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Retailing-consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer. Last step in supply chain. Trends that affect Retailing today: E-tailing- ie. The Internet accounts for less than 5% of retail sales but has changed consumer behavior. (speed, convenience, control, vast info, lowest prices) hasn’t destroyed … Bricks-and-Mortar retailers – Retailers that operate out of a physical building. ’ but B & M retailers must give customers more control to combat E-tailing.
Outshopping-when customers get needed info (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 sales tax. Price Competition Loss Leader-selling a product at or below its cost Bottom Line-net profit on an income statement *Same-Store sales-compares an individual store’s sales to its sales for the same month in the previous year.
The 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 ex. Convenience store that sells low margin gasoline but high margin bread, milk, beer, ciggs ETC. Supercenters, gift cards in grocery stores but causes cost increases in RENT, INVENTORY COSTS, LABOR COSTs *Category Killer-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 that they need, thus KILLING the competition
Categorizing Retailers Census Bureau- NAICS code Number of outlets- Chain? Or not? *Standard Stock list-a merchandising method in which all stores in a retail chain stock the same merchandise *Optional Stock List approach-merchandising method in which each store in a retail chain is given the flexibility to adjust its merchandise mix to local tastes and demands.
*Channel Advisor or Captain-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. Margin/Turnover Gross margin percentage- measure of profitability GROSS MARGIN/NETSALES Gross Margin-NET SALES – COST OF GOODS SOLD
Operating Expenses-expenses that a retailer incurs in running the business other than the cost of merchandise Inventory Turnover- refers to the number of times per year, on average, that a retailer sells its inventory. High Performance retailers-retailers that produce financial results substantially superior to the industry average. Low margin/low turnover-operates on a low gross margin percentage and a low rate of inventory turnover… will not be able to generate sufficient profits to remain competitive and survive. High Margin/Low turnover-(bricks and mortar) high gross margin percentage and low ate of inventory turnover ( high end stores, mom and pop) Clicks and Mortar-instore and online Low margin High turnover- low gmp, high rate of inventory turnover (wal mart, amazon. com) High, High- convenience stores, 7 eleven, circle k, Location- new non traditional places. Size *Store management- the retailing career path that involves responsibility for selecting, training, and evaluating personnel, as well as instore promotions, displays, customer service, building maintenance, and security *Buying-retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the store’s merchandise lines.
Analytical method –finder and investigator of facts Creative Method- Idea person Two pronged approach- both analytical and creative
Mission statement- a basic description of the fundamental nature, rationale, and direction of the firm. Market Share- retailer’s TOTAL SALES/ TOTAL MARKET SALES Profit-based Objectives-deal directly with the monetary return a retailer desires from its business ROI/RONW- Return on investment/ Return on Net Worth STRATIEGIC PROFIT MODEL (MEMORIZE) Net ProfitMargin| Net Profit /Total Sales| Return on Assets| Net Profit* /Total Assets| Financial Leverage| Total Assets/Net Worth| Return on Net Worth|
Net Profit*/Net Worth| X = Asset Turnover| Total Sales/Total Assets| Stockouts- products that are out of stock and therefore unavailable to customers when they want them Productivity objectives- state how much output the retailer desires for each unit of resource input: Floor space, labor, and inventory investment. Sales prod: net sales/ total square feet of retail floor space Labor prod: net sales/#of full time equivalent employees Merchandise prod: net sales/average dollar investment in inventory
Societal Objectives- those that reflect the retailer’s desire to help society fulfill some of it’s needs.
Being a benefactor RASM- (revenue per available seat mile) calculation used by airlines. Yield Management- the understanding, anticipating and reacting to changing customer needs in order to maximize the revenue from a fixed capacity of available services. (1)low marginal costs (2)fixed capacity (3) perishable product (4)fluctuation demand (5)different market segments
Personal Objectives-reflect the retailer’s desire to help individuals employed in retailing fulfill some of their needs.
Power and authority Strategy- a carefully designed plan for achieving the retailers goals and objectives. 3 strategies Get shoppers into your store/ traffic strategy Convert these shoppers into customers by having them purchase merchandise (retailers conversion Do this at the lowest operating cost possible that is consistent with the level of service that your customers expect
Target market-the group of customers that the retailer is seeking to serve Location-geographic or cyber space where the retailer conducts business Retail mix- the combination of merchandise, price, advertising and promotion, locations, customer service and selling, and store layout and design Value proposition- clear statement of the tangible and/or intangible results a customer receives from shopping at and using the retailer’s products or services Operations Management- deals with activities directed at maximizing the efficiency of the retailer’s use of resources. It is frequently referred to as day to day management.
Horizontal Price Fixing- occurs when a group of competing retailers (or other channel members operating at a given level of distribution) establishes a fixed price at which to sell certain brands of products ILLEGAL violates Sherman Antitrust Sec 1 Vertical Price Fixing-occurs when a retailer collaborates with the manufacturer or wholesaler to resell an item at an agreed upon price Price discrimination- occurs when 2 retailers buy an identical amount of “like grade and quality” merchandise from the same supplier but pay different prices. Clayton act makes only certain forms illegal DEFENSES
Cost justification- differential in price could be accounted for on the basis of differences in cost to the seller in the manufactur, sale, or delivery. Due to differences in quantity or method. Changing market differences-justifies based on the danger of imminent deterioration of perishable goods or on the obsolescence of seasonal goods. Meeting Competition in good faith -lower price was made in good faith in order to meet an equally low price of a competitor Deceptive Pricing-occurs when an misleading price is used to lure customers into the store and then hidden charges are added; or the item advertised may be unavailable.
Predatory Pricing-exists when a retail chain charges different prices in different geographic areas to eliminate competition in selected geographic areas. Palming off-occurs when a retailer represents that merchandise is made by a firm other than the true manufacturer Deceptive advertising-when a retailer makes false of misleading advertising claims about the physical makeup of a product, the benefits to be gained by its use, or the appropriate uses for the product. Bait and switch- advertising or promoting a product at an unrealistically low rice to serve as “bait” and then trying to “switch” the customer to a higher priced product. Product liability laws-deal with the seller’s responsibility to market safe products. These laws invoke the forseeability doctrine, which states that a seller of a product must attempt to foresee how a product may be misused and warn the consumer against hazards of misuse. Expressed warranties- are either written or verbalized agreements about the performance of a product and can cover all attributes of the merchandise or only one attribute
Implied warranty of merchantability- made by every retailer when the retailer sells goods and implies that the merchandise sold is fit for the ordinary purpose for which such goods are typically used Implied warranty of fitness- a warranty that implies that the merchandise is fit for a particular purpose and arises when the customer relies on the retailer to assist or make the selection of goods to serve a particular purpose Territorial restrictions-are attempts by the supplier, usually a manufacturer, to limit the geographic area in which a retailer may resell its merchandise
Dual distribution- occurs when a manufacturer sells to independent retailers and also through its own retail outlets One way exclusive dealing arrangement-occurs when the supplier agrees to give the retailer the exclusive right to sell the suppliers product in a particular trade area Two way exclusive dealing arrangement- occurs when the supplier offers the retailer the exclusive distribution of a merchandise line or product in a particular trade area if in return the retailer will agree to do something or the manufacturer, such as heavily promote the suppliers products or not handle competing brands. ILLEGAL. Tying agreement-exists when a seller with a strong product or service requires a buyer to purchase a weak product or service as a condition for buying the strong product or service Ethics-set of rules for human moral behavior Explicit code of ethics-consists of a written policy that states what is ethical and unethical behavior Implicit code of ethics- an unwritten but well understood set of rules or standards of moral responsibility Chapter 14
Empowerment- occurs when employees are given the power in their jobs to do the things necessary to satisfy and make things right for customers. Servant leadership-an employees recognition that their primary responsibility is to be of service to others. 20% of customers generate 80% of sales value proposition-the promised benefits a retailer offers in relation to the cost the consumer incurs customer relationship management CRM-comprised of an integrated information system where the fundamental unit of data collection is the customer, supplemented by relevant information about the customer erformance appraisal and review- is the formal, systematic assessment of how well employees are performing their jobs in relation to established standards and the communication of that assessment to employees Motivation-is the drive that a person has to excel at activities, such as a job, that he or she undertakes Esprit de corps- occurs when a group of workers feel a common mission and a passion for that mission and a pride in being part of the group
Fixed component- typically is composed of some base wage per hour, week, month, or year Variable component-is often composed if some bonus that is received if performance warrants Fringe benefit package-is a part of the total compensation package offered to many retail employees and may include health insurance, disability benefits, life insurance, retirement plans, child care, use of an auto, and financial counseling Job enrichment- the process of enhancing the core job characteristics to improve the motivation, productivity, and job satisfaction of employees.
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