OF RETAILING 4. Retailing 8 Developing a Retail II Social Responsibility 8 JCPenney Moves from Main Street to Multichannel Retail Sales 9 Retailing

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1 CONTENTS i SECTION OF RETAILING OF RETAILING 4 What Retailing? 6 Retailing View Sam Walton, Founder of The Retailer's Role in a Supply Chain 6 Retailers Value 7 The Retail Management Decision Process Social and Economic Significance of Understanding the World of Retailing-Section Retailing 8 Developing a Retail II Social Responsibility 8 JCPenney Moves from Main Street to Multichannel Retail Sales 9 Retailing Retailing View Socially Responsible Implementing the Retail III and IV 20 Retailers 9 Foods Market: An Organic and Natural Food Employment Supermarket Chain 20 Structure of Retailing and Distribution Channels 22 around the World 23 Global Retailers Terms 23 Differences in Distribution Channels Get Out and Do It! 24 Opportunities in Retailing Discussion Questions and Problems 24 Management Opportunities 25 Entrepreneurial Opportunities Appendix A: Careers in Retailing 25 CHAPTER 2 TYPES OF RETAILERS 28 Retailer Characteristics 30 View 2.3: Specializing in Video Type of Merchandise 30 Games... Buy, Play, Sell 44 Luxury Category Specialists 45 Variety and Assortment 32 Extreme-Value Retailers 46 Services Offered 33 Retailers 46 Prices and the Cost of Offering Breadth and Depth of Services Retailing 48 Merchandise and Services 33 Differences between Services and Merchandise Food Retailers 35 Supermarkets 35 Types of Ownership View ALDI: Provides Excellent Value in Independent, Single-Store Establishments the United States 36 Corporate Retail Chains 52 Supercenters 38 Franchising 52 Warehouse Clubs :Tart Sweet Convenience Stores 40 Franchise 52 General Merchandise Retailers Department Stores Terms 54 Full-Line Discount Stores 42 Get Out and Do It! 54 Specialty Stores 42 Discussion Questions and Problems Drugstores CHAPTER 3 MULTICHANNEL RETAILING 56 Retail Channels 58 Benefits Offered by the Retail Internet Channel 58 Channels Catalog Channel 58 Direct Selling 59 Television Home Shopping 60 Automated Retailing 60 : Direct Selling in China 59 Store Channel 3.2: Bass Pro Shops Makes Shopping Fun 62 Catalog Channel 63 Internet Channel 63

2 3.3: Helping Couples Get Ready for the 3.4: Uses Big Day 64 Multiple Channels to Enhance Its Image 73 Benefits of Multichannel Retailing 66 Multichannel Shopping in the Future 74 Overcoming the Limitations of an Existing Format 67 Shopping Experience Scenario 74 Increasing Customer Satisfaction and Loyalty 67 Supporting the Shopping Experience 75 Gaining Insights into Consumer Shopping Behavior Expanding Market Presence 68 Terms 76 Building a Strategic Advantage 68 and Do It! 76 Other Multichannel Retailing Issues 69 Discussion Questions and Problems 77 Which Channel Has the Lowest Costs? 69 Will Manufacturers Bypass Retailers and Sell Directly to Consumers? 69 Challenges of Effective Multichannel Retailing 70 Providing an Integrated Shopping Experience 70 Supporting M-Commerce Organizing for Multichannel Retailing CHAPTER 4 CUSTOMER BUYING 78 The Buying Process 79 Social Factors Influencing the Buying Process 94 Need Recognition Family 94 Information Search 83 Reference Groups 94 :The Internet Has Changed the 4.4: Retailing 95 Process 84 Culture 96 Evaluation of Alternatives:The Multiattribute Market Segmentation 96 Criteria for Evaluating Market Segments : Do It Herself at Lowe's 89 Approaches for Segmenting Markets 98 Purchasing the Merchandise or Service 90.,. Composite Segmentation Approaches Postpurchase Evaluation Types of Buying Decisions Extended Problem Solving Terms Get Out and Do It! Limited Problem Solving 92 Discussion Questions and Problems Habitual Decision Making : Using Digital Displays to Stimulate Appendix 4A: Customer Buying Behavior and Unplanned Purchases 93 Fashion SECTION II CHAPTER 5 RETAILING STRATEGY RETAIL MARKET STRATEGY What a Retail Strategy? 5.2:The Container a Definition of Retail Market Strategy Competitive Advantage by Selling Products That. Life Simpler Target Market and Retail Format Market Expansion Building a Sustainable Competitive Advantage Format Development Relationships with Loyalty Diversification :The Way Growth Opportunities and Competitive Advantage Relationships with Suppliers Efficiency of Internal Operations Growth Opportunities Attractiveness of International Markets Location 5.3:The Fashion Are Men in Multiple Sources of Advantage Growth Strategies Market Penetration Keys to Success Entry Strategies

3 CHAPTER 8 RETAIL SITE LOCATION Evaluating Specific Areas for Locations 8.3: Economic Conditions Customer Spotting for Multichannel Retailers 202 Competition Strategic Fit Competition in the Trade Area 207 Estimating Potential Sales for a Needs a Kitchen You Have Whole Foods Trader Joe's Downstairs? Huff Gravity Model 207 Operating Costs Regression Analysis 209 Number of Stores Area Analog Approach Economies of Scale from Multiple Stores Cannibalization Illustration of Site Selection: Edward Beiner Optical Conduct Competitive Analysis Evaluating a Site for Locating a Retail Store Define Present Trade Area Site Characteristics Identify Trade Area Characteristics Traffic Flow and Accessibility Match Characteristics of Present Trade Area with Location Characteristics Potential Sites Importance of a _.. Turn Negotiating a Lease Restrictions and Costs Types of Leases Locations within a Shopping Center Terms of the Lease Trade Area Characteristics Trade Area Definition Factors Affecting the Size of the Trade Area 200 Measuring the Trade Area for a Retail Site Sources of Information about the Trade Area 202 Key Terms Get Out and Do It! Discussion Questions and Problems CHAPTER 9 HUMAN RESOURCE MANAGEMENT Objectives of Human Resource Management :Walmart Cares about Its : Men's Wearhouse: Using Human Resources to Build a Competitive Advantage Managing Diversity 239 Issues in Retail Human Resource Management 222 Diversity Training 240 Balancing the Human Resource Triad 222 Support Groups and Mentoring 240 Expense Control 222 Career Development and Promotions 240 Part-Time Employees 223 Legal Issues in Human Resource Management Utilizing Diverse Employee Groups 223 Equal Employment Opportunity International Human Resource Issues 223 Compensation Designing the Organization Structure for a Labor Relations 242 Retail Firm 224 Employee Safety and Health 242 Organization a Single-Store Retailer 224 Sexual Harassment 242 Organization of a National Retail Chain 226 Employee Privacy 242 Retail Organization Design Issues 228 Centralization versus Decentralization : My Centralize Expenses and Decentralize Merchandising Decisions 229 Coordinating Merchandise and Store Management 230 Developing Policies Winning the Talent War Discussion Questions and Problems 245 Talent: Employment Marketing 245 Talent: Selection and Training : Careful Employee Selection = Low Employee Turnover The Container Store 233 Goals : Peet's Knows Tea 234 Keeping Talent: Building Employee Commitment 237

4 CHAPTER INFORMATION SUPPLY CHAIN MANAGEMENT 246 Creating Strategic Advantage through Supply Supply Chain for Fulfilling Catalog and Internet Orders 263 Management and Information Systems Collaboration between Retailers and Vendors in Improved Product Availability 250 Supply Chain Management 264 Higher Return on Assets Benefits of Coordination 264 The Flow of Information and Products in a Supply Chain Quick Response and Efficient : Zara Delivers Fast Fashion 252 Consumer Response 265 Information Flows 253 Sharing Information 266 The Physical Flow of 255 Vendor-Managed Inventory 266 The Distribution Center 256 Collaborative Planning, Forecasting, and Replenishment 267 Management of Inbound Transportation 256 Radio Frequency Identification 267 Receiving and Checking 256 Marine Uses CPFR to Build Storing and Cross-Docking 257 a Competitive Advantage 268 Getting Merchandise Floor-Ready 257 Types of Tags 269 Preparing to Ship Merchandise to a Store 258 Benefits of RFID 269 Management of Outbound Transportation 258 System Design Issues 259 RFID at American Apparel 269 Outsourcing Logistics 259 Impediments to the Adoption of RFID 270 How Netflix Makes You Your Movie 260 Terms Pull and Push Supply Chains Get Out and Do It! 272 Distribution Centers versus Direct Store Delivery Discussion Questions and Problems 272 Reverse Logistics HAPTER CUSTOMER RELATIONSHIP MANAGEMENT 274 The CRM Process 276 CRM at CVS Caremark, Inc. 287 What Is Loyalty? 276 Developing CRM Programs 288 Overview the CRM Process 277 Customer Retention 288 Collecting Customer Data 278 CRM at Marcus 290 : Harrah's Hits Retail Community Provides the Jackpot with CRM 278 Value and Builds Customer Loyalty 292 Customer Database 279 Converting Good Customers into Best Customers 293 Identifying Information 279 Dealing with Unprofitable Customers 294 Privacy and CRM Programs Implementing CRM Programs 295 Analyzing Customer Data and Identifying Target 295 Customers 282 Key Terms 296 Retail Analytics 283 Get Out and Do It! 296 Identifying the Best Customers 283 Discussion Questions and Problems 296 Uses Data from Its _ 297 Frequent-Shopper Program 284 SECTION III MERCHANDISE MANAGEMENT CHAPTER PLANNING PROCESS 300 Merchandise Management Overview 302 Forecasting Sales The Buying Organization 303 Forecasting Staple Merchandise Merchandise Planning Unit 304 Forecasting Fashion Merchandise Evaluating Merchandise Management Performance 305 Categories Managing Turnover 307 Weather's Effect on Retail Sales Merchandise Management Process 308. Sales Forecasting for Service Fast Fashion at Mango Retailers

5 The Strategic Retail Planning Process 5.4: Topic Emphasizes Its Strength Step : Define the Business Mission Step 2: Conduct a Situation Audit Step 3: Identify Strategic Opportunities Step 4: Evaluate Strategic Opportunities in Indie Music Terms Get Out and Do Step Establish Specific Objectives and Allocate Discussion Questions and Problems Resources Step 6: Develop a Retail Mix to Implement the Strategy Step 7: Evaluate Performance and Make Adjustments Strategic Planning in the Real World CHAPTER 6 FINANCIAL STRATEGY Objectives and Goals Current Ratio Financial Objectives Quick Ratio Societal Objectives 6.4: Private Equity Firms Invest in Teeing Up Kids Retailers Personal Objectives Setting and Measuring Performance Objectives Strategic Profit Model Top-Down versus Bottom-Up Process Profit Margin Management Path Who Is Accountable for Performance? 6.2: Family Dollar and Performance Objectives and Measures Retailers Targeting Customers at the Opposite Ends Types of Measures of the Income Distribution Assessing Role of Benchmarks Asset Management Path 6.3: Cutting Costs at Costco Implications for Improving Financial Performance Key Terms Get Out and Do Illustration: Kelly Bradford's Evaluation of the Gifts-To- Go.com Growth Opportunity Discussion Questions and Problems Analysis of Financial Strength Cash-Flow Analysis Debt-Equity Ratio :HAPTER 7 RETAIL LOCATIONS Types of Locations Merchandise Kiosks Unplanned Retail Locations Freestanding Sites Airports Location and Retail Strategy City Town Locations Shopping Behavior of Consumers in Retailer's Target. Market Retailing : Cleveland...,.. 7.5: Beall's Locations Support Its 7.2: Magic Johnson Brings Retailing to the City St t Density of Target Market Shopping Centers...,,... Uniqueness of Retail Offering Neighborhood and Community Shopping Centers Power Centers Shopping Malls Lifestyle Centers 7.3: Mega in Asia Mixed-Use Developments Outlet Centers Theme/Festival Centers Larger, Other Location Opportunities 7.4: Subway Goes to Church Pop-Up Stores and Other Temporary Locations Store within a Store Legal Considerations Environmental and Sustainability Issues Zoning and Building Codes Terms Get Out and Do Discussion Questions and Problems

6 Developing an Assortment Plan Customer-Centric Merchandise Assortment Allocation at Saks Fifth Avenue 324 Determining Variety and Assortment Merchandise Allocation 325 Setting Inventory and Product Availability Analyzing Merchandise Management Performance 325 Levels Sell-Through Analysis Evaluating Merchandise Plan 326 Model Stock Plan Evaluating the Assortment Plan Vendors 326 Availability Home Vendor Establishing a Control System for Managing Evaluations Seriously 328 Inventory 329 Control System for Managing Inventory of Staple Terms 329 Merchandise Get Out and Do It! 330 Control System for Managing Inventory of Fashion Discussion Questions and Problems Merchandise Open-to-Buy System 322 Appendix Merchandise Budget Report and Open-to- Allocating Merchandise to Stores 323 Buy System for a Fashion Merchandise Category 332 Amount of Merchandise Allocated 323 Appendix Retail Inventory Method 337 Type of Merchandise Allocated 323 CHAPTER BUYING MERCHANDISE 340 Brand Alternatives 342 Strategic Relationships 358 National Brands 342 Defining Strategic Relationships 358 Private-Label Brands 343 Maintaining Strategic Relationships 359 Loves Private-Label Building Partnering Relationships 360 Brands 343 Legal, Ethical, and Social Responsibility Issues for Only at Kohl's 347 Buying Merchandise Buying National-Brand Merchandise 348 Legal and Ethical Issues Meeting National-Brand Vendors 348 DidT.J.Maxx Get Its Coach National-Brand Buying Process 348 Handbags? 364 Developing and Sourcing Private-Label Corporate Social Responsibility 365 Merchandise Developing Private-Label Merchandise 349 Terms 367 Datang, China, Is Sock City 350 Get Out and Do It! 367 Sourcing Merchandise Discussion Questions and 352 Problems 368 Negotiating with Vendors Knowledge Is Power 353 Negotiation Issues 354 Tips for Effective Negotiating 356 CHAPTER RETAIL PRICING 370 Pricing Strategies 372 Profit Impact of Setting a Retail Use of Break- High/Low Pricing 372 Even Analysis Everyday Low Pricing 372 Markdowns 382 Advantages of the Pricing Strategies 373 Reasons Taking Markdowns 382 Considerations in Setting Retail Prices 373 Techniques for Increasing Sales and Customer Price Sensitivity and Cost 373 Profits 385 Competition 376 Variable Pricing and Price Discrimination 385 U.K. Grocery Chains Battle Buy aticket? 386 Out 376 Haggling a Better Price 387 Pricing Services 377 Men Are Winning the Battle Setting Retail Prices 378 against Gender-Based Pricing 389 Setting Prices Based on Costs 379 Leader Pricing 390 Pricing Optimization Software 380 Price Lining

7 Odd Pricing Scanned versus Posted Prices 394 Using the Internet to Make Pricing Decisions 393 Deceptive Reference Prices 395 Legal and Ethical Pricing Issues Predatory Pricing 393 Key Terms 395 Resale Price Maintenance 394 Get Out and Do It! 396 Horizontal Price Fixing 394 Discussion Questions and Problems 397 Bait-and-Switch Tactics HAPTER RETAIL COMMUNICATION MIX 398 Using Communication Programs to Develop Brand Marcus Images and Build Customer Loyalty 400 Fantasy Gifts Value of Brand Image 400 Planning the Retail Communication Program 420 Afford You Establish Objectives 420 Crew's Quality Determine the Communication Budget Building Brand Equity 402 Allocate the Promotional Budget 425 L.L.Bean Celebrates the Plan, Implement, and Evaluate Communication Programs- Outdoors 404 Two Illustrations 425 Extending the Brand Name 405 Sales Promotion Opportunity 426 Methods of Communicating with Customers Direct Marketing 407 Key Terms 428 Online Marketing 408 Get Out and Do It! 428 and HSN Discussion Questions and Sales Promotions Problems 429 Virtual 429 Personal Selling Advertising Public Relations IV STORE MANAGEMENT CHAPTER MANAGING THE STORE 432 Store Management Responsibilities 434 Motivating Different Generational Recruiting and Selecting Store Employees 435 Cohorts 447 Analysis 435 Evaluating Store Employees and Providing Job Description 436 Feedback 448 Who Should Do the Evaluation? 448 Locating Prospective Employees 436 How Often Should Evaluations Be Made? 449 ScreeningApplicants to Interview 436 Format for Evaluations 449 Selecting Applicants 438 Evaluation Errors 450 Legal Considerations in Selecting and Hiring Store Employees 439 Compensating and Rewarding Store Orientation and Training Programs for New Store Employees 440 Extrinsic Rewards Orientation Programs 440 Intrinsic Rewards from Student to Compensation Programs 452 Trainee 440 Compensation 455 Training Store Employees Controlling Costs 455 Motivating and Managing Store Employees 443 Labor Scheduling 455 Leadership 443 Increasing Operating Motivating Employees 444 Efficiency 456 Setting Goals or Quotas 445 Green and Energy-Efficient Stores 457 Them Do It? 445 Maintaining Morale 446 Sexual Harassment 446 Should Managers Make Store Maintenance 457

8 Reducing Inventory Shrinkage Calculating Shrinkage 458 Terms 463 Organized and High-Tech Retail Theft 458 Get Out and Do It! 463 Detecting and Preventing Shoplifting 459 Discussion Questions and Problems 464 Reducing Employee Theft 465 CHAPTER STORE LAYOUT, DESIGN, AND VISUAL MERCHANDISING Store Design Objectives 468 Implement Retail Strategy 468 Build Loyalty 468 Presentation Techniques 487 Increase Sales on Visits 469 Store Atmosphere 489 Control Cost 469 Lighting 490 Legal with Disabilities Act Color Goes Green and Lowers Energy Costs Music Design Trade-Offs 472 Scent Store Design Elements 472 How Exciting Should a Store Be? 492 Layouts 472 Web Site Design 493 Store Designs Are Not Simplicity Matters 493 Appealing to Indian Shoppers 473 Getting Around 493 Signage and Graphics 476 Them See It 493 Feature Areas 479 Blend the Web Site with the Store 493 Space Management Prioritize 493 Space Allocated to Merchandise Categories 494 Location of Merchandise Categories and Design Checkout 494 Elements Location of Merchandise within a Category 484 Key Terms 495 Suggestions for Merchandising a Pet Food Category 485 Get Out and Do It! 496 Marks & Spencer Automates with Questions and Problems 496 Planograms CHAPTER CUSTOMER SERVICE 498 Strategic Advantage through Customer Service 500 Waiting Game Challenges in Providing Consistent Meeting and Exceeding Service Standards: Customer Service 500 The Delivery Gap Customer Service Approaches Communicating the Service : Managing the Costs and Benefits Communications Gap of Returns 502 Service Recovery Customer Service at IKEA 504 Listening to Customers 520 Customer Evaluations of Service Quality 505 Providing a Fair Solution 520 Finding the Unexpected at TopShop 507 The Gaps Model for Improving Retail Customer Service Quality 508 and Do It! 522 KnowingWhat Customers The Knowledge Gap 509 Discussion Questions and Problems 522 Setting Service Standards:The Standards Gap 523 A BUSINESS 524 B STARTING A FRANCHISE BUSINESS 532

9 ECTION V CASES Overview Grid 537 PenAgain Sells Walmart 564 Tractor Supply Company Targets the Part-Time 22 American Furniture Warehouse Sources Globally 565 Rancher 538 Merchandise Exclusively for JCPenney 566 Where Best Friends How Much for a Good Smell? 568 Are Made Promoting a Sale Sustainability Target Marketing with AdWords Netflix Personalizes the Customer's Experience Enterprise Rent-A-Car Focuses on Its People The Decision-Making Process for Buying a Bicycle Diamond in the Rough 6 Retailing in Impact of Hypermarkets "Touch and Feel" at Sephora Diamonds from Mine to Market A Stockout at Discmart Save-A-Lot:An Extreme-Value Retailer 547 Customer Service and Relationship Management at 9 Ahold:The Biggest Supermarket You Have Nordstrom 574 Never Heard Of Building the Apple Store 575 & Fitch and American Eagle Compete for Y Old 549 Generating Advertising Revenue from a Digital Screen Network at Harrods of London 577 Merchandise Strategy: Process for Success Starbucks' Retail Strategy 578 Tiffany's and Walmart: Comparing Financial Performance 35 Yankee Candle: New Product Innovation Where Pets Are Family 583 Choosing a Store Location for a Boutique 553 ' Hutch: Locating New Store 554 Bridal Shop 585, 38 Interviewing for a Trainee Position 586 Attracting Generation to a Retail Career 559 Glossary Nordstrom Rewards Its Customers Notes Active Endeavors Analyzes Its Customer Database 562 Photo Credits 639 Developing an Assortment Plan for Hughe's Preparing a Merchandise Budget Plan 563