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Retail Management
RMG 200

CRMG200: Retailing Management Book Notes Chapter 1 Define Retailing – set of business activities that add value to products and services sold to consumers for personal or family use(not all retailing is done in stores – catalogue, internet, direct sales) - retailing is a global high-tech industry - walmart is the the worlds largest corporation - Carrefour second largest retailer (not in Canada or us) - Lawblaws is the largest retailer in Canada, also largest wholesales food distributor in canada - Failure is trying to please everyone - target markets, retail locations, detemining what merch and services to offer, negogating with suppliers and distributing merch to stores, training motivating sales associates, deciding how to price, promote, and present merch o satisfy consumers by haing the right merch at the right price at the right place at the right quantities at the right time Success in Retailing - understanding an engaing customers - brand image, customer service, management of employees - growth stratigies and deal with current economic crisis o cut costs o think; risk management, customer experience, human capital management, smaller stores, market segmentation, global o re-think supply chains o you are a brand o think multichannel Understand the role retailers play in the distribution channel and the functions they perform Distribution Channel – set of firms that facilitate the movement of products from point of production to the point of sale to the ultimate consumer - Manufacturing, wholesale, retailer, consumer Vertical Integration – firm performs more than one set of activities in the channel - backwards integration o retailer performs some distribution and manufacturing activities - forward integration o when a manufacturer undertakes retailing activities Functions performed by retailers – to increase value consumers receive from product - providing an assortment of products and services o selection of brands, sizes, designs, colours, and prices - breaking bulk o cost effective for manufacturers to ship in bulk, easier for consumers to purchase in smaller quantities - holding inventory o reduce consumers cost of holding inventory, useful for perishable products - providing service and services o various methods of payment, payment plans o display products to been seen and tested before purchase o knowledgeable sales staff to answer questions and provide info o multichannel – answer questions online anytime Know the economic significance of retailing in Canada Corporate social responsibilities - voluntary actions taken by a company to address the ethical, social, and environmental, impacts of its business - growing in popularity in Canadian retail industry o asked to explain and the suitable strategies to seize the related opportunities Discuss the different types of decisions retail manager make Management Opportunities - hiring and promoting people with a wide range of skills and interests o to undertake most of the traditional business activities, raise capital from financial institutions – purchase goods and services, develop accounting and management systems to control operations – manage warehouse and distribution systems, design and develop new products, undertake marketing activities – advertising, promotions, sales force management, market research o employ people who have expertise and interest in; finance, accounting, human resource management, logistics, computer systems, and marketing Retail Strategy - how the firm plans to focus its resources to accomplish its objectives o target market, or markets o nature of merch and/or services to offer to satisfy customers needs o how the retailer will build long term advantage over competitors Strategic Decision Areas - market strategy o analyze environment and the firm’s strengths and weaknesses o must be consistent with financial objectives - location strategy o usually consumers top considertion o can gain long term advantage over competition when their location is the best - organizational structure and human resource strategy o related to market strategy o coordinates the implementation of the retailing strategy by buyers, store managers, and sales associates - information systems and supply chain strategies o opportunity to gain strategic advantage in the coming decade o point of sales (POS)  terminals read price and product info that’s coded into universal product codes (UPC) affixed to the merch  overall inventory management  give customers a more complete selection of merch  increase awareness of inventory levels  decrease inventory investment - customer relationship strategies (CRM) o business philosophy and set of strategies, programs, and systems that focus on indentifying their most valued customers  once indentified special programs are created to build their loyalty implementing retail strategy - elements of the retail mix o product  intensity, assortment  types of merch/services offered o place  size, layout and design, location  store design, merch display, convenience of stores location o value  quality, price  value perception o people  climate, knowledge, service  climate is the measure of what it is like to shop in the store, product knowledge, policies, get customers in and out efficiently o communication  promotional max  public relations, sales promotion, advertising, direct marketing, personal selling ethical and legal considerations - ethics o principle governing behaviour of individuals and companies to establish appropriate behaviour and indicate what is right and wrong o easily varies from country to county, and industry to industry - retail manager must rely on their own code of ethics and that of the companies to decide what is right and wrong Examine the various career and entrepreneurial opportunities retail offers Entrepreneurial opportunities - can provide opportunities for those who wish to start their own business o tim hortons, eddie black (black’s cameras), john holt and G.R. Renfrew Retail council of Canada - started 1963 – voice of retail in Canada - not for profit and represents over 40000 members across Canada by providing support in today’s competitive market place - training at the canadian retail institute o promote retail education, career awareness, advancing professional designation programs Understand the meaning of ethics and social responsibility and how they relate to the individual, retailer, and society Fair trade - items were produced in factories that pay workers far more then the prevailing min. wage and offered other benefits Socially responsible retailers - fair trade - educate consumers with products and donate a portion of profits to global funds - lower the use of bags - hands on by contributing hours of service in their community Other notes Chip Wilson - creator of Lululemon Athlectia inc. o no traditional advertising – television commercials, radio ads, national newspaper campaigns - simply word of mouth programs o made the website more like an online community o Ivianna – tween market – brightly coloured dance inspired - started the surf and snowboard trend in van. with Westbeach Snowboard Ltd. - Newline Oqoqo o Uses economical feasible fabrics - Business module: to elevate the world from mediocrity to greatness o Built on empowerment and personal responsibility for “creating, creating” Retail sales in Canada - driving force of canadas economy o largest employer nationally – 2008 - largest share of retail sales in Canada are Ontario and quebec, then BC and Alberta o largest cities o where leading retailers concentrate operations - one of every 10 business is a retail store - roughly 6 store locations for every 1000 persons - largest retail sectors of retail sales o food and automotive – occupying roughly half of the retail landscape - retail sales trade groups o automotive, furniture/home furnishings/electronic stores, building and outdoor home supply stores, pharmacies and personal care stores, clothing and accessories, general merch, misc retailers o pg. 9 - top three retailers in Canada o Weston group  Second largest private employer in the nation  Largest retailer  Third largest firm in Canada o walmart, the sobey’s group o Controlled approx 20% of non automotive retail market - Foreign companies control 40% of canadas retail market, 38% being from American companies Global Retailers - walmart, Carrefour, royal ahold, metro, Schwartz o each generate more than $20 billion annually - good retailers continue to be among the largest retailers - European and American have the largest international presence o 34.8% us, 39.6% euro, 9.6% japan, 4.4% Canada (headquarters) - 2009 was a challenging year as it resulted in a global recession - North America saw a decline in retail sales - Elsewhere the retail market saw various growth rates Competitors - intratype competition o comp between retailers of the same type or similar merch in different format stores o variety – which creates scrambled merchendising  number of diff merch in a store  can create one stop shopping - know competitors to implement retail strategies Customers - needs are changing at an increasing rate - increased importance of shopping convenience - retailers must understand o why customers shop o how they select a store o how they select among a stores merch Chapter 2 – Types of retailers Explore Various trends that are shaping todays retailers changes in retail industry - changing consumer preferences - increasing industry concentration - globalization of retail - the use of multiple channels to interact with consumers - increasing competition in the Canadian marketplace - the growing importance of tech to retail success - retail branding Compare and contrast different types of retailers Examine how retailers differ in terms of how they meet the needs of their customers retailer characteristics - to satisfy a group of consumers needs more efectivily then its competetors o type of merch sold (variety and assortment) o level of customer service o value is a combination of price and quality o communicate the stores position o place which includes location, store layout, and design tradeoff between costs and benefits for maintaining additional inventory or additional services variety - breadth of merch – number of merch categories a retailer offers - number of product lines – ex. Shoes, appliances, apperal assortment - depth of merch – number of different items in a merch category - number of items within each product line ex – shoes – running, dress, children SKU (stock keeping unit) - each different types of merch is called a SKU - when a retailer offers many SKUs, inventory investment increases because the retailer must have backup stock for each SKU customer servies - customers expect retailers to provide some services o accepting credit and debit payment o providing parking o and being open during convienient hours - services attract customers but are costly o more sales people = more $$$ Review how services retailers differ from merch retailers Indentify the types of ownership for retail firms Explore how multichannel retailers provide more value to their customers Recognize the key success factors in multichannel retailing Other notes Imagewear multi channel approach elements – to reach the business customer wherever he or she may be o the creation of an online presence, featuring a complete list of products o a print catalogue/guide featuring a complete list of product possibilities o making imagewear accessible through all stores and online presence o launching a fleet of mobile imagewear service vehicles o reaching business directly through a 100-strong sales force with a 1- 800 number increasing industry concentration - number of diff types of retailers has grown, number of competitors within each format is decreasing - marketplace is dominated by few large retailers NAICS - north American industry classification system o six digit code based on type of products and services it produces and sells - united states, Canada, mexico developed this classification system Discount stores (or mass merchandisers or full-line discount stores) - offers a broad variety of merch, limited services and low prices - have private labels and national brands – less fashion oriented - wamart accounts for almost 66% of all discount stores and pioneered the the everyday low price concept - full-line discount stores face lots of competition from supercentres and discount speciality stores - issues o competition with; supercentres – carry grocery items as well, speciality stores o to fix issues they; strong emphasis on fashion, layout of store/shopping environment, placed more emphasis on strong private labels specialty stores - limited number of complementary merch categories and provides a high level of service - issues o specific target market and lots of tailoring to it, knowledgeable sales staff, deep but narrow assortment – vulnerable to shift in consumers tastes and preferences category specialist/category killer - offering merch that is specialized - SA must be knowledgeable and reflect company, hired for their specific expertise - Offer complete assortment at low prices, kill all competitors in set category - Most successful in this group is a home improvement centre - Issues o Start in one region, then expand after saturating the one region o Once expanded competition is difficult since they are all the same with low prices and it is difficult to differentiate themselves with competitors – therefore lower prices – therefore lower profit  To fix this they; reduce costs by increasing operating efficiency, and aquire smaller chains, service Department stores - retailers that carry a broad variety and deep assortment of stock, offer some customer services, separate departments to display merch - largest in Canada; sears, the bay (now owned by US based Lord and taylor) - categorized into three tiers o first tier - upscales, high fashion  exclusive designer merch and exellent customer service – holts o second tier – upscales, more modestly prices, less customer service  the bay o third tier – value-oriented cater to price conscious consumers  sears canada - leased department is when there is a space in a department store that is leased/rented to an independent firm o pays department a percentage of sales - issues o overall department stores sales have become stagnant due to increase competition with discount/specialty stores and overall lowered perception of merch and services - QR – quick response o When department store retailers work closely with vendors to ensure better instock positions and reduce average inventory levels – monitor and choose stock as it comes but pay at beginning Drugstores - speciality stores that concentrate on health and personal grooming merch - pharmacies represent 50% of drugstore sales and greater % of their profits - issues o non prescription side is having trouble due to elderly demands and from discount store sales off-price retailers - offer inconsistent assortment of brand-name, fashion oriented soft goods at low prices due to unique buying and merch practices - winners – launched in 1982 - closeout retailers o off price, that sell a broad but inconsistent assortment of merch – usually get merch from failing buisnesses - outlet stores o off price, owned by manufacturers or retailers (those owned by manufacturers are known as factory outlets) o offer added services, usually clustered together, food and beverages value retailers - general merch discount stores that are found in either lower income urban, or middle income suburbs, or rural areas and are smaller than original discount stores - fastest growing segmant in Canadian retail pop-up stores - temporary stores – word of mouth, email, signs - create a retail buzz – reach out in no traditional ways or locations to respond to consumers - can be a promotional medium food retailers - where grocery shoppers do most of their food shopping o 56 – conventional supermarket  self service food store offering groceries, meat, produce with limited sales and nonfood items  superstores are larger  1 – offer fresh perishables 2- target health conscious and ethnic consumers 3- better instore experience 4 – more private label brands o 23 – super centres/ big box  sell 30-40% food and 60-70% non food  fastest growing retail category  one stop shopping experience  o 12 – others (like convenience stores)  convenience stores  limited variety and assortment of merch at a convenient location  higher prices then supermarkets  couche-tarde/mac’s is canada’s biggest – known as circle k in the states o 5 – limited assortment supermarket o 4 – warehouse clubs  limited merch and food (about half and half) with little service to offer the lowest price  located in low rent districts and simple structure  Costco – usually annual fee - worlds largest food retailer is walmart (which is only 40% of revenue) - issues in food retailing o increased competition from other retailers  grocery chains are making hot meals/meal solutions Nonstore Retail Format - primary modes of operation are not bricks-and-mortar stores - electronic retailing (e-tailing, online retailing, internet retailing) o merch for sale over the internet o creation of over 10000 entrepreneurial retailers in the last 5 yrs o amazon over 3$billion annually, craigslist (online urban communities with classified ads) o usually lack understanding of consumer needs and retaiing expertise o when the new channel is added it only benefits the consumers (multichannel) - catalogue and direct-mail retailing o nonstore retail format where retailer offers merch communicated to a customer through a catalogue  jc penny, sears, Williams-sonoma, limited brands (like VS), LL bean o direct mailing retailer does this with letters and brochures o historically most successful with rural consumers who lack access to stores o now it as used to create multichannel by putting internet into catalogues – way to almost adertise the website o 95% of cata describe themselves as multichannel retailers  types  general merch cata retailers – broad variety of merch cata’s are periodically mailed  specialty cata retailers – specific catagories of merch  direct mail retailers – usually for specific product or service o issues in cata retailing  start up cost are low, but business is challenging  hard for small retailers to compete with large who are well- established  mailing and printing costs are high and rising  consumers are mailed so many it is hard to get their attention  timely to design, develop, distribute – hard to respond quickly to new trends and fashions Direct selling - salesperson (independent businessperson) contact consumer directly in convenient location, demonstrates merch benefits, takes order, then delivers - face-to-face - annual sales in US are over $30 billion – worldwide 100billion - personal care – home/family care, wellness, other services, leisure/educational items - use internet to complement face-to-face, but 73% are face-to-face - 14million people are direct sellers and almost all independent and 87% work part time - party plan system o 27% of sales o consumer invites friends over where the merch is demonstrated o host receives gift - multilevel network o people serve as master distributors then get other people to distribute in their network o pyramid scheme (illegal)  firm and program are designed to sell merch to other distributors instead of end users Television Home Shopping (t-commerce or teleshopping) - customers watch tv program demonstrating merch then consumers place order over telephone o now you can also place order using tv romote control - three forms of electronic home shopping are o cable channels dedicated to television shopping o infomercials  tv programs, usually 30min, mix entertainment with product o direct-response advertising  advertisements on tv or radio describe product and give opertunity to order - the shopping channel (located in Ontario – mississauga) goes through thousands of units daily o 18h of live broadcast per day o tv/satellite, website, catalogue, soon interactive television (tele with comp) - competition are home shopping networks in the US through infomercials and online also amazon, ebay, sears - advantage – see merch and demonstration, but cant choose which item o to fix this issue categories of merch for specific time Vending Machine Retailing - nonstore format, where merch or services are stored in a machine and dispensed to customers when cash or credit is deposited - placed at convenient high-traffic locations - 25.6 billion are sold annually in north America - growth is slow, 5%, and mirrors growth of economy - new concept: Get&Go Express combines convience store and vending machine o 16 machine accept credit or debit and cash Services Retailing - sell primarily services rather than merch – large and growing part of retail industry - trends that support growth o ageing requires health services – and younger are more interested in health/fitness o more income in family allows more room to spend – cleaners - differences between services (left of continuum) and merch retailers (right on continuum) o intangibility  hard to evaluate can rely on evaluations and complaints o simultaneous production and consumption  create and deliver the service as the customer consumes it, therefore difficult to reduce costs with mass production – unless industrialized (mcD) o Perishability  Because creation and consumption is at the same time it can not be saved, stored, or resold – must match supply and demand – large investments o Inconsistency  Services produced by people no two services will be identical – consistently high quality services Types of Ownership - independent, single store establishments o entrepreneurial activity is extensive, over 60thousand are started each year in north America o usually owner is manager, so quick response to demands o advertising and lower costs are more difficult – also owner must be able to do a lot of jobs o to better compete with corporate chains retailers join wholesale- sponsored voluntary cooperative group – offers merch program to small retailers on voluntary basis  IGA (independent grocers alliance) - Cooperate retail chains o Retail chain – company operating multiple retail units under common ownership and usually centralized decision making for strategy o Average has 35 stores and sells $140million yearly o Concern that coperate retail chains drive independent retailers out of business – lower price – but local offer complementary merch and services - Franchises o Agreement between franchisor and franchisee that allows franchisee to operate a retail outlet using a name and format developed and supported by the franchisor  1/3 of all north American retail sales are by franchisee o contract – franchisee pays lump sum plus royalty on all sales for the right to operate the store in specific location, also operate outlet in accordance of procedures by franchisor  franchisor helps with location and building, developing products or services sold, management training, and ads – to maintain reputation o combines advantages of owner-managed business with efficiency of centralized decision making Multichannel retailing - retailer that sells merch or services through more than one channel - stores o browsing  preferred form of browsing o touching and feeling  greatest benifit o personal service  can provide meaningful, personalized info o cash payment  only channel that accepts this o immediate gratification o entertainment and social interaction  break from daily routine - catalogue o convenience  place order at anytime o portability o safety o visual presentation  better then CRT screen - internet o convenience, safety, broad selection, detailed info, personalized, problem-solving info - evolution o reach new market online, leverage skills and assets to grow revenue profits, expand product and info, allows retailer to gain valuable insight on consumer, increase “share of wallet”  toad hall is one of canadas largest independent toy retailers – unique items  1990 etail site – servers and payment were outsourced - turning into the multichannel universe o reasons for using internet  50% - purchasing products and services  77% - information seeking - in store electronic kiosks o space in store where there is a computer connected to internet of stores central offices o can be used by customers or sales people o create synergy between website and store – can show additional products and information - customer service using technology o 6/10 canadians believe in the importance of customer service, with a SA or kiosk - integrated concept o brand image  project same image through all channels  talbots makes it look like your endtering their store “always classic..” o merch assortment  might use multichannel to expand assortment, colours, sizes ex. Gap o pricing - customization approach o encourages retailers to tailor services to meet each customers personal needs  Land’s End allows customers to chat with service representatives (orders increased by 8%) - Designing the website o Simplicity matters o Getting around o Blend website with store o Prioritize o Type of layout o Let them see it Chapter 3 – customer buying behaviour Explore how customers make decisions about whether to patronize a retailer and buy merch The buying process - the stages consumers go through to purchase merch or services - need recognition o buying process triggered when consumer realizes they have an unsatisfied need o utilitarian needs - needs motivating consumers to go shopping and accomplish a specific task o hedonic needs - needs motivating consumers to go shopping for pleasure  stimulation – music, visual displays, scents, demonstrations  social experience – meet friends and develop new relationships  learning new trends – visiting retailer lean about new trends and ideas  status and power – one of the few places they can get attention and respect  self reward – the merch and also providing a service like personal makeover  adventure – treat shopping as a game to be won – bargains and low prices o leisure shopper – spends $113.33 on average per trip – most profitable shopper o conflicting needs – since shoppers cannot satisfy in one store or one product they appear to be inconsistent  cross-shopping  a pattern of buying both premium and low-priced merch or patronizing expensive, status oriented retailers and price-oriented retailers o stimulating need recognition  advertising, internet promotions, direct mail, publicity, special events - information search o the stage in the buying process in which a customer seeks additional information to satisfy a need o amount of information needed  the nature and use of the product being purchased  characteristics of the individual customer  aspects of the market and the buying situation  # of competing brands and retail outlets  time pressure under which the purchase must be made o sources of info  internal – info in a customers memory such as names, images, and past experiences with different stores  external – info provided by media and other people o reducing information search  everyday low pricing strategy (EDLP) – a pricing strategy that stresses continuity of retail prices at a level somewhere between the regular nonsale price and the deep-discount sale price of the retailers competitors - evaluations of alternative: the multiattribute model o a model of customers decision making based on the notion that consumers see a retailer or a product as a collection of attributes or characteristics. The model can also be used for evaluating a retailer, product, or vendor. The model uses a weighted average score based on the importance of various issues and performance of those issue. o Beliefs about performance o importance weighs (differs for each customer) o evaluating stores (performance belief x importance eights) o implications for retailers – can do market research to collect following info:  alternative retailers that customers consider  characteristics or benefits that customers consider when evaluating and choosing a retailer  customers’ ratings of each retailer’s performance on characteristics  the importance weights that customers attach to the characteristics o getting into the consideration set - the set of alternatives the customer evaluates when making a merch selection  four methods to increase customers chances of selecting set store  increase beliefs about the store’s performance  decrease the performance beliefs for competing stores in the considering set  increase customer’s importance weights  add a new benefit o changing performance beliefs  change customer’s belief about performance by improving a performance rating in one characteristic – important to set target market  Lowe’s example  More then 50% of cust are woman  Widened isles to prevent “butt brush”  Shorter shelves and signs like a grocery store  Website has a DIY section  Or decrease performance rating on another store – can be illegal and uneffective, can backfire o Changing importance weights  Can influence store choice – improve benefits and decrease importance of inferior performance o Adding a new benefit  Example – Fair Indigo – made it so employees were paid a fair wage , picked ethical factories  Easier to change cust evaluations of newer benefits - Purchasing the Merchandise or Service o Retailers use various tactics to increase the chances that cust will convert positive merch or service evaluations into purchases  Make it easier to purchase, quicker, entertaining  Risk in making decision - reviews  Risk in purchase so eliminate by adding return policies, refunds - Postpurchase evaluation o Satisfaction – a post consumption evaluation of the degree to which a store or product meets or exceeds customer expectations o Postpurchase evaluation – the evaluation of merch or services after the cust has purchased and consumed them o High levels build store and brand loyalty – competitive advantage Social Factors Influencing Buying Decisions - 6% of shoppers had a problem with retailer and contacted them, but 31% did and told friends – word of mouth it costly - family o family decision making  needs of all members  children play important role – must consider them in all situations - reference groups o one or more people whom a person uses as a basis of comparison for beliefs, feelings, and behaviours  offering info  providing rewards for specific purchasing behaviour  enhancing a consumer’s self-image o store advocates are customers who like a store so much that they actively share their positive experiences with friends and family  perfect target - alpha moms – educated, tech savvy, type a mom with a common goal: mommy excellence - canada’s multicultural market o minorities make up 13% of Canadian pop, 20% and 16% of labor force by 2016  8/10 are first gen immigrants and 48% of torontos pop is foreign born making Toronto most ethically diver city in the world – also van more diverse than any city in US  immigrants usually arrive to Canada with money and suitcase, they will need to buy necessary supplies and housegold items  immigrants are often used to sophisticated marketing from their home country and will look to adv
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