Post on 20-Jan-2016
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Week 1
Chapter 1: Retailing Formats and StructuresVarious ways to classify businesses
FM10211 – Retail Operations
Let’s see your schedules!
Why are you here?
What do you want to do?
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Industrial Classification• What does the business do?• SIC
– Standard Industrial Classification– Old System
• NAICS– North American Industry Classification System– As of 2002
• Why use codes?– Classifies businesses in standard categories– Words can be vague– One business may fall into multiple categories
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Why Classify?
• Identify businesses independent of current business lingo
• Business Census taken every 5 years
• Data can be used for a variety of purposes:– zapdata.com – prospect lists, mailing lists– infousa.com – mailing lists
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Types of Ownership
• Who owns the business?
• Several business structures to choose from– Each has benefits and drawbacks
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Types of Ownership:Sole Proprietorship
• A company owned by one person
• Benefits– Simple!– Fully controlled by the owner– Taxed once
• Drawbacks– Full personal liability
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Types of Ownership: Partnership
• A company owned by two or more persons, each with a financial interest
• Benefits– Simpler than a corporation– Shared workload– Taxed once
• Drawbacks– Shared decisions– Can be personally liable, depending on type
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Types of Ownership: Corporation
• A company that exists as an independent entity• Owned by shareholders• Benefits
– No personal liability
– Easier to raise money through sale of stock
• Drawbacks– More complicated
– Double Taxation (depending on type)
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Types of Stores
• Who owns the store?
• Are there others?
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Types of Stores: Independent• A single unit owned by an individual, small group,
or family• 1.5 million in operation today• Trend is away from independent stores
– Very hard to survive– 1/3 of all new retailers fail within the first year
• Largest Independent Department Stores?– Nordstrom– Dillard’s
• Other examples?
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Types of Stores: Chain
• Multiple retail units owned by one company– Can be as few as two, usually many more
• Usually has centralized buying and management
• Examples?
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Types of Stores: Franchise
• Contractual arrangement between a franchiser (the licensor) and a franchisee (the individual owner)
• Company may own some, but not all, stores• License can include:
– Name
– Operating Procedures
– Buying rights
– Etc.
• Examples?
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Types of Retailers
• Wide variety, offering various types of – Merchandise– Service level– Price level
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Stored Retailers
• Has a physical location
• Classifications have changed over time
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Department Stores• Extensive assortment• Organized by department• U.S. Bureau of Census definition:
– At least 25 employees– At least $10 million in sales– Carries:
• Dry goods and household items• Family apparel• Furniture• Home furnishings
• What about Nordstrom, Saks, etc?• Criteria has been relaxed
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Specialty Stores
• Limited type and/or assortment
• Specialized service
• Examples– Gap– Home Depot– Best Buy
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Other Stored Retailers - I• Boutiques
– Small specialty stores– Often owned or franchised by designer
• Variety stores– Wide assortment
• Mom and Pop stores– Small– Privately owned
• Discount stores– Lower Prices– Lower operating costs – why?
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Other Stored Retailers - II• Mass merchandisers
– Large discount stores
• Off-price stores– Sell brand-name merchandise lower than department
stores, due to low overhead and overruns
• Catalog showrooms– Samples on floor
– Order from catalog
– Filled from warehouse
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Other Stored Retailers - III
• Warehouse stores– Discounters– No-frills setting – no credit cards?– Often make special purchases of brands– Sometimes have membership fee
• Factory outlets– Manufacturer-owned (traditionally)– Closeouts, overruns, discontinued items
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Non-stored Retailers – I• Catalog/Mail order
– Independent or an extension of a store’s business– Can be highly specialized– Serves specific customers
• not necessarily within one geographical area
• Direct marketing– Mailed catalogs– Flyers– Radio– Telemarketing– TV Home Shopping
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Non-stored Retailers – II• Home parties
– Opening your home to guests– Tupperware parties– Pickle parties
• Kiosks– Small stationary facilities– Order through a computer
• Temporary retailers– Small vendors who set up carts– More recently short-term rentals
• Halloween stores
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Non-stored Retailers – III
• Door-to-door selling– Personal contact with the consumer at home or
office– Avon, Avon Mark– Mary Kay
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Malls and Shopping Centers• Large Malls
– Anchor store• One or more large retailers
• Usually located at the ends of the mall
• Traditionally department stores, but no longer a rule
– Specialty stores
• King of Prussia Mall– 8 Anchors!
– Over 400 Specialties!
• Why malls?
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Other Malls
• Factory outlet malls– No longer attached to factories– Can include clearance centers– Where are they located?
• Strip malls (shopping centers)– May have supermarket or other type of anchor– Attracting larger retailers
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International Retailing
• Going global: opening stores international– Increase their business– Overseas investors buying parts of American
companies– Examples
• Gap
• Benetton
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Mergers and Integration
• Combines businesses– Sustain or enhance growth– Create competitive advantage– Diversify– Share overhead
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Vertical integration
• Acquiring a company or developing a function above or below in the supply chain
• Examples– The Limited acquired Mast
Industries, which manufactured the company’s apparel
– Designer Boutiques
• Why?
The Marketing Chain
Fibers
Yarn
Fabric
Garment/Final Product
Design and Marketing
Retail
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Horizontal integration• Buying or forming a
company on the same level of the marketing chain
• The Limited owns:• Victoria’s Secret
• Express
• Bath & Body Works
• The White Barn Candle Co.
• Aura Science
• Henri Bendel
• Why?
The Marketing Chain
Fibers
Yarn
Fabric
Garment/Final Product
Design and Marketing
Retail
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Private-Label Merchandising
• Retailers have products made for them to sell exclusively
• A form of vertical integration
• Eliminates the buying level
• Examples– The Limited– Gap
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Instructor
• Instructor: Max Minkoff
• Teaching style: Interactive!
• To contact me: max@planetminkoff.com
• Other availability: Immediately after class
• Website: www.planetminkoff.com/AIPh/RetailOps/
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Course Content• Teaching Strategies
– Interactive Class Discussion– PowerPoint w/printed notes
• Textbook: – Retail and Merchandise Management, Rabolt
and Miler
• Technology Needed: – Word Processing– PowerPoint
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Evaluation
• 40%: Class Participation– including attendance
• 15%: Midterm Exam
• 15%: Final Exam
• 20%: Project
• 10%: Case Presentation
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Attendance Policy
• Two absences = one full grade drop
• A third absence = an additional grade drop
• Four absences = Failure
• NOTE: – There are NO excused absences. – Lates and/or early departures add up!
I WILL FAIL YOU IF I HAVE TO!
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How to do well in this class
• I’m not here to test your memory!
• Come to class– Don’t be late – they add up!
• Participate– We all know about retail
• Think about retail– Why have companies decided to do what they do?
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Case Presentations
• Every student must present a case at some point during the quarter
• Sign up be end of class week 2• Cases are first come, first served• No more than 5 cases per week!• Presentation should be about 5 minutes
– 5-8 slides
• Follow with Major Question and 2+ Study Questions• Presentations cannot be made up!
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Design Guidelines
• Use a pre-established design schemes– In the form of a grid.
• All type should be at least 20-24pt• Use standard type fonts
– Helvetica, Times, and Arial
• Use a low-key design template, or none at all• Maintain a consistent theme. • Use minimal or no animation.• Don't use sound effects.
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More Design Guidelines
• Your presentation is a visual aid. – Support what you say, not duplicate it.
• Provide talking points, not a script. – Do not read from the screen!
• Unless a quote, each point should fit on one line– If it doesn't, it's probably too long.
• Do not talk "to" the screen
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Example: Case 7: The Limited
• Created in 1963 by Leslie Wexner– Borrowed $5,000 from his aunt– Now a billionaire
• 2,400 Limited Stores– 7 different market segments– Huge increases in sales and profit
• By-passed traditional production system– Created global manuf. & distrib. Network
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The Limited’s Strengths
• Specialty Fashion chains - newest trend
• Unrelenting acquisition strategy
• In touch with trends - example:– President was in Italy in 1983– Saw teens buying bulky yachting sweaters– Knocked off sweaters, sold millions
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Limited Merchandise Meeting
• Spring offensive: safari clothing– Established by Banana Republic– Basis for new line
• Banana Republic safari jacket
• Flower print shirt from Laura Ashley
• Tan cotton pants from Europe
– Other elements to be added– New line named Outback Limited
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Market Test
• Late November:– Samples sent to handful of Southern stores– Results monitored daily– Final results after Thanksgiving weekend– It’s a hit!
• Certain adjustments necessary
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The Plan• 500,000 garments in stores w/in 10 weeks
– Can’t patent - must establish first!– Most retailers must deal with middlemen
• Could take 10 months!
• Limited had bought Mast Industries in ‘78– Knows how to get things done in Far East– Track down fabric– Get products through customs– Etc.
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Delivery: Late January• On jets to New York and California• Then trucked to Columbus Distribution Center
– Wexner wants airfield in Columbus OK’d• Would cut trip from 6 days to 3
• Efficient, computerized sorting and packing– Price tagged
– Sorted
– Packed
– Out the door in 48 hours• Most retailers could take weeks!
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In Stores
• Centralized visual merchandising– Every two weeks– No deviation allowed
• “We don’t want 100 managers out there deciding what the stores should look like” - Limited President
• Industry analysts report no markdowns– Suggests line is successful– “The could be a $500 million line”
• Would be 4th largest U.S. women’s sportswear brand
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Major Question:
• How Does The Limited get its product to the consumer faster than conventional manufacturer selling to retailers?
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Question 2
• Discuss how operations of The Limited (a chain) are different from department stores and small independent stores in terms of product acquisition.
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Question 4 & 5
• Why would Verna Gibson (president of The Limited division) want to check the potential for sales appeal for the Outback Red line before she commits to production?
• Why would The Limited test market the new Outback Red line in November in Southern cities?