Retailing Management / Edition 7

by Michael Levy, Barton Weitz

Overview

Retailing Management by Levy and Weitz continues to be the market-leading text for the retailing course through its readability, organization, and emphasis on how students can come to grips with real retailing issues while being able to solve problems. The text's logical decision-making focus allows students to discover the process of strategic decisions first before moving on to implementation. Students indicate that this text is a "good read" because of the numerous examples of retailers, their practices, the interesting retail facts in the margins, and eye catching design and layout.

What's new in the seventh edition? Increased treatment of how multi-channel retailers provide information and sell products and services to customers. The seventh edition is committed to discussing Internet retailing applications by including examples regarding the impact of social networks on buying behavior and the use of the Internet for training. Greater emphasis on social responsibility of retailers features material covering consumer interest in green products; issues in sourcing merchandise globally; and considering sustainability issues in store operation and design. Emphasis on practical and career applications. Students who might consider starting their own business may refer to the two new appendices, Starting Your Own Business and Starting a Franchise Business.

Product Details

ISBN-13:	9780073381046
Publisher:	McGraw-Hill Higher Education
Publication date:	04/18/2008
Edition description:	Older Edition
Pages:	736
Product dimensions:	8.80(w) x 11.20(h) x 1.10(d)

About the Author

Michael Levy received an undergraduate and M.S. degrees in business administration from the University of Colorado at Boulder and a Ph.D. in business administration from Ohio State University. He is the Charles Clarke Reynolds Professor of Marketing Emeritus at Babson College and CEO of RetailProf LLC. Dr. Levy received the inaugural ACRA Academic Lifetime Achievement Award; the 2009 Lifetime Achievement Award, American Marketing Association, Retailing Special Interest Group; the Babson Faculty Scholarship Award; and the Distinguished Service Award, Journal of Retailing. Marketing Educator rated him one of the best researchers in marketing. Dr. Levy has published more than 50 articles in leading marketing and logistics journals and is co-author of the sixth edition of Marketing. He has performed research projects with major retailers and retail technology firms, including Accenture, Federated Department Stores, Khimetrics, Mervyn’s, Neiman Marcus, ProfitLogic, and Zale Corp.
Barton A. Weitz received an undergraduate degree in electrical engineering from MIT and an M.B.A. and Ph.D. in business administration from Stanford University. He was a member of the faculty at the University of California–Los Angeles Graduate School of Business and the Wharton School at the University of Pennsylvania and is JCPenney Emeritus Eminent Scholar Chair in Retail Management in the Warrington College of Business Administration at the University of Florida (UF). Dr. Weitz founded the UF David F. Miller Center for Retailing Education and Research, which is supported by contributions from JCPenney, Macy’s, Walmart, Office Depot, and Home Depot. He has won awards for teaching excellence and published in leading academic journals on channel relationships, electronic retailing, store design, salesperson effectiveness, and sales force and human resource management. Dr. Weitz is past chair of the American Marketing Association and was honored as the AMA/Irwin Distinguished Educator.
Dhruv Grewal received a Ph.D. from Virginia Tech and is the Toyota Chair in Commerce and Electronic Business and professor of marketing at Babson College. His academic interests focus is on marketing foundations and research, retailing, pricing, and value-based strategies. Dr. Grewal was awarded the 2005 Lifetime Achievement in Behavioral Pricing Award by Fordham University and was listed in the World's Most Influential Scientific Minds by Thomson Reuters in 2014. He is a coauthor of Marketing Research, has published more than 70 articles in leading journals, and serves on numerous editorial boards. Dr. Grewal is a recipient of the 2005 Sherwin-Williams Distinguished Teaching Award, SMA; 2003 AMA Award for Innovative Excellence in Marketing Education; 1999 AMS Great Teachers in Marketing Award; and 1998 Executive MBA Teaching Excellence Award. He has taught executive seminars and joined in research with numerous firms, including IRI, TJX, Radio Shack, Monsanto, McKinsey, and Motorola.

Table of Contents

The World of Retailing
Introduction to the World of Retailing     4
What Is Retailing?     6
A Retailer's Role in a Supply Chain     7
Retailers Create Value     7
Social and Economic Significance of Retailing     9
Social Responsibility     9
Retail Sales     9
Employment     9
Global Retailers     9
Structure of Retailing and Supply Chains around the World     11
Opportunities in Retailing     13
Management Opportunities     13
Entrepreneurial Opportunities     13
The Retail Management Decision Process     15
Understanding the World of Retailing-Section I     15
Developing a Retail Strategy-Section II     17
JCPenney Moves from Main Street to the Mall     19
Implementing the Retail Strategy-Sections III and IV     21
Whole Foods Market: An Organic and Natural Food Supermarket Chain     21
Ethical and Legal Considerations     23
Summary     25
Key Terms     25
Get Out and Do It!     25
Discussion Questions and Problems     26
Suggested Readings     26
Careers in Retailing     26
Sources of Information about Retailing     30
Types of Retailers     34
Retailer Characteristics     36
Type of Merchandise     36
Variety and Assortment     37
Services Offered     39
Prices and the Cost of Offering Breadth and Depth of Merchandise and Services     39
Food Retailers     40
Supermarkets     41
Supercenters     44
Warehouse Clubs     45
Convenience Stores     46
General Merchandise Retailers     47
Department Stores     47
Full-Line Discount Stores     49
Specialty Stores     49
Drugstores     51
Category Specialists     51
Extreme Value Retailers     53
Off-Price Retailers     53
Nonstore Retailers     55
Electronic Retailers     55
Catalog and Direct-Mail Retailers     55
Direct Selling     57
Television Home Shopping     57
Vending Machine Retailing     58
Services Retailing     59
Differences between Services and Merchandise Retailers     60
Types of Ownership      62
Independent, Single-Store Establishments     62
Corporate Retail Chains     63
Franchising     63
Summary     65
Key Terms     65
Get Out and Do It!     65
Discussion Questions and Problems     66
Suggested Readings     67
Comparison Shopping     67
Multichannel Retailing     70
Retail Channels for Interacting with Customers     72
Store Channel     72
Catalog Channel     74
Internet Channel     74
Evolution toward Multichannel Retailing     83
Overcoming the Limitations of an Existing Format     83
Capabilities Needed for Multichannel Retailing     85
Who Has These Critical Resources?     86
Will Manufacturers Bypass Retailers and Sell Directly to Consumers?     87
Which Channel Is the Most Profitable?     88
Issues in Multichannel Retailing     88
Integrated Shopping Experience     89
Brand Image     89
Merchandise Assortment     90
Pricing     91
Shopping in the Future     91
Shopping Experience     91
Supporting the Shopping Experience      92
Summary     93
Key Terms     93
Get Out and Do It!     93
Discussion Questions and Problems     94
Suggested Readings     94
Customer Buying Behavior     96
The Buying Process     98
Need Recognition     99
Information Search     102
Evaluation of Alternatives: The Multiattribute Model     105
Purchasing the Merchandise or Service     110
Postpurchase Evaluation     111
Types of Buying Decisions     111
Extended Problem Solving     111
Limited Problem Solving     111
Habitual Decision Making     112
Social Factors Influencing the Buying Process     113
Family     113
Reference Groups     114
Culture     114
Market Segmentation     116
Criteria for Evaluating Market Segments     116
Approaches for segmenting Markets     117
Composite Segmentation Approaches     123
Summary     123
Key Terms     124
Get Out and Do It!     124
Discussion Questions and Problems     125
Suggested Readings      126
Customer Buying Behavior and Fashion     126
Retailing Strategy
Retail Market Strategy     132
What Is a Retail Strategy?     134
Definition of Retail Market Strategy     134
Target Market and Retail Format     135
Building a Sustainable Competitive Advantage     137
Customer Loyalty     138
Location     140
Human Resource Management     141
Distribution and Information Systems     141
Unique Merchandise     141
Vendor Relations     142
Customer Service     142
Multiple Sources of Advantage     142
Growth Strategies     144
Market Penetration     144
Market Expansion     145
Retail Format Development     145
Diversification     145
Strategic Opportunities and Competitive Advantage     146
Global Growth Opportunities     146
Who Is Successful and Who Isn't?     146
Keys to Success     148
Evaluating Global Growth Opportunities     150
Entry Strategies     152
The Strategic Retail Planning Process     153
Define the Business Mission      154
Conduct a Situation Audit     154
Identify Strategic Opportunities     159
Evaluate Strategic Opportunities     159
Establish Specific Objectives and Allocate Resources     159
Develop a Retail Mix to Implement Strategy     159
Evaluate Performance and Make Adjustments     159
Strategic Planning in the Real World     160
Summary     161
Key Terms     161
Get Out and Do It!     161
Discussion Questions and Problems     162
Suggested Readings     162
Using the Market Attractiveness/Competitive Position Matrix     163
Financial Strategy     166
Objectives and Goals     168
Financial Objectives     168
Societal Objectives     168
Personal Objectives     169
Strategic Profit Model     169
Profit Margin Management Path     171
Asset Management Path     176
Return on Assets     179
Illustration: Kelly Bradford's Evaluation of the Gifts-To-Go.com Growth Opportunity     181
Setting and Measuring Performance Objectives     184
Top-Down versus Bottom-Up Process     185
Accountable for Performance      185
Performance Objectives and Measures     186
Types of Measures     186
Assessing Performance: The Role of Benchmarks     188
Summary     190
Key Terms     190
Get Out and Do It!     190
Discussion Questions and Problems     191
Suggested Readings     191
Retail Locations     192
Types of Locations     194
Unplanned Retail Locations     195
Freestanding Sites     195
City or Town Locations     196
Shopping Centers     199
Neighborhood and Community Shopping Centers     200
Power Centers     201
Shopping Malls     201
Lifestyle Centers     204
Fashion/Specialty Centers     205
Outlet Centers     205
Theme/Festival Centers     207
Larger, Multiformat Developments-Omnicenters     207
Mixed Use Developments     207
Other Location Opportunities     208
Airports     209
Temporary Locations     209
Resorts     210
Store within a Store     210
Location and Retail Strategy     210
Shopping Behavior of Consumers in Retailer's Target Market     210
Size of Target Market     212
Uniqueness of Retail Offering     212
Legal Considerations     213
Environmental Issues     213
Zoning and Building Codes     213
Summary     214
Key Terms     214
Get Out and Do It!     214
Discussion Questions and Problems     215
Suggested Readings     215
Retail Site Location     216
Evaluating Specific Areas for Locations     218
Economic Conditions     218
Competition     219
Strategic Fit     220
Operating Costs     220
Number of Stores in an Area     221
Economies of Scale from Multiple Stores     221
Cannibalization     221
Evaluating a Site for Locating a Retail Store     222
Site Characteristics     222
Traffic Flow and Accessibility     223
Location Characteristics     224
Restrictions and Costs     225
Locations within a Shopping Center     225
Trade Area Characteristics     227
Trade Area Definition     227
Factors Affecting the Size of the Trade Area     228
Measuring the Trade Area for a Retail Site     229
Sources of Information about the Trade Area     230
Competition in the Trade Area     234
Estimating Potential Sales for a Store Site     235
Huff Gravity Model     235
Regression Analysis     237
Analog Approach     238
Illustration of Site Selection: Edward Beiner Optical     238
Competitive Analysis     239
Define Present Trade Area     239
Trade Area Characteristics     240
Match Characteristics of Present Trade Area with Potential Sites     241
Negotiating a Lease     241
Types of Leases     241
Terms of the Lease     242
Summary     243
Key Terms     243
Get Out and Do It!     244
Discussion Questions and Problems     244
Suggested Readings     245
Human Resource Management     246
Gaining Competitive Advantage Through Human Resource Management     248
Objectives of Human Resource Management     248
The Human Resource Triad     250
Special HR Conditions Facing Retailers     250
Designing the Organization Structure for a Retail Firm     252
Matching Organization Structure to Retail Strategy     253
Organization of a Single-Store Retailer     253
Organization of a National Retail Chain     255
Organization Structures of Other Types of Retailers     259
Retail Organization Design Issues     259
Centralization versus Decentralization     259
Coordinating Merchandise and Store Management     260
Winning the Talent War     261
Attracting Talent: Employment Marketing     262
Developing Talent: Selection and Training     262
Motivating Talent: Aligning Goals     263
Keeping Talent: Building Employee Commitment     266
Issues in Retail Human Resource Management     269
Managing Diversity     269
Legal and Regulatory Issues in Human Resource Management     270
Use of Technology     273
Summary     273
Key Terms     273
Get Out and Do It!     274
Discussion Questions and Problems     275
Suggested Readings     275
Information Systems and Supply Chain Management     276
Creating Strategic Advantage Through Supply Chain Management and Information Systems      278
Improved Product Availability     279
Higher Return on Investment     279
Strategic Advantage     280
Information Flows     282
Data Warehouse     284
Electronic Data Interchange     285
Pull and Push Supply Chains     286
The Physical Flow of Merchandise-Logistics     287
Distribution Centers versus Direct Store Delivery     287
The Distribution Center     289
Reverse Logistics     292
Logistics for Fulfilling Catalog and Internet Orders     292
Outsourcing Logistics     293
Collaboration Between Retailers and Vendors in Supply Chain Management     295
Using EDI     296
Sharing Information     296
Vendor-Managed Inventory     297
Collaborative Planning, Forecasting, and Replenishment     299
Radio Frequency Identification (RFID)     299
Benefits of RFID     301
Impediments to the Adoption of RFID     301
Summary     302
Key Terms     302
Get Out and Do It!     303
Discussion Questions and Problems     303
Suggested Readings     303
Customer Relationship Management     304
The CRM Process     306
What Is Loyalty?     306
Overview of the CRM Process     308
Collecting Customer Data     308
Customer Database     308
Identifying Information     309
Privacy and CRM Programs     311
Analyzing Customer Data and Identifying Target Customers     313
Identifying the Best Customers     314
Developing CRM Programs     318
Customer Retention     318
Converting Good Customers into Best Customers     321
Dealing with Unprofitable Customers     322
Implementing CRM Programs     323
Summary     324
Key Terms     324
Get Out and Do It!     324
Discussion Questions and Problems     325
Suggested Readings     325
Merchandise Management
Managing Merchandise Assortments     328
Merchandise Management Process Overview     330
The Buying Organization     330
Merchandise Category-The Planning Unit     332
Evaluating Merchandise Management Performance-GMROI     334
Managing Inventory Turnover     336
Merchandise Management Process      337
Types of Merchandise Management Planning Processes     338
Forecasting Sales     340
Category Life Cycles     340
Forecasting Staple Merchandise     342
Forecasting Fashion Merchandise Categories     345
Sales Forecasting for Service Retailers     348
Developing an Assortment Plan     349
Category Variety and Assortment     349
Determining Variety and Assortment     349
Setting Inventory and Product Availability Levels     352
Product Availability     352
Summary     353
Key Terms     354
Get Out and Do It!     354
Discussion Questions and Problems     354
Suggested Readings     355
Merchandise Planning Systems     356
Staple Merchandise Management Systems     359
The Inventory Management Report     360
Fashion Merchandise Management Systems     362
Monthly Sales Percentage Distribution to Season (Line 1)     362
Monthly Sales (Line 2)     363
Monthly Reductions Percentage Distribution to Season (Line 3)     363
Monthly Reductions (Line 4)     364
BOM (Beginning-of-Month) Stock-to-Sales Ratio (Line 5)      364
BOM Stock (Line 6)     366
EOM (End-of-Month) Stock (Line 7)     366
Monthly Additions to Stock (Line 8)     367
Evaluating the Merchandise Budget Plan     367
Open-to-Buy System     367
Calculating Open-to-Buy for the Current Period     368
Allocating Merchandise to Stores     369
Amount of Merchandise Allocated to Each Store     370
Type of Merchandise Allocated to Stores     370
Timing of Merchandise Allocations to Stores     371
Analyzing Merchandise Management Performance     373
Sell-Through Analysis Evaluating Merchandise Plan     373
Evaluating the Assortment Plan and Vendors     373
Summary     377
Key Terms     377
Get Out and Do It!     377
Discussion Questions and Problems     378
Suggested Readings     379
Retailing Inventory Method     379
Buying Merchandise     382
Brand Alternatives     384
National Brands     384
Private-Label Brands     385
Buying National Brand Merchandise     390
Meeting National Brand Vendors     390
National Brand Buying Process      392
Developing and Sourcing Private-Label Merchandise     392
Developing Private-Label Merchandise     392
Sourcing Merchandise     394
Global Sourcing     394
Support Services for Buying Merchandise     395
Resident Buying Offices     395
Retail Exchanges     396
Negotiating with Vendors     396
Knowledge Is Power     397
Negotiation Issues     398
Tips for Effective Negotiating     399
Strategic Relationships     401
Defining Strategic Relationships     401
Maintaining Strategic Relationships     402
Building Partnering Relationships     403
Legal and Ethical Issues for Buying Merchandise     404
Summary     409
Key Terms     409
Get Out and Do It!     410
Discussion Questions and Problems     410
Suggested Readings     411
Retail Pricing     412
Considerations in Setting Retail Prices     414
Customer Price Sensitivity and Cost     414
Competition     416
Legal and Ethical Pricing Issues     418
Setting Retail Prices     420
Setting Prices Based on Costs     420
Merchandising Optimization Software     422
Profit Impact of Setting a Retail Price: The Use of Break-Even Analysis     422
Price Adjustments     423
Markdowns     424
Variable Pricing and Price Discrimination     427
Pricing Strategies     431
High/Low Pricing     431
Everyday Low Pricing     432
Advantages of the Pricing Strategies     432
Pricing Services     433
Matching Supply and Demand     433
Determining Service Quality     435
Pricing Techniques for Increasing Sales     435
Leader Pricing     435
Price Lining     435
Odd Pricing     436
The Internet and Price Competition     437
Summary     437
Key Terms     438
Get Out and Do It!     438
Discussion Questions and Problems     439
Suggested Readings     439
Retail Communication Mix     440
Using Communication Programs to Develop Brand Images and Build Customer Loyalty     442
Value of Brand Image     442
Building Brand Equity     443
Extending the Brand Name      447
Methods of Communicating with Customers     447
Paid Impersonal Communications     447
Paid Personal Communications     451
Unpaid Impersonal Communications     452
Unpaid Personal Communications     453
Strengths and Weaknesses of Communication Methods     455
Planning the Retail Communication Program     457
Establish Objectives     457
Determine the Communication Budget     459
Allocation of the Promotional Budget     463
Plan, Implement, and Evaluate Communication Programs-Three Illustrations     463
Summary     465
Key Terms     465
Get Out and Do It!     466
Discussion Questions and Problems     466
Suggested Readings     467
Implementing Retail Advertising Programs     467
Store Management
Managing the Store     474
Store Management Responsibilities     476
Recruiting and Selecting Store Employees     477
Job Analysis     477
Job Description     478
Locating Prospective Employees     478
Screening Applicants to Interview     479
Selecting Applicants     480
Legal Considerations in Selecting and Hiring Store Employees     481
Orientation and Training Programs for New Store Employees     482
Orientation Programs     482
Training Store Employees     483
Motivating and Managing Store Employees     485
Leadership     485
Motivating Employees     486
Setting Goals or Quotas     487
Maintaining Morale     488
Sexual Harassment     489
Evaluating Store Employees and Providing Feedback     490
Who Should Do the Evaluation?     490
How Often Should Evaluations Be Done?     490
Format for Evaluations     491
Evaluation Errors     492
Compensate and Reward Store Employees     492
Extrinsic Rewards     493
Intrinsic Rewards     493
Compensation Programs     494
Designing the Compensation Program     495
Legal Issues in Compensation     496
Controlling Costs     496
Labor Scheduling     497
Green and Energy-Efficient Stores     498
Store Maintenance     498
Reducing Inventory Shrinkage     499
Calculating Shrinkage     499
Organized and High-Tech Retail Theft     499
Detecting and Preventing Shoplifting     500
Reducing Employee Theft     501
Summary     503
Key Terms     503
Get Out and Do It!     504
Discussion Questions and Problems     504
Suggested Readings     505
Store Layout, Design, and Visual Merchandising     506
Store Design Objectives     508
Store Design and Retail Strategy     508
Influence Customer Buying Behavior     509
Flexibility     510
Cost     510
Legal Considerations-Americans With Disabilities Act     510
Design Trade-Offs     511
Store Design     512
Layouts     512
Signage and Graphics     516
Feature Areas     518
Space Management     521
Space Allocated to Merchandise Categories     521
Location of Merchandise Categories and Design Elements     522
Location of Merchandise within a Category: The Use of Planograms     525
Visual Merchandising     527
Fixtures     527
Presentation Techniques     528
Atmospherics     530
Lighting      530
Color     531
Music     531
Scent     531
How Exciting Should a Store Be?     532
Web Site Design     532
Simplicity Matters     532
Getting Around     533
Let Them See It     533
Blend the Web Site with the Store     533
Prioritize     533
Type of Layout     533
Checkout     534
Summary     535
Key Terms     535
Get Out and Do It!     535
Discussion Questions and Problems     536
Suggested Readings     537
Customer Service     538
Strategic Advantage Through Customer Service     540
Customer Service Strategies     541
Customer Evaluations of Service Quality     543
The Gaps Model for Improving Retail Service Quality     546
Knowing What Customers Want: The Knowledge Gap     547
Setting Service Standards: The Standards Gap     549
Meeting and Exceeding Service Standards: The Delivery Gap     552
Communicating the Service Promise: The Communications Gap     556
Service Recovery     557
Listening to Customers      558
Providing a Fair Solution     558
Resolving Problems Quickly     559
Summary     559
Key Terms     559
Get Out and Do It!     560
Discussion Questions and Problems     560
Suggested Readings     561
Starting Your Own Retail Business     562
Starting a Franchise Business     570
Cases
Overview Grid     575
Tractor Supply Company-Targeting the Hobby Farmer     576
Rainforest Cafe: A Wild Place to Shop and Eat     577
Providing a Retail Experience: Build-A-Bear Workshop     578
Wal-Mart and Corporate Social Responsibility     579
Should Retailers Use Blogs?     580
Mall Anchors Away! The Franklins Discover Online Shopping     581
The Sanchez Family Buys Bicycles     582
Retailing in India: The Impact of Hypermarkets     583
Diamonds: From Mine to Market     584
Save-A-Lot     586
Royal Ahold: The Biggest Supermarket Retailer You Have Never Heard Of     587
The Competitive Environment in the 18- to 22-Year-Old Apparel Market     588
Tiffany's and Blue Nile: Comparing Financial Performance     589
Stephanie's Boutique: Selecting a Store Location      591
Hutch: Locating a New Store     592
Home Depot Changes Directions     597
Avon Embraces Diversity     598
Nordstrom Revamps Its Loyalty Program     599
Nolan's Finest Foods: Category Management     600
Developing a Buying Plan for Hughe's     602
McFadden's Department Store: Preparation of a Merchandise Budget Plan     603
Selling Pens to Wal-Mart     604
How Much for a Good Smell?     605
Promoting a Sale     606
Macy's: A National Department Store Brand     606
Discount Dining Draws a Crowd: Restaurant Weeks in Major Cities     608
Enterprise Builds on People     609
Diamond in the Rough     610
Fresh Ideas in Grocery Store Layout     611
Sephora     611
A Stockout at Discmart: Will Substitution Lead to Salvation?     612
Customer Service and Relationship Management at Nordstrom     613
Lindy's Bridal Shoppe     614
Is Apple America's Best Retailer?     616
Starbucks Coffee Company     618
New Product Development at Yankee Candle Company     621
PetSmart: Where Pets Are Family     623
Interviewing for a Management Trainee Position      625
Glossary     629
Indexes
Name     677
Company     683
Subject     687