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Chapter 1
Introduction to the World of Retailing
McGrawHill/Irwin
Retailing Management, 6/e
Copyright © 2007 by The McGrawHill Companies, Inc. All rights reserved.
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The World of Retailing
Introduction to Retailing
Types of Retailers
Multi-Channel Retailing
Customer Buying
Behavior
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What is Retailing?
• Retailing – a set of business activities that
adds value to the products and services
sold to consumers for their personal or
family use.
A retailer is a business that
sells products and/or services
to consumers for personal or
family use.
James Darell/Getty Images
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The Distribution Channel
PPT 14
Distribution Channel
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Examples of Retailers
Retailers:
Kohl’s, Macy’s, Wendy’s,
Amazon.com, Jiffy Lube, AMC
Theaters, American Eagle
Outfitter, Kroger
Firms that are retailers and
wholesalers that sell to other
business as well as consumers:
Office Depot, The Home Depot,
United Airlines, Bank of America,
Costco
The McGraw-Hill
Companies, Inc./John
Flournoy, photographer
The McGraw-Hill Companies,
Inc./Andrew Resek,
photographer
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Manufacturing, Wholesaling and Retailing
Vertical Integration – firm performs more than one set of
activities
Ex: retailer invests in wholesaling or manufacturing
Backward Integration – retailer performs some distribution
and manufacturing activities
Ex: JCPenney sells Arizona jeans (Private Label)
Forward Integration – manufacturers undertake retailing
activities
Ex: Ralph Lauren operates its own stores
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How Retailers Add Value
• Break Bulk
-Buy it in quantities customers want
• Hold Inventory
-Buy it at a convenient place when you
want it
• Provide Assortment
-Buy other products at the same time
• Offer Services
-See it before you buy, get credit,
layaway
Ryan McVay/Getty Images
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How Retailers Add Value
The value of the product and service
ncreases as the retailer performs functions.
Bicycle can be
bought on credit or
put on layaway
Bicycle is featured
on floor display
Bicycle is offered in
convenient locations
in quantities of one
Bicycle is
developed in
several styles
Bicycle is developed
at manufacturer
World’s Largest Retailers
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Social and Economic
Significance of Retailing
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• Community Support
• Over $3.4 trillion in annual U.S. sales
greater than medical care, housing, recreation
combined
• Employs 27 million people
21% of non-agricultural US workforce
• Management training opportunities
• Entrepreneurial opportunities
Retailing is Big Part of Economy
Manufacturing (11.2%)
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Retail (21.8%)
Government
(16.6%)
Services (45.8%)
Other 5.6%
Retailers are a Business Like
Manufacturers
Accounting
Finance
Marketing
MIS
Operations
The McGraw-Hill Companies,
Inc./Andrew Resek, photographer
Human Resources
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Nature of Retail Industry is Changing
To Today’s Retailer
Mom and Pop Store
Retailing is a High Tech Industry
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• Selling Merchandise over
the Internet
• Using Internet to manage
supply chains
• Analyze POS data to tailor
assortments to stores
• Computer systems for
merchandise planning
Ryan McVay/Getty Images
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Globalization of Retailing
Source Merchandise From Around the World
Wal-Mart Operates in U.S., China, Mexico, UK,
Germany
Carrefour has Stores in 25 Countries
Don Farrall/Getty Images
Comparison of Distribution Channels
Across the Globe
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Retail Management Decision Process
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JCPenney’s Strategic Evolution
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• Main Street private label soft goods retailer
• Changes in environment -- increased
disposable income, growth of suburbs,
interstate highway program
• Emulate Sears in enclosed suburban malls
• Focus on soft goods -- drop automotive,
sporting goods, hardware
• Develop catalog, develop electronic retailing
• Stand alone stores
• Centralized checkout
Sears Holdings’ Strategic Evolution
• Large number of merchandise categories -appliances, hardware, apparel
• Malls evolved into places for buying soft goods,
hard goods sold at category killers
• The Softer Side of Sears
• Refocused on value -- Testing carts in stores
• Acquired Lands’ End
• Reviewed training program for new managers
• New growth with Kmart
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Whole Foods Implementation
Organic and natural foods supermarket chain
Assortment beyond organic/natural foods
– Private labels - Whole Food™, 360 Day Value™
– Love, trust, and employee empowerment
– Always innovation:
Candy Island
Lamar Street Greens
Fifth Street Seafood
In-store Massage Therapist
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Claire’s Retail Mix
Customer Service
Location
Merchandise
Store Design
and Display
Retail Strategy
Communication Mix
Assortment
Pricing
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Claire’s Retail Mix
Location Strategy
Enclosed malls
Customer Service
Store Display
Merchandise
And Design
Assortment
Communication Mix
Pricing
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Claire’s Retail Mix
Assortment Strategy
Customer Service
Location
Jewelry, accessories and
cosmetics for tweens and
teens
Store Design
and Display
Communication Mix
Pricing
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Claire’s Retail Mix
Pricing Strategy
Location
Customer Service
Merchandise Assortment
Store Design
and Display
Communication Mix
Modest with Sales
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