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  lOMoAR cPSD| 58097008 Retail Management  Exam 1 Study Guide  Jackie Ortiz 
Chapter 1: Intro to Retailing  List of Retailers: 
- Hannaford, American Apparel, Target, Walmart, Amazon.com, QVC, Hilton, Red Box,  hair salons, airlines  What is retailing? 
 A set of business activities involved in adding value to the goods/services sold to  ultimate consumers  What is a retailer? 
 A business that adds value to the goods/services sold to ultimate consumers 
Example: Red Box adds the value of convenience by using a simple kiosk  Scope of Retailing 
Walmart ---------------------------------------------------------------------- Red Box  - Huge, global retailer   - Merely a small kiosk  -  Ex. Macy’s, Best Buy   - Ex. Fashion boutique  - Undertakes all traditional   - Focuses on buying &   Business activities   Selling goods 
Supply Chain/Channel of Distribution 
 MANUFACTURER WHOLESALER RETAILER FINAL CONSUMER 
Vertical Integration: when a company/business acts as more than one position in supply  chain 
Example: American Apparel 
 They produce their own clothing locally, distribute it locally and sell it 
locally as well all under their own business 
Backward Integration: either a retailer or wholesaler working with a wholesaler  or a manufacturer      lOMoAR cPSD| 58097008
Forward Integration: either a manufacturer or wholesaler working with a  wholesaler or a retailer 
MANUFACTURER WHOLESALER RETAILER CONSUMER 
  Ralph Lauren BJ’s Wal-Mart Levi’s Sam’s  Club Target 
 Ralph Lauren and Levi’s have their own retail stores as well 
MANUFACTURER RETAIL = FORWARD INTEGRATION 
 BJ’s and Sam’s Club have consumers that go directly to their store for food 
WHOLESALER CONSUMER = FORWARD INTEGRATION 
 WalMart doesn’t need wholesalers so they buy straight from manufacturer 
RETAILER MANUFACTURER = BACKWARD INTEGRATION  What do retailers do? 
- Retailers add value to their product o Ex. If I purchase a t-shirt from a 
manufacturer, it will probably be around 
$7. Whereas if I purchase it from American Apparel, it has been marked 
up and also has the brand name on it. Therefore, the retailer has added  value to the product. 
- Wholesalers and retailers add value and offer convenience to consumer 
How do retailers increase the value of their products? (Roles of Retailers) 
(1) Holding inventory for the consumers (the store acts as a warehouse) 
(2) Providing assortment (buying multiple different items in the same place) 
(3) Breaking bulk (retailers break up product from bulk packages from wholesalers 
and sell it individually to consumers) 
(4) Provide services (consumers can examine the product, pay with credit, get  information about product)  Why study retailing?  - Huge impact on economy 
o US retail stores represent 1/3 of total economy 
- Major source of jobs o 1 in 5 US workers is employed by retailers 
- Rising retailer power in supply chain o Manufacturer used to hold  power, now retailer does      lOMoAR cPSD| 58097008
- Implications for fashion business (Fashion sector is 1/3 of US retail 
stores) Chapter 2: Types of Retailers  Retail Mix Elements:   
1. Merchandise (variety/assortment)   
a. Variety: broad vs. narrow 
a.i. The number of merchandise categories (ex. Computers, dress,  motorcycles, makeup)   
b. Assortment: deep vs. shallow    b.i. 
The number of items in a category; SKU – stock keeping unit 
(ex. Selling cellphones but having iPhones, droids, flip phones)  2. Services Offered  3. Retail Pricing  4. Ambience  5. Location 
Example: Retail Mix- Supermarket 
1. Merchandise: extensive width and depth of assortment; average quality; private  and generic brands 
2. Atmosphere and services: Average  3. Prices: competitive  4. Location: neighborhood 
5. Promotion: heavy use of newspapers, flyers and coupons  Food Retailers  Channel Preference 
1. Conventional Supermarket (Shoprite, Hannaford)  2. Supercenter (Wal-Mart) 
3. Warehouse (Sam’s, BJ’s)   
1. Supermarkets (most preferred) 
 A large, self-service retail food store offering groceries, food, and  some non-food items 
Limited Assortment Supermarkets: extreme value food retailers  Ex. Aldi German retailer 
Issues in Supermarket Retailing:      lOMoAR cPSD| 58097008
 Competition from low-price stores (efficient distribution, low  prices and cost) 
 Competing formats: Supercenters, warehouse clubs, convenience  stores  Supermarket Survival Pack  - Emphasize fresh perishables 
- Target health conscious and ethnic customers 
- Offer more private label brands 
- Provide a better in-store experience    2. Supercenters 
 A large store that combines a supermarket with a full-line discount  store 
Hypermarket: concept originated from France; focus more on freshness 
and have large portions of food  Issues in Supercenters: 
 Fastest growing retail category 
 One stop shopping experience Challenges in finding location 
 Backlash against large retail stores 
• Drive local retailers out of business  • Offer low wages  • Provide non-union jobs 
• Have unfair labor practice    3. Convenience Stores 
 Provide a limited variety/assortment of merchandise at convenient 
location (Ex. Pilots, Hess, 7 Eleven)  Advantages:  o Convenience  o Long hours 
o Availability of both fill-in items and gas  Issues in Convenience Stores 
 Increased competition from other formats  • Solutions: 
• Try to decrease dependency on gasoline sales 
• Tailor assortments to local markets 
• Make stores even more convenient to shop in      lOMoAR cPSD| 58097008
• Add new services (Café, ATM, sell movie tickets)    4. Warehouse Clubs 
 A retailer that offers a limited and irregular assortment of food and 
general merchandise with little service and low prices 
Low prices are possible because:   Use low-cost locations 
 Have inexpensive store designs 
 Offer little service (salespeople)   Sell large quantities 
 Carry a limited assortment of fast selling items  • Keeps inventory costs low 
General Merchandise Retailers    1. Department Store 
 Retailers that carry a broad variety and deep assortment and offer 
customer services and organize their stores into distinct departments 
Issues in Department Store Retailing:  o Competition 
 Inconvenient location: discount store are big competition 
 Diminishing customer service: specialty stores competition 
 Not successful in reducing costs: discount & specialty stores 
o What to do with an eroding market 
 Increase the amount of exclusive merchandise (private label) 
 Develop strong images for stores and brands (TV ads, etc.)   Increase discount sales 
 Participate in multichannel retailing   
2. Full-line Discount Stores 
 Retailer that offers a broad variety of merchandise, limited services and  low prices 
Only Big 2 left: Wal-Mart and Target/Wal-Mart becoming supercenter 
Competition from Category Specialists/Killers      lOMoAR cPSD| 58097008   3. Specialty Stores 
 A retailer that concentrates on a limited number of merchandise 
categories with high level of service 
o Offers deep assortment but narrow variety    4. Drugstores 
 Specialty stores that concentrate on health and personal grooming  merchandise 
o Competition from pharmacies in discount stores 
 Ex. Walgreens inside a Wal-Mart o Strategies against  competition: 
 Provide more products (ex. Groceries) 
 Provide more services (ex. Health care assistant)   
5. Category Specialist/Killer  
 Big box store that provides narrow but deep assortment of merchandise 
Ex. Staples, Best Buy, Home Depot o These retailers are so big that 
they can wholesale to business customers and retail to consumers   
6. Extreme-Value Retailer 
 Small discount stores that offer a limited merchandise assortment at  very low prices    7. Off-Price Retailer 
 Offers inconsistent assortment of brand-name merchandise at  significantly low prices 
Ex. TJ Maxx, Burlington, overstock.com o  Outlet stores 
o Opportunistic buying (how they get their product from other stores)   Production overruns   Canceled orders   Forecasting mistakes   Close-outs Irregulars  Service Retailers  Merchandise/Service Continuum      lOMoAR cPSD| 58097008
Wholesale club – Supermarket – Category specialist – specialty store – optical center – 
restaurant – airline – bank/university 
*Wholesale is all goods/no service 
*Banks are all service/no goods 
Characteristics of Service Retailing  1. Intangibility 
a. Hard for customers to evaluate a service beforehand 
b. Hard for large company to control service quality as opposed to product  quality 
2. Simultaneous Production & Delivery 
a. No second chance given to service retailers 
b. Difficult to reduce costs through mass production  3. Perishability   
a. Retailers must match supply & demand (ex. Airline seats, hotel rooms) 
a.i. Why? Service retailers have capacity constraint and demand for  service varies over time 
b. Use programs to match demand and supply (ex. Prices, hours, staffing) 
(ex. Prices: movie tickets may be more expensive at night when people go  to the movies more) 
4. Inconsistency of the Offering   
a. Providing consistent high quality is challenging  Retailers by Ownership  Types:  - Independent  - Corporate  - Franchise  Franchising 
- More than 40% of US retail sales 
- Franchisee pays fixed fee plus a royalty (% of all sales) 
- Franchise contract o Franchisor: provide assistance in locating/building store, 
developing the product/service, training managers, ads 
o Franchisee: operates the store in accordance with procedures prescribed  by the franchisor      lOMoAR cPSD| 58097008     Franchisor    Franchisee  Advantages  - Rapid expansion 
- Initial services offered by franchisor  - Receives royalty  - Established proven product  - Highly motivated 
- Business and technical assistance  franchisees do good job  - Company owned units  - High royalty fees  may be more  - Mandatory participation in  profitable  promotional services  Disadvantages 
Benefits Provided by Store Channel  - Browsing  - Touching and feeling  - Personal service 
- Entertainment and social interaction  - Immediate gratification  - Risk reduction 
Benefits Provided by Internet Channel  - Convenience  - Broad/deep assortments 
- Extensive and timely information 
- Personalization (vs. personal service) o Live chats 
o Product suggestions/recommendations 
- Information for solving problems, not just merchandise characteristics o Product  reviews o Virtual communities 
The Multichannel Retailer 
 A retailer that sells merchandise or service through more than one channel 
Why are retailers using multiple channels? 
 Consumers can buy what they want, when they want it, wherever they want 
Ex. Store, kiosk, catalog, call center, web, phone 
“Omnichannel” Retailing 
 Retailers integrate disparate channels into a single seamless omnichannel experience 
Changes in Retailer’s Jobs      lOMoAR cPSD| 58097008 Traditional  Jobs  Omnichannel  Stock right products  Products  Customize products  Mass-market ad, promotions  Shoppers Awareness 
Mobile marketing, social media  In-store sales promotions  Shoppers Experience  Customized promotion, mobile  checkout, etc.  Summary of Exam 1  Chapter 1 
- Retailers add value to goods/services sold to ultimate consumers 
- Supply Chain: Manufacturer Wholesaler Retailer Consumer 
- Vertical integration (American Apparel)  - Four roles of retailers 
- US retail stores represent 1/3 of economy and employ 1 in 5 people  Chapter 2  - Retail Mix (5 elements)  - Food Retailers: 
o Supermarkets: most preferred, offer groceries and 
nonfood items o Supercenters: combines supermarket with 
full-line discount store o Convenience: limited 
assortment/connected with gas stations o Warehouse 
clubs: irregular assortment, little service, low prices      lOMoAR cPSD| 58097008
- General Merchandise Retailers: 
o Department store: only retailer with negative sales o 
Full-line discount: Wal-Mart and Target o Specialty stores o 
Drug stores o Category specialist o Extreme Value o Off- price (TJ maxx) 
- Service Retailers o 3 Characteristics that separate them from merchandise  retailers: 
 Intangibility (can’t touch or evaluate the product) 
 Simultaneous production & delivery (no second chance) 
 Perishability (match supply & demand/hotel rooms ex.) 
 Inconsistency of the offering (can’t always provide  consistent high quality) 
- Retailers by Ownership o Independent o Corporate o Franchise 
 More than 40% of US retail sales are from franchises 
 Franchisor helps set up business and train; receives $ from  franchisee 
 Franchisee operates the store, also pays fixed fee and royalty