Transcript BUS 287 RETAILING - Walla Walla Community College

BUS 287 RETAILING
Introduction
What is Retailing?
Different Types of Retailers
Retail Formats and Business Models
Customer Buying Behavior
Retail Market Strategies
Location & Layout Strategies
Planning & Buying Merchandise
Pricing Merchandise
Customer Service
BUS 287 RETAILING
Introduction
• Lecture and Class Discussion
• Breakout Groups/Projects
• Individual Presentations
• Learning Logs
• Guest Speakers
BUS 287 RETAILING
What is Retailing?
• Distribution channel function where
organization buys (reseller) or
manufactures (producer/seller) products to
sell to consumers
• Retailing involves sales of items to
consumers by organizations holding a
legal business standing (holding a
business license) and does not include
consumer to consumer sales like eBay.
BUS 287 RETAILING
What is Retailing?
The Three Basic Roles in Retaining-Retailer,
Consumer and Supplier (if retailer is a reseller
and not a producer/seller):
• Retailer wants to be able to buy (or produce)
products consumers want and then sell them at
a profit
• Consumers want to be able to buy an
assortment of products at reasonable prices
• Suppliers want opportunities to reach their target
market and establish/build on product demand
to increase sales/profit
BUS 287 RETAILING
What is Retailing?
• Retail industry 2nd largest in the U.S. with over
$3.8 trillion in sales annually ($4.2 trillion if food
sales included) (Manufacturing is 1st )
• Retail industry accounts for 12% of all U.S.
employment.
• 90% retail operations are single-store
businesses
• Wal-Mart, the largest retailer in the world
generated over $344 Billion in sales in a fiscal
year
BUS 287 RETAILING
What is Retailing?
• Consumers make up 70% of the U.S. Gross
Domestic Product and the Retail Sales Report is
a leading economic indicator of whether the
economy is growing or shrinking
• The Retail Sales Report gives a glimpse of what
the employment picture might look like, another
leading indicator that affects Gross Domestic
Product.
• The Retail Sales Report also provides individual
retailers with information that identify trends that
effect sales and profits
BUS 287 RETAILING
What is Retailing?
Retailer Concerns:
• Customer Satisfaction-keeping satisfied and loyal
customers through strong relationship building
• Acquiring Product Rights- seeking out suppliers with high
demand products and securing rights to sell those
products
• Product Presentation- establishing creative ways to
display and market merchandise
• Traffic Building- promoting methods to build customer
interest. Promotions that increase the number of visitors
to the store or website
BUS 287 RETAILING
What is Retailing?
Retailer Concerns: (continued)
• Layout- Setting up the physical layout of the store (or
design of website for online business) to create an
experience that will attract customers and optimize the
use of the facility (make the site easy to navigate).
Includes lighting, design, sound, etc. (easy navigation,
design, compatibility with user systems for online)
• Location- physical location needs to provide easy access
and high visibility (trade off between costs and benefits)
• Keeping Pace with Technology- utilization of customer
management software (tracking/trends), product
movement software (inventory controls), point of
purchase (scanners, kiosks, self-service checkout) and
online shopping carts, purchase recommendations and
customer purchases tracking
BUS 287 RETAILING
What is Retailing?
Breakout Group Assignment
• Research online the economic indicator- retail
sales report and share your information with
your group- include data from business
publications and government sources
• How is it used? What information does it share?
What are the current trends showing?
•
•
Try the site below to get you started:
http://www.schwab.com/public/schwab/research_strategies/market_insight/1
/4/schwab_guide_to_economic_indicators_retail_sales.html
BUS 287 RETAILING
Different Types of Retailers
Retail Categories Based on Marketing Decisions
• Target Market Served
• Product Offerings
• Pricing Structure
• Promotional Emphasis
• Distribution Method
• Service Level
Retail Category Based on Operational Factors
• Ownership Structure
BUS 287 RETAILING
Different Types of Retailers
Target Market Served:
• Mass Marketing- selling products to the largest market
possible-covering nearly all consumers (fiercely
competitive)
• Specialty Market- selling products to a targeted group of
consumers looking for advanced product options and/or
a higher level of customer service (not as large as mass
market, but still sizeable)
• Exclusive Market-appealing to discriminating customers
who are willing to pay a premium for features found in
few other products or that provide a high level of
personalized services (small number of retailers)
BUS 287 RETAILING
Different Types of Retailers
Product Offerings-measured by number of different
product lines and number of different products
within one product line
• General Merchandisers- carry a wide range of
product categories with limited options within
one product line
• Multiple Lines Specialty Merchandisers- offering
a limited number of product lines but offering a
greater selection
• Single Line Specialty Merchandisers- offer
limited product(s) within a single product line
BUS 287 RETAILING
Different Types of Retailers
Pricing Structure- classification based on general
pricing strategy
• Discount Pricing-sell low priced merchandise at a
low profit margin. Profits gained through volumes
of sale (Cost Controls)
• Competitive Pricing- monitoring price of
competitors and adjusting your price to be
competitive
• Full Price Pricing- targeting exclusive markets and
consumers where discount and competitive pricing
is not a factor. Using non-pricing factors like
service, quality, prestige to justify higher prices
BUS 287 RETAILING
Different Types of Retailers
Promotional Focus-based on the types of promotional technique
employers utilize to generate customer interest
• Advertising-traditional mass promotion efforts including
newspapers, television and internet advertising
• Direct Mail- utilization of bulk mailing through the postal
system including catlog mailing, promotional flyers and
postcards
• Personal Selling-utilization of one-on-one, person to
person customer service technique to establish strong
customer relations and persuade consumers to make
purchase decisions (often used for high-end products)
• Vending- Utilization of vending machines or vending
sites allowing a customer to not have to visit a physical
location to purchase goods
BUS 287 RETAILING
Different Types of Retailers
Service Level- utilizing customer service techniques that enhance or
simplify the purchasing experience. Level of service will also
influence business overhead costs thus influencing product costs
• Self-Service- allowing consumers to perform most or all
of the services associated with retail purchases- cost
benefits/no high pressure sales benefits- includes self
checkout, online purchasing, vending, warehouse stores
• Assorted-Service- where retailers offer some level of
service to consumers including handling point of
purchase transactions, product selection assistance,
arrangement of payment plans, loading/delivery/set up
• Full Service- where retailers handle all or nearly all
aspects of the purchase to produce added value to the
customer- usually connected to full price strategies
BUS 287 RETAILING
Different Types of Retailers
Ownership Structure-who owns the business?
• Individually Owned and Operated-ownership
structure where an individual or corporate entity
owns and operates one retail business or a
limited number of outlets
• Corporate Chain- multiple retail outlets owned
by a single entity and performing similar retail
activities (generally more than 5 retail outlets
constitutes a chain)
• Corporate Structure- large retailers
predominantly operating in a non-store retail
arena- online, vending, catalog
BUS 287 RETAILING
Different Types of Retailers
Breakout Group Assignment
Each member of the group will be assigned two retail
categories to research from the following: Target Market
Served, Product Offerings, Pricing Structure,
Promotional Emphasis, Distribution Method, Service
Level and each member will also be assigned to
research Ownership Structure
• Give an example of a business (local or national) that
falls within each example in your assigned category.
• How does their business fall within this example?
• Why do you think they chose this method?
BUS 287 RETAILING
Retail Formats and Business Models
Retail formats and business models help describe the retail
operation and businesses may fall within more than one
format (especially if their operation includes the internet)
• Mom & Pop- small, individually owned and operated
retail outlet catering to a local community generally with
a high level of service and a limited number of products
• Mass Discounters- general or specialized merchants
who focus on discount pricing with generally fewer
services and lower quality products
• Warehouse stores- form of discount store providing even
lower prices. Characteristics usually include larger
quantity/bulk item purchases, club memberships and
warehouse set up of the facility (Costco)
BUS 287 RETAILING
Retail Formats and Business Models
• Category Killers- expanded specialty stores with a larger
focus on a specialty line (Best Buy-electronics, Staplesoffice supplies)
• Department Stores- retailers offering general
merchandise at mid to high range prices with strong
levels of service (Sears, KMart) Could also include some
specialization of products (Nordstrom’s)
• Boutique- smaller retail store carrying specialized and
often high-end merchandise and in many cases utilizing
a full service/full price strategy
• Catalog Retailers- business relying on customers to
purchase items by placing orders on products marketed
through a mailed catalog and delivered by a third party
shipper.
BUS 287 RETAILING
Retail Formats and Business Models
• e-tailers- retailers whose principle sales are conducted
via the internet. Generally items are marketed with
picture and description and sellers have little or no stock
on hand. Retailers pass order on to their suppliers when
the customer order is made. e-tailers can also serve as a
marketing/sales point for a variety of selling and
supplying firms (Amazon)
• Franchise- form of contractual channel in which the
franchisor controls the business and activities of the
franchisee who pays fro the right to utilize their business
name, products, methods and other important business
aspects. Win-Win situation- franchisee has instant
business with recognition/support, franchisor has faster
expansion and franchisee fees for added capital.
BUS 287 RETAILING
Retail Formats and Business Models
• Convenience Store- general merchandise retailers
catering to customer purchase experience through easily
accessible stores, smaller stores with fast checkout.
Product selection is limited and pricing can be high to
pay for convenience.
• Vending- automated methods utilized to allow
consumers to make purchases and acquire products
quickly. Smaller/inexpensive items like food and
beverage items acquired through vending machines to
newer vending options that offer larger/more expensive
items and include internet/telecommunications
components allowing credit card payment options
BUS 287 RETAILING
Retail Formats and Business Models
Breakout Group Assignment
Research the following Walla Walla retailers: Earthlight
Books, Home Depot, Pepsi Cola, Subway, Dean Hoalst
Jewelers, Zip Zone, Radio Shack
• What retail format(s)/business model(s) do they each fall
under?
• Why do you think they chose these format(s)/model(s)?
Were they chosen or forced to choose based on their
circumstances?
• What are the advantages and disadvantages of each of
their choices?
BUS 287 RETAILING
Customer Buying Behavior
Why Consumers Buy?- to satisfy needs, wants
and desires
Key influences governing purchasing can be
broken down into three categories:
• Internal- perceptual filter, attitude, knowledge,
personality, lifestyle, motivation, roles
• External- Culture, groups and situation
• Marketing- product, promotion, price,
distribution, service
BUS 287 RETAILING
Customer Buying Behavior
Internal Influences
Perceptual Filter- how we see ourselves and the world
around us. Our personal sense of reality and stimulus to
that reality. Perception steps:
• Exposure- sensing stimuli (we see an ad for a new car)
• Attention- we make an effort to recognize the stimuli
(“looks like the new Mustang is out!”)
• Awareness- assigning meaning to the stimuli (humorous
Mustang ad made you laugh)
• Retention- adding the meaning to one’s own internal
makeup (Mustang must be a fun car to drive)
Marketing Implication- exposure must capture attention,
create awareness and retention, set apart from
competition
BUS 287 RETAILING
Customer Buying Behavior
Internal Influences
Attitude- what the consumer feels or believes about
something and how they will act on that belief (“wouldn’t
own a Chevy, they’re a piece of junk!”)
Marketing Implications- changing long established beliefs is
a hard task-what do they like about competing products?
How can our product be better aligned to meet their
needs? Price? Features? Service?
Knowledge-the depth of knowledge and experiences that
influence a consumer’s spending (“I’m sticking to buying
Ford products I just don’t know that much about these
new Acuras.”)
Marketing Implications- the need for retailers to educate
consumers and make them more comfortable in learning
new things
BUS 287 RETAILING
Customer Buying Behavior
Internal Influences
Personality- behaviors and personal characteristics that
define your self concept and the concept others have of
you (how you talk, how you react to things)
Marketing Implications- consumers make purchasing
decisions based on their own self concept requires
building a marketing strategy around these concepts (hard
to identify-example senior citizen who, by demographics
might be categorized as needing age specific items, may
want items to help them feel younger)
Lifestyles- the way we live through our activities we engage
in and the interests we express-what we value in life.
Marketing Implications- examining how consumers in your
targeted market live their lives and developing product
strategies that meet those needs (Hood River
Windsurfing)
BUS 287 RETAILING
Customer Buying Behavior
Internal Influences
Motivation- the consumers desire to reach a certain outcome and
the internal factors that motivate/detour a decision based on
these components (can I afford it, when should I buy it, am I
getting money’s worth, what happens if I make a bad decision)
Marketing Implications- How much effort will the consumer make in
exerting a decision based on these motivational factors, level of
consumer involvement paired with push to market items
Roles- the consumers role at the time of purchase serves as a
factor for purchasing decisions. (buying meeting snacks for a
meeting where the boss is attending may be different than buying
them for just the regular group.
Marketing Implications- Marketing that will show products will help
raise one’s status in the eye of others or degrading competition
BUS 287 RETAILING
Customer Buying Behavior
External Influences
Culture- Buying behavior that is shared behavior based on cultural
beliefs, and where sub-cultural customs/norms develop into group
shared values.
Marketing Implications- the need to incorporate cultural representation into
marketing strategies, developing cultural awareness of buying
behaviors, spot trends and capitalize through marketing tactics.
Group Membership- Consumers belong to many groups which share
certain characteristics that influence buying behavior. These groups
include social class, family and reference groups and most groups
contain an opinion leaders that influences group decision making.
Market Implications- Identifying and understanding group consumers is a
key strategy for retailers to market- identify target markets, develop
new products, create promotional materials that appeal to these groups
(and that they can identify with), utilizing opinion leaders as
spokespersons for products.
BUS 287 RETAILING
Customer Buying Behavior
External Influences
Purchase Situation- Influences on purchasing decisions
based on the situation the consumer finds themselves inphysical environment, emotional state, time constraints,
(situations can be both controllable and uncontrollable)
Marketing Implications- Retail Marketers can take
advantage of uncontrollable situations- promote other
products services, adjust prices, market the benefits of a
product in adding control to uncontrollable situations
(like auto service agreements) (selling sweatshirts at a
Mtn resort) (convenience store models-limited choices/
higher prices) (event/tourist sales promotions)
BUS 287 RETAILING
Customer Buying Behavior
Types of Consumer Purchase Decisions- Minor New Purchase,
Minor Repurchase, Major New Purchase, Major Repurchase
1.
2.
3.
4.
5.
Steps in Purchase Decision Making
Need/Want/Buy Recognition- internal and external
triggers that motivate the consumer to want to make the
purchase
Search for Information- searching out solutions to satisfy
the need/want/buy recognition
Evaluation of Options- evaluating these solutions as to
the best choice for purchase
Purchase- initiating and completing the purchase based
on best choice/available options
After Purchase Evaluation- post purchase evaluation of
the product purchased (return?, future purchase
decisions?)
BUS 287 RETAILING
Customer Buying Behavior
Breakout Group Assignment
Research and discuss each the seven internal and three
external influences in the purchase of the following
items:
1. Automobile (major repurchase)
2. Package of Gum (minor purchase)
3. A Pair of Jeans (minor repurchase)
4. Laptop Computer (major purchase)
What are the marketing implications for each in the areas
of product, promotion, pricing, distribution and service?
BUS 287 RETAILING
Retail Market Strategies
Strategic Retail Market Plans help retailers identify
and address:
• Shifting market conditions
• Changing customer needs
• Competitive threats
• Product life cycles/changes in product
• Opportunities for product innovation
• Advertising, pricing and promotion needs
• Business profit and loss/funding issues
BUS 287 RETAILING
Retail Market Strategies
Retail Market Plan Components• Organizational Mission- identification and focus on the
long-run vision of the business and what they hope to
achieve
• Objectives- specific expectations of the marketing
efforts in the terms of long and short term goals
• Marketing Strategy- decision making strategies to
accomplish objectives inclusive of action steps and
timeframes to achieve these goals
• Tactical Programs- day to day actions to undertake to
make and implement major marketing decisions
• Marketing Budget- resources allocated to plan and
implement marketing tactics including money, space,
time, personnel, etc.
BUS 287 RETAILING
Retail Market Strategies
Types of Marketing Strategies
General Marketing Strategies- strategies that set the
direction for all marketing efforts by describing how the
market will achieve objectives. Divided into 5 categories:
Market Expansion, Market Share Growth, Niche Market,
Status Quo, Market Exit.
Decision Area Strategies- strategies used to achieve
General Market Strategies by guiding decisions in
specific important marketing areas (through tactical
programs)- product, pricing, distribution, promotion,
target market
BUS 287 RETAILING
Retail Market Strategies
General Market Strategies
Market Expansion- strategy to grow overall sales through two
methods- growing sales of existing products (increase existing
customer purchases, develop new customers, expand sales
market) and growing sales of new products (updated and refined
products, product extensions/accessories, introduction of new
products never marketed before)
Market Share Growth- strategy to increase retailer’s overall
percentage of the market share by taking business away from
competitors, often including aggressive marketing tactics
Niche Market- strategy to obtain a lead position/control over a
specific segment of the market through provision of a product,
marketing strategy, price or customer service level unique to the
market.
BUS 287 RETAILING
Retail Market Strategies
General Market Strategies (continued)
Status Quo- strategy that looks at maintaining the
business’ current position in the market- market share
Market Exit- Strategy that looks to remove the product
from the retailer’s product mix by- selling the product to
another retailer, or just eliminating the product.
BUS 287 RETAILING
Retail Market Strategies
Decision Area Strategies
Strategies used to achieve general market strategies within market
areas of product, pricing, distribution, promotion and target
market (examples below)
• Product Strategy- development of a new or enhancement of an
existing product
• Pricing Strategy- quantity discounts, trade in allowances, sales
volume incentives for sales persons
• Distribution Strategy- utilization of distribution partners in sales,
product delivery/set up
• Promotion Strategy- product awareness plans, advertising plans
• Target Market Strategy- target market segmentation or
expansion of sales area
BUS 287 RETAILING
Retail Market Strategies
Breakout Group Assignment
There are many articles on the internet regarding the
marketing strategies of WalMart in their bid to be the
leading retailer in the world. Research and read over
these articles and share your information with your
group.
• What are their strategies? (General and decision making
strategies in all categories covered in the class)
• How effective have they been?
•
Try the site below to get you started:
•
http://www.articlesbase.com/management-articles/marketing-managementin-walmart-1919747.html
BUS 287 RETAILING
Location and Layout Strategies
Location Strategies
Retail business location is a critical factor to
business success and market area analysis and
location strategies play a key role in the
development and implementation of a retail
business. Critical factors to consider in
determining an appropriate business location
include:
• Market Size and Shape
• Market Area Economic Definition
• Market Area Competition
• Market Area Intersection and Union
BUS 287 RETAILING
Location and Layout Strategies
Location Strategies- Market Size and Shape
Market Area- area in which a retail operation draws its
customers- including components of transportation,
accessibility, supply/demand
Market Threshold- minimum demand necessary to support
an economic activity
Market Range- distance consumers are willing to travel to
make purchases/distance feasible for suppliers to ship
products
Market Shape- market range (radius) in which retail facility
provides optimum service in meeting demand
(determinant of need for additional facilities)
BUS 287 RETAILING
Location and Layout Strategies
Location Strategies- Market Area Economic Definition
A market area can be influenced based on the relationship between
supply and demand and demand can be influence by the following:
• Utility-level of need can affect fluctuation of demand and vary
according to income/economic cycles (necessities like food fluctuate
little, more frivolous items may have a greater fluctuation)
• Income Level- area income, especially disposable income can effect
purchasing power of the location
• Inflation- decreases purchasing power of area sees a growth in
money supply without an equal growth in income
• Taxation- sales and other area tax structures can add inhibitors to
market influence
• Savings- available capital in a market area to support business costs
Supply can be influenced by- Profits and Competition
BUS 287 RETAILING
Location and Layout Strategies
Location Strategies- Market Area Competition
The core foundation to competition is price and the strategies for
location of a retail facility can have a major impact on the price
element. Two of the most common elements are:
• Market Coverage- market area sectors that address customer
density, transport costs and location of competitors (examples fast
food, restaurants, convenience stores)
• Range Expansion- existing location expansion with complimentary
goods and service offerings aiding in customer convenience
(examples strip malls, shopping malls, service centers, full service
department stores-complementary goods/diversity of product/other
amenities)
• Reilly’s Law- Law of Retail Gravitation
• Huff’s Law- Probability Customers with Use a Specific Retail
Location
BUS 287 RETAILING
Location and Layout Strategies
Location Strategies- Market Area Intersection and Union
The evaluation of retail market areas by the measurement of GPS
intersections and union of customer flow:
• Concentric Circles- radius around a retail center where customers
are willing to travel to make purchases
• Share by Polygon- zonal level data (such as zip code) that
measures market share from each zone within the center’s radius
• Star Map- customer radius data measured by straight lines
marketed between the retail center and identified customers
• Spatial Smoothing- density map showing customer location in
relationship to retail center
• Transport Distance- drive time distance measurement for customers
to retail center
• Manual Polygon- common sense judgment of customer relationship
to retail center radius based on local knowledge
BUS 287 RETAILING
Location and Layout Strategies
Layout Strategies- Basic Components
The goal of any retail location is to draw customers into the store and
persuade them to make a purchase. Advertising and promotion bring
them in, making purchases after they come in is influenced greatly
by the store’s design and layout. Effective store layout relies on
three basic components:
• Image/Sensory Appeal- display and merchandizing, signage,
appealing to all of the senses (sight, sounds, smell, touch, taste).
Creating an experience- appealing, convenient, service oriented
• Methodology of Presentation- product grouping, product
placement/shelf layout, store layout and design, store security
• Optimum Utilization of Space- optimum product display
areas, effective storage/stockroom areas
BUS 287 RETAILING
Location and Layout Strategies
Layout Strategies- Store Layout Designs
Store layouts are chosen based on the store type and experience the
retailer wishes to present. Layout Designs include:
• Free Flow Layout- combination of racks, shelves allowing ease in customer
browsing and employee access to customers-Issues: may seem cluttered and
unorganized
• Grid/Diagonal Pattern Layout- multiple rows of items with rigid structure
utilizing end displays to feature goods-Good to familiarize customers with layout
and promote repeat sales
• Spine/Mixed Floor Layout- incorporation of both free flow and grid/ diagonal
floor plans
• Mouse Trap Layout- guiding customers to specific locations by development
of a designated route through the store (often used in furniture stores)
Essentials and Impulse Item Layouts- placement of essential items in areas
that force customers to travel through the store to seek them out. Placement of
impulse items at the front of the store and other well traveled areas.
BUS 287 RETAILING
Location and Layout Strategies
Research and examine retail store location within the Walla Walla
County area:
• How are stores clustered to meet the needs of county residents?
Residents within the radius of their market share?
• Discuss the possible location strategies in the development of the
location for the following:
– Inland Octopus, Panda Express, Big 5/Petco, Taco Bell
Research and examine retail store layout strategies for the following
types of businesses in Walla Walla County- Big Box Store,
Supermarket, Clothing Store, Electronics/Cell Phone Store
• Why do you think they chose the layout they did? What are the
advantages?
BUS 287 RETAILING
Planning and Buying Merchandise
Retail planning and buying of merchandise is a complex process
requiring planning and decision making in the following areas:
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Market Approach
Merchandise Planning
Inventory Planning
Purchase/Financial Planning
Sales Planning
Inventory Controls
Subjective Retailing- planning and buying based on productorientation and driven by views of consumer likes and dislikes
Objective Retailing- planning and buying that is consumer-oriented
and based on measurable data of consumer likes and dislikes
BUS 287 RETAILING
Planning and Buying Merchandise
Market Approach
The market approach planning and decision making process
involves identification of retail customers and market share
• Where- trading area from which retailer will attract customers
• Who- demographic descriptions and profile of potential
customers
• What- the types and kinds of merchandise that will attached
these potential customers
• When- the timeframes and frequency in which customers will
make purchases
• Why- examining habits, lifestyles and other psychological
factors that influence consumer purchases
BUS 287 RETAILING
Planning and Buying Merchandise
Merchandise Planning
Merchandise Planning is the planning and decision making process that is
driven the purchasing timeframes usually developed in six-month cycles
and monitored on a monthly basis. Merchandise Planning includes
consideration of:
Net Sales- realistic dollar estimate of your monthly sales: factors- past
experience, business/economic conditions, competition, promotions,
profit opportunities and availability of merchandise
Stock Ratio- estimates of sufficient stock on hand to permit satisfactory
selection for customers: Factors-weekly sales compared to inventory
turnover
Inventory Reductions- reductions in retail value of inventory caused by
markdowns, discounts, stock shortages that lower retail value of
inventory
Purchase Need Estimates- dollar value estimates of what is needed to
replenish stock computed by subtracting dollar value of stock on hand
from planned net sales
Open-to-Buy- the difference between what was planned for purchase and
what is needed for purchase with the remainder (if any) open to purchase
reorders, fill-ins or take advantage of unexpected market opportunities
BUS 287 RETAILING
Planning and Buying Merchandise
Inventory Planning
Identifying and procuring an assortment of products that will satisfy the
wants and needs of the target market.
Division of Stock planning by:
Category of Merchandise- determination of broad types of
merchandise to be sold in the store (Men’s Clothing, jewelry, office
items)
Classification- smaller and more defined merchandise units within a
broad category range (Men’s Suits, necklaces, computer paper)
Sub-classification- units within a classification that narrow down
specific merchandise (Double Breasted Suit, diamond necklaces,
card stock paper)
Unit Stock Plan- quantities by price, size and color
Model Stock/Basic Stock List- musts or never out items
BUS 287 RETAILING
Planning and Buying Merchandise
Purchase/Financial Planning
Purchasing Based on Inventory Plan- multiply the number of items in
the inventory plan by the price line to determine the dollar value of
planned inventory
Purchasing Based on Market Penetration- having items stocked when
customers want to buy them (pre-planning for dated/seasonal items
with set delivery times to ensure proper delivery)
Purchasing Based on Available Financing- determining the dollar value
of merchandise needed to restock examine- model stock restocking
requirements, stock on hand values, values of stock commitments,
open to buy options for reorders, fill-ins, and market opportunities
Other Considerations- reductions: planned markdowns, shrinkage,
discounts; diminished demand stock: loss of profit, resale, liquidation
BUS 287 RETAILING
Planning and Buying Merchandise
Sales Planning
Sales Plan- closely allied with buying plan, formulated once
merchandise is purchased to ensure the sale of greatest number of
units during customer acceptance of the item(s). Selling plans
should detail:
• When items should be promoted/advertised (sales/displays, etc)
• When the inventory should be peaked (time frame and quantity)
• When reorders should no longer be placed
• When markdowns for regular stock should be taken
• When item should no longer be stocked
Referred to as the ebb and flow of merchandise- when the old must go
and the new take its place.
BUS 287 RETAILING
Planning and Buying Merchandise
Inventory Controls
To maintain in-stock position of wanted items and dispose of unwanted items a
sound inventory control plan should be in place some simple forms of unit
control include:
•
•
•
•
Visual examination of stock on hand: to determine order needs
Tickler Control: segmented physical count of inventory
Stub Control: price ticket stubs measured when item is sold
Click Sheet Control: recording sales at time of purchase
More advanced forms of unit control include:
• Point of Sales Terminals: computer generated unit control
measuring sales and providing report to buyers (Off-line Point of
Sales reports generate unit control sales figures directly to suppliers)
• Manufacturer’s Inventory Controls: representative of stock
supplier completes on site inventory, restocks, removes old items
BUS 287 RETAILING
Planning and Buying Merchandise
Research and examine the challenges for planning and
buying merchandise for the following stores:
• Bi-Mart
• Waitsburg Grocery
• Costco
What strategies would they share?
What strategies would be unique to a specific store?
BUS 287 RETAILING
Pricing Merchandise
Factors to consider in determining prices for merchandise:
• Cost of Merchandise- what was the amount paid for the
product, plus shipping and handling expenses?
• Operating Expenses- what it costs to run the businessoverhead, payroll, marketing and supplies?
• Profit Margin- what type of profit would you like to make
and is your target market willing to purchase the product
at that price?
• Competition- do you have competitive retailers who
market the same price and what are they charging?
• Pricing Strategy- What pricing strategy will you use to
secure your market share?
BUS 287 RETAILING
Pricing Merchandise
Pricing Strategies
• Mark-up Pricing- addition of a pre-set (often industry
standard) profit margin, or percentage to the cost of
merchandise (needs to include adjustments for
reductions, discounts, shrinkage and other possible
expenses and still achieve a satisfactory profit)
• Manufacturer Suggested Retail Price (MSRP)- prices
set the vendor taking the retailer out of the decision
making process. Limits advantage for competition but in
small markets it can allow a decent profit while avoiding
price wars.
BUS 287 RETAILING
Pricing Merchandise
Pricing Strategies
• Competitive Pricing- Pricing strategy based on and determined by
competitors pricing including:
– Match Pricing: pricing at the same rate of your competitors or offering to
match competitor prices (requires customer loyalty, provision of
outstanding customer service, more convenience or some other draw
that will keep consumers from shopping somewhere else)
– Pricing Below Competition: reviewing competitor prices and offering
products at a lower price (requires strong vendor negotiations for prices,
higher volume of sales, reduced costs or willingness to provide pricing
specials at a loss to build business in other areas)
– Prestige Pricing- pricing above competitor prices when location,
exclusivity, or unique customer service can justify higher prices
BUS 287 RETAILING
Pricing Merchandise
Pricing Strategies
• Psychological Pricing- manipulation of pricing levels to a certain
level where consumers feel the price is fair or better than the
competition (odd-pricing: using figures like 5, 7, or 9 at the end on a
price where consumers tend to round off $9.95 to $9.00 rather than
$10.00)
• Multiple Pricing- selling more than one product at one price such
as three items of a $1.00. Encourages consumers to buy in larger
quantities and works well for markdowns and sales events.
Bundling: provision of a discount for purchasing a quantity of items
($1.19 each or 10 for $10.00)
• Membership/Trade Discounting- proving discounts and rewards to
frequent customers (Albertson’s cards, Costco membership)
BUS 287 RETAILING
Pricing Merchandise
Pricing Strategies
• Versioning- popular in services and technical products
where a product is offered in two or three different
configurations- such as a trial or basic version (at little of
no cost) with upgrades or more services available at a
higher price (computers, phone services)
• Keystone- inflating or doubling the price of a product
with a high demand level and then adjusting the price as
the demand for the product diminishes. Limiting: a
version of Keystoning where product supply is limited
and high demand for the product drives up the price of
the product
BUS 287 RETAILING
Pricing Merchandise
Discount Pricing Strategies
• Price Reductions– Markdowns
– Coupons/Rebates
– Closeouts/Seasonal Pricing
• Loss Leaders- merchandise priced below cost to
encourage consumers to come to the store in hopes they
will purchase other higher priced items. Reasoning:
– Reduction of overstock
– Brand Awareness
– Increased Traffic
Must still fall under good pricing practices/Loss leaders in
some cases are considered illegal business practices
BUS 287 RETAILING
Pricing Merchandise
Discount Pricing Strategies-Pros and Cons
• Pros:
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Increased unit sales
Competitive edge
Development of new customer base
Word of mouth advertising
Inventory reduction strategy/Shelf-life factors
• Cons:
• Less money per unit sold
• How does it effect long-term profit?
• Low Price/Low Quality Trap- Consumer association low price=low
quality
• Fragile Market Share Trap- conditioning consumers to always switch
to the next lowest price (no customer loyalty built)
• Shallow Pockets Trap- more solvent businesses have greater staying
power when cutting prices (match your discount and wait you out)
BUS 287 RETAILING
Pricing Merchandise
Research and examine sales ads for area businesses (include internet ads
and ads from both Walla Walla and Tri Cities) Share and discuss ads
that you found that incorporate the following pricing strategies:
• Competitive Pricing (2 or more ad comparison)
• Manufacturers Suggested Retail Price
• Prestige Pricing
• Multiple Pricing
• Discounted/Loss Leader Pricing
• Versioning
-Why do you think they chose the pricing strategy they are using?
-What factors would they have considered in making the choice?
-What issues might they face by making this choice?
BUS 287 RETAILING
Customer Service
• Customer Service vs. Customer Satisfaction (What are
you really working toward?)
• Total Customer Value- bundle of benefits customers
expect from a given product or service
• Total Customer Cost- bundle of costs customers expect
to incur in evaluating, selecting, purchasing and using a
product or service
• Customer Delivered Value- the difference between Total
Customer Value and Total Customer Cost
• Key is to maximize Customer Delivered Value
BUS 287 RETAILING
Customer Service
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The Key to Customer Satisfaction
Understanding the customer is your boss and that you would not
have a business without them
Listening to the customer and giving them your undivided attention
Identifying and anticipating customer needs and providing solutions
for those needs- both product and emotional needs
Make customers feel important and appreciated
Help customers understand how your products and services work,
make access to them easy and enjoyable
Give more than what is expected- take a “can do” attitude and
apologize for and correct mistakes (the platinum rule)
Get regular feedback from customers
Treat your employees well- their attitude will reflect in the customer
services provided
BUS 287 RETAILING
Customer Service
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Building the Framework for Solid Customer Service
Vision and mission statements that reflect your customer service
philosophy and our shared by employees and shared with customers
Pledge and promise to provide timely and quality service and keeping
those promises
Ready access for customers to the tools and people they need to make
a successful and enjoyable customer experience.
Seamless service delivery that links departments and employees to
one common goal- customer satisfaction
Front line authority to make decisions and resolve problems that effect
customers at the point of service
Develop systems that provide service above and beyond the sale
Provide a forum that allows customers to provide feedback
BUS 287 RETAILING
Customer Service
The Voice of the Silent Customer
• Fewer that 10% of dissatisfied customers will complain to a business
about poor customer service- they just won’t come back
• Flawless Customer Service involves- convenience, trust and
concern for the customer
• Proactive solicitation of customer feedback is vital to business
success– Initial greeting: helpful but not pushy, available but not hovering
– Ongoing support: answering questions, being available, showing
undivided attention, observation and customizing of services
– Point of sales: show appreciation, solicit feedback of services
– Sales follow up: continued contact with customer after the sale, getting
to know your customers and their buying habits, personalizing services
BUS 287 RETAILING
Customer Service
Customer Service Quotes
“Customer Service is not a department, it’s an attitude!”
“The most successful enterprises of the future will be those with the
right blend of high-tech with high-touch” Bill Gates
“Sales without customer service is like stuffing money
in a pocket full of holes”
“Quality in a service or product is not what you put into it. It is what the
client or customer gets out of it!”
“There are no traffic jams along the extra mile!”
BUS 287 RETAILING
Customer Service
What role does customer service play in your choice of
services for the following:
1. Les Schwab versus WalMart Tires
2. Super One Foods versus Harvest Foods
3. Starbucks versus Dutch Brothers
4. Walgreen’s versus BiMart
5. Mr. Ed’s versus Mill Creek Brew Pub
How important is the quality of customer service in making
the choices from the above list?
What other factors other that customer service influence
your choice from the above list?