Retail management 8th levy

The cover for this textbook illustrates that retailing
is a dynamic industry utilizing technologic innovation like this electronic shelf tag to
provide a more rewarding shopping experience. Some examples of the technologies highlighted in this textbook are the use of the Internet for providing information and selling products and services to customers; use of social media and digital
signage to communicate with customers; application of geographic information system (GIS) technology to determine store locations; integrated supply chain management systems, RFID, and CPFR (collaboration, planning, forecasting and replenishment)
systems; analysis of customer databases to identify and tailor offerings to customers; and the use of profit optimization decision support systems for setting prices in
different markets, taking markdowns, and allocating merchandise.

Through the use of these technologies, the United States remains the world’s most
sophisticated retail market. However, retail sales in the BRIC countries (Brazil, Russia, India, and China) are attractive markets with high potential growth. This edition
highlights the growth of global retailers and the issues that they face when entering
emerging markets.

Finally, this edition also highlights retailers’ heightened concern for societal issues, the
environment, and the people involved in making and transporting merchandise to markets. Retailers are buying merchandise with an eye toward its carbon footprint and
other ecological factors. They have taken an active role in making sure that workers
are treated humanely and can earn a living wage.


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RETAILING
MANAGEMENT

EIGHTH EDITION

Michael Levy, Ph.D.
Babson College

Barton A. Weitz, Ph.D.
University of Florida
Introducing Digital Co-Author:

Lauren Skinner Beitelspacher, Ph.D.
University of Alabama at Birmingham


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RETAILING MANAGEMENT
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the
Americas, New York, NY, 10020. Copyright © 2012, 2009, 2007, 2004, 2001, 1998, 1995, 1992 by The McGraw-Hill
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Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4 3 2 1
ISBN
MHID

978-0-07-353002-4
0-07-353002-6

Vice president and editor-in-chief: Brent Gordon
Editorial director: Paul Ducham
Executive editor: Sankha Basu
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Cover images: © Peter Lambert/ZBD Displays Ltd.; Liz Whitaker
Typeface: 10.5/12 Janson
Compositor: Aptara®, Inc.
Printer: R. R. Donnelley
Library of Congress Cataloging-in-Publication Data
Levy, Michael, 1950Retailing management / Michael Levy, Barton A. Weitz. — 8th ed.
p. cm.
Includes index.
ISBN-13: 978-0-07-353002-4 (alk. paper)
ISBN-10: 0-07-353002-6 (alk. paper)

1. Retail trade—Management. I. Weitz, Barton A. II. Title.
HF5429.L4828 2012
658.8′7—dc22
2010048858

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To Jacquie Levy, the best Mom in the world—loving, elegant, and with
a will to live driven by her need to give of herself. —Michael Levy
To Shirley Weitz, the best wife in the world whose love and
enthusiasm enrich our lives. —Bart Weitz


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ABOUT THE AUTHORS

Michael Levy, Ph.D.
Babson College


Barton A. Weitz, Ph.D.
University of Florida

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Michael Levy, Ph.D., is the Charles Clarke Reynolds Professor of Marketing and Director of the Retail Supply Chain Institute at Babson College (www.babson.edu/retail). He
received his Ph.D. in business administration from The Ohio State University and his undergraduate and MS degrees in business administration from the University of Colorado
at Boulder. He taught at Southern Methodist University before joining the faculty as professor and chair of the marketing department at the University of Miami.
Professor Levy received the 2009 Lifetime Achievement Award by the American Marketing Association Retailing Special Interest Group. He has developed a strong stream of
research in retailing, business logistics, financial retailing strategy, pricing, and sales management. He has published over 50 articles in leading marketing and logistics journals,
including the Journal of Retailing, Journal of Marketing, Journal of the Academy of Marketing
Science, and Journal of Marketing Research. He currently serves on the editorial review
boards of the Journal of Retailing, International Journal of Logistics Management, International
Journal of Logistics and Materials Management, and European Business Review. He is coauthor
of Marketing (3e, 2012) and M-Marketing (2e, 2011), both with McGraw-Hill/Irwin. Professor Levy was co-editor of Journal of Retailing from 2001 to 2007. He co-chaired the 1993
Academy of Marketing Science conference and the 2006 Summer AMA conference.
Professor Levy has worked in retailing and related disciplines throughout his professional life. Prior to his academic career, he worked for several retailers and a housewares distributor in Colorado. He has performed research projects with many
retailers and retail technology firms, including Accenture, Federated Department
Stores, Khimetrics (SAP), Mervyn’s, Neiman Marcus, ProfitLogic (Oracle), Zale Corporation, and numerous law firms.
Barton A. Weitz, Ph.D., received an undergraduate degree in electrical engineering
from MIT and an MBA and a Ph.D. in business administration from Stanford University.
He has been a member of the faculty at the UCLA Graduate School of Business and
the Wharton School at the University of Pennsylvania and is presently the JCPenney
Eminent Scholar Chair in Retail Management in the Warrington College of Business
Administration at the University of Florida.
Professor Weitz is the founder of the David F. Miller Center for Retailing Education
and Research at the University of Florida (www.cba.ufl.edu/mkt/retailcenter). The
activities of the center are supported by contributions from 35 retailers and firms
supporting the retail industry, including JCPenney, Macy’s, Walmart, Office Depot,
Walgreens, Target, Build-A-Bear, Brown Shoe, NPD, and the International Council of
Shopping Centers. Each year, the center places more than 250 undergraduates in paid

summer internships and management trainee positions with retail firms and funds
research on retailing issues and problems.
Professor Weitz has won awards for teaching excellence and made numerous presentations to industry and academic groups. He has published over 50 articles in leading academic journals on channel relationships, electronic retailing, store design,
salesperson effectiveness, and sales force and human resource management. His research has been recognized with two Louis Stern Awards for his contributions to
channel management research and a Paul Root Award for the Journal of Marketing article that makes the greatest contribution to marketing practice. He serves on the
editorial review boards of the Journal of Retailing, Journal of Marketing, International Journal of Research in Marketing, Marketing Science , and Journal of Marketing Research. He is
a former editor of the Journal of Marketing Research.
Professor Weitz has been the chair of the American Marketing Association and a
member of the board of directors of the National Retail Federation, the National Retail
Foundation, and the American Marketing Association. In 1989, he was honored as the
AMA/Irwin Distinguished Educator in recognition of his contributions to the marketing
discipline. He was selected by the National Retail Federation as Retail Educator of the
Year in 2005 and been recognized for lifetime achievements by American Marketing
Association Retailing, Sales, and Inter-Organizational Special Interests Groups.


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PREFACE
Retailing is a high-tech, global, growth industry that plays a vital economic role in
society. Our objective in preparing the eighth edition is to stimulate student interest in retailing courses and careers by capturing the exciting, challenging, and rewarding opportunities facing both retailers and firms that sell their products and
services to retailers, such as IBM and Procter & Gamble. The textbook focuses on
the strategic issues facing the retail industry and provides a current, informative,
“good read” for students.

As retailing continues to evolve and change, so do the ways in which we communicate to our students. We are very excited to introduce Connect Marketing for
Retailing Management, 8e. While you may have seen Connect Marketing with other
McGraw-Hill products, this is the first time it is offered for Retailing Management. Students will find lectures, practice materials, and eBook links for each
chapter. A grade management system makes its use easy for the instructor. Lauren
Skinner Beitelspacher, Ph.D., University of Alabama at Birmingham, is our digital
coauthor, overseeing and leading the development of this exciting new addition to
our package.

NEW FEATURES
In preparing the eight edition of Retailing Management, we have revised the textbook to address five important developments in retailing: (1) the increasing role of
the Internet in retailing, (2) new ways to communicate with customers, (3) the
greater emphasis on social responsibility by retailers, (4) the use of technology and
analytical methods for decision making, and (5) globalization.

Evolving Role of the Internet Fifteen years ago, many experts thought that
consumers would abandon the mall and shop for most products and services using
the Internet. Traditional retailers would be replaced by a new breed of technosavvy entrepreneurs. Now it is clear that the Internet is not replacing the traditional retail industry but rather enhancing the activities undertaken by traditional
retailers—retailers that use multiple channels (Internet, catalog, stores, and mobile) to interact with their customers.
In the eighth edition, we go beyond Chapter 3, which is dedicated to multichannel retailing, to discuss Internet retailing applications throughout the textbook. For example,
• Use of the Internet for selection and training of employees (Chapters 9 and 16).
• Use of the Internet for communicating with vendors (Chapters 11, 12, and 13).
• Internet-based digital signage in stores (Chapter 17).
• Providing information and customer service through Web-enabled kiosks and
POS terminals (Chapter 18).
New Ways to Communicate with Customers Retailers communicate
with customers using a mix of methods, such as advertising, sales promotion,
publicity, e-mail, blogs, and social media using Twitter, Facebook, YouTube, and
blogs. Although many of these traditional methods, such as advertising, have been
used for decades, Internet enabling technology has changed the way retailers
utilize their promotional budgets and communicate with customers. For example,

• The impact of social networks on buying behavior (Chapter 4).
• The increased use of cell phones to allow customers to make price
comparisons, locate merchandise, receive coupons, and buy merchandise
(Chapter 15).

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• The use of blogs, Twitter, Facebook, and YouTube to promote retailers and
specific merchandise, as well as to collect customer attitudes about retailers
and reviews of their product (Chapter 15).
• The use of the technology to customize and deliver coupons and other
targeted promotions to customers. Customers also utilize Internet sites to find
coupons to redeem at their favorite retailers (Chapter 15).

Social Responsibility of Retailers Retail institutions are pervasive in our society and thus have a major impact on the welfare of their customers, suppliers,
and employees. Given the importance of their societal role, both consumers and
retailers are becoming more concerned about social issues facing the world, such
as global warming, immigration, health care, and working conditions in less developed economies. Some of these social responsibility issues, identified with legal/
ethical icons in the margins and discussed in the eighth edition, are:
• Consumer interest in green products (Chapter 4).
• Ethical issues in sourcing merchandise globally (Chapter 13).
• Considering sustainability issues in store operations (Chapter 16) and design
(Chapter 17).

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Use of Technology in Retailing Retailing is a high-tech industry with retailers increasingly using communications and information systems technologies and
analytical models to increase operating efficiencies and improve customer service.
Some of these new technology applications, identified with technology icons in
the margins and discussed in the eighth edition, are:
• Use of Web sites to sell products and services to customers (Chapter 3).
• Providing a seamless multichannel (stores, Web sites, and catalogs) interface
so that customers can interact with retailers anytime, anywhere (Chapter 3).
• Stores of the future that use technology to provide a more rewarding shopping
experience (Chapter 3).
• Application of geographic information system (GIS) technology for store
location decisions (Chapter 8).
• Internet applications for effective human resource management (Chapter 9).
• Integrated supply chain management systems (Chapter 10).
• RFID (radio frequency identification) technology to improve supply chain
efficiency (Chapter 10).
• CPFR (collaboration, planning, forecasting, and replenishment) systems for
coordinating vendors and retailer activities (Chapter 10).
• Analysis of customer databases to determine customer lifetime value, target
promotions toward a retailer’s best customers, and undertake market basket
analyses (Chapter 11).
• Implementation of marketing programs to increase customer share of wallet
(Chapter 11).
• Sophisticated inventory management and assortment planning systems
(Chapter 12).
• Reverse auctions for buying merchandise (Chapter 13).
• Use of profit-optimization decision support systems for setting prices in
different markets and taking markdowns (Chapter 14).
• Developing targeted promotions using customer databases (Chapter 15).
• Internet-based training for store employees (Chapter 16).

• Decision support systems for scheduling sales associates (Chapter 16).
• EAS technology designed to reduce shoplifting (Chapter 16).


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• Creating planograms to optimize sales and profits from merchandise
categories (Chapter 17).
• Digital signage to reduce cost and increase message flexibility (Chapter 17 and
a new case on Harrods Department Store).
• In-store kiosks, mobile devices, and the Internet to improve customer service
(Chapter 18).
• Instant chat for servicing online customers (Chapter 18).

Globalization of the Retail Industry Retailing is a global industry. With a
greater emphasis being placed on private-label merchandise, retailers are working
with manufacturers located throughout the world to acquire merchandise. In addition, retailers are increasingly looking to international markets for growth opportunities. For instance, Sweden-based furniture retailer IKEA is successful
because it is able to manufacture and sell relatively low priced stylish furniture to
like-minded customers around the globe. Some of the global retailing issues, identified with icons in the margins, examined in this edition are:
• Retail efficiencies in different economies (Chapter 1).
• Illustrations of global expansion by retailers (Chapter 2).
• Cultural impacts on customer buying behavior (Chapter 4).
• Keys to successful entry into international markets (Chapter 5).
• Evaluation of international growth opportunities (Chapter 5).
• Differences in location opportunities in global markets (Chapter 7).
• Employee management issues in international markets (Chapters 9 and 16).
• Global sourcing of private-label merchandise (Chapter 13).
• Cultural differences in customer service needs (Chapter 18).

BASIC PHILOSOPHY
The eighth edition of Retailing Management maintains the basic philosophy of the
previous seven editions. We continue to focus on key strategic issues with an emphasis on financial considerations and implementation through merchandise and
store management. These strategic and tactical issues are examined for a broad
spectrum of retailers, both large and small, domestic and international, selling
merchandise and services.

Strategic Focus The entire textbook is organized around a model of strategic
decision making outlined in Exhibit 1–4 in Chapter 1. Each section and chapter
relates back to this overarching strategic framework. In addition, the second section of the book focuses exclusively on critical strategic decisions, such as selecting
target markets, developing a sustainable competitive advantage, building an organizational structure and information and distribution systems to support the strategic direction, building customer loyalty, and managing customer relationships.
The text explores in depth the resources that retailers use to develop sustainable
competitive advantage, such as
• Selecting store location (Chapters 7, 8).
• Developing and maintaining human resources (Chapter 9).
• Managing information systems and supply chains (Chapter 10).
• Managing customer relationship management and loyalty programs (Chapter 11).
Financial Analysis The success of any retailer, like any other business, depends on
its ability to make a profit, provide an adequate return to its owners, and be financially
stable. The financial problems experienced by some well-known retail firms, like
Circuit City, Sharper Image, and K-B Toys, highlight the need for a thorough

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understanding of the financial implications of strategic retail decisions. Financial
analysis is emphasized in selected chapters, such as Chapter 6 on the overall strategy
of the firm using the strategic profit model and the financial strength of retailers using cash flow and ratio analysis, Chapter 11 on the evaluation of customer lifetime
value, and Chapter 12 on retail buying systems. Financial issues are also raised in
the sections on negotiating leases, bargaining with suppliers, pricing merchandise,
developing a communication budget, and compensating salespeople.

Implementing a Retail Strategy Although developing a retail strategy is
critical to long-term financial performance, the execution of strategies is as important as the development of the strategy. Traditionally, retailers have exalted the
merchant prince—the buyer who knew what the hot trends were going to be.
While we provide a thorough review of merchandise management issues, the emphasis in retailing is shifting from merchandise management to the block and
tackling of getting merchandise to the stores and customers and providing excellent customer service and an exciting shopping experience. Due to this shift toward store management, most students embarking on retail careers go into
distribution and store management rather than merchandise buying. Thus, this
text devotes an entire chapter to information systems and supply chain management and an entire section to store management.
Up-to-Date Information Retailing is a very dynamic industry, with new ideas
and formats developing and traditional retailers constantly adapting to the changing environment or suffering financially. Most of the examples provided in the text
have taken place in the last two years.
Balanced Approach The eighth edition continues to offer a balanced approach for teaching an introductory retailing course by including descriptive,
how-to, and conceptual information in a highly readable format.
Descriptive Information Students can learn about the vocabulary and practice of retailing from the descriptive information throughout the text. Examples of
this material are:
• Leading U.S. and international retailers (Chapter 1).
• Management decisions made by retailers (Chapter 1).
• Types of store-based and nonstore retailers (Chapter 2 and 3).
• Approaches for entering international markets (Chapter 5).
• Location options (Chapter 7).
• Lease terms (Chapter 8).
• Organization structure of typical retailers (Chapter 9).
• Flow of information and merchandise (Chapter 10).
• Branding strategies (Chapter 13).

• Methods for communicating with customers (Chapter 15).
• Store layout options and merchandise display techniques (Chapter 17).
• Career opportunities (Appendix 1A to Chapter 1).

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How-to Information Retailing Management goes beyond this descriptive information to illustrate how and why retailers, large and small, make decisions.
Procedures with examples are provided for making the following decisions:
• Managing a multichannel operation (Chapter 3).
• Scanning the environment and developing a retail strategy (Chapter 5).
• Analyzing the financial implications of retail strategy (Chapter 6).
• Evaluating location decisions (Chapter 8).
• Developing a merchandise assortment and budget plan (Chapters 12).


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• Negotiating with vendors (Chapter 13).
• Pricing merchandise (Chapter 14).
• Recruiting, selecting, training, evaluating, and compensating sales associates
(Chapter 16).
• Designing the layout for a store (Chapter 17).
• Providing superior customer service (Chapter 18).

Conceptual Information Retailing Management also includes conceptual information that enables students to understand why decisions are made, as outlined
in the text. As Mark Twain said, “There is nothing as practical as a good theory.”
Students need to know these basic concepts so they can make effective decisions in
new situations. Examples of this conceptual information in the eighth edition are:

• Customers’ decision-making process (Chapter 4).
• The strategic profit model and approach for evaluating financial performance
(Chapter 6).
• Price theory and marginal analysis (Chapters 14 and 15).
• Motivation of employees (Chapter 16).
• In-store shopping behaviors (Chapter 17).
• The Service Gaps model for service quality management (Chapter 18).
Student-Friendly Textbook This eighth edition creates interest and involves
students in the course and the industry by making the textbook a “good read” for
students. We use Refacts (retailing factoids), Retailing Views, and retail manager
profiles at the beginning of each chapter to engage students.
Refacts We have updated and added more interesting facts about retailing,
called Refacts, in the margins of each chapter. Did you know that on average,
Americans, with mobile phone Internet access, spend 2.7 hours a day connected
to the Internet through their mobile phones? The primary usage of the mobile
Internet connection is for socializing with others. Or that the teabag was developed by a Macy’s buyer and pantyhose was developed by a JCPenney buyer?
Retailing Views Each chapter contains either new or updated vignettes called
Retailing Views to relate concepts to activities and decisions made by retailers.
The vignettes look at major retailers, like Walmart, Walgreens, JCPenney,
Target, Kohl’s, Neiman Marcus, and Macy’s, that interview students on campus
for management training positions. They also discuss innovative retailers like REI,
Starbucks, Zara, Mango, Top Shop, The Container Store, Sephora, Curves,
Chico’s, and Bass Pro Shops. Finally, a number of Retailing Views focus on entrepreneurial retailers competing effectively against national chains.
Profiles of Retail Managers To illustrate the challenges and opportunities in
retailing, each chapter in the eighth edition begins with a brief profile, in their
own words, of a manager or industry expert whose job or expertise is related to the
material in the chapter. These profiles range from Debbie Harvey, President of
Ron Jon Surf Shop and Mike Odell, CEO of Pep Boys to Heather Graham, a
Walgreen’s store manager and Darius Jackson, a JCPenney buyer. They include
people who have extensive experience in a specific aspect of retailing, like Krista

Gibson, VP Marketing, at Chili’s and Ramesh Murthy, VP Inventory Replenishment at CVS/Caremark.
The profiles illustrate how senior executives view the industry and suggest
career opportunities for college students. They also provide students with firsthand
information about what people in retailing do and the rewards and challenges of
their jobs and careers.

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SUPPLEMENTAL MATERIALS
To enhance the student learning experience, the eighth edition includes new cases
and videos illustrating state-of-the-art retail practices, a Web-based computer exercise package for students, and a comprehensive online instructor’s manual with
additional cases and teaching suggestions.
Get Out and Do It! exercises are found at the end of each chapter. These exercises suggest projects that students can undertake by visiting local retail stores,
surfing the Internet, or using the student Web site. A continuing assignment exercise is included so that students can engage in an exercise involving the same retailer throughout the course. The exercises are designed to provide a hands-on
learning experience for students.
Monthly Newsletter with Short Cases based on recent retailing articles appearing in the business and trade press. Instructors can use these short cases to
stimulate class discussions about current issues confronting retailers. The newsletter is e-mailed to instructors and archived on the text’s Web page.
Ten New Cases including Walmart, Target Marketing with Google Adwords,
Netflix Personalizes the Customer’s Experience, Tiffany’s and Blue Nile: Comparing Financial Performance, Attracting Gen-Y to a Retail Career, American Furniture Warehouse Sources Globally, Merchandise Exclusively for JCPenney, Active
Endeavors Analyzes Its Customer Database, Generating Advertising Revenue
From a Digital Screen Network and B-G Merchandise Budget Plan. All 38 cases in

the textbook are either new or updated with current information. A number of the
cases, such as Starbucks, Build-A-Bear, and Walmart, have videos that complement
the written case.
Eight New Videos among the 35 video segments available to illustrate issues
addressed in the text. The topics addressed by the new videos include using
technology to enhance the shopping experience, Zappos’ customer service, HR
management at Hot Topics, Tesco’s entry into the U.S., customer centricity at
Best Buy, and Whole Foods’ retail strategy.
Web Site for Students and Instructors (www.mhhe.com/levy8e) Just as
retailers are using the Internet to help their customers, we have developed a Web
site to help students and instructors use the eight edition of this textbook effectively. Some of the features on the Web site are:
• Multiple-choice questions on the student site.
• Experiential exercises for students.
• Chapter-by-chapter Instructor Manual coverage.
• Case and video notes.
• Retailing trade publications and professional associations.
• News articles about current events in retailing.
• PowerPoint slides summarizing key issues in each chapter.
• Hot links to retailing news sites and sites associated with the Internet exercises
in the textbook.
• Additional cases about retailers.

ACKNOWLEDGMENTS

x

Throughout the development of this text, several outstanding individuals were integrally involved and made substantial contributions. First, Britt Hackmann (Babson
College) for her important assistance in doing research for the book, writing examples, and preparing the manuscript for publication. We thank Lauren Skinner
Beitelspacher of University of Alabama at Birmingham, for developing Connect
Marketing for Retailing Management. We also recognize the invaluable contributions of Hope Bober Corrigan (Loyola College in Maryland) for editing the video

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package, and providing many useful teaching activities found in the Instructor’s
Manual. We also thank Kate Woodworth for helping us write and revise the Monthly
Newsletter, several Retailing Views, and cases. We express our sincere appreciation to
Dr. Nancy Murray (University of Wisconsin-Stout) for preparing the Test Bank and
Chapter Quizzes and to Leroy Robinson, Jr., PhD (University of Houston-Clear
Lake) for preparing the Instructor’s Manual and PowerPoint slides. Special thanks
go to Tracy Meyer (University of North Carolina Wilmington) for preparing
the “Starting a Franchise Business.” Appendix, to Christian Tassin (University of
Florida) for preparing the appendix on “Starting Your Own Retail Business.” We’d
like especially to acknowledge the contribution of Kantar Retail. Their daily news
briefing and research reports facilitated the research that has gone into this text.
We also appreciate the contributions of Margaret Jones, Cecilia Schulz and
Betsy Trobaugh (David F. Miller Center for Retailing Education and Research,
University of Florida), who provided invaluable assistance in preparing the
manuscript.
The support, expertise, and occasional coercion from our Managing Developmental Editor, Gabriela Gonzalez, are greatly appreciated. The book would also
never have come together without the editorial and production staff at McGrawHill/Irwin: Doug Hughes, Mary Conzachi, Harvey Yep, Carol Bielski, Mary
Sander, Keri Johnson, and Gregory Bates.
Retailing Management has also benefited significantly from contributions by
several leading executives and scholars in retailing and related fields. We would
like to thank:
Tim Adams
Macy’s
Mark Blakeley

Oracle
Cynthia Cohen
Strategic Mindshare
John Gremer
Walgreens
Dhruv Grewal
Babson College
Simon Hay
Dunnhumby
Linda Hyde
Retail Forward
Marlin Hutchins
Walgreens
Truman Hyde
Tires Plus

Steve Knopik
Beall’s Inc.
Doug Koch
Famous Footwear
Bradley Macullum
ESRI
Rick Lawler
Hess
Bruce Mager
Macy’s East
Kathy Mance
National Retail Federation
Richard A. McAllister
Florida Retail Federation

Mike MacDonald
DSW
Ramesh Murthy
CVS/Caremark

Steven Keith Platt
Platt Retail Institute
Susan Reda
Stores Magazine
Donna Rosenberg
Staples
Lori Schafer
SAS Retail
Bob Swan
JCPenney
John Thomas
Pinch-A-Penny
Suzanne Voorhees
The Grapevine Group

The eighth edition of Retailing Management has benefited from reviews by several leading scholars and many teachers of retailing and related disciplines.
Together, these reviewers spent hundreds of hours reading and critiquing the
manuscript. We gratefully acknowledge them and the following reviewers for
their diligence and insight in helping us prepare previous editions:
Mark Abel
Kirkwood Community College
Stephen J. Anderson
Austin Peay State University
Jill Attaway
Illinois State University

Mary Barry
Auburn University
Lance A. Bettencourt
Indiana University

David Blanchette
Rhode Island College
Jeff Blodgett
University of Mississippi
George W. Boulware
Lipscomb University
Willard Broucek
Northern State University
Leroy M. Buckner
Florida Atlantic University

David J. Burns
Purdue University
Lon Camomile
Colorado State University
Donald W. Caudill
Bluefield State College
James Clark
Northeastern State University
Sylvia Clark
St. John’s University

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J. Joseph Cronin, Jr.
Florida State University
Angela D’Auria
Stanton Radford University
Irene J. Dickey
University of Dayton
Ann DuPont
University of Texas
Chloe I. Elmgren
Mankato State University
Richard L. Entrikin
George Mason University
David Erickson
Angelo University
Kenneth R. Evans
University of
Missouri–Columbia
Richard Feinberg
Purdue University
Kevin Fertig
University of Illinois
Drew Ehrlich Fulton
Montgomery Community
College
David M. Georgoff
Florida Atlantic University
Peter Gordon
Southeast Missouri State

University
Larry Gresham
Texas A&M University
Tom Gross
University of Wisconsin
Sally Harmon
Purdue University
Susan Harmon
Middle Tennessee State
University
Michael D. Hartline
Louisiana State University
Tony L. Henthorne
University of Southern
Mississippi

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Kae Hineline
McLennan Community
College
David Horne
California State University–
Long Beach
Joshua Holt
Brigham Young University
Michael Jones
Auburn University
Eugene J. Kangas
Winona State University

Herbert Katzenstein
St. John’s University
Terrence Kroeten
North Dakota State
University
Ann Lucht
Milwaukee Area Technical
College
Elizabeth Mariotz
Philadelphia College of
Textiles and Science
Tony Mayo
George Mason University
Harold McCoy
Virginia Commonwealth
University
Michael McGinnis
University of South Alabama
Phyliss McGinnis
Boston University
Kim McKeage
University of Maine
Barbara Mihm
University of Wisconsin–
Stevens Point
Robert Miller
Central Michigan University
Mary Anne Milward
University of Arizona
Cheryl O’Hara

Kings College

Dorothy M. Oppenheim
Bridgewater State University
Michael M. Pearson
Loyola University, New Orleans
Janis Petronis
Tarleton State University
Linda Pettijohn
Southern Missouri State
University
John J. Porter
West Virginia University
Sue Riha
University of Texas–Austin
Nick Saratakes
Austin Community College
Laura Scroggins
California State
University–Chico
Steve Solesbee
Aiken Technical College
Shirley M. Stretch
California
State University–LA
William R. Swinyard
Brigham Young University
Amy Tomas
University of Vermont
Janet Wagner

University of Maryland
Gary Walk
Lima Technical College
Mary Weber
University of New Mexico
Sandy White
Greenville Tech College
Fred T. Whitman
Mary Washington College
Kathleen Debevic Witz
University of Massachusetts
Merv Yeagle
University of Maryland
Ron Zallocco
University of Toledo

We received cases from professors all over the world. Although we would like
to have used more cases in the text and the Instructor’s Manual, space was limited.
We would like to thank all who contributed but are especially appreciative of the
following authors whose cases were used in Retailing Management or in the
Instructor’s Manual:

xii

Ronald Adams
University of North Florida
Laura Bliss
Stephens College
James Camerius
Northern Michigan

University
Jeffrey M. Campbell
The University of Tennessee,
Knoxville

Guy Cheston
Director of Advertising Sales
& Sponsorship, Harrods
Daphne Comfort
University of Gloucestershire
Hope Bober Corrigan
Loyola College, Maryland
Tina Brienne Curley
Loyola College, Maryland

David Ehrlich
Marymount University
Sunil Erevelles
University of North Carolina,
Charlotte
Ann Fairhurst
Indiana University
Linda F. Felicetti
Clarion University


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Carla Ferraro
Monash University

Alex Gibelalde
Google
Joseph P. Grunewald
Clarion University
David Hillier
University of Glamorgan
K. Douglas Hoffman
University of North
Carolina–Wilmington
Terence L. Holmes
Murray State University
Lexi Hutto
The Metropolitan State
College of Denver
Peter Jones
University of
Gloucestershire
Robert P. Jones
University of Tennessee,
Knoxville
Kirthi Kalyanam
Santa Clara University
Dilip Karer
University of North Florida
Hean Tat Keh
National University,
Singapore

Robert Kenny
Saint Michael’s College

Nirmalya Kumar
London Business School
Marilyn Lavin
University
of Wisconsin–Whitewater
Robert Letovsky
Saint Michael’s College
Alicia Lueddemann
The Management Mind Group
Gordon H. G. McDougall
Wilfrid Laurier University
Debra Murphy
Saint Michael’s College
Jamie Murphy
Murdoch Business School
Todd Nicolini
Loyola College, Maryland
Meghan O’Farrell
Google
Jan Owens
University of Wisconsin
Kristina Pacca
University of Florida
Michael Pearce
University of Western Ontario
Steven Keith Platt
Platt Retail Institute

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James Pope
Loyola College, Maryland
Catherine Porter
University of Massachusetts
Richard Rausch
Hofstra University
Edward Rhee
Stonehill College
Dan Rice
University of Florida
David Rosage
Loyola College, Maryland
Sean Sands
Monash University
Cecelia Schulz
University of Florida
Vidya Sundari
National University,
Singapore
William R. Swinyard
Brigham Young University
Stephen Vitucci
Tarleton State University
Elizabeth J. Wilson
Suffolk University
Irvin Zaenglein
Northern Michigan
University

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ABOUT RETAILING MANAGEMENT, 8e
GUIDED TOUR

For seven editions, Levy & Weitz’s

Retailing Management

has been known for its

strategic focus, decision-making emphasis, applications orientation, and readability. The
authors and McGraw-Hill/Irwin are proud to introduce the eighth edition and invite you to
see how this edition captures the exciting, dynamic nature of retailing.

STUDENT FEATURES

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This edition continues the emphasis placed on creating interest and involving students in the course and the
industry. Refacts, retailing views, and executive briefings at the beginning of each chapter make the textbook
a “good read” for students.

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Executive Briefings
To illustrate the opportunities and rewards from a career in retailing, each chapter begins with a profile of a
retail manager, either a senior executive or recent college graduate, discussing their area of decision-making
and their career path. This specific executive briefing
from Chapter 3 portrays Al Callier, Vice President, Interactive Design & Web Production, of Universal Orlando
Resort. In his profile, he states, “Today online
electronic
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commerce is among our leading retail sales channels
and a strategic pillar of our marketing efforts.” Retailers
are using the Internet and other technologies to provide more value to their customers, increase customer
service, and improve operating efficiencies.

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EXECUTIVE BRIEFING
Al Callier, Vice President, Interactive Design &
Web Production, Universal Orlando® Resort
I am responsible for Universal Orlando Resort’s digital
content production including content strategy and Web site
development, online advertising, and mobile content development for the United States and the United Kingdom. In
2002, when I joined Universal Orlando, the company was

beginning to explore online e-commerce. Its Web site had
online ticket purchase capability, but was more of an interactive print brochure describing the resort. Today online
electronic commerce is among our leading retail sales
channels and a strategic pillar of our marketing efforts.
Promoting the resort and selling tickets to the theme

parks before people arrive in Orlando is critical. Visitors

participation of multiple family members in different ways.

to Orlando may plan to visit a number of the attractions

We have designed our Web site and navigation to provide

in the area during their vacation, but change plans once

the information and assistance our guests will find useful at

the vacation is underway. By making it more attractive to

each phase of the process, and encourage them to include

buy tickets online before visitors arrive in Florida, we

Universal Orlando in their vacation plans, buy tickets to

achieve more advance purchases and commitment to

our theme parks, and make reservations at our hotels.

visiting Universal Orlando.

compelling image of Universal Orlando Resort. Thus we

tioners use online resources to research their trip as well

consider the strategic brand communication objectives, as

as book and purchase specific products. We have designed

well as the different types of visitors and guest needs in

our online channel to assist families as they plan their vaca-

the design of our Web site. Some visitors come to the re-

tions. The process might begin with determining the type

sort more frequently and are more interested in specific

and location of a vacation, and conclude with choosing spe-

offers and packages, while others are in the early phase of

cific activities and then purchasing tickets for these activi-

the vacation planning process and are seeking to get a

ties. It is a highly involving process that typically engages the

basic understanding of the resort and theme parks. Our

Chapter Questions

QUESTIONS
What are the unique customer benefits offered by the
three major retail channels: stores, catalogs, and the
Internet?
Why are retailers moving toward using all three
channels to interact with customers?

What are the key benefits and challenges in providing
multichannel offerings?
How might technology affect the future multichannel
shopping experience?

Interesting and Readable
Refacts
Refacts (retailing factoids) are interesting facts
about retailing, related to the textual material,
that are placed in the margins.

xiv

Our Web site also plays an important role in building a

At this point in the evolution of the Internet, most vaca-

REFACT
More than 17 billion catalogs

are mailed in the United
States every year—about
56 for every American.6

These critical thinking questions appear at
the beginning of each chapter to give students
the opportunity to prepare for what they will
be required to understand in their reading.

Catalog Channel
The catalog channel is a nonstore retail channel in which the retail offering is
communicated to customers through a catalog mailed to customers. About half of
U.S. consumers shop through catalogs each year. The merchandise categories with
the greatest catalog sales are drugs and beauty aids, computers and software, clothing and accessories, furniture and housewares, and books, music, and magazines.5


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Retailing Views
R E TA I L I N G V I E W

3.1

Direct Selling in China

Before joining the company, many Mary
While sales growth through the direct
Kay sales agents in China held low-paying
selling channel is limited in the United
jobs as secretaries, cashiers, and rural
States, companies like Avon and Mary Kay
schoolteachers. Many were looking for a
have effectively used this channel to sell
new focus in their lives. “Because my husproducts in less developed countries. Usband is a businessman, and he is busy, we
ing the direct selling channel is particularly
talked less and less,” says Lu Laidi, a Mary
effective in less developed countries
Kay sales director. “I felt my life was boring.
because an extensive infrastructure to
I stayed home and barely dressed up.”
supply stores is
The use of a direct selling channel has
not required.
been controversial in China. Many direct
Products are
About 5.5 million sales represellers have been accused of operating
sent to hunsentatives now sell Avon
sophisticated pyramid schemes and other
dreds of thouproducts around the world, be sands of sales
sales swindles. In response to these conit lip gloss in Shanghai or face

cerns, China banned direct selling in 1998,
representatives
powder in Rio de Janeiro.11
saying that it was often a cover for “evil
in small villages.
cults, secret societies and lawless and suThey pay for
perstitious activities.” In 2006, after heavy
the products when they sell them.
lobbying from American companies, China
The direct selling channel also is The direct selling channel is particularly
lifted its ban, and since then direct selling
part of a movement around the world effective in less developed areas that lack
the
infrastructure
to
support
retail
stores.
has grown into an $8 billion industry.
for women to have more economic independence. For example, Zhang Xiaoying, a 19-year-old
woman from Guizhou, one of China’s poorest regions, says, “I Sources: David Barboza, “Direct Selling Flourishes in China,” New York
love the corporate culture of Mary Kay. This company teaches Times, December 26, 2009; J. Alex Tarquinio, “Selling Beauty on a
you to aspire to a higher level.”
Global Scale,” New York Times , November 1, 2008, p. B2

These vignettes reside in
each chapter and relate
concepts developed in the
text to issues and problems
confronting retailers.

REFACT

SUPPORT FOR STUDENT LEARNING
GET OUT AND DO IT!
EXERCISES
Found at the end of each chapter,
these exercises suggest projects that
students can undertake by either visiting local retail stores, surfing the Internet, or using the student Web site.
The exercises are designed to provide a hands-on learning experience
for students. A continuing exercise is
included in each chapter so that students can be involved in an experiential exercise involving the same
retailer throughout the course.

GET OUT AND DO IT!
1. CONTINUING CASE ASSIGNMENT: GO
SHOPPING Assume that you are shopping on the
Internet for an item in the same merchandise category
you analyzed for the Comparison Shopping exercise
in Chapter 2. Go to the retailer’s Web site, and compare the merchandise assortment offered, the prices,
and the shopping experience in the store and on the
store’s Web site. How easy was it to locate what you
were looking for? What were the assortment and pricing like? What was the checkout like? What features
of the sites do you like and dislike, such as the look
and feel of the site, navigation, and special features?
2. INTERNET EXERCISE Go to the Web sites of
J. Crew (www.jcrew.com), JCPenney (www.jcpenney.
com), and Lands’ End (www.landsend.com), and shop
for a pair of khaki pants. Evaluate your shopping experience at each site. Compare and contrast the sites
and your experiences on the basis of characteristics

you think are important to consumers.
3. INTERNET EXERCISE Assume that you are getting married and planning your wedding. Compare

and contrast the usefulness of www.theknot.com and
www.weddingchannel.com for planning your wedding. What features of the sites do you like and dislike? Indicate the specific services offered by these
sites that you would use.
4. INTERNET EXERCISE Go to the Center for
Democracy and Technology’s home page at http://
www.cdt.org/, and click on “Consumer Privacy” and
then “Privacy Guide” ( />guide/basic/topten.html). Why is privacy a concern
for Internet shoppers? What are the top-10 recommended ways for consumers to protect their privacy
online? How many of these recommendations have
you employed when using the Internet?
5. INTERNET AND SHOPPING EXERCISE Pick
a merchandise category like microwave ovens, power
drills, digital cameras, blenders, or coffee makers.
Compare a retailer’s offering in its local store and on
its Internet site. What are the differences in the assortments offered through its store and Internet
channel? Are the prices the same or different? What

Online Learning Center
The Online Learning Center provides students with exercises to evaluate international expansion opportunities, examine financial performance of retailers, analyze potential store locations, develop a merchandise
budget plan, edit the assortment for a category, make pricing and markdown decisions, and determine
break-even sales levels. Sample test questions and flash cards are provided for each chapter.
The student site provides:
• Chapter Quizzes
• Tutorials and Modules
• Flashcards

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INSTRUCTOR RESOURCES

www.mhhe.com/levy8e

Online Learning Center
Through our convenient Online Learning Center, you can access everything you
need in preparation for your course. A secured resource site provides your essential course materials to save you prep time before class.
The instructor site provides:
• Instructor’s Manual
• PowerPoint Presentations
• Testbank/EZ Test
• Newsletters
• Tutorials and Modules for students
• Chapter Quizzes
• Flashcards for students
IRCD
The Instructor’s Resource CD-ROM provides the resources an instructor needs
to prepare for their course: includes the Instructor’s Manual, PowerPoint slides,
Test Bank, and Computerized Test Bank. ISBN: 0077325028
Video DVD
Over 30 video segments are available to illustrate issues addressed in the text.
A number of the videos complement the cases located at the end of the text.
These video segments are available on the Video DVD. ISBN: 007732501X

Retailing Newsletter
Each month, the authors prepare and distribute through email a Retailing Newsletter.
The newsletters contain several videos and
twelve abstracts of articles appearing in the
business or trade press about current issues
facing retailers specifically and the industry
in general. These newsletters are also accessible on the Online Learning Center.

Newsletter for Instructors




ĞĂƌWƌŽĨĞƐƐŽƌ͗

dŚŝƐŶĞǁƐůĞƚƚĞƌƉƌŽǀŝĚĞƐƚĞĂĐŚŝŶŐƚŝƉƐĂŶĚƐƵŵŵĂƌŝnjĞƐĂƌƚŝĐůĞĂďƐƚƌĂĐƚƐĨŽƌĐĂƐĞĚŝƐĐƵƐƐŝŽŶƐĨŽƌ
ƚŚĞĨŽůůŽǁŝŶŐƚŽƉŝĐƐ͗

• ƚĂƉƉŽƐ͕ƵůƚƵƌĞWĂLJƐ;ŚĂƉƚĞƌϵͿ
• tŚLJƌŝĐŬƐĂŶĚůŝĐŬƐŽŶ͛ƚůǁĂLJƐDŝdž;ŚĂƉƚĞƌϯͿ
• ^ƚŽƌĞƐ^ĐƌĂŵďůĞƚŽĐĐŽŵŵŽĚĂƚĞƵĚŐĞƚ^ŚŽƉƉĞƌƐ;ŚĂƉƚĞƌƐϮĂŶĚϭϱͿ
• ĞďĂƚŝŶŐƚŚĞDĞĂŶŝŶŐŽĨ͚&ĂƌŵĞƌƐ͛DĂƌŬĞƚ͛;ŚĂƉƚĞƌϭϲͿ
• ĞƉĂƌƚŵĞŶƚ^ƚŽƌĞƐ͗DĂĚZƵƐŚĨŽƌDĂƌŬĞƚ^ŚĂƌĞ͟ĂŶĚ͞ƐƚĠĞ>ĂƵĚĞƌ͛ƐŽƵŶƚĞƌ
DĂŬĞŽǀĞƌ;ŚĂƉƚĞƌƐϮ͕ϰĂŶĚϱͿ
• dŽLJƐ͚Z͛hƐKǀĞƌŚĂƵůŝŶŐ&͘͘K͘^ĐŚǁĂƌnjƌĂŶĚ;ŚĂƉƚĞƌƐϱĂŶĚϭϰͿ
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• /<^ĞĞŬƐĂŶ/ŶĚŝĂKƉĞŶŝŶŐ;ŚĂƉƚĞƌϱͿ
• <ƌŽŐĞƌ͗EŽ&ĞĂƌƐŽŶWƌŝĐĞ;ŚĂƉƚĞƌϭϱͿ
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• KƵƚĚŽŽƌZĞĐƌĞĂƚŝŽŶŚĂŝŶtŝůůKƉĞŶ^ƚŽƌĞŝŶ^Ž,Ž;ŚĂƉƚĞƌϳͿ

• ZĞƐƚƌŝĐƚŝŶŐZĞƚƵƌŶƐ͕^ĂƚŝƐĨLJŝŶŐ^ŚŽƉƉĞƌƐ;ŚĂƉƚĞƌϭϳͿ
• ^ĞĂƌƐ^ĞĞŬƐdƌĞŶĚŝĞƌ͚sŝďĞ͛tŝƚŚ&ŽƌĞǀĞƌϮϭ;ŚĂƉƚĞƌƐϳĂŶĚϭϰͿ

/ĨLJŽƵĂƌĞŝŶƚĞƌĞƐƚĞĚŝŶƚŚĞƚĞdžƚŬƉůĞĂƐĞǀŝƐŝƚǁǁǁ͘ŵŚŚĞ͘ĐŽŵͬůĞǀLJϴĞ͘^ŝŵƉůĞƌĞŐŝƐƚƌĂƚŝŽŶŝƐ
ƌĞƋƵŝƌĞĚƚŽŐĂŝŶĂĐĐĞƐƐƚŽƚŚĞŶĞǁƐůĞƚƚĞƌƐĂŶĚŽƚŚĞƌŝŶƐƚƌƵĐƚŽƌŵĂƚĞƌŝĂůƐ͘/ĨLJŽƵǁŽƵůĚůŝŬĞƚŽ
ƐĞĞƚŚŝƐŶĞǁƐůĞƚƚĞƌĂŶĚƚŚĞƉƌĞǀŝŽƵƐĞĚŝƚŝŽŶƐ͕ŐŽƚŽ͗
ŚƚƚƉ͗ͬͬǁǁǁ͘ǁĂƌƌŝŶŐƚŽŶ͘ƵĨů͘ĞĚƵͬŵŬƚͬƌĞƚĂŝůĐĞŶƚĞƌͬƌĞƐĞĂƌĐŚͬƉƵďůŝĐĂƚŝŽŶƐ͘ĂƐƉ

xvi

• COMMENTS?
CONTACT US


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Cases
To stimulate class discussion about issues confronting retail managers, the authors
provide current and thought-provoking cases. For this edition, included at the end
of the text are a total of 38 cases with 10 brand new cases to use for your course.
Assurance of Learning Ready
Many educational institutions today are focused on the notion of assurance of
learning, an important element of some accreditation standards. Retailing Management is designed specifically to support instructors’ assurance of learning initiatives with a simple, yet powerful solution.
Each test bank question for Retailing Management maps to a specific chapter

learning outcome/objective listed in the text. Instructors can use our test bank
software, EZ Test and EZ Test Online, or Connect Marketing to easily query for
learning outcomes/objectives that directly relate to the learning objectives for
their course. Instructors can then use the reporting features of EZ Test to aggregate student results in similar fashion, making the collection and presentation of
assurance of learning data simple and easy.
AACSB Statement
The McGraw-Hill Companies is a proud corporate member of AACSB International. Understanding the importance and value of AACSB accreditation, Retailing
Management, Eighth Edition, recognizes the curricula guidelines detailed in the
AACSB standards for business accreditation by connecting selected questions in
the text and the test bank to the six general knowledge and skill guidelines in
the AACSB standards.
The statements contained in Retailing Management, Eighth Edition, are provided only as a guide for the users of this textbook. The AACSB leaves content
coverage and assessment within the purview of individual schools, the mission
of the school, and the faculty. While Retailing Management, Eighth Edition, and
the teaching package make no claim of any specific AACSB qualification or
evaluation, we have within Retailing Management, Eighth Edition, labeled selected
questions according to the six general knowledge and skills areas.
McGraw-Hill Customer Care Contact Information
At McGraw-Hill, we understand that getting the most from new technology can
be challenging. That’s why our services don’t stop after you purchase our products.
You can e-mail our Product Specialists 24 hours a day to get product-training
online. Or you can search our knowledge bank of Frequently Asked Questions
on our support website. For Customer Support, call 800-331-5094, e-mail
, or visit www.mhhe.com/support. One
of our Technical Support Analysts will be able to assist you in a timely
fashion.

xvii

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BRIEF CONTENTS
SECTION I
1
2
3
4

SECTION II
5
6
7
8
9
10
11

SECTION III
12
13
14
15

SECTION IV
16
17
18
Appendix A
Appendix B

SECTION V

THE WORLD OF RETAILING
Introduction to the World of Retailing 4
Types of Retailers 28
Multichannel Retailing 56
Customer Buying Behavior 78

RETAILING STRATEGY
Retail Market Strategy 110
Financial Strategy 140
Retail Locations 166
Retail Site Location 188
Human Resource Management 218
Information Systems and Supply Chain Management
Customer Relationship Management 274

MERCHANDISE MANAGEMENT
Managing the Merchandise Planning Process
Buying Merchandise 340
Retail Pricing 370
Retail Communication Mix 398

STORE MANAGEMENT
Managing the Store 432
Store Layout, Design, and Visual Merchandising
Customer Service 498
Starting Your Own Retail Business 524
Starting a Franchise Business 532

CASES
Cases

536

Glossary
Notes

591

617

Photo Credits
Index 641

xviii

300

639

466

246


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CONTENTS
SECTION I
CHAPTER 1

THE WORLD OF RETAILING
INTRODUCTION TO THE WORLD OF RETAILING 4
What Is Retailing? 6
The Retailer’s Role in a Supply Chain
Retailers Create Value

Retailing View 1.2: Sam Walton, Founder of
Walmart (1918–1992) 13

6

The Retail Management Decision Process 14
Understanding the World of Retailing—Section I 14

7

Social and Economic Significance of
Retailing 8
Social Responsibility 8
Retail Sales 9

Developing a Retail Stragegy—Section II

Implementing the Retail Strategy—Sections III and IV 20

Retailing View 1.1: Socially Responsible
Retailers 9
Employment 10

Whole Foods Market: An Organic and Natural Food
Supermarket Chain 20

Structure of Retailing and Distribution Channels
around the World 10
Global Retailers 10
Differences in Distribution Channels

CHAPTER 2

TYPES OF RETAILERS

Suggested Readings
13

31

Extreme-Value Retailers

33

Food Retailers 35
Supermarkets 35
Retailing View 2.2: ALDI: Provides Excellent Value in
the United States 36
Supercenters 38
39

46

46

Services Retailing 48
Differences between Services and Merchandise
Retailers 50
Types of Ownership 51
Independent, Single-Store Establishments
Corporate Retail Chains
Franchising

51

52

52

Retailing View 2.4:Tart Frozen Yogurt—the Sweet
Franchise 52
Summary 53

40

General Merchandise Retailers
Department Stores 41

40

Key Terms 54
Get Out and Do It!

42

54

Discussion Questions and Problems

Specialty Stores 42
Drugstores 44

CHAPTER 3

25

Retailing View 2.3: Specializing in Everything Video
Games . . . Buy, Play, Sell 44
Category Specialists 45

Off-Price Retailers

Full-Line Discount Stores

24

25

Appendix 1A: Careers in Retailing

Prices and the Cost of Offering Breadth and Depth of
Merchandise and Services 33

Convenience Stores

24

28

Retailing View 2.1: Rent Some Luxury
Variety and Assortment 32

Warehouse Clubs

22

Discussion Questions and Problems

Retailer Characteristics 30
Type of Merchandise 30

Services Offered

Ethical and Legal Considerations
Summary 23
Key Terms 23
Get Out and Do It!

11

Opportunities in Retailing 12
Management Opportunities 12
Entrepreneurial Opportunities

16

JCPenney Moves from Main Street to Multichannel
Retailing 18

Suggested Readings

55

55

MULTICHANNEL RETAILING 56
Retail Channels 58
Internet Channel 58
Catalog Channel
Direct Selling

Benefits Offered by the Retail
Channels 61
Store Channel 61

58

59

Retailing View 3.1: Direct Selling in China
Television Home Shopping 60
Automated Retailing

60

59

Retailing View 3.2: Bass Pro Shops
Makes Shopping Fun 62
Catalog Channel 63
Internet Channel

63

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Retailing View 3.3: Helping Couples Get Ready for the
Big Day 64

Retailing View 3.4: Build-A-Bear Workshop Uses
Multiple Channels to Enhance Its Image 73

Benefits of Multichannel Retailing 66
Overcoming the Limitations of an Existing Format

Multichannel Shopping in the Future
Shopping Experience Scenario 74

Increasing Customer Satisfaction and Loyalty

67

67

Gaining Insights into Consumer Shopping Behavior
Expanding Market Presence

Supporting the Shopping Experience
68

68

Building a Strategic Advantage

Summary

74
75

76

Key Terms 76

68

Get Out and Do It!

Other Multichannel Retailing Issues 69
Which Channel Has the Lowest Costs? 69

76

Discussion Questions and Problems
Suggested Readings

77

77

Will Manufacturers Bypass Retailers and Sell Directly to
Consumers? 69
Challenges of Effective Multichannel Retailing 70
Providing an Integrated Shopping Experience 70
Supporting M-Commerce

71

Organizing for Multichannel Retailing

CHAPTER 4

72

CUSTOMER BUYING BEHAVIOR

78

The Buying Process 79
Need Recognition 81
Information Search

Social Factors Influencing the Buying Process
Family 94

83

Reference Groups

Retailing View 4.1:The Internet Has Changed the
Car-Buying Process 84
Evaluation of Alternatives: The Multiattribute
Model 86
Retailing View 4.2: Do It Herself at Lowe’s
Purchasing the Merchandise or Service 90

Approaches for Segmenting Markets

Limited Problem Solving 92
92

Retailing View 4.3: Using Digital Displays to Stimulate
Unplanned Purchases 93

RETAILING STRATEGY

CHAPTER 5

RETAIL MARKET STRATEGY 110
What Is a Retail Strategy? 112
Definition of Retail Market Strategy
Target Market and Retail Format

113

Retailing View 5.1:The IKEA Way 118
Relationships with Suppliers 119
Efficiency of Internal Operations
Location

121

Multiple Sources of Advantage

xx

120

Growth Strategies 122
Market Penetration 122

121

102

Summary 103
Key Terms 103
Get Out and Do It! 103
Discussion Questions and Problems 104
Suggested Readings 105
Appendix 4A: Customer Buying Behavior and
Fashion 105

Retailing View 5.2:The Container Store—Building a
Competitive Advantage by Selling Products That
Make Life Simpler 122
Market Expansion 123

112

Building a Sustainable Competitive
Advantage 114
Relationships with Customers—Customer Loyalty

97

98

Composite Segmentation Approaches

Types of Buying Decisions 91
Extended Problem Solving 91

SECTION II

95

Market Segmentation 96
Criteria for Evaluating Market Segments

Postpurchase Evaluation 91

Habitual Decision Making

94

Retailing View 4.4: Retailing to Tweens
Culture 96

89

94

Retail Format Development
115

Diversification

123

124

Growth Opportunities and Competitive Advantage 124
Global Growth Opportunities 125
Attractiveness of International Markets

125

Retailing View 5.3:The Fashion Mavens Are Men in
India 125
Keys to Success 128
Entry Strategies

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The Strategic Retail Planning Process 130
Step 1: Define the Business Mission 131
Step 2: Conduct a Situation Audit

Retailing View 5.4: Hot Topic Emphasizes Its Strength
in Indie Music 137

Summary

132

Step 3: Identify Strategic Opportunities

136

Step 4: Evaluate Strategic Opportunities

138

Key Terms 138
Get Out and Do It!

136

138

Discussion Questions and Problems

Step 5: Establish Specific Objectives and Allocate
Resources 136

Suggested Readings

139

139

Step 6: Develop a Retail Mix to Implement the Strategy 136
Step 7: Evaluate Performance and Make Adjustments
Strategic Planning in the Real World 137

CHAPTER 6

137

FINANCIAL STRATEGY 140
Objectives and Goals 142
Financial Objectives 142
Societal Objectives

Current Ratio
Quick Ratio

142

Retailing View 6.1: Teeing Up Kids
Personal Objectives 143
Strategic Profit Model 143
Profit Margin Management Path

142

Setting and Measuring Performance Objectives 159
Top-Down versus Bottom-Up Process 159
Who Is Accountable for Performance?

144

Retailing View 6.3: Cutting Costs at Costco 149
Implications for Improving Financial Performance 153
Illustration: Kelly Bradford’s Evaluation of the Gifts-ToGo.com Growth Opportunity 153

Debt-Equity Ratio

CHAPTER 7

160

Assessing Performance: The Role of Benchmarks 162
Summary

163

Key Terms 164
Get Out and Do It!

164

Discussion Questions and Problems

164

165

166

168

Merchandise Kiosks

Unplanned Retail Locations
Freestanding Sites 169
City or Town Locations

Airports

169

170

Retailing View 7.2: Magic Johnson Brings Retailing to
the Inner City 172
Shopping Centers 173
Neighborhood and Community Shopping Centers
Power Centers

174

Shopping Malls

175

181

182

Location and Retail Strategy 182

Shopping Behavior of Consumers in Retailer’s Target
Market 182

169

Retailing View 7.1: Gentrified Cleveland

173

Retailing View 7.5: Beall’s Locations Support Its
Strategy 182
Density of Target Market 184
Uniqueness of Retail Offering

184

Legal Considerations 184
Environmental and Sustainability Issues 184

Retailing View 7.3: Mega Malls in Asia
Lifestyle Centers 177
Mixed-Use Developments
Outlet Centers

Types of Measures

Suggested Readings

156

159

Performance Objectives and Measures 160

157

RETAIL LOCATIONS
Types of Locations

158

Retailing View 6.4: Private Equity Firms Invest in
Retailers 158

Retailing View 6.2: Family Dollar and Nordstrom—
Retailers Targeting Customers at the Opposite Ends
of the Income Distribution 145
Asset Management Path 149

Analysis of Financial Strength
Cash-Flow Analysis 156

157

Zoning and Building Codes

176

Summary

Key Terms 186

178

Get Out and Do It!

178

Theme/Festival Centers

186

Discussion Questions and
Problems 187

179

Larger, Multiformat Developments—Omnicenters
Other Location Opportunities

185

186

179

Suggested Readings

187

180

Retailing View 7.4: Subway Goes to Church 180
Pop-Up Stores and Other Temporary Locations 181
Store within a Store

181

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CHAPTER 8

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RETAIL SITE LOCATION 188
Evaluating Specific Areas for Locations
Economic Conditions 190
Competition
Strategic Fit

190

Retailing View 8.3:
Customer Spotting for
Multichannel Retailers 202
Competition in the Trade Area

191
191

Estimating Potential Sales for a
Store Site 207
Huff Gravity Model 207

Retailing View 8.1: Who Needs a Kitchen
When You Have Whole Foods or Trader Joe’s
Downstairs? 192
Operating Costs 193

Regression Analysis
Analog Approach

Number of Stores in an Area 193
Economies of Scale from Multiple Stores

193

Cannibalization 193
Evaluating a Site for Locating a Retail Store
Site Characteristics 194

194

Retailing View 8.2:The Importance of a
Right Turn 196
Restrictions and Costs 197

Terms of the Lease

197

Summary

Measuring the Trade Area for a Retail Site

214

Suggested Readings

202

HUMAN RESOURCE MANAGEMENT

218

Objectives of Human Resource Management

220

Issues in Retail Human Resource Management
Balancing the Human Resource Triad 222

216

Discussion Questions and Problems

201

Retailing View 9.1: Men’s Wearhouse: Using Human
Resources to Build a Competitive Advantage 221
222

Retailing View 9.5: Walmart Cares about Its
Employees 237
Managing Diversity 239
Diversity Training 240
240

Career Development and Promotions
223

Compensation

223

Sexual Harassment

226

Employee Privacy
Developing Policies
Summary

Retailing View 9.2: My Macy’s: Centralize Expenses
and Decentralize Merchandising Decisions 229
Coordinating Merchandise and Store Management 230

242

242
242
242

243

Key Terms 243
Get Out and Do It!

244

Discussion Questions and Problems

Winning the Employee Talent War 231
Attracting Talent: Employment Marketing 231

Suggested Readings

232

Retailing View 9.3: Careful Employee Selection = Low
Employee Turnover at The Container Store 233
Motivating Talent: Aligning Goals 234
Retailing View 9.4: Peet’s Knows Its Tea 234
Keeping Talent: Building Employee Commitment

242

Employee Safety and Health

Retail Organization Design Issues 228
Centralization versus Decentralization 229

Developing Talent: Selection and Training

241

Labor Relations

Designing the Organization Structure for a
Retail Firm 224
Organization of a Single-Store Retailer 224
Organization of a National Retail Chain

240

Legal Issues in Human Resource Management
Equal Employment Opportunity 241

223

International Human Resource Issues

216

217

Support Groups and Mentoring

222

Utilizing Diverse Employee Groups

xxii

212

215

Get Out and Do It!

200

Sources of Information about the Trade Area

Part-Time Employees

211

Key Terms 215

Factors Affecting the Size of the Trade Area

Expense Control

Define Present Trade Area

Negotiating a Lease 213

Types of Leases 213

Trade Area Characteristics 199
Trade Area Definition 199

CHAPTER 9

Illustration of Site Selection: Edward Beiner
Optical 210
Conduct Competitive Analysis 211

Match Characteristics of Present Trade Area with
Potential Sites 212

196

Locations within a Shopping Center

209
210

Identify Trade Area Characteristics

Traffic Flow and Accessibility 194
Location Characteristics

207

237

245

245

241