Introduction to the World of Retailing Chapter 1 PDF

Because learning changes everything. ® Introduction to the World of Retailing CHAPTER 1 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  What is Retailing? 1...

Because learning changes everything. ® Introduction to the World of Retailing CHAPTER 1 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  What is Retailing? 1 Retailing is a set of business activities that adds value to products and services sold to consumers for their personal or family use. © McGraw Hill LLC 2  What is Retailing? Retailing exist in traditional (brick and mortar store), as well as nonstore such as: 1. Ordering a T-shirt on your mobile app 2. Buying cosmetics from a Mary Kay salesperson 3. Ordering shoes from a catalog 4. Streaming a movie through Netflix © McGraw Hill LLC 3  Why retailers are needed? Wouldn’t it be easier and cheaper for consumers to cut out the intermediaries (i.e., wholesalers and retailers) and buy directly from manufacturers? The answer, generally, is no, because retailers add value and are more efficient at adding this value than manufacturers or wholesalers. © McGraw Hill LLC  Roles of Retailing Providing assortments The retailer’s role in supply chain Breaking bulk Retailers create value Retailing Holding inventory Costs of channel activities Providing services Retailers perform wholesaling and production activities © McGraw Hill LLC 5  1. The Retailer’s Role in a Supply Chain Retailer – sells products and services to consumers. Supply chain – a set of firms that make and deliver goods and services to consumers. © McGraw Hill LLC 6  Example of a Supply Chain Manufacturer/ Wholesaler Retailer Customer Producer Coca Cola Coca Cola 7-Eleven Cindy! Company Bottlers Jaya Grocer © McGraw Hill LLC 7  2. Retailers Create Value Retailers Create Value 1. Providing an assortment. 2. Providing services. 3. Breaking bulk. 4. Holding inventory. Retailers add value by providing an assortment of goods that can satisfy consumers’ needs. © McGraw Hill LLC Tony Thiethoaly/Shutterstock 8  1. Providing Product Assortments Conventional supermarkets typically carries about 33,000 different items made by more than 500 companies. A broad assortment enables customers to choose from a wide selection of products, brands, sizes, and prices at one location. © McGraw Hill LLC  Product Mix during Covid-19 Increased dramatically past 50 years Dropped 7% © McGraw Hill LLC  2. Providing Services Retailers provide services that make it easier for customers to buy and use products. For example: Retailers offer credit so that consumers can have a product now and pay for it later; Harvey Norman gives flexible payment options Display products so that consumers can see and test them before buying; Sephora allows customers to try on their products Employ salespeople in stores or maintain websites to answer questions and provide additional information about the products they sell. LV has a salesperson dedicated to each customer © McGraw Hill LLC  3. Breaking Bulk To reduce transportation costs, manufacturers and wholesalers typically ship cases of frozen dinners or cartons of blouses to retailers. Retailers then offer the products in smaller quantities tailored to individual consumers’ and households’ consumption patterns—an activity called breaking bulk. Breaking bulk enables consumers to purchase the specific merchandise they want in smaller, more useful quantities. © McGraw Hill LLC  4. Holding Inventory A major value-providing activity performed by retailers is holding inventory so that products will be available when consumers want them. Consumers can keep a smaller inventory of products at home, because they know local retailers will have the products available when they need more. © McGraw Hill LLC  3. Costs of Channel Activities Value-creating activities increase the costs of products and services. The costs in the supply chain can be almost as much as the cost to make the product. © McGraw Hill LLC 14  Costs of Value-Added Activities in the Distribution Channel for a T-Shirt $19.95 Profit Profit $14 $1.95 Added values Handling & $1 Added values $4 storing Fold the shirt, $11 $2 Put price tags, Store it, Profit $1 Employ sales associates, Light & air- Design $14 $11 condition the store Raw material $10 Labor Production equipment Transportation Manufacturer Wholesaler Retailer © McGraw Hill LLC 4. Retailers Perform Wholesaling and Production Activities Vertical Integration – firm performs more than one set of activities in the channel Eg: retailer invests in wholesaling or manufacturing Eg: Mydin and Mydin Wholesale Hypermarket Backward Integration – retailer performs some distribution and manufacturing activities Eg: Aeon’s private label: TOPVALU Forward Integration – manufacturers undertake retailing activities Eg: Nescafe Dolce Gusto, Pensonic Official Store © McGraw Hill LLC Left: Tanawat Chantradilokrat/Shutterstock; Right: Maryia Kazlouskaya/Alamy Stock Photo 16  Economic and Social Significance of Retailing Role in Developed Economies Consumer spending plays a critical role in the economies of the United States and other developed economies. When consumers spend more money buying goods and services from retailers, a country’s economy flourishes. Merchandise flies off the shelves, and retailers place orders for replacement merchandise. Manufacturers hire more employees, place orders for raw materials, and make more products. However, if consumers feel uncertain about their financial future and decide to refrain from buying nonessential goods and services, the economy slows down. © McGraw Hill LLC 17  Economic and Social Significance of Retailing Role in Developing Economies – The Base of the Pyramid 9% of world population lives on under $2 a day. Consumers in this low-income consumer segment, referred to as the base of the pyramid (BoP), still have significant spending power. Undertaking retailing activities for BoP markets is challenging. Difficult to communicate and complete transactions. Lack access to mass media, the Internet, or credit cards. Rural, remote: high cost of transporting goods. Engagement in BoP markets requires innovative approaches for doing business. © McGraw Hill LLC 18  Base of Pyramid An international conglomerate: EssilorLuxottica (Ray-Ban & Oakley) form an entrepreneurial program calls Eye Mitra. It provides training to workers in India who are interested in opening shops offering vision tests and prescribe glasses. Through this program, an estimated 10million low-income people got accessed to inexpensive glasses. © McGraw Hill LLC  Economic and Social Significance of Retailing Role in Society Besides providing goods and services to their customers, retailers realize that their responsibility includes the needs and objectives of all stakeholders. Stakeholders: Prospective customers (want low prices) Supply chain partners (want low cost) Employees (want high wages) Shareholders (want high profits) Government agencies (want adherence to rules and regulations) Members of the firm’s communities (low carbon footprint) How to satisfy the needs and objectives of multiple stakeholders? Some forward-thinking retailers are beginning to adopt the concept of conscious retailing © McGraw Hill LLC 20  Economic and Social Significance of Retailing Role in Society continued Corporate social responsibility (CSR). Voluntary. Meets or exceeds the ethical and legal expectations of stakeholders. Conscious retailing. Recognition of the retailer’s greater purpose. Eg: TOMS, Eye Mitra Consideration of stakeholders and their interdependence. ie: Giving up on maximizing profits & try to strive balance for the needs of all stakeholders. The presence of conscious leadership, creating a conscious corporate culture. Eg: Founder of Patagonia The understanding that decisions are ethically based. Eg: should retail salespeople use hard selling approach when they know the product is not the best for customer’s needs? A commitment to social issues. Eg: Ben&Jerry was among the first corporations to voice vigorous support of the Black Lives Matter movement. https://businesschief.com/leadership-and-strategy/9- companies-taking-a-stance-on-political-or-social-issues © McGraw Hill LLC 21 Because learning changes everything.® www.mheducation.com