Chapter 1
Introduction to the World of Retailing
RETAIL
MANAGEMENT
8th Edition
Levy and Weitz
BERMAN EVANS TEMPLATE
Chapter Objectives
To define retailing.
To determine what do retailers do.
To show why retailing is important to our
society.
To show what career and entrepreneurial
opportunities does retailing offer.
To determine what types of decisions do retail
managers make.
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WHAT IS RETAILING?
Retailing is the set of business
activities that adds value to the
products and services sold to
consumers for their personal or family
use.
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WHAT IS RETAILING?
Often people think of retailing only as
the sale of products in stores, but
retailing also involves the sale of
services.
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The Retailers Role in a
Supply Chain
A supply chain is a set of firms that
make and deliver goods and services
to consumers.
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Example of a Supply Chain
Manufacturer
Retailer
Wholesaler
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Final
Consumer
The Retailers Role in a
Supply Chain
Manufacturers typically design and make
products and sell them to retailers or
wholesalers.
Wholesalers engage in buying, taking title to,
often storing and physically handling goods in
large quantities and then reselling the goods
(usually in smaller quantities) to retailers or
other business.
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The Retailers Role in a
Supply Chain
Most supply chains feature some vertical
integration.
Vertical Integration means that a firm
performs more than one set of activities in the
channel. (J. Crew and Victorias Secret)
Backward Integration arises when a retailer
performs some wholesaling and
manufacturing activities.
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The Retailers Role in a
Supply Chain
Forward Integration occurs when a
manufacturer
undertakes
retailing
and
wholesaling activities such as Ralph Lauren
operating its own retail stores.
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Retailers Create Value
Why are retailers needed?
Wouldnt it be easier and cheaper to buy
directly from manufacturers?
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Retailers Create Value
These value-creating activities include:
(1) providing an assortment of products and
services;
(2) breaking bulk;
(3) holding inventory; and
(4) providing services.
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SOCIAL AND ECONOMIC
SIGNIFICANCE OF RETAILING
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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Social Responsibility
First stage engage only in CSR
activities required by law.
Second stage go beyond required by
law to engage in CSR activities that provide
a short-term financial benefit to the
company.
Third stage operate responsibly
because they believe this is the right thing
to do.
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Social Responsibility
Fourth stage engage in socially
and
environmentally
responsible
actions because they believe these
activities must be done for the wellbeing of everyone.
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Worlds Largest Retailers
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Name of the
Company
Country of
Origin
2007 Retail
Sales (billion
dollars)
Countries
of
Operation
Walmart
Stores, Inc.
U.S.
374,526
15
Carrefour S.A.
France
112,604
34
Tesco plc
U.K.
94,740
13
Metro AG
Germany
87,586
13
The Home
Depot, Inc.
U.S.
77,349
32
Employment
Retailing is one of the nations largest
industries in terms of employment. In the
U.S., more than 29 million people were
employed in retailing in 2007 (21% of the
U.S. workforce).
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STRUCTURE OF RETAILING
AND DISTRIBUTION
CHANNELS AROUND THE
WORLD
Global Retailers
Retailing is a global industry.
The largest 250 retailers operated in 6.8
countries on average, with 21.3% of their
sales coming from outside the retailers
home countries.
Retailers offering food and other fastmoving consumer goods (FMCG) dominate
the top-250 list; however retailers in this
sector tend to be the least international.
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Global Retailers
Retailers that focus on hard lines such as
consumer electronics, appliances and
furniture
experience
better
financial
performance than FMCG and apparel
retailers.
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Differences in Distribution
Channels
The nature of retailing and distribution
channels around the world differs.
Many U.S. retailers operate stores with
over 20,000 square feet and operate their
own warehouses, eliminating the need for
wholesalers.
The Chinese and Indian distribution
systems are characterized by small stores
operated by relatively small firms and a
large independent wholesale industry.
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Differences in Distribution
Channels
In northern Europe, retailing is similar to
that in the United States, with high
concentration levels in some national
markets.
Indian and European economic policies
reduce unemployment by protecting small
businesses.
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Differences in Distribution
Channels
Finally, retail productivity is reduced when
countries restrict the hours that stores can
operate.
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OPPORTUNITIES IN
RETAILING
Management Opportunities
To cope with a highly competitive and
challenging environment, retailers hire and
promote people with a wide range of skills and
interests.
Retailers employ people with expertise and
interests in 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 worlds
richest people are retailing entrepreneurs.
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Jeff Bezos (Amazon.com)
After his research uncovered that Internet
usage was growing at 2,300% annual rate in
1994, Bezos, the 30 year old son of a Cuban
refugee, 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
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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Competitors
A retailers primary competitors are other
retailers that use the same type of store.
This competition between the same type of
retailers is called intratype competition.
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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Competitors
Intertype competition exists between
retailers that sell similar merchandise using
different types of stores, such as discount
and department stores.
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Customers
To develop and implement an effective
strategy, retailers must understand why
customers shop, how they select a store
and how they select among that stores
merchandise.
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Developing a Retail Strategy
Retail strategy indicates how the retailer
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 services the retailer will offer to satisfy
the needs of the target market; and (3) how
the retailer will build a long-term advantage
over its competitors.
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Strategic Decision Areas
Definition of its market
Financial status
Location
Organizational and human resource
structure
Information systems
Supply chain organization
Customer relationships
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Implementing the Retail
Strategy
Retail mix is a set of decisions retailers
make to satisfy customer needs and
influence their purchase decisions.
Elements in the retail mix include the types
of merchandise and services offered,
merchandise pricing, advertising and
promotional
programs,
store
design,
merchandise
display,
assistance
to
customers provided by salespeople and
convenience of the stores location.
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Ethical and Legal
Considerations
Ethics are the principles governing
individuals and companies that establish
appropriate behavior and indicate what is
right and wrong.
When you view your firms policies or
requests as improper, you have three
choices.
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Ethical and Legal
Considerations
Ignore your personal values and do what
your company asks you to do.
Take a stand and tell your employer what
you think.
Refuse to compromise your principles.
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Checklist for Making Ethical
Decisions
Would I be embarrassed if a customer
found out about this behavior?
Would my supervisor disapprove of this
behavior?
Would most coworkers feel that this
behavior is unusual?
Am I about to do this because I think I can
get away with it?
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Checklist for Making Ethical
Decisions
Would I be upset if a company did this to
me?
Would my family or friends think less of me
if I told them about engaging in this activity?
Am I concerned about the possible
consequences of this behavior?
1-41
Checklist for Making Ethical
Decisions
Would I be upset if this behavior or activity
was publicized in a newspaper article?
Would society be worse off if everyone
engage in this behavior or activity?
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End of Chapter 1
Thank you for listening
