CHAPTER 1: AN

INTRODUCTION
TO RETAILING
2013 Pearson Education Publishing as Prentice Hall 1-2
Chapter Objectives
To define retailing, consider it from different
perspectives, demonstrate its impact, and note
its special characteristics
To introduce the concept of strategic planning
and apply it
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
To indicate the focus and format of the text
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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.
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Issues 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
choices?
High unemployment, low consumer confidence, high
savings rates have reduced consumer spending. At
the same time retail competition has increased
through increased format blurring (sales of cameras
at office supply stores, carpeting and major
appliances at home improvement centers).
How can we grow our business while retaining a
core of loyal customers?
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The Philosophy
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.
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Figure 1-1: Subway
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An Ideal Candidate for a
Retailing Career
Must be a people person (more
important than technical
knowledge). Technical skills can
be taught more easily than
people skills
Must be flexible
Should be decisive
Must have analytical skills
Must have stamina
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Table 1-1: The 10 Largest Retailers in
the United States (2011)
Rank Company Main Emphasis
1 Wal-Mart Full-line discount stores, supercenters,
membership clubs
2 Kroger Supermarkets, convenience stores, jewelry stores
3 Target Full-line discount stores, supercenters
4 Walgreens Drugstores
5 Home Depot Home centers
6 Costco Membership warehouse clubs
7 CVS Caremark Pharmacies
8 Lowes Home centers
9 Best Buy Electronics, major appliances
10 Sears Holdings Department store, discount (Kmart)

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Figure 1-4: A Typical Channel of
Distribution
Manufacturer
Wholesaler
Final
Consumer
Retailer
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Figure 1-5: The Retailers Role
in the Sorting Process
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Multi-Channel Retailing
A retailer sells to
consumers through multiple
retail formats:
Web sites
Physical stores
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Multi-Channel Retailing
Cross selling across channels (in-store product
availability info on Web site)
Consistent pricing in all channels (credibility)
Can buy, and return product regardless on channel
Role of each channel
o Store try on, ease of return, fast availability
(immediacy), compare offerings
o Web 24/7, product information, product reviews by
customers, personalization (tailored assortment
based on past purchases), most current pricing,
closeout sales
o Catalog-permanency, true color

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Figure 1-6: Apple
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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
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Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
Exclusive vs Intensive Distribution
Exclusive Distribution Fate of retailer is
tied to manufacturer success, retailer has
no free-rider concerns, retailer has less
price competition, manufacturer is better
assured of high levels of customer support
Intensive Distribution- Manufacturer is
better assured of maximizing sales
(especially for convenience goods),
retailers face strong competition for price
and service, intratype competition
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Figure 1-7: Comparing
Distribution Types
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Figure 1-8: Special Characteristics
Affecting Retailers
Impulse
Purchase
Popularity
of
Stores
Retailers
Strategy
Small
Average
Sale
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Retail Strategy
An overall plan for guiding a retail
firm
Influences the firms business
activities
Influences firms response to
market forces
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Six Steps in Strategic 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)
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Figure 1-9: Expect More. Pay
Less at Target
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Aspects of Targets Strategy
Growth
objectives
Appeal to a
prime market
Distinctive image
Focus
Customer service
Multiple points of
contact
Employee
relations
Innovation
Commitment
to technology
Community
involvement
Monitoring
performance
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Figure 1-10: Applying the Retailing
Concept
Customer Orientation
Coordinated Effort
Value-driven
Goal Orientation
Retailing
Concept
Retail
Strategy
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Figure 1-11: The Build-A-Bear Experience:
Never Boring
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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
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Figure 1-12:
A Customer Respect Checklist
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?
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Relationship Retailing
Retailers seek to establish and
maintain long-term bonds with
customers, rather than act as if each
sales transaction is a completely new
encounter
Concentrate on the total retail
experience
Monitor satisfaction
Stay in touch with customers
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Effective Relationship Retailing
Use a win-win approach
It is easier to keep existing customers happy
than to gain new ones (present value of
current customers income stream cost of
keeping existing customers content versus
cost of replacing them with new customer
Develop a customer database (loyalty
programs)
Ongoing customer contact is improved with
information on peoples attributes and
shopping behaviors
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Types of Loyalty Programs
Additional discounts at register
Not a real loyalty program
1 free with every n items purchased
Easily copied, no customer database
Rebates based on cumulative purchases
Customer maintains records
Can develop heavy half programs like Hilton
Targeted offerings and mailing based on purchase
history
Tesco example Market research staff know more
about my customers than board chairperson

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Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
Relationship Management
Among Retailers and Suppliers
Disagreements may occur in the following areas (channel
conflict):
control over channel (private label)
profit allocation (resale price control)
number of competing retailers (exclusive, selective or
intensive distribution)
product displays
promotional support (cooperative advertising funds and
restrictions)
payment terms (payment on time)
operating flexibility
gray market sales
markdown monies, chargebacks by dominant retailers

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Approaches to the
Study of Retailing
Institutional
Functional
Strategic
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Parts of Retail Management:
A Strategic Approach
Building relationships and strategic
planning
Retailing institutions
Consumer behavior and information
gathering
Elements of retailing strategy
Integrating, analyzing, and improving
retail strategy
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