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Part 4: Channel Institutions Chapter 11: Retailing

. Retailing Defined. The activities involved in selling goods and services to ultimate consumers for personal consumption.. . Ronnie of Ronneez Custodial Service buys Formula 409 cleaner at CostcoA case to sell to clients for small cleanups between service callsA case for cleaning crews to use cle

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Part 4: Channel Institutions Chapter 11: Retailing

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    1. Part 4: Channel Institutions Chapter 11: Retailing MKTG 406 Pimentel

    2. Retailing Defined The activities involved in selling goods and services to ultimate consumers for personal consumption.

    3. Ronnie of Ronneez Custodial Service buys Formula 409 cleaner at Costco A case to sell to clients for small cleanups between service calls A case for cleaning crews to use cleaning clients’ offices A bottle to keep at the office for cleaning there A bottle to take home and use for cleaning at home Retailing Defined: Example

    4. World’s Top 10 Retailers

    5. World’s Top 10 Retailers

    6. Cost-side positioning Demand-side positioning Retail Positioning Strategies

    7. Margin goals Inventory turnover goals Cost-Side Positioning

    8. Measures of performance GMROI: Gross Margin Return On Inventory GMROI = Gross Margin % x Inventory Turnover GM = Sales – CGS GM% = GM / Sales IT: In units: IT = Units sold / Avg Inventory in units Cost method: IT = CGS / Avg Inventory at cost Retail method: IT = Sales / Avg Inventory at retail Cost-Side Positioning

    9. Using retail method for IT: GMROI = (GM / Sales) x (Sales / Avg Inv at retail) = GM / Avg Inv at retail Original retail Sale retail Cost-Side Positioning

    10. GMROI Example: Ronneez Pet Shop Sales for year: $1,000 Cost of goods sold: 800 Average inventory at cost: 200 Average inventory at MSRP: 250 GM = GM% = IT = GMROI = GM% x IT = or GMROI = GM / Avg Inv = Cost-Side Positioning

    11. Measures of performance (continued) Sales per employee = Sales / FTE GM per full time equivalent employee = (Sales – CGS) / FTE Cost-Side Positioning

    12. Cost-Side Positioning

    13. Measures of performance (continued) Sales per square foot GM per square foot Rent expense Anchor stores Strategic use of space Involves suppliers Cost-Side Positioning

    14. Bulk-breaking Warehouse clubs BOGO Dollar stores Demand-Side Positioning

    15. Spatial convenience Based on product class Time issues Waiting and delivery time Out-of-stocks Demand-Side Positioning

    16. Product variety Breadth Depth Demand-Side Positioning

    17. Customer service SG&A: Sales, General, and Administrative expenses Balance costs and benefits Demand-Side Positioning

    18. Multichannel Shopping Brick & mortar Internet Hybrid Free riding Click & mortar

    19. Internet Retailing

    20. Direct Selling Face-to-face consumer sales away from a fixed retail location Direct selling organizations (DSO) Independent contractors Products Sideline Developing economies

    21. Direct Selling Multi-level direct selling organizations (MLDSO) Illegal pyramid schemes Frontloading

    22. DSO Standards Low cost to join Can return unsold merchandise Rewards based on sales, not recruiting Recruit only qualified individuals

    23. Should you join a DSO? Do you love selling? Are you good at it? Are you comfortable asking your friends for money? Is this really what you want to sell?

    24. Evaluating A DSO Product value Financially sound company Legal/ethical company Follows DSO standards

    25. Channel Power of Retailers Channel power Strong power position of retailers Pressure suppliers because of own pressures Slow growth of aggregate sales Need to cut costs to be profitable Expanding role of buyers Consolidations Too many new products Have become accustomed to special offers Private brands

    26. Trade Deals Off invoice Bill-back Count-recount Free goods Co-op advertising Advertising allowances Display allowances Street money

    27. Trade Deals (cont.) Sales drives Terms or inventory financing Slotting allowances Failure fees Forward buying Diverting

    28. Private Branding Brands created by retailers Benefits to retailer Store loyalty More profitable Types of private brands Store name Retailer’s own brand Designer-exclusive License name Generic

    29. Globalization of Retailing Lags behind other industries Difficulties of going international Real estate Physical logistics operations Supplier relationships Different regulations Cultural differences

    30. Globalization of Retailing Keys to success Balance Distinctive retail competency Local preferences Competing in home market against international retailers Niche markets Superior offering

    31. Miscellaneous Retail Pricing Terms Cash discounts (2/10 net 30) F.O.B. Freight allowances Markdown or off-retail Markup Quantity discounts Cumulative Non-cumulative Seasonal discount Trade discount

    32. Key Terms Retailing Retail positioning strategy Cost-side positioning Demand-side positioning GMROI GMROL GMROS Anchor stores Out-of-stocks SG&A Brick & mortar Free riding Click & mortar Direct selling DSO MLCSO Pyramid scheme Frontloading Channel power Buyers Off invoice Bill-back Count-recount Co-op advertising Advertising allowance

    33. Key Terms Display allowances Sales drives Terms or inventory financing Slotting Street money Forward buying Failure fees Private brand Store name brand Retailer’s own brand Designer-exclusive brand License name brand Generic brand Cash discounts F.O.B. Freight allowances Markdown or off-retail Markup Cumulative quantity discount Non-cumulative quantity discount Seasonal discount Trade discount

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