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Lecture notes Retail Management and E-Commerce
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Extensive lecture notes for the course retail management and e-commerce
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Retail management and e-commerceThe world of retailing: an introduction
1. Which of the following companies is not a retailer?
Amazon.com, McDonald’s. de Bijenkorf, IKEA, all are retailers
Restaurants are also retailers. They also ‘sell’, combine stuff of suppliers and bring it to the final
customer
2. What is the largest private company in the world in terms of number of employees?
Foxconn, Walmart, China National Petroleum, Shell, Tesco
3. What percentage of the Dutch economy is contributed to retailers/firms selling products? 17.5%
4. What percent of the Dutch workforce is employed by retailers/firms selling products? 10%
5. What percentage of total retailer sales in the Netherlands are made online (desktop,
smartphone, tablet etc.)? 20-30%
What is retailing? Retailing is the set of business activities that adds value to products and services sold
to consumers for their personal or family use (Levy, Weitz, and Grewal 2014)
Why retailing (and other channel intermediaries)?
Why not sell end products to consumers directly?
• Reconciling the needs of producers and consumers
o Buying in bulk and selling smaller quantities
o Intermediaries’ profits come from quantity discounts (economies of scale)
o Also platforms to let buyers and sellers interact (e.g. Amazon)
• Improving efficiency
o Reducing the number of transactions
• Improving accessibility
o Reducing location and time gaps
o The internet helped in this function
• Providing specialist services
o Expertise in selling, servicing and installation
How a channel intermediary increases distribution efficiency?
Examples: you have companies that directly offer to products (producer sells directly)
Often you have a producer, e.g., apple, that is sold via a retailer to the consumers. The retailer here
could be Coolblue.
But you also have a possibility that the producer first sells to the wholesaler (e.g. Hanos), which sells it
to the retailer and the retailer in turn sells it to the customer.
,How do retailers add value?
Why should you pay for this as a manufacturer?
• Typical supply chain:
•
•
Value of retailers:
1. Provide assortment
2. Breaking bulk: as a customer you do not want to buy a pallet of rice, you want just 1 package
3. Holding inventory for you
4. Geographic distribution: how do you get the product to the people? If you have a large
distribution center, how do you get it to the individual customers? You e.g., need smaller stores
in different regions.
5. Providing services: e.g., with expertise, loyalty programs
,Retail power: porter model:
• Where does the retailer stand?
• Where does the manufacturer stand?
• Who are the buyers/suppliers?
It used to be that the manufacturers had all the power. But there has been a lot changed. Retailers
showed their importance. The retailer gets to decide what products are shown to consumers: retailers
being more powerful. Some manufacturers for example rely a lot on Walmart, if Walmart decides not to
sell the product of the manufacturer, they loose a lot of their sales.
Retailer power:
Retailers vs. manufacturers:
, • Size: Walmart: 482.130 billion vs Coca-Cola: 44.294 billion
• Dependence: % sales to Walmart:
o Funai Electronics (licensee of Philips AVM for US market) : 27% (%
of Walmart costs: 0.3%)
o Kellogg’s: 20% (% of Walmart costs: 0.8%)
o Schiff Nutrition: 47% (% of Walmart costs: 0.04%)
This is on average, there are also industries and categories where the power is still
with the suppliers (e.g. in case of smaller online retailers)
Example: Walmart vs. Rubbermaid
Importance of a good retail strategy
Why did Hudson’s Bay in Netherlands fail? Some insights from experts in several new items:
• "They had no clear strategy. That was the main problem. They had a good chance of making it
in the Netherlands, it could have become a favorite for the Dutch people. They were on their
way, but they didn't know in which direction to go." Retail expert Jorg Snoeck.
• "De Bijenkorf does that considerably better. You not only buy a product there, but also an
experience. This is crucial nowadays, why else would you go to a physical store?" Jorg Snoeck
(Store design & Channel management)
• "In the past, you could copy-paste with this kind of large department stores. The same concept
and rollout, and you could repeat this all over the world. But that time is far behind us. At the
time, the retailer decided what was happening. With the rise of the internet, consumers are in
control." Jorg Snoeck (Retailing across borders & Channel management)
• "We do not understand how Hudson's Bay came to the Netherlands with so little risk
awareness and knowledge of the needs of Dutch customers." CEO of Galeria Karstadt Kaufhof
(Retailing across borders)
• "Millenials are mainly looking for new and innovative brands. Hudson's Bay mainly had brands
that were easily available anyway and, moreover, were often cheaper in the stores of those
brands themselves " Lifestyle expert Ruba Zai (Shopping behaviour & RetailManufacturer
relation & Price)
• “… there would be many plants and decorations in stores, with that, Hudson's Bay wanted to
give visitors ideas, like this: I want to do this with my house. So a kind of lifestyle inspiration.
But that didn't happen." Retail expert Kitty Koelemeijer (Store design)
• The customers who still knew the way to the old V&D stores were also not served by Hudson's
Bay. “[Those] people know the way to the buildings well, of course. But Hudson's Bay has
somewhat neglected the V&D audience, many customers are disappointed because the prices
were too high.” And “…the assortment wasn’t good” Kitty Koelemeijer (Retail Price and
Assortment, and customer journey)
• According to Ronald van Zetten, former director of the Hema, “…younger customers shop very
differently.” he said that what Hudson's Bay has attempted to put down is a good idea in itself.
"But it must be hipper, more exciting. And Hudson's Bay has not had that time so far. I think
that is really a shame, because it is a sympathetic brand.“(Shopping behaviour and customer
journey)
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