Retail Marketing Exam 1

What are the types of vertical integration?

• Forward Integration

• Backward Integration

What is forward integration?

when a manufacturer or wholesaler opens its stores or sells directly to consumers, bypassing other intermediaries

What is backward integration?

when a retailer acquires or partners with suppliers to control the production or sourcing stages.

EX: a grocery store owning a farm or manufacturing plant

What is value-added functions?

when retailers provide services to make products more accessible, affordable and desirable

What are some types of value added functions?

• breaking bulk

• holding inventory

• managing risk

• assortment provision

What is breaking bulk?

When a company buys and sells products in large quantities but also provides consumers with smaller, consumer-friendly quantities

What is Holding Inventory?

storing products so they’re readily available for customers, reducing customer wait times

What is managing risk?

assuming responsibility for unsold inventory, especially for perishable goods

What is assortment provision?

when a retailer offers a wide variety of products to meet customer preferences which increases store appeal and convenience

What are some examples of decision variables for retailers?

• customer service

• merchandise assortment

• location/digital presence

• communication

• pricing

• atmosphere (digital and in-store design)

Why are decision variables important for retailers?

each element shapes the customer’s experience and perception of value, which can impact loyalty and sales

What are some major retail trends?

• concentration

• Diversity of formats

• globalization

What is concentration?

when retailers merge or acquire others to gain a larger market share and reduce competition

What is diversity of formats?

when retailers offer various store types to serve different customer needs and demographics

What is globalization?

when companies expand into international markets to tap into new customer bases and diversifying their risk

What are the retail mix components?

• type of merchandise sold

• services offered

• variety and assortment (Breadth and Depth)

• Location and Design

• Pricing Strategies

Type of merchandise sold

determines target market and competitive advantage

Services Offered

ranges from basic self-service to personalized assistance

Breadth

the number of product categories (Wide assortment vs. narrow)

Depth

refers to the variety within each category (deep assortment vs. Shallow)

Location and Design

Physical layout and online user experience

Pricing Strategies

From everyday low prices to high end pricing

→ Dependent on target market and brand position

What are the types of food and general merchandise retailers?

• food retailers

• General merchandise retailers

Food Retailers

include grocery stores, convenience stores, and specialty food retailers

General Merchandise Retailers

• department stores

• Discount stores

• Specialty stores

• off-price retailers (like TJMAXX)

Retail Institutional Evolution

• Mergers and Acquisitions

• Diversification

• Downsizing and Cost Containment

Mergers and Acquisitions

to increase market power and efficiency

Diversification

through expanding product lines or services

Downsizing and Cost-Containment

closing unprofitable stores and cutting costs (layoffs)

What are some non-store retailing formats?

• direct selling

• tv shopping

• vending machines

What are the types of retail ownership?

• independent retailers

• chain stores

• franchising

Independent Retailers

single stores owned by individuals or small groups

Chain Stores

operate multiple locations, often nationally or globally

Franchising

Franchisors (the company) provide business models and branding to Franchisees (specific location/owner) in exchange for fees or royalties

What are the 7 C’s Model for Digial Websites?

1. Core Goals

2. Context

3. Content

4. Community

5. Communication

6. Commerce

7. Connection

Core Goals

the primary objectives for the website (ex: brand awareness or direct sales)

Context (Design)

visual appeal and user-friendliness

Content

information and media presented on the site

Community

creating engagement spaces (forums, social media) to build a loyal customer base

Commerce

E-Commerce functionality (product listings, checkout process)

Connection

links to external sites or platforms (like social media)

What are benefits of digital channels for customers?

• convenience

• ability to compare prices

• easy access to product reviews

What are benefits of digital channels for retailers?

• Expanded Reach

• Data Collection for targeted marketing

• cost savings

M-Commerce

Mobile shopping through apps

→ Crucial as mobile shopping grows

Digital Communities

forums or social media groups where customers interact with brand and each other

Stickiness and Conversion Rate

metrics showing how engaging the site is and how effectively it converts visitors into buyers

What is multichannel retailing?

different sales channels operate independently (separate strategies for online and in-store sales)

Omnichannel Retailing

integrated approach where all channels work together to create a seamless customer experience

What are the benefits of Omnichannels?

• consistent customer experience

• increased sales

What are some challenges to omnichannel?

• higher costs

• complex logistics

• technology integration

What are some physical store benefits?

• Tangible product interaction

• immediate purchase and take home

What are some digital channel benefits?

• 24/7 accessibility

• lower operating costs

• wider market reach

Disintermediation

removing intermediaries for direct customer access

Reintermediation

adding new intermediaries (ex: e-Commerce marketplaces)

What are some key strategy elements for retail strategy?

• retail format

• target market

• sustainable competitive advantage

What are some controllable factors in a retail strategy?

• marketing strategies

• in-store design

• staffing

What are some uncontrollable factors in retail strategy?

• economic conditions

• regulations

• competitor actions

Global Strategy

adapting retail strategies to international markets while maintaining a brand identity

Strategic Planning and Objectives

key metrics that include:

• Customer satisfaction

• sales growth

• profitability

Customer Loyalty in retailing

• Loyalty programs

• personalized services

• exclusive offers

These all can allow repeat business from customers

What is the SPM Model?

tool for analyzing profitability

Profitability Path

measures net profit and gross margin

turnover path

measures net profit and gross margin

What are performance measures?

• sales

• inventory turnover

• profit margin

→ show financial health and growth potential

What is ROA?

Return on assets

→ indicates how well assets generate profit

What is VMI?

Vendor-Managed Inventory

→ suppliers handle retailer inventory optimizing stock levels

What are the the types of logistic models?

• Push logistics

• Pull logistics

• reverse logistics

Push Logistics

products are sent to stores based on forecasts

Pull Dynamics

products are produced and shipped in response to demand

Reverse Logistics

managing returns and recycling

Distribution and Fulfillment

efficient storage and delivery to enhance customer satisfaction

Turnover and Retention

high turnover potentially due to long hours, low pay or limited growth opportunities

Training and Development

builds skills and improves service quality

Compensation Models

• salary

• hourly wages

• bonuses

• performance incentives

Organizational Culture

affects employee satisfaction and productivity

Atmospherics

using sensory elements (color, lighting, scent, music) to create a memorable shopping environment

Store Layouts

Each layout has advantages depending on the type of store and its goals

• 3 types:

  • Grid Layout

  • Racetrack Layout

  • Free-form/ Boutique Layout

Grid Layout

used by grocery and discount stores for efficiency and high product variety

Racetrack Layout

guides customers through product displays in department stores

Free-from/ Boutique Layout

used by specialty stores to create a unique browsing experience

What are the productivity measures in layout design

• Sales per Square Foot

• Sales per Linear Foot

Sales Per Square Foot

measures efficiency of space

Sales per Linear Foot

tracks sales based on shelf length

What is the main idea of the ‘Old Pillars of New Retailing’ article

core principles of traditional retail are evolving to meet the demands of a modern, digital retail environment.

Emphasizes the adaptability of classic retail concepts, particularly in a landscape driven by technology, changing consumer expectations and global competition

What are the Key Principles and Adaptations

• Customer-Centric Approach→ shifting focus from selling products to creating customer experiences

• Personalization and Engagement → increased data analytics to personalize shopping experiences

• Seamless Omnichannel Experiences → integrates online and offline channels to provide a seamless customer experience

Examples found in “the Old Pillars of New Retailing”

• retailers like Amazon and WM use tech to streamline their operations & customer experience, using both data & infrastuture to ensure smooth interactions across all customer touchpoints

• companies have begun to merge online data collection w/ in-store strategies

The Main ideas in “The Science of Shopping”

examines the psychology of shopping and store layouts and design can influence consumer behavior

→ optimize store layouts to increase sales

key concepts in the “science of shopping”

• “Butt-Brush” Effect → how customers are likely to stop browsing or purchasing when other shoppers or fixtures intrude on their personal space. Guides retailers in designing store aisles and displays to minimize crowdedness

• Decompression Zone → area right inside a store’s entrance where customers adjust to the store environment. Retailer’s should avoid placing key displays here since more shoppers don’t engage with merchandise until they have moved further into the store

• Visual Merchandising and Signage Placement → strategically placed signs and displays direct customers through the store, encouraging more foot traffic through high-margin sections

• Impulse Buys and Checkout Areas → Items like snacks or small products are often placed near the checkout to encourage last-minute purchases, leveraging customers’ impulsive buying tendencies

What are some examples of key topics in the “Science of Shopping”

• many department stores use wide aisles and strategically place high-demand proudcts in the back to ensure customers pass through other merchandise on their way, potentially increasing unplanned purchases

• Grocery Stores often place essentials like milk or eggs at the back to create a longer path through the store, increasing exposure to other products

What is the Main Idea in the Penney’s Article?

• supply chain management and vendor relationships, highlighting J.C. Penney’s approach to optimizing its inventory and supply chain through an exclusive partnership with TAL Apparel

What are key concepts in the Supply Chain Management in this Penney’s article?

• Vendor- Managed Inventory: TAL Apparel handles inventory management for J.C. Penney, ensuring optimal stock levels reducing Penney’s operational burden

  • plan, forecast and produce according to demand to minimize stock outs and excess inventory

• Just-in-Time (JIT) Manufacturing → TAL Apparel uses a JIT approach producing shirts only as they are needed by J.C. Penney

  • Reduces waste, lowers storage costs, ensures fresh relevant inventory

• Efficiency through Technology Integration → TAL uses data from J.C. Penney’s sales records to predict demand more accurately

  • Allows for faster response times and higher accuracy in inventory management, resulting in better customer satsifaction

What are some examples from the Penney’s article?

• TAL’s close relationship with J.C. Penney allows it to produce custom sizes and styles based on customer demand, adding a degree of customization to mass retail

• By centralizing production and logistics with TAL, J.C. Penney can focus on marketing and in-store experience, rather than on the complexities of inventory management