Chapter 1 Introduction to the World of Retailing 06 17 2015 Highlighted in Grey is Quiz Related Material Retailing Retailer A set of business activities that adds value to the products and services sold to consumers for their personal or family use A business that sells products and or services to consumers for their personal or family use Supply Chain consumers Ex A set of firms that make and deliver goods and services to o Manufacturing Wholesaler Retailer Consumer Manufacturers design and produce products Wholesalers buy products in large quantities and then resell products in smaller quantities to retailers Retailers link manufacturers to consumers and satisfy needs of ultimate customers Vertical Integration when a firm performs more than one set of activities in a channel such as when a retailer engages in whole sale activities by operating its own distribution centers Backward Integration a retailers performs wholesaling and manufacturing activities Forward Integration a manufacturer performs wholesale and retailing activities Retailers Create Value 1 Provide an assortment of products and services 2 Breaking bulk 3 Holding inventory 4 Providing services Economic Significance of Retailing Corporate Social Responsibility CSR o When an organization voluntarily takes responsibility for the impact of its activities on employees customers community and environment o Several Stages 1st Companies only do CSR when required by law 2nd Companies go beyond what is required by law for the purpose of providing a short term financial benefit to the company 3rd Companies operate responsibility because they believe it is the right thing to do 4th Companies engage in socially and environmentally friendly activities because they believe they should be done for the well being of everyone Retail Sales 1 9 million retailers in USA 95 only operate one store Less than 1 have more than 100 stores Only 10 of retailers gave sales greater than 2 5 million One of the largest industries in terms of employment Employment Global Retailers Wal mart is undisputed leaders in the retail industry Retailers headquartered in Europe are typically more international than US based retailers o On average top European retailers are present in 11 1 countries Distribution Channels Differences USA o Retailers are typically large firms that have large stores and own their own warehouses eliminating the need for wholesalers which results in a highly efficient distribution system China India o Small firms that operate small stores that are dependent on wholesalers Products go through several levels of distribution o Falls in between the USA and China India system Europe Opportunities in Retailing Management Entrepreneurial o Jeff Bezos Amazon o Sam Walton Wal Mart o Anita Roddick The Body Shop o Ingvar Kamprad IKEA Understanding the World of Retailing Environmental Factors o Microenvironment o Microenvironment Technological social ethical legal political factors Focus on competitors and customers Competitors Intratype Competition competition between the same type of retailers Scrambled Merchandise retailers offer merchandise that is not typically associated with their store It leads to o Intertype Competition competition between retailers that sell similar merchandise in different types of stores The greatest intensity of competition is among retailers who are located near one another Developing a Retail Strategy o Retail Strategy indicates how the retailer plans to focus its resources to accomplish its objectives It identifies Target market Nature of merchandise and services offered How the build a long term advantage over competitors o Strategic Decision Areas Market Strategy Financial Objectives Location Organizational Design and Human Resource Management Strategies Retail Information and Supply Chain Management o Implementing the Retail Strategy Retail Mix set of decisions retailers make to satisfy customer needs and influence their purchase decisions Ethical and Legal Considerations Ethics o Principles governing individuals and companies that establish appropriate behavior and indicate what is right and wrong When You Disagree with your Organizations Code of Ethics you can o Ignore your values and do what your company asks you to do o Take a stand and tell your employer what you think o Refuse to compromise your morals Chapter 2 Types of Retailers Highlighted in Grey is Quiz Related Material 06 17 2015 North America Industry Classification NAICS Created to collect data on business activities in United States Canada Mexico Every business is categorized by a six digit code based on the type of products and services it sells o First 2 digits identify the firm s business sector o Last 4 digits identify the various subsectors o Merchandise is sector 44 45 o Service Retailers are 71 72 Variety Breadth of Merchandise The number of merchandise categories a retailer offers Assortment Depth of Merchandise The number of different items offered in a merchandise category Stock Keeping Unit SKU Each different item of merchandise is identified by an SKU Super Markets Conventional Supermarket large self serving retail food store that offers groceries as well as some non food items o About 30 000 SKUs Limited Assortment Supermarkets Extreme Value Food Retailers o About 2 000 SKUs o Through trimming costs through limited assortment and assortment they can offer products for about 40 less Trends o To compete against Super Centers and Warehouses Supermarkets must o Fresh Merchandise Emphasize Fresh Perishables Target Health Conscious and Ethnic Consumers Provide Better Value Through Private Label Merchandise Provide a Better Shopping Experience Fresh merchandise is typically placed along the Power perimeter the outer walls of the supermarket typically the most profitable areas of the supermarket Fresh Supermarkets Smaller stores that put more emphasis on foods found in the power perimeter and less emphasis on pre packaged goods Meal Solutions Restaurant quality meals that are quick to cook for time pressured consumers o Health Organic Merchandise Fair Trade Purchasing products from factories that pay workers a living wage Locavore Movement Purchasing foods grown locally to reduce carbon footprint caused by transportation Some times conflicts with consumers desire for variety Ethnic Merchandise population Hispanic consumers now constitute 15 of the US More likely to prepare meals from scratch spend more on groceries and prefer bilingual