Fundamentals Of Retailing PDF

**FUNDAMENTALS OF RETAILING (TOPIC 1)** - Retailing is a distribution process, in which all the activities involved in selling the merchandise directly to the final consumer are included. It encompasses sale of goods and services from a point of purchase to the end user, who is going...

**FUNDAMENTALS OF RETAILING (TOPIC 1)** - Retailing is a distribution process, in which all the activities involved in selling the merchandise directly to the final consumer are included. It encompasses sale of goods and services from a point of purchase to the end user, who is going to use that product. **TYPES OF CHANNELS OF DISTRIBUTION** 1. **MANUFACTURER** -- The ones who are involved in production of goods with the help of machines, labour and raw materials. 2. **WHOLESALER** -- The one who purchases the goods from the manufacturers and sells to the retailers in large numbers but at a lower price. 3. **RETAILER** -- Retailer comes at the end of the supply chain who sells the products in small quantities to the end users as per their requirement and need. 4. **CUSTOMER** -- The end user is the ultimate consumer of the products; goes to the retailer to buy the goods (products) in small quantities to satisfy his need. **RETAILING CONCEPT** **01 Customer Orientation** -- The retailer determines the attributes and needs of its customers and endeavors to satisfy these needs to the fullest. **02 Coordinated Effort** -- The retailer integrates all plans and activities to maximize efficiency. **03 Value** **Driven** -- The retailer offers good value to customers, whether it be upscale or discount. This means having prices appropriate for the level of products and customer service. **04 Goal Orientation** -- The retailer sets goals and then uses its strategy to attain them. **SHOPS (RETAILERS) 5 DISTINCTIVE ROLES** ✓ Advertising & Promotions ✓ Advice & Guidance ✓ Negotiate & Form Contracts ✓ Arrange for Payment & Accept Risk ✓ Handles Claims & After-sales Facilities **STRATEGIC PLANNING IN RETAILING (TOPIC 2)** **STRATEGIC PLANNING** - is a complex process with a number of intertwined factors, both controllable and uncontrollable. **ELEMENTS OF A RETAIL STRATEGY** a. Situational Analysis b. Objectives c. Identification of consumers d. Overall Strategy e. Specific activities f. Control **SITUATION ANALYSIS** - is a candid evaluation of the opportunities and threats facing a prospective or existing retailer. It means being guided by an organizational mission, evaluating ownership and management options, and outlining the goods/service category to be sold. **OPPORTUNITIES** - are marketplace openings that exist because other retailers have not yet capitalized on them. **THREATS -** are environmental and marketplace factors that can adversely affect retailers if they do not react to them. **ORGANIZATIONAL MISSION** - is a retailer's commitment to a type of business and to a distinctive role in the marketplace. A clear mission lets a firm gain a customer following and distinguish it from competitors. **OWNERSHIP AND MANAGEMENT ALTERNATIVES** **1. Sole Proprietorship** - is an unincorporated retail firm owned by one person. **2. Partnership** - is an unincorporated retail firm owned by two or more persons, each with a financial interest. **3. Corporation** - is a retail firm that is formally incorporated under state law. It is a legal entity apart from individual officers. **CHECKLISTS TO CONSIDER WHEN STARTING A RETAIL BUSINESS** A. SELF ASSESMENT AND BUSINESS CHOICE B. OVERALL RETAIL PLAN C. FINANCIAL PLAN D. ORGANIZATIONAL DETAILS PLAN **CHECKLIST TO CONSIDER WHEN PURCHASING AN EXISTING RETAIL BUSINESS** 1. Why is the seller placing the business up for sale? 2. How much are you paying for goodwill? 3. How sales, inventory levels, and profit figures been confirmed by your accountant? 4. Will the seller introduce you to his or her customers and stay on during the transition period? 5. Has a lawyer examined the proposed contracts? **GOODS AND SERVICE CATEGORY** - Before a prospective retail firm can fully design a strategic plan, it selects a goods/service category in which to operate. - It is advisable to specify both a general goods/service category and a niche within that category. - A potential retail business owner should select a type of business that will allow him or her to match personal abilities, financial resources, and time availability with the requirements of that kind of business. **SELECTED KINDS OF GOODS AND SERVICE ESTABLISHMENT** **GOODS ESTABLISHMENT** a\. Durable goods stores b\. Nondurable goods stores **SERVICE ESTABLIHMENTS** a\. Personal services b\. Amusement services c\. Repair services d\. Hotel services **PERSONAL ABILITIES** - depend on an individual's aptitude, formal learning about retail practices and policies; and experience. **OBJECTIVES** - After situation analysis, a retailer sets objectives. This helps in strategy and translates the organizational mission into action. **SALES OBJECTIVES** - are related to the volume of goods and services a retailer sells. Some retailers set sales growth as a top priority. (For some firms, market share is another goal. It is often an objective only for large retailers or retail chains) **IMAGE (POSITIONING)** **IMAGE** -- it represents how a given retailer is perceived by consumers and others. The key to a successful image is that consumers view the retailer in the manner the firm intends. **POSITIONING** - through positioning, a retailer devises its strategy in a way that projects an image relative to its retail category and its competitors and that elicits a positive consumer response. There are two different positioning approaches; **mass merchandising** and **niche retailing:** 1. **Mass Merchandising** - a positioning approach whereby retailers offer a discount or value-oriented image, a wide and/or deep merchandise selection, and large store facilities. 2. **Niche Retailing** - allows retailers to identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market. **IDENTIFICATION OF CONSUMER CHARACTERISTICS** **TARGET MARKET** - is the group of customers/consumers to whom a firm wants to sell their goods/services. There are three techniques a firm may use in selecting its target market: [mass marketing, concentrated marketing, and differentiated marketing.] **A. MASS MARKETING** - is the advertising or promotion of a product, good or service to a wide variety of audiences with the expectation of appealing to as many people as possible. **B. CONCENTRATED MAKRETING** - is a type of marketing strategy where the organization\'s marketing efforts are focused to a well-defined market segment. **C. DIFFERENTIATED MARKETING** - enables a firm to appeal to multiple customer segments and target groups with a different marketing message for each. (it is a combination of concentrated marketing and undifferentiated marketing) **OVERALL STRATEGY** A retailer develops an in-depth overall strategy. This involves two components: **Controllable variables** --- the aspects of business the firm can directly affect. *The controllable parts of a retail strategy consist of:* - Store location - Managing a business - Merchandise management and pricing **Uncontrollable variables** --- those to which the retailer must adapt. *Uncontrollable parts of a strategy consists of:* - Consumers - Competition - Technology - Seasonality - Legal issues **SPECIFIC ACTIVITIES** - Short-run decisions are now made and enacted for each controllable part of the strategy. These actions are known as tactics and encompass a retailer's daily and short-term operations, and they must be responsive to the uncontrollable environment **CONTROL** - In the control phase of strategic planning for retailers, a review takes place on the fourth step (identification of consumers). - As the strategy and tactics (Steps IV and V) are assessed against the business mission, objectives, and target market. **RETAIL AUDIT** - a systematic process for analyzing the performance of a retailer. **FEEDBACK** - At each strategic stage, feedbacks are observed in each step to see the success or failure of that part of the strategy. *Positive Feedback* - includes high revenue, a high percentage of customers renewing annual membership in a membership (warehouse) club, and low employee turnover and absenteeism *Negative Feedback* - includes falling sales revenue, low membership renewals, and high employee turnover and absenteeism. **TYPES OF RETAIL INSTITUTIONS (TOPIC 3)** **RETAIL INSTITUTIONS** - the basic format or structure of a business. **RETAIL INSTITUTIONS CHARACTERIZED BY OWNERSHIP** A. **INDEPENDENT** Owns one retail unit. The management has direct contact with the customers and can quickly respond to their needs. They capitalize on a highly targeted customer base and please shoppers in a friendly way. These retailers should not try to serve too many customers or enter into price wars. **ADVANTAGES** - Investments costs are low - Devising a strategy becomes easier - Better customer relationship management **DISADVANTAGES** - Limited advertisements - Unequal distribution of work - Operations are often handled manually with little computerization B. **CHAIN** - Can advertise - They have bargaining power due o their volume of purchase - Achieve costs efficiency due to performing the wholesale functions themselves **DISADVANTAGES** - Investments are high - Loss control of the management\] - Personnel may have limited independence **FRANCHISE** *There are two different types of franchising:* **1. Product/Trademark Franchising** - A franchisee acquires the identity of a franchisor by agreeing to sell the latter's products and/or operate under the latter's name. **2. Business Format Franchising** - The franchisee receives assistance on site location, quality control, accounting systems, startup practices, management training, and responding to problems besides the right to sell goods and services. **SELECTED FACTORS FOR PROSPECTIVE FRANCHISEES TO CONSIDER** **A. Costs** - Initial franchise fee and other expenses - Continuing royalty payments - Advertising fees **B. Franchisors Control** - Site approval - Restrictions on sales are - Design or appearance standards **C. Contractual Obligations** - Renewals are not automatic. The franchisor may decline to renew or offer a new renewal that doesn't have the same terms as the original contract. **THREE STRUCTURAL AGREEMENTS THAT DOMINATE RETAIL FRANCHISING** **1. Manufacturer-retailer** - A manufacturer gives independent franchisees the right to sell goods and related services through a licensing agreement. **2. Wholesaler-retailer** **a. Voluntary** - A wholesaler sets up a franchise system and grants franchises to individual retailers. **b. Cooperative** - A group of retailers' sets up a franchise system and shares the ownership and operations of a wholesaling organization. **3. Service sponsored-retailer** - A service firm licenses individual retailers so they can offer specific service packages to consumers. **LEASED DEPARTMENTS** - a department in a retail store that is rented to an outside party. It is sometimes called as "stores within a store" or kiosks with even smaller footprint. (watch repair, photographic studios, in-store beauty salons) **VERTICAL MARKETING SYSTEM** **1. INDEPENDENT VERTICAL MARKETING SYSTEM** - It is separately owned manufacturers, wholesalers, and retailers. (stationary stores, gift shops, drugstores) **2. PARTIALLY INTEGRATED SYSTEM** - Two separately owned firms, usually manufacturers and retailers, perform all production and distribution functions. (appliance stores, restaurants, furniture stores) **3. FULLY INTEGRATED SYSTEM** - The firm has total control over its strategy, direct customer contact, and exclusivity over its offering; it also keeps all profits. This system can be costly and requires a lot of expertise. **CHANNEL CONTROL** - one member of a distribution channel dominates the decisions made in that channel due to the power it possesses. **CONSUMER COOPERATIVE** - are owned by their customers, who invest, elect officers, and manage operations, and share savings or profits. Consumer cooperatives have been most popular in [food retailing.] **RETAIL INSTITUTIONS BY STORE-BASED STRATEGY MIX** **WHEEL OF RETAILING** - Refers to the general life cycle retailers experience over time. The wheel is based on four principles: 1. Many price-sensitive shoppers will trade customer services, wide selections, and convenient locations for lower prices. 2. Price-sensitive shoppers are often not loyal and will switch to retailers with lower prices. 3. New institutions are frequently able to have lower operating costs than existing formats. 4. As retailers move up the wheel, they typically do so to increase sales, broaden the target market, and improve their image. **SCRAMBLED MERCHANDISING** - occurs when a retailer adds goods and services that may be unrelated to each other and to the firm's original business. **RETAIL LIFE CYCLE CONCEPT** - states that retail institutions pass through identifiable life stages. **5. DECLINE** Retail concept loses popularity due to firms in other stages; less competition. **HOW RETAIL INSTITUTIONS ARE EVOLVING** **A. MERGERS** - involve the combination of separately owned retail firms. **B. DIVERSIFICATION** - retailers become active in businesses outside their normal operations, perhaps adding stores in different goods/service categories. **C. DOWNSIZING** - Various retailers have overextended themselves and do not have the resources or management talent to succeed without retrenching. **RETAIL INSTITUTIONS CATEGORIZED BY STORE-BASED STRATEGY MIX** **FOOD ORIENTED RETAILERS** 1. **CONVENIENCE STORE** -- a well-located, food-oriented retailer that is open long hours and carries a moderate number of items. 2. **CONVENTIONAL SUPERMARKET** - a self-service food store with grocery, meat, and produce departments. Included are conventional supermarkets, food-based superstores, combination stores, box (limited-line) stores, and warehouse stores. 3. **FOOD-BASED SUPERSTORE** - larger and more diversified than a conventional supermarket but usually smaller and less diversified than a combination store and caters to complete grocery needs, along with fill-in general merchandise. 4. **COMBINATION STORE** - unites supermarket and general merchandise in one facility, with general merchandise accounting for 25 to 40 percent of sales. 5. **BOX (LIMITED-LINE) STORE** - a food-based discounter that focuses on a small selection of items, moderate hours of operation (compared with other supermarkets), few services, and limited manufacturer brands. 6. **WAREHOUSE STORE** - a food-based discounter that offers a moderate number of food items in a no-frills setting, and appeals to one-stop food shoppers, concentrates on special purchases of popular brands. **GENERAL MERCHANDISE RETAILERS** 1. **SPECIALTY STORE** - concentrates on selling one type of goods or service line and usually carries a narrow but deep assortment in the chosen category and tailors the strategy to a given market segment. 2. **TRADITIONAL DEPARTMEMENT STORE** - a large retail unit with an extensive assortment (width and depth) of goods and services that is organized into separate departments for purposes of buying, promotion, customer service, and control. 3. **FULL LINE DISCOUNT SORE** -- a type of department store but conveys the image of a high-volume, low-cost outlet selling and products are normally sold via self-service. 4. **VARIETY STORE** - handles an assortment of inexpensive and popularly priced goods and services, such as apparel and accessories, costume jewelry, notions and small wares, candy, toys, and other items in the price range. 5. **OFF-PRICE CHAIN** - features brand-name apparel and accessories, footwear linens, fabrics, cosmetics, and/or house wares and sells them at everyday low prices in an efficient, limited-service environment. 6. **FACTORY OUTLET**- a manufacturer-owned store that sells closeouts, discontinued merchandise, irregulars, canceled orders, and sometimes in-season, first-quality merchandise. 7. **MEMERSHIP CLUB** - stores that require a membership to shop, offering bulk products at lower prices. 8. **FLEA MARKET** - many retail vendors sell a range of products at discount prices in plain surroundings or nontraditional sites. **WEB, NON-STORE ABSED & OTHER FORMS OF NON-TRADITIONAL RETAILING** **THE DOMAIN OF DIRECT MARKETING** **DIRECT MARKETING** - a form of retailing in which a consumer is exposed to a good or service through a non-personal medium and then orders by mail, phone, fax, computer, or mobile media. *Direct marketers can be divided into two categories:* **1. General** - General direct marketing firms offer a full line of products and sell everything from clothing to house wares. **2. Specialty** - Specialty direct marketers focus on narrower product lines. **ADVANTAGES OF DIRECT MARKETING** - can build brand loyalty by continual brand messaging on direct marketing channels. - eliminates price hikes due to "middlemen" and provides a direct approach. - has a long-standing reputation for high profitability and great ROI. **EVOLVING ACTIVITIES OF DIRECT MARKETERS** *Over the past several decades, these direct marketing activities have evolved:* - Web and mobile technology have moved to the forefront in all aspects of direct marketing--- from lead generation to order processing. - Multiple points of customer contact are offered by most firms today. - There is an increased focus on database retailing. **8 STEPS IN DIRECT MARKETING STRATEGY** 1. BUSINESS DEFINITION 2. GENERATING CUSTOMERS 3. MEDIA SELECTION 4. PRESENTING THE MESSAGE 5. EMASURING RESULTS AND MAINTAINING THE DATABASE 6. ORDER FULFILLMENT 7. CUSTIOMER RESPONSE 8. CUSTOMER CONTACT **DIRECT SELLING** - is selling products directly to consumers in a non-retail environment. Instead, sales occur at home, work, online or other non-store locations. **VENDING MACHINES** - is a cash- or card-operated retailing format that dispenses goods (such as beverages) and services (such as electronic arcade games). It eliminates use of sales personnel and allows 24-hour sales. **ELECTRONIC RETAILING** **INTERNET** - is a global electronic superhighway of computer networks that use a common protocol and that are linked by telecommunications lines and satellites. **WORLD WIDE WEB** - is one way to access information on the Internet, whereby people work with easy-to-use Web addresses (sites) and pages. **6 SCOPE OF ONLINE RETAIILING** 1. Store management 2. Category management 3. Customer relationship management 4. Vendor management 5. Inventory management 6. Supply chain management **CHARACTERISTICS OF WEB USERS IN RETAILING** a. Gender b. Age c. Community Type d. Income e. Education **OTHER NON-TRADITIONAL FORMS OF RETAILING** **1. Video Kiosk** - a freestanding, interactive, electronic computer terminal that displays products and related information on a video screen. Retail store kiosks locate items in the store and enhance customer service. Kiosks can be linked to retailers' computer networks or to the Web. **2. Airport Retailing** - is the sale of products and services in airports. It includes shops, restaurants, and duty-free stores that travelers can visit while waiting for their flights. Since people often have time to browse before departure or during layovers, airports offer a variety of stores and food options, from luxury brands and souvenirs to convenience items.