Retailrefers to the sale of goods or services to consumers,typically through physical stor, Schemes and Mind Maps of Business

Download Retailrefers to the sale of goods or services to consumers,typically through physical stor and more Schemes and Mind Maps Business in PDF only on Docsity! Understanding the World of Retailing-Section I The first step in the retail management decision process, as Exhibit 1-6 shows, is un derstanding the world of retailing. Retail managers need to know the environment in which they operate before they can develop and implement efective strutegies. The first section of this book therefore provides a general overview of the retailing industry And its customers. The critical environmental factors in the world of retailing are (1) the macroenvi ronment and (2) the microenvironment. The impacts of the macroenvironment including technological, social, and ethical/legal/political factors-on retailing are discussed throughout this book. For example, the influence of technology on the rise of multichannel and omnichannel retailing is reviewed in Chapter 3, the use of new information and supply chain technologies are examined in Chapter 9, customer rela tionship management systems are reviewed in Chapter 10, and new communication Technologies are discussed in Chapter 14. Competitors The retailer’s microenvironment focuses specifically on its competi tors and customers. At first glance, identifying competitors appears easy: A retailer’s primary competitors are other retailers that use the same retail approach. Thus, depart ment stores compete against other department stores, and supermarkets compete with other supermarkets. This competition between the same type of retailers is called intratype competition. Yet to appeal to a broader group of con sumers, many retailers are increasing the va riety of merchandise they offer. By offering greater variety, retailers satisfy the needs of customers seeking a one-stop shopping ex perience. For example, Walgreens has added jewelry, accessories, and apparel to its al ready extensive health and beauty categories to meet the lifestyle needs of its customers. Amazon offers virtually any product, and many services, you might ever want to buy or rent. When retailers offer merchandise not typically associated with their type of store, such as clothing in a drugstore, the result is scrambled merchandising. Scram bled merchandising increases intertype Competition, or competition among retailers that sell similar merchandise using different types of retail outlets, such as drugstores and department stores. Management’s view of competition also may differ depending on the manager’s po sition within the retail firm. For example, the manager of the Saks Fifth Avenue wom en’s sportswear department in Bergen County, New Jersey, views the other women’s sportswear specialty stores in the Riverside Square mall as her major competitors. But the Saks store manager views the Bloomingdale’s store in a nearby mall as her strongest competitor. These differences in perspective arise because the department sales man ager is primarily concerned with customers for a specific category of merchandise, whereas the store manager is concerned with customers seeking the entire selection of all merchandise and services offered by a department store. The chief executive officer (CEO) of a retail chain, in contrast, views competition from a much broader perspec tive. For example, Nordstrom might identify its strongest competitor as Saks, Neiman Marcus, Bloomingdale’s, and even Bluefly.com. Chapter 2 discusses various types of retailers and their competitive strategies, and Chapter 3 concentrates on different types of channels that retailers use to complete transactions with their customers. Customers The second factor in the microenvironment is customers. Retailers must respond to broad demographic and lifestyle trends in our society, such as the growth in the senior and minority segments of the U.S. population or the importance of shopping convenience to the increasing number of two- income fanmilies. To develop and implement an effective strategy, retailers must understand why customers shop, how they select a store, and how they select among that store’s merchandise-the information found in Chapter 4. Developing a Retail Strategy-Section II The next stages in the retail management decision-making process, formulating and implementing a retail strategy, are based on an understanding of the macro- and micro environments developed in the first section of this book. Section II focuses on decisions related to developing a retail strategy. Whereas Sections Ill and IV pertain to decisions surrounding the implementation of the strategy and building a long-term competitive advantage. The decisions discussed in Sections Ill and IV are more taCtical. Retail Strategy The retail strategy identifies (1) the target market, or markets, Loward which the retailer will direct its efforts; (2) the nature of the merchandise and services the retailer will offer to satisfy the needs of the target market; and (3) how the retailer will develop unique assets that enable it to achieve long-term advantage over its competitors. The nature of a retail strategy can be illustrated by comparing the strategies of Walmart and Toys “R” Us. Initially, Walmart identified its target market as small towns (fewer than 35,000 in population) in Arkansas, Texas, and Oklahoma. It of. Fered name -brand merchandise at low prices in a broad array of categories, ranging from laundry detergent to girls’ dresses, but offerings in each category were limited. Today, even as Walmart stores have expanded across the world, the selection in each category remains limited. A Walmart store might have only 3 models of flat-screen television sets, while an electronic category specialist like Best Buy might carry 30 models. In contrast Walmart, Toys “R” Us defines its primary target as consumers living in suburban areas of large cities. Rather than carrying many merchandise categories, Toys “R” Us stores specialize in toys and children’s apparel and carry most types and brands currently available in the market. Walmart emphasizes self-service: Customers select their merchandise, bring it to the checkout line, and then carry it to their cars. But Toys “R” Us provides more customer service. It has salespeople to assist custom ers with certain types of merchandise. Because Walmart and Toys R” Us both emphasize competitive prices, they have made strategic decisions to sustain their low prices by developing a cost advantage over their competitors. Both firms have sophisticated distribution and management information systems to manage inventory. Their strong relationships with their supplH ers enable them to buy merchandise at low prices. Strategic Decision Areas The key strategic decisions a retailer makes are detim ing its target market and its financial objectives. Chapter 5 discusses how the selection of a retail market strategy requires analyzing the environment and the firm’s streng and weaknesses. When major environmental changes