The Retail Management Decision Process

CHAPTER I: Introduction to the World of Retailing

THE RETAL MANAGEMENT DECISION PROCESS

The success of a small entrepreneurial retailer or a major retail corporation, in making these decisions, depends largely on how much it embraces the retailing concept. The RETAILING CONCEPT is a managerial orientation that focuses a retailer on determining its target market’s needs and satisfying those needs more effectively and efficiently than its competitors.

The retailing concept emphasizes that high-performance retailers must be strong competitors. They can’t achieve high performance by simply satisfying customers’ needs. They must also keep a close watch to ensure that competitors don’t attract their customers.

UNDERSTANDING THE WORLD OF RETAILING – SECTION I

The first step in the retail management decision process is getting an understanding of the world of retailing. Retail managers need a good understanding of their environment, especially their customers and competition, before they can develop and implement effective strategies.
The critical environmental factors in the world of retailing are:

1. The macroenvironment
2. The microenvironment

Ethical standards and legal and public policy are critical macroeconomic factors affecting retail decisions. Strategy development and implementation must be consistent with corporate values, legal opinions, and public policies. Federal, state, and local laws are enacted to ensure that business activities re consistent with society’s interests. These laws define unfair competitive practices related to suppliers and customers; regulate advertising, promotion, and pricing practices; and restrict store locations.

Retailers rely on ethical standards to guide decision making when confronting questionable situations not covered by laws. Buyers may have to decide whether to accept a supplier’s offer of free tickets to a football game Some retailers have policies that outline correct behavior of employees in these situations, but in many situations people must rely on their own code of ethics.

The introductory section on the world of retailing focuses on the retailer’s microenvironment – the retailer’s competitors and customers.

COMPETITORS. At first glance, identifying competitors appears easy. A retailer’s primary competitors are those with the same format. This competition with the same type of retailers is called intratype competition.

To appeal to a broader group of consumers and provide one-stop shopping, many retailers are increasing their variety of merchandise. By offering greater variety in one store, retailers can offer one-stop shopping to satisfy more of the needs of their target market. The offering of merchandise not typically associated with the store type is called scrambled merchandising. Scrambled merchandising increases intertype competition – competition between retailers that sell similar merchandise using different formats.

Increasing intertype competition has made it harder for retailers to identify and monitor their competition. In one sense, all retailers compete against each other for the dollars consumers spend buying goods and services. But the intensity of competition is greatest among retailers located close together with retail offerings that are viewed as very similar.

• Since convenience of location is important in store choice, a store’s proximity to competitors is a critical factor in identifying competition.
• Management’s point of competition also can differ, depending on the manager’s position within the retail firm.

CUSTOMERS. Customer needs are continually changing at an ever increasing rate. Retailers need to respond to broad demography and lifestyle trends in our society.

To develop and implement an effective strategy, retailers also need to know the information about why customers shop, how they select a store, and how they select among that store’s merchandise.

DEVELOPING A RETAIL STRATEGY – SECTION II

RETAIL STRATEGY – indicates how the firm plans to focus its resources to accomplish its objectives. It identifies :

1. The target market toward which the retailer will direct its efforts;
2. The nature of the merchandise and services the retailer will offer to satisfy needs of the target market; and
3. How the retailer will build a long-term advantage over competitors.

STRATEGIC DECISION AREAS

• The key strategic decision areas involve determining a market strategy, financial strategy, location strategy, organizational structure and human resource strategy, and information systems strategy. When major environmental changes occur, the current strategy and the reasoning behind it are reexamined. The retailer then decides what, if any, strategy changes are needed to take advantage of new opportunities or avoid new threat in the environment.
• The retailer’s market strategy must be consistent with the firm’s financial objectives.
• A retailer’s organization design and human resource management strategy are intimately related to its market strategy.
• Retail information and supply chain management systems will offer a significant opportunity for retailers to gain strategic advantage in the coming decade.

IMPLEMENTING THE RETAIL STRATEGY – SECTIONS III AND IV

- To implement a retail strategy, management develops a retail mix that satisfies the needs of its target market better than its competitors. The retail mix is the combination of factors retailers use to satisfy customer needs and influence their purchase decisions.
- Elements in the retail mix include
o The types of merchandise and services offered
o Merchandise pricing
o Advertising and promotional programs
o Store design
o Merchandise display
o Assistance to customers provided by salespeople
o Convenience of the store’s location

PREVIOUS READINGS TO COMPLETE CHAPTER I:

What is retailing
Opportunities in Retailing

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