Depicts the retailing market in India

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McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 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.
• A retailer is a business that sells
products and/or services to consumers
for personal or family use.

3. DEFINITIONS
• RETAILING is the business activity of selling
goods and services to the final consumer
• RETAILER is any business which directs its
marketing effort towards the final consumer
for the purpose of selling goods or services -
-greater than 50% of the total sales must
be retail sales to be a retailer
-many types of retailers

4. CONTRASTING RETAIL AND
WHOLESALE OPERATION
• RETAILERS
• Sell smaller product quantities on a more
frequent basis
• Store facilities open to the general public
• Higher per unit price due to individual unit
sales
• Almost exclusive reliance on one price policy
• Ultimate consumers makes initial sales
contact
• Considerable emphasis placed on store
atmosphere

5. CONTRASTING RETAIL AND
WHOLESALES OPERATION
 WHOLESALERS
• sell larger product quantities on a less
frequent basis
• over-the-counter sales seldom made to
general public
• lower per unit price due to bulk package
sales
• more extensive use of variable price structure
• sales representatives make initial sales
contract
• little or no emphasis on facility atmospherics

6. RETAILING IS:
educational, exciting
dynamic, demanding
small town, big city
local, regional, national, international
the management of change
the most imp link in the distribution channel
a major economic force
a significant area for career opportunities

7. Examples of Retailers
• Retailers:
-Sears, Holiday Inn, McDonalds, Amazon.com,
Jiffy Lube, AMC Theaters, American Eagle
Outfitter, FAO Schwartz, Kroger
• Firms that are retailers and
wholesalers that sell to other business
as well as consumers:
-Office Depot, The Home Depot, United
Airlines, Bank of America, Sams Clubs

8. How Retailers Add Value
• Breaking Bulk
-Buy it in quantities customers want
• Holding Inventory
-Buy it at a convenient place when you
want it
• Providing Assortment
-Buy other products at the same time
• Offering Services
-See it before you buy, get credit, layaway

9. How Retailers Add Value
The value of the product and service increases
as the retailer performs functions.
Doll can be bought
on credit or put on
layaway
Doll is featured on
floor display
Doll is offered in
convenient
locations in
Doll is developed in quantities of one
several styles
Doll is developed at
manufacturer

10. Manufacturer’s Perspective
The Four P’s of Marketing
Retailers are part of the
distribution channel
Retailers are part of the
distribution channel
Distribution
Product
Price
Promotion

11. Distribution Channel
Distribution Channel PPT 1-4

12. Retailers are a Business Like Manufacturers
Accounting Finance
Operations MIS
Marketing
Human Resources

13. Decision Variables for Retailers
Customer Service
Store Design
and Display
Merchandise
Assortment
Retail
Strategy
Pricing Location
Communication
Mix

14. Nature of Retail Industry is
Changing
To Today’s Retailer
Mom and Pop Store

15. Retailing is a High Tech
Industry
- Selling Merchandise over the Internet
- Using Internet to manage supply chains
- Analyze POS data to tailor assortments to stores
- Computer systems for merchandise planning

16. 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 (Limited)
• Menard (Menard’s)
• Marcus, Blank (The Home Depot)
• Kellogg (Kohl’s)
• Schulze (Best Buy)
• Levine (Family Dollar)
• Gold (99Cent Only)

17. Misconceptions About Careers
in Retailing
• Don’t need college
• Low pay
• Long hours
• Boring
• Dead-end job
• No benefits
• Everyone is part-time
• Unstable
environment

18. Why You Should 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 with great benefits
- Some retailers pay graduate school
• No two days are alike
• Buying for financially oriented people
• Management for people people

19. Types of Jobs in Retailing
Most entry level jobs are in
store management or buying, but…
retailers also have staff specialists:
--accounting and finance
--real estate
--human resource management
--supply chain management
--advertising
--public affairs

20. CHARACTERISTICS OF RETAIL CAREERS
• Many job opportunities in smallest towns or
largest urban center
• High job security, even in times of economic
stagnation
• Many opportunities for advancement
• Many opportunities for women
• Salaries vary significantly; often low pay at
start
• Skills gained in retailing are transferable to
other job opportunities
• The downsides of retail careers are:
 image problems
constant evaluation

21. JOB SKILLS NEEDED IN RETAIL
1. Merchandising
 buying
 supplier management
 selling
 relationship building
 advertising & promotion
 display building
2. Operations
warehousing
receiving
delivery
security
customer service
store management

22. JOB SKILLS NEEDED IN RETAIL
3.Sales Promotion
advertising
5.Personnel
display
recruiting
publicity
selecting
sales promo
activities
training
compensation
4.Control
union issues
asset management
credit
A/P, A/R, auditing
data processing

23. RETAIL CHALLENGE
You are given the job to head a committee to
select a new president for a retail chain.
Rank the following criteria on a scale of 1-
10(where 10 is high) on the importance of
each criteria in evaluating candidates.
1. hard work 6. initiative
2. analytical skills 7. leadership
3. creativity 8. organization
4. decisiveness 9. risk taking
5. flexibility 10. stress tolerance

24. RETAILERS ARE AN IMPORTANT LINK IN
THE CHANNEL OF DISTRIBUTION
Retailer provide services for manufacturers
buying
selling
assortment creating
stocking
delivering
credit extending
informing
consulting
transferring ownership

25. RETAILERS ARE AN IMPORTANT LINK
IN THE CHANNEL OF DISTRIBUTION
Retailers provide services for consumers
buying
selling
bulk breaking
assortment creating
stocking
delivering
credit extending
informing
consulting
transferring ownership

26. RETAILER AS A
PRODUCER/CONSUMER LINK
• Assortment Gap
• Quantity gap
• Space Gap
• Time gap
Retailers create utility!!

27. Retailers are intermediaries
who are very interested in
channel relationships.
Improved channel
relationships often involve
forming vertical marketing
systems.

28. RETAIL IMAGES ARE IMPORTANT BECAUSE
1. Simplify the consumer’s decision making and
shopping process.
2. Attract shoppers who have a self image close
to the retailer’s image.
3. Help segment consumer markets and
improve targeting.
4. Differentiate the retailer from competing
retailers and other businesses.

29. THE PROBLEM OF RETAILING
Must balance
ability of the firm’s merchandising programs
to meet the needs of targeted consumers
With
ability of the firm’s administrative plans to
meet the retailer’s need to operate effectively
and efficiently
*See Key Performance Measures for
Retail Businesses

30. THE RETAIL CHALLENGE IS
TO OFFER THE RIGHT
MERCHANDISING BLEND
 the right product
 in the right quantities
 in the right place
 at the right time
 at the right price
 by the right appeal
 with the right service

31. QUOTE FROM SAM WALTON
FOUNDER OF WALMART
“For my whole retail career, I have stuck to
one guiding principle…give your customers
what they want, and customers want
everything: a wide assortment of good quality
merchandise; the lowest possible prices;
guaranteed satisfaction with what you buy;
friendly, knowledgeable service; convenient
hours; free parking; a pleasant shopping
experience.
You love it when you visit a store that
somehow exceeds your expectations, and
you hate it when a store inconveniences you,
or gives you a hard time, or just pretends
you’re invisible.”

32. Classification of Retail
Operations
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22

33. Classification of Ownership
Independent
Retailers
Independent
Retailers
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FFrraanncchhiisseess
22

34. Level of Service
22
Self Service Full Service
Factory outlets Discount stores Exclusive stores
Warehouse clubs

35. Types of Stores and
Their Characteristics
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36. Major Types of Retail Operations
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SSppeecciiaallttyy SSttoorreess
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Blockbust
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er
33

37. Categories of Discount Stores
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ooff DDiissccoouunntt
SSttoorreess
Full-Line
Discounters
Discount Specialty
Stores
Warehouse
Clubs
Off-Price
Discount Retailers
33

38. Mass Merchandising
Retailing strategy using
moderate to low prices on
large quantities of
merchandise and lower
service to stimulate high
turnover of products.
33

39. Hypermarket and Supercenter
HHyyppeerrmmaarrkkeett
A large retail store combining
a supermarket and
a full-line discount store.
SSuuppeerrcceenntteerr Retail store combining groceries
and general merchandise goods
with a wide range of services.
33

40. Non store Retailing
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MMaajjoorr FFoorrmmss
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44

41. Direct Retailing
NFL.COM 44
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DDiirreecctt RReettaaiilleerrss
sseellll pprroodduuccttss::
Office-to-
Office
Office-to-
Office
Home Sales
Parties
Home Sales
Parties
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sseellll pprroodduuccttss::

42. Direct Marketing
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44

43. Electronic Retailing
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TTyyppeess
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EElleeccttrroonniicc
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44

44. Basic Forms of Franchising
Product and Trade Name
Product and Trade Name
Franchising
Franchising
Business Format
Franchising
Business Format
Franchising
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45. Retail Marketing Strategy
Define & Select
a Target Market
Define & Select
a Target Market
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46. Defining a Target Market
STEP 1:
STEP 1:
Segment the Market
Segment the Market
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47. Choosing the Retailing Mix
STEP 2:
Choose the
Retailing Mix
STEP 2:
Choose the
Retailing Mix
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48. The Retailing Mix
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66

49. Product Offering
The mix of products offered to
the consumer by the retailer;
also called the product
assortment or merchandise
mix.
66

50. Retail Promotion Strategy
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51. Factors to Consider in Site
Selection
Economic growth
Economic growth
potential
potential
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52. Location Decisions
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Shopping Center
Shopping Center
Tenant
Tenant
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On Line
http://www.mallofamerica.com
On Line
http://www.mallofamerica.com
66

53. Shopping Center and Mall
Locations
AAddvvaannttaaggeess
• Design attracts
shoppers
• Activities and anchor
stores draw customers
• Ample parking
• Unified image
DDiissaaddvvaannttaaggeess
• Expensive leases
• Failure of common
promotion efforts
• Lease restrictions
• Anchor store
domination
• Direct competitors
66

54. Price
66
Low Price High Price
Quality
Image
Good Value

55. Presentation of the Retail Store
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56. Personnel and Customer
Service
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57. Trends in Retailing
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Convenience
and Efficiency
Convenience
and Efficiency
CCuussttoommeerr MMaannaaggeemmeenntt
88

58. Customer Management
Strategies
Customer Relationship
Customer Relationship
Marketing
Marketing
Loyalty
Programs
Loyalty
Programs
CClliieenntteelliinngg
88

59. Creating Value Through Customer
and Supplier Relationships

60. Traditional vs. Marketing
• With the cost of customer attraction escalating,
companies are paying more attention to holding on to
their existing customers
• Long-standing customers are less expensive to reach
and less expensive to serve
• Customer relationships are assets that should be
evaluated and managed as rigorously as any financial
or physical assets
• Relationship marketing not only focuses on customer
retention, but also takes a long-term perspective

61. Fig. 11.1 Traditional Versus Relationship Marketing
Relationship
Marketing
Traditional
Marketing
Interactive Marketing -
Value-added Product/
Service Emphasized
Value Created/
Customer Retention
Customer
Acquisition/
Satisfaction
Marketing Mix - Core
Product Emphasized
Short-term Focus Long-term Focus
Adapted from Jag Sheth, AMA Faculty Consortium/Evolution of Global Marketing and the Relationship Imperative, 1996

62. Relationship Marketing Defined
“To establish, maintain, and enhance (usually
but not necessarily long-term) relationships
with customers and other partners, at a profit,
so that the objectives of the parties involved
are met. This is achieved by a mutual exchange
and fulfillment of promises.”
___Grönroos (Service Management and Marketing, 1990)

63. What is Relationship Marketing?
• The cornerstone of marketing is getting close to
customers in order to better identify and satisfy their
needs
• Realize that marketing is responsible for more than
“just the sale”
• The focus is shifting from the transaction to the
relationship
• It is difficult to separate service operations and delivery
from relationship building
• Managing customer relationships continues to be
paramount, so is the growing importance of managing
relationships with suppliers and resellers

64. Continuum of Relationships
Industry Relationship Bandwidth
Pure
Transactional
Exchange
Pure
Collaborative
Exchange
Flaring - Out
Unbundling
Strategy
Added
Augmentation
Strategy
CCoorree
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65. Relationship Marketing -
Goals and Outcomes
• Whereas the goal of traditional marketing is customer
acquisition, under relationship marketing the focus shifts
to creating value
• The objective is to create more value through
interdependent, collaborative relationships with
customers, the outcome is customer retention
• Relationship marketing is ongoing, constantly looking for
opportunities to generate new value
• Retaining customers requires marketers to exhibit care
and concern after they have made a purchase
• The sale often represents only the beginning of the
relationship between the buyer and seller

66. Building Lasting
Customer Relationships
• Sellers can resist the natural tendency toward decline and
complacency by developing what we refer to as “relationship
enablers”
• It is the seller’s responsibility to nurture the relationship
beyond its simple dollar value
• Using the relationship enablers sellers can minimize
relationship decay and strengthen the bonds that lead to
long-term, perhaps even lifetime associations

67. Figure 11.2 Key Relationship Variables
TTrruusstt CCoommmmiittmmeenntt
Relationship
Enablers
DDeeppeennddeennccee CCooooppeerraattiioonn
Information
Exchange
Information
Exchange

68. Marshall Field’s
Layout
• Over 800,000 square feet
• Lower level & 9 floors
– Men’s only on Second Floor
– Women’s on Third, Fourth & Fifth Floor
– Both have accessories on First Floor

69. Marshall Field’s
Layout
• 2 Juice Bars in 2003
– Bally Total Fitness
– Crunch Fitness
• 3 restaurants
– 7 on State
– Café
– Walnut Room
• 2 food courts
• Australian Homemade Ice Cream
• 2 Starbucks coffee bars

70. Marshall Field’s
Layout
• Lighting, music &
decor determined by
department
• Shoes Department
– 16,000 square feet
• Cosmetic
Departments
– 26,000 square feet

71. Marshall Field’s
Layout & Displays
• Crowded
• Stocked like a
department store
• Primary displays,
few secondary
displays
• Lots of racks
• Hectic, congested
transportation
between floors

72. Lord & Taylor
Layout
• 7 Floors
– First Floor
• Accessories
• Cosmetics
– All were very small
• Felt like a cheap, crowded department
store
• Light music in background
• Store signs looked cheap
• Plain mannequins
– No makeup
– No faces
• Racks overflowing

73. Nordstrom
Layout
• Easy to read map
• Very Spacious
• Customer Friendly
Shopping
Environment
– Comfy Chairs

74. • Main Level
– Cosmetics
– Women’s Shoes
• Second Level
– Men’s Merchandise
• Third Level
– Women’s Apparel
– High-end designer
lines
• Classic or
Conservative
Collections
– Wood trim
• Modern Collections
– Vibrant colors
– Lighting displays

75. Nordstorm
Layout & Display
• Clean displays to accent special
items
• Add home décor to give display
style
• Racks are not stuffed full

76. Nordstrom
Layout & Displays
• Displays include
everything including
accessories
• Every displays has a
certain look to it
• Each display pulled
products together

77. Planning Merchandise
Assortments

78. Merchandise Planning Is Done at
the Category Level
• Why?
• Category: group of products likely to have
similar demand patterns. They are
substitutes
• How does a category differ from a SKU?

79. Two Basic Considerations
• Must stock what the customer wants to
buy.
• Merchandise in stock must meet the profit
goal.

80. Buyer’s Dilemma
• Need to balance customer preferences/
shopping behaviors vs. profit goals

81. Retail Market Strategy

82. 1. Retail Market Strategy
Identifies:
1. Target Market
2. Format
3. Bases of SUSTAINABLE competitive
advantage

83. Store Positioning

84. Bases of Sustainable
Competitive Advantage
1. Customer Relationship
2. Location
3. Vendor Relationships
4. Information Systems and Logistics

85. Toys “R” Us
Times Square
New York City

86. Facts about the Store
• Opened: November 2001
• Cost: $35 Million
• “largest toy store in the world”
• 110,000 square feet

87. Times Square Location??
Advantages:
High Pedestrian
Traffic
Prime tourist
attraction area
No longer a “seedy”
arear
Drawbacks:
Only a few retailers
in the area
Warner Bros. Studio
Store 1 block away
closed one month
before Toys’
opening

88. So Why Times Square
• Wants to change “store image”
Old Image: unimaginative, crowded, an
“ordeal for parents”
New Image: fun, interesting
• Is Times Square location good for this
purpose?

89. Times Square Toys
• Serve as “flagship” for the chain
• Place to showcase company in a new way
• Place for new product introductions (example,
Microsoft’s Xbox)
• Sales in store really secondary

90. Special Features
• 60 foot Ferris wheel
• 5 ton dinosaur that roars
• 25 foot replica of Empire State Building
complete with King Kong

91. Bases of Sustainable
Competitive Advantage
5. Effective Employees
6. Low Cost Operations
Multiple Sources of Advantage
Wal-Mart
Neiman Marcus

92. Retail marketing mix
• Retail marketing mix is the term used to describe the
various elements and methods required to formulate and
execute retail marketing strategy.
• Retail managers must determine the optimum mix of
retailing activities and co-ordinate the elements of the
mix.
• The aim of such coordination is for each store to have a
distinct retail image in consumers’ mind.
• The mix may vary greatly according to the type of market
the retailer is in, and the type of product/services.
92.

93. Retail Marketing Mix
While many elements may make up a firm’s retail
marketing mix, the essential elements may include:
• Store location,
• merchandise assortments
• Store ambience,
• customer service,
• price,
• Communication with customers
10

94. Mix …
• Personal selling
• Store image
• Store design
• Sales incentives
• People
• Process
• Physical evidence
11

95. The mix planning
The retail marketing mix is the vehicle through which a
retailer’s marketing strategy is implemented and, in
planning the mix, retailers should be guided by three
basic principles:
1. The mix must be consistent with the expectation of
target customers;
2. Elements must be consistent with each other to create
synergy; and
3. The mix must be responsive to competitive strategy.
95.

96. Key Element
Place (store location)
• Target market
• Channel structure
• Channel management
• Retailer image
• Retail logistics
• Retail distribution
14

97. Key element
Product (merchandise)
• Product development
• Product management
• Product features and benefits
• Branding
• Packaging
• After-sales services
15

98. Key element
Price
• Costs
• Profitability
• Value for money
• Competitiveness
• Incentives
• Quality
• Status
16

99. Key element
Promotion
• Developing promotional mixes
• Advertising management
• Sales promotion
• Sales management
• Public relations
• Direct marketing
17

100. Key element
People element
• Staff capability
• Efficiency
• Availability
• Effectiveness
• Customer interaction
• Internal marketing
18

101. Key element
Process element
• Order processing
• Database management
• Service delivery
• Queuing system
• Standardisation
19

102. Retail Marketing Planning
• Retail marketing plan consists of:
• Setting objectives
• Systematic way of identifying a range of
options.
• Formulation of plans for achieving goals
• Logical sequence of retailing activities.
102

103. Importance of retail marketing
planning
• Hostile and complex retail marketing environment
• External and internal retail organisation factors interact
– Maximising revenue
– Maximising profit
– Maximising return on investment
– Minimising costs
• Each element has conflicting needs
• All these variables interact
• All these variables result in optimum compromise.
103.

104. Approaches to planning
Top down approach
• Retail management sets goals and plans
for all levels of management.
Bottom up approach
• Various units prepare own goals and plans
sent up for approval.

105. Types of planning
• Annual plan – short term and tactical.
• Long range – three to five years relating to
strategic retail management.
• Strategic plans – five to ten years long term
plans relating to the adaptation of the retailing
approach.
105

106. Short-term Retail Planning
Short-term
Tactical planning relating to:
• Current retail marketing position
• Strategy for the year
• Objectives for the year
• Action , budgets and controls.
• Coordinating retail activities within departments.
25

107. Long-term plan
Long-term
Medium range planning relating to:
• Major factors and forces affecting the retailer.
• Long-term objectives.
• Resources required.
• Reviewed and updated regularly.
• Deals with current business
26

108. Strategic retail planning
• This is the process of developing and
maintaining a strategic fit between the retail
organisation’s capabilities and its changing
marketing opportunities.
• It relies on developing a clear corporate
mission, supporting objectives, creating a
sound business portfolio, and coordinating
functional strategies.
108.

109. Corporate level planning
• Retail management should plan which
business the retailer should stay in and which
new areas to pursue.
• Design the retail organisation to withstand
shocks.
• Adapt the organisation to take advantage of
market opportunities.
• Define the corporate mission.
109.

110. Mission statement
• A strategic plan should begin with a mission
statement.
• A mission statement is a statement of the
retail organization’s purpose, what it wants to
achieve in the large environment.
• It guides people in the retail organization so
that they can work independently and yet
collectively towards overall organizational
goals.

111. Pricing

112. What is Price?
• Basis for exchange. What the retailer is
willing to sell product/service for; what the
consumer is willing to pay to obtain
product/service
• No intrinsic value to ANYTHING. If the
customer is willing to pay the price, that’s
what the product is “worth.”

113. Pricing Challenges for Retailers
1. All the sales in past decade have
conditioned consumers to never pay full
price
2. Economic recession – and actually time
since 1990s --makes price more
important – raises the “value” issue
3. Stores with “everyday low prices” are
increasingly important

114. Two Price Strategies
1. Every day low price – not necessarily lowest
price
Advantages: fewer price wars, limited advertising, improved
customer service, reduced stock outs, improved inventory
management, better profit margins
2. High/low pricing – price sometimes above
EDLP, and sometimes below; frequent sales
Advantages: same stuff is sold to different markets,
excitement, moves merchandise, signals quality, hard to
maintain EDLP

115. Methods of setting price
1. Cost oriented – take merchandise cost
and add fixed percent markup
2. Demand oriented – price is what
customer will pay
Which is preferred by marketers? Why?
Retailers actually use both

116. Initial MU Calculations
• Initial Markup=Maintained Markup + Reductions
Net sales + Reductions
OR in percent terms
• Initial Markup%=Maintained Markup% + Reductions%
100% + Reductions%

117. Example
• Assume reductions = $14,400
Initial MU = 62,000 + 14,400 = 56.85%
120,000 + 14,400
OR in % terms
= 51.67% + 12% = 56.85%
100% + 12%
** Initial MU is always greater than maintained MU
if there are reductions

118. RSP, Cost and Mark Up
Retail Selling Price = Cost = Mark Up
So if RSP is $100 and MU is 56.85%, what is cost?
$100 = cost + (56.85% x RSP)
$100 = cost + (56.85% x $100)
$100 = cost + 56.85
$43.15 = cost
Only trick to keep in mind here is that you always
take % MU of RSP NOT of Cost

119. Adjustments to Price
• Markdowns
• Markdown cancellations
• Additional markups
• Additional markdown cancellations

120. Markdowns
• Reductions in initial retail selling price
• Reasons for taking markdowns
Clearance (get rid of stuff)
Promotional (build store traffic)
• Always calculate markdowns as a % of the
the last RSP
• Selling price = $25; markdown = $5
Markdown % = 5/25 = 20%

121. Markdown Cancellation
• Amount by which price is raised after a
sale used only for promotional markdowns
only in effect up to initial retail price
• IMPORTANT – If an item is marked down
20% and then a 20% Markdown
cancellation is applied, the new selling
price will NOT be the price before the 20%
markdown. WHY NOT?

122. Additional Markup
• Increase in the initial selling price
• Rare, but does happen
• Why?

123. Demand-oriented pricing
• What the traffic will bear
• This relates to price sensitivity
• Factors that affect price sensitivity
Substitute awareness effect
Total expenditure effect
Difficult comparison effect
Benefits/price effect
Situation effect