Chapter 1 - Introduction To Retailing

Food Retailing Management and Technology HTC610
Ali Mohamad Noor
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
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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.
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 so many choices? How can we grow our business while retaining a core of loyal customers?
The Framework of Retailing

Retailing involves sale of tangible goods as well as services. A service may be the shoppers primary purchase (haircuts) or it may be part of the shoppers purchase of goods Retailing may not have to involve a store Mail / phone / direct selling / web transaction and vending machine fall within the scope of retailing.
The Impact of Retailing on the Economy

Retailing is the major of world commerce Retail sales and employment are vital economic contribution. Retail trends is mirror trends in a nation overall economy. Retailing as a major source of job
A Typical Channels of Distribution
Manufacturer
Wholesaler
Retailer
Final Consumer
Retailing is the last stage in the channel of distribution. Retailer as a contact between manufacturers, wholesalers, and consumer. Manufacturers prefer to make one basic type of item and sell their entire inventory to a few buyers as possible, but consumers want to choose from a variety of goods and services and purchase a limited quantity. Retailers collect assortment from various source, buy in large quantity, and sell in small amounts. This is called sorting process.
Adopted from Berman & Evans, 2004
The Retailers Role in the Sorting Process

Manufacturer Brand A Wholesaler Manufacturer Brand B Brand A customer
Brand B customer
Manufacturer Brand C Wholesaler Manufacturer Brand D Retailer
Brand C customer
Brand D customer
Brand E customer Manufacturer Brand E Wholesaler Manufacturer Brand F

Adopted from Berman & Evans, 2004
Brand F customer
Multi-Channel Retailing
A retailer sells to consumers through multiple retail formats: Web sites Physical stores
Relationship Management Among Retailers and Suppliers

Disagreements may occur in the following areas:
control over channel profit allocation number of competing retailers product displays promotional support payment terms operating flexibility
Distribution Types
Exclusive: suppliers make agreements with one or few retailers, designating such retailers as the only ones to carry certain brands or products within a specified geographic area Intensive: suppliers sell through as many retailers as possible Selective: suppliers sell through a moderate number of retailers
Figure 1-7: Comparing Distribution Types
The Relationships Among Retailers and Their Suppliers

Complex relationships retailers are part of the distribution channel, manufacturers and wholesalers must be concerned about the caliber of display, customer service, store hours, retailers reliability as business partners etc. Retailers and suppliers have different priorities. Channel relations tend to be smoothest with - Exclusive Distribution Channel relations tend to be most volatile with Intensive Distribution With Selective Distribution, suppliers sell through a moderate number of retailers ( a combines aspects of exclusive and intensive distribution.
The Special Characteristics of Retailing The average amount of sales transaction for retailers is much less than for manufacturers. Final consumers make many unplanned or impulse purchase Retail consumers usually visit a store, even though mail, phone, and Web sale have increased.
The Special Characteristics Affecting Retailers

Small average sale Impulse purchase
Retailers strategy
Popularity of sources
Taken from Berman & Evans, 2004
Retail Strategy
An overall plan for guiding a retail firm Influences the firms business activities Influences firms response to market forces
Six Steps in Strategic Planning

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

Growth objectives Appeal to a prime market Distinctive image Focus Customer service Multiple points of contact Employee relations Innovation Commitment to technology Community involvement Monitoring performance
The Retailing Concept

Customer orientation retailer determines the attributes and needs of its customers and endeavors to satisfy these needs to the fullest. Coordinated effort the retailer integrates all plans and activities to maximize efficiency. Value-driven retailer offer good value to customer, whether it be upscale or discount. This means having prices appropriate to the level of products and customer service. Goal orientation retailer sets goals and then uses its strategy to attain them.
Figure 1-10: Applying the Retailing Concept

Customer Orientation
Coordinated Effort Retailing Concept Value-driven Retail Strategy
Goal Orientation
Issues that relate to retailers performance in term of the Retailing Concept Total retail experience Customer service Relationship retailing
Customer Service
Activities undertaken by a retailer in

Store hours Parking Shopper-friendliness Credit acceptance Salespeople
conjunction with the basic goods and services it sells. This includes:
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?
Relationship Retailing
Retailers 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
Effective Relationship Retailing

Use a win-win approach
It is easier to keep existing customers happy than to gain new ones
Develop a customer database

Ongoing customer contact is improved with information on peoples attributes and shopping behaviors
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
The Importance of Developing and Applying a Retail Strategy ( An overall plan guiding a retail firm) The six steps in strategic planning
Define type of business of the goods or services category and the companys specific orientation. Set long-run and short-run objectives for sales and profit, market share, image, and so on. Determine the consumer market to target on the basis of its characteristics (such as gender and income level) and needs (such as product and brand preferences). Devise an overall, long-run plan that gives general direction to the firm and its employees. Implement an integrated strategy that combines such factors as store location, product assortment, pricing, and advertising and displays to achieve objectives. Regularly evaluate performance and correct weaknesses or problem when observed.

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Food Retailing Management and Technology HTC610

Ali Mohamad Noor

The Framework of Retailing

The Impact of Retailing on the Economy

A Typical Channels of Distribution

Adopted from Berman & Evans, 2004

The Retailers Role in the Sorting Process

Manufacturer Brand C Wholesaler Manufacturer Brand D Retailer

Brand E customer Manufacturer Brand E Wholesaler Manufacturer Brand F

Relationship Management Among Retailers and Suppliers

Figure 1-7: Comparing Distribution Types

The Relationships Among Retailers and Their Suppliers

The Special Characteristics Affecting Retailers

Six Steps in Strategic Planning

Aspects of Targets Strategy

The Retailing Concept

Figure 1-10: Applying the Retailing Concept

Coordinated Effort Retailing Concept Value-driven Retail Strategy

Activities undertaken by a retailer in

Figure 1-12: A Customer Respect Checklist

Effective Relationship Retailing

Develop a customer database

Parts of Retail Management: A Strategic Approach

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