Retail Concepts and Principles
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What is the primary difference between strategic and tactical decisions in retail?

  • Strategic decisions involve significant investment, while tactical decisions are typically less expensive.
  • Strategic decisions are based on data analysis, while tactical decisions are based on intuition.
  • Strategic decisions are made by senior management, while tactical decisions are made by lower-level employees.
  • Strategic decisions focus on long-term goals, while tactical decisions focus on immediate actions. (correct)

    • Which of the following is an example of a strategic decision for a retailer?

  • Hiring additional staff for the holiday season.
  • Updating the store layout to improve customer flow.
  • Adjusting pricing based on competitor promotions.
  • Choosing a new e-commerce platform. (correct)

    • Which of the following is NOT a key element of a successful retail strategy?

  • Creating a long-term sustainable strategy.
  • Identifying the target market.
  • Maximizing short-term profits. (correct)
  • Developing a unique product/service mix.

    • What is the primary difference between direct and indirect competition in retail?

    <p>Direct competition involves retailers selling similar products, while indirect competition involves retailers selling different products but targeting the same customer base. (D)</p> Signup and view all the answers

    What is 'scrambled merchandising' in retail?

    <p>Selling products that are not related to the primary merchandise category. (D)</p> Signup and view all the answers

    What is the key difference between 'variety' and 'assortment' in retail?

    <p>Variety refers to the number of merchandise categories, while assortment refers to the number of items within each category. (C)</p> Signup and view all the answers

    Why is stocking a deep and broad assortment costly for retailers?

    <p>It requires more storage space and inventory management. (B)</p> Signup and view all the answers

    Which of the following is NOT a component of the retail mix?

    <p>Packaging (A)</p> Signup and view all the answers

    Which retail type primarily focuses on low-income customers and offers limited service?

    <p>Extreme value retailers (C)</p> Signup and view all the answers

    Which of the following is NOT a channel strength for in-store shopping?

    <p>Personalization (B)</p> Signup and view all the answers

    What is the primary difference between a channel and a medium?

    <p>A channel is used for direct purchasing, while a medium is for branding and advertising (A)</p> Signup and view all the answers

    Which retail ownership type is most likely to operate as a single-store business?

    <p>Independent, single-store (D)</p> Signup and view all the answers

    What is the main difference between a multi-channel and an omnichannel retail strategy?

    <p>Multi-channel uses separate platforms, while omnichannel integrates all channels (B)</p> Signup and view all the answers

    Which of these is NOT a recognized benefit of omnichannel retailing?

    <p>Reduced operating costs (C)</p> Signup and view all the answers

    What is the main disadvantage of m-commerce?

    <p>Small viewing screens (C)</p> Signup and view all the answers

    Which of the following is a key characteristic of off-price retailers?

    <p>Inconsistent assortment of brand-name merchandise at low prices (B)</p> Signup and view all the answers

    Which of the following is NOT a factor affecting information search?

    <p>Store loyalty (C)</p> Signup and view all the answers

    What is the primary goal of 'reducing information search' for retailers?

    <p>Increase conversion rate (A)</p> Signup and view all the answers

    Which of these is NOT a way retailers can encourage customers to spend more time in the store?

    <p>Limit access to product information (C)</p> Signup and view all the answers

    What is the key element of the multiattribute model used to evaluate a retailer?

    <p>The importance of attributes (C)</p> Signup and view all the answers

    Which of the following is an example of 'scarcity' as a tactic used by retailers?

    <p>Selling limited edition items that will soon be unavailable (A)</p> Signup and view all the answers

    What is the primary reason for a customer to experience 'postpurchase cognitive dissonance'?

    <p>Regret after purchasing a high-priced item (A)</p> Signup and view all the answers

    Which of these tactics is NOT a way to stimulate need recognition?

    <p>Providing customer surveys (C)</p> Signup and view all the answers

    What is the core concept of 'need recognition' in the retail context?

    <p>Identifying a gap between actual and desired levels of satisfaction (A)</p> Signup and view all the answers

    Flashcards

    Need Recognition

    The realization that the desired level of satisfaction does not match the current level.

    Types of Needs

    Categories that define the motivations behind purchasing, such as stimulation and social experiences.

    Simulating Need Recognition

    Methods used to stimulate a customer's awareness of their needs, leading to potential purchases.

    Factors Affecting Information Search

    Elements that influence how much effort a customer puts into researching a product before purchasing.

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    Sources of Information

    Where a customer gathers details before making a purchase, divided into external and internal sources.

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    Reducing Information Search

    Strategies aimed at shortening the time customers take to make a purchasing decision, increasing conversion rates.

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    Multiattribute Model

    A framework for evaluating retailers based on multiple performance characteristics and their importance to the customer.

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    Postpurchase Cognitive Dissonance

    The internal conflict a consumer feels after a purchase when their beliefs and their choice don't align.

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    Category specialists

    Retailers that focus on a specific category, offering low prices and low services.

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    Extreme value retailers

    Retailers that target low-income customers with low cost and limited service.

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    Off-price retailers

    Stores that sell brand name merchandise at reduced prices with inconsistent assortments.

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    Omnichannel Retailing

    A coordinated shopping experience across various channels like online, in-store, and mobile.

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    Channel strengths (in-store)

    Benefits of shopping in physical stores, such as immediate gratification and personal service.

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    Channel strengths (online)

    Advantages of online retailing, including a wider selection and personalized experiences.

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    Single-channel retailing

    Retailing through one channel without integration with others.

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    M-commerce

    Mobile commerce that allows users to access retail sites via smartphones and tablets.

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    Retail Purpose

    A retailer's sense of purpose that guides its operations and is clear to customers.

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    Strategic Decisions

    Long-term decisions made infrequently, involving significant investment and difficult to reverse.

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    Retail Mix

    A strategy that identifies target customers, product assortment, pricing, and place.

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    Variety vs Assortment

    Variety refers to the number of categories; assortment refers to the number of items within those categories.

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    Direct Competition

    Competition between retailers that sell the same type of merchandise to the same target market.

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    Ethically-based Decisions

    Decisions made by retailers reflecting corporate responsibility and social commitment.

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    Store Classification

    Categorizing retailers based on variety, services offered, pricing, and store type.

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    Study Notes

    Five Rights of Retailing

    • Right product, at the right price, at the right time, in the right place, in the right quantity.
    • Sell the most with the least amount of inventory.

    Definition of Retail

    • A set of business activities that adds value to the products and services sold to consumers for their personal or family use.

    Retailer Definition

    • A business that sells products and/or services to consumers for personal or family use.
    • Wholesale = business/retailer for resale

    Manufacturer's Perspective

    • Retailers are part of the distribution channel
    • Supply chain: A set of firms that make and deliver goods/services to the final consumer

    Vertical Integration

    • Firm performs more than one set of activities in the channel

    Backward Integration

    • Retailer performs some distribution and manufacturing activities

    Forward Integration

    • Manufacturers undertake retailing activities

    How Retailers Add Value

    • Provide assortment (buy other products at same time)
    • Break bulk (buy in quantities customers want)
    • Hold inventory (buy at convenient place, when customers want it)
    • Offer services (in-store, before you buy; get credit, layaway)

    U.S. Retail is Unique

    • Has the greatest retail density (wealth driven)
    • Has the greatest concentration of large retail firms
    • Large enough to operate their own warehouses, eliminating wholesaling
    • Result in a very efficient distribution system

    Retailers Serve Diverse Markets

    • Stakeholders = all affected by a firm's actions
    • Customers want low prices
    • Shareholders want higher profits
    • Employees want higher wages
    • Community wants support
    • Retailer must balance needs of all

    Corporate Social Responsibility

    • The voluntary actions taken by a company to address ethical, social, and environmental impacts of operations, in addition to stakeholders' concerns.

    Retail + Technology

    • M-commerce
    • Internet managed supply chains
    • Real-time in-store inventory online
    • Tailored assortments to each store based on sales
    • Merchandise tracking/pricing/inventory technology (Walmart AI)

    Strategic vs Tactical Decisions

    • Strategic decisions are made infrequently, long-term, and require significant investment
    • Store location, organizational design, MIS, distribution systems, customer service are strategic decisions

    Strategy Competition

    • Direct competition (ex. Ulta vs Sephora),
    • Indirect (different prices),
    • Intratype (same type of merchandise same target customers),
    • Intertype,
    • Variety, and Scramble merchandising (selling stuff not associated with the type of store)

    Strategy Customers

    • Target market
    • Significant demographic and lifestyle trends

    Retail Strategy

    • To identify a target mix (product/service mix), a long-term sustainable strategy, and retail mix (personnel, presentation, product, promotion, pricing, place).

    Types of Retailers

    • How to classify retailers: variety/assortment, services offered, pricing, ownership, store type
    • Variety (breadth): Wide (lots of categories) vs. narrow (one category) - how many merchandise categories are carried
    • Assortment (depth): Deep vs. shallow - how many items within a category are carried (SKU's - size, color, etc.)
    • EX: Walmart has the deepest assortment, Aldi has a shallow assortment

    Cost Considerations

    • Stocking a broad assortment is costly because the retailer needs backup stock.
    • Online ordering/delivery
    • Ready-to-eat meals/kits
    • Private label/exclusive products
    • Improved shopping experiences (events, restaurants)
    • Gourmet/specialty food items
    • Large stores (160,000-200,000 sq. ft)

    Warehouse Clubs

    • Limited/irregular merchandise assortment
    • Limited service
    • Low prices
    • Low inventory holding costs
    • Low markup

    Convenience Stores

    • 3,000-5,000 sq. ft
    • Buy now, eat now example - Break Time.

    Online Grocery

    • All online with delivery/Instacart

    General Merchandise Retailers

    • EX) Marshall's (clothes), Walgreens (medicine)

    Department Stores

    • Hard goods, soft goods

    Three Tiers of Department Stores

    • Specialty department stores
    • Moderate prices
    • Value-oriented

    Full-Line Discount Stores

    • Broad variety, limited service, low prices
    • EX) Walmart, Target

    Specialty Stores

    • More depth, less breadth
    • Private label/branded
    • Specific market segments
    • EX) Alo, Lululemon, Altar'd State

    Category Specialists/Category Killer/Big Box/Destination

    • Customer buys a higher percentage of their time
    • Low price/low service
    • Lots of growth
    • EX) Staples, Lowes, Menards

    Extreme Value Retailers

    • Focus on low-income customers, imply good value, low cost location, limited service, fast-growing segment, adding more food
    • EX) Dollar General, Dollar Tree

    Off-Price Retailers

    • Inconsistent assortment of brand name products at low prices, EX: Marshalls, Ross

    Outlet Stores

    • Manufacturer outlets, retailer outlets

    Omnichannel Retailing

    • Channel = the way that the retailer sells and delivers merchandise and services to the customer
    • Retail channels: Store, online, app, social media, catalog, TV
    • Medium communicates but is not a direct way to purchase (ex. watching a YouTube channel)
    • Single-channel (retailer POV), multi-channel (retailer POV, multiple channels that aren't integrated), cross-channel (consumer POV)
    • Omnichannel: coordinated, seamless, synchronizes customer experience
    • Challenges: Providing an integrated experience, some have different divisions online vs in-store, showrooming, private label merchandise reduces this

    Channel Strengths (In-store)

    • Touch and smell, personal service, risk reduction
    • Immediate gratification, entertainment, and social experience, browsing, cash payment

    Channel Strengths (Online)

    • Deeper and broader selection, more info, personalization, expanded market presence

    Technology (Retail)

    • Increases conversion rates
    • M-commerce
    • Customers access retail sites from anywhere
    • Location-sensitive
    • Biggest disadvantage is smaller viewing screen, some retailers design websites

    Customer Buying Behavior

    • Need Recognition
    • Information Search (pre-search, for store and product, evaluation- comparing options)
    • Choice + Purchase (decide to buy, what to buy, where to buy)

    Need Recognition

    • Desired level of satisfaction doesn't match the present level of satisfaction
    • EX: iPhone color, Sonic slush deal, promotions

    Types of Needs (Buying Decisions)

    • Utilitarian needs (easy and convenient), hedonic needs (experiences/pleasurable)

    Simulating Need Recognition

    • Suggestions by sales associates
    • Advertising, direct mail
    • Visual merchandising, special events
    • Signs, displays, samples, coupons, influencers
    • Value of searching vs cost of searching
    • Product characteristics (require more search); complexity, cost, customer characteristics
    • Experience, perceived risk, time pressure, education, number of choices
    • Keep merchandise in stock
    • Reduce waiting time
    • Easy navigation and checkout
    • Price matching
    • Money-back guarantees

    Multiattribute Model

    • Rate a retailer based on performance of relevant attributes (importance of those attributes)

    Consideration Set

    • The set of alternatives customers evaluate when making a selection
    • EX: grocery stores, location, large range of assortment

    Scarcity

    • Products that disappear quickly, sold at regular price.
    • EX: TJ Maxx

    Satisfaction

    • Post-consumption evaluation of how well a store or product meets or exceeds customer expectations
    • EX: What am I loyal to? Telescopic mascara brand.

    Postpurchase Cognitive Dissonance

    • Internal conflict due to discrepancies between beliefs and purchases

    Types of Buying Decisions (Postpurchase)

    • Extended problem solving (biggest purchase), limited problem solving (prior experience), habitual decision making (already loyal to brand/store, purchase isn't important).

    Customer Loyalty

    • Brand loyalty, retailer loyalty
    • Factors influencing buying process: economy, family, reference groups, culture
    • Market segment= group of consumers with similar needs

    Lifestyle/Psychographic Segmentation

    • How consumers spend their time and money; good predictor of purchase

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    Description

    Explore the fundamentals of retailing with a focus on the five rights of retailing, the definition and role of retailers, and the concepts of vertical and horizontal integration. This quiz will help you understand how retailers add value and the manufacturer's perspective in the supply chain.

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