TXMI 5250: Test 1
103 Cards in this Set
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Pure Competition
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rare in the US
developing nations
market has homogenous (similar) products
many buyers and sellers all having perfect knowledge of market
ease of entry to buyers and sellers
websites (AddAll)
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Pure Monopoly
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very Rare
1 seller selling 1 type of good
no competition
no demand factor
illegal in the US: Sherman Antitrust Act
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Law of Diminishing Returns (pure monopoly)
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decline marginal utility
seller must lower price because someone with a pink scooter is not likely to buy another pink scooter
if retailer seeks to sell more units, must lower price
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Near monopoly
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late night restaurant on lonely highway
happens when there aren't options nearby
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monopolistic competition
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most retail
retailers sell different products that in eyes of consumer are interchangeable
sellers may be only one selling particular brands but face competition from those selling similar goods
monopolistic: each seller trying to control own segment of market
competition: substitutes…
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oligopolistic competition
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essentially same products sold (air fair but two different airlines)
few sellers, or small firms following lead of large firm
any action by one party will be noticed and reacted to by other parties in the market
top 4 retailers have 60-80% market share
Home Depot and Lowe's
more comm…
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outshopping
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shopping out of town because consumer is not satisfied
non store shopping- internet
reason in US is lawmakers (New Yorkers outshop for cigs)
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Talbots
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going out of business since 2008
competition: Chicos, Ann Taylor, dept stores
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population not increasing means what?
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no new stores, but increase sales by new products and multichannel marketing
except in south and west
by 2020, half of young population will be minorities
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Changing environment means what?
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only those that plan and differentiate themselves will survive
ex. Macy's: engaging and targeting young millenials
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Know retailers in your trading area
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3 mile radius: 50% of customers= a primary trading zone
tertiary trading: 10 mile radius
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Category Killer
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Specialty discount stores that heavily dominate their narrow market segment. (Ex. IKEA in home, Best Buy and future shop in electronics, Staples and Office Depot)
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can small businesses compete with discount corporations?
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Yes, based on service, convenience, uniqueness
- not on price
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Competition takes place between
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price for benefits offered (etailers: no overhead, saving on costs, cant compete w/ price)
service level (neimans, nordstrom)
product selection
location (want to be located right next to competition)
customer experience
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what is market equilibrium?
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return on investment is high enough to keep capital invested in
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competition types
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intratype: same merchandise, same households, same 448 NAICS code
intertype:2 different types of retailers, same customer, different naics code
ex. VS vs. Sears (lingerie)
Grocery store vs. fast food
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divertive competition
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retailers intercept or divert customers from competition
happens in intra and inter
ex. borders vs. barnes and nobles
most retailers operate very close to break-even point
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the retail lifecycle
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introduction
growth
maturity
decline
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high profit retailers and target market
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select a unique, distinguishable market
select high traffic geographic or cyberspace sites
select measurable, substantial, and accessible markets
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global retailers
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centralized management
vertically integrated
private labels
standard retail formats
small-medium sized
ex. Zara
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multinational retailers
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decentralized
concentrate expansion within geographic area
change merchandise based on customer and culture
typically large
ex. walmart, saks
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global location factors
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macro-environment
economic, social, competitive, technological, governmental
differnet for each country
micro-environment
retail marketing strategy
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global location factor: economic environment
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foreign joint ventures (vs 100% direct investment)
economic systems around the world
centrally planned economies
socialist vs capitalist
economic vitality: inflation, unemployment, disposable income
capitol factor: safe countries
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Why does costco work?
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great customer service
treasure hunt
keeps it simple
no bags, no fancy ads
cuts deals w/ companies by buying in bulk
limit amount of products to most popular ones
pay to shop @ costco because cheap goods, fine wine, sustainable
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resource advantage theory
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superior performance is result of competitive advantage (do something better than competition)
supply is dynamic but must do it with cost in mind
all retailers cannot achieve superior results @ the same time (one winner at a time)
ex. in 2008 everything declines except Hot Topic becaus…
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Future changes in Retail competition?
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direct selling
single level: person gets % of sales
catalog sales
JC penney, Sears, VS
e-tailing
women work more- online shopping is easier
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why won't etailing surpass retailing?
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1. automobile sales
2. credit card fraud
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New retailing format successes
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1. supercenters
2. recycled merchandise retailers
3. liquidators
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new retail format fails
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1. hypermarket
-huge superstore, prices better at warehouse stores
2. discount retailers
- haven;t taken off yet
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supreme court on price fixing?
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Leegin Creative Leather Products vs Kay's Kloset
-test whether brand can dictate minimum price
-remove price competition
-Law of Diminishing returns
-Supreme court ruled that brands COULD dictate minimum price
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Burberry Article
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regent store in london
audiovisual experience
pick up RFID tagged apparel>triggers multimedia content about product
stitching, craftsmanship, video on mirrors show product on catwalk
all associates carry iPad
run risk of being over the top and impersonal
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how do countries view capitalism?
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1. US: predatory
2. Germany: paternal
3. Japan: protected because they have extreme laws
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non price decisions
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using price as a weapon sometimes isn't enough
differentiate itself with merchandise mix
private label merchandise
provide other benefits (parking, gift wrap, customer service)
master stocking (can never be out of stock)
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private labels
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store brands
retailers use them because they
do well in recession compared to national brands
key business asset for diversifying
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common strategies for private labels
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-Develop celebrity brand
-Develop relationship with high-end supplier
-Reintroduce products with strong name recognition
-Brand an entire dept. not just product line
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bribery in other countries?
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Bribery Payers Index (2008)
Africa is WORST
North America is BEST
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Which countries limit large retailers?
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1. France
2. Japan
3. India
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which countries have restrictive advertising laws?
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1. France: ad must tell that you photo shopped
2. Canada: must specify origins of product
3. Saudi Arabia: woman mannequins must be dressed conservatively
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which countries have environmental impact laws?
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S. Korea and Japan: need to apply if you want build in a "Green zone"
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which countries have religious and sumptuary laws?
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1. Germany: restricts # of stores open on Sunday
2. Netherlands: only open past 6pm one a week, min price on goods produced in country
3. Middle East: no business on prayer Friday
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most corrupt nations?
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venezuala
irag
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least corrupt nations?
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denmark, new zealand, finland, singapore, sweden
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Religious laws impacting retailing?
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iran: all mannequins have head covering
Germany (protestant): closed Sundays (some stores)
Middle East: Friday is day of prayer but large companies stay open
India: McDonalds doesnt sell beef
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Code law (civil law)
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written, tries to spell out laws
Italy and France
whoever registers it first, its yours (Paris Haute Couture registration)
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Marxist Law
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North Korea, China
Everyone is equal
government owns everything
everyone gets same amount of everything
Communism
one party government
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common law
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British legal system, Australia, US, Canada, Nigeria, India
whoever prints it first
laws change as society changes
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Islamic Law
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the Karan is law
Pakistan, Iran, other islamic countries
Turkey is 99% Islamic but doesn't operate on Islamic laws
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can a country force retailers to give up ownership? (pre-determined domestication)
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yes
China 1950
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horizontal price fixing
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sherman antitrust act
competing retailers conspire to monopolize (usually a high price so no one looses money)
takes away consumer choice and option
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vertical price fixing
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sherman antitrust act
manufacturers of brands illegally tell retailers to sell a product at a certain price (when a brand or manufacturer artificially sets the price for a retailers
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dual distribution
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damages retailer and manufacturer relationships
not illegal
ex. Alice & Olivia have 4 stores in Manhattan but also sell at bloomingdales.
only way it is illegal is with :rule of reason criterion)
if Alice & Olivia pay for a tons of ads but dont mention bloomingdales and unfairly hurts…
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puffery
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exaggeration
company making false advertisements to the physical makeup or the benefits to be gained
FTC must prove 3 criteria
has to be an ad
has to be deceptive
the claim has to be "material"
ex. Papa johns "better ingredients, better pizza" pizza hut sued and court said they were…
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predatory pricing
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when a well known national retailer comes in and sells their product at a loss to hurt local stores
tries to buy stuff at store and sell if for cheaper
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bait-and-switch
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ad on unrealistically low price to serve as "bait" then try to "switch" you into higher priced product
store still must have enough of product for demand
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slotting fees
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fees paid by a vendor for space or a slot on retailers slot, as well as having its upc# given a slot in retailers computer system
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markdown money
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retailers charge to suppliers when merchandise does not sell at what the vendor intended
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central business district
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unplanned
where city started
based on public transit system
1 or 2 anchor department store
merchandise selection caters to local people
coffee shops and boutiques do well
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neighborhood business district
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five points
shopping area that evolves to satisfy the convenience-oriented shopping needs
small stores, grocery or drug store, and in residential area
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lifestyle shopping center
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all about fun and entertainment
targets working women who makes 85000+
20% higher sales per feet than malls
anchors: Target, cheescake factory, bookstore
2.5 miles from highest wealth
all outside
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Why internationalize
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1. Mature Home Market- Low growth potential
2. diversify investment (don't put all your eggs in one basket)
3. expansion at home blocked by legislation
4. possession of a unique market format
5. intense competition at home
6. economic downturn at home
7. first mover advantages
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Bio of retailers
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strong and unique retailers can relocate anywhere
weak and standard retailers should go to less developed countries
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Globalization movie
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Russia, once shut off from world, now open again
Russia's new found wealth is based on energy
big change in globalization as china and india enter the world economy
india has a new middle class due to companies like Microsoft
branding determines price, globalization makes products alm…
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4 types of retailers
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low margin/ low turnover
low margin/ high turnover
high margin/ low turnover
high margin/ high turnover
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retailing
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final activities & steps needed to place a product made elsewhere into the hands of the consumer or to provide services
to the consumer
*accounts for 20% of worldwide labor
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NRF anticipates change
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1. Luxury reset
2. World class emerging markets
3. Globalization of US retailers
4. Social networking
5. Rationalization of assortments
6. Increased polarization
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categorizing retailers
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1. U.S. Census Bureau
2. Number of Outlets
3. Margins vs Turnover
4. Location
5. Size
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size
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sales volume or # of employees
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Time
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Monochronic- US, UK, Germany
Polychronic- middle east, south america
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what makes US retail different?
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little gov't regulation (robinson batman act- price reg)
importance of chains
sophisticated logistics (RFID)
strong manufacturers (brands)
discount format well established
strong private labels
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what makes US retail different? (2)
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healthy independent retailers
retail buyers are considered profit centers
performance merchandise market
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NAICS code
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north american industry classification system
3 digit- single unit
4 digit- 2-10 units
5 digits- 11+ outlets
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Key to retailer success
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1. How the retailer uses or intends to use its resources
2. How the retailer expects to relate to the ever- changing environment
3. The values intended to offer to serve the needs and wants of consumers
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Goals and objectives
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market performance
financial performance
societal objectives
personal objectives
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market performance
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sales volume
market share= store total sales/ total market sales
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Financial objectives
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profitability= strategic profit model (SPM)
net profit margin (after expenses and taxes)- 2.5-3.5
return on net worth (says how you're doing)
assest turnover (total sales/ total assets) 2.5- 4 rating
financial leverage (total assets/ net worth) large #=bad
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Financial objectives
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profitability= strategic profit model (SPM)
net profit margin (after expenses and taxes)- 2.5-3.5
return on net worth (says how you're doing)
assest turnover (total sales/ total assets) 2.5- 4 rating
financial leverage (total assets/ net worth) large #=bad
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asset
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something you own and can turn into cash (inventory, equipment, building, fixtures)
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gross margin
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doesn't favor in expenses and taxes
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Productivity
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space (based on sq footage of selling space)- 300$ is average
labor
merchandise
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societal objectives
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employment
payment of taxes
consumer choice
equity
benefactor
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personal objectives
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self gratification
status and respect
power and authority
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3 common objectives
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get shoppers into store
convert shopper to consumer
loyalty at the lowest possible cost
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SWOT
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strengths, weakness, opportunities, threats
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strategic planning includes
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1. mission
2. goals and objectives
3.SWOT
4.retail marketing strategy (target market, location, pricing)
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pure play
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strictly online presence
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customer satisfaction
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total shopping experience meets or exceeds customers expectation
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consumer shopping model (ways to segment a market)
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1. population trends
2. social trends
3. economic trends
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where retailers go wrong
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Less than 75% of small retailers plan,90% of larger retailers do plan
Thinking strategic plans are extensions of financial plans
Confusing strategy & objectives
Expecting consultants to plan
Focusing on expansion while ignoring base
Taking too narrow a perspective
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what is culture?
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shared way of life based on geography
space
formal vs. casual
individualism vs. collectivism
high power distance
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high context vs. low context
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high- asia, arab
low-swiss, german
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Product constraints
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product safety (substantial hazard)
product liability (foreseeability doctrine)
warranties
expressed, written, or said
implied warranty of merchantability- fit function that you want it to
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2 types of deceptive advertising
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bait and switch, deceptive sales practice
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promotional constraints
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FTC act of 1914 and Wheeler Lea amendment
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supply chain constraints
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territorial restrictions (tesco on designer jeans)
dual distribution (legal) (rule of reasoncriterion)
exclusive dealing (one way legal) (two way illegal)
tying agreements (franchise)
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Gen X
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first tech, most educated, smaller generational groups
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Gen Y
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entertainment,influence 50% of all decisions made
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Gen Z
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teenagers (1995-present) "me generation"
*births plummet during war times
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Boomers
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DIFM, do it for me market
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Population trends (geographic)
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shift centers to west and south (micro marketing)
urban centers (MSA, metro stat areas)
mobility (stability of chain stores)
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Social trends
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education
state of marriage
25% married couple households
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Economic trends
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income growth
average savings of 4% of income
women in the workforce, 60% women over 16 are working
credit cards
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price discrimination
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clayton act (robinson batman act)
*like grade and like quality have to be the same price
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deceptive pricing (rebates)
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wheeler lea amendment of FTC act
(predatory pricing)
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TXMI 5250: Test 1