CH 1 L2-Economic and Social Significance of Retailing

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RETAIL MANAGEMENT
ECONOMIC AND SOCIAL SIGNIFICANCE OF RETAILING
Ms. Tiffany Anne Tan

ROLE OF RETAILING IN DEVELOPED COUNTRIES
Consumer spending plays a critical role in the economies

of the United States and other developed countries.
When consumers spend more money buying goods and

services from retailers, a country’s economy flourishes.
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When retailers grow, so does the

manufacturers and other parts of
the supply chain.
Manufacturers would hire more

employees, place orders for raw
materials, and make more products.
THE CIRCULAR FLOW
However, if consumers feel uncertain

about their financial future and decide
to refrain from spending, economy
slows.
e.g. health and education

The retail sector plays a key role in

developed economies, not only
because consumer demand indicates
vibrant financial system but also
because retailers are large employers.
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ROLE OF RETAILERS IN DEVELOPING COUNTRIES

THE BOTTOM OF THE PYRAMID
Role of Retailing in Developing Countries
Retailers also need to focus on opportunities by serving the needs

of the 3 billion people living at the lowest end of the income
distribution.
Serving these customers also

provides an important social
benefit: reducing worldwide
poverty
BOTTOM OF THE PYRAMID/
BASE OF THE PYRAMID (BoP)
 25 percent of the world’s population at the lowest end of the
global income distribution
 Consumers in this low-income consumer segment, the BoP. still
have significant spending power
9
Challenges of retailers in BoP Market?
 Communication (mass media,

internet, mobile phones)
 Lives in rural areas
 Requires innovative approaches
(retrofitting approaches in developed countries won’t
work)
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ROLE OF RETAILERS IN SOCIETY

CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility (CSR)

involves an organization voluntarily
taking responsibility for the impact of
its activities on its employees, its
customers, the community and the
environment.
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CONSCIOUS MARKETING
Conscious marketing entails a sense of purpose for

the firm higher than simply making a profit by
selling products and services.
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4 PRINCIPLES OF CONSCIOUS MARKETING
1 2 3 4
A High purpose Stakeholders Conscious Ethics
leadership/
Conscious culture
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RECOGNITION OF THE RETAILING FIRM’S GREATER PURPOSE
When retailers recognize that its purpose should be more

than just making profits-their actions changes focus.
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Consideration of stakeholders and their interdependence
Retailers that practice conscious marketing

consider how their actions will affect the
expansive range of potential stakeholders.
16
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The presence of conscious leadership, creating a corporate
culture
A conscious marketing approach implies that

the firm’s leaders are dedicated to the
proposition of being conscious at all levels of
the business, throughout its entire culture.
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The understanding that decisions are ethically based
Business ethics is concerned with distinguishing between

right and wrong actions and decisions that arise in a business
setting, according to broad and well-established moral
principles.
18
THE EVOLUTION OF RETAIL INDUSTRY
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19
World’s Largest Retailers
20
THE EVOLUTION OF RETAIL INDUSTRY
The development of information

systems is one of the forces facilitating
the growth of large retail firms—the
shift from an industry dominated by
small local retailers to large
multinational chains.
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Role of Information Systems
 Information systems are the tools, hardware and software

that help retailers achieve success in a dynamic
environment.
 They serve several functions including planning, inventory

control, managing budgets and sales goals, and also with
point of sale transactions and logistics.
22
Uses of Information system in retail
1. Efficient Stocking of Merchandise

2. Collection of Data
3. Efficiency in Operations
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4. Helps Communication
Efficient Stocking of Merchandise
 Basis of sales analysis and
decision on replenishment
 Re-ordering and merchandise
planning
 Trends in sales can be analyzed
it helps to avoid situation of
stock out, spot merchandise or
product, higher inventory turns.
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Collection of Data
 Data can be about consumers,
purchases, frequency of buying
and typical basket size
 Customer preference for certain

brands can be identified
 Many retailers now use customer

data to identify their best
customers and target customized
promotions to them
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Efficiency in Operations
 Serves as a basis for integrating the functioning of
various departments
 Automated process, billing etc. reduces time
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26
OPPORTUNITIES IN RETAILING
Management Opportunities
People with a wide range of skills and interests needed because of
retailers functions include:
 Finance,
 accounting,
 human resource management,
 supply chain management and
 computer systems as well as marketing.
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Management Opportunities
Retail management is also financially rewarding. Starting salaries

are typically between $35,000 to $55,000 for college graduate
entering management trainee positions.
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Entrepreneurial Opportunities
Retailing also provides
opportunities for people who wish
to start their own business.
Some of the world’s richest people

are retailing entrepreneurs.
30
Jeff Bezos (Amazon.com)
After his research uncovered that
Internet usage was growing at
2,300% annual rate in 1994,
Bezos, quit his job on Wall Street
and left behind a hefty bonus to
start an Internet business.
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Jeff Bezos (Amazon.com)
The company, Amazon.com is named after
the river that carries the greatest amount of
water, symbolizing his objective of achieving
the greatest volume of Internet sales.
It is now the largest online retailer with

annual sales over $20 billion – 3 times more
sales than the second largest online retailer.
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THE RETAIL MANAGEMENT DECISION PROCESS
Understanding the World of Retailing- Section I
 Retail managers need to know the environment in which

they operate before they can develop and implement
effective strategies.
The critical environmental factors in the world of retailing

are (1) the macroenvironment and the (2) microenvironment.
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MACROENVIRONMENT
The impacts of the macroenvironment—includes

technological, social, and ethical/legal/political
factors
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MICROENVIRONMENT
Retailer’s microenvironment focuses specifically

on its competitors and customers.
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INTRATYPE COMPETITOR
A retailer’s primary competitors are other

retailers that use the same retail approach.
This competition between the same type of

retailers is called intratype competition.
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SCRAMBLED MERCHANDISING
When retailers offers merchandise not typically

associated with their type of store, such as clothing
in drugstore, the result is scrambled merchandising.
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INTERTYPE COMPETITOR
Intertype competition exists between retailers

that sell similar merchandise using different types
of stores, such as discount and department
stores.
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Customer
Second factor in Microenvironment

Understanding customer is essential in formulating
strategy
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Developing a Retail Strategy—Section II
Formulating and implementing a retail strategy,

are based on an understanding of the macro- and
microenvironments.
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Retail Strategy identifies:
 The target market, or markets toward which the
retailer will direct its efforts.
 The nature of the merchandise and services the retailer
will offer to satisfy the needs of the target market
 How the retailer will develop unique assets that enable
it to achieve long-term advantage over its competitors.
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Strategic Decision
1. The key strategic decisions a retailer makes are
defining its target market and its financial objectives.
2. Analysis of environment and firm’s strengths and
weaknesses.
3. Retailer’s market strategy must be consistent with the
firm’s financial objectives.
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Strategic Decision
4. Development of critical assets that enable retailers to
build strategic advantages. (Strategic assets are location, human
resources, information and supply chain systems, supply chain organization, and
customer loyalty)
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IMPLEMENTING THE RETAIL STRATEGY- SECTION III
To implement a retail strategy, retailers develop a retail mix

that satisfies the needs of its target market better than that of
its competitors
RETAIL MIX
The retail mix is a set of decisions retailers make to

satisfy customer needs and influence their purchase
decisions.
Merchandise managers manage areas:
1. how much and what types of merchandise to buy,
2. what vendors to use and how to interact with them
3. the retail prices to set
4. how to advertise and promote merchandise
Store managers must determine:
1. how to recruit, select, and motivate sales

associates;
2. where and how merchandise will be displayed
3. nature of services to provide for customers
48
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FDM

Ms. Tiffany Anne Tan

Consumer spending plays a critical role in the economies

When consumers spend more money buying goods and

When retailers grow, so does the

Manufacturers would hire more

However, if consumers feel uncertain

e.g. health and education

The retail sector plays a key role in

ROLE OF RETAILERS IN DEVELOPING COUNTRIES

Retailers also need to focus on opportunities by serving the needs

Serving these customers also

 Communication (mass media,

ROLE OF RETAILERS IN SOCIETY

Corporate social responsibility (CSR)

Conscious marketing entails a sense of purpose for

4 PRINCIPLES OF CONSCIOUS MARKETING

When retailers recognize that its purpose should be more

Retailers that practice conscious marketing

A conscious marketing approach implies that

Business ethics is concerned with distinguishing between

The development of information

 Information systems are the tools, hardware and software

 They serve several functions including planning, inventory

1. Efficient Stocking of Merchandise

 Customer preference for certain

 Many retailers now use customer

Retail management is also financially rewarding. Starting salaries

Some of the world’s richest people

It is now the largest online retailer with

 Retail managers need to know the environment in which

The critical environmental factors in the world of retailing

The impacts of the macroenvironment—includes

Retailer’s microenvironment focuses specifically

A retailer’s primary competitors are other

This competition between the same type of

When retailers offers merchandise not typically

Intertype competition exists between retailers

Second factor in Microenvironment

Formulating and implementing a retail strategy,

To implement a retail strategy, retailers develop a retail mix

The retail mix is a set of decisions retailers make to

1. how to recruit, select, and motivate sales

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