SEGMENT 16: RETAILING
SEGMENT 16: RETAILING
(Related chapter in text: 17)
LEARNING OBJECTIVES:
-Understand the scope and functions of retailing
-Understand the concept of retail positioning
-Know the most common forms of retailers and retail locations
-Understand the role of store image and atmospherics
-Be able to compute key measures of retail productivity
-Distinguish brand management and category management
SCOPE OF RETAILING (2003)
-Greater than $3 Trillion annual sales
-Approximately 3 Million retail stores
-Approximately 26 Million retail employees (17% of U.S. workforce)
MAJOR CATEGORIES OF RETAIL SALES
Automotive $750 BILLION
Food Stores $460 BILLION
General Merchandise $380 BILLION
Eating/Drinking $285 BILLION
Gasoline $180 BILLION
Building Supplies $180 BILLION
Furniture $165 BILLION
Clothing $135 BILLION
RETAIL FUNCTIONS
How retailers add value…
-Providing assortments- set of products they offer for sale, the selection, buyers- one who makes decisions about what products to buy and select for the retailers, what assortment to get
-Breaking bulk- manu produce things in huge quantities, making a 6 pack of water, so consumers can buy smaller amount
-Holding inventory- having the product there when you want it, in the back if it is sold out
-Providing services- geek squad at best buy, try on clothing, restroom, returns
COMMON TYPES OF GENERAL MERCHANDISE RETAILERS
• Discount Stores
■ Wal-Mart, Target, Kmart, Costco, sams club
■ Very low price, low service- don’t get a lot of service
■ Broad, shallow selection, wide array of product categories, huge breadth, but not a lot of options in that category (shoes, tv, tires but not many choices)
• Department Stores
■ Burdines, JCPenney, Sears
■ Moderate to high price, service
■ Broad, average to deep selection- on steady decline
• Specialty Stores- careful about image, style, and atmosphere, same store sales important
■ Gap, Limited, Foot Locker
■ Generally high price, service
■ Narrow, average to deep selection
• Power Retailers (Category Killers)- offer selection that drive other merchants out
■ Best Buy, Office Depot, Toys “R” Us
■ Low price, service varies- some high, some low.
■ Narrow, very deep selection (best buy and electronics )
RETAIL STRATEGY
• Positioning
-Merchandise mix
-Price/Service
• Location
• Image/Atmospherics
[pic]
LOCATION
• Regional Mall-enclosed shopping center, 3 anchor stores shopping mecca, goes through lifecycle
• Strip Center- strip of smaller store, outside, might be supermarket or drugstore
• Power Center- one anchor store such as retailer, with smaller stores
• Central Business District- downtown shopping area, with a macy, has declined.
• Stand-Alone Store- located anywhere, less common, has to survive on destination shopping- items onsale is something you go out of your way for, cars, boats, furniture stores
• Lifestyle center-outdoor shopping center, central area and some small stores mostly speciality stores. More upscale and entertainment .
SITE LOCATION: MACRO FACTORS- what city are we going to go into
• Economic Climate- data on household income, unemployment, growth phase, eco factors positive or negative
• Demographic/Psychographic Profile- who is there, hobbies, interest, lifestyle,
• Competition- other retailers, and competition in area (publix vs winn Dixie )
• Business Climate- general businnes climate, political situation with codes and regulations anti-business or welcomed?
SITE LOCATION: MICRO FACTORS- where within in city?
• Accessibility- easy transportation, easy access
• Visibility-visibile from street?
• Traffic congestion- how bad is traffic? Widenning roads, Traffic patterns (right side for doungouts )Not having to turn from traffic
• Parking- enough parking space, bad weather walking to
• Rent- more attraction, higher rent, marketing in mall, further away is less rent
• Cannibalization- multiple stores in area (starbucks saturation) how many stores can a area support without over saturation
STORE IMAGE AND ATMOSPHERICS
• Store Layout-
• Merchandise display
• Fixtures and signage
• Lighting and color
• Music and scents
RETAIL PRODUCTIVITY MEASURES
- Net Sales per Square Foot- how much we sell per square foot within store
- Stockturn Rate- how quickly items turn over in particular area, how long is in on the shelf before it sells
- Contribution per Square Foot
NET SALES PER SQUARE FOOT
--Used to compare departments, stores in a chain
Net Sales = Total Sales – Returns
EXAMPLE
Net Sales = $300,000 300,000/600=500
Size of Store = 600 square feet
Net Sales per Square Foot = $500.00
STOCKTURN RATE where are we going to put the fastest moving product how many tide faces in a row vs other products used to delete products also incaps- special display on front of row in supermarket, paid forr extra shelving
--Used to compare products, brands
Stockturn Rate [SR]=
Cost of Goods Sold [COGS]/ Average Inventory (at cost)
Average Inventory [AI]=
(Beginning Inventory [BI] + Ending Inventory [EI]) / 2
EXAMPLE
BI = $34,000
EI = $38,000
COGS = $234,000
SR = COGS / ((BI + EI) / 2)
= $234,000 / (($34,000 + $38,000) / 2)
= $234,000 / $36,000
SR = 6.5 turns per year
CONTRIBUTION PER SQUARE FOOT
--Used to compare stores, departments, product categories, brands
Contribution per Square Foot =
(Avg. Inventory x Stockturn x (100 - % Markup)/100) / # Sq. Ft.
EXAMPLE
% Markup = 50%
Avg. Inventory = $12,000
Stockturn = 4.5
# Sq. Ft. = 1500
Contribution per Sq. Ft.
= ($12,000 x 4.5 x (100-50)/100) / 1500 sq. ft.
= ($12,000 x 4.5 x .5) / 1500 sq. ft.
= $18.00 per square foot
NONSTORE RETAILING
0. DOOR-TO-DOOR- type of retailing used by mary-kay from indivi to indivi called -“NETWORK” MARKETING- team of people who sell for who also known as mutli-level marketing (pyramid scheme –where you try to lure people into pyramid is a promise of money for membership fee, no real product…emailed advice)
1. TELEMARKETING- “dinner tella” two types, outbound-calls out for sale, inbound-call into buy
2. CATALOGS
3. TV HOME SHOPPING
4. ONLINE (WWW)
--“MULTICHANNEL” RETAILING- same retailer using multiple channels to reach the different markets. Not holding as much retailer
BRAND MANAGEMENT : Manufacturers’ perspective - maximizing profit performance of the brand- shelf spacing at eye level
CATEGORY MANAGEMENT : Retailers’ perspective - maximizing profit performance of the entire mix of brands in a product category-entire perforamce of store
KEY ISSUE FOR THE FUTURE OF “BRICK-AND-MORTAR” RETAILING: HOW TO ADD VALUE FOR THE CONSUMER THAT CANNOT BE DELIVERED VIA E-COMMERCE
--RECREATIONAL SHOPPING-whom shopping is a recreational sport, women and daughter going to the mall, making place more desireable
--“RETAILTAINMENT”- retailing and entertainment, test driving courses. The experience of shopping
Questions on exam: specialty advertising same as premiuns. Relative vs absolute look at implications
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