Pro Deo et Patria

Dr. Solomon U. Molina College, Inc.

Villaflor, Oroquieta City
“A Prime Mover in Creating Quality Life and Life-long
School ID: Education”
405130/10107

SY 2023-2024

RETAIL MANAGEMENT
(chapter 3 &4)

Chapter_3

I. Retail Customers
An individual or entity that purchases goods or services from a retailer for personal or business
consumption. These customers can be found in various types of retail environments, including brick-
and-mortar stores, online marketplaces, and e-commerce platforms.

Retailing Inside Story

NAICS

Stands for the North American Industry Classification System, a classification scheme
developed by the US, Canada, and Mexico, for which to collects data on business activity in
each country.

Retailers Satisfying their Customer

Provide exceptional products and services to create a positive customer experience and
encourage repeat business. Establish loyalty programs to incentivize customers to return for
future purchases and maintain their loyalty.

Supermarkets

A conventional supermarket is a self-service food store offering groceries, meat, and produce
with limited sales of nonfood items, such as health and beauty aids and general merchandise.
Whereas conventional supermarket carries about 30,000 SKUs, limited assortment
supermarkets, also called extreme value food retailers.

Department Stores
 Retailers that carry a broad variety and deep assortment, offer customer services, and
organize their stores into distinctly separate departments for displaying merchandise.
Traditionally, department stores attracted customers by offering a pleasing ambience,
attentive service, and a wide variety of merchandise under one roof.
Department stores chains can categorize into three tiers;
 First Tier – include upscale, high fashion chains with exclusive designer
merchandise and excellent customer service.
 Second Tier – traditional department stores, in which retailers sell more modesty
priced merchandise with less customer service.
 Third Tier – a value-oriented tier caters to more price- conscious consumers.

Discount Stores

Retailers that offer a broad variety of merchandise, limited service, and low prices. Discount
stores offer both private labels and national brands, but these brands are typically less fashion
oriented than the brands in department stores.

Office- Supply Retailers

ACSI scores of the office supply retailers fell and dissatisfied customers have inflicted much
punishment on office depot. Th company close more than 100 stores over the next few months
in an effort to avoid bankruptcy.

Banks

Covers satisfaction with checking, savings, and personal loan accounts, mortgages had
probably not yet had an impact on the quality of these banking services.

Social
Population Trends
Trends

Economic
Trends

Market Segmentation
 The practice of dividing your target market into approachable groups. Market segmentation
creates subsets of a market based on demographics, needs, priorities, common interests, and
other psychographic or behavioral criteria used to better understand the target audience.

Service Retailing

Service retailers are retailers who deal with products that are categorized as services. These
retailers may be involved in hotel industries, hospitals, restaurants, salons, airlines, movie
theaters, or colleges. Service retailing requires the participants to offer quality services to
keep and attract new customers.

Population Trends

Retailers often find it useful to group consumers according to population variables, such as
population growth trends, age distributions, ethnic makeup, and geographic trends.
 Data is often linked to marketplace needs.
 The data is readily available and can be easily applied in analyzing markets.

Population Growth

The retail fabric of cities responds to demographic, technological, behavioral, and

entrepreneurial change. In general, retailers choose their locations in response to market
conditions. If the population and income mix of a particular area constitute an appropriate
market for retail goods, retailers will attempt to move in. At the same time, the spatial pattern
of retail groupings relates to the transportation technology of the time. When mobility was low
(that is, before the era of the automobile), retail activities tended to concentrate; as mobility
increased throughout the postwar era, retail activities tended to become more dispersed. At a
finer scale, consumer preferences for particular goods and locations and entrepreneurial
decisions in response to those preferences help determine the growth and decline of retail
areas. Certain urban shopping areas go in and out of fashion for particular groups.
Meanwhile, investment decisions are based on entrepreneurs' evaluation of the prospects of
the market over time.

Implications for Retailers

As a result of the retailer's gatekeeping, the change in the negotiated wholesale price only
depends on the manufacturer's individual benefit, whereas the change in the retailer's optimal
retail price is associated with the channel-wide benefit. When the impact of quality relative to
retail price on demand is higher, the retailer benefits more from her gatekeeping activity, thus
having a greater incentive to take on the quality gatekeeping responsibility.

Age Distribution
 In population studies, the proportionate numbers of persons in successive age categories in a
given population. Age distributions differ among countries mainly because of differences in the
levels and trends of fertility.

Geographic Trends

The location of consumers in relation to the retailer will often affect how they buy. In this
section of overall population trends, we take a closer look at how geographic trends affect
retail operation.

Shifting Geographic Centers

In recent years, some cities have experienced significant growth in terms of command and
control functions of cities, and thus have managed to relocate themselves to a much upscale
position in the global economy. The main goal of this study is to examine the command-and-
control function of cities and the impact of the relocation of corporate headquarters on a city’s
command-and-control function. The study examines the changes in the revenues of companies
located in selected cities and countries and measure the command-and-control function
(“C&C”) of cities that well illustrates the strength of cities and countries in the global
economy.

Micromarketing

Micromarketing is an advertising strategy that allows a corporation to target a niche group

with a particular product or service. With micromarketing, a company defines an audience by
a specific trait, such as gender or job title or age range, and then creates campaigns geared
toward that specific group.

Urban Centers

Large and densely populated urban area; may include several independent administrative
districts. synonyms: city, metropolis. types: national capital. the capital city of a nation.
Large and densely populated urban area; may

State of Marriage
Divorce

Boomerang Effect

There are 'boomerang effects' where adaptation and mitigation bring about unexpected,
 perverse effects on communities through social, political, economic and ecological impacts,
which then ends up 'manifesting as threats to economic stability, state authority and/or
ecological sustainability.

Disposable Income

Disposable Income is the money that is available from an individual's salary after he/she pays
local, state, and federal taxes. It is also known as disposable personal income or net pay. The
disposable income of a household includes earnings plus unemployment benefits and capital
income.

Discretionary Income

The amount of money you have left after paying for necessary expenses, like taxes, housing
and food. You use discretionary income for "extra" things, like entertainment, savings and
investments. Depending on the purpose, discretionary income may be calculated in different
ways.

Personal Savings

The money that a person, rather than a business or organization, keeps in an account in a
bank or similar financial organization: They introduced tax breaks which made many personal
savings tax-free.

Problem Recognition

The point at which a potential customer realizes they need or want a product or service. It's
the first step in the buying process and one of the most important. If your customer doesn't
need or want a product or service, you'll have a hard time making a sale.

Problem Solving

The act of defining a problem; determining the cause of the problem; identifying, prioritizing,
and selecting alternatives for a solution; and implementing a solution. The problem-solving
process.

Habitual Problem Solving

The consumer relies on past experience and learning to convert the problem into a situation
requiring less thought.

Limited Problem Solving

Falls somewhere between low-involvement (routine) and high-involvement (extended problem

 solving) decisions. Consumers engage in limited problem solving when they already have
some information about a good or service but continue to search for a little more information.

Extended Problem Solving

The situation where a potential consumer looks for the best good or service in an unfamiliar,
expensive, or infrequently-bought category, requiring a great deal of research.

Problem Solving Stages

The three main steps of problem-solving include Identifying and Understanding the Problem,
Developing Possible Solutions, and Implementing the Chosen Solution. These steps equip
individuals with the necessary methodologies to navigate through any issue in a systematic
and logical manner.

Purchase and Post-purchase

While the purchase stage is more crucial from the manufacturers or marketer's perspective,
the post purchase behavior indicates the ultimate satisfaction perceived by consumers and has
implications for marketers as a determinant of future purchase decisions.

Purchase and Post-purchase

While the purchase stage is more crucial from the manufacturers or marketer's perspective,
the post purchase behavior indicates the ultimate satisfaction perceived by consumers and has
implications for marketers as a determinant of future purchase decisions.

Chapter_4

I. Evaluating the Competition in Retailing

 Retail competition is a fierce field, with similar products and stores attempting to gain more
customers. Explore the types of retail competition, their defining characteristics, and examples
of intertype, intertype, and divertive competition.

Models of Retail Competition

• The competitive marketplace

• Market structure
• The demand side of retailing
• Nonprice decisions
• Competitive actions
• Suppliers as partners and competitors

The Competitive Marketplace

• Helps identify primary and secondary

competitors
• Retailers compete for target customers on five
major fronts:
• The price for the benefits offered
• Service level
• Product selection
• Location or access
• Customer experience

Market Structure

• Pure competition
• Occurs when a market has:
• Homogenous products
• Many buyers and sellers, having perfect knowledge of
the market
• Ease of entry for both buyers and sellers
• Each retailer:
• Faces a horizontal demand curve
• Must sell its products at the going ‘‘market’’ or
equilibrium price
• It is rare in retailing
 Market Structure

• Pure monopoly: Occurs when there is only

one seller for a product or service
• Law of diminishing returns or declining marginal
utility
• As the retailer seeks to sell more units, it must lower
the selling prices

• Monopolistic competition
• Products offered are different, yet viewed as
substitutable for each other
• Sellers recognize that they compete with sellers of
these different products
• Retailers attempt to differentiate themselves with
the products or services they offer

• Oligopolistic competition
• Essentially homogeneous products are sold
• Relatively few sellers or many small firms who
follow the lead of the few large firms
• Any action by one seller is expected to be noticed
and reacted to by the other sellers

• Sellers end up selling at a similar price

• Is rare in retailing
• Is more common at a local level, especially in
smaller communities
• Outshopping: Occurs when a household:
• Travels outside their community of residence or uses
the Internet to shop in another community

The Demand Side of Retailing

• Negatively sloping demand curve

• Consumers will demand a higher quantity as price
is lowered
• The true price (or cost) the customer pays
actually includes:
• The retailer charges
• Sales tax on the purchase
• Delivery or transportation cost
 Demand as a Function of Price

The Demand Side of Retailing

• Retailers will need to recognize when:

• A drop in a competitor’s prices is temporary and
inconsequential to long-term competition
• The competitor has set a new permanent pricing
standard

Nonprice Decisions

• Nonprice variables are directed at:

• Enlarging the retailer’s demand by offering
customers benefit beyond the lowest price
• Price is the easiest variable for competitors to
copy

• Using nonprice variables:

• Store positioning - distinguishing from
competitors in specific ways in order to be the
preferred provider for certain market segment
• Offering private-label merchandise that has
unique features or offers better value than
competitors
• Providing additional benefits for the customer
• Mastering stock keeping with basic merchandise
assortment

How to Implement a Store Positioning Program

• Assess how shoppers and even competitors

view the retailer
• Determine the best position for the retailer
• Analyze the retailer’s current target customers
• Factor in current environmental trends
• Implement the new positioning strategy
Competitive Actions

• Overstored
• Condition in a community where the number of
stores in relation to households is so large:
• That to engage in retailing is usually unprofitable or
marginally profitable
• Understored
• Condition in a community where the number of
stores in relation to households is relatively low:
• So that engaging in retailing is an attractive economic
endeavor

Economics of Overstoring

Competitive Actions

• Competition is most intense in overstored

markets
• Many retailers are achieving an inadequate return
on investment

Suppliers as Partners and Competitors

• Retailers must:
• Develop a loyal group of patrons that encourages
the supplier to accommodate their needs
• Determine how they can be most productive for
their suppliers yet still maintain profitability
• Unique product or promotion by suppliers:
• Can provide critical competitive advantage to
retailers

Types of Competition

• Intratype competition
• Two or more retailers of same type compete
directly with each other for the same households
• Intertype competition
• Two or more retailers of different type compete
directly by:
• Attempting to sell the same merchandise lines to the
same households
Types of Competition

• Divertive competition: Retailers intercept or

divert customers from competing retailers
• Can be intertype or intratype
• Retailers operate very close to their breakeven point
• Pop-up stores
• Temporary small-scale stores
• Set up for a relatively short period of time
• Explicitly intercept shoppers
• Has escalated due to the Internet

Evolution of Retail Competition

• The wheel of retailing

• The retail accordions
• Retail life cycle
• Resource-advantage theory

Wheel of Retailing Theory

• New types of retailers:

• Enter the market as low-status, low-margin, and
low-price operators
• Gradually, enter a trading-up phase and acquire
more sophisticated and elaborate facilities thus:
• Become vulnerable to new types of low-margin retail
competitors who progress through the same pattern

Wheel of Retailing

The Retail Accordion

• Describes how retail institutions evolve from:

• Outlets that offer wide assortments to specialized
stores
• Is vague about the competitive importance of
providing wide assortments to customers
 The Retail Life Cycle

• Introduction
• Simple methods of distribution
• Savings passed to the customers
• Low profits despite increasing sales levels
• Growth
• Sales and profits explode
• Towards the end, cost pressure increases
• Market share reaches maximum levels
• Profitability begins to decline
• Maturity - Market share stabilizes and profits
decline due to:
• The shift from a simple and small high growth firm
to a large and complex firm with static growth
• Overexpansion
• Intense competition
• Decline
• Major loss of market share
• Profits fall
• Once-promising idea is no longer required

Resource-Advantage Theory

• Firms gain competitive advantage by:

• Offering superior value to customers
• Having lower costs of operating
• Important lessons for retailers:
• Superior performance is due to tangible or intangible
resources
• All retailers cannot achieve superior results at the
same time
• A retailer uses unique resources to:
• Offer greater relative value to the marketplace
• Operate firms at a lower cost

Future Changes in Retail Competition

• Nonstore retailing
• New retailing formats
• Heightened global competition
• Integration of technology
• Increasing use of private labels
Nonstore Retailing

• Result of accelerated communication

technology and changing consumer lifestyles
• Prerequisite for the success of e-tailing:
• Having enough consumers with access to the
Internet
• Paying attention to customer service

New Retailing Formats

• Off-price retailers
• Sell products at a discount
• Do not carry certain brands on a continuous basis
• Carry brands that can be bought at closeout or
deep one-time discount prices
• Merchandise brands and selection could be
unpredictable
• Examples of off-price retailers - Factory outlets,
independent carriers, and warehouse clubs
• Supercenter
• Combination of supermarket and discount
department store
• Carries more than 80,000 to 100,000 SKUs
• Recycled merchandise retailers
• Sell used and reconditioned products
• Examples - Pawn and thrift shops, auction houses,
flea markets, and eBay
• Liquidators - Purchase the inventory of the
existing retailer
• Rentals

Heightened Global Competition

• The increase in the rate of change in retailing

• Greater diversity
• Creation of new retail formats
Integration of Technology

• Technological innovations can be grouped

under:
• Supply chain management - Using new initiatives
such as:
• Direct store delivery (DSD)
• Collaborative planning, forecasting, and replenishment
(CPFR) systems
• Customer management
• Customer satisfaction

Increasing use of Private Labels

• Set the retailer apart from the competition

• Private-label branding strategies
• Develop a partnership with:
• Well-known celebrities, noted experts, and institutional
authorities
• Traditionally higher-end suppliers
• Reintroduce products that have strong name
recognition
• Brand an entire department or business