Lecture of Retail Management Subject .pdf
ethan19hg
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Jul 31, 2024
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About This Presentation
Retail Management
Slide Content
RETAIL MANAGEMENT
Chapter 1: Overview about retail world
Chapter 1: Overview about retail world
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Content
•What is retail?
•The role of retail in supply chain management
•Value-added from retailers
•The economic and social roles of retailers
•Retail channels and global distribution system
•Changes in Distribution channels
•Retail opportunities: management, entrepreneur
•Decision process in retail management
•What is retail?
•The role of retail in supply chain management
•Value-added from retailers
•The economic and social roles of retailers
•Retail channels and global distribution system
•Changes in Distribution channels
•Retail opportunities: management, entrepreneur
•Decision process in retail management
Activity
Spend five minutes writing your responses to the following questions:
•When is the last time you went to your favorite retailer?What store
was it? Maybe you prefer to shop online. Why?
•Have you wondered about the journey those products take before
making it out to the shelves?
•What is your definition the word “retail”
Spend five minutes writing your responses to the following questions:
•When is the last time you went to your favorite retailer?What store
was it? Maybe you prefer to shop online. Why?
•Have you wondered about the journey those products take before
making it out to the shelves?
•What is your definition the word “retail”
Which company is retailer?
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 retaileris a business that sells products and/or services to
consumers for personal or family use
Retailing–a set of business activities that adds value to the
products and services sold to consumers for their personal or
family use
A retaileris a business that sells products and/or services to
consumers for personal or family use
The role of retail in supply chain management
•Retailers are a key component in a supply chain that links manufacturers to
consumers
•A supply chain is a set of firms that make and deliver goods and services to
consumers
•Wholesalers buy and store merchandise in large quantities from manufacturers
and then resell the merchandise (usually in smaller quantities) to retailers
•Retailers are a key component in a supply chain that links manufacturers to
consumers
•A supply chain is a set of firms that make and deliver goods and services to
consumers
•Wholesalers buy and store merchandise in large quantities from manufacturers
and then resell the merchandise (usually in smaller quantities) to retailers
Why are retailers needed?
•Wouldn’t it be easier and cheaper for consumers to cut out the middlemen,
the wholesalers and retailers, and buy directly from manufacturers?
•Because retailers add value and are more efficient at adding this value than
manufacturers or wholesalers
CONSIDERABLE
•Wouldn’t it be easier and cheaper for consumers to cut out the middlemen,
the wholesalers and retailers, and buy directly from manufacturers?
•Because retailers add value and are more efficient at adding this value than
manufacturers or wholesalers
CONSIDERABLE
Supply Chains
A supply chain is system of organizations, people, activities, information, and
resources that involve transformation in an efficient, nimble, and seamless way
Supplier: person providing service (domestic or international)
Factory: supplier has raw materials made into products
Distribution Center: finished product goes here after leaving factory
Regional Distribution Center: local to area with many advantages
A supply chain is system of organizations, people, activities, information, and
resources that involve transformation in an efficient, nimble, and seamless way
Supplier: person providing service (domestic or international)
Factory: supplier has raw materials made into products
Distribution Center: finished product goes here after leaving factory
Regional Distribution Center: local to area with many advantages
Retailers Create Value
Providing
Assortments
Breaking
Bulk
Holding
Inventory
Providing
Services
Providing
Assortments
Breaking
Bulk
Holding
Inventory
Providing
Services
Functions of a retailer
•Creates value (Assorting, breaking bulk, holding inventory,
providing services)
•Customer convenience
•Important link in the supply chain
•Supply of information
•Risk bearing (Spoilage, natural risks, change in customer’s taste)
•Financing
•Introduction of new products
•Advertising
•Economic development
•Creates value (Assorting, breaking bulk, holding inventory,
providing services)
•Customer convenience
•Important link in the supply chain
•Supply of information
•Risk bearing (Spoilage, natural risks, change in customer’s taste)
•Financing
•Introduction of new products
•Advertising
•Economic development
Challenges in Retailing
1.Inventory: having too much or too little can affect reputation of
retailer and perception of consumer
2.Mobile Experience and Engagement: 90% of customers use
smartphones while shopping
3.Digital Disruption: 5 stages (need recognition, information search,
evaluating alternatives, purchase decision, post-purchase
evaluation)
1.Inventory: having too much or too little can affect reputation of
retailer and perception of consumer
2.Mobile Experience and Engagement: 90% of customers use
smartphones while shopping
3.Digital Disruption: 5 stages (need recognition, information search,
evaluating alternatives, purchase decision, post-purchase
evaluation)
The economic and social roles of retailers
•Corporate Social Responsibility (CSR): The voluntary actions
taken by a company to address the ethical, social, and
environmental impacts of its business operations, in
addition to the concerns of its stakeholders
•Role in Developed Economies: 4,3 trillion USD (2011)
•Employment: 14 million people were employed in retailing
in 2012
•Corporate Social Responsibility (CSR): The voluntary actions
taken by a company to address the ethical, social, and
environmental impacts of its business operations, in
addition to the concerns of its stakeholders
•Role in Developed Economies: 4,3 trillion USD (2011)
•Employment: 14 million people were employed in retailing
in 2012
Retail channels and global distribution system
•Top 50 Global Retailers 2024
•Top 50 Global Retailers 2024
Leading global retailers of 2023
Retail channels and global distribution system
•Differences in Distribution Channels
•Differences in Distribution Channels
Changes in Distribution channels
Information Systems in Retail
Frequently utilized information systems in retail:
•Inventory Management Software (IMS): tracks inventory levels, orders, sales,
and deliveries
•Customer Relationship Management (CRM): looks at data about current
and future customers in hopes of retaining and building relationships
(personal profile/details, sales history, communication, feedback)
•Accounting Information Systems (AIS): system of collecting, storing, and
processing data used by decision makers
Frequently utilized information systems in retail:
•Inventory Management Software (IMS): tracks inventory levels, orders, sales,
and deliveries
•Customer Relationship Management (CRM): looks at data about current
and future customers in hopes of retaining and building relationships
(personal profile/details, sales history, communication, feedback)
•Accounting Information Systems (AIS): system of collecting, storing, and
processing data used by decision makers
Historical Changes in Retail
Pre-1800s: retail was made up of local merchants who provided full service to
customers (credit, repairs, etc.)
First department store was developed in 1800s, by the 1950s over 4,000
department stores operated, and by 1970s department stores closed and
replaced with malls
1990s: Internet impacted retail industry, online shopping became widely
popular and still is to this day
Pre-1800s: retail was made up of local merchants who provided full service to
customers (credit, repairs, etc.)
First department store was developed in 1800s, by the 1950s over 4,000
department stores operated, and by 1970s department stores closed and
replaced with malls
1990s: Internet impacted retail industry, online shopping became widely
popular and still is to this day
Retail opportunities: Management
•Management:People with a wide range of skills and
interests needed because retailers' functions include
➢Finance
➢Purchase
➢Accounting
➢Management information system (MIS)
➢Supply management including warehouse and distribution
management
➢Design and new product development
•Management:People with a wide range of skills and
interests needed because retailers' functions include
➢Finance
➢Purchase
➢Accounting
➢Management information system (MIS)
➢Supply management including warehouse and distribution
management
➢Design and new product development
Retail opportunities: Entrepreneur
•Entrepreneur:Retailing provides opportunities for people
who want to start their own business
•Some of the world's richest people are retailing
entrepreneurs
Amazon: Jeff Beros
•Entrepreneur:Retailing provides opportunities for people
who want to start their own business
•Some of the world's richest people are retailing
entrepreneurs
Amazon: Jeff Beros
Decision process in
retail management
retail management
The Retail Mix
Strategic vs. Tactical Decisions
•Doing the Right Thing (direction) vs. Doing Things Right (execution)
•Strategic Decisions Are:
✓Made Infrequently
✓Long-term
✓Require significant investment
✓Not easily reversed
•Location, Organization Design, Information and Distribution Systems,
Customer Service
•Doing the Right Thing (direction) vs. Doing Things Right (execution)
•Strategic Decisions Are:
✓Made Infrequently
✓Long-term
✓Require significant investment
✓Not easily reversed
•Location, Organization Design, Information and Distribution Systems,
Customer Service
Checklist for Making Ethical Decisions
Misconceptions About Careers in Retailing
•College not needed
•Low pay
•Long hours
•Boring
•Dead-end job
•No benefits
•Everyone is part-time
•Unstable environment
•No opportunity for women and minorities
•College not needed
•Low pay
•Long hours
•Boring
•Dead-end job
•No benefits
•Everyone is part-time
•Unstable environment
•No opportunity for women and minorities
Why You Should Consider Retailing
•Entry level management positions: department manager or
assistant buyer/planner
•Manage and have P&Lresponsibility on your first job
•Starting pay average with great benefits
•Some retailers pay graduate school
•No two days are alike
•Buying and planning for financially analytically oriented
•Management for people-people
•Entry level management positions: department manager or
assistant buyer/planner
•Manage and have P&Lresponsibility on your first job
•Starting pay average with great benefits
•Some retailers pay graduate school
•No two days are alike
•Buying and planning for financially analytically oriented
•Management for people-people
THANK FOR LISTENING!
Retail Management
Chapter 2: Types of Retailers
Chapter 2: Types of Retailers
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Contents
•Retailer Types: Advantages & Disadvantages
•Retailers’ characteristics
•Foods retailers
•General merchandise retailers
•Service retailing
•Types of ownership
•Additional
•Retailer Types: Advantages & Disadvantages
•Retailers’ characteristics
•Foods retailers
•General merchandise retailers
•Service retailing
•Types of ownership
•Additional
Retailer Types: Advantages & Disadvantages
➢Club and Warehouse Stores: offer value, require memberships
➢Mass Merchandisers: low prices, busy
➢Convenience and Drug Stores: limited selection
➢Discount and Dollar Stores: low prices, lesser: known brands
➢Natural and Organic Stores: array of unique items at high price
➢Specialty Retailers: offers alternative to mass merchandisers
➢Online Retailers: home delivery
➢Traditional Grocers: wide assortment, local
Source:https://courses.lumenlearning.com/wm-retailmanagement/chapter/advantages-and-
disadvantages-of-retailer-types/
➢Club and Warehouse Stores: offer value, require memberships
➢Mass Merchandisers: low prices, busy
➢Convenience and Drug Stores: limited selection
➢Discount and Dollar Stores: low prices, lesser: known brands
➢Natural and Organic Stores: array of unique items at high price
➢Specialty Retailers: offers alternative to mass merchandisers
➢Online Retailers: home delivery
➢Traditional Grocers: wide assortment, local
Source:https://courses.lumenlearning.com/wm-retailmanagement/chapter/advantages-and-
disadvantages-of-retailer-types/
Retailers’ characteristics
“The type of retailer a consumer chooses to patronize
depends on the benefits the consumer is seeking”
“The type of retailer a consumer chooses to patronize
depends on the benefits the consumer is seeking”
RETAILERS’ CHARACTERISTICS
•From individual street vendors selling hot dogs to multichannel retailers
•The different types of retailers offer unique benefits
•All these retailers survive and prosper because they satisfy a group of
consumers’ needs more effectively than their competitors, and thus
consumers patronize different retail types when they have different
needs
•Many retailers also are broadening their assortments, which means that
their offerings overlap and competition increases.
•From individual street vendors selling hot dogs to multichannel retailers
•The different types of retailers offer unique benefits
•All these retailers survive and prosper because they satisfy a group of
consumers’ needs more effectively than their competitors, and thus
consumers patronize different retail types when they have different
needs
•Many retailers also are broadening their assortments, which means that
their offerings overlap and competition increases.
Retailers’ characteristics
Type of Merchandise
Variety and Assortment
Services Offered
Prices and the Cost of Offering Breadth and Depth of
Merchandise and Services
Type of Merchandise
Variety and Assortment
Services Offered
Prices and the Cost of Offering Breadth and Depth of
Merchandise and Services
Retailers’ characteristics -Type of Merchandise
•North American Industry Classification
System (NAICS) ➔US, MEXICO,
CANADA.
•To collect data on business activity in
each country
•Six-digit code assigned to every
business
•North American Industry Classification
System (NAICS) ➔US, MEXICO,
CANADA.
•To collect data on business activity in
each country
•Six-digit code assigned to every
business
NAICS Codes
for
RetailersTypes:
for
RetailersTypes:
Retailers’ characteristics -Variety and Assortment
•Variety (breadth) is the number of merchandise categories a
retailer offers.
•Assortment (depth) is the number of different items offered in a
merchandise category
•Variety and assortment also apply to a specific merchandise
category rather than entire store
•Stock-keeping unit (SKU)
•Variety (breadth) is the number of merchandise categories a
retailer offers.
•Assortment (depth) is the number of different items offered in a
merchandise category
•Variety and assortment also apply to a specific merchandise
category rather than entire store
•Stock-keeping unit (SKU)
Retailers’ characteristics -Services Offered
•Retailers also differ in the services they offer customers
•Certain services expected:
✓Displaying merchandise
✓Accepting credit cards
✓Providing parking
✓Being open at convenient hours
•Some retailers charge customers for other services, such as home
delivery and gift wrapping
•Retailers also differ in the services they offer customers
•Certain services expected:
✓Displaying merchandise
✓Accepting credit cards
✓Providing parking
✓Being open at convenient hours
•Some retailers charge customers for other services, such as home
delivery and gift wrapping
Retailers’ characteristics -Prices and the Cost
•Stocking a deep and broad assortment is costly for retailers.
•Many SKUs
✓Retailer must have backup stock for each SKU
✓This leads to a rise in inventory investment cost
•Broader variety, deeper assortment, and/or additional services
requires retailer to charge higher prices to make a profit
•Stocking a deep and broad assortment is costly for retailers.
•Many SKUs
✓Retailer must have backup stock for each SKU
✓This leads to a rise in inventory investment cost
•Broader variety, deeper assortment, and/or additional services
requires retailer to charge higher prices to make a profit
Food Retailers
“The food retailing landscape is changing dramatically”
“The food retailing landscape is changing dramatically”
Changes in Food Retailing
Retailers aren’t just competing with one another through the items they offer
and the pricing they set. Instead, they’re competing on a whole host of other
criteria, such as convenience and customer service.
Convenience: is the store nearby? Is there ample parking? Will they have what I
need?
Customer Service: is this a place I like to shop? Is the store clean? Are the staff
available/helpful, can I get in and out quickly
Retailers aren’t just competing with one another through the items they offer
and the pricing they set. Instead, they’re competing on a whole host of other
criteria, such as convenience and customer service.
Convenience: is the store nearby? Is there ample parking? Will they have what I
need?
Customer Service: is this a place I like to shop? Is the store clean? Are the staff
available/helpful, can I get in and out quickly
Variety and Assortment of Goods in Food Retail
Categories are divided into several segments & sub-segments, which can be
further divided into brands and into Stock Keeping Units (SKU)
•Segments and sub-segments: dry soup (ramen), ingredients
•Leading brands: Campbell’s, Progresso
Retailers make assortment decisions at category, segment, brand, & SKU level
•Family Dollar vs. Sam’s Club
Categories are divided into several segments & sub-segments, which can be
further divided into brands and into Stock Keeping Units (SKU)
•Segments and sub-segments: dry soup (ramen), ingredients
•Leading brands: Campbell’s, Progresso
Retailers make assortment decisions at category, segment, brand, & SKU level
•Family Dollar vs. Sam’s Club
Current Trends in Food Retail
Increased interest in healthy food
More single-person households
Developing diversity food choices
Increasing convenience services
Popularization of home automation
Wage inflation is a growing concern
Increased interest in healthy food
More single-person households
Developing diversity food choices
Increasing convenience services
Popularization of home automation
Wage inflation is a growing concern
Categorize the various types of food retailers
•Conventional supermarkets only account for slightly more
than 60 percent of food sales (not including restaurants):
•Offer services: pharmacies, health care, banks, coffee
•Want customers to think of it as a place to “hang out”
•Conventional supermarkets only account for slightly more
than 60 percent of food sales (not including restaurants):
•Offer services: pharmacies, health care, banks, coffee
•Want customers to think of it as a place to “hang out”
Sales and
Growth Rate
for Retail
Sectors
Sources: Economic Forecast: Outlook to 2013
Food, Drug, Mass (Columbus, OH: Retail
Forward, November 2008);Economic Forecast:
Outlook to 2013 Homegoods(Columbus, OH.:
Retail Forward, November 2008); Economic
Forecast: Outlook to 2013 Softgoods(Columbus,
OH: Retail Forward, November 2008).
Growth Rate
for Retail
Sectors
Sources: Economic Forecast: Outlook to 2013
Food, Drug, Mass (Columbus, OH: Retail
Forward, November 2008);Economic Forecast:
Outlook to 2013 Homegoods(Columbus, OH.:
Retail Forward, November 2008); Economic
Forecast: Outlook to 2013 Softgoods(Columbus,
OH: Retail Forward, November 2008).
Characteristics of Food Retailers
Supermarkets
Supercenters
Warehouse Clubs
Convenience Stores
Online Grocery Retailers
Food
retailers
Supercenters
Warehouse Clubs
Convenience Stores
Online Grocery Retailers
Food
retailers
Food retailers –Super markets
•Conventional supermarkets
✓Perishables (meat, dairy, produce) are
almost 54% of sales
•Limited assortment supermarkets:
✓Extreme-value food retailers
✓1500 SKU
✓Offer one or two brands and sizes
✓Maximize efficiency to reduce costs
✓Merchandise up to 40% lower than
conventional supermarkets
Kroger is the largest supermarket chain in the United States
•Conventional supermarkets
✓Perishables (meat, dairy, produce) are
almost 54% of sales
•Limited assortment supermarkets:
✓Extreme-value food retailers
✓1500 SKU
✓Offer one or two brands and sizes
✓Maximize efficiency to reduce costs
✓Merchandise up to 40% lower than
conventional supermarkets
Kroger is the largest supermarket chain in the United States
Food retailers –Super markets
•Competition
✓Supercenters
✓Warehouse Clubs
✓Convenience Stores
✓Extreme Price Retailers
✓Convenience Stores
✓Drug Stores
•Competition
✓Supercenters
✓Warehouse Clubs
✓Convenience Stores
✓Extreme Price Retailers
✓Convenience Stores
✓Drug Stores
Food retailers –Super markets
•Fresh Merchandise: “Power perimeter” (dairy, bakery, meat, florist,
produce, deli, and coffee bar)
•Green Merchandise:
✓Fair trade (natural, organic, and locally sourced foods)
✓Locavore movement (focuses on reducing the carbon footprint caused by the
transportation of food throughout the world)
•Ethnic Merchandise
•Private-Label Merchandise
•Fresh Merchandise: “Power perimeter” (dairy, bakery, meat, florist,
produce, deli, and coffee bar)
•Green Merchandise:
✓Fair trade (natural, organic, and locally sourced foods)
✓Locavore movement (focuses on reducing the carbon footprint caused by the
transportation of food throughout the world)
•Ethnic Merchandise
•Private-Label Merchandise
Food retailers –Supercenters
•Supercenters offer a vast assortments
under one roof.
•Combine supermarket with full-line
discount store
•One-stop shopping experience
•Hypermarketsemphasize perishables
•Big-box stores
•Supercenters offer a vast assortments
under one roof.
•Combine supermarket with full-line
discount store
•One-stop shopping experience
•Hypermarketsemphasize perishables
•Big-box stores
Food retailers –Warehouse Clubs
•Offer limited and irregular
assortment of food and general
merchandise
•Little service and low prices
•Low-rent districts
•Simple interiors
•Low inventory holding costs
•Offer limited and irregular
assortment of food and general
merchandise
•Little service and low prices
•Low-rent districts
•Simple interiors
•Low inventory holding costs
Food retailers –Convenience Stores
•Limited assortment of merchandise
•Convenience shopping
•Prices generally higher than supermarkets
•Tailoring assortment to local markets
•Offering more fresh options
•Adding services: banking, movie tickets,
gift cards
•Limited assortment of merchandise
•Convenience shopping
•Prices generally higher than supermarkets
•Tailoring assortment to local markets
•Offering more fresh options
•Adding services: banking, movie tickets,
gift cards
Food retailers –Online Grocery Retailers
•Customers willing to pay more to save
time
•Online retailers continues to expand
•About 30% of orders are for nonfood
items: Paper products, cleaning items
•Slim profit margins continue to be a
problem
•Customers willing to pay more to save
time
•Online retailers continues to expand
•About 30% of orders are for nonfood
items: Paper products, cleaning items
•Slim profit margins continue to be a
problem
General Merchandise Retailers
“…focus more on product quality to differentiate
themselves from competition…”
“…focus more on product quality to differentiate
themselves from competition…”
Characteristics of General Merchandise Retailers
General Merchandise Retailers
Department stores
Full
-
line discount stores
Specialty stores
Drugstores
Category specialists
Extreme
-
value retailers
Off
-
price retailers Outlet stores
8 types
Department stores
Full
-
line discount stores
Specialty stores
Drugstores
Category specialists
Extreme
-
value retailers
Off
-
price retailers Outlet stores
8 types
General Merchandise Retailers -Department
Stores
•Broad variety, deep assortment
•Customer services and distinct merchandise
departments
•Soft goods, hard goods, durable goods
•Must minimize eroding market share:
✓Aggressively seeking exclusive brands
✓More emphasis on developing private label / store
brands
✓Expanding omnichannel and social media presence
•Three tiers:
✓Upscale, high-fashion chains
✓Moderate pricing with less customer service
✓Value-oriented
Stores
•Broad variety, deep assortment
•Customer services and distinct merchandise
departments
•Soft goods, hard goods, durable goods
•Must minimize eroding market share:
✓Aggressively seeking exclusive brands
✓More emphasis on developing private label / store
brands
✓Expanding omnichannel and social media presence
•Three tiers:
✓Upscale, high-fashion chains
✓Moderate pricing with less customer service
✓Value-oriented
General Merchandise Retailers -Full-Line
Discount Stores
•Broad variety, limited service, low prices
•Walmart:
✓Converted many discount stores into
supercenters
✓Online order with store pick-up
✓Expanding product range
•Target: Fashionable merchandise
“cheap chic” appeal
•Kmart: Seeking innovative solutions as it
continues to struggle
Discount Stores
•Broad variety, limited service, low prices
•Walmart:
✓Converted many discount stores into
supercenters
✓Online order with store pick-up
✓Expanding product range
•Target: Fashionable merchandise
“cheap chic” appeal
•Kmart: Seeking innovative solutions as it
continues to struggle
General Merchandise Retailers -Category
Specialists
•Deep, narrow assortment
•Self-service approach
•Category killers –consumers
drawn to deep assortment and
competitive prices
•Intense competition
•Trying to differentiate with
customer service
Specialists
•Deep, narrow assortment
•Self-service approach
•Category killers –consumers
drawn to deep assortment and
competitive prices
•Intense competition
•Trying to differentiate with
customer service
General Merchandise Retailers -Specialty
Stores
•Concentrate on limited number
of complementary merchandise
categories
•Deep but narrow variety
•Sales associate expertise
•Among most-profitable and
fastest-growing firms
•Growing specialty store sector
✓Resale stores
✓Thrift stores
✓Consignment shops
Stores
•Concentrate on limited number
of complementary merchandise
categories
•Deep but narrow variety
•Sales associate expertise
•Among most-profitable and
fastest-growing firms
•Growing specialty store sector
✓Resale stores
✓Thrift stores
✓Consignment shops
General Merchandise Retailers -Drugstores
•Concentrate on health and
beauty care
•Competition from pharmacies,
some food retailers, pressure to
reduce costs
•Offer wider assortment of
merchandise
•Offer more services with drive-
through windows, curbside pick-
up, in-store clinics
•Concentrate on health and
beauty care
•Competition from pharmacies,
some food retailers, pressure to
reduce costs
•Offer wider assortment of
merchandise
•Offer more services with drive-
through windows, curbside pick-
up, in-store clinics
General Merchandise Retailers -Extreme-
Value Retailers
•Dollar stores
•Broad variety, but shallow
assortment
•Target low income consumers
Value Retailers
•Dollar stores
•Broad variety, but shallow
assortment
•Target low income consumers
General Merchandise Retailers -Off-Price
Retailers
•Inconsistent assortment of brand-
name merchandise
•Significant price discounts –20% to
60% lower than suggested retail price
•Closeoutsare end-of-season
merchandise that will not be used in
following seasons
•Irregulars are merchandise with minor
mistakes in construction
•Outlet stores / Factory outlets / Flash
sale sites
Retailers
•Inconsistent assortment of brand-
name merchandise
•Significant price discounts –20% to
60% lower than suggested retail price
•Closeoutsare end-of-season
merchandise that will not be used in
following seasons
•Irregulars are merchandise with minor
mistakes in construction
•Outlet stores / Factory outlets / Flash
sale sites
Activity
Full line discount stores are retailers that provide name-brand products at a
lower cost than other stores.
What is an example of a full-line discount store near you? What do they sell?
How are they different from a specialty store and a department store?
Discuss your thoughts with a partner, and take notes about your contrast and
comparisons.
Full line discount stores are retailers that provide name-brand products at a
lower cost than other stores.
What is an example of a full-line discount store near you? What do they sell?
How are they different from a specialty store and a department store?
Discuss your thoughts with a partner, and take notes about your contrast and
comparisons.
Service Retailing
“Firms that primarily sell services rather than
merchandise, are a large and growing part of the
retail industry”
“…focus of service retailers…”
“Firms that primarily sell services rather than
merchandise, are a large and growing part of the
retail industry”
“…focus of service retailers…”
Services Retailers
Continuum of Merchandise and Services Retailers
Differences between service and merchandise
retailers
Four important differences in the
nature of the offerings provided by
services and merchandise retailers:
1)Intangibility
2)Simultaneous production and
consumption
3)Perishability
4)Inconsistency of offerings to
customers
retailers
Four important differences in the
nature of the offerings provided by
services and merchandise retailers:
1)Intangibility
2)Simultaneous production and
consumption
3)Perishability
4)Inconsistency of offerings to
customers
Types of Ownership
“Explain the types of ownership for retail firms”
“Explain the types of ownership for retail firms”
Independent, Single-Store
Establishments
Corporate Retail Chains
Franchising
Types of
Ownership
Establishments
Corporate Retail Chains
Franchising
Types of
Ownership
Independent, Single-Store Establishments
•Many retail start-ups are owner-
managed, which means management
has direct contact with customers and
can respond quickly to their needs
•Rely on owner/manager capabilities to
make retail decisions
•Some join wholesale-sponsored
voluntary cooperative groups
•Many retail start-ups are owner-
managed, which means management
has direct contact with customers and
can respond quickly to their needs
•Rely on owner/manager capabilities to
make retail decisions
•Some join wholesale-sponsored
voluntary cooperative groups
Corporate Retail Chains
•Retail chains operate multiple units
under common ownership
•Centralized decision-making for
defining and implementing
strategy
•Retail chains operate multiple units
under common ownership
•Centralized decision-making for
defining and implementing
strategy
Franchising
•Franchisor sells rights to use business
trademark to franchisee for a fee
•More than 40% of U.S. retail sales
•Drawbacks:
✓Start-up costs
✓Must adhere to franchisor’s
rules/guidelines
•Franchisor sells rights to use business
trademark to franchisee for a fee
•More than 40% of U.S. retail sales
•Drawbacks:
✓Start-up costs
✓Must adhere to franchisor’s
rules/guidelines
Additional
Wheel of Retailing
Entry: retailer penetrates a new market, ex: low prices, low retailer margins, low
customer awareness
•focus on streamlining operations to support new venture
Growth: retailer has foothold in new market and seeks to expand
•higher prices and retailer margins, improved customer awareness
Maturity: retailer operates at full capacity
•robust infrastructure, capabilities, and service
Decline: retailer is vulnerable to lower cost operations
•doesn’t mean retailer will fail
Entry: retailer penetrates a new market, ex: low prices, low retailer margins, low
customer awareness
•focus on streamlining operations to support new venture
Growth: retailer has foothold in new market and seeks to expand
•higher prices and retailer margins, improved customer awareness
Maturity: retailer operates at full capacity
•robust infrastructure, capabilities, and service
Decline: retailer is vulnerable to lower cost operations
•doesn’t mean retailer will fail
Retail Tactic:
Scrambled Merchandising
Broadens assortment to include items that are generally outside their focus
Adds to shopping experience rather than distracting
Risk comes when unexpected items are included in assortment that confuse
shoppers.
Can detract from experience and tarnish retailer’s brand image
Scrambled Merchandising
Broadens assortment to include items that are generally outside their focus
Adds to shopping experience rather than distracting
Risk comes when unexpected items are included in assortment that confuse
shoppers.
Can detract from experience and tarnish retailer’s brand image
Evolving Through Mergers, Diversification, and
Downsizing
Throughout 1990s, retail food industry underwent period of consolidation
Consolidation lead to long-term trend where sales are concentrated among
fewer number of retailers (1992, 20 largest food retailers accounted for 39.2% of
grocery sales; 2000, 54.7%, 2016, 66.6%)
Mergers and Acquisitions: transactions in which ownership of companies &
business organizations are combined
Downsizing
Throughout 1990s, retail food industry underwent period of consolidation
Consolidation lead to long-term trend where sales are concentrated among
fewer number of retailers (1992, 20 largest food retailers accounted for 39.2% of
grocery sales; 2000, 54.7%, 2016, 66.6%)
Mergers and Acquisitions: transactions in which ownership of companies &
business organizations are combined
Obtaining Information on Competition
Collecting from Industry
•Government reports
•white papers
•industry publications
Specific competitors:
•Press releases,
•financial reporting,
•weekly circulars,
•store visits
Collecting from Industry
•Government reports
•white papers
•industry publications
Specific competitors:
•Press releases,
•financial reporting,
•weekly circulars,
•store visits
NAICS Codes and Direct Competitors
North American Industry Classification System: https://www.naics.com/
Common codes:
•445110: supermarkets and grocery stores
•445120: convenience stores
•445220: fish and seafood markets
•445230: fruit and vegetable markets
•446110: pharmacies and drug stores
•452311: warehouse clubs and supercenters
•452319: all other general merchandise stores
North American Industry Classification System: https://www.naics.com/
Common codes:
•445110: supermarkets and grocery stores
•445120: convenience stores
•445220: fish and seafood markets
•445230: fruit and vegetable markets
•446110: pharmacies and drug stores
•452311: warehouse clubs and supercenters
•452319: all other general merchandise stores
THANK FOR YOUR ATTENTION!
Retail Management
Chapter 3: Multichannel Retailing
Chapter 3: Multichannel Retailing
LEARNING OBJECTIVES
•Understand the nonstorechannels offered by retailers.
•Compare the benefits offered by the four major retail
channels: stores, Internet, mobile, and catalogs.
•Analyze the challenges facing multichannel retailers.
•Consider the multichannel shopping experience in the
future.
•Understand the nonstorechannels offered by retailers.
•Compare the benefits offered by the four major retail
channels: stores, Internet, mobile, and catalogs.
•Analyze the challenges facing multichannel retailers.
•Consider the multichannel shopping experience in the
future.
CONTENTS
•What is retail strategy?
•Relative benefits of retail channels
•Challenges facing multichannel retailers
•Increase customer loyalty and customer satisfaction
•Multi channel shopping in the future
•Additional
•What is retail strategy?
•Relative benefits of retail channels
•Challenges facing multichannel retailers
•Increase customer loyalty and customer satisfaction
•Multi channel shopping in the future
•Additional
Definition and retail channel
“Some of the challenges facing multichannel retailers are
due to the operational and organizational differences
inherent in managing multiple information and supply chain
systems, channel operations, pricing, branding, and
assortments”
“Some of the challenges facing multichannel retailers are
due to the operational and organizational differences
inherent in managing multiple information and supply chain
systems, channel operations, pricing, branding, and
assortments”
Activity and Game
If you are a retailer:
How do you want to
reach your customers?
What should you do?
Boba tea coffee
GAME:
15 MINS
If you are a retailer:
How do you want to
reach your customers?
What should you do?
Boba tea coffee
GAME:
15 MINS
Definition
•A retail channel is the way a retailer sells and delivers merchandise and
services to its customers.
•The most common channel used by retailers is a store.
•Retailers also use a variety of nonstorechannels
•A channel involves the opportunity to complete a transaction—to sell and
deliver merchandise
•Multichannel retailing involves using more than one channel to sell and
deliver merchandise and services to consumers
•A retail channel is the way a retailer sells and delivers merchandise and
services to its customers.
•The most common channel used by retailers is a store.
•Retailers also use a variety of nonstorechannels
•A channel involves the opportunity to complete a transaction—to sell and
deliver merchandise
•Multichannel retailing involves using more than one channel to sell and
deliver merchandise and services to consumers
Retail channel
•The birth of multichannel
retailing can be traced
back to when Sears
opened its first store in
1925.
U.S. Retail Sales by Channel
•The birth of multichannel
retailing can be traced
back to when Sears
opened its first store in
1925.
U.S. Retail Sales by Channel
Retail channel
Nonstore
Retail
Channels
Internet Retailing Channels—Electronic and Mobile Retailing
Catalog Channel
Direct-Response TV Channel
Television Home Shopping Channel
Direct Selling Channel
Automated Retailing (Vending Machines) Channel
Retail
Channels
Internet Retailing Channels—Electronic and Mobile Retailing
Catalog Channel
Direct-Response TV Channel
Television Home Shopping Channel
Direct Selling Channel
Automated Retailing (Vending Machines) Channel
Internet Retailing Channels—Electronic and
Mobile Retailing
•Retailers interacting with consumers
via the Internet
•The mobile channel (also called
mobile retailing, mobile commerce, or
m-commerce), involves accessing the
Internet using a smartphone
•75%of U.S. consumers use the Internet
to search for information
•83%go online before buying
electronics, computers, books, music,
and movies in stores
Mobile Retailing
•Retailers interacting with consumers
via the Internet
•The mobile channel (also called
mobile retailing, mobile commerce, or
m-commerce), involves accessing the
Internet using a smartphone
•75%of U.S. consumers use the Internet
to search for information
•83%go online before buying
electronics, computers, books, music,
and movies in stores
Catalog Channel
•The retail offering is communicated to
customers through a catalog mailed to
customers
•50%of U.S. consumers shop through
catalogs each year
•Catalogs’ share of sales is declining
relative to the Internet
•Catalog channel role is shifting from
primarily generating sales to building a
brand image and driving traffic to the
Internet and physical stores
•The retail offering is communicated to
customers through a catalog mailed to
customers
•50%of U.S. consumers shop through
catalogs each year
•Catalogs’ share of sales is declining
relative to the Internet
•Catalog channel role is shifting from
primarily generating sales to building a
brand image and driving traffic to the
Internet and physical stores
Direct-Response TV Channel
•Customers watch a TV advertisementthat
demonstrates merchandise and then place
orders for that merchandise
•Customers watch a TV advertisementthat
demonstrates merchandise and then place
orders for that merchandise
Television Home Shopping Channel
•Customers watch a TV network with
programs that demonstrate merchandise
and then place orders for that merchandise,
usually by telephone or via the Internet
•Advantage of TV home shopping is that
customers can see the merchandise
demonstrated either on their television
screens or through streaming videos on the
Internet
•Customers watch a TV network with
programs that demonstrate merchandise
and then place orders for that merchandise,
usually by telephone or via the Internet
•Advantage of TV home shopping is that
customers can see the merchandise
demonstrated either on their television
screens or through streaming videos on the
Internet
Direct Selling Channel
•Salespeople interact with customers
face-to-face in a convenient
location, either at the customer’s
home or at work
•Two special types of direct selling:
the party plan systemand multilevel
systems
•Some multilevel direct selling firms
are illegal pyramid schemes
•Salespeople interact with customers
face-to-face in a convenient
location, either at the customer’s
home or at work
•Two special types of direct selling:
the party plan systemand multilevel
systems
•Some multilevel direct selling firms
are illegal pyramid schemes
Automated Retailing (Vending Machines)
Channel
•Merchandise or services are stored in a
machine and dispensed to customers
when they deposit cash or use a credit
card
•Benefits of applying vending machines to
the retail industry:
•Cost savings
•Access to a large customer network
•Easily expand distribution channels
Channel
•Merchandise or services are stored in a
machine and dispensed to customers
when they deposit cash or use a credit
card
•Benefits of applying vending machines to
the retail industry:
•Cost savings
•Access to a large customer network
•Easily expand distribution channels
Relative benefits of retail channels
“…how retailers provide a better customer shopping
experience by integrating these channels into a true
multichannel experience…”
“…how retailers provide a better customer shopping
experience by integrating these channels into a true
multichannel experience…”
Focus on
Comparison of Store, Catalog, and Internet
Channels
Store
•Higher costs because of things like rent, utilities, inventory, and staffing
Catalog
•When they are effective they are high-involvement marketing materials
•As e-commerce has grown, catalog sales have eroded
•Costs of catalog: creation, photography, copy, design
Internet Channels
•Costs are still present: transaction processing, electronic fund transfer, inventory
management
Channels
Store
•Higher costs because of things like rent, utilities, inventory, and staffing
Catalog
•When they are effective they are high-involvement marketing materials
•As e-commerce has grown, catalog sales have eroded
•Costs of catalog: creation, photography, copy, design
Internet Channels
•Costs are still present: transaction processing, electronic fund transfer, inventory
management
Electronic Retailing:
Advantages and Disadvantages
Advantages:
•Consumers can be reached out of immediate market area
•Retailer is more convenient
•Maximizes retailers ability to fulfill orders
•Provides a lot of information for the retailer
Disadvantages:
•Maintaining e-commerce infrastructure is very expensive
•E-tailing does not provide the same social or emotional
experience as in-store shopping does for the consumer
•Shoppers are responsible for the return of incorrect purchases
•Data breaches are always something to be wary of!
Advantages and Disadvantages
Advantages:
•Consumers can be reached out of immediate market area
•Retailer is more convenient
•Maximizes retailers ability to fulfill orders
•Provides a lot of information for the retailer
Disadvantages:
•Maintaining e-commerce infrastructure is very expensive
•E-tailing does not provide the same social or emotional
experience as in-store shopping does for the consumer
•Shoppers are responsible for the return of incorrect purchases
•Data breaches are always something to be wary of!
Mobile Apps and Customer Interaction
Apps vs. Internet Channels:
•Apps have design constraints
•Designed with an interface to support specific activity and functionality
•Can be meaningful transaction tools
•Average order value is greater on apps than traditional e-commerce
•Conversion rates on apps are twice that of mobile websites
Apps have better engagement because they’re specifically designed for the
needs of a mobile user to facilitate transactions
•Leverage mapping technology
•Tie-in social media
•Store payment methods
Apps vs. Internet Channels:
•Apps have design constraints
•Designed with an interface to support specific activity and functionality
•Can be meaningful transaction tools
•Average order value is greater on apps than traditional e-commerce
•Conversion rates on apps are twice that of mobile websites
Apps have better engagement because they’re specifically designed for the
needs of a mobile user to facilitate transactions
•Leverage mapping technology
•Tie-in social media
•Store payment methods
Benefit of Multichannel Retailing
“…using multiple channels to improve their offerings
to their customers and build a competitive
advantage…”
“…using multiple channels to improve their offerings
to their customers and build a competitive
advantage…”
5 reasons:
Overcoming
the Limitation
of an Existing
Format
•Increased
Assortment
•Low-Cost,
Consistent
execution
•Current
Information
Increasing
Customer
Satisfaction
and Loyalty
Gaining
Insight into
Customer
Shopping
Behavior
Expanding
Market
Presence
Build a
Strategy
Advantage
Overcoming
the Limitation
of an Existing
Format
•Increased
Assortment
•Low-Cost,
Consistent
execution
•Current
Information
Increasing
Customer
Satisfaction
and Loyalty
Gaining
Insight into
Customer
Shopping
Behavior
Expanding
Market
Presence
Build a
Strategy
Advantage
Challenges facing multichannel retailers
“…how retailers are using multiple channels to
improve their offerings to their customers and build a
competitive advantage…”
“…how retailers are using multiple channels to
improve their offerings to their customers and build a
competitive advantage…”
Multichannel Factors to Consider
•Storebasedretailers and catalogers add Internet channels
•Retailers that focus on direct selling and TV home shopping network
channels have also added Internet channels
•Retailer using only Internet channels, is even considering establishing a
physical presence –Amazon,…
•Consumers want a seamless experience
•Various channels need to be consistent in the information they provide
•Most multichannel retailers have yet to provide these seamless customer-
facing processes ➔OmniChannel
•Storebasedretailers and catalogers add Internet channels
•Retailers that focus on direct selling and TV home shopping network
channels have also added Internet channels
•Retailer using only Internet channels, is even considering establishing a
physical presence –Amazon,…
•Consumers want a seamless experience
•Various channels need to be consistent in the information they provide
•Most multichannel retailers have yet to provide these seamless customer-
facing processes ➔OmniChannel
Percentage of Multichannel Retailers Offering
Cross-Channel Fulfillment
Cross-Channel Fulfillment
Several
challenges
and trade-off
decisions
Multichannel supply chain and information system issues
Centralized versus Decentralized multichannel retailing
Maintaining a consistent brand image across channels
Merchandise assortment trade-offs
Pricing issues
Challenge surrounding channel migration and showrooming
challenges
and trade-off
decisions
Multichannel supply chain and information system issues
Centralized versus Decentralized multichannel retailing
Maintaining a consistent brand image across channels
Merchandise assortment trade-offs
Pricing issues
Challenge surrounding channel migration and showrooming
Example
Channel Migration
•Most common multichannel usage involves an initial search online, followed
by a purchase in stores and vice versa
•Most common multichannel usage involves an initial search online, followed
by a purchase in stores and vice versa
Showrooming
Three approaches that multichannel retailers can
use to reduce showrooming
Providing
better
customer
service
Offering
uniquely
relevant
information
Promoting
private label
merchandise
use to reduce showrooming
Providing
better
customer
service
Offering
uniquely
relevant
information
Promoting
private label
merchandise
Increase customer loyalty and customer
satisfaction
“…Customer loyalty is often described as the most
valuable currency on the market…”
satisfaction
“…Customer loyalty is often described as the most
valuable currency on the market…”
Multi channel shopping in the future
“…The technologies and seamless interface across channels
that customers in the future may experience…”
“…The technologies and seamless interface across channels
that customers in the future may experience…”
Consider the multichannel shopping
experience in the future.
experience in the future.
New Retail in the future.
https://my.matterport.com/show/?m=iZ1gqrmhv5F
https://my.matterport.com/show/?m=iZ1gqrmhv5F
Additional
“More haste, less speed” –English proverb
“More haste, less speed” –English proverb
Understanding Single Channel, Multi-
Channel, and Omni-Channel Retailing
Single channel:Refers to a producer or retailer’s effort to reach
customers through only one distribution option, regardless of whether
it’s online, face-to-face selling or traditional retail.
Multi-channel:Refers to a producers or retailer’s effort to combine
and blend different distribution channels to accommodate where
and how consumers shop, ensuring that the producers and retailers
will be present when the purchase decision is made.
Omni-channel: Marketing that is an expansion of the multi-channel
concept by incorporating all the communication and interactions
between customer, brand, and retailer, regardless of whether it’s at
a point of purchase or not.
Channel, and Omni-Channel Retailing
Single channel:Refers to a producer or retailer’s effort to reach
customers through only one distribution option, regardless of whether
it’s online, face-to-face selling or traditional retail.
Multi-channel:Refers to a producers or retailer’s effort to combine
and blend different distribution channels to accommodate where
and how consumers shop, ensuring that the producers and retailers
will be present when the purchase decision is made.
Omni-channel: Marketing that is an expansion of the multi-channel
concept by incorporating all the communication and interactions
between customer, brand, and retailer, regardless of whether it’s at
a point of purchase or not.
Understanding Single Channel, Multi-
Channel, and Omni-Channel Retailing
Channel, and Omni-Channel Retailing
OmniChannel
Benefit of OmniChannel
Customer Impressions and the Seamless
Experience
Questions to ask to test exactly how seamless your experience is:
•Are there specific activities that require transition from one channel to
another?
•Is the experience optimized for the specific channel interface?
•Are there systematic roadblocks, which prevent shoppers from completing
transactions or discourage them from using the tools in the future?
Experience
Questions to ask to test exactly how seamless your experience is:
•Are there specific activities that require transition from one channel to
another?
•Is the experience optimized for the specific channel interface?
•Are there systematic roadblocks, which prevent shoppers from completing
transactions or discourage them from using the tools in the future?
KEY TERMS
•apps
•automated retailing
•catalog channel
•channel migration
•direct-response TV (DRTV) channel
•direct selling
•Infomercial
•Internet retailing
•live chat
•m-commerce
•mobile commerce
•mobile retailing
•Multichannel retailing
•multilevel system
•omniretailing
•party plan system
•pyramid scheme
•retail channel
•showrooming
•television home shopping
•vending machines
•apps
•automated retailing
•catalog channel
•channel migration
•direct-response TV (DRTV) channel
•direct selling
•Infomercial
•Internet retailing
•live chat
•m-commerce
•mobile commerce
•mobile retailing
•Multichannel retailing
•multilevel system
•omniretailing
•party plan system
•pyramid scheme
•retail channel
•showrooming
•television home shopping
•vending machines
THANK FOR YOUR ATTENTION!
Retail Management
Chapter 5: Retail Strategy
Chapter 5: Retail Strategy
LEARNING OBJECTIVES
•Define the retail strategy.
•Illustrate how retailers build a sustainable competitive
advantage.
•Classify the different strategic growth opportunities
retailers pursue.
•Identify issues that arise as domestic retailers become
global retailers.
•Know the steps retailers go through to develop a
strategic plan.
•Define the retail strategy.
•Illustrate how retailers build a sustainable competitive
advantage.
•Classify the different strategic growth opportunities
retailers pursue.
•Identify issues that arise as domestic retailers become
global retailers.
•Know the steps retailers go through to develop a
strategic plan.
CONTENTS
•What is retail strategy?
•Central concepts in retail market strategy
•Global growth opportunities
•The strategic retail planning process
•Strategic planning in real world
•Additional
•What is retail strategy?
•Central concepts in retail market strategy
•Global growth opportunities
•The strategic retail planning process
•Strategic planning in real world
•Additional
What is retail strategy?
“The term strategyis frequently used in retailing. For
example, retailers talk about
their merchandise strategy, promotion strategy, location
strategy, channel strategy,
or branding strategy”
“The term strategyis frequently used in retailing. For
example, retailers talk about
their merchandise strategy, promotion strategy, location
strategy, channel strategy,
or branding strategy”
Retailer’s target market
Format and resources the retailer plans to
use to satisfy the target market’s needs
Build a sustainable competitive advantage
Definition of Retail Market Strategy
Retail
Strategy
Format and resources the retailer plans to
use to satisfy the target market’s needs
Build a sustainable competitive advantage
Definition of Retail Market Strategy
Retail
Strategy
Retail Strategy -Target market
•Market segment(s) toward which the retailer plans
•Focus its resources and retail mix
•Market segment(s) toward which the retailer plans
•Focus its resources and retail mix
Retail Strategy –Retail Format
•Describes the nature of the retailer’s operations
•Retail mix
•Use to satisfy the needs of its target market
Retail
Mix
•Describes the nature of the retailer’s operations
•Retail mix
•Use to satisfy the needs of its target market
Retail
Mix
Retail Strategy –Sustainable competitive advantage
•An advantage the retailer
has over its competition
•Not easily copied by
competitors
•Can be maintained over
a long period of time
•An advantage the retailer
has over its competition
•Not easily copied by
competitors
•Can be maintained over
a long period of time
Central concepts in retail market strategy
“Illustrate how retailers build a sustainable
competitive advantage”
“Illustrate how retailers build a sustainable
competitive advantage”
Target Market and Retail Format
A retail market is a group of consumers with similar needs
and a group of retailers that satisfy those needs using a
similar retail channels and format
Read chapter 4:
Customer Buying Behavior
A retail market is a group of consumers with similar needs
and a group of retailers that satisfy those needs using a
similar retail channels and format
Read chapter 4:
Customer Buying Behavior
Example:
Retail
Market
Segments
for
Apparel
Retail
Market
Segments
for
Apparel
Building a Sustainable Competitive Advantage
•Builds a wall around its position in a retail market around its present
and potential customers and its competitors
•Some advantages are sustainable over a long period of time, while
others can be duplicated by competitors almost immediately
•Builds a wall around its position in a retail market around its present
and potential customers and its competitors
•Some advantages are sustainable over a long period of time, while
others can be duplicated by competitors almost immediately
Approaches for Developing a Sustainable
Competitive Advantage
Competitive Advantage
Thinking??
•Develop a long-term advantage by offering
broader or deeper assortments of national
brands
•If the broader and deeper assortment
attracts a lot of customers, competitors will
simply go out and buy the same branded
merchandise
•Develop a long-term advantage by offering
broader or deeper assortments of national
brands
•If the broader and deeper assortment
attracts a lot of customers, competitors will
simply go out and buy the same branded
merchandise
Example: McDonald
McDonald’s has developed a
competitive advantage by
projecting an image of fast
service, consistent quality,
and clean restrooms
McDonald’s has developed a
competitive advantage by
projecting an image of fast
service, consistent quality,
and clean restrooms
Three approaches for developing a sustainable
competitive advantage
CX
Building
strong
relationships
with
customers
SX
Building
strong
relationships
with
suppliers
EX
Achieving
efficient
internal
operations
competitive advantage
CX
Building
strong
relationships
with
customers
SX
Building
strong
relationships
with
suppliers
EX
Achieving
efficient
internal
operations
CX + EX + SX= SIR (Success In Retail)
Relationships with Customers—Customer Loyalty
•Customers are committed to
buying merchandise and
services from a particular
retailer
•Loyalty is more than simply
liking one retailer over
another.
•Loyalty means that
customers will be reluctant
to switch and patronize a
competitive retailer
Read chapter 11
•Customers are committed to
buying merchandise and
services from a particular
retailer
•Loyalty is more than simply
liking one retailer over
another.
•Loyalty means that
customers will be reluctant
to switch and patronize a
competitive retailer
Read chapter 11
Approaches
for
developing
loyalty
1
•Building a strong brand image
2
•Creating a unique positioning in target market
3
•Offering unique merchandise
4
•Providing excellent customer service
5
•Implementing a customer relationship management program
6
•Building a retail community
for
developing
loyalty
1
•Building a strong brand image
2
•Creating a unique positioning in target market
3
•Offering unique merchandise
4
•Providing excellent customer service
5
•Implementing a customer relationship management program
6
•Building a retail community
Positioning
Example:
Hypothetical
Perceptual
Map of
Women’s
Apparel
Market
Example:
Hypothetical
Perceptual
Map of
Women’s
Apparel
Market
Relationships with Suppliers
Relationships with vendors, like relationships with customers, are
developed over a long time and may not be easily offset by a
competitor.
Read chapter 13:
Buying Merchandise
Relationships with vendors, like relationships with customers, are
developed over a long time and may not be easily offset by a
competitor.
Read chapter 13:
Buying Merchandise
Efficiency of Internal Operations
Read chapter 9 & 16 Read chapter 10 & 11
Read chapter 9 & 16 Read chapter 10 & 11
Location
•Location is a pervasive
source of advantage
in retailing
•“What are the three
most important things
in retailing?” -
“Location, location,
location.”
•Two reasons:
•Determining which
store a consumer
patronizes
•Not easily duplicated Read chapter 7 & 8
•Location is a pervasive
source of advantage
in retailing
•“What are the three
most important things
in retailing?” -
“Location, location,
location.”
•Two reasons:
•Determining which
store a consumer
patronizes
•Not easily duplicated Read chapter 7 & 8
Multiple Sources of Advantage
•Cannot rely on a single
approach, such as good
locations or excellent customer
service
•Retailers use multiple
approaches to build as high a
wall around their position as
possible
•Built multiple bases of
sustainable competitive
advantages through unique
merchandise, excellent
customer service, and strong
customer and vendor
relationships
•Cannot rely on a single
approach, such as good
locations or excellent customer
service
•Retailers use multiple
approaches to build as high a
wall around their position as
possible
•Built multiple bases of
sustainable competitive
advantages through unique
merchandise, excellent
customer service, and strong
customer and vendor
relationships
Global growth opportunities
“…growth opportunity is becoming particularly
attractive to large retailers as they begin to
saturate their domestic market…”
“…growth opportunity is becoming particularly
attractive to large retailers as they begin to
saturate their domestic market…”
International expansion is risky
•Deal with different government regulations
•Cultural traditions
•Consumer preferences
•Supply chains
•Languages
•Deal with different government regulations
•Cultural traditions
•Consumer preferences
•Supply chains
•Languages
Attractiveness of International Markets
Three
factors
The potential size of the retail market in the
country
The degree to which the country does and
can support the entry of foreign retailers
engaged in modern retail practices
The risks or uncertainties in sales and profits
1
2
3
Three
factors
The potential size of the retail market in the
country
The degree to which the country does and
can support the entry of foreign retailers
engaged in modern retail practices
The risks or uncertainties in sales and profits
1
2
3
Indicators of the Potential, Support, and Risk in
International Markets
International Markets
Example: Country Attractiveness
Keys to Success in Global Retailing
Four
characteristics
1
•globally sustainable competitive
advantage
2
•adaptability
3
•global culture
4
•financial resources
Four
characteristics
1
•globally sustainable competitive
advantage
2
•adaptability
3
•global culture
4
•financial resources
Entry Strategies
Four
approaches
Direct
investment
Joint Venture
Strategic
Alliance
Franchising
Four
approaches
Direct
investment
Joint Venture
Strategic
Alliance
Franchising
The strategic retail planning process
“…describes how retailers select target market
segments, determine the appropriate retail format,
and build sustainable competitive advantages…”
“…describes how retailers select target market
segments, determine the appropriate retail format,
and build sustainable competitive advantages…”
Stages in the
Strategic
Planning
Process
7 steps
Strategic
Planning
Process
7 steps
Step 1: Define the Business Mission
The mission statement is a broad description of a retailer's
objectives and the scope of activities it plans to undertake.
The mission statement is a broad description of a retailer's
objectives and the scope of activities it plans to undertake.
Step 2: Conduct a SWOT Analysis (Conduct a
situation Audit –Elements in situation audit)
situation Audit –Elements in situation audit)
•Identify opportunities for increasing retail sales
Step 3: Identify Strategic Opportunities
Step 3: Identify Strategic Opportunities
Step 4: Evaluate Strategic Opportunities
•Evaluate opportunities that have been identified in the SWOT analysis
•Must focus on opportunities that utilize its strengths and its competitive
advantage
•The greatest investments should be made in market opportunities for which
the retailer has a strong competitive position
•Evaluate opportunities that have been identified in the SWOT analysis
•Must focus on opportunities that utilize its strengths and its competitive
advantage
•The greatest investments should be made in market opportunities for which
the retailer has a strong competitive position
Step 5: Establish Specific Objectives and Allocate
Resources
Specific objectives have three components:
✓the performance sought, including a numerical index against
which progress may be measured
✓a time frame within which the goal is to be achieved
✓the level of investment needed to achieve the objective
Resources
Specific objectives have three components:
✓the performance sought, including a numerical index against
which progress may be measured
✓a time frame within which the goal is to be achieved
✓the level of investment needed to achieve the objective
Step 6: Develop a Retail Mix to Implement the
Strategy
•Decisions related to the elements in the retail mix are discussed in Sections III
and IV
Read chapter 12 to 18
Strategy
•Decisions related to the elements in the retail mix are discussed in Sections III
and IV
Read chapter 12 to 18
Step 7: Evaluate Performance and Make
Adjustments
•Evaluate the results of the strategy and implementation program
•If the retailer is meeting or exceeding its objectives, changes aren’t needed
•If the retailer fails to meet its objectives, reanalysis is required.
Adjustments
•Evaluate the results of the strategy and implementation program
•If the retailer is meeting or exceeding its objectives, changes aren’t needed
•If the retailer fails to meet its objectives, reanalysis is required.
Strategic Planning in the Real World
The challenge of the retail business is the
human condition
-Howard Schultz
The challenge of the retail business is the
human condition
-Howard Schultz
Strategic decisions are made in a sequential
manner
•the business mission is defined,
•the SWOT analysis is performed,
•strategic opportunities are
identified,
•alternatives are evaluated,
•objectives are set,
•resources are allocated,
•the implementation plan is
developed,
•performance is evaluated
•adjustments are made
•the SWOT analysis may uncover a
logical alternative for the firm to
consider,
•the mission statement may need
to be reformulated,
•the objective would need to be
changed,
•the resources would need to be
increased
•consider not investing in the
opportunity at all
manner
•the business mission is defined,
•the SWOT analysis is performed,
•strategic opportunities are
identified,
•alternatives are evaluated,
•objectives are set,
•resources are allocated,
•the implementation plan is
developed,
•performance is evaluated
•adjustments are made
•the SWOT analysis may uncover a
logical alternative for the firm to
consider,
•the mission statement may need
to be reformulated,
•the objective would need to be
changed,
•the resources would need to be
increased
•consider not investing in the
opportunity at all
Student Retail Project
•What is unique advantage??
•What is target market? Target Audience? Persona Customer?
•How about your CX, SX, EX??
•SWOT analysis
•What is unique advantage??
•What is target market? Target Audience? Persona Customer?
•How about your CX, SX, EX??
•SWOT analysis
Additional
“Retail is Detail” –James Gulliver
“Retail is Detail” –James Gulliver
Steps of Retail Strategy Planning
Strategic planning is formal processmarked by specific activities
where firms engage to build marketing plan.
The actions included in strategic planning are:
1.Objective Setting
2.Situational Analysis
3.Customer Analysis
4.Tactical Planning
5.Implementation and Control
Strategic planning is a formal process that firms should do to develop plan for
how to best compete
Strategic planning is formal processmarked by specific activities
where firms engage to build marketing plan.
The actions included in strategic planning are:
1.Objective Setting
2.Situational Analysis
3.Customer Analysis
4.Tactical Planning
5.Implementation and Control
Strategic planning is a formal process that firms should do to develop plan for
how to best compete
Visions and Missions
•Keeping members focused, takes consistent
communication, effective management, & efficient
resourcing
•Mission statements: what firm does or wants to do
•critical process/performance to satisfy customer
•Vision statement: what company hopes to do and be in
future
•future oriented, meant to inspire
•Keeping members focused, takes consistent
communication, effective management, & efficient
resourcing
•Mission statements: what firm does or wants to do
•critical process/performance to satisfy customer
•Vision statement: what company hopes to do and be in
future
•future oriented, meant to inspire
Decisions and Strategy
•Strategic planning evaluates market and
factors that influence it, consumer needs,
competition, capabilities,& implications
•Strategic planning is internally and
externally oriented
•Situational and customer analysis
captures factors that will support and
those that will challenge
•Helps retailers make decisions around
growth opportunities, consumer
targeting, and performance
•Strategic planning evaluates market and
factors that influence it, consumer needs,
competition, capabilities,& implications
•Strategic planning is internally and
externally oriented
•Situational and customer analysis
captures factors that will support and
those that will challenge
•Helps retailers make decisions around
growth opportunities, consumer
targeting, and performance
Situation Analysis
Helps decision makers understand what to do and when to
do it.
•A situation analysis focuses on:
✓context
✓organizational capabilities
✓customer needs
✓Competition
✓Describes environment,
✓how our abilities can deliver value to consumer needs
✓our actions/reactions
Helps decision makers understand what to do and when to
do it.
•A situation analysis focuses on:
✓context
✓organizational capabilities
✓customer needs
✓Competition
✓Describes environment,
✓how our abilities can deliver value to consumer needs
✓our actions/reactions
Situation Analysis (cont.)
•Customer analysis includes consideration of needs of current and
future consumers as well as characteristics
•Assessment of customer within analysis does not require much rigor
•Competition includes assessment of strengths and weaknesses of
competitive set
•Decision-makers can assess their direct influencers on strategic
opportunities and threats
•Customer analysis includes consideration of needs of current and
future consumers as well as characteristics
•Assessment of customer within analysis does not require much rigor
•Competition includes assessment of strengths and weaknesses of
competitive set
•Decision-makers can assess their direct influencers on strategic
opportunities and threats
Internal analysis
•Human Resource
1. Is the present strength of employees at various levels sufficient for future action?
2. Are the employees trained and capable to perform the tasks assigned to them?
3. Are the employees loyal to the store?
4. Are the employees punctual and regular?
5. Are the employees skilled matched to their assigned tasks?
•Financial Resource
1. What is the total cash flow from the store’s present activities?
2. What is the ability of the retail store to collect money at the time of
requirement/emergency?
3. How effective and stable are the financial policies?
4. What is the ratio between fixed and current assets?
5. What are the contingency plans in case of negative cash flow?
•Human Resource
1. Is the present strength of employees at various levels sufficient for future action?
2. Are the employees trained and capable to perform the tasks assigned to them?
3. Are the employees loyal to the store?
4. Are the employees punctual and regular?
5. Are the employees skilled matched to their assigned tasks?
•Financial Resource
1. What is the total cash flow from the store’s present activities?
2. What is the ability of the retail store to collect money at the time of
requirement/emergency?
3. How effective and stable are the financial policies?
4. What is the ratio between fixed and current assets?
5. What are the contingency plans in case of negative cash flow?
Internal analysis
•Physical Resources
1.What is the contribution of fixed assets?
2. What is the position of abandoned/unused assets?
3. How effective and updated are the store’s information systems?
•Intangible resources
1.What are the present capabilities of the company’s management?
2. How effective is the R&D cell?
3. How good is the competitor’s intelligence system?
4. How effective are the store’s loyalty programmes?
5. What is the capability of a retail store manager?
6. Are customers loyal towards the company’s products?
•Physical Resources
1.What is the contribution of fixed assets?
2. What is the position of abandoned/unused assets?
3. How effective and updated are the store’s information systems?
•Intangible resources
1.What are the present capabilities of the company’s management?
2. How effective is the R&D cell?
3. How good is the competitor’s intelligence system?
4. How effective are the store’s loyalty programmes?
5. What is the capability of a retail store manager?
6. Are customers loyal towards the company’s products?
Short and Long-Run Objectives
•Some firms might expect to achieve objectives quickly, while
others are expected to require more time
•Important to identify leading indicators: meaningful factors whose
change indicates/predicts future change
•By tracking shoppers, data might show that they are on track to
grow revenue by the x%
•Some firms might expect to achieve objectives quickly, while
others are expected to require more time
•Important to identify leading indicators: meaningful factors whose
change indicates/predicts future change
•By tracking shoppers, data might show that they are on track to
grow revenue by the x%
Target Market Techniques
•Effective customer analysis includes work around how firm will
position itself as unique
•Physical differences (layout, assortment, service levels, pricing) or
perceptual (focus on what the use of product means to a
customer)
•Slogan does not create differentiation
•Effective positioning follows defined process, the first step being
identify relevant competitive set
•Identification of determinants of demand is important because it
shows variables that influence consumer choice
•Effective customer analysis includes work around how firm will
position itself as unique
•Physical differences (layout, assortment, service levels, pricing) or
perceptual (focus on what the use of product means to a
customer)
•Slogan does not create differentiation
•Effective positioning follows defined process, the first step being
identify relevant competitive set
•Identification of determinants of demand is important because it
shows variables that influence consumer choice
Target Market Techniques (cont.)
•Next step is for firm to analyze position relative to competition using
positioning grid or value curve
•Positioning grid helps marketers identify white space: areas for competitive
entry that aren’t currently occupied
•Value curves reflect performance on each factor
•With results of grid and curves in mind, retailer should consider
what positioning best fits them given their capabilities, resources,
priorities, and investments
•Positioning process helps describe how firm is uniquely different
from others
•Next step is for firm to analyze position relative to competition using
positioning grid or value curve
•Positioning grid helps marketers identify white space: areas for competitive
entry that aren’t currently occupied
•Value curves reflect performance on each factor
•With results of grid and curves in mind, retailer should consider
what positioning best fits them given their capabilities, resources,
priorities, and investments
•Positioning process helps describe how firm is uniquely different
from others
Key Variables in Planning
•Firms use strategic planning to develop plans for how to best
compete
•Not all variables are controllable: economic trends, government
regulation, volatility of supply, cultural changes, etc.
•Consumers are using digital interfaces and low-cost fulfillment to
order products online and in apps
•Demographic changes have elevated interest in health: consider
what this means and what the implications are
•Cultural values evolved around economic disparity, and pressuring
governments to increase minimum wage
•Firms use strategic planning to develop plans for how to best
compete
•Not all variables are controllable: economic trends, government
regulation, volatility of supply, cultural changes, etc.
•Consumers are using digital interfaces and low-cost fulfillment to
order products online and in apps
•Demographic changes have elevated interest in health: consider
what this means and what the implications are
•Cultural values evolved around economic disparity, and pressuring
governments to increase minimum wage
Tactical Decisions
•Short-term actions firms take to affect controllable elements of
strategy
•Within firm, decision-makers and managers outline specific
initiatives that will be undertaken and delegate roles to support
them
•Within smaller tactical decisions, a firm can ultimately deliver
strategic goal or prevent its accomplishment
•Short-term actions firms take to affect controllable elements of
strategy
•Within firm, decision-makers and managers outline specific
initiatives that will be undertaken and delegate roles to support
them
•Within smaller tactical decisions, a firm can ultimately deliver
strategic goal or prevent its accomplishment
Retail Audits
•Audits are reviews to assess how well store operators meet
organizational standards, provide satisfactory experiences, and
implement priority initiatives
•Health and safety, loss prevention, & merchandising audits
•Review on-shelf products and ensure pricing compliance
•Audits are reviews to assess how well store operators meet
organizational standards, provide satisfactory experiences, and
implement priority initiatives
•Health and safety, loss prevention, & merchandising audits
•Review on-shelf products and ensure pricing compliance
The Feedback Process
•Feedback can make process iterative and roundabout
rather than sequential
•Feedback is fundamental to effective control
Quantitative
•change in store traffic
•sales revenue
•satisfaction scores
•operating profit
Qualitative
•Positive/negative comments from customers
•Feedback can make process iterative and roundabout
rather than sequential
•Feedback is fundamental to effective control
Quantitative
•change in store traffic
•sales revenue
•satisfaction scores
•operating profit
Qualitative
•Positive/negative comments from customers
Building a Competitive Analysis
Goal is to create sustainable competitive advantage
•Firm has edge over competition which they cannot easily
overcome
Advantages can be in intellectual property, technology
leadership, assets, scales, or barriers
•Supports how firm competes, not what it does to compete
•Wal-Mart and Amazon have strong competitive
advantage
•Firms can possess powerful internal strengths or can
compete with system that is so expansive it cannot be
matched
Goal is to create sustainable competitive advantage
•Firm has edge over competition which they cannot easily
overcome
Advantages can be in intellectual property, technology
leadership, assets, scales, or barriers
•Supports how firm competes, not what it does to compete
•Wal-Mart and Amazon have strong competitive
advantage
•Firms can possess powerful internal strengths or can
compete with system that is so expansive it cannot be
matched
Retail Growth Opportunities
•Growth has two benefits
1.Firms access capital through loans
2.Reflection that firm is meeting customer needs
•Growth is positive and reflects that the firm is delivering
customer value
•Firms grow customer target and business by increasing
penetration levels
•Firms may choose to grow through development, such
as servicing current target with new business
•Last way is through diversification: targeting new
customers with new business
•Growth has two benefits
1.Firms access capital through loans
2.Reflection that firm is meeting customer needs
•Growth is positive and reflects that the firm is delivering
customer value
•Firms grow customer target and business by increasing
penetration levels
•Firms may choose to grow through development, such
as servicing current target with new business
•Last way is through diversification: targeting new
customers with new business
Retail Value Chain
KEY TERM
•bargaining power of vendors
•barriers to entry
•competitive rivalry
•cross-selling
•customer loyalty
•customer relationship management (CRM) program
•direct investment
•diversification growth opportunity
•frequent shopper program
•joint venture
•loyalty program
•bargaining power of vendors
•barriers to entry
•competitive rivalry
•cross-selling
•customer loyalty
•customer relationship management (CRM) program
•direct investment
•diversification growth opportunity
•frequent shopper program
•joint venture
•loyalty program
THANK FOR YOUR ATTENTION!
Retail Management
Chapter 7: Retail Locations
Chapter 7: Retail Locations
LEARNING OBJECTIVES
•Describe the types of retail locations available to
retailers.
•Review the types of unplanned locations.
•Analyze the characteristics of the different types of
shopping centers.
•Discuss nontraditional retail locations.
•Match the locations to the retailer’s strategy.
•Describe the types of retail locations available to
retailers.
•Review the types of unplanned locations.
•Analyze the characteristics of the different types of
shopping centers.
•Discuss nontraditional retail locations.
•Match the locations to the retailer’s strategy.
CONTENTS
•Retail pricing strategy
•Unplanned locations
•Shopping centers and planned retail locations
•Nontraditional locations
•Locations and retail strategy
•Additional
•Retail pricing strategy
•Unplanned locations
•Shopping centers and planned retail locations
•Nontraditional locations
•Locations and retail strategy
•Additional
Retail pricing strategy
The importance of pricing decisions is growing because today’s
customers have more alternatives to choose from and are better
informed about the alternatives available in the marketplace.
Read chapter 14:
Retail Pricing
The importance of pricing decisions is growing because today’s
customers have more alternatives to choose from and are better
informed about the alternatives available in the marketplace.
Read chapter 14:
Retail Pricing
PRICING STRATEGIES
High/Low
Pricing
Frequently
Discount through
sales promotions
Everyday Low
Pricing (EDLP)
Somewhat misleading
because low doesn’t
mean “lowest”
Low-price guarantee
policy
High/Low
Pricing
Frequently
Discount through
sales promotions
Everyday Low
Pricing (EDLP)
Somewhat misleading
because low doesn’t
mean “lowest”
Low-price guarantee
policy
Advantages of the Pricing Strategies
High/low pricing
strategy
Increases profits
Creates excitement
Sells slow moving
merchandise
EDLPapproach
Assures customers of low
prices
Reduces advertising and
operating expenses
Reduces stockouts and
improves inventory
management
High/low pricing
strategy
Increases profits
Creates excitement
Sells slow moving
merchandise
EDLPapproach
Assures customers of low
prices
Reduces advertising and
operating expenses
Reduces stockouts and
improves inventory
management
SETTING RETAIL PRICES
Setting Prices Based on Costs
Pricing Optimization Software
Profit Impact of Setting a Retail Price:
“The Use of Break-Even Analysis”
Setting Prices Based on Costs
Pricing Optimization Software
Profit Impact of Setting a Retail Price:
“The Use of Break-Even Analysis”
MARKDOWNS
Clearance
markdowns
OR
Promotional
markdowns
Reasons
for Taking
Markdowns
Clearance
markdowns
OR
Promotional
markdowns
Reasons
for Taking
Markdowns
MARKDOWNS
Optimizing Markdown Decisions
Reducing the Amount of Markdowns
Liquidating Markdown Merchandise
Optimizing Markdown Decisions
Reducing the Amount of Markdowns
Liquidating Markdown Merchandise
Markdown
Markdown
Markdown example
RETAIL
PRICE
SOLD W1
STOCK
EOW1
SOLD W2
STOCK
EOW2
SOLD W3
STOCK
EOW3
SOLD
W4
STOCK
EOW4
TOTAL
QUANTITY 10,000
COGS(USD) 10,000
TOTAL COGS (USD) 100,000,000
MARKUP (%) 50%
RETAIL PRICE (USD) 15,000 15,000 2,000 8,000
MARKDOWN W1 20% 12,000 4,000 4,000
MARKDOWN W2 10% 10,800 2,200 1,800
MARKDOWN W3 25% 8,100 1,000 800
MARKDOWN W4
TURNOVER (USD) 30,000,000 48,000,000 23,760,000 8,100,000 109,860,000
MARGIN (USD) 9,860,000
MARGIN (%) 9.86%
Note: W: week, EOW: End of Week, COGS: Cost of Good Sold
RETAIL
PRICE
SOLD W1
STOCK
EOW1
SOLD W2
STOCK
EOW2
SOLD W3
STOCK
EOW3
SOLD
W4
STOCK
EOW4
TOTAL
QUANTITY 10,000
COGS(USD) 10,000
TOTAL COGS (USD) 100,000,000
MARKUP (%) 50%
RETAIL PRICE (USD) 15,000 15,000 2,000 8,000
MARKDOWN W1 20% 12,000 4,000 4,000
MARKDOWN W2 10% 10,800 2,200 1,800
MARKDOWN W3 25% 8,100 1,000 800
MARKDOWN W4
TURNOVER (USD) 30,000,000 48,000,000 23,760,000 8,100,000 109,860,000
MARGIN (USD) 9,860,000
MARGIN (%) 9.86%
Note: W: week, EOW: End of Week, COGS: Cost of Good Sold
The important of location
“What are the three most important things in retailing?”,
“Location, location and location”
Rich by Real Estate
“What are the three most important things in retailing?”,
“Location, location and location”
Rich by Real Estate
Location is typically one of the most influential
considerations in a customer’s store-choice
decision
Location decision can be used to develop a
sustainable competitive advantage
Location decisions are risky
Why is store
location such an
important
decision for a
retailer?
considerations in a customer’s store-choice
decision
Location decision can be used to develop a
sustainable competitive advantage
Location decisions are risky
Why is store
location such an
important
decision for a
retailer?
For
Retailer
Not for
Retailer
Retailer
Not for
Retailer
Process of Choosing Particular Locations
•Size of the trade area
•Occupancy cost of the location
•Pedestrian and vehicle customer traffic location
•Restrictions on operations by property managers
•Convenience of location for customers
“Trade area: the geographic area that encompasses most of the
customers who would patronize a specific retail site”
•Size of the trade area
•Occupancy cost of the location
•Pedestrian and vehicle customer traffic location
•Restrictions on operations by property managers
•Convenience of location for customers
“Trade area: the geographic area that encompasses most of the
customers who would patronize a specific retail site”
Characteristics of Different Retail Locations
TYPES OF RETAIL LOCATIONS
Unplanned Location
Freestanding
sites
Urban
locations
Mainstreet
locations
Freestanding
sites
Urban
locations
Mainstreet
locations
Freestanding sites
Advantages
•Convenience for
customer
•High vehicular
traffic and visibility
•Modest occupancy
costs
•Separation from
competition
Disadvantages
•Limited trade area
when not around
nearby retailers
•Higher Occupancy
costs that strip
centers
•Usually located
where there is little
pedestrian traffic
“Freestanding sites
are retail locations
for an individual,
isolated store
unconnected to
other stores;
however, they might
be near other
freestanding stores
or near a shopping
center.”
Advantages
•Convenience for
customer
•High vehicular
traffic and visibility
•Modest occupancy
costs
•Separation from
competition
Disadvantages
•Limited trade area
when not around
nearby retailers
•Higher Occupancy
costs that strip
centers
•Usually located
where there is little
pedestrian traffic
“Freestanding sites
are retail locations
for an individual,
isolated store
unconnected to
other stores;
however, they might
be near other
freestanding stores
or near a shopping
center.”
Freestanding sites (cont.)
“Outparcelsare
freestanding stores that are
not connected to other
stores in a shopping center,
but are located on the
premises of a shopping
center, typically in a
parking area.”
Some advantages
•Can offer customers the
convenience of a drive-through
window
•Extensive parking
•Clear visibility from the street
“Outparcelsare
freestanding stores that are
not connected to other
stores in a shopping center,
but are located on the
premises of a shopping
center, typically in a
parking area.”
Some advantages
•Can offer customers the
convenience of a drive-through
window
•Extensive parking
•Clear visibility from the street
Urban locations
Central Business
District
Inner city
Gentrified
residential sites
the traditional downtown
financial and business area
in a city or town
Low income residential
area within a large city
renewal and rebuilding of
offices, housing, and
retailers in deteriorating areas
Central Business
District
Inner city
Gentrified
residential sites
the traditional downtown
financial and business area
in a city or town
Low income residential
area within a large city
renewal and rebuilding of
offices, housing, and
retailers in deteriorating areas
Urban locations (cont.)
•Retailers need to tailor their offerings to the unique characteristics of urban
gentrified consumers and the restrictions associated with these locations
•Selecting a store to patronize, these urban consumers, compared with
suburban consumers, typically place more importance on reducing their
shopping time rather than the breadth and depth of the retailer’s assortment
•Retailers with urban locations also need to recognize the differences in
consumer needs within these markets
•Deal with the traffic and parking problems in these gentrified residential
areas, many residents use public transportation or walk when they go
shopping
•Retailers need to tailor their offerings to the unique characteristics of urban
gentrified consumers and the restrictions associated with these locations
•Selecting a store to patronize, these urban consumers, compared with
suburban consumers, typically place more importance on reducing their
shopping time rather than the breadth and depth of the retailer’s assortment
•Retailers with urban locations also need to recognize the differences in
consumer needs within these markets
•Deal with the traffic and parking problems in these gentrified residential
areas, many residents use public transportation or walk when they go
shopping
Main Street locations
•Main Streetrefers to the traditional downtown shopping area in smaller towns
and secondary shopping areas in large cities and their suburbs
•Focus shopping experience and pedestrian walkways
•Main Street locations share most of the characteristics of locations in
gentrified urban areas, but their occupancy costs are generally lower
•Main Street locations do not draw as many people as the CBD because
fewer people work in the area, and the fewer stores generally mean a
smaller overall draw to the area
•Main Streetrefers to the traditional downtown shopping area in smaller towns
and secondary shopping areas in large cities and their suburbs
•Focus shopping experience and pedestrian walkways
•Main Street locations share most of the characteristics of locations in
gentrified urban areas, but their occupancy costs are generally lower
•Main Street locations do not draw as many people as the CBD because
fewer people work in the area, and the fewer stores generally mean a
smaller overall draw to the area
Shopping centers and planned retail
locations
Shopping centeris a group of retail and
other commercial establishments that are
planned, developed, owned, and
managed as a single property
PhD. Michael Levy
locations
Shopping centeris a group of retail and
other commercial establishments that are
planned, developed, owned, and
managed as a single property
PhD. Michael Levy
Characteristics
•Combining many stores at one location
•Lease agreements typically require that retailers in the center pay
a portion of the common area maintenance (CAM) costs
•Managed by a shopping center property management (SCPM)
firm
•Combining many stores at one location
•Lease agreements typically require that retailers in the center pay
a portion of the common area maintenance (CAM) costs
•Managed by a shopping center property management (SCPM)
firm
Types of shopping centers
Convenience,
Neighborhoo,
and
Community
Shopping
Centers
Power Centers
Enclosed
Shopping Malls
Lifestyle
Centers
Mixed-Use
Developments
Outlet Centers
Theme/
Festival
Centers
Larger,
Multiformat
Developments
(Omnicenters)
Convenience,
Neighborhoo,
and
Community
Shopping
Centers
Power Centers
Enclosed
Shopping Malls
Lifestyle
Centers
Mixed-Use
Developments
Outlet Centers
Theme/
Festival
Centers
Larger,
Multiformat
Developments
(Omnicenters)
Number, Sales per Square Foot, and Growth Rate
of Shopping Centers
of Shopping Centers
Nontraditional Locations
any location that is attached to, located within, or located on
the property of an existing business or facility
any location that is attached to, located within, or located on
the property of an existing business or facility
Nontraditional Locations
Pop-Up Stores and
Other Temporary
Locations
Store-within-a-Store
Merchandise Kiosks
Airports
1 2 3 4
Pop-Up Stores and
Other Temporary
Locations
Store-within-a-Store
Merchandise Kiosks
Airports
1 2 3 4
LOCATION AND RETAIL STRATEGY
The location-type decision is consistent with the shopping
behavior and size of the target market and the retailer’s
positioning in its target market
The location-type decision is consistent with the shopping
behavior and size of the target market and the retailer’s
positioning in its target market
Shopping Behavior of Consumers in Retailer’s
Target Market
Specialty
Shopping
Comparison
Shopping
Convenience
Shopping
Target Market
Specialty
Shopping
Comparison
Shopping
Convenience
Shopping
Density of Target Market
A good location has many people in the target
market who are drawn to it
Target
market
Target
market
Target
market
A good location has many people in the target
market who are drawn to it
Target
market
Target
market
Target
market
Uniqueness of Retail Offering
The convenience of locations is less
important for retailers with unique,
differentiated offerings than for
retailers with an offering similar to
other retailers
The convenience of locations is less
important for retailers with unique,
differentiated offerings than for
retailers with an offering similar to
other retailers
Additional
“The three most important things in retail are
location, location, location. The three most important
things for our consumer business are technology,
technology, technology.”
—Jeff Bezos
“The three most important things in retail are
location, location, location. The three most important
things for our consumer business are technology,
technology, technology.”
—Jeff Bezos
Selecting a Store Location
Selecting a location by Criteria and Weight
Example: Importance of the criteria for site selection
(Scale 1 to 10: 10 is the best, 1 is the worst)
No. Criterion Weight
1 Rent cost 10
2 Geographical location 8
3 Population density 7
4 Vehicular Traffic 5
5 Number of competitors 6
Example: Importance of the criteria for site selection
(Scale 1 to 10: 10 is the best, 1 is the worst)
No. Criterion Weight
1 Rent cost 10
2 Geographical location 8
3 Population density 7
4 Vehicular Traffic 5
5 Number of competitors 6
Selecting a location by Criteria and Weight
Example: Evaluation scores
(Scale 1 to 10: 10 is the best, 1 is the worst)
No.Location
Rent
cost
Geographical
location
Population
density
Vehicular
Traffic
Number of
competitors
1Location A 2 9 9 10 9
2Location B 4 7 8 7 8
3Location C 6 4 8 9 7
4Location D 7 8 5 7 4
5Location E 7 9 8 9 8
6Location F 9 7 6 8 3
7Location G 5 7 6 7 7
Example: Evaluation scores
(Scale 1 to 10: 10 is the best, 1 is the worst)
No.Location
Rent
cost
Geographical
location
Population
density
Vehicular
Traffic
Number of
competitors
1Location A 2 9 9 10 9
2Location B 4 7 8 7 8
3Location C 6 4 8 9 7
4Location D 7 8 5 7 4
5Location E 7 9 8 9 8
6Location F 9 7 6 8 3
7Location G 5 7 6 7 7
Selecting a location by Criteria and Weight
Example: Selecting 3 best locations: A, E and FNo.Location
1Location A 2 20 9 72 9 63 10 50 9 54 259
2Location B 4 40 7 56 8 56 7 35 8 48 235
3Location C 6 60 4 32 8 56 9 45 7 42 235
4Location D 7 70 8 64 5 35 7 35 4 24 228
5Location E 7 70 9 72 8 56 9 45 8 48 291
6Location F 9 90 7 56 6 42 8 40 3 18 246
7Location G 5 50 7 56 6 42 7 35 7 42 225
Total
Vehicular
Traffic
5
Number of
competitors
6Weight
Rent cost
10
Geographical
location
8
Population
density
7
Example: Selecting 3 best locations: A, E and FNo.Location
1Location A 2 20 9 72 9 63 10 50 9 54 259
2Location B 4 40 7 56 8 56 7 35 8 48 235
3Location C 6 60 4 32 8 56 9 45 7 42 235
4Location D 7 70 8 64 5 35 7 35 4 24 228
5Location E 7 70 9 72 8 56 9 45 8 48 291
6Location F 9 90 7 56 6 42 8 40 3 18 246
7Location G 5 50 7 56 6 42 7 35 7 42 225
Total
Vehicular
Traffic
5
Number of
competitors
6Weight
Rent cost
10
Geographical
location
8
Population
density
7
Data Analysis for Location Selection
A retailer with excellent location has strategic advantage.
When considering location, you’ll want to evaluate:
•alternative geographic trading areas
•determine type of location (population, density)
•literacy level and educational level of populations
•languages spoken
Are there other similar stores?
•What do they stock and what is their reputation?
A retailer with excellent location has strategic advantage.
When considering location, you’ll want to evaluate:
•alternative geographic trading areas
•determine type of location (population, density)
•literacy level and educational level of populations
•languages spoken
Are there other similar stores?
•What do they stock and what is their reputation?
Location Effects on Planning
•Knowing demographic of location is important
•Preparing for ebbs and flows of demographic changes is another
planning option
•Looking at history of planned location can tell a story of the
market
•Having ability to grow or change with the community will be
important component
•Knowing demographic of location is important
•Preparing for ebbs and flows of demographic changes is another
planning option
•Looking at history of planned location can tell a story of the
market
•Having ability to grow or change with the community will be
important component
Retail Trading Area
U.S. Census Bureau and Demographic Data
U.S. Census Bureau data includes
•Number of people in household
•Household relationships
•Age, sex, race
•Number household units
•Status of plumbing facilities
•Owner occupied or rental
•Value of home and vacancy status
U.S. Census Bureau data includes
•Number of people in household
•Household relationships
•Age, sex, race
•Number household units
•Status of plumbing facilities
•Owner occupied or rental
•Value of home and vacancy status
GIS and Location Decisions
•Geographic information system (GIS): system that can store,
retrieve, map, & analyze geographic data
•GIS helps visualize information about customer buying behaviors
and demographics
•GIS has a fee, but is updated frequently
•Nielsen is company that offers wide range of useful tools
•Geographic information system (GIS): system that can store,
retrieve, map, & analyze geographic data
•GIS helps visualize information about customer buying behaviors
and demographics
•GIS has a fee, but is updated frequently
•Nielsen is company that offers wide range of useful tools
Factors in Analyzing Trading Area
Types of Trading Areas
•Primary
•Secondary
•Fringe
Make sure that area surrounding location has
•Enough customers
•Enough money to spend
•Need for product or service you are bringing
•Competition in trading area
Types of Trading Areas
•Primary
•Secondary
•Fringe
Make sure that area surrounding location has
•Enough customers
•Enough money to spend
•Need for product or service you are bringing
•Competition in trading area
Available Retail Locations
Comparing Location Benefits
Unplanned shopping areas: spaces that developed over time
•Downtown areas, strip malls
Planned shopping areas:
•Omni-centers: large planned centers with variety of retail formats
•Lifestyle centers: located in upscale areas with specialty chain
stores, restaurants, and theatres
•Outlet centers: place that sells damage, discontinued, or surplus
merchandise
•Mixed use developments: shopping, restaurants, hotels, residential
spaces
Unplanned shopping areas: spaces that developed over time
•Downtown areas, strip malls
Planned shopping areas:
•Omni-centers: large planned centers with variety of retail formats
•Lifestyle centers: located in upscale areas with specialty chain
stores, restaurants, and theatres
•Outlet centers: place that sells damage, discontinued, or surplus
merchandise
•Mixed use developments: shopping, restaurants, hotels, residential
spaces
Site Selection Decisions
Evaluating Site Characteristics
•The style of operation must match area
•Demographics: Who are your customers?
•Foot traffic: Can you people get to the door?
•Accessibility and parking
•Competition
•The style of operation must match area
•Demographics: Who are your customers?
•Foot traffic: Can you people get to the door?
•Accessibility and parking
•Competition
Influence of Societal Views
•Using data from U.S. Census Bureau and GIS analysis to determine if
space you are thinking of is a good decision
•Societal environment is another component of a successful business
location
•Make sure to do your location and find space that has right
population to help business grow
•Using data from U.S. Census Bureau and GIS analysis to determine if
space you are thinking of is a good decision
•Societal environment is another component of a successful business
location
•Make sure to do your location and find space that has right
population to help business grow
Huff Gravity Model
•Huff’s model is mathematical model that recognizes correlation
between patronage and distance from location to store.
•The further a consumer is from location, the less likely they will be to
shop there.
•The model doesn’t account for factors that would affect a
customer patronizing the store.
•Huff’s model is mathematical model that recognizes correlation
between patronage and distance from location to store.
•The further a consumer is from location, the less likely they will be to
shop there.
•The model doesn’t account for factors that would affect a
customer patronizing the store.
Common Lease Types
•Percentage (retail business, mall)
•Net (any commercial lease)
•Double net (any commercial lease)
•Triple net (any commercial lease)
•Fully serviced (offices, industrial, and retail leases)
•Percentage (retail business, mall)
•Net (any commercial lease)
•Double net (any commercial lease)
•Triple net (any commercial lease)
•Fully serviced (offices, industrial, and retail leases)
THANK FOR YOUR ATTENTION!
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