| Terms |
Definitions |
|
Irregulars
|
· merchandise that has minor mistakes in construction
|
|
Drug Stores è
|
Stand Alone
|
|
CPFR
|
■Common goals
■A single demand forecast developed collaboratively
■Collaborative Promotional planning & execution
■A single, shared data source
■Improved inventory management across entire Supply Chain
■Optimized replenishment strategies with joint ownership
■Process simplicity creates optimal framework for success
|
|
Above-ground” risks
|
such as asbestos-containing
materials or lead pipes used in construction.
|
|
Hypermarkets
|
also large (100,000-300,000 square feet) combination food (60-70 percent) and general merchandise (30-40 percent) stores
|
|
Franchisers are not concerned about..
|
cannibalization
|
|
Outsourcing Logistics
|
■Retailers consider outsourcing logistical functions if those functions can be performed better or less expensively by third-party logistics companies
■Transportation
■Warehousing
■Freight Forwarders
■Integrated Third-Party Logistics Services
|
|
Net Operating Income
|
■Before interest expenses/income, taxes, and extraordinary expenses
■A commonly used overall profit measure due to the lack of control over taxes, interest, and extraordinary expenses
■Allows for a comparison of financial performance across companies or divisions within companies
|
|
Analog Approach
|
■Do a competitve analysis
■Define present trade area
■Analyze trade area characteristics
■Match characteristics of present area with potential sites
|
|
Elasticity
|
percent change in quantity sold
percent change in price
|
|
Electronic retailing
|
also called e-tailing, online retailing, and internet retailing; a retail format in which the retailers communicate with customers and offer products and services for sale over the Internet
|
|
Culture
|
the meaning, beliefs, morals, and values shared by most members of a society
|
|
Online Chat
|
provides customers with the opportunity to click a button at anytime and have an instant messaging e-mail or voice conversation with a customer service representative
|
|
Direct-response advertising
|
includes advertisements on television and radio that describe products and provide an opportunity for consumers to order them
|
|
Cookie
|
small computer program that provides identifying information installed on your hard drive
|
|
Drugstores
|
specialty stores that concentrate on health and personal grooming merchandise
|
|
Cannibalization
|
open stores as long as profits increase
■Cannibalization diminishes returns from locating too many stores in an area
|
|
A buyer is responsible for
|
■procuring merchandise
■setting prices and markdowns
■managing inventories
■building and maintaining relationships
■attending trade and fashion shows
■negotiating with vendors on price, quantities, assortments, delivery dates and payment terms
■specifying private label merchandise
|
|
Trade area
|
■A contiguous geographic area that accounts for the majority of a store’s sales and customers
|
|
Inventory Turnover
|
Inventory Turnover = COGS/Avg. Inventory (cost)
|
|
VMI—What it Lacked
|
■Focused on replenishment activity only
■Static-model based (assumed fixed reorder points to trigger replenishment)
■Often only moved inventory ownership rather than removing it
■Incomplete information for decision making
■Vendor and retailers use different systems and data bases
|
|
General expenses
|
Rent + Utilities + Miscellaneous expenses
|
|
Reachable
|
the retailer can target promotions and other elements of the retail mix to consumers in the segment
|
|
Retailing Concept
|
a management orientation that focuses a retailer on determining the needs of its target market and satisfying those needs more effectively and efficiently than its competitors
|
|
Retailing
|
the set of business activites that adds value to the products and services sold to consumers for their personal or family use
|
|
Multilevel Network
|
people serve as master distributors, recruiting other people to become distributors in their network
|
|
Services Retailers
|
firms that primarily sell services rather than merchandise, are a large and growing part of the retail industry
|
|
Virtual Communites
|
networks of people who seek information, products, and services and communicate with one another about specific issues, also help customers solve problems by providing information not readily available through other channels
|
|
Multichannel Retailers
|
retailers that sell merchandise or services through more than one channel
|
|
Fair trade
|
purchasing from factories that pay workers a living wage, well more than the prevailing minimum wage, and offer other benefits, like onsite medical treatment
|
|
Scrambled Merchandising
|
when retailers offer merchandise not typically associated with their type of store, such as clothing in a drug store
|
|
Social Shoppers
|
people who participate in vitrual communites to obtain not just information for future use but also an enhanced emotional connection to other participants in the shopping experience
|
|
Internal Sources
|
information in customer's memory, such as names, images, and past experiences with different stores
|
|
Selling expenses
|
Sales staff salaries + Commissions + Benefits
|
|
How do retailers increase Inventory Turnover?
|
nIncrease Sales
nDecrease Inventory
•Decrease delivery lead-time
•Drive waist out
|
|
■Exclusive Use Clause
|
Prohibits the landlord from leasing to retailers selling competing merchandise
nSpecify no outparcels
nSpecify if certain retailer leaves center, they can
n terminate lease
|
|
EDI Electronic Data Interchange
|
■is the computer-to-computer exchange of business documents between retailers and vendors
•Merchandise sales, Inventory On Hand, Orders
•Advanced shipping notices,
•Receipt of merchandise, Invoices for payment
nStandards:
•UCS (Uniform Communication Standard)
•VICS (Voluntary Interindustry Commerce Solutions)
nTransmission system:
•Intranet: local area network (LAN) that employs Internet technology
•Extranet: collaborative network that uses Internet technology to link businesses with suppliers, customers, etc.
|
|
Central Business District (CBD) Disadvantages
|
■High security required
■Shoplifting
■Parking is poor
■Evenings and weekends are slow
|
|
Specialty Apparel è
|
Central Business District, Regional malls
|
|
Category Specialists
|
Offer the benefits of comparison shopping
Consumers can see almost all brands and models in one store
Destination stores
|
|
Benefits of EDI
|
■Reduces cycle time – inventory turnover is higher
■Improves overall quality of communications through better record-keeping
■Information can be easily analyzed
|
|
Larger, Multi-format Developments: Omni-centers
|
■Combines enclosed malls, lifestyle center, and power centers
■Larger developments are targeted
nto generate more pedestrian traffic and longer shopping trips
nTo capture cross-shopping consumers
|
|
Secondary Trading Area
|
geographic area of secondary importance in terms of customer sales, generating about 20-30% of the site's customers
|
|
Advantages of Centralization
|
■Reduce costs (overhead falls with fewer managers)
■Coordinated buying achieve lower prices from suppliers
■Opportunity to have the best people make decisions for the entire corporation
■Increases efficiency
|
|
Fast Fashion
|
a retail business strategy that uses a supply chain management process to rapidly introduce fashionable merchandise and quickly respond tocustomer demand for the merchandise
|
|
Activities Performed by Distribution Center
|
■Managing inbound transportation
■Receiving and checking merchandise
■Storing or cross docking merchandise
■Getting merchandise floor ready
nTicketing and marking
nPutting on hangers
■Preparing to ship merchandise to a store
■Managing outbound transportation
|
|
■Franchisee’s goal:
|
nto maximize the sales and profits of its store(s)
nConcern about cannibalization
|
|
Assortment
|
the number of different items in a merchandise category
|
|
Intratype Competition
|
competition between the same type of retailers
Example: Kroger vs. Safeway
|
|
External Sources
|
refer to information provided by ads and other people
|
|
Brand Loyalty
|
customers like and consistently buy a specific brand in a product category
|
|
Specialty Stores
|
concentrate on a limited number of complementary merchandise categories and provide a high level of service in relatively small stores
|
|
Conventional Supermarket
|
a self- service food store offering groceries, meat, and produce with limited sales of nonfood items, such as health and beauty aids and general merchandise
|
|
Barriers to Entry
|
institute conditions in a retail market that make it difficult for other firms to enter the market, such as scale economies, customer loyalty, and the availability of good locations
|
|
Scale Economies
|
cost advantages due to a retailer's size
|
|
Television home shopping
|
also known as T-commerce or teleshopping
a retail format in which customers watch a television program that demonstrates merchandise and then place orders for that merchandise, usually by telephone
|
|
Situation Audit
|
an analysis of the opportunties and threats in the retail environment and the strengths and weaknesses of the retail business relative to its competitors
|
|
Mission Statement
|
a broad description of a retailer's objectives and the scope of activities it plans to undertake
|
|
Consideration Set
|
the set of alternatives the customer evaluates when making a selection
|
|
Breaking Bulk
|
a function performed by retailers or wholesalers in which they receive large quantities of merchandise and sell them in smaller quantities
|
|
Wholesale-sponsored voluntary cooperative group
|
an organization operated by a wholesaler offering a merchandising program to small, independent retailers on voluntary basis
|
|
Habitual Decision Making
|
a purchase decision process involving little or no conscious effort
|
|
Why is Efficient Supply Chain Management so Important to Retailers?
|
■Improved product availability
■Higher return on investment
■Strategic advantage
|
|
Primary Trading Area
|
geographic area from which the shopping center or store site derives 50-70% of its customers
|
|
Graduated Lease
|
a variation of the fixed rate lease
-Rent increases by a fixed amount over a specified period of time.
|
|
■Escape Clause
|
Allows the retailer to terminate its lease if sales don’treach a certain level after a specified number of years, or if a specific co-tenant in the center terminates its lease
|
|
Customer Spotting
|
the process of locating the residences of customers for a store on a map and displaying their positions relative to the store location
|
|
Bottom-up Planning
|
involves lower levels in the company developing performance objectives that are aggregated up to develoop overall company objectives
buyers and store managers estimate what they can achieve, and their estimates are transmitted up the organization to the corporate executives
|
|
Input Measures
|
assess the amount of resources or money used by the retailer to achieve outputs such as sales
|
|
Retailers’ Protection
|
Stipulate in the lease that the lessor is responsible for removal and disposal of this material if it’s found.
Retailer can buy insurance that specifically protects it from these risks.
|
|
Mixed Use Developments (MXDs)
|
■Combine several different uses into one complex, including shopping centers, office tours, hotels, residential complexes, civic centers, and convention centers.
■Offer an all-inclusive environment so that consumers can work, live, and play in a proximal area
|
|
Retail Strategy
|
indicates how the firm plans to focus its resources to accomplish its objectives.. Identifies:
the target market, or markets, toward which the retailer will direct its efforts
the nature of the merchandise and services the retailer will offer to satisfy the needs of the target market
How the retailer will build a long-term advantage over its competitors
|
|
Extended Problem Solving
|
a purchase decision process in which customers devote considerable time and effort to analyzing their alternatives
|
|
Sustainable Competitive Advantage
|
an advantage over the competition that is not easily copied and thus can be maintained over a long period of time
|
|
Composite Segmentation
|
a method of segmenting a retail market using multiple variables, including benefits sought, lifestyles, and demographics
|
|
Demographic Segmentation
|
groups of consumers on the basis of easily measured, objective characteristics such as age, gender, income, and education
|
|
Information Search
|
the stage in the buying process in which a customer seeks additional information to satisfy a need
|
|
Limited assortment supermarkets or extreme value food retailers
|
only stock about 1250 SKUs
|
|
Share of Wallet
|
the percentage of total purchases made by a customer from that retailer
|
|
Vending Machine Retailing
|
a nonstore format in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card
|
|
Factors Affecting the Size of the Trade Area
|
■Accessibility
■Natural & Physical Barriers
■Type of Shopping Area
■Type of Store
■The nature of merchandise, assortment, location of alternative sources for the merchandise
■Competition
■Parasite Stores
|
|
Gross Margin (Gross Profit)
|
profit made on merchandise sales without considering the operating expenses and corporate overhead expenses.
|
|
Benefits of Efficient Supply Chain Management to Customers
|
■Reduced stockouts – merchandise will be available when the customer wants them
■Tailoring assortments – the right merchandise is available at the right store
|
|
Tertiary Trading or Fringe
|
(the outermost area) includes the remaining customers who shop at the site but come from widely dispersed areas
|
|
Disadvantages of Centralization
|
■It is difficult for a retailer to adapt to local market conditions
■It may have problems responding to local competition and labor markets
■Personnel policies make it hard for local managers to pay competitive wages
|
|
Assignment of Responsibility for Tasks
|
■Strategic – Top Management, Board of Directors
■Merchandise Management – Merchandise Division
■Store Management – Stores Division
■Administrative – Corporate Specialists
|
|
■A category manager
|
nIs responsible for a set of products that are viewed as substitutes by customers (Ex: all pastas – fresh, frozen, packed, or canned)
nIs evaluated on the profitability of category
nIs motivated to eliminate “me to” products and keep essential niche products
nIs used primarily by supermarkets, big box retailers
|
|
What Causes a Bull-Whip Effect?
|
■Delays in transmitting orders and receiving merchandise
■Over-reacting to shortages
■Ordering in batches rather than generating a number of small orders
|
|
North American Industry Classificationi System (NAICS)
|
classification of retail firms into a hierarchical set of six-digit codes based on the types of products and services they produce and sell
|
|
Retail Market Segment
|
a group of customers whose needs are satisfied by the same retail mix because they have similar needs
|
|
Vertical Integration
|
a firm performs more than one set of activities in the supply chain, such as investments by retailers in wholesaling or manufacturing
|
|
Logistics for Fulfilling Catalog and Internet orders
|
■When fulfilling orders from individual consumers, retailers ship small packages with one or two items to a large number of different places
nDistribution centers for picking and packing orders for consumers
|
|
How to obtain customer spotting data
|
•credit card or checks
• customer loyalty programs
• manually as part of the checkout process
• automobile license plates
|
|
Vendor- Managed Inventory (VMI)
|
an approach for improving supply chain efficiency in which the vendor is responsible for maintaining the retailer's inventory levels in each of its stores
|
|
Advanced shipping notice (ASN)
|
is a document that tells the distribution center what specifically is being shipped and when it will be delivered.The distribution center then makes appointments for trucks to make the delivery at a specific time, date, and loading dock.
|
|
Bargaining Power of Vendors
|
a characteristic of a market in which retailers are so dependent on large, important vendors that their profits are adverstly affected
|
|
Retail Format Development Growth Opportunity
|
an opportunity in which a retailer develps a new retail format-- a format with a different retail mix-- for the same target market
|
|
Strategic Issues Facing Retail HR Professionals
|
■The design of the organization structure for assigning
responsibility, and authority for tasks to people and business units
■The approaches utilized coordinate the activities of the firm’s department and employees, while motivating employees to work toward achieving company goals
■The programs used to build employee commitment, and retain valuable human resources
|
|
Why does human resource management give a sustainable competitive advantage?
|
■Labor costs account for a significant percentage of a retailer’s total expenses
■The customer experiences are determined by the activities of employees (selecting merchandise, providing information and assistance, etc.)
■These potential advantages are difficult for competitors to duplicate
|
|
Why the Hesitation with RFID?
|
RFID is expensive – the return on investment is lowIt still only makes sense to put tags on pallets, cartons, expensive merchandise or high theft itemsRFID generates more data than what can be currently processedConsumers worry about privacy invasion
|
|
Requirements for a Pull Approach to Work
|
■Requires a more costly and sophisticated information to support it
■Should have the flexibility to adjust inventory levels on the basis of demand
|
