After all, it is retailing that is responsible for matching the individual demands of the consumer with vast

quantities of supplies produced by a huge range of manufacturers and service providers.

Retailing, as we use the term in this text, consists of the final activities and steps needed either to place
a product in the hands of the consumer or to provide a service to the consumer.

Many observers of the American business scene believe that retailing is the most ‘‘staid and stable’’
sector of business

E-tailing

Interestingly, embedded in the word retail is one of the most important trends in the retail industry, and
that is e-tailing (just remove the ‘‘r’’ from retailing and you have e-tailing).

Bricks-and-Mortar retailers, or those operating in a physical building

. Outshopping, occurs when the customer gets needed information (such as proper size or how to
assemble a product) in the store and then orders it online for a lower price and to avoid paying state
sales tax

Price Competition

Some people claim that America’s fixation with low prices began after World War II when fair-trade
laws, which allowed the manufacturer to set a price that no retailer was allowed to sell below, paved
the way for America’s first discounter, E. J. Corvett.

Walmart is obsessed with its top line (sales), which it grows by focusing on the consumer’s bottom line.

Demographic Shifts

Other significant changes in retailing over the past decade have resulted from changing demographic
factors such as

(1) the fluctuating birthrate,

(2) the growing importance of the 70 million Generation Y consumers (those born between 1978 and
1994),

(3) the move of Generation X into middle age,

(4) the beginning movement of the baby boomer generation into retirement, and

(5) the increasing number of immigrants.

Same-store sales is a retailing term that compares an individual store’s sales to its sales for the same
month in the previous year

Market share refers to a retailer’s sales as a percentage of total market sales for the merchandise line or
service category under consideration.
Store Size

The more merchandise customers see, the more they will buy

scrambled merchandising Exists when a retailer handles many different and unrelated items.

result of the pressure being placed on many retailers to increase profits by carrying additional
merchandise or services (with higher profit margins) that will also increase store traffic

These retailers realized that having supersized stores increased several major costs:

1. rent—which is usually paid on the square feet of space used;

2. inventory costs—if spending is down, retailers may reduce their various selections offered within the
product categories; and

3. labor costs—the larger the store, the greater the staffing needs.

category killer Is a retailer that carries such a large amount of merchandise in a single category at such
good prices that it makes it impossible for customers to walk out without purchasing what they need,
thus killing the competition.
Categorizing retailers

Categorizing retailers can help the reader understand competition and the changes that occur in
retailing. There is no single acceptable method of classifying retail competitors

Census Bureau

In almost all instances, the NAICS code reflects the type of merchandise the retailer sells.

As a rule, these three-digit NAICS codes are too broad to be of much use to the retail analyst. Four-digit
NAICS codes provide much more information on the structure of retail competition and are easier to
work with.

second cautionary note about using this Census Bureau data is that comparisons between years may not
be accurate

Another shortcoming of using the NAICS codes is that they do not reflect all retail activity. The Census
Bureau’s definition equates retailing only with the sale of ‘‘tangible’’ goods or merchandise. However,
by our definition, selling of services to the final consumer is also retailing

Remember, any time the consumer spends money, whether on tangibles (merchandise) or intangibles
(services), retailing has occurred.

Number of Outlets

Generally, retailers with several units are a stronger competitive threat because they can spread many
fixed costs, such as advertising and top management salaries, over a larger number of stores and can
achieve economies in purchasing

However, single-unit retailers, such as your neighborhood IGA grocery store, do have several
advantages. They are generally owner- and family-operated and tend to have harder-working, more
motivated employees. Also, they can focus all their efforts on one trade area and tailor their
merchandise to that area while gaining buying efficiencies by being a member of the IGA group. In the
past such stores were usually able to spot emerging customer desires sooner and respond to them
faster than the larger multiunit operations.

Any retail organization that operates more than one unit is technically a chain, but this is really not a
very practical definition. Therefore this text will only consider a retail operation to be a chain if it has 10
or more stores

Small chains are local and may enjoy some economies in buying and in having the merchandise tailored
to their market needs.

Large chains are generally regional or national and can take full advantage of the economies of scale
that centralized buying, accounting, training, advertising, and information systems, and a standard stock
list can achieve.
standard stock list Is a merchandising method in which all stores in a retail chain stock the same
merchandise.

optional stock list Is a merchandising method in which each store in a retail chain is given the flexibility
to adjust its merchandise mix to local tastes and demands.

When a chain store retailer is able to achieve critical mass in purchases, it can get other supply-chain
members—wholesalers, brokers, and manufacturers—to engage in activities they might not otherwise
engage in, and it is then referred to as the channel advisor or channel captain.

channel advisor or channel captain Is the institution (manufacturer, wholesaler, broker, or retailer) in
the marketing channel that is able to plan for and get other channel institutions to engage in activities
they might not otherwise engage in. Large store retailers are often able to perform the role of channel
captain.

private label branding May be store branding, when a retailer develops its own brand name and
contracts with a manufacturer to produce the product with the retailer’s brand, or designer lines, where
a known designer develops a line exclusively for the retailer.

Margins versus Turnover

gross-margin percentage A measure of profitability derived by dividing gross margin by net sales.

gross margin Is the difference between net sales and cost of goods sold.

operating expenses Are those expenses that a retailer incurs in running the business other than the cost
of the merchandise.

inventory turnover Refers to the number of times per year, on average, that a retailer sells its inventory

high-performance retailers Are those retailers that produce financial results substantially superior to
the industry average.

low-margin/lowturnover retailer Is one that operates on a low gross margin percentage and a low rate
of inventory turnover

high-margin/lowturnover retailer Is one that operates on a high gross margin percentage and a low rate
of inventory turnover

clicks-and-mortar retailers Retailers that sell both online and in physical stores

low-margin/highturnover retailer Is one that operates on a low gross margin percentage and a high rate
of inventory turnover.

high-margin/highturnover retailer Is one that operates on a high gross margin percentage and a high
rate of inventory turnover

Location
Now retailers are reaching out for alternative retail sites

Size

larger firms generally have lower operating costs per sales dollar than smaller firms do

A Retailing Career

Over the course of a career, you will have to deal with many issues. Among them are:

1. what product(s) or service(s) to offer,

2. what group of customers to target,

3. where to locate the store,

4. how to train and motivate your employees,

5. what price level to use,

6. what levels of customer service (store hours, credit, staffing, parking, etc.) to offer your customers,

7. how to lay out the store,

8. how to control store operating expenses and police employees and customers to cut down on
shoplifting and employee theft of merchandise, and 9. how to leverage the Internet to support your
mission

store management The retailing career path that involves responsibility for selecting, training, and
evaluating personnel, as well as in-store promotions, displays, customer service, building maintenance,
and security

buying The retailing career path whereby one uses quantitative tools to develop appropriate buying
plans for the store’s merchandise lines

One of the greatest opportunities for people entering a retailing career is in online retailing, or e-tailing.
One particular e-tailing field that is attracting many job seekers is the retailing of online information,
which is providing unheralded opportunities to those seeking new challenges.

Common Questions about a Retailing Career

Salary, Career Progression, Geographic Mobility, Societal Perspective

Prerequisites for Success

The ability to make rapid decisions, and to render judgments, take action, and commit oneself to a
course of action until completion is termed decisiveness

The ability to adjust to the ever-changing needs of the situation calls for flexibility

They must have the ability to originate action rather than wait to be told what to do. This ability is called
initiative

The ability to inspire the team members to trust and respect your judgment and the ability to delegate,
guide, and persuade this team calls for leadership.

Another important quality is the ability to establish priorities and plans and follow through to achieve
these results. This prerequisite is organization.

The Study and Practice of Retailing

Analytical Method

The analytical retail manager is a finder and investigator of facts. These facts are summarized and
synthesized so a manager can make decisions systematically. In doing so, the manager uses models and
theories of retail phenomena that enable him or her to structure all dimensions of retailing. An
analytical perspective can result in a standardized set of procedures, success formulas, and guidelines.

Creative Method

Conversely, the creative retail manager is an idea person. This retail manager tends to be a
conceptualizer and has a very imaginative and fertile mind capable of creating a highly successful retail
chain

A Two-Pronged Approach

The synthesis of creativity and analysis is necessary in all fields of retailing. One retail expert noted that
‘‘many successful merchandisers are fast duplicators rather than originators.’’40 To decide who or what
to duplicate requires not only creativity but also an analysis of the strategies that retailers are pursuing.
This is an exercise in weighing potential returns against risks. Thus, according to this expert, ‘‘creativity
in retailing is for the sake of increasing the sales and profits of the firm.’’41 If creativity is tied to sales
and profits, then one cannot avoid analysis; profit and sales statistics require analysis

A Proposed Orientation
This approach has four major orientations:

(1) environmental- Retailers should have an environmental orientation that will allow them to anticipate
and adapt continuously to external forces in the environment. Retailing is not static

(2) management planning- Retailers should have a planning orientation that will help them to adapt
systematically to a changing environment. A retailer that wants to have the competitive edge must plan
today for the future.

(3) profit- The profit orientation will therefore focus on the fundamental management of assets,
revenues, and expenses. Management tools that show how to evaluate the profit impact of retail
decisions will be discussed.

(4) decision making- l allow them to focus on the need to collect and analyze data for making intelligent
retail decisions.