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

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download