

• closeouts

• irregulars

• outlet stores

• factory outlets

• flash sale sites

What are issues in off-price retailing?

• Opportunistic Buying

• High Growth Area

• Buying First Line Merchandise

• Sales down during the Pandemic

What is the off price retailing strategy?

• pay vendor quickly with no promotional allowances, cooperative advertising funds, chargebacks, or markdown monies

• do not promote brand name to no6 anger department and specialty shops, which are vendor’s traditional customers

• Buy all of the vendor’s excess inventory, canceled orders, and returns regardless of color, size, or style distributions

• Pay 10-20% of vendors’ traditional wholesale $500 jacket purchased for $50 and sold for $100 versus sold for $250 less allowances

• Can also arrange for vendors to produce special goods for off-price retailers to reduce loss on fabrics, and to keep subcontractors busy

issues in extreme value retailing

• customer base is changing

• major challenges in this sector of retailing today

• inconsistent product offering

What are some other retailers?

• online

• flea markets

• vending machines

• short term retailers - kiosks, pop up stores

• variety stores

What are some examples of services retailing?

• aging population having increased demand for health care and home services

• young people are spending more time on health and fitness

• busy families are using services like home cleaning, lawn services, and meal prep to balance lifestyles

What is the difference between service retailers and merchandise retailers?

• intangibility

• simultaneous production and consumption

• perishability

• inconsistency of offerings to customers

What are issues in catalog retailing?

• low start up cost

• evolution of multi-channel offering

  • electronic channel, stores

• Increasing mail costs

• clutter from other catalogs

What are some issues with direct selling?

• completely bypasses retailers and wholesalers

  • manufacturers set up their own channels to sell their products directly to consumers

Party Plan System

Merchandise is demonstrated in a party atmosphere

Multi-level network

master distributors sell to distributors who sell merchandise

Pyramid Schemes

firm sells to other distributors and little if any merchandise goes to end users

Issues in Television Home Shopping

• few consumers watch regularly

• most purchases made by small proportion of viewers

• customers can’t examine merchandise

• customers must wait for merchandise to come on

• sells predominately jewelry, apparel, cosmetics, kitchenware, and exercise equipment (but this is evolving)

• host is key in selling process

What are the types of ownership in retail?

• independent

• chain

• franchise

• lease department

• vertical marketing system

• consumer cooperative

What are trends in ownership?

• concentration on one format

• growth in services franchising

What are Independent Advantages

• flexibility

• investment costs down

• specialists

• strong control

• image

• consistency

• independence

• entrepreneurial drive

What are some advantages of chains?

• scale and scope

• bargaining power

• cost and operating efficiencies

• technical abilities

Franchising

• 30-40% of US Retail Sales

• Franchisee pays fixed fee plus % of sales

• Franchisee implements program

What are reasons for franchising growth?

• technological advances

• profitable utilization of capital resources

• attainment of the American “Ownership Dream”

• demographic changes

• product/service consistency

What are the types of franchising?

• product/trademark

• business format

What are benefits of franchisors?

• national or global presence

• ownership qualifications set

• money obtained on delivery

• stringent rules for franchisees

• franchisee work incentive

• royalties continue

What are problems with Franchisors?

• damaged reputation

• loss of customer loyalty

• intra-franchise competition

• reduced resale value

• injured profitability

• franchisee desire for independence

What are franchisee benefits?

• small capital investment

• brand awareness

• operation procedures and management skills

• cooperative marketing

• exclusive selling rights

• purchasing costs

What are Franchisee problems?

• oversaturation

• franchisor overselling

• contract provisions

• cancellation clauses

• short duration

• gross sales based royalties

What causes franchising failures?

• inept management

• fraudulent activities

• market saturation

What are some trends for franchising in the 21st century?

• sustained growth

• enduring plus un-imagined applications

• international expansion

• increasing tensions