Lecture 1-2 - Retailing - OVERVIEW
Lecture 1-2 - Retailing - OVERVIEW
Retail comes from the Old French word tailer, which means "to cut off, clip, pare,
divide" in terms of tailoring (1365). Like the French, the word retail in both Dutch and
German (detailhandel and Einzelhandel, respectively) also refers to the sale of small
quantities of items.
Retailing is a function of distribution of goods and services to reach the final consumers
at the right time and when needed. Thus, it is one of the activities within the overall
distribution function. Includes all the activities involved in selling goods or services
directly to final customers for their personal, non-business use. A retailer is any business
enterprise whose sales volume comes primarily from retailing. Retailing deals with
breaking bulks ready for small consumers and plays a big role in the distribution channel.
We can therefore consider retail logistics as one part of the physical distribution systems.
Retail logistics includes transportation of goods to the points of retail sales and storage
there. It also covers any additional activities for door delivery of goods to the customers.
It is often taken for granted that products will be available to buy in the shops. The
abundance of goods that is available in a supermarket or a department store is made
possible by retail logistics but we sometimes forget how the products were supplied. We
expect our lettuces to be fresh, the new Playstation to be available on launch day and our
clothes to be in good condition and ready to wear. With the introduction of e-commerce
we have come to demand complete availability and at times, seek home delivery of some
products. It is retail logistics that make all of these possible by providing form utility,
place utility, time utility as well as possession utility.
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As part of its logistics activities, the company’s physical distribution function makes this
possible through retailing.
Characteristics of Retailers
Retailers have certain characteristics which include, but not limited to the following:
The final contact with consumers
Operate out of their shops and sell a large assortment and variety of goods
Located closest to consumers
Buy from companies, distributors or wholesalers
Highest margins in the network
Provide personalized services to their customers
Deals with breaking bulks for small consumers
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Department stores: very large stores offering a huge assortment of "soft" and
"hard goods; often bear a resemblance to a collection of specialty stores. A retailer
of such store carries variety of categories and has broad assortment at average
price. They offer considerable customer service.
Discount stores: tend to offer a wide array of products and services, but they
compete mainly on price. Offers extensive assortment of merchandise at
affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands.
Variety stores:- these offer extremely low-cost goods, with limited selection;
Demographic: retailers that aim at one particular segment (e.g., high-end retailers
focusing on wealthy individuals).
General store: a rural store that supplies the main needs for the local community.
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Malls: has a range of retail shops at a single outlet. They are endowed with
products, food and entertainment under a roof.
E-tailers: The customer can shop and order through internet and the merchandise
are dropped at the customer's doorstep. Here the retailers use drop shipping
technique. They accept the payment for the product but the customer receives the
product directly from the manufacturer or a wholesaler. This format is ideal for
customers who do not want to travel to retail stores and are interested in home
shopping. However it is important for the customer to be wary about defective
products and non secure credit card transaction. Example: Amazon, Pennyful and
eBay.
Some stores take a no frills approach, while others are "mid-range" or "high end",
depending on what income level they target.
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Automated Retail stores: These are self service, robotic kiosks located in
airports, malls and grocery stores. The stores accept credit cards and are usually
open 24/7. Examples include ZoomShops and Redbox (an American company that
specializes in the rental of DVDs, Blu-ray Discs, and video games via automated
retail kiosks).
Big-box stores: These encompass larger department, discount, general
merchandise, and warehouse stores.
Retailers can opt for a format as each provides different retail mix to its customers based
on their customer demographics, lifestyle and purchase behaviour. A good format will
lend a hand to display products well and entice the target customers to yield more sales.
Retail Organizations
Retail organizations achieve many economies of scale, such as greater purchasing power,
wider brand recognition, & better trained employees. The major types of retail
organizations are:
1. Corporate Chain Stores: Two or more outlets that are commonly owned &
controlled. Such stores usually employ central buying and merchandising, and sell
similar lines of merchandise. Their size allows them to buy in large quantities.
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1. Self-service.
2. Self-selection. Customers can ask for assistance. Higher operating expenses than
the previous one.
3. Limited-service. More sales assistance because customers need more information
4. Full-service. Provides salespeople who are ready to assist in every phase of the
locate-compare-select process.
Non-store Retailing
This consists of four major categories:
One-to-many: A salesperson goes to the house of a host who has some people in
the house.
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Once the retailer decides on the product-assortment strategy, the retailer must
decide on procurement sources, policies, and practices. Retailers are rapidly
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improving their procurement skills. Stores are learning to measure direct product
profitability, which enables them to measure a product's handling costs from the
time it reaches their warehouse until a customer buys it and takes it out.
3. Services and store atmosphere decision: The service mix is one of the key tools
for differentiating one store from another. The store's atmosphere is another
element.
Strip malls. Contain a cluster of stores, usually housed in one long building.
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Changing Definition of One-Stop Shopping. Now specialty stores within malls are
becoming increasingly competitive with large department stores in offering one-
stop shopping.
Global Expansion of major Retailers due to mature and saturated markets at home.
Discussion Questions:
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