MKT 320 Retailing Bundle
MKT 320 Retailing Bundle MKT 320
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This 70 page Bundle was uploaded by Jenna Hochman on Friday February 6, 2015. The Bundle belongs to MKT 320 at University of Miami taught by in Fall2014. Since its upload, it has received 1287 views.
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Date Created: 02/06/15
Class 1 History of WalMart Video a Rise of the Discount Store 0 Department stores were the most popular form of retail until 1960 when less full service was required and there was an enhancement in the trusting of name brands b Retail Strategy identi es the target markets toward which the retailer will direct its efforts the nature of the merchandise and services the retailer will offer to satisfy the needs of the target market and how the retailer will develop unique assets that enable it to achieve longterm advantage over its competitors WalMart provides limited service low prices and a broad assortment o WalMart s original model was to build a distribution center in a rural area and then build retailers around it c Success WalMart s success comes from strong cost advantage over competition overhead is about 22 of sales and because they bene t from rst mover advantage there is no more room for anyone else 0 Overhead the ongoing expense to keep a company in production eg rent 0 First Mover Advantage the theory that once a consumer is there no one else can enter the market 0 Building distribution centers in rural areas with stores around it strong cost advantage d Criticism from Local Merchants People complain about extensive foreign sourcing low wages for a company that size substandard health insurance antiunion sexism political pressure and local merchants can t compete e How to Compete Jurisdiction is restricting building of WalMart in certain locations 0 Extreme value stores can compete because there is no market leader in dollar stores 0 Category specialists can compete because they focus on one type of good eg Home DepotBest Buy Mom Pop stores can compete by advertising their customer service which can t be duplicated f Opportunities International expansion g Threats ll Chapter 1 Category specialists a De nition b Myths Retailing the set of business activities that adds value to products and services sold to consumers for their personal or family use Retailer a business that sells products andor services to consumers for their personal or family use 0 Supply Chain a set of rms that make and deliver goods and services to consumers Good in retail right now sales have never been higher technological advances makes products cheaper opportunities for entrepreneurs arose after the recession global possibilities make the world appear to be smaller Problems in retail right now people are spending less time shopping belief that there are too many physical stores web uncertainty retailers don t know how to utilize the internet poor customer service Only tangible goods Involves a store Must be a quotretailerquot c Integration Vertical Integration a rm performs more than one set of activities in the channel eg retailer engages in wholesaling activities by operating its own distribution centers to supply its stores Backward Integration type of vertical integration where a retailer performs some wholesaling and manufacturing activities eg operating warehouses or designing privatelabel merchandise Forward Integration type of vertical integration where a manufacturer undertakes retailing and wholesaling activities eg Apple operates its own retail stores d Functions 0 Providing Assortments 0 Bulk Breaking Retailers offer products from manufacturers and wholesalers to individual consumers and households 0 Wholesalers buy and sell merchandise in large quantities from manufacturers and then resell the merchandise usually in smaller quantities to retailers 0 Holding Inventory a major valueproviding activity performed by retailers that provides the products when consumers want them 0 Provide Service e Special Characteristics of Retailing 0 Average amount of transaction is lower than at a manufacturer s Unplanned or impulse purchases cause chaos There s usually a visit involved f Competition 0 lntratype Competition competition between the same type of retailers eg department store vs department store Scrambled Merchandising retailers offer merchandise not typically associated with their type of store 0 Scrambled merchandising increases intertype competition retailer that sells something unexpected o lntertype Competition competition among retailers that sell similar merchandise using different types of retail outlets eg drug and department stores III BuildABear Case and Video a Is it a fad In 19705 the purchasing power of ages 612 doubled In 19805 the purchasing power of ages 612 doubled In 19905 the purchasing power of ages 612 tripled People pay more for products that have emotional attachment eg jewelryperfume Fad a large amount of sales for a short period of time 0 There will always be a new young generation and as the older generation fades out it will pass down to younger kidssiblings b Target Customer 0 Children ages 612 but has expanded because the generation didn t stop coming c Repeat Visit Strategies Frequent shopping programs coupons 0 Update merchandise so that the customers want new things 0 Events birthdays for both the bear and the customer d Human Resource Management is Critical 0 Sales representatives must be child friendly and patient Class 2 l Yum Brands Video Taco Bell Pizza Hut KFC Long John Silvers AampW All American Food a Bene ts of the 3 Major Restaurant Segments 0 Fine Dining eg steak houses higher price point full service dining experience 0 Casual Family Dining eg Olive Garden more relaxed less service moderate prices 0 Quick Service eg McDonalds fast great value reasonable prices b How quotThink Outside the Bunquot Reinforces Taco Bell Reminds you that it is Mexican inspired and uses humor c Employee Satisfaction Measures 0 One system is in place for all restaurants to train employees and then a rating system is in place d CoBranding MultiBrandingCoBranding combines two of Yum Brands restaurants into one space for convenience and value to market to several submarkets o This is the biggest innovation since the drivethru Preferred 6 to 1 by customers over single branding e Growth Strategy Recommendations 0 Include healthy foods 0 Breakfast items 0 lnternationalexpansion ll Chapter 2 a Retail Mix type of merchandise NAICS variety assortment SKU Retail Mix a set of decisions retailers make to satisfy customer needs and in uence their purchase decisions 0 Retail mix includes location merchandise management pricing customer service store design and display communication mix NAICS collects data on business activity in each country Variety Breadth of Merchandise the number of merchandise categories a retailer offers Assortment Depth of Merchandise the number of different items offered in a merchandise category 0 Each different item of merchandise is called a stockkeeping unit SKU b Food Retailers Conventional Supermarkets a large selfservice retail food store offering groceries meat and produce as well as some nonfood items such as health and beauty aids and general merchandise carry about 30000 SKUs o Differentiating their offerings by emphasizing fresh perishables targeting green and ethnic consumers providing better value with privatelabel merchandise and providing a better shopping experience 0 Offering more fair trade Fair trade the practice of purchasing from factories that pay workers a living wage considerable more than the prevailing minimum wage and offer other bene ts such as onsite medical treatment Limited Assortment Supermarket Extreme Value Food Retailers carry about 1500 SKUs eg Save ALot and ALDI offer one or two brands and sizes one of which is a store brand 0 High Low Pricing couponing eg WinnDixie gives cards 0 EDLP everyday low pricing less coupons eg Publix Supercenters large stores 160000200000 sq ft that combine a supermarket with a fullline discount store eg Kroger and Sears provide a onestop shopping experience Hypermarkets large 160000200000 sq ft combination of food and general merchandise stores carry a larger portion of food items than supercenters and have greater emphasis on perishables fewer SKUs than supercenter Warehouse Club 100000150000 sq ft retailers that offer a limited and irregular assortment of food and general merchandise with little service at low prices for ultimate consumers and small businesses can offer low prices because they use lowcost locations have inexpensive store designs and offer little customer service typically in lowrent districts Convenience Stores 30005000 sq ft provide a limited variety and assortment of merchandise at a convenient location generally charge higher prices than supermarkets c General Merchandise Retailers Department Stores retailers that carry a broad variety and deep assortment offer customer services and organize their stores into distinct departments for displaying merchandise 0 Soft Goods have a shorter lifespan eg cosmetics clothing bedding 0 Hard Durable Goods manufactured items that are expected to last several years eg appliances furniture consumer electronics To deal with their eroding market share department stores are increasing the amount of exclusive merchandise they sell increasing their use of privatelabel merchandise and expanding their multichannel presence FullLine Discount Stores retailers that offer a broad variety of merchandise limited service and low prices offer private labels and national brands Category Specialists category killers bigbox stores that offer a narrow but deep assortment of merchandise 0 BigBox Stores large limited service Specialty Stores concentrate on a limited number of complementary merchandise categories and provide a high level of service 0 Thrift Stores retailers that sell secondhand or used merchandise merchandise is donated and proceeds go to charity o Consignment Shops stores that accept used merchandise from people and pays them after it is sold Drugstores specialty stores that concentrate on health and beauty care products Extreme Value Retailers small discount stores that offer a broad variety but shallow assortment of household goods health and beauty care products and groceries OffPrice Retailers offer an inconsistent assortment of brand name merchandise at a signi cant discount off the manufacturers suggested retail price eg Marshalls Offprice retailers are able to sell brand name and designerlabel merchandise at 2060 lower than the manufacturer s suggested retail price because of their unique buying and merchandising practices 0 Closeouts endofseason merchandise that will not be used in the following seasons 0 lrregulars merchandise with minor mistakes in construction 0 Outlets offprice retailers owned by manufacturers or retailers 0 Flash sales each day at the same time members receive an email that announces the deals available d Service Retailers primarily sell services rather than merchandise lntangibility Simultaneous Production and Consumption Pedshathy lnconsistence e Types of Ownership Independent Single Store can tailor their offerings to their customers needs Retail Chain a company that operates multiple retail units under common ownership and usually has centralized decision making for de ning and implementing its strategy can effectively negotiate lower prices for merchandise and advertising because of their larger size Franchise contractual agreement in which the franchisor the company sells the rights to use its business trademark service mark or trade name or another commercial symbol of the company to the franchisee for a onetime franchise fee and an ongoing royalty fee typically expressed as a percentage of gross monthly sales lll Retailing In India a Appeal of Hypermarkets to Consumers convenience comfort and sanitary reasons There is a gross disparity of income in India High growth rate 8 Neighborhood markets known as karans have a high waste percentage 50 of products aren t sold Hypermarkets provide a one stop shop convenient displays air conditioning and cleanliness b 500 Billion good or bad The country wants to protect local businesses Government invests in its own success with 500 billion to improve the infrastructure c Changes in the Indian Consumer Class 3 54 of Indian population is under the age of 25 l eBay and Online Auctions Video a Classi cation RetailerVendorMall Operator Similar to a malloperator that facilitates between buyers and sellers b Success 0 Removed from ugly aspects of retail eg overhead distribution and inventory c Competition Amazon and Yahoo 0 Law of externalities says when a total market expands the market leader eventually gets the majority of the growth d Fraud 0 Fraud is not the legal responsibility for eBay but could harm their reputation e Collectibles 0 Collectibles are hard to price and hard to nd ll Chapter 3 a MultiChannel Retailer using more than one channel to sell and deliver merchandise and services to consumers Prereqs 0 Develop assortments OOOOOO Manage people remotely Ef cient Distribution Presentation Ability to process electronically Full llment and returns Seamless integration using info systems b Store Channel 0 Bene ts 0 O 0000 O Browsing TouchingFeeling Products involves the ve senses Personal Service Cash Entertainment Immediate Grati cation Risk Reduction c Catalog Channel nonstore channel in which the retail offering is communicated to customers through a catalog mailed to customers 0 Bene ts 0 Convenience 0 Information their role is shifting from primarily generating sales to building a brand image and driving traf c to the Internet and physical stores 0 Safety no need to leave home d lnternet Channel facilitating rather than transformational technology fastest growing channel 0 Bene ts 0 O O O O Broad Selection vast number of alternatives retailers can make available to consumers without crowding their aisles or increasing their square footage satisfy customer demand for less popular stylescolorssizes Allow retailers to provide more information Collect more information about consumer shopping to evaluate Personalization live chats Retailers can enter new markets economically without having to build new stores 0 Types of Merchandise no touchfeel gifts travel and banking Risks privacy spam security 0 Reasons for Retailers to Go Online 0 Overcoming limitations of an existing format O O O 0 Share of wallet Study consumer shopping behavior Increase market presence especially brand name Strategic Advantage e Prereques for Multichannel Must be able to have a variety of assortments Must have the ability to manage people remotely 0 Must have an ef cient distribution system 0 Must be able to present merchandise visually Must have the ability to process electronically Must have an ef cient system of ful llment and returns 0 Ful llment getting items out on time 0 Must have seamless integration using information systems f Channel Migration customers gather information from one channel and then buy from a channel hosted by a competitor Showrooming a consumer goes into a store to learn about different brands and products and then searches the Internet for the same product sold at a lower price g Airport Retailing Facts 3 million passengers daily in the US 1 million employees 6 billion a year 0 Features 0 00000 lll Laduree Case Large group of shoppers with disposable incomes Captive audience Higher rents quotI forgotquot merchandise Longer hours Tighter security a Target Market and Retail Strategy in US 0 High income well educated Fashion forward buyers 0 Privately owned in the US 0 Secret recipe b Key Steps to Enter US c Own vs Franchise Franchise in high risk places currency uctuations and political instability 0 Some countries require franchises o Franchises know location better d Ideal Formats and Locations in US 0 Specialty store 0 Pop up store Upscale malls Stores within upscale department stores Merchandised kiosks in an airport e Online 0 Could ship from Switzerland and open a pastry lab in the US Class 4 L Census a Baby Boomers 0 Who are they 19461964 about 75 million people had a lot of babies to cause a spike in baby products everyday in US 10000 people turn 65 years old individualists 75 are white non hispanic value leisure are uni ed by the fact that they all went through the Vietnam War and Civil Rights movement 0 Characteristics individualistic leisure time is important self suf cient concerned with maintaining youth 0 How will their aging affect retailers Health care pharmaceuticals plastic surgery nursing homes traveltourism and nancial advisorsretirement planning are all affected 0 Strategies sell nostalgia sell natural products rst generation to recognize environment sell youth and tness b Generation X 0 Who are they 19651978 about 1819 million people decrease in birth rate diverse latchkey kid both parents work rst generation raised on advertising less education by 1 year of college than the Boomers Strategies do not rush them to buy present a lot of options and product information use technology when presenting c Generation Y 0 Who are they 19791994 about 50 million people respike in birthrate 67 white nonhispanic but by 2050 under 50 will be white nonhispanic minority uni ed by the fact that the Internet makes the world smaller greenenergy ef cient generation will be wealthiest generation 0 Strategies Get young people involved in the store both through work and experience conscious of environment honest in advertising get stores involved in community service tie in sports and music ll Chapter 4 a Buying Process steps consumers go through when buying a product or service 0 Need recognition consumer notices an unsatis ed need 0 Information search customers seek information about retailerschannelsproducts 0 Internal Sources information in a customer s memory 0 External Sources information provided by a host of sources The amount of information search is affected by characteristics of the individual customer and aspects of the market and buying situation in which the purchase is made Marketplace and situational factors affecting information search the number of competing brands and retail outlets and the time pressure under which the purchase must be made 0 Evaluation of alternatives 0 Purchasing the merchandise Postpurchase behavior 0 Satisfaction postconsumption evaluation of how well a store or product meets or exceeds customer expectations Postpurchase evaluation becomes part of the customer s interal information and affects store and product evaluations and purchase decisions b Types of Buying Decisions 0 Extended Problem Solving a purchase decision process in which customers devote considerable time and effort to analyze their alternatives 0 Financial Risk customers purchase an expensive product or service 0 Physical Risk customers feel that a product or service may affect their health or safety 0 Societal Risk customers believe a product will affect how others view them Limited Problem Solving a purchase decision process involving a moderate amount of effort and time o Impulse Buying a buying decision is made by customers on the spot after seeing the merchandise Habitual Decision Making a purchase decision process involving little or no conscious effort or time 0 Brand Loyalty customers like and consistently buy a speci c brand in a product category 0 Retailer Loyalty customers like and habitually visit the same retailer to purchase a type of merchandise c Social Factors Affecting Behavior Family the majority of items we buy when we move away will be the same as the ones we use in our parent s homes Reference Groups includes one or more people whom a person uses a basis of comparison for beliefs feelings and behaviors people we identify with for feelingsbeliefsbehaviors Culture the meaning beliefs morals and values shared by most members of a society 0 Subculture Economy when the economy is poor people have greater level of uncertainty and risk d Market Segmentation a retail market segment is a group of customers who are attracted to the same retail mix because they have similar needs Criteria customers in the segment must have similar needs seek similar bene ts and be satis ed by a similar retail offering and those customers needs must differ from the needs of customers in other segments 0 Actionable the retailer should know what to do to satisfy needs for the consumers in the segment o Identi able the retailer is able to determine which customers are in the market segment to help know the segment s size and the consumers to whom the retailer needs to target its communications and promotions o Reachable retailer can target promotions and other elements of the retail mix to consumers in the segment 0 Substantial large enough market to having signi cant buying power Approaches 0 Geographic groups consumers according to where they live 0 Demographic groups consumers on the basis of easily measured objective characteristics 0 Lifestyle psychographics groups people by how they livehow they spend their time and moneywhat activities they pursueattitudes and opinions about the world in which they live in o Bene t group customers seeking similar bene ts lll Staples a Factors in multichannel success 0 Existing experience distribution infrastructure high customer service leads to strong branding understanding of target market being aware of cannibalism eat your own sales b Advantages and Disadvantages of kiosks Advantages more SKU options so you can reduce store inventory Disadvantages convince customers to use kiosk rather than go to another retailer sales people don t get commission from transaction c SKU s in stores vs internet 0 You determine if an item is sold online or in the store by complexity of the item popularity of the item pro tability d Staples Copy and Print Centers Allows customers to order print jobs and still get help from instore specialists can be adapted to be small enough to be placed away from the stores Class 5 l Retailer Plan Barnes and Noble a Mission Statement 0 Current type of business bookstore Future type of business digital coffee shop social area where people can download books on iPads Customers baby boomers and generation x browse but generation y go into store with purpose looking for one book Capabilities Assets strong online presence connected to Starbucks and Nook appeals to a wide audience knowledgeable staff well known store 0 Statement we service the leisure time book and media needs of the baby boom and gen x generations in the manner that utilizes partnerships online and store presence educated staff wide variety of selection and remain top of mind awareness b Situation Audit 0 Market Factors 0 Size of market large 0 Growingmaturingdeclining declining 0 Seasonal time of success back to school summer vacations Competition 0 Barriers to entry brand loyalty brand awareness partnerships 0 Competitive rivalry onlineamazon brick and mortarsmall coffee shopslibraries Environmental Factors 0 Technology opens a new market and increases competition while declining the original model 0 Economic detrimental people turn to the library Regulatory agencies future education policies 0 Social environmental trend to go green and conserve paper 0 Class 6 l Potbelly Sandwich Works Video 0 Product made to order sandwiches Price one price for all sandwiches Place average 2200 sq ft 0 Promotion event promotions national sandwich day a Growth Strategy 0 Market development and market expansion 0 One location in a city and then look to grow if it is successful b Positioning Strategy 0 Young urban professionals who want quick tasty food at a good price c External Opportunities 0 Places where people are time compressed urban areas 0 Take part in urban redevelopment since some urban areas are quotroughquot d External Threats Committing to urban redevelopment makes you really involved take on the problems of the urban area Pet Economy Video a Why Americans Spend So Much on Pets 0 Americans spend 41 billion on pets per year and that s expect to increase to 52 billion per year in the next 5 years 0 Many people look at animals like members of the family 0 Many people are emotionally attached to pets b Future Products and Services 0 Pet foods that look like human snacks Kennels are being remarketed as pet hotels 0 Dog spas Dog poop pick up services Chapter 5 a Retail Strategy a statement identifying the retailer s target market the format and resources the retailer plans to use to satisfy the target market s needs and the bases on which the retailer plans to build a sustainable competitive advantage 0 Target Market segment that retailer uses its resources towards 0 Retail Market a group of consumers with similar needs and a group of retailers that satisfy those needs using a similar retail channels and format Retail Format describes the nature of the retailer s operations that it will use to satisfy the needs of its target market retail mix types of merchandiseservices offered price advertising store design visual merchandising location Sustainable Competition Advantage an advantage that the retailer has over its competition that is not easily copied by competitors and thus can be maintained over a long period of time o Magni cent Seven customer loyalty location human resource management distribution and information systems unique merchandise vendor relations customer services b Growth Strategies Market Penetration same customers same format involve either attracting new customers from the retailer s current target market who don t patronize the retailer currently or devising approaches that get current customers to visit the retailer more often andor buy more merchandise on each visit eg opening more stores in the target market andor keeping existing stores open for longer hours 0 CrossSelling sales associates in one department attempt to sell complementary merchandise from other departments to their customers Market Expansion new customers same format Retail Format Development same customers new format Diversi cation new customers new format c Strategic Retail Planning Process set of steps a retailer goes through to develop a strategy and plan describes how retailers select target market segments determine the appropriate retail format and build sustainable competitive advantages De ne the business mission 0 Mission Statement a broad description of a retailer s objectives and the scope of activities it plans to undertake de nes the general nature of the target segments and retail formats on which the rm will focus Conduct a SWOT analysis o SWOT Analysis involves an analysis of the retailer s internal environment strengths and weaknesses and external environment opportunities and threats The attractiveness of a target market in which a retailer is involvedconsidering is affect by the size of the market market growth cyclicality of sales and seasonality 0 Identify strategic opportunities 0 Evaluate strategic opportunities 0 Establish speci c objectives and allocate resources 0 Develop a retail mix to implement the strategy 0 Evaluate performance and make adjustments IV Harrod s of London a Success in Comparison to Others 0 Unique group of customers high net worth customers 0 Runs the network itself inhouse Bundles advertising with other promotional opportunities 0 Both capability and incentive to maker sure that its working properly b Consumer Product Manufacturers Want to Advertise Upscale audience is difficult to reach and look for more of an entertainment experience c Positives of Offering Digital Network 0 Extra advertising revenue 0 Additional sales d Negatives of Offering Digital Network 0 Not for everyone 0 Store image must be consistent with advertising Class 7 McDonalds in India Video a Think Global 0 Brand name 0 Reputation 0 Information and distribution systems 0 Buying power b Act Locally Merchandise Sourcing 0 Locations 0 Pricing c Adapt lnto Indian Marketplace Sensitive to dietary restrictions Developed an infrastructure in India 0 Use local suppliers and local managers rather than staf ng with Americans ll Chapter 6 a Objectives 0 Financial Objectives 0 ROA pro t generated by the assets possessed by the rm return on assets net profit margin X asset turnover 0 ROI return on investment Societal Objectives goal is to make the world a better place 0 Personal Objectives concepts such as status and respect b Formulas Net Sales total revenues received by a retailer that are related to selling merchandise during a given time period minus returns discounts and credits for damaged merchandise Net Sales 2 gross sales promotional allowances customer returns 0 Gross Margin Gross Pro t indicates how much pro t the retailer is making on merchandise sold without considering the expenses associates with operating the store and corporate overhead expenses Gross Margin net sales cost of good sold 0 Operation Expenses cost incurred during normal course of business overhead costs associated with normal business operations 0 Net Profit Margin 2 gross margin operating expenses extraordinary expenses inter Assets economic resources owned by a retailer as a result of past transactions c Ratios total debt o Debt EquityRatioz measures how much totalequity money a company can safely borrow over long periods of time a high ratio means the retailer faces greater risk and more potential for bankruptcy short term assets short term liabilities short term assets 0 Quick Ratio inventory same as short term liabilities current ratio minus inventory d Planning TopDown Planning corporate decisions goals get set at the top of the organization and are passed down to the lower operating levels 0 BottomUp Planning store level decisions lower levels in the company developing performance objectives that are aggregated up to develop overall company objectives e Measures 0 Input Measures resourcesmoney used by a retailer to achieve results 0 Output Measures results of retailers investment decisions 0 Productivity Measures ratio of outputs to inputs designed to track how effectively retailers use their resources what return they get on their investments in inputs 0 Current Ratio lll Target a Role of Consumer Expectations 0 Customers understand that Target will offer limited time partnerships with top designers which creates senses of urgency exclusivity and excitement b Models 0 New Model put storewithinastore which bene ts both companies through brand recognition and some cases have complimentary goals c Ability to Attract Top Designers as Partners 0 Target shoppers expect new designer brands and so the designers are attracted to Target Unit 2 Notes Chapter 7 l Types of Retail Locations a Unplanned Locations do not have centralized management that determines what stores will be in a development where the speci c stores will be located and how they will be operated Freestanding Sites retail locations for an individual isolated store unconnected to other stores 0 Advantages include convenience for customers high vehicular traf c and visibility to attract customers driving by modest occupancy cost fewer restrictions on signshoursmerchandise than planned loca ons o Disadvantages include limited trade area no other nearby retailers higher occupancy costs than shopping centers and have little pedestrian traf c Trade Area the geographic area that encompasses most of the customers who would patronize a speci c retail site 0 Outparcels freestanding stores that are not connected to other stores in a shopping center but are located on the premises of a shopping center typically in a parking area freestanding retailers that are next to other retailers Urban Locations 0 Central Business District CBD the traditional downtown nancial and business area in a city or town eg Rodeo Drive 0 Urban Decay the process of a previously functioning city or part of a city falling into disrepair 0 Inner City a low income residential area within a large city tend to have a bad reputation due to urban decay in 19505605 0 Main Street traditional downtown shopping area in smaller towns and secondary shopping areas in large cities and their suburbs 0 Main street locations do not draw as many people as the CBD because fewer people work in the area and the fewer stores generally mean a smaller overall draw to the area b Planned Retail Locations Shopping Center a group of retail and other commercial establishments that are planned developed owned and managed as a single property 0 The shopping center group can place restrictions on the operating hours signage and even the type of merchandise sold in the stores 0 Shopping centers attract more customers by combining many stores at one location ConvenienceNeighborhoodCommunityStrip Shopping Centers attached rows of openair stores with onsite parking usually located in the front of the store 0 Strip shopping centers can offer lower prices because of the lower occupancy cost and their customers can drive up to the door 0 Typically have a grocery storedrug store anchor Power Centers shopping centers that consist primarily of collections of bigbox retail stores large anchors grouped together eg Dadeland North Center Target Michaels Best Buy 0 Power centers often consist of a collection of freestanding unconnected anchor stores and only a minimum number of smaller specialty store tenants Shopping Mall enclosed climatecontrolled lighted shopping centers with retail stores on one or both sides of an enclosed walkway 0 Regional Malls lt800000 square feet 0 SuperRegional Malls gt800000 square feet 0 Advantages Attract many shoppers and have a large trade area because of the number of stores and the opportunity to combine shopping with an inexpensive form of entertainment generate a lot of pedestrian traffic inside the mall customers don t have to worry about weather 0 Disadvantages mall occupancy costs are higher mall management might not be ideal competition within shopping centers can be intense and the growing sales through the Internet channel is cannibalizing sales through the store channel 0 Lifestyle Centers shopping centers that have an openair con guration of specialty stores entertainment and restaurants with design ambience and amenities such as fountains and street furniture eg Shops of Sunset 0 Many lifestyle centers are located near higher income areas 0 Typically don t have an anchor store MixedUse Developments MXDs combine several different uses into one complex including residential hotel recreation or other functions 0 Outlet Centers shopping centers that combine mostly manufacturers and retailers outlet stores c Nontraditinoal Locations PopUp Stores stores in temporary locations that focus on new products or a limited group of products 0 Popup stores are attractive to retailers with highly seasonal sales 0 StoreWithinAStore involve an agreement in which a retailer rents a part of the retail space in a store operated by another independent retailer eg Starbucks inside Barnes and Noble 0 The store within gets an excellent location with high pedestrian traffic of customers in its target market and the host retailer generates increased revenue from the space and enhances its brand image 0 Merchandise Kiosks small selling spaces typically located in the walkways of enclosed mallsairportslobbies o Kiosks are an opportunity for mall operators to generate rental income in otherwise vacant space and offer a broad assortment of merchandise for visitors ll Strategy 0 More convenience with strip malls More comparison shopping with shopping malls More specialty with power centers and freestanding locations lll Social and Legal Considerations 0 Urban Sprawl the increased expansion of residential and shopping center development in suburban and rural areas outside of their respective urban centers 0 Opposition to BigBox Retailers believe bigbox stores sell merchandise at lower prices that drive local retailers out of business do not provide a living wage for employees hire parttime workers to avoid providing health insurance and achieve low prices by manufacturing outside the US thus contributing to US unemployment Zoning used to regulate land uses in speci c areas to prevent any interference with existing uses by residents or businesses as well as encourage the preservation of a community s sense of identity 0 Building Codes legal restrictions that specify the type of buildingsignsizeparking lot that can be used at a particular location Chapter 8 l Evaluating Areas Metropolitan Statistical Area MSA a core urban area containing a population of more than 50000 inhabitants together with adjacent communities that have a high degree of economic and social integration with the core community 0 Micropolitan Statistical Area somewhat removed from larger US cities often by up to 100 miles 10000 people ll Considerations in Evaluating Store Locations a Factors 0 Affecting Locating Area economic conditions overall economy of society competition strategic t and cost Affecting Number of Stores in Area economic scale and cannibalization b Site Characteristics 0 Traffic ow past the site and accessibility to the site 0 Traffic Flow the number of vehicles and pedestrians that pass by the site 0 Accessibility the ease with which customers can get into and out of the site 0 Natural Barriers eg riversmountains 0 Arti cial Barriers eg railroad tracks 0 Parking 0 Congestion an excess level of traf c that results in the customer delays Visibility refers to customers ability to see the store from the street Adjacent tenants locations with complementarycompeting adjacent retailers have the potential to build traffic 0 Cumulative Attraction a cluster of similar and complementary retailing activities will generally have greater drawing power than isolated stores that engage in the same retailing activities 0 Restrictions and costs lll Trade Area Characteristics a Characteristics of the Trading Area 0 Trade Area a contiguous geographic area that accounts for the majority of a store s sales and customers 0 Primary Trading Area the geographic area from which the shopping center or store site derives 50 70 of its customers 0 Secondary Trading Area the geographic area of secondary importance in terms of customer sales generating about 2030 of the site s customers 0 Tertiary Trading Area Fringe the remaining b Factors Affecting the Size 0 The boundaries of a trade area are determined by the store s accessibility natural and physical barriers level of competition nature of the merchandise solve the assortment offered and the location of alternative sources of the merchandise 0 Accessibility ease of accessability to go in and out lngress Latin word for entrance Egress Latin word for exit 0 Customers will drive larger distances for category specialists who offer a large choice of brands and products for which customers are engaged in comparison shopping 0 Destination stores have a large trade area because people are willing to drive further to shop there c Sources of Information 0 Census takers gather demographic information sexageethnicityeducationmarital status from every household in the US 0 Census Blocks an area bounded on all sides by visible roadsriversetc andor invisible county state boundaries features that is the smallest geographic entity for which census data are available 0 Block Group the smallest unit of analysis a collection of adjacent census blocks that contain BOO3000 people that is the smallest unit for the sample data 0 Geographic Information System GIS a system of hardware and software used to store retrieve map and analyze geographic data 0 A GIS includes the operating personnel and the data that go into the system 0 GIS data is identi ed with a coordinate system latitude and longitude that references a particular place on Earth IV Negotiating a Lease a Types of Leases Percentage Lease the most common lease where the rent is based on a percentage of sales and retailers typically pay a common area maintenance CAM fee based on a percentage of their gross leasable square footage FixedRate Lease most commonly used by community and neighborhood centers where a retailer pays a xed amount per month over the life ofthelease Chapter 9 l Objectives of Human Resource Management a HRM Uniqueness Labor costs are signi cant portion of total expense 0 Most customers have actual experience with the employee 0 HR advantages are hard to duplicate b HRM Performance Measures Retailers achieve nancial objectives by effectively managing location merchandise inventory channels employees and customers 0 Human resource management HRM is responsible for aligning the capabilities and behaviors of employees with the short and longterm goals of the retail rm HRM performance is measured in employee productivity turnover and engagement 0 Productivity the sales generated per employee 0 Turnover the number of employees who voluntarily leave theirjob divided by the number of positions in the rm 0 Engagement an emotional commitment by an employee to the organization and its goals beyond employee satisfaction ll Designing the Organization Structure 0 Organization Structure identi es the activities to be performed by speci c employees and determines the lines of authority and responsibility in the rm 0 The rst step in developing an organization structure is to determine the tasks that must be performed out of the categories of strategic management administrative management operations merchandise management and store management 0 Issues of HR include large number of part time employees thin pro t margins managing a diverse work force a Single Store Singlestore retailers have little specialization o Specialization the organizational structure in which employees are typically responsible for only one or two tasks rather than performing all tasks enables employees to develop expertise and increase productivity 0 Buyer the merchandise manager handles the advertising and promotion tasks as well as merchandise selection and inventory management task b National Retail Chain 0 Chief Executive Of cer CEO responsible for overseeing the entire organization 0 Senior Vice President SVP of Merchandising works with buyers and planners to develop and coordinate the management of the retailer s merchandise offerings and ensure that it is consistent with the rm s strategy 0 Merchandising Planners responsible for allocating merchandise and tailoring the assortment of several categories for speci c stores in a geographic area c Centralization and Coordination Structure identi es activities to be performed and lines of authorityresponsibility of the rm Centralization occurs when the authority for retailing decisions is delegated to corporate managers rather than to geographically dispersed managers 0 Retailers reduce costs when decision making is centralized in corporate management 0 Overhead is lowered the company can bargain for lower prices from suppliers by coordinating buying across geographically dispersed stores the best people can make decisions for the entire corporation and ef ciency is increased Decentralization occurs when the authority for decisions is assigned to lower levels in the organization Approaches to coordinate buying and selling 1 improving buyers appreciation for the store environment 2 making store visits and 3 assigning employees to coordinating roles lll Winning the Employee Talent War quotWinning the talent warquot applies to the idea that there aren t enough good workers in retail therefore you should have policies writtenenforced offer incentives bonuses and commission and create an organization culture where family is felt and traditions are passed on Organization Culture the set of values traditions and customs of a rm that guides employee behavior To build employee commitment 1 skill development in hiring and training 2 empowerment by transferring decision making authority to someone else 3 engage employees through reducing status difference promoting from within balancing career and family High turnover reduces sales and increases costs 0 Sales are lost because inexperienced replacement employees lack the skills and knowledge about company policies and merchandise to interact effectively with customers 0 Costs increase due to the need to recruit and train new employees Empowerment a process in which managers share power and decisionmaking authority with employees Flextime a job scheduling system that enables employees to choose the times they work Job Sharing two employees voluntarily are responsible for a job that was previously held by one person Glass Ceiling an invisible barrier that makes it difficult for minorities and women to be promoted beyond a certain level IV Legal Issues Chapter 10 Illegal Discrimination the actions of a company or its managers that result in members of a protected class being treated unfairly and differently from others Protected Class a group of individuals who share a common characteristic as de ned by the law Labor Relations Laws the process by which unions can be formed and the ways in which companies must deal with the unions Health and Safety Laws the employer is obligated to provide each employee with an environment that is free of hazards that are likely to case death or serious injury Sexual Harassment unwelcome sexual advances requests for sexual favors and other inappropriate verbal or physical conduct Perceptions of fairness are based on two perceptions distributive justice and procedural jusUce o Distributive Justice arises when the outcomes received are viewed as fair with respect to the outcomes received by others someone s perception of the result 0 Procedural Justice based on the fairness of the process used to determine the outcome someone s perception of the process I Creating Strategic Advantage a Strategic Advantage Supply Chain Management a set of activities and techniques rms employ to ef ciently and effectively manage the ow of merchandise from the vendors to the retailer s customers Effective supply chain management can provide a strategic advantage from increases in product availability and inventory turnover and produces a higher return on assets Effective supply chain management provides fewer stockouts and tailored assortments which translate to greater sales lower costs higher inventory turnover and lower prices markdowns for retailers o Stockout occurs when an SKU that a customer wants is not available 0 Rain Check when sale merchandise is out of stock a written promise to customers to sell them that merchandise at the sale price when it arrives ll Flow of Information a Information Flows Data Warehousing purchased data is collected at the point of sale and stored for later Universal Product Code UPC a blackandwhite UPC bar code containing a 13digit code that indicates the manufacturer of the item a description of the item information about special packaging and special promotions Pointof Sale POS the time when the information about the transaction is captured 0 Purchased data collected at the point of sale goes into a database known as a data warehouse Advance Shipping Notice ASN a document that tells the DC what speci cally is being shipped and when it will be delivered Electronic Data Interchange EDI the computerto computer exchange of business documents using a standardized format 0 To facilitate the adoption of EDI the retail industry agreed to use speci c symbols to delineate the purchase order the vendor s name the address the merchandise is being shipped to and so forth 0 Security concerns for EDI include authentication true to who you say you are authorization having the right to be there and integrity does data say the same through communication 0 Secure Policy the set of rules that apply to activities involving computer and communication resources that belong an organization b The Physical Flow of Merchandise Logistics 0 Merchandise ows from vendor gt DC gt stores 0 Logistics the aspect of supply chain management that refers to the planning implementation and control of the efficient ow and storage of goods services and related information from the point of origin to the point of consumption to meet customers needs tracking of merchandise from point of origin to point of consumption c Storing and CrossDocking CrossDocked items that are unloaded from the shippers truck and within a few hours reloaded onto trucks going to stores These items are prepackaged by the vendor for a speci c store such that the UPC labels on a carton indicate the store to which it is to be sent 0 Cross docking allows for cartons to only be in the DC for a few hours before they are shipped to the stores 0 Cross docking is an efficient way to get merchandise in a store without it staying in a warehouse for long 0 Break Pack Area the area in a distribution center where employees open large cartons and distribute their contents into smaller packages for delivery to stores lll System Design Issues a Pull and Push Supply Chains 0 Pull Supply Chain a supply chain in which requests for merchandise are generated at the store level on the basis of sales data captured by POS terminals 0 Point of purchase alerts the retailer that they are out of a product 0 Push Supply Chain merchandise is allocated to stores on the basis of forecasted demand 0 Knowledge of lack of products is done by historical selling In a pull supply chain there is less likelihood of being overstocked or out of stock because the store requests for merchandise are based on customer demand A pull approach increases inventory turnover and is more responsive to changes in customer demand and it becomes even more ef cient than a push approach when demand is uncertain and dif cult to forecast b Reverse Logistics Reverse Logistics the process of capturing value from andor properly disposing of merchandising returned by customers andor stores A reverse logistics system processes merchandise that is returned because it is damaged has been recalled is no longer sold to customers because its selling season has ended the merchandise was incorrectly sent to a store or directly to a customer the product has been discontinued or there is excessive inventory in stores or DCs A forward process sends goods from a few DCs to a vast number of storescustomers whereas a reverse process receives goods from all over and must consolidate them in one or a few receiving centers c Drop Shipping Drop Shipping Consumer Direct Ful llment a system in which retailers receive orders from customers and relay these orders to vendors the vendors then ship the merchandise ordered directly to the customer Drop shipping is particularly attractive for retailers that do not have DCs capable of ful lling individual orders from customers Drop shipping can lengthen delivery times and increase costs particularly for customers who order multiple items from different vendors d Catalog and Internet Orders DCs supporting nonstore channels are designed to receive about the same number of cartons from vendors as store channels but ship a very large number of small packages to customers Hubandspoke designs help with same daynext day deliveries by utilizing many geographically diverse smaller distribution centers supporting a larger one where the smaller ones are located closer to customers allowing for faster and cheaper shipping times for the retailer IV Collaboration Between Retailers and Vendors a VendorManaged Inventory 0 VendorManaged Inventory VMI an approach for improving supply chain ef ciency in which the vendor is responsible for maintaining the retailer s inventory levels 0 Bene ts of VMI lower retailers cost lower vendors cost in the long run reduce stockouts Reorder Point a level of inventory at which more merchandise is ordered VMI can reduce the vendor s and the retailer s costs 0 Vendor salespeople no longer need to spend time generating orders on items that are already in the stores and their role shifts to selling new items and maintaining relationships 0 The sharing of POS transaction data allows vendors to sell merchandise on consignment o Consignment the vendor owns the merchandise until it is sold by the retailer at which time the retailer pays for the merchandise Consignment selling provides an incentive for the vendor to pick SKUs and inventory levels that will minimize inventory and generate sales b CPFR 0 Collaborative Planning Forecasting and Replenishment CPFR the sharing of forecasts and related business information and collaborative planning between retailers and vendors to improve supply chain efficiency and product replenishment CPFR is a more advanced form of retailervendor collaboration that involves sharing proprietary information such as business strategies promotion plans newproduct developments and introductions production schedules and leadtime information V Radio Frequency Identi cation Devices a Bene ts of RFID 0 Radio Frequency Identi cation RFID a technology that allows an object or person to be identi ed at a distance by means of radio waves Chapter 11 Radio frequency identi cation devices are tags that transmit identifying information and are attached to individual items shipping cartons and containers RFID can hold more data than bar codes can update the data stored and the data on the device can be acquired without a visual line of sight RFID enables the accurate realtime tracking of every single product from manufacturer to checkout in the store The primary bene t of tagging individual items to retailers is to economically provide an accurate realtime measure of item inventory levels Pack Veri cation occurs after a worker has packed a case or carton usually just before sealing it a check of the contents of a carton before sealing it Ship Veri cation a check of the contents of a carton usually as cartons are being loaded on a pallet or truck I The CRM Process a Overview of the CRM Process Customer Relationship Management CRM a business philosophy and set of strategies programs and systems that focuses on identifying and building relationships with a retailer s valued customers CRM enables retailers to develop a base of loyal customers and increase its share of wallet 0 Share of Wallet the percentage of the customers purchases made from the retailer The objective of the CRM process is to develop loyalty and repeatpurchase behavior among a retailer s best customers Customer Loyalty customers are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronage o Loyal customers have an emotional bond with a retailer that is a personal connection CRM turns customer data into customer loyalty and repeatpurchase behavior through 1 collecting customer data 2 analyzing customer data and identifying target customers 3 developing CRM H CoHchng through frequentshopper programs and 4 implementing CRM programs Customer Shopping Data a Customer Database b c Privacy Customer Database the rst step in the CRM process the coordinated and periodic copying of data from various sources both inside and outside the enterprise into an environment ready for analytical and information processing contains all of the data the rm has collected about its customers and is the foundation for subsequent CRM activities The customer database should contain transactions customer contacts customer preferences and descriptive information o Transactions a complete history of the purchases made by the customer Customer Contacts a record of the interactions that the customer has had with the retailer Customer Preferences what the customer likes Descriptive Information demographic and psychographic data 0 O 0 Identifying Information Five approaches that storebased retailers use to overcome identifying customers are 1 ask customers for identifying information 2 connect Internet and store purchasing data 3 offer frequentshopper programs 4 use biometrics to identify customers 5 place RFID chips on merchandise FrequentShopper Programs Loyalty Programs programs that identify and provide rewards to customers who patronize a retailer Biometrics help identify customers and provide a cardlesscashless method of payment through the measurement of human characteristics a person s handfingerprintvoice o Biometrics results in faster checkout and the ability to target promotions o Biometrics reduces employee fraud and shoplifting Cookies small les stored on a customer s computer that identify customers when they return to a website therefore customers don t have to provide passwords Congress is considering new legislation on consumer privacy based on the principles of privacy by design simpli ed consumer choice and greater transparency 0 Privacy By Design encourage businesses to treat consumer privacy as their default setting thus shifting the responsibility for privacy protection from consumers to retailers 0 Simpli ed Consumer Choice develop ways that consumers can track their online activities 0 Greater Transparency improve consumer understanding of how consumer data are collected through better education and information Opt In the agreement that consumers own their personal information so retailers must get consumer to agree explicitly to share this personal information Opt Out consumers must explicitly tell retailers not to use their personal information lll Analyzing Data a Identifying the Best Customers Two objectives for analyzing the customer database are identifying the retailer s best customers and using analytical methods to improve decisions made by retail managers Customer Lifetime Value CLV the value of a customer is the expected contribution from the customer to the retailer s pro ts over their entire relationship with the retailer RFM Analysis a method used in catalog and Internet channels to determine customer segments that a retailer should target for a promotion or catalog mailing using the factors of how recently the customers in the segment made a purchase how frequently they make purchases and how much money they have spent b Retail Analytics 0 Retail Analytics applications of statistical techniques and models that seek to improve retail decisions through analyses of customer data 0 Data Mining an information processing method that relies on search techniques to discover new insights into the buying patterns of customers using large databases 0 Market Basket Analysis the data mining tools determine which products appear in the market basket that a customer purchases during a single shopping trip performed by a computer program counting the number of times two products get purchased at the same time 0 Market basket analysis can help provide insights into assortment decisions and promotions IV Implementing CRM Programs a Customer Pyramid 8020 Rule 80 of the sales or pro ts come from 20 of the customers 0 The Customer Pyramid platinum top 25 gold next 25 iron remaining 50 lead customers that cost retailers money 0 Platinum Segment segment composed of the customers with the top 25 CLVs customer lifetime value the most pro table and loyal customers who are typically not concerned with prices 0 Gold Segment Customers who buy a signi cant amount of merchandise from the retailer not as loyal as platinum and patronize some of the retailer s competitors b Customer Retention Personalization and community help retain customers and increase the share of wallet 0 Personalization personalized services 0 1to1 Retailing developing retail programs for small groups or individual customers 0 Retail Brand Community a group of customers who are bound together by their loyalty to a retailer and the activities the retailer sponsors and undertakes V Customer Conversion a Dealing With Unpro table Customers Customer Alchemy increasing the sales made to good customers converting iron and gold Chapter 12 customers into platinum customers same customers buying more of the same products Addon selling is used to achieve customer alchemy o AddOn Selling offering and selling more products and services to existing customers to increase the retailer s share of wallet with these customers same customers buying new products Approaches for getting the bottom tier customers out are 1 offering less costly services to satisfy the needs of lead customers and 2 charging customers for the services they are abusing Merchandise Management Overview Merchandise management activities are undertaken primarily by buyers and their superiors divisional merchandise managers DMMs and general merchandise managers GMMs 0 Merchandise Management the process by which a retailer attempts to offer the appropriate quantity of the right merchandise in the right place and at the right time so that it can meet the company s nancial goals Buyers must be able to anticipate what customers will want to buy and analyze sales data continually to make appropriate adjustments in prices and inventory levels Levels of merchandise management 1 merchandise group SVP manages them 2 department divisional management in charge and 3 SKU deal with size unit and color Retail buyers manage a portfolio of merchandise inventory and buy merchandise they think will be popular with their customers information gained through an information system a The Buying Organization Merchandise Group the highest classi cation level a group within an organization managed by the senior vice presidents of merchandise and responsible for several departments 0 Department the second level in the merchandise classi cation scheme which are management by divisional merchandise managers DMMs Classi cation the third level for categorizing merchandise and organizing merchandise management activities StockKeeping Unit SKU the smallest unit available for inventory control b Merchandise Category The Planning Unit Merchandising Category the basic unit of analysis for making merchandising management decisions an assortment of items that customers see as substitutes for one another 0 Advantages of merchandise category increased sales volume reduction of mark downs and more resources for buying opportunities 0 Negatives of quick inventory turn over decrease in sales and don t take advantage of quantity discounts Retailers typically manage merchandise at the category level but many supermarkets organize their merchandise management around brands or vendors Category Management an approach to managing merchandise that assigns one buyer or category manager to oversee all merchandising activities for the entire category 0 Category Captain the vendor that works with the retailer to develop a better understanding of consumer shopping behaviors create assortments that satisfy consumer needs and improve the pro tability of the merchandise category 0 Advantages to selecting category captains makes merchandise management tasks easier can increase pro ts vendors have superior information about a category than the retailers vendor s entire focus is on a speci c category while buyers are typically responsible for several categories 0 Negatives to selecting category captains the vendor could take advantage of its position ll Merchandise Planning Process a Types of Merchandise Management Planning Systems Staple Merchandise Basic Merchandise categories of merchandise that are in continuous demand over an extended time period 0 Continuous Replenishment merchandise planning system typically used for staple categories because their demand is very predictable Fashion Merchandise categories are in demand only for a relatively short period of time 0 Buyers for fashion merchandise have less exibility in correcting forecasting errors and typically do not have a chance to reorder additional merchandise after an initial order is placed 0 Seasonal Merchandise categories consisting of items whose sales uctuate dramatically depending on the time of year lll Forecasting Category Sales a Forecasting Fashion Merchandise Category 0 Buyers for fashion merchandise categories perform market research activities to help them forecast sales 0 Forecasting fashion merchandise is done through previous sales market research fashiontrend services and vendors themselves lnDepth Interview an unstructured personal interview in which the interviewer uses extensive probing to get individual respondents to talk in detail about a subject 0 Focus Group a small group of respondents interviewed by a moderator using a loosely structured format IV Developing an Assortment Plan a Category Variety and Assortment Assortment Plan the set of SKU s that a retailer will offer in a merchandise category in each of its stores and from its website 0 The assortment plan re ects the breadth and depth of merchandise that the retailer plans to offer in a merchandise category 0 Variety Breadth the number of different merchandising subcategories offered 0 Assortment Depth the number of SKUs within a subcategory V Setting Inventory and Product Availability Levels a Product Availability 0 Backup Stock Buffer Safety Stock the number of units in the model stock plan that determine product availability inventory you keep to make sure you don t run out of cycle stock 0 Product Availability Level of Support Service Level the percentage of demand for a particular SKU that is satis ed o If the backup stock is too low the retailer will lose salescustomers but if the backup stock is too high then nancial resources will be wasted on needless inventory Vl Establishing a Control System or Managing Inventory 0 The rst three steps in the merchandise planning process forecasting SKU and category sales determining the assortment plan and establishing the model stock quantify the buyer s sales expectations and service level 0 The fourth step in the merchandise planning process is to establish a control system for how the ordersdeliveriesinventory levelsmerchandise sales will evolve over time a Staple Merchandise 0 The SKUs in a staple merchandise category are continuously sold at the same amount and if the amount differs then the product can be sold during the following month Staple merchandise uses an automated continuous replenishment control system that monitors the inventory level of each SKU in a store and automatically triggers the reorder if a SKU falls below a predetermined level 0 Two Types of stock merchandise are cycle stock base and backup stock safetybuffer 0 Cycle Stock Base Stock inventory for which the level goes up and down due to the replenishment process inventory that you carry if you could estimate demand perfectly The retailer hopes to reduce the cycle stock inventory to keep its inventory investment low which can be done by reordering smaller quantities more frequently 0 Factors that determine the level of backup stock needed for an SKU include the product availability the retailer wants to provide the greater the uctuation in demand the more backup stock is needed the amount of backup stock needed is affected by the lead time from the vendor uctuations in lead time affect the amount of backup stock needed the vendor s ll rate affects the retailer s backup stock requirements 0 More backup stock is needed when the retailer wants to reduce the chances of a stockout and increase the availability 0 Lead Time the amount of time between the recognition that an order needs to be placed and the point at which the merchandise arrives in the store and is ready for sale 0 Fill Rate the percentage of SKUs received complete on a particular order from a vendor b Order Point and Order Quantity Order Point the amount of inventory below which the quantity available shouldn t go or the item will be out of stock before the next order arrives 0 Order point tells the buyer when the inventory level drops to a certain point so that additional merchandise can be ordered c OpentoBuy Systems VII OpentoBuy after the merchandise is purchased on the basis of the merchandise budget plan this system is used to keep track of the actual merchandise ows keeps track of merchandise in real time The opentobuy system compares the planned endof month inventory to the actual endof month inventory Analyzing Merchandise Management Performance a SelfThrough Analysis Types of analyses related to the monitoring and adjustment step are 1 sellthrough analysis 2 ABC analysis of assortments and 3 multiatribute analysis of vendors SellThrough Analysis compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reductions markdowns are required Sellthrough analysis provides an ongoing evaluation of the merchandise management plan compared with actual sales o The need for adjusting sellthrough analysis depends on experience with the merchandise in the past plans for featuring the merchandise in advertising and the availability of markdown money from vendors o Markdown Money funds that a vendor gives a retailer to cover lost gross margin dollars that result from markdowns b Evaluating the Assortment Plan and Vendors Videos 0 ABC Analysis identi es the performance of individual SKUs in the assortment plan breaks down SKUs into categories 0 A 5 of items that give 70 of sales 0 B 10 of items that give 20 of sales 0 C 65 of items that give the rest of sales 0 D items that have no sales remove or put on clearance ABC analysis is used to determine which SKUs should be in the plan and how much backup stock and resulting product availability are provided for each SKU in the plan 0 In an ABC analysis the SKUs the SKUs in a merchandise category are rankordered by several performance measures that reveals the general 80 20 principle I Mall of America a What environmental factors suggest that the concept would be successful 0 Must have a large global market currently has 13 counties surrounding it leading to 3 million people 0 Natural tourist area Minnesota is known for its lakes which brings 15 million tourists a year 8 million of which are from Minneapolis area 0 Consumer desire to combine shopping and entertainment What environmental factors suggest that the concept would be unsuccessful o Decline in importance of shopping malls Competition and hard to get inside Mall of America What were the primary challenges facing managers as they designed and built it 0 Money nding investors Authorization had to ght local politicians to build Designing the mall s architecture Logistics of bathroomstelephonesetc Advertising to attract people outside of Minnesota d From a retailer s perspective why locate there 0 Higher foot traf c e From a retailer s perspective why not locate there 0 High rent 0 People come for entertainment not to buy 0 Some nd it too large and intimidating ll Domino s Pizza in Mexico a How do they address cultural and societal differences 0 Adjust products and system for local tastes and preferences 0 Use consistent signage logos and colors 0 Select high traf c locations b What is their entry strategy and why has it worked 0 Mater franchising strategy by partnering with a huge local corporation that will do most of the work for them lll Suburban Regional Malls a SWOT analysis Strengths secure and safe protected from weather Weaknesses high rent old age of building 0 Opportunities renovation combine entertainment with shopping Threats interest rates over supply of retail space b Brief description of each type of store 0 Neighborhood center fooddrugstore anchor in a strip format 0 Regional mall enclosed with department store anchor Power center category killers and full line discount stores 0 Outlets owned by manufacturers themselves c Function of anchor stores 0 Anchor stores attract more traf c to the shopping center and have bigger advertising budgets d Zonal merchandising Shopping has become more purpose driven there is less leisure time therefore shopping centers are grouping types of retailers together to help with comparison shopping and cross shopping IV VI VII 0 Zonal merchandising is where similar retailers are grouped by merchandise category and allows for comparison shopping e Types of entertainment choices 0 Entertainment choices include movies restaurants and night clubs Lifestyle Centers Video a What is a Lifestyle Center 0 A lifestyle center is a hybrid mall with high end retailers and easy parking 0 Lifestyle centers provide a social experience designed for convenience and people that don t want to browse b Why are they appealing to customers 0 Lifestyle centers appeal to consumers through convenience being smaller than shopping malls appealing to the underserved market of adult men and providing ower opportunity costs to retailers Patagonia Video a Why is Patagonia a great place to work 0 Employee loyalty support from the founder loyal customers and little turnover 0 Bene ts offered quotlet my people surfquot philosophy exible hours internships with Grassroots programs and childcare Corporate environmental values quotDo you need this productquot mentality and 1 for planet Physical Distribution Video a Key bene ts to bar codes in the retail supply chain 0 Warehouse and distribution costs would be saved 2530 0 Accuracy 0 Less paperwork 0 Lower costs for consumers b Advantages of RFID technology 0 Read out of line of sight 0 Accuracy is constant regardless of where the chip is c Disadvantages of RFID technology 0 RFID costs more than barcodes Creston Vineyards Video a Business functions and value provided by distribution channel 0 Business functions are provided by transactional logistical and facilitating V Cases 0 Values provided are assortment break down bulk hold inventory and provide services like nancing b Channels they use 0 Traditional channel of distributer and brokers Wine clubs iraderJoes c Firms involved in their primary channel and their role 0 Distributer takes title 0 Broker does not take title but gets a commission instead d Why do they use multiple channels 0 Multiple channels are used to reach different rnarketsegrnents e Opportunities and problems of selling wine online Opportunity cheaper 0 Problem illegal in 15 states underage drinking Rubkfs a Why do restaurants have such a high failure rate Considerable competition because the cost of entry Slow Selling a service rather than product b Franchising advantages Retailer can use capital from franchisee Managers tend to be more motivated because they are also owners c Franchising disadvantages quotFree ridingquot franchisee takes advantage of franchisor Tend to have less cash ow and less pro ts from each restaurant d Why do they not do franchising for higher quality restaurants 0 5 star restaurants don t franchise because of the time there is something unique that can t be duplicated such as a chef West Point Market a How can they compete in a market served by a number of larger supermarkets Most supermarkets cater to quotbroad middle marketquot but West Point has unique high quality merchandise and outstanding service to upscale customers Stephanie Wilson s Boutique a Pluses of each location 0 Downtown Arcade popular and wellknown area will eventually be new from redevelopment the store is near the entrance Tenderloin near target market lower rent 0 Apple Tree a lot of traf c b Minuses of each location 0 Downtown Arcade unsure of popularity because of the redevelopment o Tenderloin limited traf c 0 Apple Tree competition high rent and contributes to urban sprawl c Appropriateness for each location 0 Downtown caters to working women so it is more traditional merchandise 0 Tenderloin can get more eclectic with merchandise and focus on a trendy market 0 Apple Tree more competition so the company would have to have competitive or lower prices Hutch Company a How do people in the trade area compare with their target market 0 Hinesville greater percentage of the target market price conscious women ages 1840 more educated o Dalton larger population wealthier b How do the locations t with their location requirements 0 Requirements include a population of 1050 thousand and a trade area of 50150 thousand which both areas meet Hinesville next to a military base so people could be shipped out o Dalton larger risks trouble if there is a drought c Which location would you pick and why Hinesville has less stores 0 Dalton is bigger Avon a Why so committed to diversity 1800519605 women were only employed to sell doortodoor and by hosting parties but in the 19605 women began to become employed in the corporate world 0 Avon hires women to meet their customer s needs women know what women want b Why don t other retailers follow Avon s lead 0 Other companies don t follow Avon s lead because they have different target markets and their products don t lend themselves to this type of sales force c Avon s values and new opportunities Avon s values peaked in the 1950 s because of the gender work force and suburbs Future markets include younger people men and the internet IV Diva and Generation Y a How can Diva make Generation Y employees aware of opportunities 0 Clearly de ne career progression 0 Share success stories b Pros of learning organizational culture 0 Encourage goal setting and self improvement 0 Could lead to good salaries c Cons of learning organization culture 0 May not attract Generation Y despite what you do d How do others attract Generation Y 0 Google is the most admired due to the exible work environment lack of corporate culture no suits and engaging work place makes you feel like you are part of the process V Sephora Loyalty Programs a Bene ts to a company of a loyalty program 0 Repeat purchase behavior 0 Retailer loyalty Create a bond with the retailer b Design characteristics of a loyalty program Tiered the more you spend the greater the savings offer different choices for rewards Reward all transactions Transparency people should know where they stand at all times c Bene ts of a tiered program 0 Premium customers will get personalized rewards 0 People in the lower tiers will try to move up d French vs US loyalty programs 0 France combination of discounts 3 tiers and much more personalized offers 0 US mostly just rewards 2 tiers and not much differentiation between customers e Are the programs worth it 0 France 0 Costs rewards themselves shipping sales persons training 0 Bene ts increased spending more ef cient marketing 0 US 0 Costs deluxe samples event invitations 0 Bene ts increased spending f Could French premium program work in the US 0 No the US consumer spends more money on mass market beauty products rather than premium beauty products so there wouldn t be enough Americans in the gold tier Vl Lindy s Bridal Shop a Should she change the emphasis of her merchandise mix to increase sales Deemphasize owers they re not a great t and take up time which as an asset that she can t get back Emphasize used gowns and menswear which is an underserved market b Personnel decisions 0 She must hire a business manager to relieve her of some responsibilities 0 Address commitment c How can you balance family and business ldeally you d want to be full time in both areas but you have to gure out priorities and hire help Videos Land s End a Private Label 0 Private Label retailer makes the brand 0 National Label manufactures makes brand 0 Advantages unique merchandise and increased pro t Disadvantages customers are loyal to national brands perception that private label is inferior in quality and if the retailer can t sell the private label then it has to be thrown away or go to an outlet store b Criteria to Evaluate Vendors Vendors are evaluated through the demand of merchandise and cost of merchandise c Long Term Relationship With Suppliers 0 Advantages increased ef ciency and greater potential for innovative products Disadvantages marriage causes companies to stay with the vendor and vendor complacency occurs if the company is satis ed with how things are causing them to be unmotivated to make changes ll JC Penney Private Label Shirts a Private Label Merchandise 0 Advantages unique merchandise and increased pro t Disadvantages customers are loyal to national brands perception that private label is inferior in quality and if the retailer can t sell the private label then it has to be thrown away or go to an outlet store b Investment in Quality Control JCP s goal is not to be the best but rather to be the most consistent so they hold control in quality lll Pricing Decisions a Importance of Price in Determining Customer Value 0 Customers must feel that the bene ts out way the costs 0 Price indicates quality 0 Price communicates status and prestige b Sun Electronics Pricing Strategy 0 Use EDLP every day low prices VI 0 Do not want customers to comparison shop so they offer a guarantee if there is a price difference between them and another store they will pay the difference c Shelton Matthews Chocolate Pricing Strategy 0 Price is above many brands but not as high as some exclusive ones 0 Looking to show image and status similar to high quality European chocolates d Rally sCheckers DriveThru Strategy 0 Use a limited menu 0 Use tiered pricing e Jean Patou s Strategy 0 Use psychological pricing 0 Image and status Microwave Popcorn Act II a Common Brands 0 Act II Orval Redmacher Jolly Time Pop Secret Paul Newman b Place of Purchase 0 Grocery store convenient store discount retailers TargetWalmart warehouse club vending machine c Multiple Channels Help Distribution 0 Reach more customers 0 Increase brand recognition and awareness d Homepage 0 Provide information for consumers Ideas for new avors Market research Walgreens Video a Shoplifting 0 Inventory losses for shoplifting account for 23 of total sales because most pro t margins are between 315 making it a huge problem b EAS Tags 0 EAS electronic article surveillance 0 It is cheaper for manufacturers to put on EAS tags Retailers using EAS tags creates a sense of ownership c Reducing Shoplifting Greater customer service lowers shoplifting because if someone is nice it creates a connection and more guilt for stealing Jos A Bank Growth Strategy a Vertical Integration 0 Vertical integration helps control all aspects of design and merchandising o Vertically integrating allows you to not have to out source anything b Differentiating Characteristics 0 Well stocked inventory 0 High quality clothing 0 Great service c Competitive Environment 0 Fewer mom and pop stores 0 Little expansion Reattracts adult men the demographic that shops the least Vll McDonalds Made for You a Problems with the Made for You Kitchen System 0 There was demand for different products 0 People working longer hours meant eating is more spread out 0 Special orders created long wait times b How the System Delivers Quality and Service Took out metal warming bins 0 Each item is made right after you order it 0 New standards for service quality and food preparation 0 Can now assemble a sandwich in 15 seconds or less Vlll Ritz Carlton a Credo A place where the genuine care and comfort of the guises is the mission b Motto Ladies and gentlemen serving ladies and gentlemen c 3 Steps of Service 0 Warm greeting Ful llment of each guest s needs 0 A fond farewell d Service Values 0 Create Ritz Carlton guests for life 0 Always be responsive to the needs of the guests e Employee Promise Diversity is valued Quality of life is enhanced 0 Individual aspirations are ful lled Ritz Carlton mystique is strengthened f Competitive Advantage Personalized services 0 High service standards g HR Activities Careful hiring Strong training Cases American Furniture Warehouse a Ethical Tradeoffs vs Consumer Self Interests 0 Most people are not turned off if a product is manufactured outside of the US even if the conditions aren t great b Strategies to Hold Prices 0 Own and maintain their own eet of trucks 0 Take delivery at the factory or port 0 Look for upstart vendors seeking to give price breaks c Criteria 0 Vendor Criteria merchandise suits target market uniqueness of merchandise trustworthiness of merchandise 0 Best Practices with Small Vendors have high quality expectations and require vendors to have the same technology as you to communicate 0 Stretch Productivity of Buying Staff pan buying trips carefully and use internetemail to conduct business ll JC Penney Case a Environmental Factors Contributing to Fair and Square 0 Economy crash in 2007 caused real estate values to plunge unemployment to spike and consumer con dence to decrease Midmarket segment became crowded Target and WaIMart took away business and market share JCP did a poorjob building sustainable competitive advantage through customer loyalty b Alternative Pricing Strategies 0 Keep highlow pricing strategy but have less than 600 sales 0 Use more 2nCI or 3rd degree price discrimination eg early bird specials coege discount days 0 Try to emphasize store and national brands better by promoting one brand a month c Fair and Square Failure and Retreat From EDLP Fair and Square failed because JCP customers had become accustomed to heavy discounts as part of the value so switching to EDLP confused customers d Attract New Customers Communicate better to target market 0 Strong customer relation management CRM program 0 Update private label brands 0 Better electronic and social media platform e Potential Success for Fair and Square 0 Unknown partnership with Sephora was ignored and could have helped customers they lost aren t returning lll Apple Store a Layout Utilize bright lights and bright acoustics so that the store feels like a gathering place b Atmosphere Referred to as quotNordstrom s of technologyquot 0 High energy employees genius bars in the back of the stores and personal shoppers are available by appointment c Best Retailer Apple is in the top 5 companies of America s best retailers To be the best you need a strong brand name strong customer service innovative products and multiple locations IV Blue Tomato a Strengths of Each Distribution Channel 0 Brick and mortar store allows direct contact with the customer 0 Online store offers more products 0 Catalog appeals potentially to new customers that don t shop online b Synergies Across Different Channels Additional Actions to Be Omnichannel 0 Brick and mortar stores have kiosks that allow you to long onto Facebook see offers search items in catalogs and order online Omnichannel allows you to order products using online forms or via email develop an app c Challenges to Coordinate Different Channels Consistent face to customers along all contact points 0 Reduce overlap in variety and assortment across channeb Make sure communication is formally integrated d Challenges With International Expansion 0 Invest a lot of capital 0 Account for differences in shipping and payment conditions 0 Economic power and level of income will differ in each country V Discmart Company a Why Service Breakdown Occurred There was an out of stock item that should have been in stock b GAPS Communication Gap advertised something that they didn t have 0 Standards Gap customers expect advertised items to be in stock 0 Delivery Gap employee was not empowered to resolve the problem 0 Knowledge Gap wasn t affected don t need market research to know this Class Activity 1 essay question 0 Used the promotion mix to create a new night club 0 Worked on advertising sales promotion personal selling publicity and website3 l was in the publicity subgroup which focused on media coverage special events press releases and community events 0 We then planned out when each event would occur Textbook Notes Chapter 13 l Types of Brands 0 National BrandsManufacturer s Brands products are designed produced and marketed by a vendormanufacturer and sold to many different retailers eg Ralph Lauren polo shirts 0 National brands develop customer loyalty through aggressive marketing Umbrella BrandFamily Brand brand within a brand Ford is a family brand and the Fseries trucks is the subbrand StorePrivate Label products are made by retailer 0 Premium Store Brand comparable quality to national brand slightly lower price eg Bloomingdale s Aqua 0 Copy Cat Brand visually looks like national brands price is lower 0 Exclusive Brand partnership between retailer and designer only sold in one retailer developed by a nationalbrand vendor and sold exclusively by the retailer eg Walmart sells Mary Kate and Ashley apparel and accessories 0 Generic Brand only have name of item eg sugar or quotsaltquot no name brand target price sensitive shoppers ll Buying National Brand Merchandise 0 Wholesale Market Centers permanent places for retailers and vendors to meet eg showrooms that open during market weeks where appointments are made to visit Tradeshow vendors display their merchandise for a limited period of time typically in convention centers lll Sourcing Issues a Global Sourcing Cost additional costs to source overseas Currency uctuations buying contracts that lock a retailer into a set price helps reduce shortterm foreign currency uctuations TariffDuties tax on imports Longer lead times allocate more time for product to arrive Higher transportation costs b Subjective Issues 0 Quality control 0 Time to market Socialpolitical risks c Support Services 0 Resident Buying Office third party that brings retailers and vendors together organizations IV Vl located in major market centers that provide services to help retailers buy merchandise Reverse Action one retailer invites a lot of vendors to bid for its business eg Wal Mart auctions conducted by retailer buyers of private label merchandise where there is one buyer the retailer and many potential sellers the manufacturing rms Vendor Negotiation Tips Same number of negotiators on each side Pick good place to negotiate neutral and distraction free SetrealdeadHnes Separate people from the problem Use objective information Look for mutual gain Let everyone talk Know your limits Don t burn bridges Assume nothing Strategic RelationshipsPartnering Relationships a retailer and vendor are committed to maintaining the relationship over the long term and investing in opportunities that are mutually bene cial to both parties Mutual trust honesty and benevolence Open communication Common goals Credible commitment where both sides invest tangible assets into the relationship LegalEthical Issues a Merchandise Counterfeit Merchandise merchandise that is sold without the permission of the owner of the trademarkcopyrightpatent 0 Intellectual Property intangible and created by intellectual efforts eg trademarks and copyrights o Trademark any mark word picture device or nonfunctional design associated with certain merchandise eg crown on Rolex watch 0 Copyright protects the original work of authors painters musicians who produce works of artistic or intellectual merit Grey Market MerchandiseParallel Imports product has patent but it is not required to be paid for payment is by passed by being manufactured overseas Diverted Merchandise same as grey market in that you don t pay patent but the product is manufactured domestically Black Market Merchandise scarce item is not sold through any channels b Terms of Purchase Chapter 14 Abuse occurred before the Great Depression so FDR passed the Robinson Patman Act where if quantity and quality are equal then the manufacturer can t charge different prices to different retailers reduces price discrimination Commercial Bribery illegal inducements to buy through bribes or kickbacks Chargebacks the retailer deducts money that it owes to the vendor eg Sony bills 1200 to Best Buy but Best Buy only pays 500 BuybackStockliftsLiftOuts vendor purchases all inventory of competitor and then replaces their shelf space eg Coca Cola buys all of the Pepsi in Publix and replaces it with Coke products Exclusive Dealing Agreements retailer and vendor agree to deal exclusively with one another in order to restrict competition the law validates this as long as the consumer can easily nd a competitive product and the purpose isn t to eliminate competition Tying Contracts vendor allows the retailer to sell its product as long as the retailer buys another unattractive that is connected to it eg allowing blurays but requiring DVDs too illegal if they lessen competition or create a monopoly Refusing to Deal any retailer can refuse to deal with any vendor as long as the goal is not to restrict competition I Pricing Strategies Value the ratio of what customers receive the perceived bene t of the products and services offered by the retailer to what they have to pay for it EDLP everyday low pricing do not coupon as much complaints that prices aren t as low as they could be 0 0 Low Price Guarantee Policy guarantees customers that the retailer will have the lowest price in a market for products it sells Advantages assures customers of low prices reduces advertising and operating expenses reduces stockouts and improves inventory management HighLow coupons constantly eg Winn Dixie and CVS 0 Advantages increases pro t by allowing retailers to charge higher prices to customers who are not price sensitive and charge lower prices to price cautious customers creates excitement through sales and events sells slow moving merchandise by discounting pdces Markdowns lower price than initial price reduction in initial price Pricing Techniques a Variable Pricing most common First Degree Price Discrimination charge people based on what they re willing to pay auction 0 Dynamic PricingIndividualized Pricing type of rst degree pricing where you charge people based on the type of customer or will of demand eg airline ight tickets depends on the person time of dayweekseason and level of demand Second Degree Price Discrimination offer the same multipleprice schedule to all customers which encourages pricesensitive custoemrs to take advantage of the lower price price bundling clearance markdowns coupons 0 O O Promotional Markdown holidaysspecial events Clearance Markdown lower price at the end of the season compared to the beginning Coupons discount when purchased price sensitive customers will likely spend extra effort to collect and redeem coupons 0 Price Bundling two or more different products for one price eg value meal or toothbrush and toothpaste 0 Quantity DiscountsMultiple Unit Pricing two or more of the same product for one lower total price eg 3 toothbrushes 0 Third Degree Price Discrimination different prices based on different demographic segments eg studentsenior movie tickets 0 Zone Pricing different prices based on where someone lives addresses different competitive situations in various markets b Leader Pricing a popular product that you put on sale to bring people in the store 0 Loss Leaders products that are sold below cost and would therefore be considered predatory pricing usually commonly used items such as milk or eggs or wellOknown brand names such as CocaCola and Kellogg s Cherry Pickers shoppers who go from one store to another buying only items that are on special they are unpro table for retailers c Price Lining one category of products separated from highest to lowest price and customers can comparison shop eg national brands placed next to private label 0 Price lining is where retailers offer a limited number of predetermined price points within a merchandise category Decreases confusion of multipleprice choices since the customer can choose an item with lowmediumhigh price d Odd Pricing using odd number to make it seem like there is a deal eg 9999 IV Legal Issues Predatory Pricing market leader purposely lowers price to destroy competition Resale Price Maintenance retailer purposely lowers product price below MSRP manufactured suggested retail price other companies that don t sell as much can t lower the price and it hurts the perceived value 0 MSRPs are set by vendors to reduce retail price competition among retailers and stimulate retailers to provide complementary services 0 Horizontal Price Fixing retailers get together to control prices on a product Bait and Switch trick customer to come into a store with a deal that doesn t exist Chapter 15 0 Integrating Marketing Communication Program retailers integrate a variety of communication elements to deliver a comprehensive consistent message to all customers over time across all elements of their retail mix and across all delivery channels I Traditional Media a Mass Media Advertising impersonal placement of messages to inform and persuade Newspapers thinner and more money short shelf life read and thrown away 0 Freestanding Insert FSlPreprint an advertisement printed at the retailer s expense and distributed as an insert in the newspaper Magazines typically used by national retailers for image advertisement 0 Direct Mail brochures catalogs printed materials sent to certain zip codes for certain people to target consumers TV used for image advertising production and broadcasting rights are expensive 0 Spots ads in local markets as opposed to national ads have relatively small audiences but may be economical for local retailers Radio cheaper option loyal listeners built in audience viewed as background noise b Sales Promotions incentives for a limited period of time provide little information 0 Coupons discount at the time of purchase 0 Rebate refund from manufacturer 0 Premium free item to reward behavior c lnStore Marketing POP point of purchase merchandise displays located at the point of purchase 0 Samples offer potential customers the opportunity to try a product before purchasing 0 Special Events seasonal or around sporting events d Personal Selling face to face exchanges e Public Relations managing communication and relationships to control image in media II New Media a Online Media Websites build retailer image inform and sell Email messages over internet to speci c individuals Mobile Communications wireless handheld devices Social Media encourages word of mouth eg blogs create a sense of community lll Brand Image and Customer Loyalty IV Budget Chapter 16 Brand Image strategic objective Brand any feature that identi es one seller s goods as distinct from others namesymbolfeature Brand Equity value that a brand image provides retailers Brand Awareness customer s ability to recognize that a brand name is a type of retailer o Aided Recall recognize brand after the name is heard 0 Top of Mind mentioning the retailer allows you to remember the brand Brand Association anything linked to a brand name in a consumer s memory Marginal Analysis Method you can spend money as long as you get at least that amount back Objective and Task Method treat each entity as its own budget and own project determines the budget required to undertake speci c tasks to accomplish communication objectives by establishing a set of communication objectives and then determining the necessary tasks and costs Rule of Thumb Method use past sales and communication activities to determine the present communication budget 0 Affordable Budgeting total expenses excluding communication expenses 0 Percent of Sales xed percentage of forecast sales 0 Competitive Parity budget is based on market shares Store Management Responsibilities a Recruitment and Selection Job Description identi es the activities each employee performs and puts it in quantitative terms includes speci c activities the employee needs to perform and the performance expectations Locating Employees through referrals from other employees partnering with government agencies creatively using storefront for help wanted signs Screening matches applicants quali cations with the job description 0 Job application forms contain information about the applicant s employment history previous compensation reasons for leaving previous employment educationtraining and references shows if the applicant has the minimum quali cations 0 References help verify information on an appHca on Social media pro les 0 Testing eg IQ Test tests can only be performed if they are directly correlated to jobs lie detector tests are typically prohibited 0 Realistic Job Preview Selection 0 Interview Prep prepare for interview thoroughly Behavioral Interview asks candidates how they have handled actual situations they have encountered in the past 0 Manage the interview by asking open ended ques ons Legal Issues discrimination of age and against disabilities 0 Disparate Treatment one class of people is treated differently than another class Discrimination arises when a member of a protected class women minorities etc is treated differently from nonmembers of that class or when an apparently neutral rule has an unjusti ed discriminatory effect 0 Disparate Impact seemingly neutral law results in discrimination O 0 Age Discrimination governs people aged 40 70 years old 0 Americans With Disabilities Act ADA protects the disabled Socializing and Training Employees 0 Orientation reduces entry shock 0 Training Structured eg classroom training helps new employees acquire basic skills and knowledge On the Job training of a speci c task in front of customers Blended combines structured and on thejob Failures and Successes always study successes and failures of training methods and pay most attention to failures Evaluation and Feedback the evaluation process identi es the employees who are performing well and those who aren t 0 Who usually performed by human resources and the employee s immediate supervisors How Often typically performed once or twice per year Format performed through evaluation forms or observing worker s behavior Compensation and Rewards Extrinsic Rewards money power recognition rewards provided by either the employee s manager or the rm 0 A La Carte Plans give effective employees a choice of rewards for their good performance lntrinsic Rewards feeling of a job well done rewards that employees get personally from doing theirjob well 0 Contests makes work fun by hosting small contests 0 Job Enrichment the redesign of a job to include a greater range of tasks and responsibilities such as skill variety task signi cance autonomy and job feedback Compensation Programs the objective is to attract and keep good employees motivate them to undertake activities and balance controlling labor d Legal Issues costs and providing enough compensation to keep highquality employees 0 Types straight salary or incentive based Straight Salary Compensation salespeople receive a xed amount of compensation for each hour or week they work employees ack immediate incentives to improve their productivity and the straight salary becomes a xed cost that the rm incurs even if sales decHne lncentive Compensation Plans reward employees on the basis of their productivity Straight Commission when a salesperson s income is based entirely on commission 0 Design typicay combines straight salary and incentive based payments 0 Setting Commission Percentage the percentage varies by company and industry fair labor standards act governs minimum wag overtime and child labor equal pay act governs gender discrimination Fair Labor Standards Act set minimum wages maximum hours child labor standards and overtimepay provisions Equal Pay Act enforced by the EEOC Equal Employment Opportunity Commission prohibits unequal pay for men and women who perform equa work or work of comparable worth ll Leadership the process by which a person attempts to in uence others to accomplish a common goal or task a Types b Styes Task Performance ability of a store to make its goals store manager s efforts to plan organize motivate evaluate and coordinate store employees activities Group Maintenance ability of everyone to get along activities store managers undertake to make sure that employees are satis ed and work well together considering employees needs showing concern for their wellbeing creating a pleasant work environment Autocratic Leaders no input from employees leaders make all decisions on their own and then announce them to employees Democratic Leaders do have employee input Transformational Leaders get people to transcend their personal needs for the sake of the group or organization get employees to put the company above their own personal goals c Sexual Harassment deals with workplace behavior Cost Control a Scheduling and Maintenance Labor Scheduling the right number of employees per shift Labor scheduling is difficult because customer traffic varies during the day and the week Store Maintenance physical environment of the store managing the exterior and interior physical facilities associated with the store b Inventory Loss Reduction Chapter 17 Good Store Design a Objectives Shrinkage difference between the actual inventory and the recorded inventory inventory loss due to employee theft shoplifting mistakes inaccurate records and vendor errors Shoplifting Detection and Prevention 0 Store Design try not to have checkouts and registers near the store exit 0 Security undercover and mystery shoppers 0 Personnel Policies require receipts for all refunds o Prosecution zero tolerance for shoplifting 0 Technology invest in tools to reduce shop lifting Employee Theft 0 Screening 0 Security Policies and Controls Implements the retail strategy design must be consistent and reinforce the strategy by meeting needs of target market and building a sustainable competitive advantage Builds loyalty by providing a rewarding shopping expedence o Utilitarian Bene ts enables the customers to locate and purchase products in an ef cient and timely manner with minimum hassle o Hedonic Bene ts offer customers and entertaining and enjoyable shopping expedence Increases sales Controls cost Meet legal requirements such as taking into account the needs of disabled people ll Store Design Elements a Types of Layouts Grid series of shelves grocery storedrug store has parallel aisles with merchandise on shelves on both sides of the aisles with cash registers located at the entrancesexits of the stores makes shopping quick and easy best for planned purchases RacetrackLoop one long aisle that circles the entire store to guide customer traf c around different departments department store FreeForm designed to stimulate a room in your house xtures and aisles are arranged in an asymmetric pattern boutique b Feature Areas areas within a store at are designed to get customers attention Windows exterior to the store window displays draw customers into the store and provide a visual message about the type of merchandise offered in the store and the type of image the store wants to portray Entrances customer makes rst impression of retailer Freestanding Displays designed to pull you into department xtures located on aisles often display and store the newest and most exciting merchandise in the particular department Mannequins life size representation of the human body End Caps items at the end of the aisle in stores using a grid layout used for highermargin impulse and sale merchandise Promotional AisleArea items on sale for limited amount of time Walls creatively use space Dressing Room people make decisions there Cash WrapPointof Purchase Counters POPCheckout Areas where you pay for merchandise used to display impulse purchase items lll Space Management a Locations of Department Destination Merchandise products that customers have decided to buy before entering the store Impulse Merchandise found at the checkout products that are purchased without planning Demand Merchandise found in the back left area of the store highdemand merchandise which pulls customers through the store Special Merchandise lightly trafficked area Adjacencies complementary categories that are placed next to each other to encourage unplanned purchases Planograms diagram showing where every SKU is located IV Visual Merchandising the presentation of a store and its merchandise in ways that will attract the attention of potential customers a Fixtures equipment used to hold and display merchandise Straight Rack long pipe suspended from the wall oor and can look at merchandise RounderBulk FixtureCapacity Fixture pedestal that holds a lot of merchandise and typically goes in a circle 4Way two perpendicular pipes that cross each other and can see 4 different types of merchandise at once Gondola island type of selfservice counter with shelves or bins b Presentation Techniques ldea Oriented present merchandise based on a speci c idea or the image of the store Item and Size most common items are arranged by the particular type of merchandise eg all breakfast cereals together Color bold technique apparel stores use it Price Lining most expensive to least expensive left to right 0 Vertical use walls and high gondolas Tonnage show large quantities of merchandise used to enhance and reinforce a store s price image because customers associate it with low prices Frontal show as much of an item as possible to the naked eye c Appealing Atmosphere 0 Lighting highlights merchandise sets the mood cut energy costs and become ecologically conscious Color image and mood Music can add or detract from the atmosphere can be easily changed Scent appeals to emotion Taste restaurants inside stores to appeal to taste Chapter 18 Customer Service a set of activities undertaken by the retailer to make the shopping experience more rewarding a Approaches Personalized tailor service to meet individual needs 0 Less consistent than standardized service Standardized set of rules implemented consistently effectiveness relies mainly on the quality of the retailer s policy procedures and store 0 Retailers standardize the service they offer to increase the consistency of the service quality and avoid the costs of paying more skilled service providers ll GAPS Model Service Gap results when the customer s perception of the service delivered by a retailer fails to meet the customer s expectations a Knowledge Gap difference between customer expectations and the retailer perception of such expectations 0 Reduce the gap by researching customer expectations and perceptions through Social media Surveys panels contests focus groups Customer interaction Customer complaints Store employee feedback 0 Using customer research on a timely basis b Standards Gap the difference between retailer perceptions of customer expectations and retailer service standards 0 Reduce the gap by 0 Commitment to service quality 0 O O O O 0 De ning the role of service providers 0 Setting service goals 0 Measuring service performance c Delivery Gap a difference between retailer service standards and actual service provided 0 Reduce the gap by O O O O 0 Giving information and training Employee empowerment transfer decision making to employees Empowerment allowing employees at the firm s lowest levels to make important decisions regarding how service will be provided to customers Providing instrumental machines and emotional people support Instrumental Support appropriate systems and equipment used to deliver service desired by customers Emotional Support demonstrating a concern for the wellbeing of others Providing incentives bonuses and commission Improving internal communications and reducing con ict Using technology eg service kiosks d Communications Gap difference between actual service provided and service promised in promotion program 0 Reduce gap through 0 O Realistic commitments Managing customer expectations lll Service Recovery 0 Listening to the customer 0 Providing a fair solution 0 O Distributive Fairness customer s perception of the result Procedural Fairness customer s perception of the process used to resolve complaints Resolving problems quickly
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