BUS 287 RETAILING Introduction

1. BUS 287 RETAILINGIntroduction What is Retailing? Different Types of Retailers Retail Formats and Business Models Customer Buying Behavior Retail Market Strategies Location & Layout Strategies Planning & Buying Merchandise Pricing Merchandise Customer Service

2. BUS 287 RETAILINGIntroduction • Lecture and Class Discussion • Breakout Groups/Projects • Individual Presentations • Learning Logs • Guest Speakers

3. BUS 287 RETAILINGWhat is Retailing? • Distribution channel function where organization buys (reseller) or manufactures (producer/seller) products to sell to consumers • Retailing involves sales of items to consumers by organizations holding a legal business standing (holding a business license) and does not include consumer to consumer sales like eBay.

4. BUS 287 RETAILINGWhat is Retailing? The Three Basic Roles in Retaining-Retailer, Consumer and Supplier (if retailer is a reseller and not a producer/seller): • Retailer wants to be able to buy (or produce) products consumers want and then sell them at a profit • Consumers want to be able to buy an assortment of products at reasonable prices • Suppliers want opportunities to reach their target market and establish/build on product demand to increase sales/profit

5. BUS 287 RETAILINGWhat is Retailing? • Retail industry 2nd largest in the U.S. with over $3.8 trillion in sales annually ($4.2 trillion if food sales included) (Manufacturing is 1st ) • Retail industry accounts for 12% of all U.S. employment. • 90% retail operations are single-store businesses • Wal-Mart, the largest retailer in the world generated over $344 Billion in sales in a fiscal year

6. BUS 287 RETAILINGWhat is Retailing? • Consumers make up 70% of the U.S. Gross Domestic Product and the Retail Sales Report is a leading economic indicator of whether the economy is growing or shrinking • The Retail Sales Report gives a glimpse of what the employment picture might look like, another leading indicator that affects Gross Domestic Product. • The Retail Sales Report also provides individual retailers with information that identify trends that effect sales and profits

7. BUS 287 RETAILINGWhat is Retailing? Retailer Concerns: • Customer Satisfaction-keeping satisfied and loyal customers through strong relationship building • Acquiring Product Rights- seeking out suppliers with high demand products and securing rights to sell those products • Product Presentation- establishing creative ways to display and market merchandise • Traffic Building- promoting methods to build customer interest. Promotions that increase the number of visitors to the store or website

8. BUS 287 RETAILINGWhat is Retailing? Retailer Concerns: (continued) • Layout- Setting up the physical layout of the store (or design of website for online business) to create an experience that will attract customers and optimize the use of the facility (make the site easy to navigate). Includes lighting, design, sound, etc. (easy navigation, design, compatibility with user systems for online) • Location- physical location needs to provide easy access and high visibility (trade off between costs and benefits) • Keeping Pace with Technology- utilization of customer management software (tracking/trends), product movement software (inventory controls), point of purchase (scanners, kiosks, self-service checkout) and online shopping carts, purchase recommendations and customer purchases tracking

9. BUS 287 RETAILINGWhat is Retailing? Breakout Group Assignment • Research online the economic indicator- retail sales report and share your information with your group- include data from business publications and government sources • How is it used? What information does it share? What are the current trends showing? • Try the site below to get you started: • http://www.schwab.com/public/schwab/research_strategies/market_insight/1/4/schwab_guide_to_economic_indicators_retail_sales.html

10. BUS 287 RETAILINGDifferent Types of Retailers Retail Categories Based on Marketing Decisions • Target Market Served • Product Offerings • Pricing Structure • Promotional Emphasis • Distribution Method • Service Level Retail Category Based on Operational Factors • Ownership Structure

11. BUS 287 RETAILINGDifferent Types of Retailers Target Market Served: • Mass Marketing- selling products to the largest market possible-covering nearly all consumers (fiercely competitive) • Specialty Market- selling products to a targeted group of consumers looking for advanced product options and/or a higher level of customer service (not as large as mass market, but still sizeable) • Exclusive Market-appealing to discriminating customers who are willing to pay a premium for features found in few other products or that provide a high level of personalized services (small number of retailers)

12. BUS 287 RETAILINGDifferent Types of Retailers Product Offerings-measured by number of different product lines and number of different products within one product line • General Merchandisers- carry a wide range of product categories with limited options within one product line • Multiple Lines Specialty Merchandisers- offering a limited number of product lines but offering a greater selection • Single Line Specialty Merchandisers- offer limited product(s) within a single product line

13. BUS 287 RETAILINGDifferent Types of Retailers Pricing Structure- classification based on general pricing strategy • Discount Pricing-sell low priced merchandise at a low profit margin. Profits gained through volumes of sale (Cost Controls) • Competitive Pricing- monitoring price of competitors and adjusting your price to be competitive • Full Price Pricing- targeting exclusive markets and consumers where discount and competitive pricing is not a factor. Using non-pricing factors like service, quality, prestige to justify higher prices

14. BUS 287 RETAILINGDifferent Types of Retailers Promotional Focus-based on the types of promotional technique employers utilize to generate customer interest • Advertising-traditional mass promotion efforts including newspapers, television and internet advertising • Direct Mail- utilization of bulk mailing through the postal system including catlog mailing, promotional flyers and postcards • Personal Selling-utilization of one-on-one, person to person customer service technique to establish strong customer relations and persuade consumers to make purchase decisions (often used for high-end products) • Vending- Utilization of vending machines or vending sites allowing a customer to not have to visit a physical location to purchase goods

15. BUS 287 RETAILINGDifferent Types of Retailers Service Level- utilizing customer service techniques that enhance or simplify the purchasing experience. Level of service will also influence business overhead costs thus influencing product costs • Self-Service- allowing consumers to perform most or all of the services associated with retail purchases- cost benefits/no high pressure sales benefits- includes self checkout, online purchasing, vending, warehouse stores • Assorted-Service- where retailers offer some level of service to consumers including handling point of purchase transactions, product selection assistance, arrangement of payment plans, loading/delivery/set up • Full Service- where retailers handle all or nearly all aspects of the purchase to produce added value to the customer- usually connected to full price strategies

16. BUS 287 RETAILINGDifferent Types of Retailers Ownership Structure-who owns the business? • Individually Owned and Operated-ownership structure where an individual or corporate entity owns and operates one retail business or a limited number of outlets • Corporate Chain- multiple retail outlets owned by a single entity and performing similar retail activities (generally more than 5 retail outlets constitutes a chain) • Corporate Structure- large retailers predominantly operating in a non-store retail arena- online, vending, catalog

17. BUS 287 RETAILINGDifferent Types of Retailers Breakout Group Assignment Each member of the group will be assigned two retail categories to research from the following: Target Market Served, Product Offerings, Pricing Structure, Promotional Emphasis, Distribution Method, Service Level and each member will also be assigned to research Ownership Structure • Give an example of a business (local or national) that falls within each example in your assigned category. • How does their business fall within this example? • Why do you think they chose this method?

18. BUS 287 RETAILINGRetail Formats and Business Models Retail formats and business models help describe the retail operation and businesses may fall within more than one format (especially if their operation includes the internet) • Mom & Pop- small, individually owned and operated retail outlet catering to a local community generally with a high level of service and a limited number of products • Mass Discounters- general or specialized merchants who focus on discount pricing with generally fewer services and lower quality products • Warehouse stores- form of discount store providing even lower prices. Characteristics usually include larger quantity/bulk item purchases, club memberships and warehouse set up of the facility (Costco)

19. BUS 287 RETAILINGRetail Formats and Business Models • Category Killers- expanded specialty stores with a larger focus on a specialty line (Best Buy-electronics, Staples-office supplies) • Department Stores- retailers offering general merchandise at mid to high range prices with strong levels of service (Sears, KMart) Could also include some specialization of products (Nordstrom’s) • Boutique- smaller retail store carrying specialized and often high-end merchandise and in many cases utilizing a full service/full price strategy • Catalog Retailers- business relying on customers to purchase items by placing orders on products marketed through a mailed catalog and delivered by a third party shipper.

20. BUS 287 RETAILINGRetail Formats and Business Models • e-tailers- retailers whose principle sales are conducted via the internet. Generally items are marketed with picture and description and sellers have little or no stock on hand. Retailers pass order on to their suppliers when the customer order is made. e-tailers can also serve as a marketing/sales point for a variety of selling and supplying firms (Amazon) • Franchise- form of contractual channel in which the franchisor controls the business and activities of the franchisee who pays fro the right to utilize their business name, products, methods and other important business aspects. Win-Win situation- franchisee has instant business with recognition/support, franchisor has faster expansion and franchisee fees for added capital.

21. BUS 287 RETAILINGRetail Formats and Business Models • Convenience Store- general merchandise retailers catering to customer purchase experience through easily accessible stores, smaller stores with fast checkout. Product selection is limited and pricing can be high to pay for convenience. • Vending- automated methods utilized to allow consumers to make purchases and acquire products quickly. Smaller/inexpensive items like food and beverage items acquired through vending machines to newer vending options that offer larger/more expensive items and include internet/telecommunications components allowing credit card payment options

22. BUS 287 RETAILINGRetail Formats and Business Models Breakout Group Assignment Research the following Walla Walla retailers: Earthlight Books, Home Depot, Pepsi Cola, Subway, Dean Hoalst Jewelers, Zip Zone, Radio Shack • What retail format(s)/business model(s) do they each fall under? • Why do you think they chose these format(s)/model(s)? Were they chosen or forced to choose based on their circumstances? • What are the advantages and disadvantages of each of their choices?

23. BUS 287 RETAILINGCustomer Buying Behavior Why Consumers Buy?- to satisfy needs, wants and desires Key influences governing purchasing can be broken down into three categories: • Internal- perceptual filter, attitude, knowledge, personality, lifestyle, motivation, roles • External- Culture, groups and situation • Marketing- product, promotion, price, distribution, service

24. BUS 287 RETAILINGCustomer Buying Behavior Internal Influences Perceptual Filter- how we see ourselves and the world around us. Our personal sense of reality and stimulus to that reality. Perception steps: • Exposure- sensing stimuli (we see an ad for a new car) • Attention- we make an effort to recognize the stimuli (“looks like the new Mustang is out!”) • Awareness- assigning meaning to the stimuli (humorous Mustang ad made you laugh) • Retention- adding the meaning to one’s own internal makeup (Mustang must be a fun car to drive) Marketing Implication- exposure must capture attention, create awareness and retention, set apart from competition

25. BUS 287 RETAILINGCustomer Buying Behavior Internal Influences Attitude- what the consumer feels or believes about something and how they will act on that belief (“wouldn’t own a Chevy, they’re a piece of junk!”) Marketing Implications- changing long established beliefs is a hard task-what do they like about competing products? How can our product be better aligned to meet their needs? Price? Features? Service? Knowledge-the depth of knowledge and experiences that influence a consumer’s spending (“I’m sticking to buying Ford products I just don’t know that much about these new Acuras.”) Marketing Implications- the need for retailers to educate consumers and make them more comfortable in learning new things

26. BUS 287 RETAILINGCustomer Buying Behavior Internal Influences Personality- behaviors and personal characteristics that define your self concept and the concept others have of you (how you talk, how you react to things) Marketing Implications- consumers make purchasing decisions based on their own self concept requires building a marketing strategy around these concepts (hard to identify-example senior citizen who, by demographics might be categorized as needing age specific items, may want items to help them feel younger) Lifestyles- the way we live through our activities we engage in and the interests we express-what we value in life. Marketing Implications- examining how consumers in your targeted market live their lives and developing product strategies that meet those needs (Hood River Windsurfing)

27. BUS 287 RETAILINGCustomer Buying Behavior Internal Influences Motivation- the consumers desire to reach a certain outcome and the internal factors that motivate/detour a decision based on these components (can I afford it, when should I buy it, am I getting money’s worth, what happens if I make a bad decision) Marketing Implications- How much effort will the consumer make in exerting a decision based on these motivational factors, level of consumer involvement paired with push to market items Roles- the consumers role at the time of purchase serves as a factor for purchasing decisions. (buying meeting snacks for a meeting where the boss is attending may be different than buying them for just the regular group. Marketing Implications- Marketing that will show products will help raise one’s status in the eye of others or degrading competition

28. BUS 287 RETAILINGCustomer Buying Behavior External Influences Culture- Buying behavior that is shared behavior based on cultural beliefs, and where sub-cultural customs/norms develop into group shared values. Marketing Implications- the need to incorporate cultural representation into marketing strategies, developing cultural awareness of buying behaviors, spot trends and capitalize through marketing tactics. Group Membership- Consumers belong to many groups which share certain characteristics that influence buying behavior. These groups include social class, family and reference groups and most groups contain an opinion leaders that influences group decision making. Market Implications- Identifying and understanding group consumers is a key strategy for retailers to market- identify target markets, develop new products, create promotional materials that appeal to these groups (and that they can identify with), utilizing opinion leaders as spokespersons for products.

29. BUS 287 RETAILINGCustomer Buying Behavior External Influences Purchase Situation- Influences on purchasing decisions based on the situation the consumer finds themselves in- physical environment, emotional state, time constraints, (situations can be both controllable and uncontrollable) Marketing Implications- Retail Marketers can take advantage of uncontrollable situations- promote other products services, adjust prices, market the benefits of a product in adding control to uncontrollable situations (like auto service agreements) (selling sweatshirts at a Mtn resort) (convenience store models-limited choices/ higher prices) (event/tourist sales promotions)

30. BUS 287 RETAILINGCustomer Buying Behavior Types of Consumer Purchase Decisions- Minor New Purchase, Minor Repurchase, Major New Purchase, Major Repurchase Steps in Purchase Decision Making • Need/Want/Buy Recognition- internal and external triggers that motivate the consumer to want to make the purchase • Search for Information- searching out solutions to satisfy the need/want/buy recognition • Evaluation of Options- evaluating these solutions as to the best choice for purchase • Purchase- initiating and completing the purchase based on best choice/available options • After Purchase Evaluation- post purchase evaluation of the product purchased (return?, future purchase decisions?)

31. BUS 287 RETAILINGCustomer Buying Behavior Breakout Group Assignment Research and discuss each the seven internal and three external influences in the purchase of the following items: • Automobile (major repurchase) • Package of Gum (minor purchase) • A Pair of Jeans (minor repurchase) • Laptop Computer (major purchase) What are the marketing implications for each in the areas of product, promotion, pricing, distribution and service?

32. BUS 287 RETAILINGRetail Market Strategies Strategic Retail Market Plans help retailers identify and address: • Shifting market conditions • Changing customer needs • Competitive threats • Product life cycles/changes in product • Opportunities for product innovation • Advertising, pricing and promotion needs • Business profit and loss/funding issues

33. BUS 287 RETAILINGRetail Market Strategies Retail Market Plan Components- • Organizational Mission- identification and focus on the long-run vision of the business and what they hope to achieve • Objectives- specific expectations of the marketing efforts in the terms of long and short term goals • Marketing Strategy- decision making strategies to accomplish objectives inclusive of action steps and timeframes to achieve these goals • Tactical Programs- day to day actions to undertake to make and implement major marketing decisions • Marketing Budget- resources allocated to plan and implement marketing tactics including money, space, time, personnel, etc.

34. BUS 287 RETAILINGRetail Market Strategies Types of Marketing Strategies General Marketing Strategies- strategies that set the direction for all marketing efforts by describing how the market will achieve objectives. Divided into 5 categories: Market Expansion, Market Share Growth, Niche Market, Status Quo, Market Exit. Decision Area Strategies- strategies used to achieve General Market Strategies by guiding decisions in specific important marketing areas (through tactical programs)- product, pricing, distribution, promotion, target market

35. BUS 287 RETAILINGRetail Market Strategies General Market Strategies Market Expansion- strategy to grow overall sales through two methods- growing sales of existing products (increase existing customer purchases, develop new customers, expand sales market) and growing sales of new products (updated and refined products, product extensions/accessories, introduction of new products never marketed before) Market Share Growth- strategy to increase retailer’s overall percentage of the market share by taking business away from competitors, often including aggressive marketing tactics Niche Market- strategy to obtain a lead position/control over a specific segment of the market through provision of a product, marketing strategy, price or customer service level unique to the market.

36. BUS 287 RETAILINGRetail Market Strategies General Market Strategies (continued) Status Quo- strategy that looks at maintaining the business’ current position in the market- market share Market Exit- Strategy that looks to remove the product from the retailer’s product mix by- selling the product to another retailer, or just eliminating the product.

37. BUS 287 RETAILINGRetail Market Strategies Decision Area Strategies Strategies used to achieve general market strategies within market areas of product, pricing, distribution, promotion and target market (examples below) • Product Strategy- development of a new or enhancement of an existing product • Pricing Strategy- quantity discounts, trade in allowances, sales volume incentives for sales persons • Distribution Strategy- utilization of distribution partners in sales, product delivery/set up • Promotion Strategy- product awareness plans, advertising plans • Target Market Strategy- target market segmentation or expansion of sales area

38. BUS 287 RETAILINGRetail Market Strategies Breakout Group Assignment There are many articles on the internet regarding the marketing strategies of WalMart in their bid to be the leading retailer in the world. Research and read over these articles and share your information with your group. • What are their strategies? (General and decision making strategies in all categories covered in the class) • How effective have they been? • Try the site below to get you started: • http://www.articlesbase.com/management-articles/marketing-management-in-walmart-1919747.html

39. BUS 287 RETAILINGLocation and Layout Strategies Location Strategies Retail business location is a critical factor to business success and market area analysis and location strategies play a key role in the development and implementation of a retail business. Critical factors to consider in determining an appropriate business location include: • Market Size and Shape • Market Area Economic Definition • Market Area Competition • Market Area Intersection and Union

40. BUS 287 RETAILINGLocation and Layout Strategies Location Strategies- Market Size and Shape Market Area- area in which a retail operation draws its customers- including components of transportation, accessibility, supply/demand Market Threshold- minimum demand necessary to support an economic activity Market Range- distance consumers are willing to travel to make purchases/distance feasible for suppliers to ship products Market Shape- market range (radius) in which retail facility provides optimum service in meeting demand (determinant of need for additional facilities)

41. BUS 287 RETAILINGLocation and Layout Strategies Location Strategies- Market Area Economic Definition A market area can be influenced based on the relationship between supply and demand and demand can be influence by the following: • Utility-level of need can affect fluctuation of demand and vary according to income/economic cycles (necessities like food fluctuate little, more frivolous items may have a greater fluctuation) • Income Level- area income, especially disposable income can effect purchasing power of the location • Inflation- decreases purchasing power of area sees a growth in money supply without an equal growth in income • Taxation- sales and other area tax structures can add inhibitors to market influence • Savings- available capital in a market area to support business costs Supply can be influenced by- Profits and Competition

42. BUS 287 RETAILINGLocation and Layout Strategies Location Strategies- Market Area Competition The core foundation to competition is price and the strategies for location of a retail facility can have a major impact on the price element. Two of the most common elements are: • Market Coverage- market area sectors that address customer density, transport costs and location of competitors (examples fast food, restaurants, convenience stores) • Range Expansion- existing location expansion with complimentary goods and service offerings aiding in customer convenience (examples strip malls, shopping malls, service centers, full service department stores-complementary goods/diversity of product/other amenities) • Reilly’s Law- Law of Retail Gravitation • Huff’s Law- Probability Customers with Use a Specific Retail Location

43. BUS 287 RETAILINGLocation and Layout Strategies Location Strategies- Market Area Intersection and Union The evaluation of retail market areas by the measurement of GPS intersections and union of customer flow: • Concentric Circles- radius around a retail center where customers are willing to travel to make purchases • Share by Polygon- zonal level data (such as zip code) that measures market share from each zone within the center’s radius • Star Map- customer radius data measured by straight lines marketed between the retail center and identified customers • Spatial Smoothing- density map showing customer location in relationship to retail center • Transport Distance- drive time distance measurement for customers to retail center • Manual Polygon- common sense judgment of customer relationship to retail center radius based on local knowledge

44. BUS 287 RETAILINGLocation and Layout Strategies Layout Strategies- Basic Components The goal of any retail location is to draw customers into the store and persuade them to make a purchase. Advertising and promotion bring them in, making purchases after they come in is influenced greatly by the store’s design and layout. Effective store layout relies on three basic components: • Image/Sensory Appeal- display and merchandizing, signage, appealing to all of the senses (sight, sounds, smell, touch, taste). Creating an experience- appealing, convenient, service oriented • Methodology of Presentation- product grouping, product placement/shelf layout, store layout and design, store security • Optimum Utilization of Space- optimum product display areas, effective storage/stockroom areas

45. BUS 287 RETAILINGLocation and Layout Strategies Layout Strategies- Store Layout Designs Store layouts are chosen based on the store type and experience the retailer wishes to present. Layout Designs include: • Free Flow Layout-combination of racks, shelves allowing ease in customer browsing and employee access to customers-Issues: may seem cluttered and unorganized • Grid/Diagonal Pattern Layout- multiple rows of items with rigid structure utilizing end displays to feature goods-Good to familiarize customers with layout and promote repeat sales • Spine/Mixed Floor Layout- incorporation of both free flow and grid/ diagonal floor plans • Mouse Trap Layout- guiding customers to specific locations by development of a designated route through the store (often used in furniture stores) Essentials and Impulse Item Layouts- placement of essential items in areas that force customers to travel through the store to seek them out. Placement of impulse items at the front of the store and other well traveled areas.

46. BUS 287 RETAILINGLocation and Layout Strategies Research and examine retail store location within the Walla Walla County area: • How are stores clustered to meet the needs of county residents? Residents within the radius of their market share? • Discuss the possible location strategies in the development of the location for the following: • Inland Octopus, Panda Express, Big 5/Petco, Taco Bell Research and examine retail store layout strategies for the following types of businesses in Walla Walla County- Big Box Store, Supermarket, Clothing Store, Electronics/Cell Phone Store • Why do you think they chose the layout they did? What are the advantages?

47. BUS 287 RETAILINGPlanning and Buying Merchandise Retail planning and buying of merchandise is a complex process requiring planning and decision making in the following areas: • Market Approach • Merchandise Planning • Inventory Planning • Purchase/Financial Planning • Sales Planning • Inventory Controls Subjective Retailing- planning and buying based on product-orientation and driven by views of consumer likes and dislikes Objective Retailing- planning and buying that is consumer-oriented and based on measurable data of consumer likes and dislikes

48. BUS 287 RETAILINGPlanning and Buying Merchandise Market Approach The market approach planning and decision making process involves identification of retail customers and market share • Where- trading area from which retailer will attract customers • Who- demographic descriptions and profile of potential customers • What- the types and kinds of merchandise that will attached these potential customers • When- the timeframes and frequency in which customers will make purchases • Why- examining habits, lifestyles and other psychological factors that influence consumer purchases

49. BUS 287 RETAILINGPlanning and Buying Merchandise Merchandise Planning Merchandise Planning is the planning and decision making process that is driven the purchasing timeframes usually developed in six-month cycles and monitored on a monthly basis. Merchandise Planning includes consideration of: Net Sales- realistic dollar estimate of your monthly sales: factors- past experience, business/economic conditions, competition, promotions, profit opportunities and availability of merchandise Stock Ratio- estimates of sufficient stock on hand to permit satisfactory selection for customers: Factors-weekly sales compared to inventory turnover Inventory Reductions- reductions in retail value of inventory caused by markdowns, discounts, stock shortages that lower retail value of inventory Purchase Need Estimates- dollar value estimates of what is needed to replenish stock computed by subtracting dollar value of stock on hand from planned net sales Open-to-Buy- the difference between what was planned for purchase and what is needed for purchase with the remainder (if any) open to purchase reorders, fill-ins or take advantage of unexpected market opportunities

50. BUS 287 RETAILINGPlanning and Buying Merchandise Inventory Planning Identifying and procuring an assortment of products that will satisfy the wants and needs of the target market. Division of Stock planning by: Category of Merchandise- determination of broad types of merchandise to be sold in the store (Men’s Clothing, jewelry, office items) Classification- smaller and more defined merchandise units within a broad category range (Men’s Suits, necklaces, computer paper) Sub-classification- units within a classification that narrow down specific merchandise (Double Breasted Suit, diamond necklaces, card stock paper) Unit Stock Plan- quantities by price, size and color Model Stock/Basic Stock List- musts or never out items