Retail Merchandising

Supply chain

1. Manufacturing

2. Wholesale

3. Retailer

4. Consumer

Vertical Integration

Firm performs more than one set of activities in the channel

Backward Imtegration

When a retailer performs wholesale and manufacturing jobs

Forward Integration

When a manufacturer performs retailing and activites

Macroenviormment

Impact includes technology, social, ethical/legal/political factors

Microenviornment

Focuses on its customers and competitors

Intratype competition

Competition between same type of retailer

Scrambled merchandise

When a retailer offers merch that isnt typically associated with their store

Retail stratey

Identify target market, nature of merch and services they offer to satisfy customers, how retailer will build long term competitive advantage

Breadth

Variety, different kinds

Depth

Assortment, many kinds of one product

Service retailing

Company that offers a service instead of a product

Retail channels

The way a retailer sells and delivers merch and services to customers (store, internet, catalog, tv, automated, direct)

Multichannel retailing

When a retailer uses many channels to improve offerings and build comp. advantage

Channel Migration

When consumers collect info about products in one channel but buy from another

Cannibalization

When one channel of a company takes away business from another channel of the same company

Buying Process

1. Recognize needs

2. Info search

3. Evaluation of alternatives

4. Purchase

5. Post purchase evaluation

Recognize needs

Triggers buying process

Utilitarian

Shopping to complete a task

Hedonic

Shopping for pleasure

Info search

Seek info about retailers channels or products that satisfy needs

Internal source

Customers memory ie. Names, or past experiences

External source

Info from ads and other people

Multi Attribute model

Think about and mentally process each retailer, consider benefits like time, convenience, depth/breadth, etc then rate on scale of 1-10

Conversion rate

Percent of people who visit a store or website and make a purchase

Consideration set

Alternatives the customers evaluates when deciding on a retailer

Extended problem solving

A type of buying decision where customers devote a lot of time and effort to analyze products (high risk items)

Limited problem solving

A type of buying decision that involves moderate amount of effort and time (majority of purchases, moderate risk, impulse buying)

Habitual decision making

A type of buying decision that requires little to no conscious effort (not important, familiar products)

Market segmentations

Retailers identify a group of customers and target their needs rather than just one person

Geographic

Groups customers according to where they live

Demographic

Groups customers based on age, gender, income, education (most used)

Geodemographic

Combines geo and demo graphic to classify customers

Lifestyle

How people live, spend time/money, what activities and attitudes they have

Benefit segmentation

Groups customers seeking similar benefits

Composite segmentation

Uses benefits sought, lifestyles, and demographics to identify customers

Sustainable competitive advantage

Advantage retailer has over its competition and is not easily copied

Department store

Retailers that carry a broad variety and deep assortment, good customer service, and organized

3 tiers

1st tier of a department store

Upscale, high fashion chains with exclusive designer merch and good customer service ex. Nordstrom

2nd tier of department stores

Retailers sell more moderately priced items with less customer service ex. Macys

3rd tier of department stores

Value-oriented caters to more price conscious customers ex. JcPenny

Full line discount store

Retailers that offer a broad variety of merchandise, limited service and low prices ex. Walmart

Specialty stores

Concentrate on a limited number of complementary merchandise categories and high customer service

Category specialists

Big box stores that offer a narrow but deep assortment of merchandise

Category killer

By offering a complete assortment in a category

Retail market segment

A group of customers who have similar needs so they are satisfied by the same retail mix

Retail strategy

Plans retailers use to satisfy the target market and to build sustainable competitive advantage

Target market

Market segment the retailer focuses on

Sustainable competitive advantage

Advantage a retailer has over its competition that is not easily copied

Customer loyalty

A way to build sustainable competitive advantage where customers are committed to a retailer

Ways to build loyalty

A. Strong brand image

B. Clear positioning

C. Good customer service

D. Customer relationship management

E. Unique merchandise

Relationship with suppliers

A way to build competitive advantage by strengthening relationships with vendors is mutually beneficial

Efficiency of internal operations

A way to build competitive advantage by using human resources and distribution and info systems

Human resources

Employees committed to retailers objectives

Distribution and info systems

Helps reduce operating costs and makes sure right products are available at the right time

Location

A way to build competitive advantage that is the most important and not easily copied

Market penetration

A growth strategy where a growth opportunity is directed toward existing customers using present retail format

Market expansion

A growth strategy that use retailers existing retail format in new market segments

Retail format development

A growth strategy that use a new retail format for existing market segments

Diversification

A growth strategy that introduces a new retail format in a new market segment (can be dangerous) it is either related, unrelated or vertical integration

Related diversification

Present target market has something in common with new opportunity

Unrelated diversification

Little in common with retailer and new growth opportunity

Direct investment

When a retail firm invests in a foreign country

Joint venture

When entering retailer mixes with a local retailer to form a new company where ownership and profits are shared

Strategic alliance

Collaborative relationship between independent firms

Franchising

Many stores all around, lowest risk, least investment, limited control, reduced profits

Strategic retail planning process

Step 1. Define business mission

Step 2. Conduct a situation audit

Step 3. Identify and evaluate strategic opportunities

Mission statement

Description of retailers objectives

Situation audit

Strengths and weaknesses of the retailer relative to it competitors

Market factors

Related to consumers and buying process are target market size, growth, seasonality, and sales cycle

Competitive factors

Competition is affected by barriers to entry, bargaining power of vendors and competitive rivalry

Barriers to entry

Conditions that make it difficult to enter the market

Financial strategy retailer goals

A. Financial objectives

B. Societal objectives

C. Personal objectives

Return on assets (ROA)

The profit generated by the assets possessed by the firm

Strategic profit model

Summarizes the factors affecting a firms financial performance

Net sales

Total revenue that is related to selling merchandise

Cost of goods sold (COGS)

Amount retailer pays to vendors for merchandise sold

Operating expenses

Include selling, general and administrative expenses plus depreciation of retailer assets

Asset turnover

Performance of asset management

Inventory turnover

Measure of efficiency of retailers utilization if investment inventory

Asset

Economic resources owned or controlled by a firm

Current asset

Can easily be converted to cash (1 year) ex. Cash, credit card payment, merchandise

Fixed asset

Takes more then 1 year to convert to cash ex. Buildings, fixtures, equipment

Intangible asset

Cannot be measured but important for long term financial performance

Debt-equity ratio

Retailers short and long term debt divided by the value of the owners or stock holders equity in the firm

Current ratio

Short term assets divided by short term liabilities (most common)

Quick ratio

Removes inventory from short term assets

Positioning

Design implementation of a retail mix to create an image in the customers mind of the retailer relative to its competitors