Introduction to retailing industry

Introduction to retailing industry

1. 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 ranging from cars to apparel to meals at restaurants to movie tickets. Retailing is the last stage in the distribution process.

2. Retail functions in distribution

   • Retailing is the last stage in a channel of distribution, all of the business and people involved in the physical movement and transfer of ownership of goods and services from producer to consumer.
   • Retailers often act as the contact between manufacturers, wholesalers, and the consumer.
   • Typical channel of distribution

3. Sorting process

   • Retailers collect an assortment from various sources, buy in large quantity, and sell in small amounts

4. Multi-channel retailing

   • Whereby a retailer sells to consumers through multiple retail formats (points of contact). Most large retailers oper- ate both physical stores and Web sites to make shopping easier and to accommodate consumer desires. Some firms even sell to customers through retail stores, mail order, a Web site, and a toll-free phone number.

5. Comparing Exclusive, Intensive, and Selective Distribution

   • Exclusive distribution
     • Channel relations tend to be smoothest with exclusive distribution, whereby suppliers make agreements with one or a few retailers that designate the latter as the only ones in speci- fied geographic areas to carry certain brands or products.
     • This stimulates both parties to work together to maintain an image, assign shelf space, allot profits and costs, and advertise. It also usually requires that retailers limit their brand selection in the specified product lines; they might have to decline to handle other suppliers’ brands.
   • Intensive distribution
     • Channel relations tend to be most volatile with intensive distribution, whereby suppliers sell through as many retailers as possible. This often maximizes suppliers’ sales and lets retailers offer many brands and product versions.
     • Competition among retailers selling the same items is high; retailers may use tactics not beneficial to individual suppliers, because they are more con- cerned about their own results. Retailers may assign little space to specific brands, set very high prices on them, and not advertise them.
   • Selective distribution
     • Suppliers sell through a moderate number of retailers. This combines aspects of exclusive and intensive distribution.
     • Suppliers have higher sales than in exclusive distribution, and retailers carry some competing brands. It encourages suppliers to provide some marketing support and retailers to give adequate shelf space.

6. Special Characteristics Affecting Retailers

   • Final consumers make many unplanned or impulse purchases.
     • Surveys show that a large percentage of consumers do not look at ads before shopping, do not prepare shopping lists (or do deviate from the lists) once in stores, and make fully unplanned purchases.
     • Candy, cosmetics, snack foods, magazines, and other items are sold as impulse goods when placed in visible, high-traffic areas in a store, catalog, or Web site.
     • Because so many purchases are unplanned, the retailer’s ability to forecast, budget, order merchandise, and have sufficient personnel on the selling floor is more difficult.

7. Retail Strategy

   • A retail strategy is the overall plan guiding a retail firm. It influences the firm’s business activi- ties and its response to market forces, such as competition and the economy
   • Any retailer, regard- less of size or type, should utilize these six steps in strategic planning:
     • 1. Define the type of business in terms of the goods or service category and the company’s specific orientation (such as full service or “no frills”).
     • 2. Set long-run and short-run objectives for sales and profit, market share, image, and so on.
     • 3. Determine the customer market to target on the basis of its characteristics (such as gender and income level) and needs (such as product and brand preferences).
     • 4. Devise an overall, long-run plan that gives general direction to the firm and its employees.
     • 5. Implement an integrated strategy that combines such factors as store location, product assortment, pricing, and advertising and displays to achieve objectives.
     • 6. Regularly evaluate performance and correct weaknesses or problems when observed.

8. The Retailing Concept

   • It uses a customer- centered, chainwide approach to strategy development and implementation, is value-driven, and has clear goals.
   • 1. Customer orientation. The retailer determines the attributes and needs of its customers and endeavors to satisfy these needs to the fullest. 2. Coordinated effort. The retailer integrates all plans and activities to maximize efficiency. 3. Value driven. The retailer offers good value to customers, whether it be upscale or discount. This means having prices appropriate for the level of products and customer service. 4. Goal orientation. The retailer sets goals and then uses its strategy to attain them.

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