CHAPTER 1

CHAPTER 01

Introduction to the World

of Retailing

Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 1-1

Questions

■ What is retailing?
■ What do retailers do?
■ Why is retailing important in our society?
■ What types of decisions do retail managers
make?

1-2
 What is Retailing?

 Retailing – a set of business

activities that adds value to the
products and services sold to
consumers for their personal or family
use.
 A retailer is a business that sells
products and/or services to
consumers for personal or family use.

1-3
Examples of Retailers

 Retailers:
Coppmart, BigC, Dien may xanh,
Vien Thong A, Shop and Go…

 Firms that are retailers and

wholesalers - sell to other
business as well as
consumers:
Costco, Metro cash and carry,
Distribution Channel
Integration in channel

Vertical Integration – firm performs more than one set of

activities in the channel

 Backward Integration – retailer performs some distribution and

manufacturing activities
 Ex: JCPenney sells Arizona jeans (Private Label)

Coopmart: sell many types of goods under brand “coop”

 Forward Integration – manufacturers/ Wholesalers undertake

retailing activities
 Large retailers engage in both wholesaling and retailing
 Ex: Wal-Mart, Lowe’s, Safeway, Brown Shoe Company

1-6
How Retailers Add Value

■ Provide Assortment
 The customer can choose from a wide of
brands, designs, sizes, prices products at
the same time and at one location
■ Break Bulk
 Buy it in quantities customers want
■ Hold Inventory
 Buy it at a convenient place when you
want it, allow customers can keep a small
inventory at home
■ Offer Services
 Make it easier to buy and use product :
get credit, display, ATM … 1-7
Examples: How Retailers Add Values

 BagBorrowerSteal.com
 jewelry and bag rental; Get (not buy, but borrow) exactly what you
want
 Home Depot
 DIYer (Do-it-yourselfer); Learn how to do it yourself with in-store
clinics and online workshops

1-8
Growing Importance of Retail Sector

 Large and increasing contribution to

GDP
 Major employer
 Retailers as gatekeepers
 Blurring of areas of retail to include
wider areas of business activity –
store cards/credit cards, gas/petrol
retailing, bank services.
 Size of operation allowing for supply
chain control.

1-10
World’s 20 Largest Retailers in 2007
Nature of Retail Industry is Changing

Today’s Retailer
Retailers are a Business Like
Manufacturers

Real Estate Finance

Store Design
Promotion/Advertising

MIS
Loss Prevention

Operations
Human Resources

The McGraw-Hill Companies,

Inc./Andrew Resek, photographer

1-13
Retail Strategy

 A retail strategy should

identify
 the target market

 the product and service

mix
 a long-term comparative

advantage
Decision Variables for Retailers

Customer Service

Store Design Merchandise

and Display Assortment
Retail
Strategy
Pricing Location

Communication
Mix
1-15
Misconceptions About Careers in Retailing

■ College not needed

■ Low pay
■ Long hours
■ Boring
■ Dead-end job
■ No benefits
■ Everyone is part-time
■ Unstable environment The McGraw-Hill Companies, Inc./Andrew Resek, photographer

■ No opportunity for women and

minorities

1-16
 CHAPTER 2
1

CHAPTER 02

Types of Retailers

Retailing Management 8e © The McGraw-Hill Companies,Copyright © 2012

All rights by The McGraw-Hill Companies, Inc. All rights2reserved.
reserved. - 18
McGraw-Hill/Irwin
Merchandise Offering

Variety (breadth of merchandise): wide vs. narrow

- The number of merchandise categories

Assortment (depth of merchandise): deep vs. shallow

-the number of items in a category (SKUs)
Services Offered

 Retailers differ in the

services they offer customers
 EMS offers assistance in
selecting the appropriate kayak
and repairing them
VS
 http://www.outdoorplay.com

and
 Wal-Mart: doesn’t provide any

services
Prices and the cost of offering breath and
depth of merchandise and services

 Stocking a deep and broad assortment (like

EMS) is costly for retailers.

Many SKUs

Because the retailer must have backup stock for each

SKU in addition to holding the inventory

Inventory Investment Cost

Types of Merchandise Retailers

Food Retailers General Merchandise Retailers

 Department stores
 Mom and Pop stores
 Specialty stores
 Convenience stores
 Discount stores
 Supermarkets
 Category Specialist
 Supercenters
 Off-price retailers
 Warehouse clubs
 Drug stores
 Extreme value stores
 Vendors, Kiosk …..
Examples of Service Retailers

Type of Service Service Retail Firms

Airlines American, Delta, British Airways, Singapore Airways

Automobile maint/repair Jiffy Lube, Midas, AAMCO
Automobile rental Hertz, Avis, Budget, Alamo
Banks Citibank, NCNB, Bank of America
Child care centers Kindercare, Gymboree
Credit cards American Express, VISA, Mastercard
Education University of Florida, Babson College
Entertainment parks Disney, Universal Studios, Six Flags
Express package delivery Federal Express, UPS, US Postal Service
Financial services Merrill Lynch, Dean Witter
Fitness Jazzercise, Bally’s, Gold’s Gym
Health Care Humana, HCA
Home maintenance Chemlawn, MiniMaid, Roto-Rooter
Merchandise/Service Continuum
Keywords

 breaking bulk A function performed by retailers or wholesalers in which they

receive large quantities of merchandise and sell them in smaller quantities.
 ethics A system or code of conduct based on universal moral duties and
obligations that indicate how one should behave.
 holding inventory A major value-providing activity performed by retailers
whereby products will be available when consumers want them.
 intertype competition Competition between retailers that sell similar
merchandise using different formats, such as discount and department stores.
 intratype competition Competition between the same type of retailers (e.g.,
Kroger versus Safeway).
 wholesaler A merchant establishment operated by a concern that is primarily
engaged in buying, taking title to, usually storing, and physically handling
goods in large quantities, and reselling the goods (usually in smaller
quantities) to retailers or industrial or business users.
 Keywords
 assortment The number of SKUs within a merchandise category. Also called depth
of merchandise.
 breadth of merchandise The number of different merchandise categories within a
store or department.
 category killer A discount retailer that offers a narrow but deep assortment of
merchandise in a category and thus dominates the category from the customers’
perspective. Also called a category specialist.
 category specialist A discount retailer that offers a narrow but deep assortment of
merchandise in a category and thus dominates the category from the customers’
perspective. Also called a category killer.
 convenience store A store that provides a limited variety and assortment of
merchandise at a convenient location in a 2,000- to 3,000-square-foot store with
speedy checkout.
 conventional supermarket A self-service food store that offers groceries, meat,
and produce with limited sales of nonfood items, such as health and beauty aids
and general merchandise.
 department store A retailer that carries a wide variety and deep assortment, offers
considerable customer services, and is organized into separate departments for
displaying merchandise.
 Keywords
 depth of merchandise The number of SKUs within a merchandise category. Also
called depth of merchandise.
 discount store A general merchandise retailer that offers a wide variety of
merchandise, limited service, and low prices.
 franchising A contractual agreement between a franchisor and a franchisee that
allows the franchisee to operate a retail outlet using a name and format developed
and supported by the franchisor.
 full-line discount store Retailers that offer a broad variety of merchandise, limited
service, and low prices.
 hypermarket Large (100,000–300,000 square feet) combination food (60–70
percent) and general merchandise (30–40 percent) retailer.
 North American Industry Classification System (NAICS) Classification of retail
firms into a hierarchical set of six-digit codes based on the types of products and
services they produce and sell.
 off-price retailer A retailer that offers an inconsistent assortment of brand-name,
fashion-oriented soft goods at low prices.
 specialty store A type of store concentrating on a limited number of
complementary merchandise categories and providing a high level of service.
 Keywords
 stock-keeping unit (SKU) The smallest unit available for keeping inventory control.
In soft goods merchandise, an SKU usually means a size, color, and style.
 supercenter Large store (150,000 to 220,000 square feet) combining a discount
store with a supermarket.
 supermarket A conventional supermarket is a large, self-service retail food store
offering groceries, meat, and produce, as well as some nonfood items, such as
health and beauty aids and general merchandise.
 value retailers Small, full-line discount stores that offer a limited merchandise
assortment at very low prices.
 variety The number of different merchandise categories within a store or department.
 warehouse club A retailer that offers a limited assortment of food and general
merchandise with little service and low prices to ultimate consumers and small
businesses.
 wholesale-sponsored voluntary cooperative group An organization operated by a
wholesaler offering a merchandising program to small, independent retailers on a
voluntary basis.