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Ryerson University
Retail Management
RMG 200
Ken Wong

Chapter 1 INTRODUCTION TO THE WORLD OF RETAILING Retailing is the set of business activities that add value to the products and services sold to consumers for their personal or family use. Retailer is a business that sells products or services, or both, to consumers for their personal or family use. Retailers attempt to satisfy consumer needs by having the right merchandise, at the right price, at the right place, in the right quantities, at the right time when the consumer wants. Distribution channel is a set of firms that facilitate the movement of products from the point of production to the point of sale to the ultimate consumer. Vertical integration means that a firm performs more than one set of activities in the channel, such as investments by retailers in wholesaling or manufactuFunctions performed by retailers: 1) Providing anAssortment of products and services. 2) Breaking Bulk 3) Holding inventory 4) Providing service and services. Breaking Bulk Retailers that offer the products in smaller quantities tailored to the individual consumer’s and household’s consumption patterns. Breaking bulk is important to both manufacturers and consumers. It is cost-effective for manufacturers to package and ship merchandise in larger rather than smaller quantities. In 2008, total retail sales amounted to $425.3 bilThe Retail Management Decision Process Intratype competition -Aretailer’s primary competitors are those with the same format. Thus, department stores compete against other department stores and supermarkets against other supermarkets. Intertype competition- competition between retailers that sell similar merchandise using different formats, such as discount and department stores. Variety is the number of different merchandise categories within a store or department. Scrambled merchandising-The offering of merchandise not typically associated with the store type, such as clothing in a drugstorDeveloping a Retail Strategy : The retail strategy indicates how the firm plans to focus its resources to accomplish its objectives. It identifies: 1) the target market, or markets, toward which the retailer will direct its efforts 2) the nature of the merchandise and/or services the retailer will offer to satisfy needs of the target market 3) how the retailer will build a long-term advantage ovThe key strategic decision areas for a retailer involve : determining a market strategy, financial strategy, location strategy, organizational structure and human resource strategy, information systems and supply chain strategies, and customer relationship management strategies. Customer relationship management (CRM) is a business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a firm’s most-valued customers. SKU (stock keeping unit)-Each different item of merchandise: These technologies are part of an overall inventory management system that enables retailers: 1) to give customers a more complete selection of merchandise 2) to increase awareness of inventory levels 3) to decrease inventory investment. Elements in the Retail Mix: Product : Intensity, assortment. Place: Size, layout and design, location. Value: Quality, Price. People: Climate, Knowledge, Service. Communication: Promotional Mix. Chapter 2 TYPES OF RETAILERS TRENDS IN THE RETAIL INDUSTRY : Some important changes: changing consumer preferences--Increasing industry concentration--globalization of retail--the use of multiple channels to interact with customers--increasing competition in the Canadian marketplace--the growing importance of technology to retail success--the blurring of retail channels--retail branding. NorthAmerican Industry Classification System (NAICS) Classification scheme, collects data on business activity in each country. Variety (breadth of merchandise) is the number of merchandise categories a retailer offers. Assortment (depth of merchandise) is the number of different items in a merchandise category.TYPES OF GENERALMERCHANDISE RETAILERS : Adiscount store is a retailer that offers a broad variety of merchandise, limited service, and low prices. Discount stores offer both private labels and national brands, but these brands are typically less fashion-oriented than brands in department stores. Discount stores can also be referred to as mass merchandisers or full-line discount stores. Examples include Zellers and Wal-Mart: Issues: discount stores face intense competition from specialty stores that focus on a single category of merchandise, such as Future Shop, Home Depot. Aspecialty store concentrates on a limited number of complementary merchandise categories and provides a high level of service in an area typically under 744 square metres. For example, Pro Hockey Life. Issues: Because specialty retailers focus on specific market segments, they are vulnerable to shifts in consumer tastes and preferences. Bass Pro Shops’Outdoor World is a category specialist offering merchandise for outdoor recreational activities. The stores offer everything a person needs for hunting and fishing. Ahome improvement center is a category specialist offering equipment and material used by do-it-yourselfers and home contractors to make home improvements. Issues: Competition between specialists in each category becomes intense as firms expand into regions originally dominated by another firm. This direct competition focuses on price, resulting in reduced profits because the competitors have difficulty differentiating themselves on other elements of the retail mix. Department stores are retailers that carry a broad variety and deep assortment of stock, offer some customer services, and are organized into separate departments for displaying merchandise. Leased department is an area in a retail store that is leased or rented to an independent firm. Issues: Many believe that they are difficult to get to because they are located in large malls, that it is difficult to find specific merchandise because the same category is often located in several designer departments, difficult to get professional sales assistance because of labour cutbacks. Also, department stores typically charge higher prices than their discount and specialty store competitors. Drugstores are specialty stores that concentrate on health and personal grooming merchandise. Issues: competition from pharmacies in discount stores and supermarkets, as well as from prescription mail-order retailers. Off-price retailers offer an inconsistent assortment of brand-name, fashion-oriented soft goods at low prices ex.Winners. Closeout retailers are off- price retailers that sell a broad but inconsistent assortment of merchandise usually obtained from a store closing or bankruptcy. Outlet stores are off-price retailers owned by manufacturers or retailers. Outlet stores owned by manufacturers are referred to as factory outlets. Value retailers are general merchandise discount stores that are found in either lower-income urban, or middle-income suburbs, or in rural areas and are much smaller than traditional discount stores (less than 837 square metres). Pop-up stores temporary stores are creating retail buzz as they respond to customers by reaching out in non-traditional ways and locations such as unfinished space. These stores pop up unexpectedly for hours, days or months, draw word-of-mouth crowds, then vanish and may resurface someplace else. Combination stores sell both food and non-food items. Aconventional supermarket is a self-service food store offering groceries, meat, and produce with limited sales of nonfood items, such as health and beauty aids and general merchandise. Conventional supermarkets are differentiating their offerings by (1) emphasizing fresh perishables, (2) targeting health-conscious and ethnic consumers, (3) providing a better in-store experience (4) offering more private-label brands. Superstores are larger conventional supermarkets (1860 to 4650 square metres) with expanded service deli, bakery, seafood, and nonfood sections. Power perimeter: high traffic/Profitable departments that pull customer. Fair trade means purchasing from factories that pay workers a living wage. Ahigh-low pricing strategy: promotion-oriented supermarkets also offer their own coupons and may agree to reimburse customers double or triple the face value of manufacturer coupons. Everyday low pricing (EDLP) policy: The other half of conventional supermarkets uses very few promotions and sell almost all merchandise at the same price every day. Supercenters are 13 950 to 20 460 square metre stores that offer a wide variety of food (30–40 percent) and nonfood merchandise (60–70 percent). They are the fastest-growing retail category. Supercenters stock between 100 000 and 150 000 individual items (SKUs). Hypermarkets are also large (9300 to 27 900 square metres) combination food (60–70 percent) and general merchandise (30–40 percent) retailers. Hypermarkets typically stock less than supercentres, between 40 000 and 60 000 items ranging from groceries, hardware, and sports equipment, to furniture and appliances, computers, and electronics. Big-box (large, limited service) stores.Awarehouse club is a retailer that offers a limited assortment of food and general merchandise with little service at low prices to ultimate consumers and small businesses. Stores are large (at least 9300 square metres, with some over 13 950) and located in low-rent districts. The largest warehouse club chains are Costco and Sam’s Club, a division of Walmart. Convenience stores provide a limited variety and assortment of merchandise at a convenient location in a 186 to 279 square metre store with speedy checkout. They are the modern version of the neighbourhood mom-and-pop grocery/general store. Convenience stores offer a limited breadth and depth, and they charge higher prices than supermarkets. The primary issue facing food retailers in general, and supermarket and convenience store retailers in particular, is the increasing level of competition from other types of retailers. (But now they are offering hot food to appeal to consumers other than just buyiNon-store retail formats >>> Electronic retailing>>>Catalogue retailing is a non-store retail format in which the retail offering is communicated to a customer through a catalogue, whereas direct-mail retailers communicate with their customers using letters and brochures. General merchandise catalogue retailers offer a broad variety of merchandise in catalogues that are periodically mailed to their customers. Specialty catalogue retailers focus on specific categories of merchandise, such as fruit (Harry and David), gardening tools (Smith & Hawken), and seeds and plants (Burpee)>>> Catalogues are good to start because of low price..but..It is difficult for smaller catalogue and direct-mail retailers to compete with large, well-established firms that have embraced a multichannel strategy. The mailing and printing costs are high and increasing. It is difficult to get consumers’attention as they are mailed so many direct-mail promotions. The length of time required to design. Direct selling is a retail format in which a salesperson, frequently an independent businessperson, contacts a customer directly in a convenient location, either at the customer’s home or at work, and demonstrates merchandise benefits, takes an order, and delivers the merchandise to the customer. Two special types of direct selling are the party plan and multilevel selling. In a multilevel network, people serve as master distributors, recruiting other people to become distributors in their network. pyramid scheme develops when the firm and its program are designed to sell merchandise and services to other distributors rather than to end users. Television home shopping, also known as T-commerce or teleshopping is a retail format in which customers watch a TV program demonstrating merchandise and then place orders for he merchandise by telephone. Infomercials are TV programs, typically 30 minutes long, which mix entertainment with product demonstrations and then solicit orders placed by telephone. Direct-response advertising includes advertisements on TV and radio that describe products and provide an opportunity for consumers to order them. Vending machine retailing is a non-store format in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card. Services retailers, firms selling primarily services (Laundry Differences Between Service and Merchandise Retailers: Intangibility: customers cannot see, touch, or feel them. They are performances or actions rather than objects. Simultaneous Production and Consumption: Products are typically made in a factory, stored and sold by a retailer, and then used by consumers in their homes. Service providers, on the other hand, create and deliver the service as the customer is consuming it. Perishable: They can’t be saved, stored, or resold. Inconsistency: No 2 services are tTypes of Ownership: independent, single-store establishments, Small retailers are also very flexible and can therefore react quickly to market changes and customer needs. Some small store retailers join wholesale-sponsored voluntary cooperative group, which is an organization operated by a wholesaler offering a merchandising program to small, independent retailers on a voluntary basis. Corporate Retail Chains: ARetail Chain is a company operating multiple retail units under common ownership and usually has centralized decision making for defining and implementing its strategy. Franchising: Franchising is 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. Amultichannel retailer is a retailer that sells merchandise or services through more than one channel. Single-channel retailers are evolving into multichannel retailers to attract and satisfy more STORE CHANELS OFFER: Browsing, Touching and Feeling, Personal Service, Cash Payment, Immediate Gratification, Entertainment and Social Experience, Convenience, Safety, Quality of Visual PresentatioReasons for becoming a multichannel distributor : The Internet gives them an opportunity to reach new markets. They can leverage their skills and assets to grow revenues and profits (learn about customer behavior). In-store kiosks are spaces located within stores containing a computer connected to the store’s central offices or to the Internet. In-store kiosks can be used by customers or salespeople to order merchandise through a retailer’s electronic channel, check on product availability at distribution centres or other stores, get more information. The customization approach retailers tailor services to meet customer’s personal needs. Chapter 3 CUSTOMER BUYING BEHAVIOUR Canadian Marketplace Trend: Value-oriented consumers -Bigger is better -Ease is the key -Women are the dominant consumer -Tweens (age 10-12) are a growing segment -Ethnic shopper opportunity -Customer satisfaction -Loyalty -Shopping Centers need to re-invent themselves -Online shopping -Aging populationSTAGES IN THE BUYING PROCESS (a.k.a. Consumer Decision Making) 1. Need/Problem Recognition (e.g., broken TV) 2. Information Search (e.g., reviews on web) 3. Evaluation ofAlternatives (e.g., 3D TV?) 4. Product Choice (e.g., promo on this model) 5. Outcome (e.g., complete transaction) 6. Post Purchase Evaluation (e.g., feedback/returnTYPES OF NEEDS: Utilitarian – when consumers go shopping to accomplish a specific task. Hedonic – when consumers go shopping for pleasure.Some hedonic needs that retailers can satisfy include stimulation, social experience, learning new trends, status and power, self-reward, and adventure. Some consumers have Conflicting Needs: they want both hedonic/utilitarian. The pattern of buying premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers is called cross-shopping. Internal sources are information in a customer’s memory, such as names, images, and past experiences with different stores. External sources refer to information provided by ads and other people. The objective of the retailer is to limit the search to its store or website. Everyday low pricing is another way retailers increase the chance that customers will buy in their store and not search for a better price elsewhere.An everyday low pricing strategy maintains the continuity of retail prices at a level somewhere between the regular non-sale price and the deep discount sale price of the retailer’s competitors. Walmart and The Source have everyday low pricing policies. The multi-attribute attitude model is based on the notion that customers see a retailer, a product, or a service as a collection of attributes or characteristics. The model is designed to predict a customer’s evaluation of a product, service, or retailer based on (1) its performance on relevant attributes and (2) the importance of those attributes to the custoRetailers can use the Multi-attribute attitude model to encourage customers by Researching : 1. Alternative retailers that customers consider. 2. Characteristics or benefits that customers consider when evaluating and choosing a retailer. 3. Customers’ratings of each retailer’s performance on the characteristics. 4. The importance weights that customers attach to the characteristics. Consideration Set: Set of alternatives that consumers value when making a merchandise selection… retailers can influence by top of mind action…internet exposure/gAogle. retailer can use four methods to increase the chances that customers will select its store for a visit: 1. Increase beliefs about the store’s performance. 2)Decrease the performance beliefs for competing stores in the consideration set. 3. Increase customers’importance weights. 4.Add a new benefit. Satisfaction is a post consumption evaluation of how well a store or product meets or exceeds customer expectations. This post purchase evaluation then becomes part of the customer’s internal information and affects future store and product decisiSOCIALFACTORS INFLUENCING BUYING DECESIONS , Family, Reference Groups composed of two or more people whom a person uses as a basis of comparison for his or her beliefs, feelings, and behaviours. Aconsumer might have a number of different reference groups, although the most important reference group is the family. These reference groups affect buying decisions by: 1) offering information 2) providing rewards for specific purchasing behaviors 3) enhancing a consumers self-image. Store advocates are customers who like a store so much that they actively share their positive experiences with family and friends. Culture: values shared by most members of a society. Subcultures are distinctive groups of people within a culture (age) (geography)(ethnicity). Aretail market segment is a group of customers whose needs are satisfied by the same retail mix because they have similar needs. Criteria For evaluating Market SEGMENTS: Actionability means that the definition of a segment must clearly indicate what the retailer should do to satisfy its needs. Identifiability: must be able to identify the customers in a target segment—size, and with whom they promote offers. Accessibility is the ability of the retailer to deliver the appropriate retail mix to the customers in the segment. Size must be large enough. Geographic segmentation groups customers by where they live. Demographic segmentation groups consumers on the basis of easily measured, objective characteristics such as age, gender, income, and education. Geodemographic segmentation: uses geographic/demographic. Lifestyle or psychographics refers to how people live, how they spend their time and money. Buying situation segmentation such as fill-in versus weekly shopping to segment a market. Composite segmentation plans use multiple variables to identify customers in the target segment. They define target customers by benefits sought, lifestyles, and demograpAdvanced topics: 7 Mental Models Of Consumer Market Segments : 1) Benefit Segmentation 2) Lifecycle & Lifestyle Segmentation (Ryerson MasterCard) 3) Belief Segmentation (Winterlicious) 4) Choice rule Segmentation: (Landrover vs porshe) 5) Brand Loyalty segmentation: (Harley-Davidson) 6) Price Sensitivity segmentation (presidents choice financial) 7)Search & Shopping segmentation (hotel booking vs pricelineFashion is a type of product or a way of behaving that is temporarily adopted by a large number of consumers because the product or behaviour is considered to be socially appropriate for the time and place. RETALIERS need to UNDERSTAND HOW FASHIONS develop and the use operating systems that enable them to match supply and demand. Stages In The Fashion Life Cycle A) Consumers Needs Satisfied By fashion: People use fashions both to develop their own identity and to gain acceptance from others. B) What creates fashion? Economic Factors: Fashion merchandise is a luxury. Sociological Factors: Fashion changes reflect changes in our social environment, our feelings about class structure, the roles of women and men, and the structure of the family. Psychological Factors: Consumers adopt fashions to overcome boredom. C) 3 theories how fashion spreads within a society: The trickle-down theory suggests that the fashion leaders are consumers with the highest social status—wealthy, well-educated consumers.After they adopt a fashion, the fashion trickles down to consumers in lower social classes. When the fashion is accepted by the lowest social class, it is no longer acceptable to the fashion leaders in the highest social class. Manufacturers and retailers stimulate this trickle-down process by copying the latest styles that are sold at lower prices though retailers targeting a
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