Chapter 1

An Introduction to Retailing
 Chapter Objectives
 To define retailing, consider it from different
perspectives, demonstrate its impact, and note
its special characteristics
 To introduce the concept of strategic planning
and apply it
 To show why the retailing concept is the
foundation of a successful business, with an
emphasis on the total retail experience,
customer service, and relationship retailing
 To indicate the focus and format of the text

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 Retailing

Retailing encompasses the business

activities involved in selling goods and
services to consumers for their
personal, family, or household use. It
includes every sale to the final
consumer.

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 Retailing Points
• Retailing means selling both tangible and
non- tangible products such services
• All retailing activities are not done within a
physical location, i.e. web, telephone

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 Issues in Retailing
 How can we best serve our customers while
earning a fair profit?
 How can we stand out in a highly
competitive environment where consumers
have too many choices?
 How can we grow our business, while
retaining a core of loyal customers?

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 Marketing Concept and Retailing

• Marketing Concept defined is a philosophy

to satisfy customers need and make a profit
• Retailers practice the marketing concept

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 The Philosophy

Retailers can best address these

questions by fully understanding and
applying the basic principles of
retailing, as well as the elements in a
well-structured, systematic, and
focused retail strategy.

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 Reasons for Studying Retailing

• Retailing has major impact in the Economy

• Retailing is the final stage in delivering
products to consumers

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 Impact of Retailing in Economy

• Major part of commerce

• Retailing trends often mirror trends in the
economy
• Annual U.S. Retail Store sales $3.5 Trillion
Represents 31% of the total us economy
• Retailing is a major source of job
23 million people employed in retailing

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 Figure 1.2 Career Pathways
to Success

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 Career Pathways to Success

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 An Ideal Candidate for
Retailing Career
 Be a people person
 Be flexible
 Be decisive
 Have analytical skills
 Have stamina

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 Table 1.1 The 10 Largest
Retailers in the U.S., 2001
Rank Company $ Sales (million) # of stores # of employees

1 Wal-Mart 219,812 4,414 1,383,000

2 Home Depot 53,553 1,348 256,300
3 Kroger 50,098 3,534 288,000
4 Sears 41,078 2,960 310,000
5 Target 39,362 1,381 223,500
6 Albertson’s 37,931 2,400 220,000
7 Kmart 37,028 2,150 240,525
8 Costco 34,797 369 64,500
9 Safeway 34,301 1,773 193,000
10 J.C. Penney 32,004 3,770 270,000

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 Figure 1.3 The High Costs and
Low Profits of Retailing

72.65 % - Manufacturer’s costs and profits

23.94 - Retailer’s operating, personnel and

other overhead
1.33 - Taxes
2.08 - Profits

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 Final Stage of Delivering Products

• Retailers make the final contact with the

consumers
• Retailers are sandwich between consumers
and channel members above them
(manufacturers and wholesalers)
• Retailers are a major source of information
• Retailers provide sorting functions which
results in greater variety for consumers

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 Figure 1.4 A Typical Channel of
Distribution

Manufacturer
Retailer

Final
Wholesaler
Consumer

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 Figure 1.5 The Retailer’s Role in
the Sorting Process

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 Multi-Channel Retailing
 A retailer sells to consumers through
multiple retail formats
 Web sites
 Physical stores

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 Relationship Management
Among Retailers and Suppliers
• Disagreements may occur:
control over channel
profit allocation
number of competing retailers
product displays
promotional support
payment terms
operating flexibility
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 Distribution Types
• Exclusive: suppliers make agreements with
one or few retailers that designate the latter
as the only ones in a specified geographic
area to carry certain brands or products
• Intensive: suppliers sell through as many
retailers as possible
• Selective: suppliers sell through a moderate
number of retailers

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 Figure 1.7 Comparing
Distribution Types

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 Special Characteristics of Retailing

• Average transaction is much smaller than

for manufacturers
on average less than a $100.00 for department and specialty
stores, and supermarkets. Costs must be tightly controlled
• Consumers make many unplanned/impulse
purchases
• Consumers still make most purchases thru
a location based store

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 Figure 1.8 Special Characteristics
Affecting Retailers
Small
Impulse
Average
Purchase
Sale

Retailer’s
Strategy

Popularity
of
Stores

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 Retail Strategy

 An overall plan for guiding a retail firm

 Influences the firm’s business activities
 Influences firm’s response to market
forces

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 Six Steps in Strategic
Planning
1. Define the type of business
2. Set long-run and short-run objectives
3. Determine the customer market
4. Devise an overall, long-run plan
5. Implement an integrated strategy
6. Evaluate and correct

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 Aspects of Target’s Strategy
 Growth-oriented  Multiple points of
objectives contact
 Appeal to a prime  Employee relations
market  Innovation
 Distinctive company  Commitment to
image technology
 Community
 Focus
involvement
 Strong customer  Constantly
service monitoring
performance

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 Figure 1.10 Applying the
Retail Concept

Customer Orientation

Coordinated Effort
Retailing Retail
Concept Strategy
Value driven

Goal Orientation

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 Retail Concept
• Customer Orientation –determine attributes and
needs of customers
• Coordinated Effort – integration of plans and activities
to maximize efficiency
• Value-driven – prices appropriate for the level of
products and customer service
• Goal orientation – sets goals for strategy

There is a need to communicate with shoppers and view their

needs as important

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 Practicing Retailing Concept Means

• Concern for Total Retail Experience

• Great Customer Service
• Building Strong, lasting Relationships
(Relationship Retailing

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 Customer Service
• Activities undertaken by a retailer in
conjunction with the basic goods and
services it sells.
Store hours
Parking
Shopper-friendliness
Credit acceptance
Salespeople

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 Relationship Retailing
• Seek to establish and maintain long-term
bonds with customers, rather than act as
if each sales transaction is a completely
new encounter
– Concentrate on the total retail experience
– Monitor satisfaction
– Stay in touch with customers

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 Figure 1.12 A Customer
Respect Checklist
 Do we trust our customers?
 Do we stand behind what we sell?
 Is keeping commitments to customers
important to our company?
 Do we value customer time?
 Do we communicate with customers
respectfully?
 Do we treat all customers with respect?
 Do we thank customers for their business?
 Do we respect employees?

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 Effective Relationship
Retailing
• Use a win-win approach
– It is harder to get new customers than to
keep existing ones happy
• Develop a customer database
– Ongoing customer contact is improved
with information on people’s attributes
and shopping behavior

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 Approaches to the Study of
Retailing

Institutional
Functional

Strategic

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 Parts of Retail Management: A
Strategic Approach
 Building relationships and strategic planning
 Retailing institutions
 Consumer behavior and information
gathering
 Elements of retailing strategy
 Integrating, analyzing, and improving retail
strategy

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