Introduction to Retailing

Week 1

Learning Objectives
When you complete this
chapter you should be able to:
1. What retailing is
2. What retailers do
3. Carrier and Opportunities in
Retailing
4. Decisions to be made by
Managers

LO 1: WHAT RETAILING IS
Retailing a set of business
activities that adds value to the
products and services sold to
consumers for their personal or
family use
A retailer is a business that
sells products and/or services
to consumers for personal or
family use.

Examples of Retailers
Retailers:

Kohls, Macys, Wendys,

www.Amazon.com, Jiffy
Lube, AMC Theaters,
American Eagle
Outfitter, Avon, J.Crew

Firms that are retailers and wholesalers sell to other business as well as consumers:
Office Depot, The Home Depot, United
Airlines, Bank of America, Costco

Worlds 20 Largest
Retailers

Table 1-1: The 10 Largest Retailers

in the United States
Rank

Company

Main Emphasis

Wal-Mart

Full-line discount stores, supercenters,

membership clubs

Home Depot

Home centers, design centers

CVS Caremark

Drugstores

Kroger

Supermarkets, convenience stores, jewelry stores

Costco

Membership clubs

Target

Full-line discount stores, supercenters

Walgreens

Drugstores

Sears Holdings Department stores, specialty stores

Lowes

Home centers

10

Safeway

Supermarkets

Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

1-6

LO 2: WHAT DO RETAILERS DO
DISTRIBUTION CHANNEL

The Retailers Role in a Supply

Chain
Retailers are the final business
within a supply chain which links
manufacturers to consumers.
A Supply Chain is a set of firms that
make and deliver a given set of
goods and services to the ultimate
consumer.

The Retailers Role in the

Sorting Process

1-9

Retail Mgt. 11e (c) 2010 Pearson

Education, Inc. publishing as
Prentice Hall

Manufacturing, Wholesaling
and Retailing
Vertical Integration firm performs
more than one set of activities in the
channel
Ex: retailer invests in wholesaling or
manufacturing

Backward Integration retailer

performs some distribution and
manufacturing activities
Ex: JCPenney sells Arizona jeans (Private

Manufacturing, Wholesaling
and Retailing
Forward Integration manufacturers
undertake retailing activities
Ex: Ralph Lauren (New York Jones, Liz
Claiborne) operates its own stores

Large retailers engage in both

wholesaling and retailing
Ex: Wal-Mart, Lowes, Safeway, Brown Shoe
Company

Relationship Management Among

Retailers and Suppliers
Disagreements may occur in the
following areas:
control over channel
profit allocation
number of competing retailers
product displays
promotional support
payment terms
operating flexibility
1-12

Retail Mgt. 11e (c) 2010 Pearson

Education, Inc. publishing as
Prentice Hall

Distribution Types
Exclusive: suppliers make agreements with
one or few retailers, designating such retailers
as the only ones to carry certain brands or
products within a specified geographic area
Intensive: suppliers sell through as many
retailers as possible
Selective: suppliers sell through a moderate
number of retailers

1-13

Retail Mgt. 11e (c) 2010 Pearson

Education, Inc. publishing as
Prentice Hall

How Retailers Add Value

Provide Assortment

Buy other products at

the same time
Break Bulk

Buy it in quantities
customers want
Hold Inventory

Buy it at a convenient
place when you
want it
Offer Services

See it before you

buy; get credit;

LO 3: CARRIERS AND OPPORTUNITIES

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

Opportunities in Retailing:
Entrepreneurial Opportunities
Retailing provides
opportunities for people who
want to start their own
business
Some of the worlds richest
people are retailing
entrepreneurs
Examples of retailing
entrepreneurs
Sam Walton (Wal-Mart)
Jeff Bezos (
www.Amazon.com)
Ingvar Kamprad (IKEA)

Wal-Mart: Sam Walton

IKEA: Ingvar Kamprad

Career Opportunities in Retailing

Start Your Own Business
List of Retail Entrepreneurs on Forbes
400 Richest Americans

Walton Family (Wal-Mart)

Fisher (The Gap)
Wexner (The Limited)
Menard (Menards)
Marcus (The Home Depot)
Kellogg (Kohls)
Schulze (Best Buy)
Levine (Family Dollar)
Gold (99Cent Only)

Careers in Retailing
Career Opportunities
Store Management
Merchandise Management
Corporate Staff

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

The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Why You Should Consider

Retailing
Entry level management positions:
Department manager or assistant buyer/planner

Manage and have P&L responsibility 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

Types of Jobs in Retailing

Most entry level jobs are in store
management or buying, but theres

Accounting and finance

Real estate
Human resource management
Supply chain management
Advertising
Public affairs
Information systems
Loss prevention
Visual merchandising

LO 4: Decision to be made by Managers

Need to identify
the competition
Intratype
competition
(e.g., Dillards
vs.. JCPenney)

Intertype
competition
(e.g., Dillards
vs.. Wal-Mart)

Retail Strategy
Identifying
customers
What are the
significant
demographic
and life-style
trends
Who are your
target
customers

Retail Strategy
A retail strategy
should identify
the target market
the product and
service mix
a long-term
comparative
advantage

JC Penneys Strategic Evolution(1)

Main Street (small town) private

label, soft goods (apparel, home
furnishings), decentralized retailer
Changes in environment -increased disposable income,
growth of suburbs, interstate
highway program
Emulate Sears in moving to
enclosed suburban malls
Add hard goods (appliances,
automotive)
Diversify drug stores,
insurance, specialty stores
Develop catalog channel

JC Penneys Strategic Evolution(2)

Focus on department store format and soft
goods develop electronic retail channel
Mid-market, mall based department store,
between Wal-Mart/Target and
Macys/Dillards
Competition from Target, Kohls
Centralization to reduce cost, increase
responsiveness - centralized buying,
warehouse delivery
Off the mall stores to increase customer
convenience
Improving store atmospherics
Upgrading merchandise offering (e.g.,
Sephora, American Living by Polo Ralph
Lauren)

Whole Foods
Implementation
Strategy - organic and natural
foods supermarket chain
Assortment beyond
organic/natural foods
Private labels - Whole Food,
360 Day Value
Love, trust, and employee
empowerment
Equality in compensation

Decision Variables for

Retailers

Ethical Situations for a Retail

Manager
Should a retailer sell merchandise that they
suspect utilized child labor?
Should it advertise that its prices are the lowest
in an area even though some items are not?
Should a buyer accept an expensive gift from a
vendor?
Should salespeople use high-pressure sales when
they know the product is not the best for the
customers needs?
Should a retailer give preference to minorities
when making a promotion decision?
Should a retailer treat some customers better
than others?

You are Faced with an Ethical Decision:

What Can You Do?

Ignore your personal values and do what

your company asks you to do you will
probably feel dissatisfied with your job .
Take a stand and tell your employer what
you think. Work to change the policies.
Refuse to compromise your principles you
could lose your job!

Discussion
What is your favorite retailer?
Discuss the criteria you have used in
making your selection. What can a
competing firm do to lure you away
from your favorite firm?
What are the pros and cons a firm
such as Polo Ralph Lauren having its
own retail facilities, as well as selling
through traditional retailers?

Discussions
Do you believe that customer service
in retailing is improving or declining?
Why?
Think of your top-five favorite
retailers. Are they regional, national,
or global companies? Could any of
the regional or national companies
have success in the future in a global
market? Explain your response.