Retail Management and Evolution

Retail Life Cycle

• Retail institutions pass through four stages:
  • Introduction
  • Growth
  • Maturity
  • Decline

How Retail Institutions Are Evolving

• Mergers, diversification, and downsizing:
  • Combinations of separately owned firms
  • Expanding into businesses outside normal operations
  • Closing unprofitable stores or selling off divisions
• Cost-containment and value-driven retailing:
  • Striving to hold down initial investments and operating costs
  • Maximizing productivity in response to intense competition and economic uncertainty

Types of Retail Stores

• Convenience store:
  • Well-located, food-oriented retailer
  • Open long hours, carries a moderate number of items
  • Small store facility, average to above-average prices
• Full-line discount store:
  • High-volume, low-cost outlet selling a broad product assortment
  • Customer service at a centralized area
  • Self-service with minimal assistance in departments
• Variety store:
  • Assortment of inexpensive and popularly priced goods and services
  • Open displays, few salespeople
  • No full product lines, no delivery
• Off-price chain:
  • Brand-name apparel and accessories at everyday low prices
  • Efficient, limited-service environment
  • No gift wrapping, extra charges for alterations
• Vending machines:
  • Cash- or card-operated retailing format
  • Eliminates sales personnel, allows 24-hour sales
  • Machines placed conveniently for consumers

Emergence of World Wide Web

• The World Wide Web:
  • A way to access information on the Internet
  • Easy-to-use Web addresses and pages
  • Visual and audio content
• The role of the Web:
  • Projecting a retail presence
  • Enhancing image and generating sales
  • Reaching geographically dispersed customers
  • Providing information and customer service
  • Promoting new products and offering employment opportunities
• Web strengths:
  • Information, entertainment, and interactive communication
  • Shopping online with selection, prices, convenience, and fun

Financial Ratios and Trends

• Cost of goods sold:
  • Amount a retailer pays to acquire merchandise
  • Based on purchase prices, freight, and discounts
• Gross profit (margin):
  • Difference between net sales and cost of goods sold
  • Includes operating expenses and net profit
• Net profit after taxes:
  • Profit earned after all costs and taxes deducted
  • Net profit margin is a performance measure
• Asset turnover:
  • Performance measure based on net sales and total assets
  • Return on assets (ROA) can be computed
• Other key business ratios:
  • Quick ratio, current ratio, collection period, accounts payable to net sales
  • Overall gross profit
• Financial trends in retailing:
  • Slow growth in economy
  • Funding sources, mergers, and consolidations
  • Bankruptcies and liquidations
  • Questionable accounting and financial reporting practices

Merchandise Planning and Control

• Selecting merchandise source:
  • Company-owned, outside supplier, or new supplier
• Negotiating the purchase:
  • Special considerations, especially low prices
• Opportunistic buying:
  • Negotiating low prices for merchandise with low sales
• Slotting allowances:
  • Payments to vendors for shelf space
• Concluding purchases:
  • Taking title immediately, upon receipt, or after billing cycle
• Reordering merchandise:
  • Four critical factors: order and delivery time, inventory turnover, financial outlays, and inventory versus ordering costs

This quiz covers retail management concepts, including scrambled merchandising, retail life cycle, and how retail institutions evolve through mergers, diversification, and downsizing.