RETAIL MANAGEMENT
Chapter 1 – Introduction to the World of Retailing
THE RETAIL MANAGEMENT DECISION PROCESS
Retail Managers need to know the environment in which they operate before they can develop and implement effective strategies.
The first step in retail management decision process, as the diagram below shows, is understanding the world of retailing.
Retailing – is the set of business activities that adds value to the products and services sold to consumers for their personal or family use.
A Retailer is a business that sells products and/or services to consumers for their personal of family use. Retailers are the final business in a distribution channel that links manufacturers to consumers.
A Distribution Channel is a set of firms that facilitate the movement from one point of production to the point of sale to the ultimate consumer.
In some distribution channels, the manufacturing, wholesaling, and retailing activities are performed by independent firms, but most distribution channels have some vertical integration.
Vertical Integration means that a firm performs more than one set of activities in the channel, such as investments by retailers in wholesaling or manufacturing.
Backward Integration arises when a retailer performs some distribution and manufacturing activities, such as operating warehouses or designing private label merchandise.
Forward Integration is when a manufacturer undertakes retailing activities, such as operating their own retail stores.
Functions Performed by Retailers
Retailers provide important functions that increase the value of the products and services they sell to consumers and facilitate the distribution of those products and services for those who produce them.
Value-Creating Functions: (How do retailers add value?)
Retailers Increase the Value of Product and Services: By providing assortments, breaking bulk, holding inventory, and providing services, retailers increase the value consumers receive from their products and services.
· Providing Assortments: Buy other products at the same time.
Supermarkets typically carry 20,000 to 30,000 different items made by over 500 companies. Offering assortments enable their customers to choose from a wide selection of brands, designs, sizes, colors, and prices at one location.
· Breaking Bulk: Buy it in quantities customers want.
To reduce transportation costs, manufacturers typically ships in cases or cartons of goods to retailers. Retailers then offer the products in smaller quantities tailored to individual consumers’ and households’ consumption patterns.
· Holding Inventory: Buy it at a convenient place when you want it.
A major function of retailers is to keep inventory that is already broken into user- friendly sizes so that products will be available when consumers want them. By maintaining an inventory, retailers provide a benefit to consumers; they reduce the consumers’ cost of storing products.
· Providing Services: See it before you buy, get credit, layaway.
Retailers provide services that make it easier for customers to buy and use products. They offer credit so some consumers can have a product now and pay later. They display products so consumers can see and test them before buying. Some retailers have salespeople in stores or use their websites to answer questions and provide additional information about products.
Social and Economic Significance of Retailing
· Employment -Employs large part of the population.
· Retail Sales – In the US over $ 2.5 trillion in annual sales. (SM)
· Support for Community – Retailers provide value to their communities and society, as well as to their customers. They are also responsible for developing many innovative products and services. Greater than medical care, housing, recreation combined.
Retailing affects every facet of life.
Opportunities in Retailing
· Management Opportunities – To cope with a highly competitive and challenging environment, retailers are hiring and promoting people with a wide range of skills and interests. Thus, retailers employ people with expertise and interest in finance, accounting, human resource management, logistics, and computer systems, as well as marketing. Retail management is financially rewarding. After completing a management trainee program, managers can double their starting salary in three to five years in they perform well.
· Entrepreneurial Opportunities – Retailing provides opportunities for people who wish to start their own business. Some of the worlds’ richest people are retailing entrepreneurs.
· Career Opportunities in Retailing
Types of Jobs in Retailing
Most entry level jobs are in store management or buying, but..retailers also have staff
specialists:
- accounting and finance
- real estate
- human resource management
- supply chain management
- advertising
- public affairs
Misconceptions about Careers in Retailing
- Don’t need college education
- Low pay
- Long hours
- Boring
- Dead-end job
- No benefits
- Everyone is part-time
- Unstable environment
Why You Should Consider Retailing
· Entry level management positions
-Department manager or assistant buyer/planner
-Manage and have responsibility on your first job
· Starting pay average with great benefits
· No two days are alike
· Buying for financially oriented people
· Management for people’s people
Nature of Retail Industry is Changing
Retailing Today is a High Tech Industry
- Selling Merchandise over the Internet
- Using Internet to manage supply chains
- Analyze POS data to tailor assortments to stores
- Computer systems for merchandise planning
Globalization of Retailing
- Source Merchandise From Around the World
- Wal-Mart Operates in U.S., China, Mexico, UK, Germany
- Carrefour has Stores in 25 Countries
- SM has branched out to some countries.
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