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Transcript of Chapter 1 Perspectives on Retailing Retailing, 6 th Edition. Copyright ©2008 by South-Western, a...
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Chapter 1
Perspectives on Retailing
Retailing, 6th Edition. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved.
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Learning Objectives
1. Explain what retailing is.2. Explain why retailing is undergoing so
much change today.3. Describe the five methods used to
categorize retailers.4. Understand what is involved in a retail
career and be able to list the prerequisites necessary for success in retailing.
5. Be able to explain the different methods for the study and practice of retailing.
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What is Retailing?
Retailing:
Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer.
LO 1
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Wal-Mart’s Retail Focus
Work with manufacturers to help produce goods at the lowest possible cost.
Manage the supply chain bringing goods from manufacturers to stores at lowest possible cost.
Use cutting edge technology to manage inventory.
LO 1
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The Nature of Change in Retailing
E-Tailing Price Competition Demographic Shifts Store Size
LO 2
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E-tailing
Unknown for retail mangers is what the ultimate roll of the Internet will be.
Observers recognize the value of online shopping for travel, clothing, cosmetics, and music.
It is unclear if online shopping will reach its projections for “everyday” needs.
LO 2
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E-tailing
E-tailing now accounts for about three percent of total retail sales.
E-tailing has caused a shift in power between retailers and consumers.
LO 2
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E-tailing
E-tailers provide the consumer with detailed pricing and product information, making better informed consumers which increases the consumers’ transaction power and negotiations with retailers.
LO 2
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Price Competition
Sam Walton forever changed the retail environment by computerizing his operations resulting in lower costs allowing him to lower prices.
LO 2
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Price Competition
• Costco seeks to boost store traffic by getting shoppers to come in for a “super, low price” on key products.
LO 2
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Demographic Shifts
Fluctuating birth rate, the increasing number of immigrants, the growing importance of Generation Y consumers, Generation X starting to reach middle age, and baby boomers retiring are all demographic shifts in the United States that shape the retailing environment.
LO 2
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Demographic Shifts
Same-Store Sales:
Compares an individual store’s sales to its sales for the same month in the previous year.
LO 2
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Demographic Shifts
Market Share:
Is the retailer’s total sales divided by total market sales.
LO 2
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Store Size
As stores increase in size they often employ a scrambled merchandising strategy.
LO 2
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Store Size
Scrambled Merchandising:
Exists when a retailer handles many different and unrelated items.
LO 2
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Store Size
Convenience stores use a scrambled merchandising approach.
LO 2
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Store Size
Category Killer:
Is a retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition.
LO 2
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Categorizing Retailers
Census Bureau Number of Outlets Margin Versus Turnover Location Size
LO 3
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External Environmental Forces Confronting Retail Firms
Exhibit 1.1 LO 3
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Categorizing Retailers
Exhibit 1.2 LO 3
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Using NAICS Codes
Exhibit 1.3 LO 3
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Number of Outlets
Chain Stores:
Normally refers to operations having 11 or more units.
LO 3
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Number of Outlets
Standard Stock List:
Is a merchandising method in which all stores in a retail chain stock the same merchandise.
LO 3
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Number of Outlets
Optimal Stock List:
Is a merchandising method in which each store in a retail chain is given flexibility to adjust its merchandise mix to local tastes and demands.
LO 3
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Number of Outlets
Channel Advisor or Channel Captain:
Is the institution (manufacturer, wholesaler, broker, or retailer) in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in. Large store retailers are often able to perform the role of channel captain.
LO 3
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Number of Outlets
Private Label Branding (Store Branding):
Also called store branding, occurs when a retailer develops its own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name.
LO 3
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Private Labels by Country
LO 3
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Number of Outlets
Bricks & Mortar Retailers:
Retailers that operate out of a physical building.
LO 3
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Margins Versus Turnover
Gross Margin Percentage:
Is the gross margin divided by net sales or what percent of each sales dollar is gross margin.
LO 3
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Margins Versus Turnover
Gross Margin:
Is net sales minus the cost of goods sold.
LO 3
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Margins Versus Turnover
Operating Expenses:
Are the expenses the retailer incurs in running the business other than the cost of the merchandise.
LO 3
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Margins Versus Turnover
Inventory Turnover:
Refers to the number of times per year, on average, that a retailer sells its inventory.
LO 3
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Margins Versus Turnover
High-Performance Retailers:
Are those retailers that produce financial results substantially superior to the industry average.
LO 3
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Margins Versus Turnover
Low Margin/Low Turnover:
Is one that operates on a low gross margin percentage and a low rate on inventory turnover.
LO 3
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Margins Versus Turnover
Low Margin/High Turnover:
Is one that operates on a low gross margin percentage and a high rate of inventory turnover.
LO 3
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Margins Versus Turnover
High Margin/Low Turnover:
Is one that operates on a high gross margin percentage and a low rate on inventory turnover.
LO 3
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Margin Versus Turnover
Clicks & Mortar Retailers:
Retailers that sell both online and via physical stores.
LO 3
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Margins Versus Turnover
High Margin/High Turnover:
Is one that operates on a high gross margin percentage and high rate of inventory turnover.
LO 3
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Retailers Classified by Margin & Turnover
LowTurnover
HighTurnover
High Margin
Low Margin
High-Margin/Low-Turnover
Retailers
High-Margin/High-Turnover
Retailers
Low-Margin/Low-Turnover
Retailers
Low-Margin/High-Turnover
Retailers
LO 3
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LowTurnover
HighTurnover
High Margin
Low Margin
Excellent positionto withstand a
competitive attack
Least able towithstand a
competitive attack
Margin & Turnover
Competitiveness: Retailers Classified
LO 3
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Location
Retailers have long been classified according to their location within a metropolitan area, be it the central business district, a regional shopping center or neighborhood shopping center, or as a freestanding unit.
Location is an area that retailing may undergo significant changes in the decade to come.
LO 3
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Size
The reason for classifying by size is that the operating performance of retailers tends to vary according to size.
Larger firms generally have lower operating costs per sales dollar than smaller firms do.
With advances in technology using classification of size is unclear.
LO 3
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A Retailing Career
Career Path Common Questions About a Retailing Career Prerequisites for Success
LO 4
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Career Path
Store Management:
The retailing career path that involves responsibility for selecting, training, and evaluating personnel, as well as in-store promotions, displays, customer service, building maintenance, and security.
LO 4
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Career Path
Buying:
The retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the store’s merchandise lines.
LO 4
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Retailing-Two Career Paths
Exhibit 1.4 LO 4
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Common Questions About A Retailing Career
Salary Career Progression Geographic Mobility Women in Retailing Societal Perspective
LO 4
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Prerequisites for Success
Hard Work Analytical Skills Creativity Decisiveness Flexibility Initiative
Leadership Organization Risk Taking Stress Tolerance Perseverance Enthusiasm
LO 4
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Prerequisites for Success
Hard Work:
A willingness to work extra hours,
evenings and weekends often
pays off through career advancement.
LO 4
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Prerequisites for Success
Analytical Skills:
An ability to interpret the facts
and data that are related to the
past and present performance of a
store, merchandise lines, and
departments.
LO 4
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Prerequisites for Success
Creativity:
An ability to develop and
capitalize on unique ideas and
opportunities.
LO 4
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Prerequisites for Success
Decisiveness:
The ability to make rapid decisions,
render judgments, take action and
commit oneself to a course of
action until completion.
Prerequisites for Success
LO 4
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Prerequisites for Success
Flexibility:
A willingness and enthusiasm to do
whatever is necessary (although not
planned) to complete the job.
LO 4
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Prerequisites for Success
Initiative:
The ability to originate action.
LO 4
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Prerequisites for Success
Leadership:
The ability to inspire others to
trust and respect your judgment
and an aptitude for delegating,
guiding and persuading others.
LO 4
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Prerequisites for Success
Organization:
The ability to establish priorities and
courses of action and to plan and
follow up to achieve results.
LO 4
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Prerequisites for Success
Risk Taking:
The willingness to take calculated
risks and to accept responsibility
for the results.
LO 4
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Prerequisites for Success
Stress Tolerance:
The retailing leaders of the 21st Century must be able to perform consistently under pressure and to thrive on constant
change and challenge.
LO 4
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Prerequisites for Success
Perseverance:
Individuals that have the ability to persevere and take marketplace
changes in stride will find an increasing
number of career advancement
opportunities.
LO 4
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Prerequisites for Success
Enthusiasm:
Successful retailers must have a strong
warmth of feeling for their job, otherwise
they will convey the wrong image to their
customers and associates in their
department.
LO 4
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The Study and Practice of Retailing
Analytical Method Creative Method A Two-Pronged Approach A Proposed Orientation
LO 5
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The Study and Practice of Retailing
Analytical Method
Manager is finder and
investigator of facts.
Creative Method
Manager is conceptual
and very imaginative.
Two-Pronged Method
Manager who employs both
approaches.
LO 5
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A Proposed Orientation
Environmental Management Planning Profit Decision Making
LO 5
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The Importance of Proactive Planning
Exhibit 1.5 LO 5
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Additional Slides
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A Retailing Career
Retail Career
Salary
CareerProgression
GeographicMobility
Women inRetailing
SocietalPerspective
LO 4
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Prerequisites for Success
Success
Hard WorkAnalytical Skills
Creativity
Decisiveness
Flexibility
Initiative
Leadership
Organization
Risk Taking Stress Tolerance
Perseverance
Enthusiasm
LO 4