TheMcGraw-Hill/Irwin

shopping service, costs $10 per month, or $95 a year. The fee gets you unlimited
Retailing Management,
same-day or overnight delivery on orders over $15.

McGraw-Hill/Irwin
Retailing Management,

McGraw-Hill/Irwin
Retailing Management,

McGraw-Hill/Irwin
Retailing Management,

McGraw-Hill/Irwin
Retailing Management,

Computer Source: 44 outlets

1-6

1-7

Chapter 1

Introduction to the World of Retailing

McGraw-Hill/Irwin
Retailing Management,

1-9

The World of Retailing

Introduction to Retailing
Types of Retailers
Multi-Channel Retailing
Customer Buying Behavior

1-10

Questions

What is retailing?
What do retailers do?
Why is retailing important in our society?
What career and entrepreneurial opportunities
does retailing offer?
What types of decisions do retail managers
make?

1-11

What is Retailing?
Retailing a set of business
activities that adds value to
the products and services
sold to consumers for their
personal or family use
Retailing is a business that
sells products and/or
services to consumers for
personal or family use.
1-12

Examples of Retailers

Retailers:
Otobi
Aarong
Agora
Bata
Singer

Firms that are retailers and wholesalers - sell to

other business as well as consumers:
Bata, Singer, Hatil
1-13

Manufacturers Perspective
The Four Ps of Marketing
Retailers
of the
the
Retailersare
are part
part of
distribution
channel
distribution channel
Product

Price

Distribution
Promotion

1-14

Distribution Channel

1-15

Typical Supply Chain Network

Customers

Suppliers

Plants
Distribution
Centers

retailers

A Retailers Role in a Supply Chain

Retailers are the final business orgs within a
supply chain which links manufacturers to
consumers.

1-17

Manufacturing, Wholesaling and Retailing

Vertical Integration firm performs more than one set of activities in
the channel
Ex: retailer invests in wholesaling or manufacturing
Backward Integration retailer performs some distribution and
manufacturing activities
Ex: JCPenney sells Arizona jeans (Private Label)
Forward Integration manufacturers undertake retailing activities
Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates its own
stores
Large retailers engage in both wholesaling and retailing
Ex: Wal-Mart, Lowes, Safeway, Brown Shoe Company
1-18

Vertical Integration

1-19

Do Retailers Add Value?

Example

a box of crackers at a grocery store

costs $1 to manufacturer

sells at a price of $2

Retailers add significantly to the prices consumers face

Why not buy directly from the manufacturer?
Does that mean that grocery stores are very profitable?

1-20

Why Not Get Rid of the Middlemen?

Price to
Distributor
$1.00

$.85

$.15

Manufacturer

Distributor

Vendor

Wholesaler

Price to
Retailer

Price to
Consumer

$1.20

$2.00

$.70

Retailer

Consumer
1-21

The High Costs and Low Profits of

Retailing

1-22

Why Not Get Rid of the Middlemen?

Better services to
customers
More efficient
1-23

How Retailers Add Value

Provide Assortment
Buy other products
at the same time
Break Bulk
Buy it in quantities
customers want
Hold Inventory
Buy it at a
convenient place
when you want it
Offer Services
See it before you
buy; get credit;
layaway
Ryan McVay/Getty Images

1-24

How Retailers Add Value

The value of the product and service

ncreases as the retailer performs functions.

Bicycle can be
bought on credit or
put on layaway
Bicycle is featured
on floor display

Bicycle is offered in
convenient locations
in quantities of one
Bicycle is
developed in
several styles
Bicycle is developed at
manufacturer
1-25

Examples: How Retailers Add Values

BagBorrowerSteal.com
jewelry and bag rental; Get (not buy, but borrow) exactly what you
want
Home Depot
DIYer (Do-it-yourselfer); Learn how to do it yourself with in-store clinics
and online workshops

1-26

Social and Economic Significance of Retailing

Retail Sales:
Over $4.1 trillion in annual
U.S. sales in 2005
Employment:
Employs over 24 million
people in 2005
One of the largest sectors
for job growth in US
Social responsibility
Global player
1-27

Social responsibility
Corporate social responsibility

The voluntary actions taken by a

company to address the ethical,
social, and environmental impacts
of its business operations, in
addition to the concerns of its
stakeholders
Examples: Edun - a fair-trade fashion
brand by the U2 lead singer Bono

Starbucks: pays its farmers 42%

more than the commodity price of
Arabica coffee beans

Target: community giving programs

(5% of income, $3 million a week)
Retail companies give away 1.7% of
their profits, compared with about 0.9%
for companies in other industries
1-28

Worlds 10 Largest Retailers in 2011

1-29

Structure of Retailing and Distribution Channels around the

World: The United States
The United States

CHINA

The nature of retailing and

distribution channels in the U.S.
is unique.
Has the greatest retail density
Has the greatest concentration of
large retail firms
Large enough to operate their
own warehouses, eliminating the
need for wholesaling.
The combination of large stores
and large firms result in a very
efficient distribution system.
1-30

Comparison of Distribution Channels

around the World

1-31

What have created these differences

in distribution systems?
Social &
Political
Objectives

China, India: To reduce unemployment by

protecting small businesses
EU: To protect small retailers
To preserve green spaces/town centers

Geography

Much lower population density in the US than in India,

China, and EU (where less low-cost real estate are
available for building large stores)

Market size

Large retail markets in US, India, China

Countries in EU distribution channels and retail
chains operate in a single country (no economy of scales
to be achieved; trade barriers still exist)

1-32

Nature of Retail Industry is Changing

To Todays Retailer

Mom and Pop Store

1-33

Retailing is a High Tech Industry

Selling Merchandise through the Internet
Using Internet to manage supply chains
Analyze POS data to tailor assortments to stores
Computer systems for merchandise planning and
tracking
1-34

Retailers are a Business Like

Manufacturers
Accounting

Finance

Marketing

MIS

Operations

Human Resources

The McGraw-Hill Companies,

Inc./Andrew Resek, photographer

1-35

Opportunities in Retailing:
Management opportunities
People with a wide range of skills and interests needed
because retailers functions include

Finance

Purchase

Accounting

Management information system (MIS)

Supply management including warehouse and distribution

management

Design and new product development

Financially rewarding

5-year salary of buyers: $50,000 - $60,000

5-year salary of store managers: $120,000 - $160,000

1-36

Opportunities in Retailing:
Entrepreneurial opportunities
Wal-Mart: Sam Walton

Retailing provides opportunities for

people who want to start their own
business
Some of the worlds richest people
are retailing entrepreneurs
Examples of retailing
entrepreneurs
Sam Walton (Wal-Mart)
Jeff Bezos (Amazon.com)
Ingvar Kamprad (IKEA)
Anita Roddick (the Body Shop)

IKEA: Ingvar Kamprad

1-37

Career Opportunities in Retailing

Start Your Own Business
List of Retail Entrepreneurs on Forbes 400 Richest Americans

Walton Family (Wal-Mart)

Fisher (The Gap)
Wexner (The Limited)
Menard (Menards)
Marcus (The Home Depot)
Kellogg (Kohls)
Schulze (Best Buy)
Levine (Family Dollar)
Gold (99Cent Only)

1-38

Misconceptions About Careers in Retailing

College not needed

Low pay
Long hours
Boring
Dead-end job
No benefits
Everyone is part-time
Unstable environment
No opportunity for women and minorities

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

1-39

Why You Should Consider Retailing

Entry level management positions:
Department manager or assistant buyer/planner
Manage and have P&L (Profit & Loss) responsibility on your first
job
Starting pay average with great benefits
Some retailers pay graduate school
No two days are alike
Buying and planning for financially analytically oriented
Management for people-people
1-40

Types of Jobs in Retailing

Most entry level jobs are in
store management or buying, but theres
-accounting and finance
-real estate
-human resource management
-supply chain management
-advertising
-public affairs
-information systems
-loss prevention
-visual merchandising

1-41

Retail Management Decision Process

1-42

Decision Variables for Retailers

Customer Service
Store Design
and Display

Retail

Merchandise
Assortment

Strategy
Pricing

Location

Communication
Mix
1-43

Wal-Marts Retail Mix

Customer
Service

Store Design
And Display

Location

Retail Strategy Merchandise

MiX

Communication
Mix

Assortment

Pricing

1-44

Wal-Marts Retail Mix

Location Strategy

Location: Freestanding Stores

Customer
Service
Store Display
And Design

Communication
Mix

Merchandise
Assortment

Pricing
1-45

Wal-Marts Retail Mix

Assortment Strategy
Merchandise
Assortment
Customer
Service

Location

Store Design
and Display

Communication
Mix

Pricing

Large Number
of
Categories
Few Items
in Each
Category

1-46

Wal-Marts Retail Mix

Location
Customer
Service

Pricing Strategy
Merchandise
Assortment

Store Design
and Display

Communication
Mix

Pricing: Low, EDLP

1-47

Wal-Marts Retail Mix

Customer
Service

Communication Mix

Location

Store Design
and Display

Merchandise
Assortment

Pricing

Comm Mix:TV and Newspaper

Insert Ads

1-48

1-49

Wal-Marts Retail Mix

Store Design and Display

Store Design
and Display

Basic, Special
Displays
for Products

Customer
Service

Location

Merchandise
Assortments

Communication
Mix

Pricing

1-50

Wal-Marts Retail Mix

Customer Service
Customer
Service

Limited

Location
Merchandise
Assortment
Store Design
and Display

Pricing

Communication
Mix
1-51

Ethical Situations for a Retail Manager

Should a retailer sell merchandise that they suspect utilized
child labor?
Should it advertise that its prices are the lowest in an area
even though some items are not?
Should a buyer accept an expensive gift from a vendor?
Should salespeople use high-pressure sales when they know
the product is not the best for the customers needs?
Should a retailer give preference to minorities when making a
promotion decision?
Should a retailer treat some customers better than others?

1-52