2nd FACE-TO-FACE MEETING
PJJ
MGM 4254
SEPTEMBER 2011
EXAMS & ASSIGNMENTS
•
-
Mid term exam
30%
Unit 1,2,3,4,5,6,7
Multiple choice questions
•
-
Final exam
40%
Unit 10,16,17,18,19
Short answers
• ASSIGNMENT 1: 15%
• ASSIGNMENT 2 : 15%
(ARTICLE REVIEW OR RETAIL STRATEGY PROJECT)
Overview
Step 1: investigate alternative trading
areas
Step 2: determine what type of location
is desirable
Step 3: select the general location
Step 4: evaluate alternative specific
store sites
Chpt 9
Trading-Area Analysis
To demonstrate the importance of store
location for a retailer and outline the process
for choosing a store location
To discuss the concept of a trading area and
its related components
To show how trading areas may be
delineated for existing and new stores
Criteria to consider include
population size and traits
competition
transportation access
parking availability
nature of nearby stores
property costs
length of agreement
legal restrictions
Choosing a Store Location
Step 1: Evaluate alternate geographic (trading)
areas in terms of residents and existing retailers
Step 2: Determine whether to locate as an
isolated store or in a planned shopping center
Step 3: Select the location type
Step 4: Analyze alternate sites contained in the
specific retail location type
Figure 9.5 The Segments of a Trading Area
Table 9.1 Chief Factors to Consider in Evaluating
Retail Trading Areas
Population Size and Characteristics
• Total size and density
• Age distribution
• Average educational
level
• Percentage of residents
owning homes
• Total disposable income
• Per capita disposable
income
• Occupation distribution
• Trends
Figure 9.8
Analyzing
Retail Trading
Areas
Chp 10
Site Selection
 To thoroughly examine the types of locations
available to a retailer: isolated store, unplanned
business district, and planned shopping center
 To note the decisions necessary in choosing a general
retail location
 To describe the concept of one-hundred percent
location
 To discuss several criteria for evaluating general retail
locations and the specific sites within them
 To contrast alternative terms of occupancy
3 Types of Locations
Isolated
Store
Planned
Shopping
Center
Unplanned
Business
District
Isolated Stores
Advantages
Disadvantages
* No competition
* Difficulty attracting
customers
* Low rental costs
* Travel distance
* Flexibility
* Lack of variety for
* Good for
customers
convenience stores
* High advertising
* Better visibility
expenses
* Adaptable facilities
* No cost sharing
* Easy parking
* Restrictive zoning laws
Unplanned Business Districts
Central Business
District
Neighborhood
Business
District
Secondary
Business
District
String
District
Planned Shopping Centers
Disadvantages
Advantages
* Limited flexibility
* Well-rounded assortments
* Higher rent
* Strong suburban
* Restrictions on offerings
population
* Competitive environment
* One-stop, family shopping
* Requirements for
* Cost sharing
association memberships
* Transportation access * Too many malls
* Pedestrian traffic
* Domination by anchor stores
Figure 10.7
Location/ Site
Evaluation
Checklist
Chp 11
Retail Organization and Human
Resource Management
To study the procedures involved in setting up a
retail organization
To examine the various organizational
arrangements utilized in retailing
To consider the special human resource
environment of retailing
To describe the principles and practices involved
with the human resource management process
in retailing
Figure 11.1 Planning and Assessing a Retail
Organization: Factors to Consider
Figure 11.1 Planning and Assessing a Retail
Organization: Factors to Consider
Figure 11.1 Planning and Assessing a Retail
Organization: Factors to Consider
Figure 11.3 Division of Tasks in a Distribution
Channel
Grouping Tasks into Jobs
TASKS
JOBS
Displaying merchandise, customer contact, gift wrapping, customer
follow-up
Sales personnel
Entering transaction data, handling cash and credit purchases, gift
wrapping
Cashier
Receiving merchandise, checking incoming shipments, marking
merchandise, inventory storage and control, returning merchandise
to vendors
Inventory personnel
Window dressing, interior display setups, use of mobile displays
Display personnel
Billing customers, credit operations, customer research
Credit personnel
Merchandise repairs and alterations, complaint resolution,
customer research
Customer service
personnel
Cleaning store, replacing old fixtures
Janitorial personnel
Personnel management, sales forecasting, budgeting, pricing,
coordinating tasks
Management personnel
Figure 11.4 A Job Description for a
Store Manager
Table 11.1 Principles for Organizing a Retail Firm
 Show interest in employees
 Monitor employee turnover, lateness, and absenteeism
 Trace line of authority from top to bottom
 Limit span of control
 Empower employees
 Delegate authority while maintaining responsibility
 Acknowledge need for coordination and
communication
 Recognize the power of informal relationships
Figure 11.5 Different Forms of Retail
Organization
Figure 11.5 Different Forms of Retail
Organization
Figure 11.5 Different Forms of Retail
Organization
Figure 11.5 Different Forms of Retail
Organization
Figure 11.6 Organization Structures Used by
Small Independents
Figure 11.7
The Basic
Mazur
Organization
Plan for
Department
Stores
Figure 11.8
The
Equal-Store
Organizational
Format Used by
Chain Stores
Human Resource Management in Retailing
Recruiting
Selecting
Training
Compensating
Supervising
Chp 12
Operations Management: Financial
Dimensions
To define operations management
To discuss profit planning
To describe asset management, including the
strategic profit model, other key business
ratios, and financial trends in retailing
To look at retail budgeting
To examine resource allocation
Major Components of a
Profit-and-Loss Statement
•
•
•
•
•
•
Net Sales
Cost of Goods Sold
Gross Profit (Margin)
Operating Expenses
Taxes
Net Profit After Taxes
Net Sales
$330,000
CGS
$180,000
Gross Profit
$150,000
Operating
Expenses
$ 95,250
Other Costs
$ 20,000
Total Costs
$115,250
Net Profit before
Taxes
$ 34,750
Taxes
$ 15,500
Net Profit after
Taxes
$ 19,250
Asset Management
The Balance Sheet
– Assets
– Liabilities
– Net Worth
– Net Profit Margin
– Asset Turnover
– Return on Assets
– Financial Leverage
Financial Trends in Retailing
Slow growth in U.S. economy
Funding sources
Mergers, consolidations, spinoffs
Bankruptcies and liquidations
Questionable accounting and financial
reporting practices
Budgeting
Budgeting outlines a retailer’s planned
expenditures for a given time based on
expected performance
Costs are linked to satisfying target
market, employee, and management
goals
Budget Benefits
 Expenditures are related to expected performance
 Costs can be adjusted as goals are revised
 Resources are allocated to the right areas
 Spending is coordinated
 Planning is structured and integrated
 Cost standards are set
 Expenditures are monitored during a budget cycle
 Planned budgets versus actual budgets can be compared
 Costs/performance can be compared with industry
averages
Cost Categories
Capital expenditures
Fixed costs
Direct costs
Natural account expenses
Resource Allocation
• Capital Expenditures
• Operating Expenditures
– Long-term
– Short-term selling and
investments in fixed
administrative costs in
assets
running a business
Chp 13
Operations Management: Operational
Dimensions
To describe the operational scope of operations
management
To examine several specific aspects of operating
a retail business: operations blue-print; store
format, size, and space allocation; personnel
utilization; store maintenance, energy
management, and renovations; inventory
management; store security; insurance; credit
management; computerization; outsourcing;
and crisis management
Operational Decisions
What operating guidelines are used?
What is the optimal format and size of a
store? What is the relationship among shelf
space, shelf location, and sales for each
item in the store?
How can personnel be matched to
customer traffic flows? Would increased
staffing improve or reduce productivity?
What impact does self-service have on
sales?
Operational Decisions_2
What effect does the use of various
building materials have on store
maintenance? How can energy costs be
better controlled? How often should
facilities be renovated?
How can inventory best be managed?
How can the personal safety of shoppers
and employees be ensured?
Operational Decisions_3
What levels of insurance are required?
How can credit transactions be managed most
effectively?
How can computer systems improve operating
efficiency?
Should any aspects of operations be
outsourced?
What kind of crisis management plans should
be in place?
Operating A Retail Business











Operations Blueprint
Store Format, Size, and Space Allocation
Personnel Utilization
Store Maintenance, Energy Management, and Renovations
Inventory Management
Store Security
Insurance
Credit Management
Computerization
Outsourcing
Crisis Management
Inventory Management Decisions
 How can handling of merchandise from different suppliers be
coordinated?
 How much inventory should be on the sales floor versus in a
warehouse or storeroom?
 How often should inventory be moved from nonselling to selling areas
of a store?
 What inventory functions can be done during nonstore hours?
 What are the trade-offs between faster supplier delivery and higher
shipping costs?
 What supplier support is expected in storing merchandise or setting
up displays?
 What level of in-store merchandise breakage is acceptable?
 Which items require customer delivery? When? By whom?
Credit Management Decisions
What form of payment is acceptable?
Who administers the credit plan?
What are customer eligibility
requirements for a check or credit
purchase?
What credit terms will be used?
How are late payments or nonpayments
to be handled?
Crisis Management
 There should be contingency plans for as many
different types of crisis situations as possible
 Essential information should be communicated to all
affected parties as soon as the crisis occurs
 Cooperation – not conflict – among the involved
parties is essential
 Responses should be as swift as feasible
 The chain of command should be clear and decision
makers given adequate authority
Chp 14
Developing Merchandise Plans
• To demonstrate the importance of a sound
merchandising philosophy
• To study various buying organization formats
and the processes they use
• To outline the considerations in devising
merchandise plans: forecasts, innovativeness,
assortment, brands, timing, and allocation
• To discuss category management and
merchandising software
Merchandising
Activities involved in acquiring
particular goods and/or services
and making them available at the
places, times, and prices and in
the quantity that enable a
retailer to reach its goals.
Merchandising Philosophy
• Sets the guiding principles for all the merchandise
decisions that a retailer makes
• Should reflect
– Target market desires
– Retailer’s institutional type
– Market-place positioning
– Defined value chain
– Supplier capabilities
– Costs
– Competitors
– Product trends
Scope of Responsibility
• Full array of merchandising functions
– Buying and selling
– Selection, pricing, display, customer transactions
• Focus on buying function only
Functions Performed
• Merchandising view
– All buying and selling functions
•
•
•
•
•
Assortments
Advertising pricing
Point-of-sale displays
Employee utilization
Personal selling approaches
Functions Performed
• Buying view
– Buyers manage buying functions
• Buying
• Advertising
• Pricing
– In-store personnel manage other functions
• Assortments
• Point-of-sale displays
• Employee utilization
• Personal selling approaches
Figure 14.4
Merchandising
Versus Store
Management
Career Tracks
Figure 14.5 Considerations in Devising
Merchandise Plans
Types of Merchandise
•
•
•
•
•
Staple merchandise
Assortment merchandise
Fashion merchandise
Seasonal merchandise
Fad merchandise
Table 14.1a Factors to Bear in Mind When Planning
Merchandise Innovativeness
FACTOR
RELEVANCE for PLANNING
Target market(s)
Evaluate whether the target market is
conservative or innovative
Goods/ service
growth potential
Consider each new offering on the basis of
rapidity of initial sales, maximum sales
potential per time period, and length of
sales life
Fashion trends
Understand vertical and horizontal fashion
trends, if appropriate
Retailer image
Carry goods/ services that reinforce the
firm’s image
Table 14.1b Factors to Bear in Mind When
Planning Merchandise Innovativeness
FACTOR
RELEVANCE for PLANNING
Competition
Lead or follow competition in the selection
of new goods/services
Customer segments Segment customers by dividing
merchandise into established-product
displays and new-product displays
Responsiveness to
consumers
Carry new offerings when requested by the
target market
Amount of
investment
Consider all possible investment for each
new good/service: product costs, new
fixtures, and additional personnel
Table 14.1c Factors to Bear in Mind When Planning
Merchandise Innovativeness
FACTOR
RELEVANCE for PLANNING
Profitability
Assess each new offering for potential
profits
Risk
Be aware of the possible tarnishing of the
retailer’s image, investment costs, and
opportunity costs
Constrained
decision making
Restrict franchisees and chain branches
from buying certain items
Declining goods/
services
Delete older goods/services if sales and/or
profits are too low
Structured Guidelines for
Pruning Products
• Select items for possible elimination on the basis of
declining sales, prices, and profits, appearance of substitutes
• Gather and analyze detailed financial and other data about
these items
• Consider nondeletion strategies such as cutting costs,
revising promotion efforts, adjusting prices, and cooperating
with other retailers
• After making a deletion decision, do not overlook timing,
parts and servicing, inventory, and holdover demand
Table 14.2a Factors to Consider
When Planning Merchandise Quality
FACTOR
RELEVANCE for PLANNING
Target market(s)
Match merchandise quality to the wishes of
the desired target market(s)
Competition
Sell similar quality or different quality
Retailer’s image
Relate merchandise quality directly to the
perception that customers have of retailer
Store location
Consider the impact of location on the
retailer’s image and the number of
competitors, which, in turn, relate to quality
Table 14.2b Factors to Consider
When Planning Merchandise Quality
FACTOR
RELEVANCE for PLANNING
Profitability
Recognize that high quality goods generally
bring greater profit per unit than lesserquality goods; turnover may cause total
profits to be greater for the latter
Manufacturer
versus private
brands
Understand that, for many, manufacturer
brands connote higher quality than private
brands
Customer services Know that high-quality goods require
offered
personal selling, alterations, delivery, and so
on
Personnel
Employ skilled, knowledgeable personnel for
high-quality merchandise
Table 14.2c Factors to Consider
When Planning Merchandise Quality
FACTOR
RELEVANCE for PLANNING
Perceived goods/
service benefits
Analyze consumers. Lesser quality goods
attract customers who desire functional
product benefits; High-quality goods attract
customers who desire extended product
benefits
Constrained
decision making
Face reality. Franchises or chain store
managers have limited or no control over
products; Independent retailers that buy from
a few large wholesalers are limited to the
range of quality offered by those wholesalers
Figure 14.9
Retail
Assortment
Strategies
Brands
Manufacturer
(national)
Private
(dealer or store)
Generic
Chp 15
Implementing Merchandise Plans
• To describe the steps in the implementation
of merchandise plans: gathering information,
selecting and interacting with merchandise
sources, evaluation, negotiation, concluding
purchases, receiving and stocking
merchandise, reordering, and re-evaluation
• To examine the prominent roles of logistics
and inventory management in the
implementation of merchandise plans
Figure 15.1 The Process for Implementing
Merchandise Plans
Selecting Merchandise Sources
• Company-owned
• Outside, regularly used supplier
• Outside, new supplier
Figure 15.4
A Checklist
of
Points
to Review
in
Choosing Vendors
Concluding Purchases
• The retailer takes title immediately on purchase
• The retailer assumes ownership after titles are loaded onto
the mode of transportation
• The retailer takes title when a shipment is received
• The retailer does not take title until the end of a billing cycle,
when the supplier is paid
• The retailer accepts merchandise on consignment and does
not own the items. The supplier is paid after merchandise is
sold
Reordering Merchandise
• Four critical factors:
– Order and delivery time
– Inventory turnover
– Financial outlays
– Inventory versus ordering costs
Performance Goals
• Relate costs incurred to specific logistics activities
• Place and receive orders as easily, accurately, and
satisfactorily as possible
• Minimize the time between ordering and receiving
merchandise
• Coordinate shipments from various suppliers
• Have enough merchandise on hand to satisfy customer
demand, without having so much inventory that heavy
markdowns will be necessary
Performance Goals_2
• Place merchandise on the sales floor efficiently
• Process customer orders efficiently and in a manner
satisfactory to customers
• Work collaboratively and communicate regularly with other
supply chain members
• Handle returns effectively and minimize damaged products
• Monitor logistics’ performance
• Have backup plans in case of breakdowns in the system
Problems Balancing Inventory Levels
• The retailer wants to be appealing and never lose a sale by
being out of stock; it does not want to be “stuck” with excess
merchandise
• What fad merchandise and how much should be carried?
• Customer demand is never completely predictable
• Shelf space allocation should be linked to current revenues
Chp 16
Financial Merchandise Management
• To describe the major aspects of financial
merchandise planning and management
• To explain the cost and retail methods of
accounting
• To study the merchandise forecasting and
budgeting process
• To examine alternative methods of inventory
unit control
• To integrate dollar and unit merchandising
control concepts
Financial Merchandise
Management
• A retailer specifies which products are
purchased, when products are purchased, and
how many products are purchased
– Dollar control involves planning and monitoring a
retailer’s financial investment in merchandise over
a stated period
– Unit control relates to the quantities of
merchandise a retailer handles during a stated
period
Table 16.1 Handy Hardware Store Profitand-Loss Statement
Sales
$417,460
Less cost of goods sold:
Beginning inventory (at cost)
Purchases (at cost)
Transportation charges
Merchandise available for sale
$ 44,620
289,400
2,600
$336,620
90,500
Ending inventory (at cost)
$246,120
Cost of goods sold
$171,340
Gross profit
Less operating expenses:
Salaries
$ 70,000
Advertising
25,000
Rental
16,000
Other
26,000
Total operating expenses
Net profit before taxes
137,000
$ 34,340
Benefits of
Financial Merchandise Plans
• A buyer’s performance is rated. Measures may
be used to set standards
• Stock shortages are determined and
bookkeeping errors and pilferage are
uncovered
• Slow-moving items are classified – leading to
increased sales efforts or markdowns
• A proper balance between inventory and outof-stock conditions is maintained
Inventory Accounting Systems
• The cost accounting system values
merchandise at cost plus inbound
transportation charges
• The retail accounting system values
merchandise at current retail prices
Cost Method of Accounting
• The cost to the retailer of each item is
recorded on an accounting sheet and/or is
coded on a price tag or merchandise container
• Can be used with physical or book inventories:
– Physical inventory – actual merchandise count
– Book inventory - recordkeeping
Physical Inventory System
• Ending inventory - recorded at cost – is
measured by counting the merchandise in
stock at the close of a selling period
• Gross profit is not computed until ending
inventory is valued
• Gross profit derived during full merchandise
count
Book Inventory System
• Keeps a running total of the value of all
inventory on hand at cost at a given time
• End-of-month inventory values can be
computed without a physical inventory
• Frequent financial statements can be
prepared
Disadvantages of Cost-Based Inventory Systems
• Requires that a cost be assigned to each item
in stock
• Do not adjust inventory values to reflect style
changes, end-of-season markdowns, or
sudden surges of demand
Figure 16.1
Applying FIFO
and LIFO
Inventory
Methods
Table 16.2 Handy Hardware Store
Perpetual Inventory System
Date
Beginning-of-Month
Inventory
Net Monthly
Purchases
Monthly Sales
End-of-Month
Inventory
7/1/03
$90,500
$40,000
$ 62,400
$68,100
8/1/03
68,100
28,000
38,400
57,700
9/1/03
57,700
27,600
28,800
56,500
10/1/03
56,500
44,000
28,800
71,700
11/1/03
71,700
50,400
40,800
81,300
12/1/03
81,300
15,900
61,200
36,000
TOTAL
$205,900
$260,400
(as of 12/31/03)
The Retail Method
• Closing inventory is determined by calculating
the average relationship between the cost and
retail values of merchandise available for sale
during a period
Determining Ending Inventory Value
• 1. Calculating the cost complement
• 2. Calculating deductions from retail value
• 3. Converting retail inventory value to cost
Table 16.3 Handy Hardware Store, Calculating Merchandise
Available for Sale
at Cost and at Retail
Beginning Inventory
Net Purchases
At Cost
At Retail
$ 90,500
$139,200
205,900
340,526
Additional Markups
Transportation Charges
Total Merchandise Available
__
3,492
$299,892
16,400
__
$496,126
Table 16.4 Handy Hardware Store, Computing Ending Retail
Book Value
Merchandise available for sale (at retail)
$496,126
Less deductions:
Sales
Markdowns
Employee discounts
Total deductions
Ending retail book value of inventory
$422,540
11,634
2,400
436,574
$ 59,552
Table 16.5 Handy Hardware Store, Computing Stock
Shortages and Adjusting Retail Book Value
Ending retail book value of inventory
Physical inventory (at retail)
Stock shortages (at retail)
Adjusted ending retail book value of inventory
$ 59,552
56,470
3,082
$ 56,470
Table 16.6 Handy Hardware Store,
Profit-and-Loss Statement
Sales
$422,540
Less cost of goods sold:
Total merchandise available for
$299,892
sale
Adjusted ending inventory
34,136
Cost of goods sold
$265,756
Gross profit
$156,784
Less operating expenses:
Salaries
$ 70,000
Advertising
25,000
Rental
16,000
Other
28,000
Total operating expenses
Net profit before taxes
139,000
$ 17,784
Advantages of the Retail Method
• Valuation errors are reduced when conducting a physical
inventory since merchandise value is recorded at retail and
costs do not have to be decoded
• Because the process is simpler, a physical inventory can be
completed more often
• Profit-and-loss statement can be based on book inventory
• Method gives an estimate of inventory throughout the year
and is accepted in insurance claims
Limitations of the Retail Method
• Bookkeeping burden of recording data
• Ending book inventory figures correctly computed only if the
following are accurate:
– Value of beginning inventory
– Purchases
– Shipping charges
– Markups
– Markdowns
– Employee discounts
– Transfers
– Returns
– Sales
• Cost complement is an average based on the total cost of
merchandise available for sale and total retail value
Figure 16.3
A Checklist to
Reduce Inventory
Shortages Due to
Clerical and
Handling Errors
Figure 16.6a
How Stockouts May Occur
Figure 16.6b
How Stockouts May Occur
Figure 16.7 Economic Order Quantity
Chp 17
Pricing in Retailing
• To describe the role of pricing in a retail strategy
and to show that pricing decisions must be
made in an integrated and adaptive manner
• To examine the impact of consumers;
government; manufacturers, wholesalers, and
other suppliers; and current and potential
competitors on pricing decisions
• To present a framework for developing a retail
price strategy: objectives, broad policy, basic
strategy, implementation, and adjustments
Pricing Options for Retailers
• Discount orientation
• At-the-market orientation
• Upscale orientation
Figure 17.2 Factors Affecting Retail Price
Strategy
Figure 17.5 Specific
Pricing Objectives
from
Which
Retailers May
Choose
Price Strategy
• Demand-Oriented Pricing
• Cost-Oriented Pricing
• Competition-Oriented Pricing
Demand-Oriented Pricing
• Psychological pricing
– Price-quality association
– Prestige pricing
Integration of Approaches to
Price Strategy
• If prices are reduced, will revenues increase greatly? (Demand
orientation)
• Should different prices be charged for a product based on
negotiations with customers, seasonality, and so on? (Demand
orientation)
• Will a given price level allow a traditional markup to be attained?
(Cost orientation)
• What price level is necessary for a product requiring special costs
in purchasing, selling, or delivery? (Cost orientation)
• What price levels are competitors setting? (Competitive
orientation)
• Can above-market prices be set due to a superior image?
(Competitive orientation)
Figure 17.7 A Checklist of Selected Specific
Pricing Decisions
Price Strategy Concepts
• Customary Pricing
– Everyday Low Pricing
• Variable Pricing
– Yield Management
Pricing
• One-Price Policy
• Flexible Pricing
– Contingency Pricing
• Odd Pricing
• Leader Pricing
• Multiple-Unit Pricing
• Price Lining
Price Adjustments
• Adaptive mechanism
– Markdown
– Additional markup
– Employee discount
Chp 18
Establishing and Maintaining A
Retail Image
• To show the importance of communicating with
customers and examine the concept of retail
image
• To describe how a retail store image is related to
the atmosphere it creates via its exterior,
general interior, layout, and displays, and to look
at the special case of non-store atmospherics
• To discuss ways of encouraging customers to
spend more time shopping
• To consider the impact of community relations
on a retailer’s image
Figure 18.2 The Elements of a Retail Image
Figure 18.4 The Elements of Atmosphere
Exterior Planning
•
•
•
•
•
•
•
Storefront
Marquee
Store entrances
Display windows
Exterior building height
Surrounding stores and area
Parking facilities
General Interior
•
•
•
•
•
•
•
•
•
Flooring
Colors
Lighting
Scents
Sounds
Store fixtures
Wall textures
Temperature
Aisle space
• Dressing facilities
• In-store transportation
(elevator, escalator, stairs)
• Dead areas
• Personnel
• Merchandise
• Price levels
• Displays
• Technology
• Store cleanliness
Allocation of Floor Space
•
•
•
•
Selling space
Merchandise space
Personnel space
Customer space
Figure 18.8 How a Supermarket Uses a Straight
(Gridiron) Traffic Pattern
Figure 18.9
How a
Department Store
Uses a Curving
(Free-Flowing)
Traffic Pattern
Straight Traffic Pattern
Advantages
• An efficient atmosphere is
created
• More floor space is devoted to
product displays
• People can shop quickly
• Inventory control and security
are simplified
• Self-service is easy, thereby
reducing labor costs
Disadvantages
• Impersonal atmosphere
• More limited browsing by
customers
• Rushed shopping behavior
Curving Traffic Pattern
Advantages
• A friendly atmosphere
• Shoppers do not feel rushed
• People are encouraged to
walk through in any direction
• Impulse or unplanned
purchases are enhanced
Disadvantages
• Possible customer confusion
• Wasted floor space
• Difficulties in inventory
control
• Higher labor intensity
• Potential loitering
• Displays may cost more
Approaches for Determining Space Needs
• Model Stock Approach
– Determines floor space
necessary to carry and
display a proper
merchandise
assortment
• Sales-Productivity Ratio
– Assigns floor space on
the basis of sales or
profit per foot
Interior (Point-of-Purchase)
Displays
•
•
•
•
•
•
•
Assortment display
Theme-setting display
Ensemble display
Rack display
Case display
Cut case
Dump bin
Online Store Considerations
Advantages
• Unlimited space to present product
assortments, displays, and
information
• Can be customized to the individual
customer
• Can be modified frequently
• Can promote cross-merchandising
and impulse purchasing
• Enables a shopper to enter and exit
an online store in a matter of
minutes
Disadvantages
• Can be slow for dialup shoppers
• Can be too complex
• Cannot display three-dimensional
aspects of products well
• Requires constant updating
• More likely to be exited without
purchase
Chp 19
Promotional Strategy
• To explore the scope of retail promotion
• To study the elements of retail promotion:
advertising, public relations, personal selling,
and sales promotion
• To discuss the strategic aspects of retail
promotion: objectives, budgeting, the mix of
forms, implementing the mix, and reviewing
and revising the plan
Advertising Objectives for Retailers
•
•
•
•
Lifting short-term sales
Increasing customer traffic
Developing and/or reinforcing a retail image
Informing customers about goods and services
and/or company attributes
• Easing the job for sales personnel
• Developing demand for private brands
Figure 19.4
Types of
Advertising
Public Relations Objectives for Retailers
• Increase awareness of the retailer and its
strategy mix
• Maintain or improve the company image
• Show the retailer as a contributor to the
public’s quality of life
• Demonstrate innovativeness
• Present a favorable message in a highly
believable manner
• Minimize total promotion costs
Personal Selling Objectives
for Retailers
• Persuade customers to buy
• Stimulate sales of impulse items or products related to
customers’ basic purchases
• Complete customer transactions
• Feed back information to company decision makers
• Provide proper levels of customer service
• Improve and maintain customer satisfaction
• Create awareness of items also marketed through the Web,
mail, and telemarketing
Figure 19.7 Typical Personal Selling Functions
Sales Promotions Objectives
for Retailers
•
•
•
•
Increasing short-term sales volume
Maintaining customer loyalty
Emphasizing novelty
Complementing other promotion tools
Figure 19.9
Types
of
Sales
Promotions
Promotional Objectives
•
•
•
•
•
•
•
•
•
•
•
Increase sales
Stimulate impulse and reminder buying
Raise customer traffic
Get leads for sales personnel
Present and reinforce the retailer image
Inform customers about goods and services
Popularize new stores and Web sites
Capitalize on manufacturer support
Enhance customer relations
Maintain customer loyalty
Have consumers pass along positive information to friends and
others
Figure 19.14 Promotion
and the Hierarchy of Effects