Retail Management: A Strategic Approach - PDF

Retail Management: A Strategic Approach Thirteenth Edition Chapter 3 Strategic Planning In Retailing Copyright @ 2...

Retail Management: A Strategic Approach Thirteenth Edition Chapter 3 Strategic Planning In Retailing Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Learning Objectives 3.1 To show the value of strategic planning for all types of retailers 3.2 To explain the steps in strategic planning for retailers: situation analysis, objectives, identification of consumers, overall strategy, specific activities, control, and feedback 3.3 To examine the individual elements of a retail strategy (both controllable and uncontrollable), and to present strategic planning as a series of integrated steps 3.4 To demonstrate how a strategic plan can be prepared Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Retail Strategy The overall plan or framework of action that guides a retailer – One year in duration – Outlines mission, goals, consumer market, overall and specific activities, and control mechanisms Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Benefits of Strategic Retail Planning Provides thorough analysis of the requirements for doing business for different types of retailers Outlines retailer goals Allows retailer to determine how to differentiate itself from competitors Allows retailer to develop an offering that appeals to a group of customers Offers an analysis of the legal, economic, and competitive environment Provides for the coordination of firm’s total efforts Encourages anticipation and avoidance of crises Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.1 Elements of a Retail Strategy Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Organizational Mission Retailer’s commitment to a type of business and to a distinctive role in the marketplace. Organizational missions for retailers involve these decisions: Whether to base a business around the goods and services sold or around consumer needs. Whether a retailer wants a place in the market as a leader or follower. Desired market scope. (Large chains often seek a broad customer base while smaller ones focus on a narrower customer base.) Organizational mission should be continually reviewed and adjusted. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.2 Leadership Lessons from Retail Executives Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Ownership and Management Alternatives Sole proprietorship is an unincorporated retail firm owned by one person A partnership is an unincorporated retail firm owned by two or more persons, each with a financial interest A corporation is a retail firm that is formally incorporated under state law; it is a legal entity apart from its officers Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Sole proprietorship—this is an unincorporated retail firm owned by one person. All benefits, profits, risks, and costs accrue to that individual. It is simple to form, fully controlled by the owner, operationally flexible, easy to dissolve, and subject to single taxation by the government. It makes the owner personally liable for legal claims from suppliers, creditors, and others; it can also lead to limited capital and expertise. Partnership—this is an unincorporated retail firm owned by two or more persons, each with a financial interest. Partners share benefits, profits, risks, and costs. Advantages include the following: responsibility and expertise are divided among multiple principals, there is a greater capability for raising funds than with a proprietorship, the format is simpler to form than a corporation, and it is subject to single taxation by the government. Depending on the type of partnership, it can make owners personally liable for legal claims, can be dissolved due to a partner’s death or a disagreement, it binds all partners to actions made by any individual partner acting on behalf of the firm, and it usually has less ability to raise capital than a corporation. Corporation—this is a retail firm that is formally incorporated under state law and is established as a legal entity apart from individual officers (or stockholders). Twenty percent of all U.S. retail firms are corporations but they account for 85 percent of total U.S. retail store sales. Funds can be raised through the sale of stock; legal claims against individuals are not usually allowed; ownership transfer is relatively easy; the firm is more assured of long-term existence (if a founder leaves, retires, or dies); the use of professional managers is encouraged; and unambiguous operating authority is outlined. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.3 Checklist to Consider When Starting a New Business Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.4 Checklist for Purchasing an Existing Retail Business Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.5a Selected Kinds of Retail Goods and Service Establishments (1 of 3) Durable Goods Stores: – Automotive group – Furniture and appliances group – Lumber, building, and hardware group – Jewelry stores Nondurable Goods Stores: – Apparel group – Food group – General merchandise group – Gasoline service stations Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.5b Selected Kinds of Retail Goods and Service Establishments (2 of 3) Service Establishments (Personal): – Laundry and dry cleaning – Beauty/barber shops – Funeral services – Health-care services Service Establishments (Amusement): – Movie theaters – Bowling alleys – Dance halls – Golf courses Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.5c Selected Kinds of Retail Goods and Service Establishments (3 of 3) Service Establishments (Repair): – Automobile repair – Car washes Consumer electronics repair – Appliance repairs Service Establishments (Hotel): – Hotels – Motels – Trailer parks – Camps Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Table 3.1 Some Typical Financial Investments for a New Retail Venture Use of Funds Source of Funds Land and building (lease or purchase) Personal savings, bank loan, commercial finance company Inventory Personal savings, manufacturer credit, commercial finance company, sales revenues Fixtures (display cases, storage facilities, Personal savings, manufacturer credit, bank signs, lighting, carpeting, etc.) loan, commercial finance company Equipment (cash register, marking machine, Personal savings, manufacturer credit, bank office equipment, computers, etc.) loan, commercial finance company Personnel (salespeople, cashiers, stockpeople, Personal savings, bank loan, sales revenues etc.) Promotion Personal savings, sales revenues Personal drawing account Personal savings, life insurance loan Miscellaneous (equipment repair, credit sales Personal savings, manufacturer and credit [bad debts], professional wholesaler credit, plan, bank loan, commercial finance company bank services, repayment of loans) Note: Collateral for a bank loan may be a building, fixtures, land, inventory, or a personal residence. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Table 3.2 Financial Requirements for a Used-Car Dealer Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Image and Positioning An image represents how a given retailer is perceived by consumers and others. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Positioning Approaches Mass merchandising is a positioning approach whereby retailers offer a discount or value-oriented image, a wide or deep merchandise selection, and large store facilities. Niche retailing occurs when retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.7 Selected Retail Positioning Strategies Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Target Market Selection Three techniques 1. Mass marketing—this is selling goods and services to a broad spectrum of consumers. Conventional supermarkets and drugstores are retailers that employ mass marketing. 2. Concentrated marketing—this approach zeroes in on one specific group. A small upscale men’s shoe store might use this technique. 3. Differentiated marketing—this entails aiming at two or more distinct consumer groups, with different retailing approaches for each group. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Table 3.3 Target Marketing Techniques and Their Strategic Implications Target Market Techniques Strategic Implications Mass Marketing Concentrated Marketing Differentiated Marketing Retailer’s location Near a large Near a small or medium Near a large population population base population base base Goods and service mix Wide selection of Selection geared to Distinct goods/services medium-quality market segment—high- aimed at each market items or low-quality items segment Promotion efforts Mass advertising Direct mail, E-mail, and Different for each subscription segmented social media segment Price orientation Popular prices High or low High, medium, and low— depending on market segment Strategy One general One specific strategy Multiple specific strategy for a large directed at a specific, strategies, each homogeneous limited group of directed at different (similar) group of customers (heterogeneous) consumers groups of consumers Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 3.9 Developing an Overall Retail Strategy Controllable Variables: Uncontrollable Variables: Store location Consumers Managing business Competition Merchandise management Technology and pricing Economic conditions Communicating with customer Seasonality Legal restrictions Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Retail Strategy–Cost Control (1 of 2) Removal of bad costs Use of private label products to reduce costs of national/manufacturer brands Reduce product proliferation Obtain best net price instead of focus on promotional monies, trade incentives and forward buying Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved  Retail Strategy–Cost Control (2 of 2) Supply chain initiatives Low promotional expense (everyday low pricing) Proper employee utilization Control In the control phase, a semiannual or annual review of the company takes place. This procedure is called a retail audit, which is a systematic process for analyzing the performance of a retailer. As a retailer’s performance is assessed, its strengths and weaknesses are revealed. Adjustments are made if necessary and are reviewed in the firm’s next retail audit. Specific Activities Short-run decisions are now made and enacted for each controllable part of the retail strategy – like controlling costs. These actions, known as tactics, encompass a retailer’s daily and short-term operations. Retailers must be responsive to the uncontrollable environment. Four examples of tactical decisions that a retailer may make are provided. Excellence in retailing entails building a sound strategy and fine-tuning it as the environment changes. Feedback Signals or cues about the success of a retail strategy represent feedback. Forms of positive feedback are high sales revenue, no problems with the government, and low employee turnover. Negative feedback includes falling sales revenue, government sanctions (e.g., fines), and high employee turnover. Retail executives look for positive and negative feedback so they can determine the causes and then capitalize on opportunities or rectify problems. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Retail Strategy–Differentiation Well-thought out private labels (Trader Joe’s, Target, King Arthur flour, etc.) Hiring right employees (value-profit chain) Empowering employees Use of a fun atmosphere “Little things that mean a lot” Money-back guarantees Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Table 3.4a Legal Environment and Retailing Store Location Managing the Business zoning laws licensing provisions blue laws personnel laws environmental laws antitrust laws direct selling laws franchise agreements local ordinances business taxes leases and mortgages recycling laws Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved  Store location Zoning laws restrict the potential choices for a location and the type of facilities constructed. Blue laws restrict the days and hours during which retailers may operate. Environmental laws limit the retail uses of certain sites. Door-to-door (direct) selling laws protect consumer privacy. Local ordinances involve fire, smoking, outside lighting, capacity, and other rules. Leases and mortgages require parties to abide by stipulations in tenancy documents. Managing the business Licensing provisions mandate minimum education and/or experience for certain personnel. Personnel laws involve nondiscriminatory hiring, promoting, and firing of employees. Antitrust laws limit large firm mergers and expansion. Franchise agreements require parties to abide by various legal provisions. Business taxes include real-estate and income taxes. Recycling laws mandate that retailers participate in recycling for various materials. Table 3.4b Legal Environment and Retailing Merchandise Management and Pricing trademarks merchandise restrictions product liability laws and lemon laws sales taxes unit-pricing laws collusion laws sale prices price discrimination laws Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Trademarks provide retailers with exclusive rights to the brand names they develop. Merchandise restrictions forbid some retailers from selling specified goods or services. Product liability laws allow retailers to be sued if they sell defective products. Lemon laws specify consumer rights if products, such as autos, require continuing repairs. Sales taxes are required in most states, although tax-free days have been introduced in some locales to encourage consumer shopping. Unit-pricing laws require price per unit to be displayed (most often applied to supermarkets). Collusion laws prohibit retailers from discussing selling prices with competitors. Sale prices must be a reduction from the retailer’s normal selling prices. Price discrimination laws prohibit suppliers from offering unjustified discounts to large retailers that are unavailable to smaller ones. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Table 3.4c Legal Environment and Retailing Communicating with the Customer truth-in-advertising and selling laws truth-in-credit laws telemarketing laws bait-and-switch laws inventory laws labeling laws cooling-off laws Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Truth-in-advertising and truth-in-selling laws require retailers to be honest and not omit key facts. Truth-in-credit laws require that shoppers be informed of all terms when buying on credit. Telemarketing laws protect the privacy and rights of consumers regarding telephone sales. Bait-and-switch laws make it illegal to lure shoppers into a store to buy low-priced items and then to aggressively try to switch them to higher priced ones. Inventory laws mandate that retailers must have sufficient stock when running sales. Labeling laws require merchandise to be correctly labeled and displayed. Cooling-off laws let customers cancel completed orders, often made by in-home sales, within three days of a contract. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Table 3.6 Sample Strategic Plan Sally’s is a small, independently owned, high-fashion ladies clothing shop located in a suburban strip mall. It is a full-price, full-service store for fashion-forward shoppers. Sally’s carries sportswear from popular designers, has a personal shopper for busy executives, and has an on- premises tailor. The store is updating its strategic plan as a means of getting additional financing for an anticipated expansion. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Additional Concerns for Global Retailing In addition to the strategic planning process: – assess your international potential – get expert advice and counseling – select your countries – develop, implement, and review an international retailing strategy Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved  Retailers looking to operate globally should follow these seven steps: Choose a strategy—then execute it. Find a competitive advantage. Learn much about local tastes and customs. Use mostly local talent. Develop local relationships. Be prepared to make big mistakes. Be prepared to invest on a large scale. Opportunities and Threats in Global Retailing 1. There are wide-ranging opportunities and threats in global retailing. 2. Opportunities may exist for several reasons. 3. Foreign markets may be used to complement domestic sales. 4. Foreign markets may represent growth opportunities if domestic markets are saturated or stagnant. 5. A retailer may be able to offer goods, services, or technology not yet available in foreign markets. Competition may be less in foreign markets. There may be tax or investment advantages in foreign markets. Due to government and economic shifts, many countries are more open to the entry of foreign firms. Communications are easier; the Internet enables retailers to reach customers and suppliers well outside their domestic markets. 1. Threats may also exist for several reasons. 2. There may be cultural differences between domestic and foreign markets. 3. Management styles may not be easily adaptable. Foreign govenments may place restrictions on some operations. Personal income may be poorly distributed among consumers in foreign markets. Distribution systems and technology may be inadequate, which may minimize the effectiveness of the Web as a selling tool. Institutional formats may vary greatly among countries. Currencies are different; however, the countries in the European Union have sought to alleviate this problem through the euro. Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Zara Masters the Art of Retail Please click URL to view: https://youtu.be/Ir1b-ez2x5g https://youtu.be/qhCM0F81vEg Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Factors Affecting the Success of a Global Retailing Strategy Timing A balanced international program A growing middle class Matching concept to market Solo or partnering Store location and facilities Product selection Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure A3.1 Factors to Consider When Engaging in Global Retailing Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Copyright Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Retail Management: A Strategic Approach Thirteenth Edition Chapter 7 Identifying And Understanding Consumers Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Learning Objectives (1 of 2) 7.1 To discuss why it is important for a retailer to properly identify, understand, and appeal to its customers 7.2 To enumerate and describe a number of consumer demographics, lifestyle factors, needs and desires – and to explain how these concepts can be applied to retailing 7.3 To examine consumer attitudes toward shopping and consumer shopping behavior, including the consumer decision process and its stages 7.4 To look at retailer actions based on target market planning 7.5 To note some of the environmental factors that affect consumer shopping Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 7.2 What Makes Retail Shoppers Tick Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Consumer Demographics and Lifestyles Consumer Demographics Consumer Lifestyles objective, quantifiable, ways in which individual easily identifiable, and consumers and families measurable population (households) live and data spend time and money gender, age, population growth rate, on social and psychological factors life expectancy, literacy, language and are influenced by demographics spoken, household size, marital and family status, income, retail sales, mobility, place of residence, occupation, education, and ethnic/racial background. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Helpful Facts for Understanding U.S. Demographics (1 of 2) Typical household has an annual income of $54,000 Top 1/5 of households earn approximately $100,000 or more Lowest 1/5 of households earn $20,000 or less High incomes lead to high discretionary income Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Helpful Facts for Understanding U.S. Demographics (2 of 2) There are about 6.5 million more females than males 57 percent of adult females are in the labor force Most U.S. employment is in services Approximately 32 percent of all U.S. adults age 25 and older have at least a four-year college degree African Americans, Hispanic Americans, and Asian Americans account for one-third of U.S. residents. their total annual buying power is more than $3.4 trillion. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Understanding Consumer Lifestyles: Social Factors Lifestyle – Culture- a distinctive heritage shared by a group of people that passes on a series of beliefs, norms, and customs – Reference Groups- influence people’s thoughts and behavior. (aspirational group, membership group, disassociative group, face-to-face groups) – Social Class-informal ranking of people based on income, occupation, education. Often have similar values – Time Utilization-activities in which a person engages and the time allocated to them. – Household Copyright Life Cycle-incorporates © 2018, 2014, 2012 by Pearsonlife stages Education, Inc. Allfor both Rights Reserved Understanding Consumer Lifestyles: Psychological Factors Lifestyle – Personality- sum total of an individual’s traits, which make that individual unique – Attitudes- positive, neutral, or negative feelings a person has about different topics. Attitudes are also feelings consumers have about a given retailer and its activities. – Perceived Risk- the level of risk a consumer believes exists regarding the purchase of a specific good or service from a given retailer, whether or not the belief is correct. -Perceived risk is high if a retailer or its brands are new, a person is on a budget or has little experience, there are many choices, and an item is socially visible or complex. Firms can reduce perceived risk with information. – Class Consciousness- the extent to which a person desires and pursues social status. It helps determine the use of reference groups and the importance of prestige purchases. – Purchase Importance- affects the amount of time he or she will spend to make a decision and the range of alternatives considered Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 7.3 The Impact of Perceived Risk on Consumers Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Retailer Strategies to Reduce Perceived Risk by Shoppers (1 of 2) Functional– product usage testing by retailer; especially private labels. Double check returned “B” goods. Simulate wear for new goods. Physical- safety testing, reduce salt and fat in food products Financial- money back guarantee and exchange privileges Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Retailer Strategies to Reduce Perceived Risk by Shoppers (2 of 2) Social— co-branding of private label products with major high-quality national brands (Kirkland by Starbucks) Psychological– showing empathy for consumer Time- double money back guarantee; auto dealers picking and returning recalled cars Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Illustrations of Life Styles Gender Roles Consumer Sophistication and Confidence-consumers know more about trends and their preferences Poverty of Time-busy lifestyle Component Lifestyles-situation-based and low predictable ability Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Three Special Market Segments In-Home Shoppers Online/mobile Shoppers Out shoppers Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Online Shoppers Use of Web for decision-making process as well as buying process Convenience is important Above average incomes, well- educated Time scarcity is a motivation Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Attitudes Towards Shopping Level of shopping enjoyment Shopping time Cautious Optimism and Disparity in Wealth Effect Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  Shopper Segmentation Shifting feelings about retailing Attitudes by market segment ‒ Involved-apt to be Baby Boomers and prioritize saving time and effort, be attracted by retailers that provide good product assortment and price-saving opportunities in the form of sales, coupons, or bulk pricing. They spend more time planning stores to visit, but engage in minimal information search on products and brand alternatives, hence in-store purchase activities of hedonic value (sampling, in-store café) are essential. ‒ Spontaneous-primarily Baby Boomers and least likely to engage in pre-purchase planning and information search, but they care more about saving time and effort than apathetic shoppers ‒ Apathetic-are Generation Xers, those less likely to be time conscious and more likely to have a low marketplace knowledge. This group holds the inherent belief that they are smart shoppers. Although they are most likely to engage in online pre-purchase information search than the other segments, they are price-conscious but do not plan or respond to in-store promotional stimuli Attitudes toward private brands Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Top Reasons for Leaving an Apparel Store Without Buying Change in shopping goals Deficiencies in merchandise assortment (cannot find an appealing style, right size, fit) Lack of salesperson support and unsatisfactory in-store experience Cannot find a good value Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 7.3 Global Shopping Attitudes and Behavior Why Consumers in 51 Countries Shop at a Specific Retailer (% saying highly influential): Good value for the money 61 Lowest prices 58 Convenient location 57 Great sales and promotions 55 Desired products in stock 54 Organized store layout (ease of shopping) 42 Friendly, knowledgeable employees 40 Fast checkout 38 Customer loyalty program 28 Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Cross-Shopping Shopping for a product category at more than one retail format during the year Visiting multiple retailers on one shopping trip Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 7.6 The Consumer Decision Process Six Steps in the Consumer Decision Process 1.Stimulus Trigger that creates interest in a product (e.g., online ads). 1.Problem Awareness Consumer recognizes a need or problem (e.g., retailer stocks new models to highlight options). 1.Information Search Consumer gathers details about available options (e.g., point-of-sale displays, knowledgeable salespeople). 1.Evaluation of Alternative Consumer compares products before deciding (e.g., retailers highlight noticeable product differences). 1.Purchase Consumer makes the final buying decision (e.g., acceptance of credit cards makes purchasing easier). 1.Post-Purchase Behavior Consumer evaluates their purchase experience (e.g., extended warranties and money-back returns enhance satisfaction). Retailer’s Role in the Process The best retailers assist shoppers at each stage to enhance customer experience and build loyalty. The more a retailer supports the consumer decision process, the greater customer loyalty they can achieve. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 7.7 Key Factors in the Purchase Act Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Types of Consumer Decisions Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  1. Extended Decision Making Consumer fully engages in the decision process and 2. Limited Decision Making spends significant time gathering information. Consumer follows all steps of the purchase process but spends less time on each step. Applies to items purchased before but not regularly (e.g., second car, clothing, vacation, High risk of cognitive dissonance (buyer’s regret). gifts). Some prior experience with the product or retailer exists. Key Influences: Applies to expensive and complex items with little to no Store environment and product assortment. prior experience (e.g., house, first car, life insurance). Sales personnel help answer questions and highlight product differences. Department stores, specialty stores, and nonstore retailers try to influence Perceived risk is high (financial, functional, and buyer behavior. psychological). Consumers may pause or stop at any stage of the decision process. Influencing factors: 3. Routine Decision Making Age, education, income have the most impact. Consumer buys out of habit and skips steps in the decision process. Real estate brokers and auto dealers use Purchases are frequent and automatic with minimal shopping time. personal selling, printed materials, and Consumer sticks to familiar brands and retailers (low perceived risk). financing options to ease concerns. Key step: Problem awareness → Once the need arises, the consumer A low-key, informative approach prevents repurchases automatically. shoppers from feeling pressured. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Types of Impulse Shopping Completely unplanned-consumer has no intention of making a purchase in a goods or service category. Partially unplanned-Before coming into contact with a retailer, a consumer has decided to make a purchase in a goods or service category but has not chosen a brand or model Unplanned substitution-A consumer intends to buy a specific brand of a good or service but changes his or her mind about the brand after coming into contact with a retailer. Retail atmospherics Enhanced service mix – related + unrelated to core Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 7.10 Devising a Target Marketing Strategy Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Possible Retailer Approaches Mass Marketing – Kohl’s Department Stores Concentrated Marketing – Family Dollar Differentiated Marketing – Foot Locker Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Copyright Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Retail Management: A Strategic Approach Thirteenth Edition Chapter 9 Trading-Area Analysis Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Rese Location, Location, Location Criteria to consider include – population size and traits – competition – transportation access – parking availability – nature of nearby stores – property costs – length of agreement – legal restrictions Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Choosing a Store Location Step 1: Evaluate alternate geographic (trading) areas in terms of residents and existing retailers Step 2: Determine whether to locate as an isolated store or in a planned shopping center Step 3: Select the location type Step 4: Analyze alternate sites contained in the specific retail location type Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Trading-Area Analysis A trading-area is a geographic area containing the customers of a particular firm or group of firms for specific goods or services. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Benefits of Trading-Area Analysis Discovery of consumer Assessment of effects of demographics and trading area overlap socioeconomic characteristics Ascertain whether chain’s Opportunity to determine competitors will open nearby focus of promotional activities Discovery of ideal number of Opportunity to view media outlets, geographic coverage patterns weaknesses Review of other issues (e.g. transportation) Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 9.2 The Trading-Areas of Current and Proposed Outlets Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved GIS Software Geographic Information Systems – Digitized mapping with key location-specific data used to graphically depict trading-area characteristics such as ▪ population demographics ▪ data on customer purchases ▪ listings of current, proposed, and competitor locations Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 9.3(A) GIS Software in Action Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 9.3(B) GIS Software in Action Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 9.3(C) GIS Software in Action Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 9.3(D) GIS Software in Action Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Retail Trade Area Visualization Tool Please click URL to view: https://youtu.be/qPszDQ9g7GA Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 9.4 The Segments of a Trading Area Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved The Size and Shape of Trading-Areas Primary trading-area – 50-80% of a store’s customers Secondary trading-area – 15-25% of a store’s customers Fringe trading-area – all remaining customers Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 9.5 Planning a Mixed-Use Center Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Destination Versus Parasite Stores Destination stores have a Parasite stores do not create better assortment, promotion, their own traffic and have no and image. real trading-area of their own. They generate trading-areas These stores depend on much larger than competitors. people who are drawn to area for other reasons. Dunkin’ Donuts: “It’s worth the trip!” Magazine stand in office building Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Trading Areas and Store Types Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Delineating Trading-Area of an Existing Store Multiple data sources must be used: Secondary data: – Store records (cash, credit customers) – Purchase frequency, ticket amount, geographic location Primary data: – Patronage, traffic patterns – Demographic & lifestyle info (PRIZM) Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved The Trading-Area of a New Store Different tools must be used when an area is evaluated in terms of opportunities rather than current patronage and traffic patterns: – Trend analysis – Consumer surveys – Computerized trading-area analysis models Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Computerized Trading-Area Analysis Models Analog Model Regression Model Gravity Model Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Analog, Regression and Gravity Models Analog models– simplest. Revenue estimates based on similar stores, competition, expected market share, size and population density Regression models- looks at population size, average income, transportation barriers and traffic patterns Gravity models– people are drawn to stores that are closer and more attractive than competitors’ stores. BENEFITS:They operate in an objective and systematic way. They offer insights as to how each locational attribute should be weighted. They are useful in screening a large number of locations. They can assess management performance by comparing forecasts with results. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Reilly’s Law (1 of 2) Reilly’s law of retail gravitation—a traditional means of trading-area delineation—establishes a point of indifference between two cities or communities so that the trading-area of each can be determined. point of indifference is the geographic breaking point between two cities (communities) at which consumers are indifferent to shopping at either. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Reilly’s Law (2 of 2) d Dab = Pb 1+ Pa Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Exercise: Reilly’s Law Cities A and B are 50 miles apart. City A has a population of 400,000 and City B has a population of 100,000. According to Reilly's law, what is the point of indifference for City B? Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Calculation: Reilly’s Law 50 miles Dab = 100,000 1+ 400,000 Point of indifference for City B = 16.7 miles Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Exercise Solution: Reilly’s Law 50 Dab = , i.e., 16.7 miles from smaller city and 33.3 miles 1.5 from larger city Indifference point Assumes that larger city has more retail facilities and greater drawing power as a result Assumes that road conditions, congestion, driving conditions are equal in both cities Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Limitations of Reilly’s Law Distance is only measured by major thoroughfares; some people will travel shorter distances along cross streets. Travel time does not reflect distance traveled. Many people are more concerned with time traveled than with distance. Actual distance may not correspond with perceptions of distance. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Huff’s Law Huff’s law of shopper attraction delineates trading-areas on the basis of product assortment at various shopping locations, travel times from the shopper’s home to alternative locations, and the sensitivity of the kind of shopping to travel time. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Exercise: Huff’s Law Use Huff’s law to compute the probability of consumers’ traveling from their homes to each of three shopping areas: square footage of selling space—Location 1, 15,000; Location 2, 20,000; Location 3, 25,000; travel time—to Location 1, 15 minutes; to Location 2, 21 minutes; to Location 3, 25 minutes; effect of travel time on shopping trip—2 Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Solution: Huff’s Law (15,000)/(15)2 pil = = 43.9% 2 2 (15,000)/(15) + (20,000)/(21) + (25.000)/(25)2 (20,000)/(21)2 pil = = 29.8% 2 2 (15,000)/(15) + (20,000)/(21) + (25.000)/(25)2 (25,000)/(25)2 pil = = 26.3% 2 2 (15,000)/(15) + (20,000)/(21) + (25.000)/(25)2 The probabilities of consumers, traveling to locations 1, 2, and are 43.9 percent, and 26.3percent, respectively. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Elements in Trading-Area Selection Population Characteristics Economic Base Characteristics Nature and Saturation of Competition Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9.1a Chief Factors to Consider in Evaluating Retail Trading-Areas Population Size and Characteristics Total size and density Age distribution Average educational level Percentage of residents owning homes Total disposable income Per-capita disposable income Occupation distribution Trends Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9.1b Chief Factors to Consider in Evaluating Retail Trading-Areas Availability of Labor Management Management trainees Clerical Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9.1c Chief Factors to Consider in Evaluating Retail Trading-Areas Closeness to Sources of Supply Delivery costs Timeliness Number of manufacturers Number of wholesalers Availability of product lines Reliability of product lines Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9.1d Chief Factors to Consider in Evaluating Retail Trading-Areas Economic Base Dominant industry Extent of diversification Growth projections Freedom from economic and seasonal fluctuations Availability of credit and financial facilities Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9.1e Chief Factors to Consider in Evaluating Retail Trading-Areas Competitive Situation Number and size of existing competition Evaluation of competitor strengths and weaknesses Short- and long-run outlook Level of saturation Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9.1f Chief Factors to Consider in Evaluating Retail Trading-Areas Availability of Store Locations Number and type of store locations Access to transportation Owning versus leasing opportunities Zoning restrictions Costs Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9.1g Chief Factors to Consider in Evaluating Retail Trading-Areas Regulations Taxes Licensing Operations Minimum wages Zoning Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 9-3 Selected 2010 Population Statistics for Long Beach Trading-Areas A and B (4164 and 4166) (4167.01 and 4168) Total population, 2010 12,532 10,430 Population change 2000-2010 (%) -8.7 -5.7 College graduates 12 and older, 48.2 48.9 2010 (%) Median household income, 2010 $94,778 $98,317 Managerial and professional specialty occupations (% of employed persons 16 and older), 47.1 51.5 2010 Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Trading Area Saturation Indices Number of persons per retail establishment Average sales per retail store Average sales per capita Average sales per square foot of selling area Average sales per employee Saturated, oversaturated and under saturated conditions Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Copyright Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Retail Management: A Strategic Approach Thirteenth Edition Chapter 11 Retail Organization And Human Resource Management Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Learning Objectives 11.1 To study the procedures involved in setting up a retail organization 11.2 To examine the various organizational arrangements utilized in retailing 11.3 To consider the special human resource environment of retailing 11.4 To describe the principles and practices involved with the human resource management process in retailing Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Steps in Operating Retail Business Setting up an organization structure Hiring and managing personnel Managing operations—financially and nonfinancially Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Factors in Planning and Assessing a Retail Organization Target market needs Employee needs Management needs Through a retail organization, a firm structures and assigns tasks (functions), policies, resources, authority, responsibilities, and rewards to efficiently and effectively satisfy the needs of its target market, employees, and management. A firm cannot survive unless its organization structure satisfies the target market, no matter how well employee and management needs are met. A structure that reduces costs via centralized buying but leads to a firm’s insensitivity to geographic differences in customer preferences will lose market share. Although many retailers perform similar tasks (buying, pricing, displaying, and wrapping merchandise), there are many ways of organizing to conduct these functions. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.1a Planning and Assessing a Retail Organization Target Market Needs – Are there sufficient personnel to provide appropriate customer service? – Are personnel knowledgeable and courteous? – Are store facilities well maintained? – Are the specific needs of branch store customers met? – Are changing needs promptly addressed? Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.1b Planning and Assessing a Retail Organization Employee Needs – Are positions challenging and satisfying enough? – Is there an orderly promotion program from within? – Is the employee able to participate in the decision making? – Are the channels of communication clear and open? – Is the authority-responsibility relationship clear? – Is each employee treated fairly? – Is good performance rewarded? Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.1c Planning and Assessing a Retail Organization Management Needs – Is it relatively easy to obtain and retain competent personnel? – Are personnel procedures clearly defined? – Does each worker report to only one supervisor? – Can each manager properly supervise all the workers reporting to him or her? – Do operating departments have adequate staff support (e.g., marketing research)? – Are the levels of organization properly developed? – Are the organization’s plans well integrated? – Are employees motivated? – Is absenteeism low? – Is there a system to replace personnel in an orderly manner? – Is there enough flexibility to adapt to changes in customers or the environment? Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved The Value Profit Chain and Human Resource Management Satisfaction Mirror– Employee satisfaction and loyalty (due to fairness of management, the quality of one’s peers in the workplace, employee empowerment and monetary compensation) translates into high levels of customer service and customer loyalty. Recognizes that employees interact with customers not management Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Wegman’s Employees In a recent survey of Wegman’s employees, 33,000 of 37,000 employees responded (close to 90 percent). When asked, “Does management know what it’s doing?”, 96 percent responded with a “Yes” answer. The most common response to another question to describe Wegman’s management, was the word “family.” Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.2 The Process of Organizing a Retail Firm Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.3 Division of Tasks in a Distribution Channel Performer Tasks Retailer Can perform all or some of the tasks in the distribution channel, from buying merchandise to coordination. Manufacturer or Can take care of few or many functions, such as shipping, marking Wholesaler merchandise, inventory storage, displays, research, etc. Specialist(s) Can undertake a particular task: buying oce, delivery firm, warehouse, marketing research firm, ad agency, accountant, credit bureau, computer service firm. Consumer Can be responsible for delivery, credit (cash purchases), sales effort (self- service), product alterations (do-it-yourselfers), etc. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Grouping Tasks into Jobs Tasks Jobs Displaying merchandise, customer contact, gift wrapping, customer Sales personnel follow-up Entering transaction data, handling cash and credit purchases, gift Cashier(s) wrapping Receiving merchandise, checking incoming shipments, marking Inventory personnel merchandise, inventory storage and control, returning merchandise to vendors Window dressing, interior display setups, use of mobile displays Display personnel Billing customers, credit operations, customer research Credit personnel Merchandise repairs and alterations, resolution of complaints, Customer service personnel customer research Cleaning store, replacing old fixtures Janitorial personnel Employee management, sales forecasting, budgeting, pricing, Management personnel coordinating tasks Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  After the retailer decides which tasks to perform, they are grouped into jobs. The jobs must be clearly structured. While grouping tasks into jobs, specialization should be considered so each employee is responsible for a limited range of functions (as opposed to performing many diverse tasks). Specialization has the advantages of clearly defined tasks, greater expertise, reduced training, and hiring people with narrow education and experience. Problems can result due to extreme specialization: poor morale (boredom), people not being aware of their jobs’ importance, and the need for more employees. Specialization means assigning explicit duties to individuals so a job position encompasses a homogeneous cluster of tasks. Once tasks are grouped, job descriptions are constructed. These outline the job titles, objectives, duties, and responsibilities for every position. They are used as a hiring, supervision, and evaluation tool Figure 11.4 A Job Description for a Store Manager Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 11.1 Principles for Organizing a Retail Firm Show interest in employees Monitor employee turnover, lateness, and absenteeism Trace line of authority from top to bottom Limit span of control Empower employees Delegate authority while maintaining responsibility Acknowledge need for coordination and communication Recognize the power of informal relationships Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.6 Organization Structures Used by Small Independents Organizational Arrangements Used by Small Independent Retailers: The organization used by a small independent store is simple because it contains only two or three levels of personnel (owner-manager and employees), and the owner-manager personally runs the firm and oversees workers. There are few employees, little specialization, and no branch units. Each employee completes several tasks. Figure 11-6 shows the organizations of two small independents. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Mazur Plan Merchandising—buying/selling, stock planning, Publicity—displays, event planning, advertising research Store management—customer service, merchandise protection, receiving Accounting and control—credit, expense budgeting, inventory management The Mazur plan divides all retail activities into these four functional areas: Merchandising Communications Store management Financial accounting The four areas are organized by line (direct authority and responsibility) and staff (advisory and support) components. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.7 The Basic Mazur Organization Plan for Department Stores The merchandising division is responsible for buying and selling. Merchandise managers supervise buyers, devise financial goals for each department, coordinate department merchandise plans, and interpret the effects of economic data. Buyers have complete responsibility for expenses and profit goals within a department. They prepare budgets, study trends, negotiate with vendors, plan the number of salespeople, and inform sales personnel about the merchandise purchased. Because buyers are not constantly on the selling floor, training, scheduling, and supervising personnel may suffer. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  The growth of branch stores has led to three Mazur plan derivatives: Headquarters executives oversee and operate branches (main store control). Merchandise planning and buying, advertising, financial controls, store hours, and other tasks are centrally managed to standardize performance. Branch store managers hire and supervise the employees in their stores. This format is best when there are few branches and the preferences of branch customers are similar to those of the main store’s customers. As branch stores increase in number, central personnel may become overworked and give too little attention to the branches. Differences in customer preferences may be overlooked. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Chain Retailer Organizations Centralized functional divisions– real estate, distribution, human resources (top management) Elaborate information system and management controls Centralization of much of buying with room to adapt to local markets Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Department Store Organization Formats Main store control– flagship executives oversee store units. Extreme centralization Separate store organization—each store buys for itself and maintains sales responsibility Equal store organization– buying is centralized; branch stores are sales units Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.8 Equal-Store Organizational Format Used by Chain Stores Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  Organizational Arrangements Used by Chain Retailers: Various chain retailers use a version of the equal store organization, as depicted in Figure 11-8. The organization structures generally have these attributes: 1. Many functional divisions. 2. Centralized authority, with store managers responsible for sales. 3. Standardized operations. 4. Elaborate control systems. Limited decentralization, which allows branch stores to adapt to localities. Figure 11.9 The Organizational Structure of Kroger Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Human Resource Management in Retailing Recruiting Selecting Training Compensating Supervising Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Direct and Indirect Costs of Employee Turnover Direct Costs include: separation costs, exit interviews, replacement costs (advertising, screening, new employee orientation) and training costs Indirect costs include: customer dissatisfaction, reduced suggestion selling, pricing errors, reduced morale among co-workers Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Table 11.2 True Cost of Employee Turnover Costs of using fill-in employees Severance pay for exiting employees Costs of hiring new employees Training costs Costs of mistakes and lower productivity while new employees gain experience Customer dissatisfaction due to the loss of prior employees and the use of inexperienced workers. Lower continuity among co-workers. Poor employee morale when turnover is high. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Women in Retailing Issues to address with regard to female workers – Meaningful training programs – Advancement opportunities – Flex time: the ability of employees to adapt their hours – Job sharing among two or more employees who each work less than full time – Child care Retailing empires – Mary Kay – Avon Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Minorities in Retailing Issues to address with regard to minority workers – Clear policy statements from top management as to the value of employee diversity – Active recruitment programs to stimulate minority applications – Meaningful training programs – Advancement opportunities – Zero tolerance for insensitive workplace behavior Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Diversity Two premises: 1. That employees be hired and promoted in a fair and open way, without regard to gender, ethnic background, and other related factors 2. That in a diverse society, the workplace should be representative of such diversity Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Labor Law Considerations Retailers must not – Hire underage workers – Pay workers “off the books” – Require workers to engage in illegal acts – Discriminate in hiring or promoting workers – Violate worker safety regulations – Disobey the Americans with Disabilities Act – Deal with suppliers that disobey labor laws Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.10 A Goal-Oriented Job Description for a Management Trainee Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Figure 11.11 A Checklist of Selected Training Decisions When should training occur? (At the time of hiring and/or after being at the workplace?) How long should training be? What training programs should there be for new employees? For existing employees? Who should conduct each training program? (Supervisor, co-worker, training department, or outside specialist?) Where should training take place? (At the workplace or in a training room?) What material (content) should be learned? How should it be taught? Should audiovisuals be used? If yes, how? Should elements of the training program be computerized? If yes, how? How should the effectiveness of training be measured? Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  Components of Compensation Total compensation Salary plus commission Profit-sharing The goals of a compensation plan in a retail setting are to reward initiative and performance, to compensate retail personnel in light of their value to the organization, and to attract and retain competent employees. Compensation includes both direct monetary payments (e.g., salary) and indirect payments (e.g., paid vacation). Some retailers often use profit-sharing plans to motivate employees. At some large firms, compensation for certain positions is set through collective bargaining. About 800,000 retail employees are represented by labor unions. Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  Under a straight salary plan, a worker is paid a fixed amount per hour, week, month, or year. The advantages are retailer control, employee security, and known expenses. The disadvantages are retailer inflexibility, limited productivity incentive, and fixed costs. With a straight commission plan, earnings are directly tied to productivity. The advantages are retailer flexibility, the link to worker productivity, no fixed costs, and employee incentive. The disadvantages are the retailer’s potential lack of control over the tasks performed, the risk of low earnings to employees, cost variability, and the lack of limits on worker earnings. A salary plus commission plan combines the attributes of salary and commission plans. Some retail executives are paid via a compensation cafeteria, where they choose their own combination of salary, bonus, deferred bonus, fringe benefits, life insurance, stock options, and retirement benefits. Employee Behavior and Motivation Several attitudes may affect employee behavior – Sense of accomplishment – Enjoyment of work – Attitude toward physical work conditions – Attitude toward supervisors – Confidence in company – Knowledge of business strategy – Recognition of employee role in achieving corporate objectives Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved  Specific problems regarding supervising and motivating middle-age workers may relate to concerns with not being able to go to work due to family obligations (such as babysitters not being available or grandchildren being ill), or not wanting to work overtime during peak seasons. Youngemployees can be motivated through fair compensation, tuition benefits, salary increases based on longevity, social events such as sports teams with contemporaries, and opportunities for advancement. Older workers can be motivated through discounts on purchases, more flexible hours, social activities with their cohorts, and career paths that can be accelerated due to hard work. Employee Motivation (1 of 2) Employee centered approach—Whole Foods team based hiring decision after 4 week trial period. Needs 2/3’s vote Hire salaries– Publix store manager = $113,000; Nordstrom has salespeople making $100,000 Continuous assessment-Trader Joe’s every three months (punctuality, is always friendly, knows product features, promotes high store morale. For part-time as well as full-time employees Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Employee Motivation (2 of 2) Profit sharing—Publix current and former employees own 85 percent of company. If price earnings multiple is 20; every $1 of extra profit equals $20 in additional wealth. Encourages harder work for self and fellow workers Au Bon Pain– store managers have compensation linked to profit goals at specific locations Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Motivating Millennial Employees Technologically advanced but often have different work values than older employees Provide flexible work hours Support volunteer activities to demonstrate firm’s commitment to society Provide mentors Get Millennials actively involved in solving important problems Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Style of Supervising Retail Employees Supervision is the manner of providing a job environment that encourages employee accomplishment. a. Supervisory goals are to oversee personnel, attain good performance, maintain morale, motivate people, control costs, communicate, and resolve problems. b. Supervision is provided by personal contact, meetings, and reports. A key element of supervision is to motivate employees to achieve company goals. c. Job motivation is the drive within people to attain work-related goals. 1. Management assumes employees must be closely supervised and controlled; only economic inducements motivate 2. Management assumes employees can be assigned authority and be self-managers; motivation is intrinsic 3. Management applies self-management approach Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Copyright Copyright © 2018, 2014, 2012 by Pearson Education, Inc. All Rights Reserved Retail Management: A Strategic Approach Thirteenth Edition Chapter 15 Implementing Merchandise Plans Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Learning Objectives 15.1 To describe the steps in the implementation of merchandise plans: gathering information, selecting and interacting with merchandise sources, evaluation, negotiation, concluding purchases, receiving and stocking merchandise, reordering, and re-evaluation 15.2 To examine the prominent roles of logistics and inventory management in the implementation of merchandise plans Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.1 Implementing Merchandise Plans Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.2 A Competition Shopping Report Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Selecting Merchandise Sources Company-owned-retailer owns manufacturing and/or wholesaling facilities Outside, regularly used supplier-retailer owns manufacturing and/or wholesaling facilities Outside, new supplier-not owned by the retailer, and the retailer has not bought from it before. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.3 Outside Sources of Supply Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Americas Mart Tradeshow: World’s Global Market Please click URL to view: https://youtu.be/BjjQ8HfkvcA Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.4 A Checklist of Points to Review in Choosing Vendors Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Negotiating the Purchase Special considerations Negotiated contract- the retailer and supplier carefully discuss all aspects of a new or special order. Uniform contract- A regular order or reorder because terms are standard. The order is handled routinely. Negotiated contracts- Off-price retailers and other deep discounters may require negotiated contracts. This is because these firms employ opportunistic buying, by which especially low prices are negotiated for merchandise whose sales have not lived up to expectations, end-of-season goods, returned items, and closeouts. Slotting allowances—payments that retailers require of vendors for providing shelf space. -common for new products in supermarkets in Northeast and in freezer sections Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Concluding Purchases The retailer takes title immediately upon purchase. The retailer assumes ownership after titles are loaded onto the mode of transportation. The retailer takes title when a shipment is received. The retailer does not take title until the end of a billing cycle, when the supplier is paid. The retailer accepts goods on consignment and does not own the items. The supplier is paid after merchandise is sold. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.6 Receiving and Verifying Inventory Receiving and Stocking Merchandise At this point, a retailer is ready to receive and handle items. This involves these varied tasks (See Figure 15-6): 1. Receiving and storing goods. 2. Items may be shipped from suppliers to warehouses (for storage and disbursement) or directly to retailers’ stores. 3. One important emerging technology involves RFID (radio frequency identification) systems. It is a method of storing and remotely retrieving data using RFID tags or transponders. At present, its use is limited. 4. Checking and paying invoices. 5. Price and inventory marking. 6. Completing transactions. 7. Arranging delivery or pickup. 8. Processing returns and damaged goods. 9. The retailer must determine the party responsible for customer returns (supplier or retailer). 10. The situations in which damaged goods would be accepted for refund or exchange also must be determined. 11. Monitoring and reducing inventory losses, a major problem due to the high costs of merchandise theft. 12. Controlling merchandise. This involves assessing sales, profits, turnover, inventory shortages, seasonality, and costs for each product category and item carried by a retailer. Control is usually achieved by preparing computerized inventory data and doing physical Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.7 On-Floor Assortments and Men’s Shirts Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Reordering Merchandise Four critical factors: – Order and delivery time – Inventory turnover – Financial outlays – Inventory versus ordering costs Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Logistics Logistics is the total process of planning, implementing, and coordinating the physical movement of merchandise from manufacturer (wholesaler) to retailer to customer in the most timely, effective, and cost-efficient manner possible. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Logistical Performance Goals (1 of 2) Relate costs incurred to specific logistics activities Place and receive orders as easily, accurately, and satisfactorily as possible Minimize the time between ordering and receiving merchandise Coordinate shipments from various suppliers Have enough goods on hand to satisfy demand without having so much inventory that heavy markdowns will be needed 1. Place merchandise on the sales floor efficiently. 2. Process customer orders efficiently and in a manner satisfactory to customers. 3. Work collaboratively and communicate regularly with other supply chain members. 4. Handle returns effectively and minimize damaged products. 5. Monitor logistics performance. 6. Have backup plans in case of breakdowns in the system. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Supply Chain Management The supply chain is the logistics aspect of a value delivery chain. – Parties involved: ▪ Manufacturers ▪ Wholesalers ▪ Third-party specialists ▪ Retailers Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Order Processing and Fulfillment Quick Response inventory planning (QR)-retailer reduces the amount of inventory it holds by ordering more frequently and in lower quantity Floor-ready merchandise-to items that are received at the store in condition to be put directly on display without any preparation by retail workers Efficient Consumer Response (ECR)24 Inventory costs are reduced, the space required for storage is minimized, and retailers are better able to match orders with market conditions. Reduce inventory turnover Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Transportation and Warehousing How often will merchandise be shipped to retailer? How will small order quantities be handled? What shipper will be used? What transportation form will be used? Are multiple forms required? What are the special considerations for perishables and expensive merchandise? How often will special shipping arrangements be necessary? How are shipping terms negotiated with suppliers? What delivery options will be available for the retailer’s customers? Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.10 Shipping Possibilities Shipping Possibilities A lot of merchandise is transported by at least two types of transportation— such as train and truck or air and truck. These shipments must be delivered as scheduled for the retail supply chain to operate well. With the growth of foreign suppliers, this is tougher to accomplish. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Problems Balancing Inventory Levels The retailer wants to be appealing and never lose a sale by being out of stock; it does not want to be “stuck” with excess merchandise. What is fad merchandise and how much should be carried?-new items for which there is no track record, and new business formats make inventory level decisions even more challenging. Customer demand is never completely predictable. Shelf space allocation should be linked to current revenues. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.12a Ways Retailers Can Deter Employee and Shopper Theft Employee Theft Use honesty tests as employee screening devices. Lock up trash to prevent merchandise from being thrown out and then retrieved. Verify through cameras and undercover personnel whether all sales are rung up. Centrally control all exterior doors to monitor opening and closing. Divide responsibilities–have one employee record sales and another make deposits. Give rewards for spotting thefts. Have training programs. Vigorously investigate all known losses and fire offenders immediately. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.12b Ways Retailers Can Deter Employee and Shopper Theft Shopper Theft While Store Is Open Use uniformed guards. Set up cameras and mirrors to increase visibility–especially in low-traffic areas. Use electronic article surveillance for high-value and theft-prone goods. Develop comprehensive employee training programs. Offer employee bonuses based on an overall reduction in shortages. Inspect all packages brought into store. Use self-locking showcases for high-value items such as jewelry. Attach expensive clothing together. Alternate the direction of hangers on clothing near doors. Limit the number of entrances and exits to the store, and the dollar value and quantity of merchandise displayed near exits. Prosecute all individuals charged with theft. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Figure 15.12c Ways Retailers Can Deter Employee and Shopper Theft Employee/Shopper Theft While Store Is Closed Conduct a through building check at night to make sure no one is left in store. Lock all exits, even fire exits. Utilize ultrasonic/infrared detectors, burglar alarm traps, or guards with dogs. Place valuables in a safe. Install shatterproof glass and/or iron gats on windows and doors to prevent break-ins. Make sure exterior lighting is adequate. Periodically test burglar alarms. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved Reverse Logistics encompasses all merchandise flows from the customer and/or the retailer back through the supply channel. It typically involves items returned because of shopper second thoughts, damages or defective products, or retailer overstocking. Decisions – Under what conditions are customer returns accepted by retailer and by manufacturer? – What is the customer refund policy? Is there a fee for returning an opened package? – What party is responsible for shipping a returned product to the manufacturer? – What customer documentation is needed to prove the date of purchase and the price paid? – How are customer repairs Copyright © 2018,handled? 2014, 2012 Pearson Education, Inc. All Rights Reserved Inventory Management Metrics Metrics used to measure inventory management performance include: – Gross margin dollars. – Inventory turnover. – Gross profit percentage. – Gross margin return on inventory. – The weeks of supply available. – The average in-stock position. Copyright © 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved