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LEARNING OBJECTIVES L01 Identify retailing activities. L02 Realize the importance of retailing in the U.S. and world economies. L03 Analyze the changing retail industry, LO4 Recognize the opportunities in retailing for you. LO5 Understand the strategic retail management decision process. Our...

LEARNING OBJECTIVES L01 Identify retailing activities. L02 Realize the importance of retailing in the U.S. and world economies. L03 Analyze the changing retail industry, LO4 Recognize the opportunities in retailing for you. LO5 Understand the strategic retail management decision process. Our ability to entertain and inspire versus iust selling a product is really how retail is evolving. We bring content, community, and commerce to life through our strategic partnerships with the entertainment community across film, music, and live events. We were Universal's partner for the launch of Snow White and the Huntsman and our 24-hour event featured 25 designers and brands that created over 220 unique products inspired by the film, including the launch of Oscar-winning costume designer Colleen Atwood's first consumer collection. Our HSN Live concert series provides our customers with a live music experience featuring some of the music industry's biggest stars. Lionel Richie held a concert at HSN's studios to kick off the release of Tuskegee, his first best-selling album in more than 25 vears. The power of appearing on HSN is unparalleled. When I met with Lady Gaga about potentially developing a line for HSN, she said, "You have the coolest job." Think of all the amazing things she has done in her career, and here she was telling me I had a cool job. And you know what? She's absolutely right. Retailing is such a common part of our everyday lives that we often take it for granted. For most people, retailers simply are places to buy things. At a very young age, children know what stores have the things they want, and they expect to find the products they want when they visit a store or website. they want them, where they want them, and at a fair price. Take the quiz in Exhibit 1-1 to check out the accuracy of your views about the retail industry and career opportunities the industry offers. The answers are at the end of the chapter. To illustrate what is below the tip of the iceberg, consider Macy's. Macy's stocks and sells more than 100,000 different sizes, colors, and brands of products. Managers at Macy's need to determine what subset of these 100,000 items they are going to offer from the millions of potential products Macy's could sell. Then managers negotiate with more than 3,000 suppliers the price they will pay the supplier for the products and the prices they will charge their customers. Managers decide which of the 100,000 products will be sold at each of Macy's 840 stores and how they will be displayed. Managers select, train, and motivate the 150,000 store employees to make sure the merchandise is attractively displayed and customers get the service they expect. And, perhaps most importantly, Macy's managers develop strategies to guide these decisions and provide a good return to its stockholders while facing intense competition.! Working in this highly competitive, rapidly changing retail environment is both challenging and exciting, and it offers significant financial rewards. This book describes the world of retailing and offers key principles for effectively managing retail businesses. Knowledge of retailing principles and practices will help you develop management skills for many business contexts. For example, retailers are the customers for most business-to-consumer (B-to-C companies such as Procter & Gamble and Hewlett-Packard. Thus, brand managers in B-to-C companies need to have a thorough understanding of how retailers operate and make money so that they can encourage retailers to offer and promote their products. Financial and health care institutions use retail principles to develop their offer-ings; improve customer service; and provide convenient, easy access to their cus-tomers. Thus, any student interested in professional B-to-C selling, marketing management, or finance should find this book useful. WHAT IS RETAILING? The word retail is derived from the French word retailer, meaning to cut a piece off or break bulk. Retailing is the set of business activities that adds value to products and services sold to consumers for their personal or family use. Often, people think of retailing only as the sale of products in stores, but retailing also involves the sale of services such as overnight lodging in a motel, a doctor's exam, a haircut, or a home- delivered pizza. Not all retailing is done in stores. Examples of nonstore retailing include ordering a T-shirt on your mobile phone app, buying cosmetics from an Avon salesperson, ordering hiking boots from an L. L. Bean catalog, and renting a Blu-Ray from a Redbox kiosk. The Retailer's Role in a Supply Chain A retailer is a business that sells products and/or services to consumers for their personal or family use. 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. Exhibit 1-2 shows the retailer's position within a supply chain. Retailers typically buy products from wholesalers and/or manufacturers and resell them to consumers. 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? The answer, generally, is no, because retailers add value and are more efficient at adding this value than manufacturers or wholesalers. Retailers Create Value The value-creating activities undertaken by retailers include (1) providing an assortment of products and services, (2) breaking bulk, (3) holding inventory, and (4) providing services. Providing Assortments Conventional supermarkets typically carry about 30,000 different items made by more than 500 companies. Offering an assortment enables their customers to choose from a wide selection of products, brands, sizes, and prices at one location. Manufacturers specialize in produc ing specific types of products. For example, Frito-Lay makes snacks, Yoplait makes yogurt, Skippy makes peanut butter, and Heinz makes ketchup. if each of these manufacturers had its own stores that sold onlv its own products, consumers would have to go to many different stores to buy the groceries needed to prepare a single meal. Breaking Bulk To reduce transportation costs, manufacturers and wholesalers typically ship cases of frozen dinners or cartons of blouses to retailers. Retailers then offer the products in smaller quantities tailored to individual consumers' and households' consumption patterns an activity called breaking bulk. Breaking bulk is important to both manufacturers and consumers. It allows manufacturers to efficiently make and ship merchandise in larger quantities at one time and enables consumers to purchase merchandise in smaller, more useful quantities. Holding Inventory A major value-providing ac- tivity performed by retailers is holding inventory so that products will be available when consumers want them. Thus, consumers can keep a smaller inventory of products at home because they know local retailers will have the products available when they need more. This activity is particularly important to consumers with limited storage space, such as families living in small apartments. Providing Services Retailers provide services that make it easier for customers to buy and use products. For example, retailers offer credit so that consumers can have a product now and pay for it later. They display products so that consumers can see and test them before buying. Some retailers employ salespeople in stores or maintain Web sites to answer questions and provide additional information about the products they sell Costs of Channel Activities While the value-creating activities undertaken by channel members provide benefits to customers, they also increase the cost of products and services. Exhibit 1-3 illustrates the supply chain costs of getting a T-shirt from the manufacturer to the consumer. In this example, it costs the T-shirt manufacturer $10.00 to make and market the T-shirt. These costs include the design, raw materials, labor, production equipment, transportation to the wholesaler, and so on. The manufacturer sells the T-shirt to the wholesaler for $11.00 and makes $1.00 profit. The wholesaler incurs $2.00 to handle and store the T-shirt and transport it to the retailers. The wholesaler sells the T-shirt to the retailers for $14.00, making a $1.00 profit. The retailer then incurs costs to fold the shirt, put price tags on it, store it, employ sales associates, light and air condition the store, and so on. The retailer sells the shirt to a customer for $19.95, making a profit of $1.95. Note that the costs in the supply chain, $8.95 ($19.95 - $11.00), are almost as much as the cost to make the product. These costs are justified by the considerable value added by the wholesaler and retailers to the product. By providing assort- ments, breaking bulk, holding inventory, and providing services, retailers increase the benefits that consumers receive from their products and services. Consider a T-shirt in a shipping crate in an Iowa manufacturer's warehouse. The T-shirt will not satisfy the needs of a student who wants to have something to wear at the basketball game tonight. The student finds the T-shirt more valuable and will pay more for it if it is available from a nearby department store that also sells pants, belts, and other items complementing the T-shirt and provides sales associates who can help the student find what he likes. If retailers did not provide these benefits, wholesalers or manufacturers would have to provide them, and they would tvpically not be as efficient as retailers in providing these benefits. Retailers Perform Wholesaling and Production Activities Wholesalers buy and store merchandise in large quantities from manufacturers and then resell the merchandise (usually in smaller quantities) to retailers. When manufacturers like Apple and Nike sell directly to consumers, they are performing the production, wholesaling, and retail business activities. Some large retailers, like Costco and Home Depot, function as both retailers and wholesalers: They perform retailing activities when they sell to consumers, but they engage in wholesaling activities when they sell to other businesses, such as restaurants or building contractors. In some supply chains, the manufacturing, wholesaling, and retailing activities are performed by independent firms, but most supply chains feature some vertical inte- gration. Vertical integration means that a firm performs more than one set of activities in the channel, as occurs when a retailer engages in wholesaling activities by operating its own distribution centers to supply its stores. Backward integration arises when a retailer performs some wholesaling and manufacturing activities. such as operating warehouses or designing private-label merchandise. Forward integration occurs when a manufacturer undertakes retailing and wholesaling activities, such as Apple operating its own retail stores. Most large retailers such as Safeway, Walmart, and Lowe's manage their own distribution centers and perform activities undertaken by wholesalers. They buy directly from manufacturers, have merchandise shipped to their warehouses, and then distribute the merchandise to their stores. Other retailers, such as J. Crew and. Victoria's Secret, are even more vertically integrated. They design the merchandise they sell and then contract with manufacturers to produce it exclusively for them. Differences in Distribution Channels around the World Some critical differences among the retailing and distribution systems in the United States, European Union, China, and India are summarized in Exhibit 1-4. As this exhibit suggests, the U.S. retail industry has the greatest retail density (retail stores per person) and concentration of large retail firms. Real estate in the United States is relatively inexpensive, and most consumers own automobiles. Thus, retailers often operate large stores in lightly populated areas. Many U.S. retailers have stores with more than 20,000 square feet. Due to their size, they have the scale economies to operate their own warehouses, eliminating the need for wholesalers. This combination of large stores and large firms in the United States results in a very efficient distribution system. In contrast, the Indian distribution system is characterized by small stores operated by relatively small firms and a large independent wholesale industry. To make the daily deliveries to these small retailers efficiently, the merchandise often passes through several different wholesalers. In addition, the infrastructure to support modern retailing, especially the transportation and communication systems, is not as well developed in India as it is in more developed economies. These efficiency differences mean that a much larger percentage of the Indian labor force is employed in distribution and retailing than is the case in the United States, and the supply chain costs in India are higher.3 China's retail industry is highly fragmented like the retail industry in India. It is composed of many small and medium-sized firms. The number of national and even regional chains is limited. However, China's retail distribution system is going through a period of rapid development. This development is spurred by the government's shifting interest from focusing on exports and satisfying basic consumer needs that provide a higher quality of life. In China, the government removed most restrictions on direct foreign investments, and global retailers flocked to this huge and growing market. Now, Walmart operates 370 stores in China, and Carrefour, the second largest retailer in the world, operates 204. However, there is great disparity between the distribution system in the first-tier, eastern coastal cities- Beijing, Shanghai, and Guangdong and the smaller western cities. The retail offering in the first-tier cities is very similar to the urban retail environment in U.S. cities such as New York and Chicago. In contrast, retailing in the smaller western cities is more similar to retailing in India.* The European distribution system falls between the American and Indian systems on this continuum of efficiency and scale. In northern Europe, retailing is similar to that in the United States, with high concentration levels in some national markets. For example, 80 percent or more of sales in sectors such as food and home improvements are made by five or fewer firms. Southern European retailing is more fragmented across all sectors. For example, traditional farmers' market retailing remains important in some sectors, operating alongside large "big-box" formats.§ Social and political objectives have created some of these differences in distribution systems in countries. An important priority of the Indian and European economic policies is to reduce unemployment by protecting small businesses such as independent neighborhood retailers.° Some countries have passed laws prohibiting large stores, as well as strict zoning laws to preserve green spaces, protect town centers, and inhibit the development of large-scale retailing in the suburbs. Finally, retail productivity is reduced when countries restrict the hours that stores can operate. For example, in France, many stores close at 7 p.m. on weeknights. Labor unions in France and elsewhere in Europe are opposed to U.S.-style 24/ shopping because of the strains it could put on store employees. SOCIAL AND ECONOMIC SIGNIFICANCE OF RETAILING L02 Realize the importance of retailing in the U.S. and world economies. Role in Developed Economies Retail sales (excluding automobile and automotive parts sales) in 2011 were $4.3 trillion. More than 8 percent of the total U.S. gross domestic product comes from retailing, almost as much as the contribution of the entire U.S, manufacturing industry sector." But this sales level underestimates the impact of retailing on the U.S. economy because it does not include the sales and employment of many firms providing consumer services such as entertainment, home repairs, and health care. Consumer spending plays a critical role in the economies of the United States and other developed countries. When consumers spend more money buying goods and services from retailers, a country's economy flourishes. Merchandise flies off the shelves, and retailers place orders for replacement merchandise. Manufacturers hire more emplovees, place orders for raw materials, and make more products. However, if consumers feel uncertain about their financial future and decide to refrain from buying new refrigerators or blue jeans, the economy slows down. The retail sector plays a key role in developed economies, not only because consumer demand is an indication of a vibrant financial system, but also because retailers are large employers. More than 14 million people were employed in retailing in 2012- -approximately 11 percent of the U.S. workforce-and an additional 15 percent work for companies that either provide services to and/or sell products through retailers.? Corporate Social Responsibility In addition to providing the benefit to their customers outlined in the previous section and a fair return for their stockholders, most retailers engage in socially responsible activities. Corporate social responsibility (CSR) involves an organization voluntarily engaging in business practices that meet or exceed the ethical and legal expectations of its stakeholders its employees, customers, community, and society in general. Many retailers now go the extra mile to support their communities, environ-ment, and social causes. Examples include reducing their use of energy, supporting local schools, and working with national organizations such as the American Red Cross and Habitat for Humanity. These corporate social responsibility activities promote a positive image to customers, build employee morale, and save money-a win-win scenario for both the companies and their stakeholders.10 For example, community philanthropy is the cornerstone of Target's CSR ac-tivities. Store managers have a budget for donations they can make to local events. Since 1946, Target has given 5 percent of its income to support local activities in the communities in which it has stores, such as company-sponsored youth leagues or a special exhibit at the local zoo. Target has been innovative in using social media to support its CSR program. Target's "Bullseye Gives" program asked its million Facebook fans to vote on how the company should allocate 33 million among 10 nonprofits." Many retailers are building LEED-certified stores. The Leadership in Energy and Environmental Design (LEED) certification is based on an assessment of the store's impact on human and environmental health, sustainable site development, water savings, energy efficiency, materials selection, and indoor environmental quality. Some features in a prototype LEED-certified McDonald's restaurant are its permeable pavement that cleans rainwater; a cistern buried behind the restaurant that collects rainwater, which is used to water the landscaping; a roof garden that insulates the restaurant; the use of less-toxic cleaners and of paints and resins that do not emit chemical odors; and the installation of low-flow toilets and urinals that use less water than standard low-flow toilets. Walmart's new stores have fuel cells that supply half of the electricity. Holes are punched in the roof for skylights that provide 70 percent of the store's lighting needs during the day. To help keep the scorching sun at bay and cool the building naturally, roofs are painted white. 13 The production of apparel has adverse effects on the environment because it involves the use of dyes, solvents, and huge amounts of water and petroleum for transportation. An industry group called the Sustainable Apparel Coalition has developed an index to rate the relative sustainability of apparel. Some members of the coalition are Walmart, Target, Kohl's, Nordstrom, and Patagonia. Environmentalists anticipate that the index will be used by consumers when selecting products and by retail buyers when they select the assortments of products to offer. The index considers the entire life of a product- -from raw materials to disposal. Brands can get higher scores by asking consumers to wash items in cold, rather than hot, water. Some buyers are rewarded for the design of products with high index levels. A new Nike "Flyknit" running shoe worn by U.S., Kenyan, and other marathoners at the London Olympics was designed based on the index. The shoe is knit from polyester, eliminating the waste of shoes sewn from cut textiles. 14 Companies typically go through several stages before they fully integrate CSR into their strategy. Companies in the first stage engage only in CSR activities required by law. In this stage, companies are not actually convinced of the importance of CSR actions. In the second stage, companies go beyond activities required by law to engage in CSR activities that also provide a short-term financial benefit to the company. For example, a retailer might reduce the energy consumption of its stores just because doing so reduces its costs. In the third stage, companies operate responsibly because they believe this is the "right thing" to do. Companies in the fourth and final stage engage in socially and environmentally responsible actions because they believe these activities must be done for the "well-being" of everyone. These companies have truly incorporated the concept of CSR into their business strategy. Role in Developing Economies-The Bottom of the Pyramid Retailers need to also focus on opportunities available by serving the needs of the 4 billion people (25 percent of the world's population) at the lowest end of the income distribution. Serving these customers also provides an important social benefit: reducing worldwide poverty. Consumers in this low income consumer segment, referred to as the base of the pyramid or bottom of the pyramid (BoP), have a potential spending power of more than $5 trillion. The sheer size and growth of the BoP markets, especially in the countries with emerging economies such as China, India, and Brazil, and maturation of consumer goods and retail markets in developed economies is motivating firms to enter the BoP market. Undertaking retailing activities to the BoP market is challenging. It is difficult to communicate and complete transactions with people in the BoP market because they are more likely to lack access to mass media, the Internet, mobile phones, or credit cards than more affluent markets. Most people in BoP markets live in rural areas remote villages that are not connected to the outside world through adequate roads. Limited local demand combined with the high cost of transporting goods to and from remote villages results in higher costs and prices for consumer goods. Thus, engagement at the BoP markets requires innovative approaches for doing business. Retrofitting business models used in the more developed markets will not work. Retailing View 1.1 describes how Grupo Elektra has improved the lifestyle of Latin America's working poor. THE GROWING IMPORTANCE OF RETAILING AND RETAILERS LO3 Analyze the changing retail industry. REFACT James Cash Penney opened the first JCPenney store, called Golden Rule, in Kemmerer, Wyoming, in 1902. Evolution of the Retail Industry From a consumer's perspective, retailers are local businesses. Even though many consumers collect information and make purchases using the Internet or a mobile device, more than 90 percent of all retail sales are made in stores usually stores that are less than a 15-minute drive from the consumer's home or workplace. Thus, retail stores predominately compete against other stores that are located nearby. There has been a dramatic change in the structure of the retail industry over the past 50 years. Fifty years ago, Sears and JCPenney were the only retail firms that had chains of stores across the United States. The retail industry consisted of the small, independent, local retailers competing against other small, independent retailers in the same community. Walmart, Home Depot, Staples, and Best Buy did not exist or were small companies with a few stores. Now, the retail industry is dominated by large, national, and even international retail firms. While there are more than 1 million retailers in the United States, over 40 percent of U.S. retail sales are made by companies with more than 10,000 employees. Home improvement centers are the most concentrated sector in the retail industry, with the four largest firms accounting for 92.7 percent of U.S. annual sales in the sector. The top four department store chains account for 73.2 percent of annual U.S. sales in that sector, and the top four drug store chains account for 63.0 percent in that sector. On the other hand, the least concentrated sectors are food service and drinking, where only 5.8 percent of sales are represented by the top four firms in the sector, and furniture stores where only 13.9 percent of sales are represented by the top four firms in the sector. 19 The largest retailers in the world are shown in Exhibit 1-5. Nine of the top 20 retailers are headquartered in the United States; while Germany has five. Of these top 20 retailers, the U.S. retailers have fewer global operations than the non-U.S. based retailers. The average number of countries that these U.S.-based retailers operate in is five, compared to the non-U.S.-headquartered retailers, who operate in an average of 16 countries. Five of the largest U.S.-based retailers operate in only one or two countries. Only four of the 11 non-U.S-based retailers operate stores in the United States, the largest retail market in the world. The development of information systems is one the forces facilitating the growth of large retail firms the shift from an industry dominated by small, local retailers to large multinational chains. Prior to the development of these systems, it was difficult for someone other than the local store manager to track. REFACT Walmart's annual sales are five times greater than the sales of Procter & Gamble, the largest consumer product producer. RETAILING VIEW Grupo Elektra Improves the Lifestyle of Latin America's Working Poor Grupo Elektra, with headquarters in Mexico City, owns and operates more than 2,600 specialty stores in Mexico, Brazil, Argentina, Guatemala, El Salvador, Honduras, Panama, and Peru. Its stores sell consumer electronics and appliances to Latin America's working poor. It is quite a challenge to sell consumer durable goods to families earning less than $400 per month and spend 90 percent of their income on basic necessities, such as food and housing. In addition, these BoP consumers often do not have formal jobs or bank accounts. But Grupo Elektra, and its banking affiliate, Banco Azteca, have been increasing sales and profits during one of the worst economic recessions in decades by servicing these low-income consumers. For the past five years, revenues and operating profits have grown at a double-digit rate. Rather than wait for low-income consumers to open their own bank accounts so they can afford to buy its products, Elektra launched its own banks inside its network of specialty retail shops. These banks make small "micro-loans" to Elektra's customers so they can afford to buy its appliances. It determines how much money its new customers can really afford to borrow- and then pay back. Within 24 hours, the bank approves or denies a client's loan application using the information gathered by the credit officer at the branch. The officer visits the customers' houses to determine their income and expenses. The bank then establishes weekly installment payments that match the borrowing capacity of each customer. More than 5,000 loan officers travel by motorcycles to the applicants' homes to assess their creditworthiness and, when necessary, to collect payments from customers. Usu-ally, however, cash payments are made once a week at an Electra store. This approach has enabled thousands of low-income consumers to acquire durables that have long been inaccessible to them because they lacked the opportunity to use credit. Traditionally, these low-income people- the taxi drivers, mango vendors, and cleaning ladies of Latin how the merchandise in the store was selling whether it was selling above plan and needed to be reordered or was selling below plan and needed to have its price reduced. It was also difficult to collect and consolidate the plans from a number of different stores so that a buyer could place large orders with vendors to get price discounts. Thus, before the availability of modern information systems, it was difficult for retailers to lower costs through scale economies, and larger retailers had limited advantages over small local or regional retailers. Most consumers shopping in their local stores don't realize the sophisticated information systems used by retailers today to manage these large, complex supply chain systems. To illustrate the complexity of these systems, consider the following example. You go to Best Buy and find a tablet you are going to buy. When you decide to buy a tablet in a store, the point-of-sale (POS) terminal transmits data about the transaction to the retailer's distribution center and then on to the manu- facturer. Data about your purchase are incorporated into a sophisticated inventory management system. When the in-store inventory level drops below a prespeci-fied level, an electronic notice is automatically transmitted, authorizing the shipment of more units to the retailer's distribution center and then to the store. The retail buyer or a computer program analyzes the sales data to determine how many and which tablet models will be stocked in the retailer's stores and what price will be charged. To add even another layer of complexity, most large retailers contract with factories around the world to have merchandise made for them. Thus, for example, nearly 1,500 employees, working in both quality-control and full-service buying centers, help Target ensure that any factory worldwide that produces products with the Target name meet Target's own standards for product quality. Role of Information Systems Now, retailers are inundated with data about the thousands of transactions that take place each day. The challenge for retailers is to convert this raw data into information that managers can use to make better decisions. Many retailers now use the data they have on their customers to identify their best customers and target customized promotions to them, place products close to each other when they find that many customers are buying the same products at the same time, and tailor the assortment of products in each store to better match the needs of the store's local market. In addition to playing an important role in society in general, retailing provides personal opportunities to work for a company in an exciting, challenging environment or to start an entrepreneurial venture. These opportunities are discussed in the next section. MANAGEMENT AND ENTREPRENEURIAL OPPORTUNITIES Management Opportunities To exploit these new technologies and systems and gain advantage in a highly competitive and challenging environment, retailers need to hire and promote the best and brightest. Sherry Hollack, a former vice president of talent development at Macy's, emphasized this point: "One of the biggest challenges facing Macy's, and most other retail chains, is hiring and retaining managers to lead our company in the coming years. The changing demographics are working against us. Over the next ten years, a lot of our senior managers, members of the Baby Boomer generation, will be retiring. So we are going to be competing with other retailers and firms in other industries for a smaller pool of available managers in the generations behind the Boomers. In addition, retailing is becoming a much more sophisticated business. Our managers need to be comfortable with new technologies, information and supply chain management systems, and international business as well as managing a diverse workforce and buying merchandise. " Students often view retailing as part of marketing because managing distribution (place) is one of the 4 Ps of marketing. But retailers are businesses and, like manufacturers, undertake all the traditional business activities. Retailers raise capital from financial institutions; purchase goods and services; use accounting and management information systems to control their operations; manage warehouses and distribution systems; design and develop new products; and undertake marketing activities such as advertising, promotion, sales force management, and market research. Thus, retailers employ people with expertise and interests in finance, accounting, human resource management, supply chain management, and computer systems, as well as management and marketing. Retail managers are often given considerable responsibility early in their careers. Retail management is also financially rewarding. Starting salaries are typically be. tween $35,000 and $65,000 for college graduates entering management trainee positions. After completing a management training program, retail managers can RETAILING VIEW Sam Walton, Founder of Walmart (1918-1992) Like Henry Ford with his Model T, Sam Walton revolutionized the retail industry. After graduating from the University of Missouri in 1940, Walton began working at a JCPenney store in Des Moines, low. He served in the army during World War II and then purchased a Ben Franklin variety store franchise in Newport, Arkansas. He boosted sales by finding suppliers that would sell him merchandise at lower prices than his cost to buy from Ben Franklin. Walton lost his store, however, in 1950 when the landlord refused to renew his lease. He then moved to Bentonville, Arkansas, where he and a younger brother franchised an- Other Ben Franklin store. Walton employed a new self-service system that he had discovered at two Ben Franklin stores in Minnesota. He placed the checkout registers and clerks at the front of the store rather than scattering them throughout. By 1960, Walton had 15 stores in Arkansas and Missouri that laid the foundation for Walmart. By the early 1960s, some retailers in large, urban, eastern cities had developed the discount store concept, incorporating self-service, shallow but broad assortments, low overhead costs, and large parking lots. In 1962, Walton brought this format to small southern towns, opening his first Walmart Discount City in Rogers, Arkansas. Walton often visited his stores, dropping in unannounced to check the merchandise presentation or financial performance and talk to his "associates." He prided himself on a profit-sharing program and a friendly, open, supportive atmosphere business practices he had learned when working for JCPenney. He often led his workers in the Walmart cheer: "Give me a W! Give me an A! Give me an L! Give me a Squiggly! (Here, everybody sort of does the twist. As part of Walmart's campaign to modernize its image, in 1998, it dropped the squiggly from its trademark.) Give me an M! Give me an A! Give me an R! Give me a T! What's that spell? Walmart! What's that spell? Walmart! Who's number one? THE CUSTOMER!" He offered his own formula for how a large company should operate: "Think one store at a time. That sounds easy enough, but it's something we've constantly had to stay on top of. Communicate, communicate, communi-cate: What good is figuring out a better way to sell beach towels if you aren't going to tell everybody in your company about it? Keep your ear to the ground: A computer is not and will never be- a substitute for getting out in your stores and learning what's going on." In 1991, due to the success of his concept and management practices, Walton became America's wealthiest person; however, he maintained his simple, unassuming lifestyle. Whenever he traveled on business. he rented the same compact economy cars and stayed in the same inexpensive hotels as his employees did. He died of leukemia in 1992. Walmart is now the world's largest corporation. Entrepreneurial Opportunities Retailing also provides opportunities for people who wish to start their own busi- ness. Some of the world's most successful people are retailing entrepreneurs. Many are well known because their names appear over stores' doors; others you may not recognize. Retailing View 1.2 examines the life of one of the world's greatest entrepreneurs, Sam Walton. Some other innovative retail entrepreneurs include Jeff Bezos, Do Won and Jin Sook Chang, Ingvar Kamprad, and Howard Schultz. These entrepreneurs came from humble backgrounds and changed the way retailing is done. Jeff Bezos (Amazon.com) After his research uncovered that Internet usage was growing at a 2,300 percent annual rate in 1994, Jeffrey Bezos, the 30-year-old son of a Cuban refugee, quit his job on Wall Street and left behind a hefty bonus to start an Internet business. While his wife MacKenzie was driving their car across country, Jeff pecked out his business plan on a laptop computer. By the time they reached Seattle, he had rounded up the investment capital to launch the first Internet book retailer. The company, Amazon.com, is named after the river that carries the greatest amount of water, symbolizing Bezos's objective of achieving the greatest volume of Internet sales. Under his leadership, Amazon developed technologies to make shopping on the Internet faster, easier, and more personal than shopping in stores by offering personalized recommendations and home pages. Amazon.com has become more than a bookstore. It is now the largest online retailer, with annual sales greater than $48 billion. Amazon also provides virtual stores and fulfillment services for many other retailers.26 Do Won and Jin Sook Chang (Forever 21) Do Won and Jin Sook Chang are self-made billionaires. In 1984, they cofounded the "fast fashion" retail chain Forever 21. The pair emigrated from South Korea in 1981 and became naturalized The World of Retailing American citizens. The couple opened their first store in 1984, focused on trendy, exciting clothing options. That year, sales grew from $35,000 to $700,000. Forever 21 has continued to experience explosive growth, as evidenced by recent store openings, like a flagship Las Vegas attraction with 127,000 square feet, a massive 45,000-square-foot store in Los Angeles, and two new megastores in New York of 86,000 and 91,000 square feet. Today, it operates more than 500 stores worldwide with more than 35,000 emplovees and projected sales of greater than $3.5 billion. Forever 21 is a family operation with Do Won at the helm, Jin Sook in charge of merchandising, eldest daughter Linda running marketing, and daughter Esther managing visuals. Ingvar Kamprad (IKEA) Ingvar Kamprad, the founder of the Swedish-based home furnishing retailer chain IKEA, was always an entrepreneur. His first business was selling matches to neighbors from his bicycle. He discovered he could make a good profit by buying matches in bulk and selling them individually at a low price. He then expanded to selling fish, Christmas tree decorations, seeds, ballpoint pens, and pencils. By the time he was 17 years of age, he had earned a reward for succeeding in school. His father gave him the money to establish what is now IKEA. Like Sam Walton, the founder of Walmart, Kamprad is known for his frugality. He drives an old Volvo, flies economy class, and encourages IKEA employees to write on both sides of a sheet of paper. This thriftiness has translated into a corporate philosophy of cost cutting throughout IKEA so that the chain can offer quality furniture with innovative designs at low prices. According to Forbes magazine, Kamprad is the richest person in Europe and the fourth-richest person in the world, with an estimated net worth of around $33 billion. Howard Schulz (Starbucks) In 1982, Howard Schultz, a salesperson for a plastic manufacturer, was hired as the new head of marketing for Starbucks, a coffee roaster with six cafés. Shortly after he was hired, he went.Verona, Italy, to attend an international housewares show. He had his first latte in Verona, but he saw something more important than the coffee. The café patrons were enjoying themselves while sipping their coffees in the elegant surroundings. He had a vision of recreating the Old World magic and romance behind the Italian coffee bar. The owner wanted to focus on his plan to sell roasted whole beans, and eventually Schultz acquired Starbucks and began the company's march across the world. Schultz's father struggled at low-paying jobs with little to show for it when he died. "He was beaten down, he wasn't respected,» Schultz said. "He had no health insurance, and he had no workers' compensation when he got hurt on the job." So with Starbucks, Schultz "wanted to build the kind of company that my father never got a chance to work for, in which people were respected." Due to this childhood experience, Schultz initiated practices at Starbucks that are still uncommon in retailing, such as providing comprehensive health care for all employees working at least 20 hours a week, including coverage for unmarried spouses, and offering an employee stock-option plan. In 2012, Starbucks' sales were greater than $11 billion from the 17,000 stores it operates in 40 countries.31 In the next section, we discuss the decisions that retailers make to design and implement their retail strategy. This book is organized around this strategic decision-making process. THE RETAIL MANAGEMENT DECISION PROCESS This book is organized around the management decisions that retailers make to provide value to their customers and develop an advantage over their competitors. Exhibit 1-6 identifies the chapters in this book associated with each type of decision. Understanding the World of Retailing Section I The first step in the retail management decision process, as Exhibit 1-6 shows, is understanding the world of retailing. Retail managers need to know the environment in which they operate before they can develop and implement effective strategies. The first section of this book therefore provides a general overview of the retailing industry and its customers. The critical environmental factors in the world of retailing are (1) the macro- environment and (2) the microenvironment. The impacts of the macroenviron-ment- including technological, social, and ethical/legal/political factors-on retailing are discussed throughout this book. For example, the influence of technology on the rise of multichannel retailing is reviewed in Chapter 3, the use of new information and supply chain technologies are examined in Chapter 10, customer relationship management systems are reviewed in Chapter 11, and new communication technologies are discussed in Chapter 15. 'Competitors The retailer's microenvironment focuses specifically on its competitors and customers. At first glance, identifying competitors appears easy: A retailer's primary competitors are other retailers that use the same retail approach. Thus, department stores compete against other department stores, and supermarkets compete with other supermarkets. This competition between the same type of retailers is called intratype competition. Yet to appeal to a broader group of consumers, many retailers are increasing the variety of merchandise they offer. By offering greater variety, retailers satisfy the needs of customers seeking a one-stop shopping experience. For example, Walgreens has added jewelry, accessories, and apparel to its already extensive health and beauty categories to meet the lifestyle needs of its customers. Amazon seems to offer any product you might ever want to buy or rent. When retailers offer merchandise not typically associated with their type of store, such as clothing in a drugstore, the result is scrambled merchandising. Scrambled merchandising increases intertype competition, or competition among retailers that sell similar merchandise using different types of retail outlets, such as drug and department stores. Increasing intertype competition makes it harder for retailers to identify and monitor their competition. In one sense, all retailers compete against one another for the dollars that consumers spend on goods and services. But the intensity of competition is greatest among retailers whose offerings are viewed as very similar. Management's view of competition also may differ depending on the manager's position within the retail firm. For example, the manager of the Saks Fifth Avenue women's sportswear department in Bergen County, New Jersey, views the other women's sportswear specialty stores in the Riverside Square mall as her major com- petitors. But the Saks store manager views the Bloomingdale's store in a nearby mall as her strongest competitor. These differences in perspective arise because the department sales manager is primarily concerned with customers for a specific category of merchandise, whereas the store manager is concerned with customers seeking the entire selection of all merchandise and services offered by a department store. The chief executive officer (CEO) of a retail chain, in contrast, views competition from a much broader perspective. For example, Nordstrom might identify its strongest competitor as Saks, Neiman Marcus, Bloomingdale's, and even Bluefly.com. Chapter 2 discusses various types of retailers and their competitive strategies, and Chapter 3 concentrates on different types of channels that retailers use to complete transactions with their customers. Customers The second factor in the microenvironment is customers. Retailers must respond to broad demographic and lifestyle trends in our society, such as the growth in the senior and minority segments of the U.S. population or the importance of shopping convenience to the increasing number of two-income families. To develop and implement an effective strategy, retailers must understand why customers shop, how they select a store, and how they select among that store's merchandise the information found in Chapter 4. Developing a Retail Strategy--Section II The next stages in the retail management decision-making process, formulating and implementing a retail strategy, are based on an understanding of the macro-and microenvironments developed in the first section of this book. Section II focuses on decisions related to developing a retail strategy, whereas Sections III and IV pertain to decisions surrounding the implementation of the strategy and building a long- term competitive advantage. The decisions discussed in Sections II and IV are more tactical. Retail Strategy The retail strategy identifies (1) the target market, or mar-kets, toward which the retailer will direct its efforts; (2) the nature of the merchandise and services the retailer will offer to satisfy the needs of the target market; and (3) how the retailer will develop unique assets that enable it to achieve long-term advantage over its competitors. The nature of a retail strategy can be illustrated by comparing the strategies of Walmart and Toys R Us. Initially, Walmart identified its target market as small towns (fewer than 35,000 in population) in Arkansas, Texas, and Oklahoma. It offered name-brand merchandise at low prices in a broad array of categories, ranging from laundry detergent to girls' dresses, but offerings in each category were limited. Today, even as Walfart stores have expanded across the world, the selection in each category remains limited. A Walmart store might have only 3 models of flat- screen television sets, while an electronic category specialist like Best Buy might carry 30 models. In contrast to Walmart, Toys R Us defines its primary target as consumers living in suburban areas of large cities. Rather than carrying many merchandise categories, Toys R Us stores specialize in toys and children's apparel and carry most types and brands currently available in the market. Walmart emphasizes self-service: Customers select their merchandise, bring it to the checkout line, and then carry it to their cars. But Toys R Us provides more customer service. It has salespeople to assist customers with certain types of merchandise. Because Walmart and Toys R Us both emphasize competitive prices, they have made, strategic decisions to sustain their low prices by developing a cost advantage over their competitors. Both firms have sophisticated distribution and management information systems to manage inventory. Their strong relationships with their suppliers enable them to buy merchandise at low prices. Strateaic Decision Areas The key strategic decisions a retailer makes are defining its target market and its financial objectives. Chapter 5 discusses how the selection of a retail market strategy requires analyzing the environment and the firm's strengths and weaknesses. When major environmental changes occur, the current strategy and the reasoning behind it must be reexamined. The retailer then decides what, if any, strategy changes are needed to take advantage of new opportunities or avoid new threats in the environment. The retailer's market strategy must be consistent with the firm's financial objectives. Chapter 6 reviews how financial variables, such as return on investment, inventory turn-over, and profit margin, can be used to evaluate the market strategy and its implementation. The next set of strategic decisions involves the development of critical assets that enable retailers to build strategic advantages. These strategic assets are loca-tion, human resource, information and supply chain systems, supply chain organi-zation, and customer loyalty. Decisions regarding location (reviewed in Chapters 7 and 8) are important because location is typically consumers' top consideration when selecting a store. Generally, consumers buy gas at the closest service station and patronize the shopping mall that's most convenient to their home or office. In addition, location offers an opportunity to gain a long-term advantage over the competition. When a retailer has the best loca-tion, a competing retailer must settle for the second-best location. Retailing is a very labor-intensive industry. Employees play a critical role in providing the services customers seek when patronizing a retailer. Chapter 9 outlines how retailers coordinate the activities of buyers, store managers, and sales associates in the implementation of the retailing strategy. Retail information and supply chain management systems also offer a significant opportunity for retailers to gain strategic advantage. Chapter 10 reviews how retailers are developing sophisticated computer and distribution technologies to monitor flows of information and merchandise from vendors to retail distribution centers to retail stores. These technologies are part of an overall inventory management system that enables retailers to (1) make sure desired merchandise is available when customers want it and (2) minimize the retailer's inventory investment. Retailers, like most businesses, want to develop repeat purchases and loyalty in their best customers. Chapter 11 examines the process that retailers use to iden- tify, design programs for, increase the share of wallet of, provide more value to, and build loyalty among their best customers. The implementation decisions are discussed in the next two sections. Implementing the Retail Strategy-Sections Ill and IV To implement a retail strategy, retailers develop a retail mix that satisfies the needs of its target market better than that of its competitors. The retail mix is a set of decisions retailers make to satisfy customer needs and influence their purchase decisions. Elements in the retail mix (Exhibit 1-7) include the types of merchandise and services offered, merchandise pricing, advertising and promotional programs, store design, merchandise display, assistance to customers provided by salespeople, and convenience of the store's location. Section III reviews the implementation decisions made by buyers, and Section IV focuses on decisions made by store managers. Managers in the merchandise management area decide how much and what types of merchandise to buy (Chapter 12), what vendors to use and how to interact with them (Chapter 13), the retail prices to set (Chapter 14), and how to advertise and promote merchandise (Chapter 15). Store managers must determine how to recruit, select, and motivate sales associates (Chapter 16); where and how merchandise will be displayed (Chapter 17); and the nature of services to provide for customers (Chapter 18). Whole Foods Market is one of the fastest growing and most profitable supermarket chains. In the next section, we illustrate the strategic and more tactical decisions Whole Foods has made and continues to make to achieve and sustain its success. The background of its founder and CEO, John Mackey, is described in Retailing View 1.3 Whole Foods Market: An Organic and Natural Food Supermarket Chain Retail Strategy In the 1960s, natural, organic foods were available only in farmers' markets or small specialty stores catering to counterculture consumers. Consumers who patronized these health food stores felt that eating organic food would liberate them from the grasp of big agribusiness and food processors that were destroying the land with chemical pesticides, mistreating migrant farmwork- ers, and encouraging people to consume unhealthy processed foods. Whole Foods' strategy is to target health-conscious, environmentally conscious, middle-class consumers by using a modern supermarket format, rather than small, specialty health food stores. Its mission is to promote the vitality and well-being of all individuals by supplying the highest quality, most wholesome foods available. Strategic Advantages Some of the strategic assets Whole Foods has developed over the years to provide long-term advantages are a strong brand image that builds customer loyalty; committed employees who provide excellent customer service; good relationships with organic food suppliers that ensures a supply of organic food, even as demand for organic food grows faster than supply; an efficient supply chain connecting local growers to a national store network; and extensive information about its customers that it uses to develop assortments and target promotions. Merchandise Management In terms of merchandise, Whole Foods stores offer the array of food categories typically found in a supermarket. However, the assortment emphasizes organic and natural products that are fresh, nutritious, and safe to eat. Products are free of artificial preservatives, colors, flavors, and sweeten-ers, as well as hydrogenated fats and other unacceptable ingredients. In addition, Whole Foods seeks out and supports local producers whose fruits and vegetables meet its standards, particularly those who farm organically and are dedicated to environmentally friendly, sustainable agriculture. Whole Foods offers seven lines of private-label products. Buyers work with artisan food producers and organic farmers to attain products sold under the super- premium Authentic Food Artisan brand. Its core private brands are called Whole Brands (department-specific products), Whole Foods (premium prod-ucts), and Whole Kids Organic (organic products for children). The 365 Day Everyday Value and 365 Day Organic Everyday Value line provide natural products at value prices. Whole Foods communicates the benefits of its offering through its website and social media. Its website has extensive information about natural and organic. RETAILING VIEW Whole Foods: The Birth of the Organic Supermarket John Mackey had a relativelv conven-tional, middle-class, suburban upbring-ing. But it was the 1970s, so Mackey quit What's in Season college and embraced an alternative lifestyle (e.g., long beard, wild hair). After having worked for a time in a vegetarian collective, he solicited money from family and friends so that he could open a new sort of co-op in 1978: organic food store on the first floor, restaurant on the second floor, and living quarters on the top of the old Victorian house he had found. A couple of years later, Mackey went further and Whole Foods store in a 10,000- square-foot space that had once been a night-club. In keeping with its history, Mackey made sure his natural food store was no stodgy, boring site with just granola. He stocked beer, meat, and wine, and he "loved it. I loved retail. I loved being around food. I loved natural foods. I loved organic foods. I loved the whole idea of it. And a thought entered into my mind that mavbe this is what I could do." But being a grocer was not a particularly popular aspiration with his family. His mother, a former teacher, strongly AroL 2000 discouraged his interest in Whole Foods. According to Mackey's account, on her deathbed in 1987, she asked him to promise to return to school to get his college degree; when he demurred, she complained, "I wish you'd just give up that stupid health-food store. Your father and I gave you a fine mind, and you're wasting it being a grocer." He never did give up on his "stupid" store, though. Instead, as the concept spread across the United States, Mackey adopted and adapted his ideas to fit local tastes. Through decentralized decision-making units, Whole Foods stores could choose to stock items specific to the preferences of the local markets, like live lobsters in Portland, Maine, or a kombucha bar in Venice, California. Through acquisitions, Whole Foods gained additional knowledge, too. In buying Wellspring Grocery, it learned about private-label options. The purchase of Mrs. Gooch's provided Whole Foods with insights into diet supplements. When it purchased Bread & Circus, it gained access to the Boston chain's famed seafood procurement expertise. foods. Its iPhone app provides not just the location information about the nearest Whole Foods store (by zip code) but also approximately 2,000 recipes, searchable by various criteria, including diet restrictions, ingredients, budgets, or family appeal. The "On Hand" option allows users to input the items on their pantry shelves and receive recommendations for some meal options. Moreover, the app offers special deals for each store, right next to a map that shows customers how to get there.' Whole Foods also uses social media extensively. A global manager and community manager assigned at every store are responsible for customer engagement. A single Global Online Community Manager runs the company's central Twitter link, @Whole Foods. Most of the tweets in this realm come from individual customers with questions, complaints, or suggestions. The manager makes sure to respond almost immediately, to ensure that no customers get the sense Whole Foods is uninterested or ignoring their concerns. Then, in each community, another manager attends to local needs, including special deal postings, charity opportunities, and upcoming events. A Los Angeles store located on Third Street owns the Twitter handle @WholeFoods3rdSt; a Mount Washington location, near Baltimore, tweets from the @WholeFoodsMTW account. Store Management All Whole Foods employees are organized into self-managed teams that meet regularly to discuss issues and solve problems. Almost all team members have stock options in the firm. They also receive a 20 percent discount in stores. Their personal wellness accounts help them cover health care expenses, both for themselves and their domestic partners. To select the benefits package, the entire company takes a vote every three years. Whole Foods thus has been on Fortune magazine's "100 Best Companies to Work For" list for 13 consecutive vears. 35 Whole Foods' decisions on visual merchandising and store design reinforce its strategy.36 Its stores are designed to make grocery shopping fun- to transform a supermarket into an interactive theater with corporate staff serving as the producer and store management as the director. Sections of its newer stores are designed with self-contained architecture that curves inward, creating a feeling of intimacy that encourages shoppers to linger. The warm feeling of the store is enhanced by signs made of an eco-friendly, woodlike material rather than plastic. Art gallery-type lighting focuses attention on produce. Finally, Whole Foods' store management provides excellent customer service. Curious about the life of a chicken in the display case? It comes with a 16-page booklet and an invitation to visit the live chickens at the company's Pennsylvania farm. Want to know the name of the farmer who grew those organic tomatoes? That information, along with some personal details, is readily available. Curious about the fish you're getting dressed at the free filleting station? The employee can offer not just ideas for cooking it but also the identity of the Whole Foods boat and the captain who caught it for you. Ethical and Legal Considerations When making the decisions discussed previously, managers need to consider the ethical and legal implications of their decisions, in addition to the effects that those decisions have on the profitability of their firms and the satisfaction of their customers. Ethics are the principles governing individuals and companies that establish appropriate behavior and indicate what is right and wrong. Defining the term is easy, but determining what the principles are is difficult. What one person thinks is ethical, another may consider unethical. What is ethical can vary from country to country and from industry to industry. For example, offering bribes to overcome bureaucratic roadblocks is an accepted practice in Middle Eastern countries but is considered unethical, and even illegal, in the United States. Ethical principles also can change over time. For example, some years ago, doctors and lawyers who advertised their services were considered unethical. Today, such advertising is accepted as common practice. Examples of difficult situations that retail managers face include the following: Should a retailer sell merchandise that it suspects was made using child labor? Should a retailer advertise that its prices are the lowest available in the market, even though some are not? Should a retail buyer accept an expensive gift from a vendor?  Should a retailer charge a supplier a fee for getting a new item in its store? Should retail salespeople use a high-pressure sales approach when they know the product is not the best for the customer's needs? Should a retailer disclose product information that may affect whether or not it is purchased? Should a retailer promote a product as being "on sale" if it never sold at a higher, nonsale price? Should a retailer offer credit at a higher interest rate or sell products at higher prices in stores patronized mostly by low-income customers? Laws dictate which activities society has deemed to be clearly wrong, those activities for which retailers and their employees will be punished through the federal or state legal systems. However, most business decisions are not regulated by laws. Often retail managers have to rely on their firms' and industries' codes of ethics and/or their own codes of ethics to determine the right thing to do. Many companies have codes of ethics to provide guidelines for their employees in making their ethical decisions. These ethical policies provide a clear sense of right and wrong so that companies and their customers can depend on their employees when questionable situations arise. However, in many situations, retail managers need to rely on their personal code of ethics-their personal sense of what is right or wrong. Exhibit 1-8 lists some questions you can ask yourself to determine whether a behavior or activity is unethical. The questions emphasize that ethical behavior is determined by widely accepted views of what is right and wrong. Thus, you should engage only in activities about which you would be proud to tell your family, friends, employer, and customers. If the answer to any of these questions is yes, the behavior or activity is probably unethical, and you should not do it. Your firm can strongly affect the ethical choices you will have to make. When vou view your firm's policies or requests as improper, you have three choices: 1. Ignore your personal values, and do what your company asks you to do. Self- respect suffers when you have to compromise your principles to please an' employer. If you take this path, you will probably feel guilty and be dissatisfied with vour job in the long run. 2. Take a stand, and tell your employer what you think. Try to influence the decisions and policies of your company and supervisors. 3. Refuse to compromise your principles. Taking this path may mean you will get fired or be forced to quit. You should not take a job with a company whose products, policies, and conduct conflict with your standards. Before taking a job, investigate the company's procedures and selling approach to see whether they conflict with your personal ethical standards. Throughout this text, we will highlight the legal and ethical issues associated with the retail decisions made by managers. Summary LO1 Identify retailing activities. Retailing is defined as a set of business activities that add value to the products and services sold to consumers for their personal or family use. These value-added activities include providing assort-ments, breaking bulk, holding inventory, and providing services. LO2 Realize the importance of retailing in the U.S. and world economies. Retailing plays an important role in the U.S. econ-omy. One out of four workers in the United States works for a retailer or for a company selling products to a retailer, and the U.S. retail sector accounts for about the same percentage of the U.S. GDP as the entire manufacturing sector. Retailing also plays an important role in developing economies. Some business scholars feel that there is need for modern retail methods to be used to serve consum. ers at the bottom of the pyramid. LO3 Analyze the changing retail industry. The retail industry has changed dramatically over the last 50 vears. Many well- known national and international retailers were small startup companies 50 years ago. Now the industry is dominated by large firms. The, development of information systems is one the forces facilitating the growth of large retailers. Before the availability of modern information sys-tems, it was difficult for retailers to lower costs through economies of scale, and larger retailers had limited advantages over small local or regional re-tailers. With these information systems, retailers are able to efficiently and effectively manage millions of customer transactions with thousands of stores and suppliers across the globe. LO4 Recognize the opportunities in retailing for you. Retailing offers opportunities for exciting, challenging careers, either by working for a retail firm or starting your own business. Aspects of retail careers are discussed in Appendix 1A. Suggestions about starting your own business appear in Appendix A at the end of the book. LO5 Understand the strategic retail management decision process. The retail management decision process involves developing a strategy for creating a competitive advantage in the marketplace and then developing a retail mix to implement that strategy. The strategic decisions, discussed in the first section of this text-book, involve selecting a target market; defining the nature of the retailer's offering; and building a competitive advantage through locations, human resource management, information and supply