(Retailing Management, 11e By Michael Levy, Barton Weitz, Dhruv Grewal)
Solution Manual, For Complete File, Download link at the end of this File)
CHAPTER 1
INTRODUCTION TO THE WORLD OF RETAILING
ANNOTATED OUTLINE INSTRUCTOR’S NOTES
I. Introduction
• Retailing is a common part of our everyday lives. For most Ask students about where they
people, retailers simply are places to buy things. bought their school supplies.
There will likely be a mix of
• However, behind the stores, websites, sales associates, responses, including the college
and cashiers are an army of managers responsible for bookstore, online, or even from
making sure that the products and services that people another student. Question
want are available when they want them, where they want students on the pros and cons of
them, and at a fair price. each type of transaction.
• Working in this highly competitive, rapidly changing retail
environment is both challenging and exciting, and it offers
significant financial rewards.
• Knowledge of retailing principles and practices will help
you develop management skills for many business contexts
II. What Is Retailing? LO 1-1 Identify retailing activities.
• Retailing is the set of business activities that adds value to
the products and services sold to consumers for their
personal or family use. See PPT 1-3
• Not all retailing is done in stores. Examples of nonstore Ask students to give examples of
retailing include ordering a T-shirt on your mobile phone retailers. One ice-breaking activity
app, buying cosmetics from an Avon salesperson, ordering is to ask each student to list as
hiking boots from an L.L.Bean catalog, and streaming a many retailers as they can think of
movie through Amazon Prime. in a specified period of time. Ask
the student with the most listed
retailers to read his or her list to
the class.
Generally, the student will think of
traditional retailers that sell
through stores. Be sure to discuss
the many other examples such as
HSN, Avon, Jiffy Lube, Pizza Hut,
and airlines.
Certainly students should be
encouraged to consider digital,
multichannel, and omnichannel
1-1
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,Chapter 01 - Introduction to the World of Retailing
retailers like Amazon.com or
Delta.
A. The Retailer's Role in a Supply Chain
• A retailer is a business that sells products and/or services A typical supply chain network is
to consumers for their personal or family use. Retailers are illustrated in PPT 1-4.
a key component in a supply chain that links
manufacturers to consumers.
• A supply chain is a set of firms that make and deliver goods
and services to consumers.
• Retailers typically buy products from wholesalers and/or
manufacturers and resell them to consumers.
B. Retailers Create Value PPT 1-5, 1-6, 1-7 illustrate the
value question for retailers.
• Retailers undertake business activities and perform
functions that increase the value of the products and
services they sell to consumers.
• The value-creating activities undertaken by retailers
include (1) providing an assortment of products and
services, (2) breaking bulk, (3) holding inventory, and (4)
providing services.
1. Providing Assortments Ask students to describe the
difference in the assortments of
• Offering an assortment enables customers to choose from bicycles provided by Walmart and
a wide selection of brands, designs, sizes, colors, and the local bike shop. What is the
prices in one location. difference in assortment of body
lotions and creams provided by
• Conventional supermarkets typically carry about 30,000 Bath and Body Works and CVS?
different items made by more than 500 companies.
2. Breaking Bulk How many students have made
purchases at Sam’s
• To reduce transportation costs, manufacturers and Club/BJ’s/Costco? What items
wholesalers typically ship cases/cartons of products to have the students or their family
retailers. members purchased in bulk?
Discuss the advantages of buying
• Retailers then offer the products in smaller quantities in bulk. For what purchases and
tailored to individual consumers’ and households’ what types of consumers does
consumption patterns—an activity called breaking bulk. buying in bulk make sense?
1-2
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,Chapter 01 - Introduction to the World of Retailing
3. Holding Inventory Discuss product categories for
which holding inventory is
• A major value-providing activity performed by retailers is particularly appealing (e.g.,
to keep inventory so that products will be available when holiday decorations, seasonal
consumers want them, reducing the consumer’s cost of gear).
storing products.
4. Providing Services Ask the students what kind of
services retailers provide. Some
• Retailers provide services such as credit, product displays, services are: acceptance of credit
salespeople, and websites to make it easier for customers cards, alteration of merchandise,
to compare, buy, and use products. assembly of merchandise, bridal
registry, check cashing, child-care
facilities, credit, delivery to home,
demonstrations of merchandise,
displaying merchandise, dressing
rooms, gift wrapping, lay-away
plans, parking, personal
assistance in selecting
merchandise, personal shoppers,
play areas for children,
presentations on how to use
merchandise, provisions for
customers with special needs
(wheelchairs, translators), repair
services, rest rooms, special
orders, and warranties.
Which of these services do
students believe offer the greatest
value to the consumer? Do their
opinions differ for different
retailers?
C. Costs of Channel Activities Exhibit 1–2 illustrates the supply
chain costs of getting a T-shirt
• While the value-creating activities undertaken by channel from the manufacturer to the
members provide benefits to customers, they also increase consumer.
the cost of products and services.
• These costs include the design, raw materials, labor,
production equipment, transportation to the wholesaler, Discuss with students the various
and so on. contributors of cost in each aspect
of supply chain. Which retailers
• Costs are justified by the considerable value added by the have the highest added costs?
wholesaler and retailers to the product, including
providing assortments, breaking bulk, holding inventory,
and providing services,
1-3
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, Chapter 01 - Introduction to the World of Retailing
D. Retailers Perform Wholesaling and Production Activities See PPT 1-8
• Wholesalers buy and store merchandise in large quantities Discuss the advantages and
from manufacturers and then resell the merchandise disadvantages of being vertically
(usually in smaller quantities) to retailers or industrial or integrated.
business users.
Advantages:
• Some retail chains are both retailers and wholesalers.
They’re performing retailing activities when they sell to Develop unique merchandise only
consumers and wholesaling activities when they sell to sold in your stores
other businesses like building contractors or restaurant
owners. Better coordination between
manufacturing and retailing
• In some supply chains, manufacturing, wholesaling, and
retailing activities are performed by independent firms. Faster speed to market
• Most supply chains have some vertical integration. Vertical Better control of product
integration means that a firm performs more than one distribution
level of activity in the channel. For example, most large
retailers—such as Safeway, Walmart, and Office Depot— Disadvantages:
do both wholesaling and retailing activities
Higher costs because retailer
• Backward integration occurs when a retailer performs might not be an efficient
some distribution and manufacturing activities, such as manufacturer
operating warehouses and/or designing private-label
More complex infrastructure
merchandise.
required
• Forward integration occurs when a manufacturer
The cost of being vertically
undertakes its own retailing activities, such as Apple
integrated is typically higher.
opening its own retail stores.
E. Differences in Distribution Channels around the World PPT 1-9, 1-10, and 1-11, illustrate
these different distribution
• Compared with distribution channels in the European channels.
Union, China, and India, the U.S. retail industry has the
greatest retail density (retail stores per person), with the Ask students to consider several
greatest concentration of large retail firms. The reasons for differences in
combination of large stores and large firms results in a very distribution systems in various
efficient distribution system. nations.
• The Chinese and Indian distribution systems are How do differences in distribution
characterized by small stores operated by relatively small systems lead to differences in
firms and a large, independent wholesale industry. As a retail experiences for consumers?
result, a larger percentage of labor is employed in
distribution and retailing than in the United States.
• Northern European retailing is most similar to the U.S.
system. Southern European retailing is more fragmented
across all sectors. Central European retailing has changed
1-4
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