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Chapter 1 Retailing

 To define retailing, consider it from different perspectives, demonstrate its impact, and
note its special characteristics
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.
Issue 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
 How can we grow our business while retaining a core of loyal customers?
 High unemployment, low consumer confidence, high saving rates have reduced consumer
spending. At the same time retail competition has increased through increase format
blurring (sales of cameras at office supply stores, carpeting and major appliances at home
improvement centres).
Retailers can best address these questions by fully understanding and applying the basic principles
of retailing, as well as the elements in a well-structured, systematic, and focused retail strategy.
An Ideal Candidate for a Retailing Career
 Must be people person (more important than technical knowledges as technical skills can
be taught more easily than people skills).
 Must be flexible
 Must have analytical skills
 Must have stamina
 Should be decisive
A Typical Channel of Distribution
Manufacturers → Wholesalers  Retailers  Final Consumers
The Retailer’s Role in the Sorting Process
Multi-Channel Retailing
Retailers sell to consumers through multiple retail format: Web sites and physical stores.
 To introduce the concept of strategic planning and apply it
Special Characteristics Affecting Retailers
Small average sale, impulse purchase and popularity of stores
Retail Strategy is an overall plan for guiding a retail firm to influence firm’s business activities
and to influence firm’s respond to market forces
6 Step in Strategy Planning
1. Define the type of business (corporate mission)
2. Set long-run and short-run objectives
3. Determine the customer market
4. Devise an overall, long-run plan
5. Implement an integrated strategy
6. Evaluate and correct (fine-tune)
Applying the Retailing Concept
Customer orientation, Goal orientation, Coordinate effort, Value-driven  Retailing concept 
Retail Strategy
 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
Customer Service
Activities undertaken by a retailer in conjunction with the basic goods and services it sells. This
includes: Store hours, Parking, Shopper-friendliness, Credit acceptance, Salespeople.
A Customer Respect Checklists:
 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?
Types of Loyalty Programs
1. Additional discounts at register - Not a real loyalty program
2. 1 free with every “n” items purchased - Easily copied, no customer database
3. Rebates based on cumulative purchases - Customer maintains records
4. Targeted offerings and mailing based on purchase history - Tesco example “Market
research staff know more about my customers than board chairperson”
 To indicate the focus and format of the text

Chapter 2 Strategy Planning

 To explain what “value” really means and to highlight its pivotal role in retailers’
building and sustaining relationships
𝑅𝑒𝑠𝑢𝑙𝑡𝑠 + 𝑃𝑟𝑜𝑐𝑒𝑠𝑠 𝑄𝑢𝑎𝑙𝑖𝑡𝑦
𝑉𝑎𝑙𝑢𝑒 =
𝑃𝑟𝑖𝑐𝑒 + 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝐴𝑐𝑐𝑒𝑠𝑠 𝐶𝑜𝑠𝑡
 Results = Overall quality, instructions, ease of assembly, taste/quality/health, warranty,
product testing by retailer
 Process Quality = Wide aisles, ease of finding, high in-stock position, fun experience, short
waiting times
 Price = Costs + delivery + assembly + credit
 Customer access costs = warehouse club membership fees, inconvenient location, poor
store hours, inadequate parking

 To describe how both customer relationships and channel relationships may be

nurtured in today’s highly competitive marketplace
Channel Perspective: Value is a series of activities and processes (the “value chain”) that provide
a certain value for the consumer.
Customer Perspective: Value is a perception that the shopper has of the value chain. It is the view
of all the benefits from a purchase versus the price paid.
Retail Value Chain: Represents the total bundle of benefits offered to consumers through a
channel of distribution. Store location and parking, retailer ambience, customer service,
brands/products carried, product quality, retailer’s in-stock position, shipping, prices, image, and
other elements
Potential Pitfalls to Avoid in Planning a Value-Oriented Retail Strategy
 Planning value solely from a price perspective
 Providing value-enhanced services that customers do not want or will not pay extra for
 Competing in the wrong value/price segment
 Believing augmented elements alone create value
 Paying lip service to customer service
A Value-Oriented Retailing Checklist:
 Is value defined from a consumer perspective?
 Does the retailer have a clear value/price point?
 Is the retailer’s value position competitively defensible?
 Are channel partners capable of value-enhancing services?
 Does the retailer distinguish between expected and augmented value chain elements?
 Has the retailer identified potential value chain elements?
 Is the retailer’s value-oriented approach aimed at a distinct market?
 Is the retailer’s value-oriented approach consistent?
 Is the retailer’s value-oriented approach effectively communicated?
 Can the target market clearly identify the retailer’s positioning?
 Does the retailer’s positioning consider sales versus profits?
 Does the retailer set customer satisfaction goals?
 Does the retailer measure customer satisfaction levels?
 Is the retailer careful to avoid the pitfalls in value-oriented retailing?
 Is the retailer always looking out for new opportunities that will create customer value?
Expected Customer Services Augmented Customer Services
Sservices level that customers want to receive Includes the activities that enhance the
from any retailer such as basic employee shopping experience and give retailers a
courtesy. competitive advantage.
Must have elements; do not differentiate retailer. Services that can provide a competitive
While absence of these expected values provides advantage. Double warranty, special
anguish, presence does not provide satisfaction delivery, product demonstrations

 To examine the differences in relationship building between goods and services retailers

• What customer services are expected and what customer services are augmented for a
particular retailer?
• What level of customer service is proper to complement a firm’s image?
• Should there be a choice of customer services?
• Should customer services be free?
• How can a retailer measure the benefits of providing customer services against their costs?
• How can customer services be terminated?
Typical Customer Services Miscellaneous Customer Services
• Credit • Bridal registry
• Delivery • Interior designers
• Alterations/ Installations • Personal shoppers
• Packaging/gift wrapping • Ticket outlets
• Complaints/Returns handling • Parking
• Gift certificates • Water fountains
• Trade-ins • Pay phones
• Trial purchases • Baby strollers
• Special sales • Restrooms
• Extended store hours • Restaurants
• Mail/phone orders • Babysitting
• Fitting rooms
• Beauty salons
• Fur storage
• Shopping bags
• Information

Turning Around Weak Customer Service

Focus on Customer Concerns  Empower Frontline Employees  Show That You Are
Listening  Express Sincere Understanding  Apologize and Rectify the Situation
Principles of Category Management
 Retailers listen more to customers
 Profitability is improved because inventory more closely matches demand
 By being better focused, each department is more desirable for shoppers
 Retail buyers are given more responsibilities and accountability for category results
 Retailers and suppliers must share data and be more computerized
 Retailers and suppliers must plan together
Elements Contributing to Effective Channel Relationships

Service Retailing
1. Rented goods services– leased cars, hotel rooms, carpet cleaning equipment
2. Owned goods services– plumbing, appliance repair,
3. Non-goods services– haircut, professional services (physician, lawyer)
4 Characteristics of Services Retailing
Intangibility Inseparability Perishability Variability
 No patent  Consumer may  Services cannot be  Standardization and
protection be involved in inventoried quality control hard to
possible service  Lost revenues from achieve
 Difficult to production unsold services are lost  Customers may
display/  Centralized forever perceive variability
communicate mass  Effects of seasonality even when it does not
service benefits production can be severe actually occur
 Quality judgment difficult  Planning employee  Need to
is subjective  Consumer schedules can be industrialize/mechanize
 Some services loyalty may rest complex /service blueprint
involve with employees  Need to balance supply services to factor out
performances/ and demand (yield variability
experiences management pricing)

Lessons in Service Retailing

 To discuss the impact of technology on relationships in retailing

Growing Importance of Retail Technology provides better forecasts, inventory control, electronic
ordering, transfer of information, scanning, online transaction processing, improved merchandise
handling systems, and the ability to connect with customers.
Retail technologies have become critically important as competitive tools. Progressive retailers are
using advanced IT and software systems to produce better forecasts, control inventory costs,
interact electronically with suppliers, send information between stores, and even sell to
customers within stores. They have adopted sophisticated systems for checkout scanning, RFID
inventory tracking, merchandise handling, information sharing, and customer interactions.
Perhaps the most startling advances in retail technology concern the ways in which retailers are
connecting with consumers. Today’s customers have gotten used to the speed and convenience of
buying online and to the control that the Internet gives them over the buying process. The Internet
lets consumers shop when they like and where they like, with instant access to gobs of information
about competing products and prices. No real-world store can do all that.
Increasingly, however, retailers are attempting to meet these new consumer expectations by
bringing online-style technologies into their stores. Many retailers now routinely use technologies
ranging from touch-screen kiosks, mobile hand-held shopping assistants, and customer-loyalty
apps to interactive dressing-room mirrors and virtual sales associates. For example, Eastern
Mountain Sports uses an iPad app to assist in outfitting shoppers for their next adventure with
items available both in the store and on the company’s website. “No longer are we constrained by
square footage as to what we can sell,” says an EMS marketer.
According to one retailing executive, the future of technology in retailing lies in merging the online
and offline shopping experiences. “It’s not as though there’s a physical retail world and an online
retail world, and as one grows, the other declines,” he says. “They’re increasingly integrated.” For
example, consider this futuristic shopping scenario.
It’s a snowy Saturday in Chicago, but Amy, age 28, needs resort wear for an upcoming Caribbean
vacation. She starts shopping from her couch via videoconference with her personal concierge at
Danella, one of her favorite retailers. Based their conversation and on Amy’s past buying at the
store, the concierge recommends several items, superimposing photos of them onto Amy’s avatar.
Amy toggles to another browser tab to research customer reviews and prices, returns to buy one
item from Danella online, and then drives to the store to try on other selected items. At the store,
a sales associate greets Amy by name and walks her to a dressing room stocked with her online
choices—plus some matching shoes. She likes the shoes, so she scans the bar code into her
smartphone and finds the same pair for $30 less at another store. The sales associate quickly offers
to match the price.
As Amy tries things on, she uses an interactive mirror that lets her scan matching items and project
them onto her body. Finally, selections in hand, she checks out using her smartphone. As she heads
for the door, a life-size screen recognizes her and shows a special offer on an irresistible summer-
weight top. Amy checks her budget online, smiles, and uses her phone to scan the customized QR
code on the screen. The item will be shipped to her home overnight.
This functional scenario is neither as futuristic nor as fanciful as it might seem. All the technology
is already available and will soon be found everywhere. The future belongs to retailers who can
blend various in-store and online technologies into a seamless shopping experience.
 To consider the interplay between retailers’ ethical performance and relationships in
Example of Consumerism in Retailing
 Proper testing of items for safety issues
 Programming cash registers not to accept payment for recalled goods
 Charging fair prices for goods in short supply--Home Depot plywood example in hurricane
 Age labelling of toys, warning labels on goods beyond legal requirements

Retail Strategy
Mix is firm’s particular combination of store location, operating procedures, good/service offered,
pricing tactics, store atmosphere, customer services and promotion methods.
Earning destination retailer status. Include trade joe’s, IKEA, microcenter, fortunoff outdoor store,
j7r music world b&h, photo video. Some combination of price-oriented and cost efficient,
innovative or exclusive merchandise and superior customer service. Wide or deep merchandise
The Wheel of Retailing
Low-end strategy: low prices, limited facilities and services, price-sensitive customers.
Medium Strategy: moderate prices, improved facilities, broad base of value- and service-
conscious consumers.
High-end strategy: high price, excellence facilities ans services, upscale consumers.
 Don’t lose sight of prime customer’s pricing awareness
 Beware of dangers in upgrading target market
 Don’t create opening for new cost-conscious retailer to arise
 Use unbundled pricing to separately charge for select service such as delivery, installation
Low High
Low retail location – side street High rental shopping center/center business
distinct location
No service/ service charged at additional fee Elaborate service available included in price
(service may be limited to credit and returns) as: credit, delivery, alterations, decoration, gift
wrapping, layaway
Spartan fixtures and displays Elaborate fixture and displays
Simple retail personnel organization Elaborate retail personnel organization
Price emphasis in promotion No price emphasis in promotion
Self-service or high sales per store personnel Product demonstrated, low sales per store
ratio personnel ratio
Crowded store interior Spacing store interior
Most merchandise visible Most merchandise in back room

Scambled merchandising (format blurring)

Traditional Non-traditional
Presences Limited geographical presence National presence
within city or specific region
Service High involvement with consumer Low involvement with consumer on shop
Low expectation about service floor.
standard High expectation.
Delivery No strict norm for delivery.
Volume Usually sell/buy consistent Sell/buy higher volumes throughout the
volume with increase during year due to promotions and regular
season/festivals expansions.
Margin Demand high margin while Demand high margin also fixed % of
retention low retention.
Promotion Seasonal Monthly/daily promotion on product.
Relationships Sale personnel relationship with Professional and legal relationships with
owner companies