• What is retailing?

• Retailing is the set of business activities that adds value to the products and services sold to consumers for their
personal or family use
• A retailer is a business that sells products and/ services to customers for their personal or family use
• Not all retailing is done in store (ex; nonstore retailing include Internet sales)- The Hire BMW
• Retailer are the final business in supply chain that links manufacturers to consumers
• A supply chain is a set of firms that make and deliver a given set of goods and services to the ultimate consumer

• Manufacturers typically make products and sell them to retailers or wholesalers

• When manufacturers like Nike and Apple sell directly to consumers, they are performing both production and
retailing business activities
• Wholesalers engage in buying, often storing, and physically handling goods in large quantities, then reselling the
goods (usually) in smaller quantities to retailers or industrial or business users
• Wholesalers satisfy retailers’ needs, whereas retailers direct their efforts to satisfying the needs of ultimate
consumers
• Some retailers function as both retailers (ex; sell to consumers) and wholesalers (ex; sell to other businesses,
restaurants, building contractors, …) such as Wal-Mart
• They buy directly from manufacturers, have merchandise shipped to their warehouse for storage, and then distribute
the merchandise to their stores
• Vertical integration means that a firm performs more than one set of activities in the supply chain, such as
investments by retailers in wholesaling or manufacturing
• Ex; Victoria’s Secret design the merchandise they sell and then contract with manufacturers to produce it exclusively
for them
• Backward integration arises when a retailer performs some distribution and manufacturing activities, such as
operating warehouses or designing private-label merchandise
• Forward integration occurs when a manufacturer undertakes retailing activities, such as Ralph Lauren operating its
own retail stores
Retailer create value
• Retailers provide important functions that increase the value of products and services they sell to customers
• They also facilitate the distribution of those products and services for the manufacturers that produce them
The Value-creating function include:
• Providing an assortment and variety of products and services
• Breaking bulk
• Holding inventory
• Providing services
Assortment and variety
• Variety is the number of merchandise categories a retailer offers = breadth of merchandise
• Assortment is the number of different items in a merchandise category = depth of merchandise
• Each different item of merchandise is called an SKU (stock keeping unit) such as Ralph Lauren shirt, size medium
• Supermarkets typically carry 20,000-30,000 different items made by more than 500 companies
• Offering an assortment enables their customers to choose from a wide selection of brands, designs, sizes, colors, and
prices at one location
• Manufacturers specialize in producing specific types of product;
• Frito-Lay makes snack
• Heinz makes ketchup
• If each of these manufacturers have its own stores that only sold its own products, consumers would have to go to
many different stores to buy the groceries needed to prepare a single meal
Breaking Bulk
 • Retailers offer the products in smaller quantities (than shipped from manufacturers or wholesalers) tailored to
individual consumers’ and households’ consumption pattern = breaking bulk
• Breaking bulk provides cost efficiencies for manufacturers that can package and ship merchandise in larger
quantities
• It gives consumers the chance to purchase in the smaller quantities they prefer
Holding Inventory
• Retailers keep inventory that has been broken into user-friendly sizes so that the products will be available when
consumers want them
• The consumers can keep a smaller inventory of products at home because they know local retailers will have the
product available when they need more
• This function is important to consumers with limited storage space and those who want to purchase perishable
merchandise (short life cycle), like meat, just before they consume it
• Discussion: Supply Chain Effect (to Holding Inventory perspective)
Providing Service
• Retailers provide services that make it easier for customers to buy and use products such as;
– Offer credit card
– Display products such as room setting @ Index Living Mall
– Employ salespeople in stores
– Maintain Web sites to answer questions and provide additional information about products
Increasing the Value of Products and Services
• Index Living Mall helps the customer to select the mattress by;
– Blind test (8 types of mattress)
– Renovate mattress department to be spa with aroma
– Convert Product Consultant (PC) to be Healthy Sleeping Specialist (Therapist)
– Provide information from researches which illustrated the importance of the mattress
– Jobs can be reshaped into order to make people more motivation, challenging, diverse, interesting, and
stimulating
– Job Rotation
– Jon Enlargement
– Job Enrichment
Job Redesign is concerned with change.
Job Rotation
• The periodic shifting of an employee from one task to another when an activity is no longer challenging
• Usually at the same level, that has similar skill requirements
• Strengths = reduce boredom and increase motivation through diversifying the employee’s activities, create
disruptions
• Vertical rotation relates to promotions and demotions
Intratype competition = competition between the same type of retailers.
• When retailers offer merchandise not typically associated with their type of store, such as clothing in a drug store, it
results in scrambled merchandising
• Scrambled merchandising increases intertype competition or competition between retailers that sell similar
merchandise using different formats
• Ex; Discount and Department Stores (Auto Accessories & Hardware Department)
• Increasing intertype competition has made it harder for retailers to identify and monitor their competition
• Because the convenience of a location is important in store choice, a store’s proximity to competitors is a critical
factor in identifying competition
• Ex; 7-11 effects to retail banking (Location becomes critical)
Retail strategy indicates how the firm plans to focus its resources to accomplish its objectives
• It identifies;
• The target market
• The nature of the merchandise and services the retailer will offer to satisfy the needs of the target market (ex;
exclusively)
 • How the retailer will build a long-term advantage over its competitors
• Determining its target market, financial status, location, organizational and human resource structure,
information systems, supply chain organization, and customer relationship management strategies
• Elements in the retail mix include
• The type of merchandise and services offered
• Merchandising pricing
• Advertising and promotional programs (Ex; Summer Holiday Sale from Department Store, Shopping Mall
VS Bed Room Sale from IKEA)
• Store design
• Merchandise display
• Assistance to customers provided by salespeople
• Convenience of the store’s location
• Ambience
• Variety and Assortment

• Space Productivity = % Net Sales I % Net Area

Key success factors in retail
• Sales & Profit Management, Merchandise Management, People & Service Management , Ambience & Atmosphere,
Seamless Experience (Omni Channel)
Total Sales 100,000 = Ticket Count (TC) 1,000 * Ticket Value (TV) 100
Conversion Rate = TC / Visitors
• Minimum Manpower = (TC * (Time for serving one customer in minute / 60)) /working hours per day

• Cross Merchandise (Mix & Match), Vertical Line, Interrupted, Intensity, Negative space, Positive space, Impulse,
Soft Line, Hard Line, Omni-channel vs Multi-channel, Visual merchandising, On life (forget the line) = Seamless
Experience
• Formalization refers to the degree to which jobs within the organization are standardized. If a job is highly
formalized, then the job incumbent has a minimum amount of discretion over what is to be done. Personalization
means the customer is a creator or cocreator of the content. (P 1 end)

• 4 elements of the retail mix are particularly useful for classifying retailers
• The variety and assortment of merchandise sold
• The level of customer service
• The price of the merchandise
• The type of merchandise and/ or services sold
• The different types of retailers ( Clothing : man/woman/children/ accessories)may not compete directly because
they appeal to different customer needs and offer different assortments and variety of merchandise and services
• Variety is the number of merchandise categories a retailer offers = breadth of merchandise
• Assortment is the number of different items in a merchandise category = depth of merchandise
• Each different item of merchandise is called an SKU (stock keeping unit) such as Ralph Lauren shirt, size medium