Retail Management Principles

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An Introduction to Retailing

Retailing consists of those business activities involved in the sale of goods/services to consumers. It is the final stage in the distribution process.

What is a Retailer?

– Holder of inventory

– Provider of goods/services – Provider of employment – Provider of value – Provider of experience Channel of Distribution

Manufacturer  Wholesaler  Retailer  Consumer Relationships between Retailers and Suppliers

– Exclusive Distribution: Suppliers make agreements with a few retailers

 Smooth relations

 Maintains an image

– Intensive Distribution: Suppliers make agreements with as many retailers as possible

 Poor relations

 Maximises suppliers’ sales

– Selective Distribution: Combination of exclusive and intensive

Relationship Retailing is establishing and maintaining long-term bonds with consumers.

Value is the view of all the benefits received from a purchase.

A Value Chain is a collection of benefits to consumers through a channel of distribution.

– Store location – Retailer’s image – Personnel – Product – Price

A Retail Brand is a name or symbol which intends to differentiate a retailer from other competitors.

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Retail Strategy

A Retail Strategy is the overall plan of action that guides a retailer.

Benefits of Strategic Retail Planning

– Provides thorough analysis of the environment (legal, economical, competitive) – Outlines goals

– Determines differentiation from competitors – Helps avoid crises

– Identifies consumers Strategic Examples

– Location – Technology – Merchandise – Brand

– Shopping experience Elements of a Retail Strategy

– Situation Analysis

 Organisational Mission: Retailer’s commitment to a unique type of business

 Ownership and Management: Sole Proprietorship/Partnership/Corporation and Centralised/Decentralised

 Goods/Services: Must match personal abilities and financial resources – Objectives

 Sales/Profit: Growth, stability and market share

 Satisfaction: Satisfy stakeholders (customers, suppliers, employees)

 Image: Mass merchandising (retailers offer a wide merchandise selection). Niche retailing (retailers identify specific customer segments)

– Target Market

 Mass Marketing: Focus on a broad range of consumers

 Concentrated Marketing: Focus on one specific consumer group

 Differentiated Marketing: Focus on two or more consumer groups – Control

 Performance Review

 Evaluation

 Retail Audit

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Retail Institutions by Ownership – Structure of the Retail Industry A Retail Institution is the basic structure of a business.

– Retail Formats

 Store Front (Shopping Centre)

 Direct (Catalogue)

 Phone/TV Sales

 Multi-Channel (Combination of These) Independent Retailers

An Independent retailer owns one retail unit.

– Advantages

 Flexibility in selecting structure, strategy and location

 Centralised control

 Consistency as one store is operated – Disadvantages

 Lack of bargaining power –buy in small volumes

 Labour intensive operations – lack of technology

 Over-dependence on owner Chain Retailers

A Chain retailer operates multiple retail units under common ownership.

– Advantages

 Bargaining power – buy in high volumes

 Cost efficiencies – buy directly from manufacturers

 Reduced costs – technology is used – Disadvantages

 Limited flexibility – new store locations are hard to find

 Higher investment costs – multiple leases

 Complex managerial control – no control over each branch Store-Based Strategy Mix

A Strategy Mix is a firm’s particular combination of:

– Location – Operations – Customer service – Pricing methods – Promotional methods

A Destination retailer is where consumers view this retailer as dominant enough to become loyal to it.