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DECA Retail Merchandising A

Key Concepts:

Terms in this set (118)

Retailing
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
Variety
is breadth
Assortment
is depth
NAICS
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.
Variety
is the number of merchandise categories a retailer offers. Example: Food, nonfood, fashion, perishable, household, etc.
Assortment
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.
Supermarket
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
Supercenters
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
Drugstores
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
Intangibility
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.
Perishability
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.
Inconsistencty
services are performed by people so no two services are identical. Retailers carefully select and train employees
Retail Channel
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
Direct selling
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
Hedonic
shopping for pleasure
Utilitarian
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
Cross shopping
buying both premium and low price merchandise
Information search
can be internal (memory) or external (friend recommendation)
Evaluation
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
Market segment
group of customers whose needs are satisfied by the same retail mix because they have similar needs
actionable
retailer should know what to do to satisfy the needs of the customer
identifiable
retailer can identify which customers are in the market segment
substanial
if a market is too small of buying power is insignificant its not substantial
Reachable
the retailer can reach those customers in the market segment with promotions
Segmentations
geographic, demographic, geodemographic, lifestyle, buying situation, benefits and composite
geodemographic
"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
geographic
groups customers according to where they live, they can be identifiable, substantial and reachable.
demographic
group customers by age, gender, income and eduation
lifestyle
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
composite
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
compatibility
degree to which fashion is consistent with existing norms, values and behaviors
complexity
how easy the new fashion is to use and understand
triability
costs and commitment required to adopt the fashion initially
observability
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
Diversificaion
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
Fixed assets
assets that require more than a year to convert to cash. Example: building, distribution centers, fixtures
Current Assets
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
Asset turnover
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.
Cashflow
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
Current ratio
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.
quick ratio
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.
Gross margin
revenue - cost of goods sold
Gross margin %
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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