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Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy Retail management 8th levy
The cover for this textbook illustrates that retailing is a dynamic industry utilizing technologic innovation like this electronic shelf tag to provide a more rewarding shopping experience Some examples of the technologies highlighted in this textbook are the use of the Internet for providing information and selling products and services to customers; use of social media and digital signage to communicate with customers; application of geographic information system (GIS) technology to determine store locations; integrated supply chain management systems, RFID, and CPFR (collaboration, planning, forecasting and replenishment) systems; analysis of customer databases to identify and tailor offerings to customers; and the use of profit optimization decision support systems for setting prices in different markets, taking markdowns, and allocating merchandise Through the use of these technologies, the United States remains the world’s most sophisticated retail market However, retail sales in the BRIC countries (Brazil, Russia, India, and China) are attractive markets with high potential growth This edition highlights the growth of global retailers and the issues that they face when entering emerging markets Finally, this edition also highlights retailers’ heightened concern for societal issues, the environment, and the people involved in making and transporting merchandise to markets Retailers are buying merchandise with an eye toward its carbon footprint and other ecological factors They have taken an active role in making sure that workers are treated humanely and can earn a living wage Lev30026_fm_i-xxviii_1.indd Page i 12/16/10 5:16 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles RETAILING MANAGEMENT EIGHTH EDITION Michael Levy, Ph.D Babson College Barton A Weitz, Ph.D University of Florida Introducing Digital Co-Author: Lauren Skinner Beitelspacher, Ph.D University of Alabama at Birmingham Lev30026_fm_i-xxviii_1.indd Page ii 12/14/10 5:04 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles RETAILING MANAGEMENT Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020 Copyright © 2012, 2009, 2007, 2004, 2001, 1998, 1995, 1992 by The McGraw-Hill Companies, Inc All rights reserved No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning Some ancillaries, including electronic and print components, may not be available to customers outside the United States This book is printed on acid-free paper DOW/DOW ISBN MHID 978-0-07-353002-4 0-07-353002-6 Vice president and editor-in-chief: Brent Gordon Editorial director: Paul Ducham Executive editor: Sankha Basu Executive director of development: Ann Torbert Editorial coordinator: Gabriela Gonzalez Vice president and director of marketing: RobinJ Zwettler Marketing director: Amee Mosley Associate marketing manager: Jaime Halteman Vice president of editing, design, and production: Sesha Bolisetty Manager of photo, design & publishing tools: Mary Conzachi Senior buyer: Carol A Bielski Senior designer: Mary Kazak Sander Senior photo research coordinator: Keri Johnson Senior media project manager: Greg Bates Interior design: Cara Hawthorne Cover design: Pam Verros Cover images: © Peter Lambert/ZBD Displays Ltd.; Liz Whitaker Typeface: 10.5/12 Janson Compositor: Aptara®, Inc Printer: R R Donnelley Library of Congress Cataloging-in-Publication Data Levy, Michael, 1950Retailing management / Michael Levy, Barton A Weitz — 8th ed p cm Includes index ISBN-13: 978-0-07-353002-4 (alk paper) ISBN-10: 0-07-353002-6 (alk paper) Retail trade—Management I Weitz, Barton A II Title HF5429.L4828 2012 658.8′7—dc22 2010048858 www.mhhe.com Lev30026_fm_i-xxviii_1.indd Page iii 12/14/10 5:04 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles To Jacquie Levy, the best Mom in the world—loving, elegant, and with a will to live driven by her need to give of herself —Michael Levy To Shirley Weitz, the best wife in the world whose love and enthusiasm enrich our lives —Bart Weitz Lev30026_fm_i-xxviii_1.indd Page iv 12/14/10 5:04 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles ABOUT THE AUTHORS Michael Levy, Ph.D Babson College mlevy@babson.edu Barton A Weitz, Ph.D University of Florida bart.weitz@cba.ufl.edu iv Michael Levy, Ph.D., is the Charles Clarke Reynolds Professor of Marketing and Director of the Retail Supply Chain Institute at Babson College (www.babson.edu/retail) He received his Ph.D in business administration from The Ohio State University and his undergraduate and MS degrees in business administration from the University of Colorado at Boulder He taught at Southern Methodist University before joining the faculty as professor and chair of the marketing department at the University of Miami Professor Levy received the 2009 Lifetime Achievement Award by the American Marketing Association Retailing Special Interest Group He has developed a strong stream of research in retailing, business logistics, financial retailing strategy, pricing, and sales management He has published over 50 articles in leading marketing and logistics journals, including the Journal of Retailing, Journal of Marketing, Journal of the Academy of Marketing Science, and Journal of Marketing Research He currently serves on the editorial review boards of the Journal of Retailing, International Journal of Logistics Management, International Journal of Logistics and Materials Management, and European Business Review He is coauthor of Marketing (3e, 2012) and M-Marketing (2e, 2011), both with McGraw-Hill/Irwin Professor Levy was co-editor of Journal of Retailing from 2001 to 2007 He co-chaired the 1993 Academy of Marketing Science conference and the 2006 Summer AMA conference Professor Levy has worked in retailing and related disciplines throughout his professional life Prior to his academic career, he worked for several retailers and a housewares distributor in Colorado He has performed research projects with many retailers and retail technology firms, including Accenture, Federated Department Stores, Khimetrics (SAP), Mervyn’s, Neiman Marcus, ProfitLogic (Oracle), Zale Corporation, and numerous law firms Barton A Weitz, Ph.D., received an undergraduate degree in electrical engineering from MIT and an MBA and a Ph.D in business administration from Stanford University He has been a member of the faculty at the UCLA Graduate School of Business and the Wharton School at the University of Pennsylvania and is presently the JCPenney Eminent Scholar Chair in Retail Management in the Warrington College of Business Administration at the University of Florida Professor Weitz is the founder of the David F Miller Center for Retailing Education and Research at the University of Florida (www.cba.ufl.edu/mkt/retailcenter) The activities of the center are supported by contributions from 35 retailers and firms supporting the retail industry, including JCPenney, Macy’s, Walmart, Office Depot, Walgreens, Target, Build-A-Bear, Brown Shoe, NPD, and the International Council of Shopping Centers Each year, the center places more than 250 undergraduates in paid summer internships and management trainee positions with retail firms and funds research on retailing issues and problems Professor Weitz has won awards for teaching excellence and made numerous presentations to industry and academic groups He has published over 50 articles in leading academic journals on channel relationships, electronic retailing, store design, salesperson effectiveness, and sales force and human resource management His research has been recognized with two Louis Stern Awards for his contributions to channel management research and a Paul Root Award for the Journal of Marketing article that makes the greatest contribution to marketing practice He serves on the editorial review boards of the Journal of Retailing, Journal of Marketing, International Journal of Research in Marketing, Marketing Science , and Journal of Marketing Research He is a former editor of the Journal of Marketing Research Professor Weitz has been the chair of the American Marketing Association and a member of the board of directors of the National Retail Federation, the National Retail Foundation, and the American Marketing Association In 1989, he was honored as the AMA/Irwin Distinguished Educator in recognition of his contributions to the marketing discipline He was selected by the National Retail Federation as Retail Educator of the Year in 2005 and been recognized for lifetime achievements by American Marketing Association Retailing, Sales, and Inter-Organizational Special Interests Groups Lev30026_fm_i-xxviii_1.indd Page v 12/16/10 5:16 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles PREFACE Retailing is a high-tech, global, growth industry that plays a vital economic role in society Our objective in preparing the eighth edition is to stimulate student interest in retailing courses and careers by capturing the exciting, challenging, and rewarding opportunities facing both retailers and firms that sell their products and services to retailers, such as IBM and Procter & Gamble The textbook focuses on the strategic issues facing the retail industry and provides a current, informative, “good read” for students As retailing continues to evolve and change, so the ways in which we communicate to our students We are very excited to introduce Connect Marketing for Retailing Management, 8e While you may have seen Connect Marketing with other McGraw-Hill products, this is the first time it is offered for Retailing Management Students will find lectures, practice materials, and eBook links for each chapter A grade management system makes its use easy for the instructor Lauren Skinner Beitelspacher, Ph.D., University of Alabama at Birmingham, is our digital coauthor, overseeing and leading the development of this exciting new addition to our package NEW FEATURES In preparing the eight edition of Retailing Management, we have revised the textbook to address five important developments in retailing: (1) the increasing role of the Internet in retailing, (2) new ways to communicate with customers, (3) the greater emphasis on social responsibility by retailers, (4) the use of technology and analytical methods for decision making, and (5) globalization Evolving Role of the Internet Fifteen years ago, many experts thought that consumers would abandon the mall and shop for most products and services using the Internet Traditional retailers would be replaced by a new breed of technosavvy entrepreneurs Now it is clear that the Internet is not replacing the traditional retail industry but rather enhancing the activities undertaken by traditional retailers—retailers that use multiple channels (Internet, catalog, stores, and mobile) to interact with their customers In the eighth edition, we go beyond Chapter 3, which is dedicated to multichannel retailing, to discuss Internet retailing applications throughout the textbook For example, • Use of the Internet for selection and training of employees (Chapters and 16) • Use of the Internet for communicating with vendors (Chapters 11, 12, and 13) • Internet-based digital signage in stores (Chapter 17) • Providing information and customer service through Web-enabled kiosks and POS terminals (Chapter 18) New Ways to Communicate with Customers Retailers communicate with customers using a mix of methods, such as advertising, sales promotion, publicity, e-mail, blogs, and social media using Twitter, Facebook, YouTube, and blogs Although many of these traditional methods, such as advertising, have been used for decades, Internet enabling technology has changed the way retailers utilize their promotional budgets and communicate with customers For example, • The impact of social networks on buying behavior (Chapter 4) • The increased use of cell phones to allow customers to make price comparisons, locate merchandise, receive coupons, and buy merchandise (Chapter 15) v Lev30026_fm_i-xxviii_1.indd Page vi 12/14/10 5:04 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles • The use of blogs, Twitter, Facebook, and YouTube to promote retailers and specific merchandise, as well as to collect customer attitudes about retailers and reviews of their product (Chapter 15) • The use of the technology to customize and deliver coupons and other targeted promotions to customers Customers also utilize Internet sites to find coupons to redeem at their favorite retailers (Chapter 15) Social Responsibility of Retailers Retail institutions are pervasive in our society and thus have a major impact on the welfare of their customers, suppliers, and employees Given the importance of their societal role, both consumers and retailers are becoming more concerned about social issues facing the world, such as global warming, immigration, health care, and working conditions in less developed economies Some of these social responsibility issues, identified with legal/ ethical icons in the margins and discussed in the eighth edition, are: • Consumer interest in green products (Chapter 4) • Ethical issues in sourcing merchandise globally (Chapter 13) • Considering sustainability issues in store operations (Chapter 16) and design (Chapter 17) vi Use of Technology in Retailing Retailing is a high-tech industry with retailers increasingly using communications and information systems technologies and analytical models to increase operating efficiencies and improve customer service Some of these new technology applications, identified with technology icons in the margins and discussed in the eighth edition, are: • Use of Web sites to sell products and services to customers (Chapter 3) • Providing a seamless multichannel (stores, Web sites, and catalogs) interface so that customers can interact with retailers anytime, anywhere (Chapter 3) • Stores of the future that use technology to provide a more rewarding shopping experience (Chapter 3) • Application of geographic information system (GIS) technology for store location decisions (Chapter 8) • Internet applications for effective human resource management (Chapter 9) • Integrated supply chain management systems (Chapter 10) • RFID (radio frequency identification) technology to improve supply chain efficiency (Chapter 10) • CPFR (collaboration, planning, forecasting, and replenishment) systems for coordinating vendors and retailer activities (Chapter 10) • Analysis of customer databases to determine customer lifetime value, target promotions toward a retailer’s best customers, and undertake market basket analyses (Chapter 11) • Implementation of marketing programs to increase customer share of wallet (Chapter 11) • Sophisticated inventory management and assortment planning systems (Chapter 12) • Reverse auctions for buying merchandise (Chapter 13) • Use of profit-optimization decision support systems for setting prices in different markets and taking markdowns (Chapter 14) • Developing targeted promotions using customer databases (Chapter 15) • Internet-based training for store employees (Chapter 16) • Decision support systems for scheduling sales associates (Chapter 16) • EAS technology designed to reduce shoplifting (Chapter 16) Lev30026_fm_i-xxviii_1.indd Page vii 12/14/10 5:04 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles • Creating planograms to optimize sales and profits from merchandise categories (Chapter 17) • Digital signage to reduce cost and increase message flexibility (Chapter 17 and a new case on Harrods Department Store) • In-store kiosks, mobile devices, and the Internet to improve customer service (Chapter 18) • Instant chat for servicing online customers (Chapter 18) Globalization of the Retail Industry Retailing is a global industry With a greater emphasis being placed on private-label merchandise, retailers are working with manufacturers located throughout the world to acquire merchandise In addition, retailers are increasingly looking to international markets for growth opportunities For instance, Sweden-based furniture retailer IKEA is successful because it is able to manufacture and sell relatively low priced stylish furniture to like-minded customers around the globe Some of the global retailing issues, identified with icons in the margins, examined in this edition are: • Retail efficiencies in different economies (Chapter 1) • Illustrations of global expansion by retailers (Chapter 2) • Cultural impacts on customer buying behavior (Chapter 4) • Keys to successful entry into international markets (Chapter 5) • Evaluation of international growth opportunities (Chapter 5) • Differences in location opportunities in global markets (Chapter 7) • Employee management issues in international markets (Chapters and 16) • Global sourcing of private-label merchandise (Chapter 13) • Cultural differences in customer service needs (Chapter 18) BASIC PHILOSOPHY The eighth edition of Retailing Management maintains the basic philosophy of the previous seven editions We continue to focus on key strategic issues with an emphasis on financial considerations and implementation through merchandise and store management These strategic and tactical issues are examined for a broad spectrum of retailers, both large and small, domestic and international, selling merchandise and services Strategic Focus The entire textbook is organized around a model of strategic decision making outlined in Exhibit 1–4 in Chapter Each section and chapter relates back to this overarching strategic framework In addition, the second section of the book focuses exclusively on critical strategic decisions, such as selecting target markets, developing a sustainable competitive advantage, building an organizational structure and information and distribution systems to support the strategic direction, building customer loyalty, and managing customer relationships The text explores in depth the resources that retailers use to develop sustainable competitive advantage, such as • Selecting store location (Chapters 7, 8) • Developing and maintaining human resources (Chapter 9) • Managing information systems and supply chains (Chapter 10) • Managing customer relationship management and loyalty programs (Chapter 11) Financial Analysis The success of any retailer, like any other business, depends on its ability to make a profit, provide an adequate return to its owners, and be financially stable The financial problems experienced by some well-known retail firms, like Circuit City, Sharper Image, and K-B Toys, highlight the need for a thorough vii Lev30026_sndx_651-676.indd Page 665 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com Subject Index merchandising planners, 226 organization chart, 226, 227 president of direct channels, 228 private-label president, 228 regional planners, 227 senior vice president of merchandising, 226 store managers, 227 stores vice president, 227 National Retail Federation, 54 Retail Careers Center, 24 Native Americans, buying power, 177 Natural barriers, 195 Necessities, price-inelastic, 375 Need recognition conflicting needs, 82 stimulating, 83 types of needs, 81–82 Needs conflicting, 82 hedonic, 91–92 utilitarian, 81–82 Neighborhood shopping centers, 173–174 fixed-rate leases, 214 main characteristics, 168 Net operating profit, 148 Net profit margin, 147, 251 for Gifts to Go, 155 Net sales definition, 146 revenue not part of, 146–147 Nevada Equal Rights Commission, 389 New Bond Street, London, 170 New Jersey, Law against Discrimination, 389 Newport Jazz Festival, 181 New products break-even analysis, 381–382 fashion merchandise, 309 limited introduction of, 308–309 presented to Walmart buyers, 564–565 Newspaper advertising, 416 New York City, location costs, 170 New York Times, 552, 569 No Dirty Gold campaign, No-haggling policies, 387 Nonstore retailers catalogs, 58–59 sales and growth rate, 34 vending machines, 60–61 No-returns policy, American Furniture Warehouse, 566 North American Industry Classification System definition, 40–41 retailer codes, 32 Objective-and-task method, 423 Objectives; see also Performance objectives of communication program, 420–421 financial, 142 of human resource management, 220–221 personal, 143 societal, 142–143 in strategic planning, 136 Observability, 107 Obsolescence of fashion, 107 Occupational Safety and Health Administration, 242 Odd pricing, 391–392 Office supply stores, 45 Off-price retailers largest chains, 46 merchandise, 46–47 outlet stores, 47 T J Maxx, 364 Ohio State University, 229 Older workers, recruiting, 436 Omnicenters, 179–180 One-stop shopping, 15 1-to-1, 291 Online applicant checks, 437 Online marketplaces, aid to employee theft, 461 Online pop-up stores, 414 Online retailing, 30, 58 abandoned cart problem, 494–495 Abercrombie & Fitch, 549 American Eagle, 550 blended with store, 493 blogs, 409 Build-A-Bear Workshop, 540 by David Jones stores, 569–570 by Dell Inc., 575 by department stores, 42 internal links, 493 layout, 494 prioritizing merchandise, 493–494 by Sephora, 572 simplicity, 493 social media, 409–411 Web sites, 408–409 Yankee Candle Company, 581–582 On-the-job training, 442 Open-sell approach, at Sephora, 572 Open-to-buy dollars, 562 Open-to-buy system, 322–323 merchandise budget plan, 335–337 Operating efficiency, 456 Operating expenses, 120, 148 assigning, 159–160 definition, 147 for Gifts to Go, 154 in location decision, 193 reduced by pricing strategy, 373 Operating profit margin, 143, 147 for selected retailers, 152 Operating profit margin percentage, 144 Operational differences, 71 Operations, careers in, 26 Opportunity, validity of, 525 Opt in, 282 Opt out, 282 Order point, 321 Order quantity, 321 Organic and natural foods retailers, 20–22 Organization chart buying organization, 303 department stores, 227 single-store retailer, 226 Organization culture definition, 235 as employee motivator, 235–237 versus rewards, 236 at Starbucks, 579 stories and symbols, 236–237 using teams, 236 Organization design, 17–18 Organization structure definition, 224 design issues centralization vs decentralization, 229–230 coordinating store and merchandise management, 230–231 employee coordinating roles, 231 store environment, 230 store visits, 231 national retail chains, 226–228 single-store retailer, 224–226 task determination, 224, 225 Organized theft, 458–459 Orientation programs, 440–441 Outbound transportation at Dollar General, 259 management, 258–259 Outlet centers changing tenant mix, 179 definition, 178 entertainment at, 178 in Europe, 179 examples, 178 main characteristics, 168 and tourism, 179 Outlet stores, 46 Outparcels, 169, 215 Output measures, 160, 161 Outsourcing Internet channel, 71 of logistics advantages and disadvantages, 259–260 freight forwarders, 259 public warehouses, 259 Overtime pay, 241–242 Own brands, 117, 343 Owners’ equity, 157 Packaging, eco-friendly, 366 Paid search, 569 Paper-and-pencil honesty tests, 437–438 Parallel imports, 363 Parasite stores, 201 Parking facilities, 196 Partnering relationships, 238–239, 358; see also Strategic relationships Yankee Candle Company, 582 Part-time employees, 223, 456 Party plan system, 60 Passive radio frequency identification tags, 269 Paycheck cycle, 325 Pay-per-click advertising, 569 Peak selling seasons, 129 Percentage leases, 213–214 Percentage lease with specified maximum, 214 Percentage lease with specified minimum, 214 Percentage-of-sales method, 424 Perceptual maps, 116–117 665 Lev30026_sndx_651-676.indd Page 666 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com 666 Subject Index Performance compared to competitors, 163 over time, 162–163 Performance-based incentives, 454 Performance beliefs, 86–87 changing, 89–90 Performance evaluation, 137 of employees format for, 449–450 frequency of, 449 managerial errors, 450 responsibility for, 448 inventory control system, 322 merchandise management, 325–329 ABC analysis, 326–327 multiattribute analysis, 327–329 sell-through analysis, 326 Performance measures Family Dollar and Nordstrom, 162 merchandise management gross margin return on inventory investment, 305–307 stock-to-sales ratio, 307 for retailers, 305 Performance objectives accountability, 159–160 bottom-up planning, 159 comparable store growth, 161 components, 159 contributing factors, 150 input measures, 150 merchandise management measures, 161–162 output measures, 150 to pinpoint problem areas, 160 productivity measures, 150–161 role of benchmarks performance compared to competitors, 162–163 performance over time, 162–163 same-store growth, 161 store operations measures, 162 top-down planning, 159 used by retailers, 161 Perishability of services, 50–51 Perpetual inventory, 320 Personal attention to customers, 277 Personal computers, Apple and competitors, 575 Personalization on Internet channel, 64–66 live chats, 65 positive feedback cycle, 291 rewards or benefits, 291 specialized promotions, 291 wedding planning, 64 Personalized service assurance, 505–506 customer benefits, 501 empathy, 506 and Internet, 502–503 with radio frequency identification tags, 502 recommendation engines, 502–503 reliability, 505 responsiveness, 506 tangibility, 506 Virtual Mirror kiosk, 503 Personal objectives, 143 Personal selling, 415 Personal service, 62 Personal shopper, 574 Personnel policies, to deter shoplifting, 460 Pet adoption programs, 584 Pet food merchandising, 485 Pet industry, 582–584 Pet owners, 583–584 Pet supply retailers, 45 Physical risks, 92 Pick ticket, 258 Planning bottom-up, 159 career opportunities, 26 top-down, 159 Planograms definition and use, 484 at Marks & Spencer, 486 Platinum customers, 482 Platinum segment, 285 Point-of-purchase counters, 481 Point-of-purchase displays, 92 disadvantages, 412 for sales promotions, 414 Point-of-sale data, 78 Point-of-sale displays, 92 Point-of-sale labor costs, 270 Point-of-sale signage, 488 Point-of-sale terminals, 5, 253 Policies and supervision, 234–235 Political systems, and international human resources issues, 223–224 Popping the merchandise, 490–491 Population density, in Europe, 171 Population growth, 190–191 Pop-up stores, 181, 414–415 disadvantages, 412 Positioning definition, 116 with perceptual maps, 116–117 Positive feedback cycle, 291 Posted prices, 394 Postpurchase evaluation, 91 Power, and hedonic need, 82 Power centers category specialists in, 183 definition, 174 examples, 174 growth since 1970, 174–175 main characteristics, 168 occupancy costs, 175 trade areas, 175 Power perimeter, 37 Predatory pricing, 393–394 Preferred clients, 445–446 Premium pricing, 401 Premium private-label brands, 344 Premiums, 412, 413 Preprint, 416 Presentation techniques, 487–489 color, 488 frontal merchandising, 489 idea-oriented, 488 item and size, 488 price lining, 489 tonnage merchandising, 489 vertical merchandising, 489 Price(s) and brand associations, 403 of breadth and depth of offerings, 33–34 as cue of quality, 378 haggling over, 387 manufacturer’s suggested retail, 394 multichannel retailers, 73 negotiations about, 354 paid by American Furniture Warehouse, 566 profit-maximizing, 375–376 reference, 395 scanned vs posted, 394 of vendors to retailers, 361–362 at warehouse clubs, 40 Price audits, 394 Price bundling, 388 Price comparisons, 370 for exclusive brands, 347 for national brands, 346 Price competition, 85–86 Price discrimination first-degree, 385–386 gender-based, 389 perceptions of fairness, 390 second-degree, 386–388 third-degree, 388–390 Price elasticity, 374–376 Price-ending decision, 392 Price experiment, 373–374 Price fixing, horizontal, 394 Price-inelastic products/services, 375 Price lining, 391, 489 Price reductions, 379 Price-scanning accuracy, 394 Price-sensitive consumers, 96 Price sensitivity consideration in price setting, 373–376 factors affecting, 375 limitation in price setting, 378 price elasticity measure, 374–376 and price experiments, 373–374 and target market, 375 Price setting based on costs initial markup, 379–380 maintained markup, 379–380 retail price markup, 379 break-even analysis, 381–382 considerations in competition, 376–377 determining service quality, 378 matching supply and demand for services, 377–378 price sensitivity and cost, 373–376 markdowns, 382–385 pricing optimization software, 380–381 problem with price sensitivity, 378 profit impact, 381–382 Price war, in United Kingdom, 376 Pricing decisions/policy everyday-low-pricing, 85 guidelines on price-ending, 392 importance to retailers, 371–372 Lev30026_sndx_651-676.indd Page 667 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com Subject Index legal/ethical issues bait-and-switch tactics, 394 deceptive reference price, 395 horizontal price fixing, 394 predatory pricing, 393–394 resale price maintenance, 394 scanned vs posted price, 394 limitation of price sensitivity for, 378 on markdowns, 383–384 money-back guarantees, 85 Pricing optimization software, 380–381 for markdowns, 383 Pricing strategy advantages assurance of low prices, 373 generating excitement, 373 increased profits, 373 inventory management, 373 reduced advertising and operating expenses, 373 reduced stockouts, 373 sales, 373 everyday low pricing, 372 high/low pricing, 372 Hutch Corporation, 554–555 to increase sales and profits clearance markdowns, 388 coupons, 388 Internet use, 393 leader pricing, 390 odd pricing, 391–392 perceptions of fairness, 390 price discrimination, 385–390 price lining, 391 pricing by market segment, 388–390 promotional markdowns, 387–388 quantity discounts, 388 variable pricing, 385–390 low price guarantee, 372 in merchandising, 551 problem at Courtney’s, 568 for services, 377–378 at Staples, Inc., 370–371 through auction bidding, 385–386 Primary trading area, 199–200 Prioritizing merchandise, 493–494 Privacy concerns with radio frequency identification tags, 271 in customer relationship management programs consumer concerns, 281 cookies, 281 Electronic Privacy Information Center, 282 European Union directive, 281–282 Federal Trade Commission principles, 282 hackers, 281 Privacy protection, 242 Privacy violations, 66 Private equity firms, 158 Private-label brands, 38, 117 at Asda, 343 buying process, 341 copycat, 344 definition, 343 at department stores, 42 developing, 349–350 drawbacks, 347 exclusive, 344–345 fast-fashion, 310 generic, 345 increased use of, 344 at Macy’s, Inc., 340–341 versus national brands, 345–347 premium, 344 sourcing, 351–353 and store loyalty, 347 Private-label credit cards, 280 Private-label president, 227 PRIZM lifestyle clusters, 206, 557 Procedural fairness, 521 Procedural justice, 243 Product(s); see also Merchandise fast-moving consumer goods, 11 increasing value of, locally grown, 37 loss leaders, 390 price-elastic, 375–376 price-inelastic, 375 sustainable, 541–542 touching and feeling, 61 Tractor Supply Company, 538 Product availability backup stock, 317 factors determining, 318 and inventory investment, 317 inventory management report, 321 model stock plan, 316–317 trade-off among variety and assortment, 318 Product-centric retailers, 295 Product development, Yankee Candle Company, 581–582 Product guidelines, 551 Production Build-A-Bear Workshop, 540 of services, 50 Productivity measures, 160–161 Product line Apple Inc., 575 Avon, 559 Build-A-Bear Workshop, 540 co-branding, 567 exclusive to JCPenney, 566–567 PetSmart, 584 Sephora, 572 at Starbucks, 579 Yankee Candle Company, 581 Product placement, 419 Product strategy, Hutch Corporation, 554–555 Profit break-even analysis, 381–382 compared to cash flow, 157 effect of pricing strategy, 373 long-term potential, 190 and outlet stores, 47 return on assets, 142 Profitability basis of customer pyramid, 286 space allocation to maximize, 482 Profit impact of price setting, 381–382 Profit margin management path; see Strategic profit model Profit maximization, 194 Profit-maximizing price, 375–376 Profit-sharing, 235 Prohibited-use clause, 214–215 Promotion, and diversity, 240–241 Promotional aisle/area, 479–480 Promotional markdowns, 382, 384, 387–388 Promotional signage, 488 Promotion from within, 239 Enterprise Rent-A-Car, 571 at Nordstrom, 574 Promotions, 519 careers in, 26 specialized, 291 Proprietary store credit cards, 150–151 Prosecution, to deter shoplifting, 460–461 Prospective employees locating, 436 screening, 461 Protected class, 241 Psychographics, 99 Public recognition programs, 452 Public relations cause marketing, 418–419 celebrity endorsements, 418 definition, 417 event sponsorship, 419 product placement, 419 by Walmart, 417–418 Public warehouses, 259 Pull supply chain strategy, 261, 325 Purchase decision, 90–91; see also Buying decisions in bicycle buying, 543–544 and customer service, 503–504 with large assortment, 316 Purchasing policy, Nordstrom, 575 Push supply chain strategy, 261, 325 Quality and brand associations, 403 of counterfeit merchandise, 362–362 determination for services, 378 diamond certification, 546–547 reputation at J Crew, 401 at Starbucks, 579 Quantity discounts, 388 Quick ratio, 168 Quick response, 265 Quota-bonus plan, 454 Quotas and compensation, 453 sales, 445–446 Racetrack layout, 475–476 Radio advertising, 417 Radio frequency identification tags, 75, 253, 257, 462 at American Apparel, 269 benefits elimination of counterfeit merchandise, 270 inventory savings, 270 667 Lev30026_sndx_651-676.indd Page 668 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com 668 Subject Index Radio frequency—Cont reduced labor costs, 269–270 reduced out-of-stock conditions, 270 reduced point-of-sale costs, 270 theft reduction, 270 and customer service, 502 definition and purpose, 267 and dressing rooms, 480–481 impediments to adoption excess of data, 270 high cost, 270 invasion or privacy, 271 vendor resistance, 270 types of, 269 use in European Union, 271 users of, 267–268 Reachable segments, 98 geographic, 99 Real estate employees, 27 Real estate transactions, 184–185 Realistic job preview, 438 Rebates, 412, 413 Receiving, 256–257 Recession, 565; see also Economic conditions effect on Starbucks, 580 financial crisis of 2008, 158 and Walmart, 541 Recommendation engines, 502–503 Recruitment of employees, 231–232, 435–436 at Diva, 560 Reductions, 379 Reference groups and consumer self-image, 95 definition, 94 providing information, 95 store advocates, 95 Reference price, 395 Refusal to deal, 365 Regional malls, 175 Regional managers, 227 Regression analysis, 209 Related diversification growth opportunity, 124 Reliability, 505 Reorder point, 266 Repeat purchases, 18 Reputation, problem for Walmart, 541 Resale price maintenance, 394 Resident buyer office, 352–353 Resource allocation, 136 Responsiveness, 506 Résumés, 437, 587–589 Retail analytics, 283 Retail brand community, 292–293 Retail business, starting complexities, 524 concept development, 525 controls, 529 customer service, 529 determining viability, 525 employee identification number, 531 employees, 529 entrepreneurial skills, 524–525 environmental analysis competitors, 527–528 growth opportunities, 527 industry size and trends, 526–527 knowledge of local area, 526–527 local research, 528 long-term objectives, 526 market segments, 527 market size, 527 target market, 527 equipment needed, 529 facilities, 529 implementation plan elements of, 529 financial plan, 530 financial statement estimation, 530 fixed costs, 530 funding request, 529–530 refining and updating, 530 start-up costs, 530 team, 529 information sources, 531 intellectual property, 525 legal structure, 531 location decision, 529 management characteristics, 528 merchandise offered, 529 promotion, 529 quick screen, 525 retail concept, 528 security, 529 Retail buyers; see Buyers Retail chains; see also National retail chains definition, 52 store classification, 323 Retail channels automated vending, 60–61 benefits Internet channel, 63–66 store channel, 61–63 catalog channel, 58–59 definition, 58 direct selling, 59–60 estimated sales by channel, 58 Internet channel, 58 lowest cost, 69 store channel, 58 television home shopping, 60 Retail concept, 528 Retailer characteristics breadth and depth of assortment, 33–34 and consumer needs, 30 retail mix, 30 services offered, 33 types of merchandise, 30–32 variety and assortment, 32–33 variety of types, 30 Retailer image, 116 Retailer loyalty, 93 Retailers adjacent tenants, 197 advantages over manufacturers, 69 benefits of multiple channels, 70 and Black Friday, 242 business-to-company, business-to-customer, buybacks, 362 chargeback, 362 classifications, 30–32 collaboration in supply chain, 264–267 competition for talent, 231 computerized scheduling systems, 223 in consideration set, 88 conversion rate, 85 corporate social responsibility, 365–366 coupon use, 388 definition, developing private-label brands, 349–350 distribution channel differences, 11–12 encouraging haggling, 387 encouraging purchase decisions, 91 evaluating, 87–88 exclusive brand names, 345 food retailers, 35–40 general merchandise, 40–47 global, 10–11 goal of customer relationship management, 275–276 implications of multiattribute model, 88 keeping merchandise in stock, 250 limited flexibility with national brands, 346 major bankruptcies since 2008, 157 market segment targets, 79 measuring shrinkage, 333 merchandise planning process, 308–311 number in United States, 30 objectives financial, 142 personal, 144 societal, 142–143 organization structure national chains, 226–228 single-store retailer, 224–226 outsourcing logistics, 259–260 owned by private equity firms, 158 parasite stores, 201 primary competitors, 15 product- vs customer-centric, 295 refusal to deal, 365 returns policy, 501, 502 of services, 48–51 share of wallet, 276 size limitations, 39 socially responsible, strategic relationships with vendors, 358–361 supply chain management, 248 and supply chain members, 248 supply chain role, 6–7 types of, 28–53 category specialists, 45–46 convenience stores, 40 department stores, 41–42 discount stores, 42 drugstores, 44–45 extreme-value, 46 off-price, 46–47 services, 48–51 specialty stores, 42–44 supercenters, 38–39 supermarkets, 35–38 warehouse clubs, 39–40 understanding consumer needs, 79 undervalued assets, 158 value creation by, 7–8 Lev30026_sndx_651-676.indd Page 669 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com Subject Index vertical integration, 124 Web sites, 408–409 world’s largest, 10 Retail format definition, 112 development growth opportunity, 123 in retail strategy, 113–114 Royal Ahold, 548 Walmart innovations, 552 Retailing add-on selling, 293–294 challenges of human resource management, 222 definition, downward performance spiral, 220 environment at Harrods, 57 fast fashion business, 252 global industry, 5–6 high-tech industry, 5–6 in India, 125, 544–545 labor-intensive business, 120 by Lindy’s Bridal Shop, 585–586 myths about college degree requirement, 27 entry-level jobs, 27 frequent relocation, 27 little opportunity for advancement, 27 long hours, 27 low-growth industry, 27 low pay, 27 number of firms, 10 1-to-1, 291 opportunities in entrepreneurial, 13–14 management, 21 percentage of gross domestic product, 10 scope of business activities, 12 social and economic significance corporate social responsibility, 8–9 employment, 10 sales volume, 9–10 store hour limitations, 12 tasks performed in administrative management, 225 merchandise management, 225 store management, 225 strategic management, 225 understanding world of, 14–16 competitors, 15–16 critical environmental factors, 15 customers, 16 Retailing concept, 113 Retailing trends fair trade practices, 37 smaller-format stores, 37 Retail inventory method advantages, 337–338 disadvantages, 338 objectives, 337 problem, 337 steps on calculating cost multiplier, 339 cumulative markup, 339 determine ending book inventory, 339 retail reductions, 339 total goods handled, 338–339 Retail locations; see Location entries Retail management decision process ethical and legal considerations, 22–23 at JCPenney, 18–19 strategy development, 16–18 key decision areas, 17–18 retail strategy, 17 strategy implementation, 19 understanding world of retailing, 14–16 at Whole Foods Market, 20–22 Retail market definition, 113 fashion, 114 segmentation, 97 Retail mix conversion rate, 85 and customer loyalty, 277 definition, 20 elements of, 20, 30 in strategic planning, 136 Whole Foods Market, 21–22 Retail ownership corporate chains, 52 franchising, 52–53 independent, single-store establishments, 51 legal structure decision, 531 Retail pricing; see Pricing decisions; Pricing strategy Retail sales; see Sales Retail space, demand for, 166–167 Retail store assistant, 518 Retail strategy assortment plan, 315 bottom-up planning, 159 cases Abercrombie & Fitch, 549 American Eagle, 549–550 American Furniture Warehouse, 565–566 Avon Products, 559 Build-A-Bear Workshop, 539 Diamond Furriers, 571 Enterprise Rent-A-Car, 570–571 Harrods, 577–578 Hughe’s, 562–563 JCPenney, 566–567 Lindy’s Bridal Shop, 585–586 merchandise strategy, 550–551 Netflix, 542–543 Nordstrom, 561, 574–575 PetSmart, 583–584 Royal Ahold, 548–549 sales promotion, 568 Save-A-Lot, 547–548 Sephora, 572–573 Starbucks, 578–580 Tiffany vs Walmart, 552–553 Tractor Supply Company, 538–539 Walmart, 540–542 Yankee Candle Company, 581–582 for competitive advantage, 114–121 definition, 17, 112 department stores, 41–42 discount stores, 42 examples of, 112–113 at Family Dollar Stores, 145 formulating, 16–17 global growth opportunities, 125–130 growth strategies, 122–124 implementation, 20 JCPenney, 18–19 key decision areas, 17–18 and location, 182–184 at Nordstrom, 145 at Pep Boys, 110–111 planning phase, 130–138 retail format, 113 retailing concept, 113 specialty stores, 42–43 store design for, 468 target market segment, 113–114 top-down planning, 159 Walmart-Best Buy comparison, 17 Whole Foods Market, 20–21, 21–22 Retina-tracking devices, 484 Returned items, 294 Return on assets, 153, 158, 161, 162 components, 144 definition, 142 determining, 144 from efficient supply chain, 251 from information systems, 251 for selected retailers, 152 Returns policy, 502 managing costs and benefits, 502 Nordstrom, 574, 575 Revenues PetSmart in 2010, 584 Starbucks, 578 Reverse auctions, 353 Reverse logistics, 262–263 Reward systems for customer service, 517 extrinsic rewards la carte plans, 451 benefits, 451 intrinsic rewards, 451–452 contests, 452 job enrichment, 452 public recognition programs, 452 RFM (recency, frequency, monetary) analysis for catalog retailers, 286–287 of customer database, 562 definition, 286 to estimate CLV, 287 target strategies, 288 Risk reduction, of in-store shopping, 62 Risks credit card information security, 66 financial, 92 in location decisions, 189 physical, 92 privacy violations, 66 social, 92 Robinson-Patman Act, 361 Rounder, 487, 488 Royalty fees, 533 Rudolph the Red-Nosed Reindeer, 412 Rule-of-thumb method for communication budget, 424–425 Russia, retail opportunities, 128 Rust Belt cities, 191 Safety, of catalog channel, 63 Safety stock, 317 669 Lev30026_sndx_651-676.indd Page 670 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com 670 Subject Index Sales break-even, 382 Build-A-Bear Workshop, 540 by channel type, 58 communication program for, 399 data sharing, 266 Diamond Furriers, 571 in direct selling worldwide, 59 effect of pricing strategy, 373 effect of weather on, 313 Enterprise Rent-A-Car, 570 food retailers, 34 foreign vs domestic, 11 general merchandise stores, 34 growth on Internet channel, 58 by hypermarkets in India, 544–545 monitoring at Harrods, 577 nonstore retailers, 34 peak selling seasons, 129 potential in foreign markets, 126 seasonal, 133 store design to increase, 469 stores classified by, 323 Tractor Supply Company, 538 volume in United States, 9–10 Sales clerks, 27 Sales data historical, 311, 332 previous, for fashion merchandise, 313 timing of merchandise allocation, 325 Sales decline at malls, 177 Sales forecasts for fashion merchandise, 308–309 difficulties, 311–312 fashion trend services, 313–314 market research, 312–313 previous sales data, 312 vendor information, 314 inventory management report, 321 for service retailers, 314 for staple merchandise adjustment for controllable factors, 311 historical sales, 311 Sales goals, 445–446 Sales irregularities, 265 Salespeople feedback from, 511 generational differences, 560 Generation Y employees, 560 goal conflicts, 516 job analysis, 435 job description, 436 number of, in direct selling, 59 as personal shoppers, 574 recruitment at Diva, 560 Sales per linear foot, 481–482 Sales per square foot, 481–482 Sales potential estimates analog approach, 210 Huff gravity model, 207–209 regression analysis, 209 Hutch Corporation, 556 Sales projections, 530 Sales promotions advertising options, 568 to attract customers, 276 coupons, 412–413 and customer loyalty, 415 definition, 411 in planning and evaluation of communication program, 426–427 point-of-purchase displays, 412, 414 pop-up stores, 412, 414–415 premiums, 412, 413 rebates, 412, 413 samples, 412, 413 special events, 412, 414 types, 412 Sales quotas, 445–446 Sales-to-stock ratio and inventory turnover, 305–306 measuring, 307 Sales transaction data, 253–254 Same-store growth, 161 Samples, for sales promotions, 413 Satisfaction, 91 Saturation stage of fashion, 107 Scale economies, 133, 249 Scalpers, 386 Scanned vs posted price, 394 Scent, in store atmosphere, 491–492 Scrambled merchandising, 15 Seasonal merchandise, 310–311 Seasonal sales, 133 Secondary trading area, 199–200 Second-degree price discrimination clearance markdowns, 388 coupons, 388 definition, 386 multiple-unit pricing, 388 price bundling, 388 promotional markdowns, 387–388 ticket prices, 386–387 Securities and Exchange Commission, 158, 526 Security measures to prevent shoplifting closed-circuit cameras, 459 electronic article surveillance systems, 459–460 to reduce employee theft, 461–462 Security policy objectives, 255 Selective hiring, 232 Self-managed teams, Whole Foods Market, 21 Self-selected variable pricing, 386–388 clearance markdowns, 388 coupons, 388 multiple-unit pricing, 388 price bundling, 388 promotional markdowns, 387–388 Self-service technologies, 517 Selling, general, and administrative expenses, 147, 148 Sell-through analysis, 326 Semipassive radio frequency identification tags, 269 Senior management officers, 224 Senior vice president of merchandising, 226 Senior vice president of stores, 227 Service gap communication gap, 509 definition, 508 delivery gap, 509 knowledge gap, 508 overcoming communication gap managing customer expectations, 519 realistic commitments, 518–519 overcoming delivery gap develop solutions, 517 emotional support, 515 empowering employees, 516 information and training, 514–515 instrumental support, 515 internal communication, 516 providing incentives, 517 using technology, 517–518 overcoming knowledge gap customer complaints, 510–511 customer panels and interviews, 510 customer research, 511 feedback from employees, 511 gauging individual transactions, 509–510 information technology, 511 interacting with customers, 510 knowing customer desires, 509 social media, 510 overcoming standards gap commitment to quality, 511–512 defining service provider role, 512 measuring performance, 514 setting goals, 513–514 standards gap, 509 Service goals, 513–514 Service level factors determining levels, 318 and model stock plan, 317 Service performance measures mystery shoppers, 514 periodic surveys, 514 sales data analysis, 514 Service providers commitment to quality, 512 dealing with complaints, 510–511 defining role of, 512 emotional support, 515 empowerment, 516 fair solutions to problems distributive fairness, 520 procedural fairness, 521 quick resolution, 521 feedback to managers, 511 information and training for, 514–515 instrumental support, 515 interacting with customers, 510 listening to customers, 520 motivation to achieve goals, 513–514 Service quality, 512 Service retailers compared to merchandise retailers, 50–51 inconsistency, 51 intangibility, 50 perishability, 50–51 simultaneous production and consumption, 50 definition, 48 growth trends, 48 sales forecasts, 314 types and companies, 48–49 Lev30026_sndx_651-676.indd Page 671 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com Subject Index Services Build-A-Bear Workshop, 540 costs of, 34 increasing value of, to limit information search, 85 offered by retailers, 33 perishable nature of, 314 price-inelastic, 375 pricing of matching supply and demand, 377–378 quality determination, 378 yield management, 377 provided by retailers, Tractor Supply Company, 538 Sexual harassment, 242, 446–448 SG&A; see Selling, general, and administrative expenses Share of wallet, 68, 276 Shipment preparation, 258 Shoe retailers, 45 Shoplifting detecting and preventing closed circuit TV cameras, 459 electronic article surveillance systems, 459–460 merchandise policies, 459 personnel policies, 460 prosecution, 460–461 store design, 459 technology for, 462 dollar value of loss, 461 professional, 458–459 spotting, 460 Shopping bot sites, 413 Shopping carts, first use, 500 Shopping centers anchor stores, 173 benefits of, 166 common area maintenance, 173 community strip shopping centers, 173–174 definition, 173 descriptions, 173–174 gross leased area, 173 lifestyle centers, 177–178 locations within, 197–199 mixed-use developments, 178 neighborhood centers, 173–174 omnicenters, 179–180 outlet centers, 178–179 parking facilities, 196 percentage leases, 213–214 power centers, 174–175 restrictions on tenants, 197 shopping malls, 175–177 theme/festival centers, 179 traffic flow, 195 types, 173 Shopping experience, 38, 400 Apple Stores, 576 integrated, 70–71 in multichannel retailing, 74–75 at Tractor Supply Company, 538 Shopping goals, 492 Shopping malls advantages over alternatives, 175 Asian mega malls, 176 changing demographics, 175 definition, 175 disadvantages, 175–177 evaluating locations in, 198–199 kiosks in, 181–182 occupancy costs, 175 redevelopment projects, 175 regional, 175 sales and traffic decline, 175 super-regional, 175 trade area map, 206 Shortages, overreacting to, 264 Shrinkage, 333 calculating, 458 causes of loss, 458 definition, 458 detecting and deterring shoplifting, 459–460 dollar value per year, 461 high-tech retail theft, 458–459 at Nordstrom, 574 by organized theft, 458–459 reducing employee theft, 461–462 and store design, 470 Signage and graphics Apple Stores, 576 category signage, 477 digital, 477–479 digital screen networks, 577–578 functions, 476 point-of-sale signage, 477 promotional signage, 477 Signs, restrictions on, 185 Simplicity, in store design, 493 Single-store retailer, 51 amount of specialization, 224–225 merchandise managers, 226 organization structure, 224–226 Situation audit bargaining power of vendors, 133 barriers to entry, 133 competitive factors, 133–134 definition, 132 environmental factors, 134–135 market forces, 132–133 strengths and weaknesses analysis, 135 60 Minutes, 574 Sliding scale lease, 214 Slotting allowances/fees, 356 Smartphones, 407 Smuggling of diamonds, 547 Social experience, in-store shopping, 62–63 Social media for customer service, 510 definition, 409 drawbacks, 409–410 Facebook, 411 for proactive dialogue, 409 sites, 313 and Starbucks, 580 Twitter, 411 YouTube, 410–411 Social responsibility, 8–9 at Avon, 559 Social risks, 92 Societal objectives, 142–143 Software, for price setting, 381 Space management allocation of merchandise categories display considerations, 482 inventory turnover, 482 space productivity, 481–482 location of merchandise categories category adjacencies, 484 demand merchandise, 482, 483 destination merchandise, 482 impulse products, 483 special merchandise, 483 strike zone, 482 location of merchandise within a category planograms, 484, 486 rules for, 484 videotaping customers, 486–487 virtual-store simulation, 484–486 pet food, 485 vertical blocking, 485 Space productivity, 481–482 Special charges, 146–147 Special customer services, 289 Special events disadvantages, 412 for sales promotions, 414 Specialization by buyers, 230 in China, 350 in single-store retailers, 224–225 Specialized promotions, 291 Special merchandise, 483 Specialty shopping, 183–184 Specialty stores characteristics, 41 definition, 42 fast-fashion retailers, 43 list of, 43 of manufacturers, 44 retail strategy, 42–43 Spending potential index, 207 Sponsored search, 569 Sporting Goods Dealer, 526 Sporting goods retailers, 45 Sports events tickets, 386–387 Spots, TV, 416–417 Staffing; see Recruitment of employees Standardized service, 503 Standards gap definition, 509 overcoming, 511–514 Staple merchandise categories, 308–309 control system for inventory automated replenishment, 320 determining backup stock, 319–320 flow of merchandise, 318–319 inventory management report, 320–321 order point, 321 order quantity, 321 sales forecasts, 311 store allocation decisions, 325 Start-up costs, 530 Statement of operations, 144; see also Income statement Statistical model for sales potential, 209 Status and hedonic need, 82 reducing differences in, 238–239 671 Lev30026_sndx_651-676.indd Page 672 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com 672 Subject Index Stimulation of hedonic needs, 82 Stock incentives, 235 Stock-keeping unit rationalization scheme, 316 Stock-keeping units, 248 A, B, and C items, 317, 327 ABC analysis, 326–327 at ALDI, 36 assortment plan, 314–316 backup stock, 33–34 category captains, 304 on consignment, 267 definition, 32, 304 on Internet channel, 63 in inventory management, 308 in multichannel retailing, 67 number offered, 315 at Save-A-Lot, 547 staple merchandise, 318–321 stockouts, 250 in supermarkets, 35 Tractor Supply Company, 538 Stocklifts, 362 Stock option plan, 579 Stockout, 250, 264, 315 at Discmart, 573–574 reduced by pricing strategy, 373 reduced with radio frequency identification tags, 270 reducing chances of, 319 Stockout rate, 250 Stock-to-sales ratio calculating, 334 in merchandise budget plan, 333–334 Store advocates, 95 Store atmosphere atmospherics color, 491 entertainment, 492–493 lighting, 490–491 music, 491 scent, 491–492 checkout, 494–495 examples, 489–490 getting around, 493 layout, 494 prioritizing merchandise, 493–494 simplicity, 493 and store web site, 493 visibility, 493 Store brands, 117, 343 Store channel benefits, 61–63 definition, 58 estimated sales, 58 geodemographic segmentation, 99 use of multiple channels, 66 Store credits, used for theft, 459 Store design appealing atmosphere, 489–495 Apple Stores, 576 careers in, 27 case study, 466–467 feature areas, 479–481 fixtures, 471 Hollister stores, 550 impact on shopping behavior, 468 in India, 473 in international markets, 129 layout, 472–476, 494 objectives and Americans with Disabilities Act, 471–472 build customer loyalty, 468–469 control costs, 469–471 hedonic benefit, 469 implement retail strategy, 468 increase sales and visits, 469 utilitarian benefit, 469 to reduce shoplifting, 459 signage and graphics, 476–479 simplicity, 493 space management, 481–487 at Starbucks, 579 and store managers, 468 trade-offs customer vs merchandise space, 472 impulse decisions vs ease of purchase, 472 pleasant vs warehouse, 472 specialty stores, 472 visual merchandising, 487–489 Whole Foods Market, 21 Store environment, 230 at Tractor Supply Company, 538 Store front displays, 215 Store hour limitations, 12 Store layout, 472–476, 494 Apple Stores, 576 and customer service, 503 free-form, 476 grid, 473–475 racetrack, 475–476 at Starbucks, 579 Store location; see Location entries Store loyalty, 346 and private-label brands, 347 Store maintenance, 457–458 Store management career opportunities, 25–26 compensation plans, 452–455 controlling costs, 455–458 coordinated with merchandise management assigning employees, 231 store environment, 230 store visits, 231 cost control, 433 entry-level positions, 26 evaluating employees, 448–450 main responsibilities, 433 motivating and managing employees, 443–448 orientation programs, 440–441 productivity, 433 recruiting and selecting employees job analysis, 435 job description, 436 legal issues, 439–440 locating prospective employees, 436 screening, 436–438 reducing shrinkage, 458–462 reward systems, 451–452 tasks involved in, 225 training programs, 441–443 at Walgreens, 432–433 Whole Foods Market, 21–22 Store managers, 227 compensation, 27 Store morale, 446 Store operations measures, 162 Stores classified by annual sales, 323 merchandise allocation to, 323–325 space limitations, 316 trading areas of, 323–324 Stores division, 227 Store size Harrods, 57 in Huff gravity model, 207 Hutch Corporation, 554 Save-A-Lot, 547 Store visibility, 196–197 Store visits, by managers, 231 Store within a store, 181 Stories, 236 Storing, 257 Straight commission, 453 Straight rack, 487, 488 Straight salary compensation, 453 Strategic advantage definition, 249 from information systems, 248 in multichannel retailing, 68–69 from supply chain management, 248 through customer service, 500–508 at Walmart, 249 Strategic alliances, 130 Starbucks, 578 Strategic fit, in location decision, 191–192 Strategic management, 225 Strategic objectives, varying for Royal Ahold, 548 Strategic opportunities, 136 Strategic profit model for analyzing other decisions, 156 asset management path components, 149–151 intangible assets, 151 performance analysis, 152 asset turnover, 143–144 definition, 143 earnings before interest and taxes, 143 illustration of asset turnover management path, 155–156 profit margin management path, 153–155 implications for performance, 153 issues illustrated by, 153 operating profit margin, 143 profit margin management path cost of goods sold, 147 extraordinary nonrecurring expenses, 147 gross margin percentage, 148 income statement, 144–146 net profit margin, 147 net sales, 146 operating expenses, 147 operating profit margin percentage, 148 Lev30026_sndx_651-676.indd Page 673 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com Subject Index payments from vendors, 147 performance analysis, 147–149 selling, general, and administrative expenses, 147 special charges, 146–147 return on assets determination, 144 for selected retailers, 152 Tiffany vs Walmart, 553 Strategic relationships with vendors building partnerships, 360–361 common goals, 360 credible commitments, 360 defining, 358–359 maintaining, 359–360 mutual trust, 359–360 open communication, 360 Strategic retail planning process adjustments, 137 allocate resources, 136 definition, 130 develop retail mix, 136 establish objectives, 136 evaluating opportunities, 136 identifying opportunities, 136 mission statement, 131–132 performance evaluation, 137 purpose of objectives, 142 in real world, 137 situation audit, 132–135 uses, 130–131 Strategy, 112; see also Retail strategy Streaming movies, 453 Strengths and weaknesses analysis, 136 Strike zone, 482 Strip malls, Hutch Corporation in, 554 Structured training programs, 441–442 Students as management trainees, 440 Subbrand, 342 Subcultures, 96 Subculture theory of fashion, 106 Substantial segments, 98 geographic, 99 Substitutes, and price sensitivity, 375 Supercenters characteristics, 35 compared to hypermarkets, 39 competition for supermarkets, 36–37 competitors for, 38 definition, 38 location challenges, 39 Walmart, 42 Supermarkets ALDI in U.S and Germany, 36 characteristics, 35 conventional, 35 end caps, 479 extreme-value, 35 inefficient supply chains, 265 limited-assortment, 35–36 loyalty cards, 289 number of items carried, power perimeter, 37 price war in United Kingdom, 376 retailing trends, 36–38 ethnic merchandise, 38 fresh merchandise, 37 health/organic merchandise, 37 locovore movement, 37 private-label brands, 38 shopping experience, 38 size of Royal Ahold, 548 slotting fees, 356 Whole Foods Market, 20–22 zone pricing, 389–390 Super-regional malls, 175 Supplier relationships, 119–120 Suppliers to American Furniture Warehouse, 566 and centralization, 229 to Walmart, 542 Supply and demand for services, 51, 377–378 Supply chain backward integration, for catalog and Internet channels, 263 definition, efficiency from vendor collaboration, 264–267 forward integration, illustration, 249 information flows, 251–255 of large retailers, members of, 248 merchandise flows, 251, 255–256 push vs pull, 261 Starbucks, 580 for supermarkets, 265 vertical integration, wholesalers, Supply chain management, 18 benefits fewer stockouts, 250 tailored assortments, 250 definition, 248 distribution centers, 248, 256–259 and higher return on assets, 251 inventory control, 319–320 logistics, 255–256 at Netflix, 260 radio frequency identification tags for, 267–271 by retailers, 248 retailer-vendor collaboration benefits, 264–265 collaborative planning, forecasting, and replenishment, 267 information sharing, 266 quick response, 265 using electronic data interchange, 265–266 vendor-managed inventory, 266–267 system design issues distribution centers vs direct store delivery, 261–262 drop-shipping, 263 fulfilling catalog and Internet orders, 263 outsourcing logistics, 259–260 push vs pull supply chains, 261 reverse logistics, 262–263 at Target, 247–248 Tractor Supply Company, 539 at Walmart, 249 at Zara, 252 Support groups, 240 Sustainability in location planning, 184–185 of new business, 528 program at Walmart, 540–542 Sustainable competitive advantage, 114–121 at Container Store, 122 customer loyalty activities, 115–116 brand image, 116 customer relationship management programs, 118–119 customer service, 117–118 definition, 115 positioning, 116 unique merchandise, 116–117 definition, 112 efficiency of operations distribution, 120 human resource management, 120 information systems, 120 erosion over time, 115 global, 128 from location, 121 methods of developing, 115 multiple sources of, 121 supplier relationships, 119–120 SWOT analysis, 110 Symbols, 236–237, 402 Tailored assortments, 250 Talent policies, 560 Talent scouts, 436 Tangibility of services, 505–506 Tapestry segmentation scheme, 99, 100 Target market at Abercrombie & Fitch, 549 at American Eagle, 549 consumer behavior in comparison shopping, 183 convenience shopping, 183 in retailer’s target market, 182–184 specialty shopping, 183–184 definition, 112 density of, 183–184 of diversification, 124 with Google AdWords, 569–570 Hutch Corporation, 554 JCPenney, 19 and lifestyle, 192 for new business, 527 newspaper advertising, 416 and price sensitivity, 375 for radio advertising, 417 in retail strategy, 17, 113–114 Save-A-Lot, 547 and store location, 198 Tractor Supply Company, 538 Whole Foods Market, 20 Tariffs, 351 Task performance behaviors, 443 Team purchase, 96 China, 387 Technical training, 524 673 Lev30026_sndx_651-676.indd Page 674 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com 674 Subject Index Technology; see also Signage and graphics for Avon, 559 at convenience stores, 40 for customer service hand-held scanners, 518 kiosks, 517–518 retail store assistant, 518 self-service, 517 touch-screen systems, 518 effect on customer expectations, 508 to reduce employee theft data mining, 462 radio frequency identification tags, 462 television cameras, 462 transaction-monitoring software, 462 to reduce knowledge gap, 511 reducing cost of information search, 83 used by retailers, Television commercials, 416–417 product placement, 419 Television home shopping definition, 60 direct-response advertising, 60 estimated sales, 58 infomercials, 60 largest retailers, 60 major advantages, 60 Temporary locations, 181 Terms and conditions of purchase, 361 Terms of purchase, 355 Tertiary trading area, 199–200 Testing job applicants, 437–438 Textile production in China, 350 Theft controlling, 162 reduced with radio frequency identification tags, 270 Theme/festival centers definition, 179 main characteristics, 168 Third-degree price discrimination definition, 388 legality of, 388–389 zone pricing, 389–390 Third-party credit cards, 280 30 Rock, 419 Ticketing and marking, 257–258 Tiers, in frequent-shopper programs, 288 Time, performance over, 162–163 Timing of merchandise allocation, 325 Title VII of the Civil Rights Act, 439 Tonnage merchandising, 489 Top-down planning, 159 Top management, setting quality standards, 512 Top-of-the mind awareness, 402 Touch-screen systems, 518 Town locations; see Urban locations Toy retailers, 45 Trade areas competition in, 207 customer spotting process, 201–202 definition, 168, 199 and driving time, 200 evaluated for location, 190–193 factors affecting size, 202–204 identifying characteristics, 212 information sources, 202–207 Census bureau data, 203 geographic information systems suppliers, 203–206 spending potential index, 207 limited and freestanding sites, 168 match present with potential sites, 212–213 measuring for retail site, 201–202 and merchandise allocation, 323–324 new vs existing store, 202 number of stores, 193–194 in power centers, 174–175 present, 211 primary, 199–200 secondary, 199–200 tertiary, 199–200 zones in, 200 Trademark, 362 Trade shows, 348 Traffic appliances, 387–388 Traffic congestion, 196 Traffic flow, 194–195 Training program analyzing success or failure, 443 blended approach, 442–443 at Container Store, 234 costs for older employees, 223 e-training, 441–442 of new employees, 232–233 at Nike, Inc., 442 on-the-job, 442 at PetSmart, 584 to reduce delivery gap, 514–515 at Sephora, 572 at Starbucks, 579 structured program, 441–442 at Tractor Supply Company, 539 of younger employees, 233 Transaction-monitoring software, 462 Transactions gauging satisfaction with, 509–510 rewarded, 289 Transformational leaders, 444 Transparency, in frequent-shopper programs, 289 Transportation costs of, 356 inbound, 256 outbound, 258–259 Travel time, in Huff gravity model, 207 Trend-setters, 106 Trialability, 107 Trickle-down theory of fashion, 106 True Bethel Baptist Church, Buffalo, NY, 180 Trust, 359–360 Tuangou (team purchase), 96, 387 Turnaround strategy, 110–111 Tween shoppers, 95 Tying contracts, 365 Umbrella brand, 342 Under the Dome (King), 393–394 Unemployment, reduced by protecting small businesses, 12 Uniform Code Council, 253 Uniform Franchise Offering Circular, 534 Unions, 242 Unique merchandise, 118 for customer loyalty, 116–117 Uniqueness of offering, 183–184 United Kingdom ethical consumers, 22 high streets, 171 importance weights, 90 price war, 376 United Nations, 546 United States backlash against Walmart, 39 efficient distribution, 11 employment in retailing, 10 Hispanic population, 38, 96 inner city locations, 171–172 metropolitan statistical areas, 190 micropolitan statistical areas, 190 number of retailers, 30 population diversity, 222 size of tween population, 95 volume of sales, 9–10 United States Chamber of Commerce, 532 United States Department of Employment Services, 436 United States dollar, decline in value, 351 United States Supreme Court, on manufacturer’s suggested retail price, 394 United Way, 143 Universal Product Code, 257 definition and functions, 253 versus radio frequency identification tags, 268 Unplanned purchase, 92 stimulating, 93 Unrelated diversification growth opportunity, 124 UPC; see Universal Product Code Urban locations for big-box retailers, 169 central business district, 170 gentrification, 169–170 inner city, 171–172 main characteristics, 168 main street/high street, 171 occupancy costs, 169 traffic congestion, 169 Urban renewal, 170 Utilitarian benefits, 469 Utilitarian needs, 81–82 Utilitarian shopping goal, 492 VALS lifestyle survey, 100–101 Value, 371 Value creation, 7–8 breaking bulk, holding inventory, increasing value of products and services, providing assortment, providing services, Values statement, Tractor Supply Company, 539 Variable costs, 381–382 Lev30026_sndx_651-676.indd Page 675 12/16/10 3:20 PM user-f494 /202/MHBR176/Lev30026_disk1of1/0073530026/Lev30026_pagefiles www.downloadslide.com Subject Index Variable pricing individualized, 385–386 by market segments, 388–390 perceptions of fairness, 390 self-selected, 386–388 Variety definition, 32, 315 determining, 315–316 and profit, 34 specific merchandise categories, 33 Vending machines, 60–61 invention of, 61 Vendor-managed inventory, 266–267, 358 Vendors to American Furniture Warehouse, 566 avoiding gray-market/diversion problems, 364 bargaining power, 133 buybacks, 362 buyers meeting with, 341 as category captains, 305 in category management, 304 chargebacks, 363 collaboration in supply chain, 264–267 and commercial bribery, 362 common goals with buyers, 360 Container Store relations with, 119–120, 122 co-op advertising, 417 direct store delivery, 261–262 enforcement of MSRP, 394 evaluation steps, 329 fill rate, 320 Home Depot scoring, 328 as information source, 354 labor practices, 352 markdown money, 326 multiattribute analysis, 327–329 of national brands, 345–346, 348 negotiating with, 348 additional markup opportunities, 355 advertising allowances, 356 exclusivity, 355–356 knowledge as power, 353–354 margin guarantees, 354–355 markdown money, 354 price and gross margin, 354 slotting fees, 355 terms of purchase, 355 tips for buyers, 356–358 transportation, 356 Nordstrom relationships with, 575 payment from, 147 reducing amount of markdowns, 384 refusal to deal, 365 resistance to radio frequency identification tags, 270 and Robinson-Patman Act, 361 sales forecast information from, 314 sales transaction data for, 253–254 strategic relationships with building partnering relationships, 360–361 defining, 358–359 maintaining, 359–360 terms and conditions of purchase, 361 tying contracts, 365 to Walmart, 352 work with buyers, 256 Venture capitalists, 529–530 Vertical blocking, 485 Vertical integration, 7, 124 Vertical merchandising, 489 Vice president of private-label development, 228 Video games, 43 Video on demand, 543 Videotaping customers, 486–487 Virtual Mirror kiosk, 503 Virtual-store simulation, 484–486 Visibility, 196–197 Visual merchandising, 21 definition, 487 fixtures, 487–488 presentation techniques, 487–489 Volume buying, 566 competition for supermarkets, 36–37 largest chains, 39 membership types, 40 size and location, 39 variety and assortment, 32–33 Warehouse labor cost reduction, 269–270 Warranties, for diamonds, 547 Weather, effect on sales, 313 Web site design, 503 Web sites for community building, 409 for franchising information, 535 for online marketing, 408–409 for social media, 409–411 Wedding planning process, 64 Wholesale market, 348–39 Wholesale market centers, 348 Wholesalers definition, eliminated by retailer warehouses, 11 Wholesale-sponsored voluntary cooperative group, 51 Window displays, 479 Window shopping, 488 Women Avon’s salesforce, 559 gender-based pricing, 389 and glass ceiling, 240–241 in retailing, 223 window shopping, 488 Word of mouth, 409 negative, 91 Work ethic, 524–525 Workforce generational differences, 560 at Walmart, 542 Work-life balance, 223 Yield management, 377; see also Price discrimination Wages, fair, 90 Wall displays, 480 Warehouse clubs characteristics, 35 Zone pricing, 389–390 Zoning laws, 12, 185 675 www.downloadslide.com This page intentionally left blank www.downloadslide.com Want an online, searchable version of your textbook? 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(Less time grading means more time teaching…) Want an instant view of student or class performance relative to learning objectives? (No more wondering if students understand…) Need to collect data and generate reports required for administration or accreditation? (Say goodbye to manually tracking student learning outcomes…) Want to record and post your lectures for students to view online? With McGraw-Hill's Connect Plus Marketing, ™ INSTRUCTORS GET: • Interactive Applications – book-specific interactive assignments that require students to APPLY what they’ve learned • Simple assignment management, allowing you to spend more time teaching • Auto-graded assignments, quizzes, and tests • Detailed Visual Reporting where student and section results can be viewed and analyzed • Sophisticated online testing capability • A filtering and reporting function that allows you to easily assign and report on materials that are correlated to accreditation standards, learning outcomes, and Bloom’s taxonomy • An easy-to-use lecture capture tool ... Data Levy, Michael, 1950Retailing management / Michael Levy, Barton A Weitz — 8th ed p cm Includes index ISBN-13: 978-0-07-353002-4 (alk paper) ISBN-10: 0-07-353002-6 (alk paper) Retail trade Management. .. SECTION V THE WORLD OF RETAILING Introduction to the World of Retailing Types of Retailers 28 Multichannel Retailing 56 Customer Buying Behavior 78 RETAILING STRATEGY Retail Market Strategy 110... Strategy 140 Retail Locations 166 Retail Site Location 188 Human Resource Management 218 Information Systems and Supply Chain Management Customer Relationship Management 274 MERCHANDISE MANAGEMENT