DECA Retail Merchandising A

Terms in this set (118)

process on how to get goods from the manufacturer to the consumer.

What is the supply chain

Manufacturer - Wholesaler - retailer - consumer

Vertical Integration

Doing more than one job in the supply chain. When a retailer engages in wholesaling activities.

Forward Integaration

occurs when a manufacturer undertakes retailing and wholesaling activities.

Backward Integration

When a retailers performs some wholesaling and manufacturing activities,

How do retailers add value

providing assortments, breaking bulk, holding inventory, providing services

Macroenvironment

technological, social and ethical/legal/political factors

Microenvironment

competitors and customers

Intratype Competition

Compartment stores compete against other compartment stores and supermarkets compete against other supermarkets.

Scrambled merchandising

when retailers offer merchandise not typically sold in their store. Example: clothing in a drug store.

Intertype Competition

competition between retailers that sell similar merchandise using different types of stores such as department and discount stores.

When is there intense competition

when retailers are located near one another who offer similar merchandise.

Retail Strategy

how the retailer plans to focus its resources to accomplish its objectives. It identifies the target market, the nature of the merchandise and the services it will offer, and how to build a long term advantage over its competitors.

6 elements in the retail mix

1. Customer service
2. Store design and display
3. Communication mix
4. Location
5. Merchandise management
6. Pricing

North American Industry Classification system. Every business has a 6 digit code based on the type of products and services it sells. First 2 # are the firms business sector, remaining 4 identify various subsectors.

is the number of merchandise categories a retailer offers. Example: Food, nonfood, fashion, perishable, household, etc.

is the number of different items offered in a merchandise category. Example: (Fashion) Girls, boys, infant apparel are all different items in the fashion category.

Services retailers offer

displaying merchandise, accepting credit cards, providing parking, and being open convenient hours.

When do you need to charge higher prices?

when you offer broader variety, deeper assortments and/or additional services in order to make a profit.

large, self service retail food store offering groceries, meat and produce as well as some nonfood items such as health and beauty aids and general merchandise. Example Byerlys

Locavore movement

reducing carbon footprint caused by the transportation of food throughout the world

large stores (185,000 sq. ft) that combine a supermarket with a full line discount store. Example: Walmart and Super Target

Warehouse clubs

retailers that offer a limited and irregular assortment of food and general merchandise with little service at low prices for ultimate consumers and small businesses. Example: Costco and Sams Club

Convenience Stores

provide a limited variety and assortment of merchandise at a convenient location in 3 - 5,000 sq. ft. store with speedy checkouts. Example: Holiday Gas Station

7 General Merchandise Retailers

Department stores
Full line discount stores
Specialty stores
Category specialists
Home improvement centers
Off price retailers
Extreme value stores

Department stores

carry a broad variety and deep assortment

Discount Stores

carry a broad variety and shallow assortment

Specialty stores

Narrow variety and deep assortment

Category specialists

Narrow variety and very deep assortment. Example: Bass Pro Shops

narrow variety and very deep assortment

Home improvement centers

narrow variety and very deep assortment

Off price stores

average variety and deep but varying assortment

Extreme value retailers

average variety and average but varying assortment

4 unique characteristics of service retailing

intangibility
simultaneous production and consumption
perishability
inconsistency of the offering to custoemrs

customers cannot see or touch services compared to products. retailers often use tangible symbols to inform customers of the quality of their service.

Simultaneous production and consumption

the retailer creates and delivers the serve as the customer is consuming it. Example: when you eat at a restaurant your meal is prepared and consumed almost at the same time.

cannot be saved, stored or resold. Example: one an airplane takes off with an empty seat, the sale is lost forever. To compensate retailers must match supply and demand.

services are performed by people so no two services are identical. Retailers carefully select and train employees

is the way a retailer sells and delivers merchandise and services to its customers

Multichannel retailing

using multiple channels to improve their offerings to their customers and build a competitive advantage.

Disintermediation

when a manufacturer sells directly to the consumer and skips the retailer

Cannibalization

refers to a situation where a new product "eats" up the sales and demand of an existing product.

Share of wallet

the % of purchases made from a specific retailer

Types of channels

internet, catalog, direct selling, home shopping, automated

where sales people interact with customers face to face in a convenient location, either at their home or work. Example: Mary Kay

Direct response advertising

a 1 - 2 min advertisement on TV or radio that describes products and provides the opportunity to order them

Automated retailing

when merchandise or service is stored in a machine and dispensed to customer. Example: redbox

Conversion Rate

percentage of customers who come into the store and buy something

Channel migration

Customers use one channel of business to research products and move to a different channel of business to purchase.

product centric

Store channel information systems are this

customer centric

Non store channel information systems are this

shopping for pleasure

shopping for a specific item/work

Stages in the buying process

Need recognition
information search
Evaluation
choice
visit
loyalty

Need recognition

can be hedonic or utilitarian

buying both premium and low price merchandise

Information search

can be internal (memory) or external (friend recommendation)

Use the multi-attribute model. Put things into a consideration set.

Consideration set

set of alternatives customer evaluates when making a choice of a retailer to buy from

Extended problem solving

purchase decision process which require a lot of time and effort and used when a lot of risk is involved. Example: buying a car

Limited Problem Solving

purchase decision process which require a moderate amount of time and effort and used when customer has prior experience with product and risk is moderate. Example: buying a toaster. Used with IMPULSE buying

Habitual Decision making

purchase decision process which requires little to no effort and customer has purchased product before, decision is not that important. Example: buying toothpaste

group of customers whose needs are satisfied by the same retail mix because they have similar needs

retailer should know what to do to satisfy the needs of the customer

retailer can identify which customers are in the market segment

if a market is too small of buying power is insignificant its not substantial

the retailer can reach those customers in the market segment with promotions

geographic, demographic, geodemographic, lifestyle, buying situation, benefits and composite

"birds of a feather flock together" - consumers in the same neighborhoods tend to buy the same products. retailers use this to select locations for their stores. Tapestry classifies neighborhoods into 65 segments

groups customers according to where they live, they can be identifiable, substantial and reachable.

group customers by age, gender, income and eduation

how people live their life and they spend their time and money. uses VALS. better at predicting behavior then demographics.

buying situations

identifiable, actionable and reachable

use multiple variables to identify customers in the target segment according to their benefits sought, lifestyles and demographics.

Fashion lifecycle stages

compatibility, complexity, triability, observability and relative advantage

degree to which fashion is consistent with existing norms, values and behaviors

how easy the new fashion is to use and understand

costs and commitment required to adopt the fashion initially

degree to which the new fashion is visible and easily communicated to others in the social group

relative advantage

degree to which the new fashion is advantageous to the customers than competing brands.

Retail Strategy

statement identifying retailers target market, format the retailer is going to use to satisfy target market needs and how the retailer is going to build a competitive advantage

5 ways to build a sustainable competitive advantage

customer loyalty, supplier relationships, internal operations, location and combination of all

4 growth strategies

market penetration, market expansion, retail format development and diversification

market penetration

growth opportunity directed towards existing customers using the retailers present retailing format. Example: opening more stores in target market or staying open longer hours

Market expansion

involves using the retailers existing retail format in a new market segment. Example: opening up stores in new areas

Retail format development

retailer develops a new retail format (different retail mix) for the same target market. Example: Target express and target supercenters

retailer introduces a new retail format to a new target market

Related diversification

retailer shares something in common with the new opportunity

Unrelated diversification

retailer has little commonality between the existing and new business

Retail Planning Process

define the mission
conduct situation audit
identify opportunities
evaluate alternatives
establish objectives and allocate resources
develop retail mix
evaluate performance and make adjustments

Define the mission

broad description of a retailers objectives and the scope of activities it plans to undertake.

Conduct situation audit

environmental scan to evaluate the current conditions which include market, competitive and environmental factors and a swot analysis

barriers to entry

conditions that make it difficult for other firms to enter the market such as scales of economy, customer loyalty and available locations

Scale economies

The cost advantage that arises with a large retailer

Bargaining power of vendors

when only a few vendors control the merchandise sold in the market

Competitive rivalry

frequency and intensity of reactions to actions undertaken by competitors.

Return on Asset (ROA)

An indicator of how profitable a company is relative to its total assets.(NET PROFIT/TOTAL ASSETS). High numbers are best

Gross Profit Margin %

profit margin/net sales x 100

assets that require more than a year to convert to cash. Example: building, distribution centers, fixtures

assets that can normally be converted to cash within one year. Example: primarily cash, accounts receivable, merchandise inventory

Intangible assets

values that cannot be objective measured.
Example: brand image, customer loyalty

a firm's use of its assets in generating sales
Net sales / Total assets

Inventory turnover

measure of efficiency of retailers' utilization of investment in inventory
COGS / Average inventory

Cost of goods sold (COGS)

the amount paid by the retailer for the merchandise

Operating expenses

A category of expenditure that a business incurs as a result of performing its normal business operations. Include selling, general and administrative.

A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing

A liquidity ratio that measures a company's ability to pay short-term obligations. (current ASSETS/current LIABILITIES)

Debt-to-equity ratio

(total liabilities/ stockholders equity) Measures how much money a firm can borrow over long periods of time. Low # is good. A measure of a company's financial leverage.

An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. (current assets - inventories) / current liabilities

Which is larger, net profit margin or gross margin?

Gross margin will be larger.

revenue - cost of goods sold

revenue - cost of goods sold/ revenue

are net sales smaller than net profit?

net profit is always smaller than net sales

strategic profit model

provides insights into how retailers can improve their performance.

Net profit margin %

= net profit margin / net sales x 100

Net profit margin

= net sales - COGS - operating expenses - tax

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