Ret531 - Chapter 01

Chapter 1
Perspectives on Retailing
Learning Objectives
Explain what retailing is and why it is undergoing

so much change today.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 1
What is Retailing, and Why is it Undergoing
so Much Change Today?
 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.**
 Any firm that sells a product or provides a service
to the final consumer is said to be performing the
retailing function.
Which is NOT a retailer????
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Nature of Change in Retailing**
1. E-tailing
2. Price competition
3. Demographic shifts
4. Store size
E-tailing**
 The great unknown for retail managers will be the

ultimate role of the Internet.
 Bricks-and-mortar retailers - Operate in a
physical building.
 With the growth of the web 2.0, the Internet has
become much more interactive and social in
nature. This has important implications for
retailers.
E-tailing**
 To combat e-tailing, bricks-and-mortar retailers

must give their customers more control over the
shopping experience.
E-tailing**
 E-tailing has caused a shift in power between

retailers and consumers.
Traditionally, the retailers’ control over pricing
information provided them the upper hand in most
transactions.
The information dissemination capabilities of the
Internet are making consumers better informed and
thus increasing their power when transacting and
negotiating with retailers.
E-tailing**
 Retailers must keep experimenting with various

strategies, both in-store and online because the
next generation of technology will change the
consumers’ expectations of what they demand
from their retailers.
Price Competition**
 Sam Walton forever changed the face of retailing

by realizing that most of any product’s cost gets
added after the item is produced.
 Walton made a major commitment to
computerizing Wal-Mart as a means to reduce
expenses.
 Costco, a retailer, seeks to boost store traffic by
getting shoppers to come in for a “super, low
price” on key products.
Demographic Shifts**
 Significant changes in retailing over the past

decade have resulted from changing demographic
factors such as:
The fluctuating birthrate, the growing importance of
the 70 million Generation Y consumers.
The move of Generation X into middle age.
The beginning movement of the baby boomer
generation into retirement.
The increasing number of immigrants.
 Successful retailers must:

become more service-oriented
offer better value in price and quality
be more promotion-oriented, and
be better attuned to their customers’ needs.
 Profit growth must come by either:

increasing same-store sales at the expense of the
competition’s market share or
by reducing expenses without reducing services to the
point of losing customers.
 Same-store sales - Compares an individual

store’s sales to its sales for the same month in the
previous year.
 Market share - Retailer’s total sales divided by
total market sales.
Store Size**
 As stores increase in size the retailer often

employs a scrambled merchandising strategy.
 Scrambled merchandising - Exists when a
retailer handles many different and unrelated
items.
It is the result of the pressure being placed on many
retailers to increase profits.
Store Size**
Retailers realized that having supersized stores
increased several major costs:
Rent
Inventory costs, and
Labor costs.
Two retail formats that have recently seen a
significant decrease in average store size and a
decrease in number of stores are:
Department stores and
Category killers.
Store Size**
 Category killer - Retailer that carries such a large

amount of merchandise in a single category at
such good prices that it makes it impossible for
the customers to walk out without purchasing
what they need, thus killing the competition.
The Retail Mix (the 6Ps)

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Chapter 1

Explain what retailing is and why it is undergoing

 The great unknown for retail managers will be the

 To combat e-tailing, bricks-and-mortar retailers

 E-tailing has caused a shift in power between

 Retailers must keep experimenting with various

 Sam Walton forever changed the face of retailing

 Significant changes in retailing over the past

 Successful retailers must:

 Profit growth must come by either:

 Same-store sales - Compares an individual

 As stores increase in size the retailer often

 Category killer - Retailer that carries such a large

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