Retail Marketing Assignment Week 1
Chapter 1
Perspectives on Retailing
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
Explain what retailing is and why it is undergoing so much change today
Describe the five methods used to categorize retailers
Understand what is involved in a retail career and be able to list the prerequisites necessary for success in retailing
Explain the different methods for the study and practice of retailing
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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What is Retailing, and Why is it Undergoing so Much Change Today? (1 of 2)
Retailing: Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer
Any firm that sells a product or provides a service to the final consumer is said to be performing the act of retailing
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
What is Retailing, and Why is it Undergoing so Much Change Today? (2 of 2)
Anything that affects how consumers choose to spend money affects the retailing industry
Retailers must consider the changes in the external environment
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (1 of 4)
The great unknown for retail managers will be the ultimate role of the Internet
Bricks-and-mortar retailers: Operate out of a physical building
M-tailing - Shoppers use their smartphones to purchase merchandise and services
Apps - Digital services that can be downloaded
Fastest growing form of e-tailing
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (2 of 4)
Growth of the Web 2.0 has important implications for retailers with the Internet becoming interactive
To combat e-tailing, bricks-and-mortar retailers must give their customers more control over the shopping experience
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (3 of 4)
Has caused a shift in power between retailers and consumers
Traditionally, the retailers’ control over pricing information provided them the upper hand in most transactions
Today, the information dissemination capabilities of the Internet are making consumers better informed
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (4 of 4)
Channel surfing: Occurs when the customer gets needed information in the stores and then orders it online for a lower price
To avoid paying state sales tax
Retailers must keep experimenting with various strategies
Next generation of technology will change the consumers’ expectations of what they demand from retailers
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Price Competition
Sam Walton forever changed the face of retailing by realizing that most of any product’s cost gets added after the item is produced
Walton made a major commitment to computerizing WalMart as a means to reduce expenses
Operating efficiency: Operating costs as a percentage of sales
Costco, a retailer, seeks to boost store traffic by lowering prices on key products
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (1 of 5)
Significant changes in retailing over the past decade have resulted from changing demographic factors such as:
The fluctuating birthrate
The growing importance of the 70 million Generation Y consumers
The move of Generation X into middle age
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (2 of 5)
The beginning movement of the baby boomer generation into retirement
The increasing number of women relative to men graduating from college and concurrent rise in unemployment among men relative to women
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (3 of 5)
Successful retailers must:
Become more service-oriented
Offer better value in price and quality
Have more convenient store hours
Be more promotion-oriented
Be better attuned to their customers’ needs
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (4 of 5)
Profit growth must come by either:
Increasing same-store sales at the expense of the competition’s market share
Reducing expenses without reducing services to the point of losing customers
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (5 of 5)
Same-store sales: Compares an individual store’s sales to its sales for the same month in the previous year
Market share: The retailer’s total sales divided by total market sales
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (1 of 4)
As stores increase in size the retailer often employs a scrambled merchandising strategy
Scrambled merchandising: Exists when a retailer handles many different and unrelated items
It is the result of the pressure being placed on many retailers to increase profits
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (2 of 4)
Retailers have found that reducing their store size is a pathway to improved profitability
Consumers prefer smaller stores due to the convenience of getting in and out faster
More personalized service
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (3 of 4)
Retailer needs a smaller geographic area to draw its customers
Retailer can easily find a location than if it had a larger store that requires more parking
Retail formats that have seen a significant decrease in average store size and a decrease in number of stores are:
Department stores
Category killers
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (4 of 4)
Category killer: Retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Experience and Niche Retailing
A trend occurring in shopping malls is to transform them into exciting experience platforms
Eu Yan Sang is a major health-care brand in Asia, and it has created a Chinese medicine clinic that includes a yoga studio, spa, and health food café
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 1.2 - External Environmental Forces Confronting Retail Firms
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Categorizing Retailers
Census bureau
Number of outlets
Margin versus turnover
Location
Size
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Census Bureau
The U.S. Bureau of the Census, for purposes of conducting the Census of Retail Trade, classifies all retailers using three-digit North American Industry Classification System (N A I C S) codes
Shortcoming of using the N A I C S codes:
They do not reflect all retail activity
Comparisons between years may not be accurate
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (1 of 5)
Retailers with several units are a stronger competitive threat because they can:
Spread many fixed costs over a larger number of stores
Achieve economies in purchasing
Advantages of single-unit retailers:
They have harder-working, more motivated employees
They can focus and tailor their efforts and merchandise in one trade area
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (2 of 5)
Standard stock list: All stores in a retail chain stock the same merchandise
Optional stock list: Each store in a retail chain is given the flexibility to adjust its merchandise mix to local tastes and demands
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (3 of 5)
Channel advisor or channel captain: Institution in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in
Large store retailers are able to perform the role of channel captain
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (4 of 5)
Private label branding: Occurs when a retailer develops own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name
Also called store branding
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (5 of 5)
The major shortcoming of using the number-of-outlets scheme for classifying retailers is that it addresses only traditional bricks-and-mortar retailers
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Margins Versus Turnover (1 of 3)
Gross-margin percentage: Measure of profitability derived by dividing gross margin by net sales
Gross margin: Difference between net sales and cost of goods sold
Operating expenses: Expenses the retailer incurs in running the business other than the cost of the merchandise
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Margins Versus Turnover (2 of 3)
Inventory turnover: The number of times per year, on average, that a retailer sells its inventory
High-performance retailers: Produce financial results substantially superior to the industry average
Low-margin/low turnover retailer: Operates on a low gross margin percentage and a low rate of inventory turnover
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Margins Versus Turnover (3 of 3)
Low-margin/high turnover retailer: Operates on a low gross margin percentage and a high rate of inventory turnover
High-margin/low turnover retailer: Operates on a high gross margin percentage and a low rate of inventory turnover
High-margin/high turnover retailer: Operates on a high gross margin percentage and a high rate of inventory turnover
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Location
The most significant of the new nontraditional shopping locations could be the one which combines culture with entertainment or shopping
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Size
The reason for classifying by size is that the operating performance of retailers tends to vary according to size
With advances in technology, using classification of size is unclear
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 1.5 - Retailing’s Two Career Paths
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Career Path (1 of 2)
Store management: The retailing career path that involves responsibility for:
Selecting
Training
Evaluating personnel
In-store promotions
Displays
Customer service
Building maintenance
Security
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Career Path (2 of 2)
Buying: The retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the store’s merchandise lines
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Common Questions About a Retailing Career (1 of 2)
Salary - Entry-level retail managers or buyers who do exceptionally well can double or triple their incomes in three to five years
Career progression - Person capable of handling increasing amounts of responsibility can move up quickly
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Common Questions About a Retailing Career (2 of 2)
Geographic mobility - Person must be willing and able to make several moves, even if the changes may not be attractive in terms of an individual’s lifestyle
Societal perspective - Leading retail executives are well-rounded individuals with a high social consciousness
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Prerequisites for Success
Hard work
Analytical skills
Creativity
Decisiveness
Flexibility
Initiative
Leadership
Organization
Risk taking
Stress tolerance
Perseverance
Enthusiasm
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Study and Practice of Retailing
Analytical method
Creative method
A two-pronged approach
A proposed orientation
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Analytical Method
The analytical retail manager is a finder and investigator of facts
Analytical perspective can result in a standardized set of procedures, success formulas, and guidelines
A small retailer can consider watching the Russell 2000 Index
Forecasting tool for future business conditions
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Creative Method
The creative retail manager is an idea person
Trader Joe’s has sales higher than leading competitors due to its creative business model of clerks in Hawaiian shirts giving high-fives and free cookies
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Two-Pronged Approach
Involves the synthesis of creativity and analysis
Retailers are duplicators rather than originators
To decide who or what to duplicate requires creativity and an analysis of the strategies that other retailers are pursuing
Sales and profits = Creativity
Profit and sales statistics = Analysis
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
A Proposed Orientation
Four major orientations:
Environmental - Allows the retailers to anticipate and adapt continuously to external forces in the environment
Management planning - Helps the retailers to adapt systematically to a changing environment
Profit - All retail decisions will have an effect on the firm’s financial performance
Decision making - Allows the retailers to focus on the need to collect and analyze data to make intelligent retail decisions
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 1.6 - The Importance of Proactive Planning
A. Standard Performance
B. Reacting to Competitor’s Attack (Old Method)
C. Proactive Planning
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Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.