Welcome to MT- 303Marketing Seminar Dear Students, The Seminar will start promptly at the Schedule Time. Remember that the system saves a transcript of everything in the Chat, if you wish to talk among yourselves you may do so, or you may use the Private Chat Option. Dr. Nardi
Welcome to MT- 303Store Management Introduction to the World of Retailing Unit 2- Seminar Professor: Dr. Nardi ………
Seminar Ground Rules • Start with person’s name, or Prof, or Dr. N., if responding to someone’s comment. • No name means response is to whole class. • When you have a question, ASK it. • Start your Question with // or ?? – examples: //What’s for Lunch? Or ?? What do you mean? • You are welcome to respond, after the person asked has a chance to answer. • When I ask to “move on”, end discussion on that topic. • Please do not use “private chat”
Agenda • Review from last week • Tonight: • Retailing • Distribution Channels • Multi-Channel Retail • Add-Value • Career Opportunities • Wrap Up
Review from Last Week • The Syllabus • Office Hours • Expectations • General • Assignments & Seminars • Q & A • Marketing in Every Day Life
Unit 1 • How did it go? • Time management? • Questions : Grades • Review? • Seminar?
Question What is Retailing?
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.
A Retailer’s Role in a Supply Chain • Retailers are the final business within a supply chain which links manufacturers to consumers. • A Supply Chain is a set of firms that make and deliver a given set of goods and services to the ultimate consumer.
Manufacturing, Wholesaling and Retailing Vertical Integration – firm performs more than one set of activities in the channel Ex: retailer invests in wholesaling or manufacturing Backward Integration – retailer performs some distribution and manufacturing activities Ex: JCPenney sells Arizona jeans (Private Label) Forward Integration – manufacturers undertake retailing activities Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates its own stores Large retailers engage in both wholesaling and retailing Ex: Wal-Mart, Lowe’s, Safeway, Brown Shoe Company
Question Do Retailers add value?
Do Retailers Add Value? a box of crackers at a grocery store • costs $1 to manufacturer • sells at a price of $2 Example Retailers add significantly to the prices consumers face Why not buy directly from the manufacturer? Does that mean that grocery stores are very profitable?
Why Not Get Rid of the Middlemen? Price to Consumer Price to Distributor Price to Retailer $2.00 $1.00 $1.20 $.15 $.85 $.70 Manufacturer Vendor Distributor Wholesaler Retailer Consumer
Why Not Get Rid of the Middlemen? • Better services to customers • More efficient
Multi-Channel Retailing • A retailer sells to consumers through multiple retail formats: • Web sites • Physical stores
Relationship Management Among Retailers and Suppliers • Disagreements may occur in the following areas: • control over channel • profit allocation • number of competing retailers • product displays • promotional support • payment terms • operating flexibility
Distribution Types • Exclusive: suppliers make agreements with one or few retailers, designating such retailers as the only ones to carry certain brands or products within a specified geographic area • Intensive: suppliers sell through as many retailers as possible • Selective: suppliers sell through a moderate number of retailers Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 1-7: Comparing Distribution Types Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
How Retailers Add Value • Provide Assortment Buy other products at the same time • Break Bulk Buy it in quantities customers want • Hold Inventory Buy it at a convenient place when you want it • Offer Services See it before you buy; get credit; layaway Ryan McVay/Getty Images
How Retailers Add Value The value of the product and service increases as the retailer performs functions. Bicycle can be bought on credit or put on layaway Bicycle is featured on floor display Bicycle is offered in convenient locations in quantities of one Bicycle is developed in several styles Bicycle is developed at manufacturer
Examples: How Retailers Add Values • BagBorrowerSteal.com • jewelry and bag rental; Get (not buy, but borrow) exactly what you want • Home Depot • DIYer (Do-it-yourselfer); Learn how to do it yourself with in-store clinics and online workshops
Social and Economic Significance of Retailing • Retail Sales: • Over $4.1 trillion in annual U.S. sales in 2005 • Employment: • Employs over 24 million people in 2005 • One of the largest sectors for job growth in US • Social responsibility • Global player
Social responsibility • Corporate social responsibility • The voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations, in addition to the concerns of its stakeholders • Examples: Edun - a fair-trade fashion brand by the U2 lead singer Bono • Starbucks: pays its farmers 42% more than the commodity price of Arabica coffee beans • Target: community giving programs (5% of income, $3 million a week) • Retail companies give away 1.7% of their profits, compared with about 0.9% for companies in other industries
Question Are retail operations the same everywhere?
Structure of Retailing and Distribution Channels around the World: The United States CHINA The United States The nature of retailing and distribution channels in the U.S. is unique. • Has the greatest retail density • Has the greatest concentration of large retail firms • Large enough to operate their own warehouses, eliminating the need for wholesaling. • The combination of large stores and large firms result in a very efficient distribution system.
? Any Questions?
Opportunities in Retailing:Management opportunities • People with a wide range of skills and interests needed because retailers’ functions include • Finance • Purchase • Accounting • Management information system (MIS) • Supply management including warehouse and distribution management • Design and new product development • Financially rewarding • 5-year salary of buyers: $50,000 - $60,000 • 5-year salary of store managers: $120,000 - $160,000
Opportunities in Retailing:Entrepreneurial opportunities Wal-Mart: Sam Walton • Retailing provides opportunities for people who want to start their own business • Some of the world’s richest people are retailing entrepreneurs • Examples of retailing entrepreneurs Sam Walton (Wal-Mart) Jeff Bezos (Amazon.com) Ingvar Kamprad (IKEA) Anita Roddick (the Body Shop) IKEA: Ingvar Kamprad
Career Opportunities in RetailingStart Your Own Business • Walton Family (Wal-Mart) • Fisher (The Gap) • Wexner (The Limited) • Menard (Menard’s) • Marcus (The Home Depot) • Kellogg (Kohl’s) • Schulze (Best Buy) • Levine (Family Dollar) • Gold (99Cent Only) List of Retail Entrepreneurs on Forbes 400 Richest Americans
Careers in Retailing • Career Opportunities • Store Management • Merchandise Management • Corporate Staff
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Retailers are a Business Like Manufacturers Real Estate Finance Store Design Promotion/Advertising MIS Loss Prevention Operations Human Resources The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Figure 1-8: Special Characteristics Affecting Retailers Small Average Sale Impulse Purchase Retailer’s Strategy Popularity of Stores
Strategic Vs Tactical Decisions • Doing the Right Thing (direction) vs. Doing Things Right (execution) • Strategic Decisions Are: • Made Infrequently • Long-term • Require significant investment • Not easily reversed • Location, Organization Design, Information and Distribution Systems, Customer Service
Retail Strategy • Need to identify the competition • intratype competition (e.g., Dillard’s vs. JCPenney) • intertype competition (e.g., Dillard’s vs. Wal-Mart) • Identifying customers • What are the significant demographic and life-style trends • Who are your target customers
Retail Strategy • An overall plan for guiding a retail firm • Influences the firm’s business activities • Influences firm’s response to market forces
Retail Strategy • A retail strategy should identify • the target market • the product and service mix • a long-term comparative advantage
Six Steps in Strategic Planning 1. Define the type of business 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
JC Penney’s Strategic Evolution(1) • Main Street (small town) private label, soft goods (apparel, home furnishings), decentralized retailer • Changes in environment -- increased disposable income, growth of suburbs, interstate highway program • Emulate Sears in moving to enclosed suburban malls • Add hard goods (appliances, automotive) • Diversify – drug stores, insurance, specialty stores • Develop catalog channel
JC Penney’s Strategic Evolution(2) • Focus on department store format and soft goods develop electronic retail channel • Mid-market, mall based department store, between Wal-Mart/Target and Macy’s/Dillards • Competition from Target, Kohl’s • Centralization to reduce cost, increase responsiveness - centralized buying, warehouse delivery • Off the mall stores to increase customer convenience • Improving store atmospherics • Upgrading merchandise offering (e.g., Sephora, American Living by Polo Ralph Lauren)
Wal-Mart’s Strategic Evolution • Small Town - Discount Store selling hard goods and soft goods • limited service, efficient distribution • Enter suburban markets • Warehouse Clubs (Sam’s) • Supercenters • International Expansion • Supermarkets, neighborhood markets
Sears’ Strategic Evolution • Large number of merchandise categories -- appliances, hardware, apparel • Malls evolved into places for buying soft goods, hard goods sold at category killers • The Softer Side of Sears • Refocused on value -- Testing carts in stores • Acquired Lands’ End • Acquired by Kmart
? Any Questions?