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Retail Management
RMG 100
Frances Gunn

Bashir Hessari RMG 100 Study Notes Classification of Retail Operations Level of Service Product Lines Price  Ownership Level of Service Self Service Full Service Factory outlets Discount Stores Exclusive Stores Warehouse clubs Product Assortment - Variety (breadth of merchandise) The number of different merchandise categories a retailer offers* - Assortment (depth of merchandise) The number of items in a merchandise category (SKU’s)* - Each different item of merchandise is called a SKU (stock keeping unit). -Customers like wide variety, deep assortment, and a lot of service, but some customers appreciate having the retailer edit the assortment for them. -Why don’t discount stores offer more services? (They appeal to a target segment that does not want to pay the cost for more service options.) Price LOW PRICE HIGH PRICE Good Value Quality Image Ownership 1 2 [Type text] Classification of Ownership - Independent Retailers - Chain Stores - Franchises Types of Retailers - Specialty Stores - Department Stores - Supermarkets - Discount Stores - Convenience Stores - Off-Price Retailers - Club Stores - Drug Stores - Superstores Specialty Stores - Concentrates on a limited number of complementary merchandise categories and provides a high level of service in a relatively small store. Level of service: High Assortment/Variety: Narrow/Deep Price: High Gross Margin: High Specialty Store Issues - 6,500 chain stores closed last year… International Council of Shopping Centers - Cheaper rents, shorter lease terms and fatter allowances from landlords for outfitting stores - Rents in new lease signing are 10.4% lower on average than the asking price (Reis, Inc) Specialty Discount Stores OR Category Killers! Ex. The Home Depot, Toys R us, Ikea, Best Buy Service Level: Low Assortment/Variety: Narrow/Deep Price: Low Gross Margin: Low Department Stores Ex. The Bay, Sears Service level: High Assortment/Variety: Broad/Med-Deep Price: High Gross Margin: High Department Store Issues -Competition -Discount Stores on Price -Specialty stores on Service, Depth of Assortment -Lower Cost by Reducing Services - Centralized Cash Wraps -More Sales 2 Bashir Hessari -Customers Wait for Sale -Focus on Apparel and Soft Home -Develop Private Labels and Exclusive Brands Ex. (Department stores are responding to competition by lowering their traditionally higher prices. The Bay is, investing heavily in private label programs, creating excitement by juxtaposing different departments in the same area, and adding new emphasis to some consumer segments by increasing advertising and selection. They are working closely with their vendors to ensure better in-stock positions for fashion merchandise and still reduce average inventory levels.) Supermarkets -Competition: fierce, low profit on many items -Large, self-service retailer with grocery specialty Discount Stores Service Level: Low Variety/Assortment: Broad/ Shallow Price: Low Gross Margin: Low Discount Store Issues -Wal-Mart’s Dominance - Sophisticated supply chain management Differentiate Strategy -Wal-Mart = EDLP and Good Value -Shoppers = Health and Beauty Products Competition from Category Specialist Convenience Stores - Convenience products - Often with gas stations - Convenience stores: fill-in your “regular” shopping - Competition (fast food also) - 24/7 is more important - We pay for the convenience Retailer Ex. Winners Off-price Retailer Low service Narrow Line Low Prices Low margins -Less wide; but deep. Club Stores - Warehouse club/ wholesale club - No frills, members only - Bulk purchases: price competition, homogeneous shopping goods Drug Stores 3 4 [Type text] - Competition from Supermarkets, discount stores - Evolution: stand alone sites with drive thru windows - Offering more frequent purchase food items - Improved systems provide personalized service in the pharmacy - Online drug store Hypermarket and Supercenter Hypermarket – A large retail store combining a supermarket and a full-line discount store. E.g. Wal-Mart Supercenter – Retail store combining groceries and general merchandise goods with a wide range of services. E.g. Loblaw’s - service level low.. variety broad/med- deep… prices moderate…gross margin low Non-Store Retail Formats Electronic Retailing -(also called e-tailing, online retailing and Internet Retailing) is a retail format in which the retailers communicate with customers and offer products and services for sale over the Internet. Catalog Retailing -is a nonstore retail format in which the retail offering is communicated to a customer through a catalog. Direct-mail Retailers- communicates with their customers using letters and brochures. Television Home Shopping- is a retail format in which customers watch a TV program demonstrating merchandise and then place orders for the merchandise by telephone. Vending Machine Retailing- is a nonstore format in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card. Automatic Vending - Non-store retailing - Maintenance and operating costs are high - Small convenience products are available in vending machines - Out of 3 million vending machines, 1.8 million is soft drinks. Catalogue Retailing - Low start up cost - Evolution of Multi-Channeling offering - Hard to compete wth large well established firms - General merchandise catalogues- Sears (offer a broad variety of merchandise) - Specialty Catalogues – Victoria Secret. (Focus on specific category) Television Home Shopping 4 Bashir Hessari - Two popular home shopping programs reach 60 million homes and have combined sales of 2 billion. - Attract 40-50 year old females - Limitations of TV shopping have been the lack of buyer- seller interaction. Telemarketing - Telemarketing sales exceed $500 billion - Privacy is an issue. Issues in Direct Selling -Direct selling is a highly interactive form of retailing through personal interactions and demonstrations. Providing high level of information is costly. Two Types of Direct Selling Party Plan System – Salespeople encourage customers to act as hosts and invite friends or co-workers to a “party” at which the merchandise is demonstrated. The host/hostess receives a commission for arranging a meeting Multilevel Network – in this network people serve as master distributors, recruiting other people to become distributors in their network. Master distributors either buy and sell to other distributors or receive commission on merchandise purchased. Pyramid Scheme – This develops when the firm and its program are designed to sell merchandise and services to other distributors rather than to end-users. Retail Marketing Strategy Step 1 Defining a Target Market  Segment the Market: - Demographics - Geographic’s - Psychographics Step 2 Choosing the Retailing Mix  The Six P’s: - Product - Price - Promotion - Place - Personnel - Presentation Product Merchandising Strategy - Category management: Retailing strategy which views each product category as an individual profit center - Slotting Allowances: Lump-sum payments by manufacturers for stocking new products - Scrambled Merchandising: Combining dissimilar product lines to boost sales volume 5 6 [Type text] - Growth of Store brands: Battle for shelf space Promotion Retail Promotion Strategy: - Advertising - Public Relations - Publicity - Sales Promotion Place: Location - Large, long-term commitment of resources - Location will affect future growth - Local environment
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