CHAPTER ONE OBJECTI VES

1 Instructor’s Manual for Levy, Retailing Management, 7ce © McGraw Hill Limited, 2023 Instructor’s Manual for Levy et al., Retailing Management, 7ce ©McGraw Hill Ltd, 2023

Chapter One - Introduction to the World of Retailing

CHAPTER ONE OBJECTI VES

LO1 – Define retailing.LO2 – Understand the role retailers play in the distribution channel and the functions they perform.LO3 – Know the economic significance of retailing in Canada.LO4 – Examine the various career and entrepreneurial opportunities retail offers.LO5 – Discuss different types of decisions retail managers make.LO6 – Understand the meaning of ethics and social responsibility and how they relate to the individual, retailer, and society.

CHAPTER ONE KEY TERMS

blockchain breaking bulk corporate social responsibility (CSR) customer relationship management (CRM) distribution channel ethics intertype competition intratype competition retail strategy retailer retailing scrambled merchandising smart contracts variety vertical integration

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CHAPTER 1

INTRODUCTION TO THE WORLD OF RETAILING

ANNOTATED OUTLINE AND INSTRUCTOR NOTES

• Introduction to The World of Retailing

• Retailing in Canada is dynamic and always changing to reflect consumer demands for product and accessibility.• Retailing in Canada is a vibrant industry, with total retail sales in 2020 of $606 billion. The retail sector is one of the largest employers nationally, employing almost two million Canadians.• Success in retailing is about understanding and engaging your customers. Retailers use sophisticated technologies and information systems to improve their customers’ shopping experience, reduce costs, and provide better value.• Customers today want to interact with retailers as they seek information and buy merchandise ranging from concert tickets to a new iPod, shopping through multiple channels, such as smartphones, tablets, computers, web-enabled kiosks, telephone lines to call centres, and retail stores.• In addition to selling merchandise, retailers use the Internet to build brand images, provide customer service, and manage their employees. Retailers such as Amazon.ca use advanced analytical techniques and data warehousing to customize approaches to online customers, suggesting books and products that might be of interest based on previous sales.• In this course we will explore the world of retailing and principles for effectively managing businesses in this challenging environment.• Knowledge of retailing principles and practices will help you develop management skills you can apply in many business contexts.• Any student interested in professional business-to-consumer (B-to-C) selling, marketing management, or finance will find this course useful.

Ask students: Where they bought their textbook for the course. One may get standard responses, such as the college bookstore or the downtown store, but some may also indicate that they bought it over the Internet or bought it used from another student. Question students on the pros and cons of each transaction.

Ask students: About their shopping habits for some commonly purchased products, such as books, clothing, shoes, and food. One can engage them in a discussion of what they seek when shopping for such product categories and what types of physical store and non-store formats best satisfies their needs

Ask students: Read the appendix to Chapter 1“Careers in Retailing” on Connect and discuss the various career options.

Discuss with students: the link between retail principles different industries.

For example, Procter & Gamble and Hewlett-Packard brand managers need to have a thorough understanding of how retailers operate and make money so that they can get their products on retail shelves and work with retailers to sell them to consumers. Financial and health care institutions use retail 2 / 4

Chapter 1 3 Instructor’s Manual for Levy, Retailing Management, 7ce © McGraw Hill Limited, 2023 Instructor’s Manual for Levy et al., Retailing Management, 7ce ©McGraw Hill Ltd, 2023

principles to develop a variety of services, improve customer service, and make their offerings available at convenient locations for their customers.II. What Is 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 or services, or both, to consumers for their personal or family use.Ask students: Give examples of retailers. Generally, they will think of traditional retailers that sell through stores.

Other examples are McDonalds, Home Shopping Network, Avon, Midas, Tim Hortons, movie theatre retailers and fitness clubs.

By this definition there certainly are many retailers who do not sell through bricks and mortar stores and sell services rather than merchandise.They will mention clicks retailers and clicks and mortar retailers like Amazon.com or eBay.

Ask students: What about universities and colleges and travel agents? These organizations sell some services to end-users and thus are retailers, but they also sell some services to businesses and thus are channel members, but not retailers.

• A Retailer's Role in Distribution Channels

• Retailers attempt to satisfy consumer needs by offering:

• the right product

-at the right price -at the right place -in the right quantities -at the right time.

• Retailers are the final business in a distribution channel that links manufacturers with consumers.

• A distribution channel is a set of firms that facilitate the movement of products from the point of production to the point of sale to the ultimate consumer.

• Manufacturers make products and sell them to retailers or wholesalers. Wholesalers buy products from manufacturers and resell these products to retailers, while retailers resell products to consumers. Wholesalers satisfy retailers' needs, while retailers direct their efforts to satisfying needs of ultimate consumers.

• Some retail chains are both retailers and wholesalers. They’re performing retailing activities when they sell to consumers and wholesaling activities when they sell to other businesses like building contractors or restaurant owners.

• In some distribution channels, manufacturing, wholesale, and retail activities are performed by independent firms.

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• But most distribution channels have some vertical integration. Vertical integration means that a firm performs more than one level of activity in the channel. For example, most large retailers— such as Wal-Mart, and Staples/Business Depot—do both wholesaling and retailing activities

• 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 occurs when a manufacturer undertakes retailing activities, such as Roots operating its own retail stores.

Discuss with students: How, in some channels, consumers can perform some of the functions performed by retailers, wholesalers, and manufacturers in other channels.

For example, assembling furniture or toys is a function frequently performed by manufacturers. IKEA would be an example of a retailer that has pushed this function onto the consumer in order to offer lower prices. Consumers who buy through discount stores have to discover information about products on their own. When buying at warehouse stores, consumers might buy in large quantities and repackaged the food into smaller packages (breaking bulk and holding inventory.)

Ask students: The advantages and disadvantages of vertical integration. Why is The Gap vertically integrated and The Bay department store is not?

Advantages:

Develop unique merchandise only sold in your stores.Better coordination between manufacturing and retailing.

Disadvantages:

Higher costs because retailer might not be an efficient manufacturer.

• Functions Performed by Retailers

• Retailers undertake business activities and perform functions that increase the value of the products and services they sell to consumers.

Note that retailers and distributors account for a lot of the cost of a product. A retailer's markup of 50% adds half of the cost in making and getting the product to the consumer.

Ask students: a hypothetical issue to debate: Suppose the local grocery store markups all its products by about 50%? Is the grocery store profitable?

Some students may confuse the markup of 50% with profits. The various functions performed by retailers as noted below would help students understand the costs borne by retailers.As an aside, standard industry average profits for grocery retailing are only in 1-3% range.

These functions are:

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