Extended Perspectives on Retailing: Changes, E-tailing, and Store Size

1. Chapter 16 - Extended Perspectives on Retailing

2. What is Retailing? • Retailing: Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer. LO 1

3. Retail Mix LO 1

4. Wal-Mart’s Retail Focus • Work with manufacturers to help produce goods at the lowest possible cost. • Manage the supply chain bringing goods from manufacturers to stores at lowest possible cost. • Use cutting edge technology to manage inventory. LO 1

5. The Nature of Change in Retailing • E-Tailing • Price Competition • Demographic Shifts • Store Size LO 2

6. E-tailing • Unknown for retail mangers is what the ultimate roll of the Internet will be. • Observers recognize the value of online shopping for travel, clothing, cosmetics, and music. • It is unclear if online shopping will reach its projections for “everyday” needs. LO 2

7. E-tailing • E-tailing now accounts for about three percent of total retail sales. • E-tailing has caused a shift in power between retailers and consumers. LO 2

8. E-tailing • E-tailers provide the consumer with detailed pricing and product information, making better informed consumers which increases the consumers’ transaction power and negotiations with retailers. LO 2

9. Price Competition • Sam Walton forever changed the retail environment by computerizing his operations resulting in lower costs allowing him to lower prices. LO 2

10. Price Competition • Costco seeks to boost store traffic by getting shoppers to come in for a “super, low price” on key products. LO 2

11. Demographic Shifts • Fluctuating birth rate, the increasing number of immigrants, the growing importance of Generation Y consumers, Generation X starting to reach middle age, and baby boomers retiring are all demographic shifts in that shape the retailing environment. LO 2

12. Demographic Shifts • Same-Store Sales: Compares an individual store’s sales to its sales for the same month in the previous year. LO 2

13. Demographic Shifts • Market Share: Is the retailer’s total sales divided by total market sales. LO 2

14. Store Size • As stores increase in size they often employ a scrambled merchandising strategy. LO 2

15. Store Size • Scrambled Merchandising: Exists when a retailer handles many different and unrelated items. LO 2

16. Store Size • Convenience stores use a scrambled merchandising approach. LO 2

17. Store Size • Category Killer: Is a retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition. LO 2

18. Categorizing Retailers • Census Bureau • Number of Outlets • Margin Versus Turnover • Location • Size LO 3

19. External Environmental Forces Confronting Retail Firms Exhibit 1.1 LO 3

20. Categorizing Retailers Exhibit 1.2 LO 3

21. Using NAICS Codes Exhibit 1.3 LO 3

22. Number of Outlets • Chain Stores: Normally refers to operations having 11 or more units. LO 3

23. Number of Outlets • Standard Stock List: Is a merchandising method in which all stores in a retail chain stock the same merchandise. LO 3

24. Number of Outlets • Optimal Stock List: Is a merchandising method in which each store in a retail chain is given flexibility to adjust its merchandise mix to local tastes and demands. LO 3

25. Number of Outlets • Channel Advisor or Channel Captain: Is the institution (manufacturer, wholesaler, broker, or retailer) in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in. Large store retailers are often able to perform the role of channel captain. LO 3

26. Number of Outlets • Private Label Branding (Store Branding): Also called store branding, occurs when a retailer develops its own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name. LO 3

27. Private Labels by Country LO 3

28. Number of Outlets • Bricks & Mortar Retailers: Retailers that operate out of a physical building. LO 3

29. Margins Versus Turnover • Gross Margin Percentage: Is the gross margin divided by net sales or what percent of each sales dollar is gross margin. LO 3

30. Margins Versus Turnover • Gross Margin: Is net sales minus the cost of goods sold. LO 3

31. Margins Versus Turnover • Operating Expenses: Are the expenses the retailer incurs in running the business other than the cost of the merchandise. LO 3

32. Margins Versus Turnover • Inventory Turnover: Refers to the number of times per year, on average, that a retailer sells its inventory. LO 3

33. Margins Versus Turnover • High-Performance Retailers: Are those retailers that produce financial results substantially superior to the industry average. LO 3

34. Margins Versus Turnover • Low Margin/Low Turnover: Is one that operates on a low gross margin percentage and a low rate on inventory turnover. LO 3

35. Margins Versus Turnover • Low Margin/High Turnover: Is one that operates on a low gross margin percentage and a high rate of inventory turnover. LO 3

36. Margins Versus Turnover • High Margin/Low Turnover: Is one that operates on a high gross margin percentage and a low rate on inventory turnover. LO 3

37. Margin Versus Turnover • Clicks & Mortar Retailers: Retailers that sell both online and via physical stores. LO 3

38. Margins Versus Turnover • High Margin/High Turnover: Is one that operates on a high gross margin percentage and high rate of inventory turnover. LO 3

39. Retailers Classified by Margin & Turnover High Margin High-Margin/ Low-Turnover Retailers High-Margin/ High-Turnover Retailers Low Turnover High Turnover Low-Margin/ Low-Turnover Retailers Low-Margin/ High-Turnover Retailers Low Margin LO 3

40. Competitiveness: Retailers Classified Margin & Turnover High Margin Excellent position to withstand a competitive attack Low Turnover High Turnover Least able to withstand a competitive attack Low Margin LO 3

41. Retailers Classified by Margin & Turnover Higher Margin Target Wal-Mart Lower Turnover Higher Turnover K mart Albertsons Lower Margin Target Wal-Mart K-mart Albertsons LO 3

42. Location • Retailers have long been classified according to their location within a metropolitan area, be it the central business district, a regional shopping center or neighborhood shopping center, or as a freestanding unit. • Location is an area that retailing may undergo significant changes in the decade to come. LO 3

43. Size • The reason for classifying by size is that the operating performance of retailers tends to vary according to size. • Larger firms generally have lower operating costs per sales dollar than smaller firms do. • With advances in technology using classification of size is unclear. LO 3

44. Career Path • Store Management: The retailing career path that involves responsibility for selecting, training, and evaluating personnel, as well as in-store promotions, displays, customer service, building maintenance, and security. LO 4

45. Career Path • Buying: The retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the store’s merchandise lines. LO 4

46. Retailing-Two Career Paths LO 4

47. The Study and Practice of Retailing Analytical Method Manager is finder and investigator of facts. Creative Method Manager is conceptual and very imaginative. Two-Pronged Method Manager who employs both approaches. LO 5

48. A Proposed Orientation • Environmental • Management Planning • Profit • Decision Making LO 5

49. The Importance of Proactive Planning LO 5

50. Strategic Profit Model LO 1