Retail Marketing Assignment Week 1

Walmart Stores, Inc., with its first discount department store in 1962, currently operates retail stores in various formats around the world and is committed to saving people money so they can live better. Currently, the company’s operations comprise three reportable business segments: the Walmart U.S. segment, the Walmart International segment, and the Sam’s Club segment. Target Corporation was incorporated in Minnesota in 1902. The company operates as three reportable segments: U.S. Retail, U.S. Credit Card, and Canadian.

Write a minimum 2-page report answering the following:

Discuss why Walmart has been growing more rapidly than Target over the last decade. Do you see this trend continuing? Explain your rationale.
Develop a summary of the mission and corporate culture of these two retailers. Note a corporate culture reflects the core values, norms, and behaviors that reflect how it behaves toward employees, customers and suppliers.

Note the above questions require you to do additional research on these two retailers. Research the library’s LIRN Databases for more information on the 2 companies. Base your answers on facts and actual financial results.

Chapter 2

Retail Strategic Planning and Operations Management

Learning Objectives
Explain why strategic planning is important and describe the components of strategic planning
Describe the retail strategic planning and operations management model

Components of Strategic Planning (1 of 2)
Strategic planning: Adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment
Through the proper use of strategic planning, retailers hope to achieve and maintain a balance between resources available and opportunities ahead
L O 1

Components of Strategic Planning (2 of 2)
Development of a mission statement for the firm
Definition of specific goals and objectives for the firm
S W O T analysis
Development of strategies that will enable the firm to reach its objectives and fulfill its mission
L O 1

Mission Statement
Basic description of the fundamental nature, rationale, and direction of the firm
Elements of a mission statement
How the retailer uses or intends to use its resources
How it expects to relate to the ever-changing environment
The kinds of values it intends to provide in order to serve the needs and wants of the consumer
L O 1

Statement of Goals and Objectives (1 of 2)
Provide:
Specific direction and guidance to the firm in the formulation of its strategy
A control mechanism by establishing a standard against which the firm can measure and evaluate its performance
L O 1

Statement of Goals and Objectives (2 of 2)
Dimensions
Market performance
Financial performance
Societal objectives
Personal objectives
L O 1

Market Performance Objectives
Establish the amount of dominance the retailer seeks in the marketplace
Market share: Retailer’s total sales divided by total market sales
High sales growth retailing is directly linked to expanding the size of the retail stores
Disney

L O 1

Exhibit 2.1 – The Market Share-Profitability Relationship

L O 1

Financial Objectives (1 of 2)
Profit-based objectives: Deal directly with the monetary return a retailer desires from its business
Profit – Aggregate total of net profit after taxes
Profit can be expressed as a percentage of net sales
It can also be defined in terms of return on investment (R O I)
Stockouts: Products that are out of stock and unavailable to customers when required
L O 1

Exhibit 2.2 – Elements of Strategic Profit Model

L O 1

Financial Objectives (2 of 2)
Productivity objectives: State the sales objectives that the retailer desires for each unit of resource input
Space productivity – Net sales divided by the total square feet of retail floor space
Labor productivity – Net sales divided by the number of full time-equivalent employees
Merchandise productivity – Net sales divided by the average dollar investment in inventory
L O 1

Societal Objectives (1 of 2)
Reflect the retailer’s desire to help society fulfill some of its needs
Employment objectives – Provision of employment opportunities for the members of the retailer’s community
Payment of taxes – Helping finance societal needs that the government deems appropriate
Consumer choice – Provide the consumer with choices that previously were not available in the trade area
L O 1

Societal Objectives (2 of 2)
Equity – Retailer’s desire to treat the consumer and suppliers fairly
Being a benefactor – Retailer may desire to underwrite certain community activities

L O 1

Personal Objectives
Reflect the retailers’ desire to help individuals employed in retailing fulfill some of their needs
Self-gratification – Focuses on the needs and desires of the owners, managers, or employees of the enterprise
Status and respect – Recognizes that the owners, managers, and employees need status and respect in their community
Power and authority – Need of managers and other employees to be in positions of influence
L O 1

Strategies (1 of 3)
Carefully designed plan for achieving the retailer’s goals and objectives
Retailers can operate with three strategies
Get shoppers into the store
Convert these shoppers into customers by having them purchase merchandise
Implement the above two strategies at the lowest operating cost possible that is consistent with the level of service that customers expect
L O 1

Strategies (2 of 3)
Forms of differentiation for a retailer
Outstanding design of the market offering
The selling process
After-purchase satisfaction
Location
Never being out of stock

L O 1

S W O T Analysis (1 of 4)
Strengths:
What major competitive advantage(s) do we have?
What are we good at?
What do customers perceive as our strong points?
L O 1

S W O T Analysis (2 of 4)
Weaknesses
What major competitive advantage(s) do competitors have over us?
What are competitors better at than we are?
What are our major internal weaknesses?
L O 1

S W O T Analysis (3 of 4)
Opportunities
What favorable environmental trends may benefit our firm?
What is the competition doing in our market?
What areas of business that are closely related to ours are undeveloped?
L O 1

S W O T Analysis (4 of 4)
Threats
What unfortunate environmental trends may hurt our future performance?
What technology is on the horizon that may soon have an impact on our firm?
L O 1

Strategies (3 of 3)
A fully developed marketing strategy should address the following considerations
Target market: Groups of customers that the retailer is seeking to serve
Location
Retail mix: Combination of merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design
Value proposition: Statement of the tangible and intangible results a customer receives from shopping
L O 1

Exhibit 2.8 – Retail Strategic Planning and Operations Management Model
Competitive Environment: Behavior of Consumers, Competition, Supply Chain Members

Social and Legal Environment: Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior
L O 2

The Retail Strategic Planning and Operations Management Model
Operations management: Deals with activities directed at maximizing the efficiency of the retailer’s use of resources
Referred to as day-to-day management
The need to strive for a high profit is tied to the extremely competitive nature of retailing
L O 2

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Chapter 1

Perspectives on Retailing

Learning Objectives
Explain what retailing is and why it is undergoing so much change today
Describe the five methods used to categorize retailers
Understand what is involved in a retail career and be able to list the prerequisites necessary for success in retailing
Explain the different methods for the study and practice of retailing

What is Retailing, and Why is it Undergoing so Much Change Today? (1 of 2)
Retailing: Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer
Any firm that sells a product or provides a service to the final consumer is said to be performing the act of retailing
L O 1

What is Retailing, and Why is it Undergoing so Much Change Today? (2 of 2)
Anything that affects how consumers choose to spend money affects the retailing industry
Retailers must consider the changes in the external environment
L O 1

E-Tailing (1 of 4)
The great unknown for retail managers will be the ultimate role of the Internet
Bricks-and-mortar retailers: Operate out of a physical building
M-tailing – Shoppers use their smartphones to purchase merchandise and services
Apps – Digital services that can be downloaded
Fastest growing form of e-tailing
L O 1

E-Tailing (2 of 4)
Growth of the Web 2.0 has important implications for retailers with the Internet becoming interactive
To combat e-tailing, bricks-and-mortar retailers must give their customers more control over the shopping experience
L O 1

E-Tailing (3 of 4)
Has caused a shift in power between retailers and consumers
Traditionally, the retailers’ control over pricing information provided them the upper hand in most transactions
Today, the information dissemination capabilities of the Internet are making consumers better informed
L O 1

E-Tailing (4 of 4)
Channel surfing: Occurs when the customer gets needed information in the stores and then orders it online for a lower price
To avoid paying state sales tax
Retailers must keep experimenting with various strategies
Next generation of technology will change the consumers’ expectations of what they demand from retailers
L O 1

Price Competition
Sam Walton forever changed the face of retailing by realizing that most of any product’s cost gets added after the item is produced
Walton made a major commitment to computerizing WalMart as a means to reduce expenses
Operating efficiency: Operating costs as a percentage of sales
Costco, a retailer, seeks to boost store traffic by lowering prices on key products
L O 1

Demographic Shifts (1 of 5)
Significant changes in retailing over the past decade have resulted from changing demographic factors such as:
The fluctuating birthrate
The growing importance of the 70 million Generation Y consumers
The move of Generation X into middle age
L O 1

Demographic Shifts (2 of 5)
The beginning movement of the baby boomer generation into retirement
The increasing number of women relative to men graduating from college and concurrent rise in unemployment among men relative to women
L O 1

Demographic Shifts (3 of 5)
Successful retailers must:
Become more service-oriented
Offer better value in price and quality
Have more convenient store hours
Be more promotion-oriented
Be better attuned to their customers’ needs
L O 1

Demographic Shifts (4 of 5)
Profit growth must come by either:
Increasing same-store sales at the expense of the competition’s market share
Reducing expenses without reducing services to the point of losing customers
L O 1

Demographic Shifts (5 of 5)
Same-store sales: Compares an individual store’s sales to its sales for the same month in the previous year
Market share: The retailer’s total sales divided by total market sales
L O 1

Store Size (1 of 4)
As stores increase in size the retailer often employs a scrambled merchandising strategy
Scrambled merchandising: Exists when a retailer handles many different and unrelated items
It is the result of the pressure being placed on many retailers to increase profits
L O 1

Store Size (2 of 4)
Retailers have found that reducing their store size is a pathway to improved profitability
Consumers prefer smaller stores due to the convenience of getting in and out faster
More personalized service

L O 1

Store Size (3 of 4)
Retailer needs a smaller geographic area to draw its customers
Retailer can easily find a location than if it had a larger store that requires more parking
Retail formats that have seen a significant decrease in average store size and a decrease in number of stores are:
Department stores
Category killers
L O 1

Store Size (4 of 4)
Category killer: Retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition
L O 1

Experience and Niche Retailing
A trend occurring in shopping malls is to transform them into exciting experience platforms
Eu Yan Sang is a major health-care brand in Asia, and it has created a Chinese medicine clinic that includes a yoga studio, spa, and health food café

L O 1

Exhibit 1.2 – External Environmental Forces Confronting Retail Firms

L O 1

Categorizing Retailers
Census bureau
Number of outlets
Margin versus turnover
Location
Size
L O 2

Census Bureau
The U.S. Bureau of the Census, for purposes of conducting the Census of Retail Trade, classifies all retailers using three-digit North American Industry Classification System (N A I C S) codes
Shortcoming of using the N A I C S codes:
They do not reflect all retail activity
Comparisons between years may not be accurate
L O 2

Number of Outlets (1 of 5)
Retailers with several units are a stronger competitive threat because they can:
Spread many fixed costs over a larger number of stores
Achieve economies in purchasing
Advantages of single-unit retailers:
They have harder-working, more motivated employees
They can focus and tailor their efforts and merchandise in one trade area
L O 2

Number of Outlets (2 of 5)
Standard stock list: All stores in a retail chain stock the same merchandise
Optional stock list: Each store in a retail chain is given the flexibility to adjust its merchandise mix to local tastes and demands
L O 2

Number of Outlets (3 of 5)
Channel advisor or channel captain: Institution in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in
Large store retailers are able to perform the role of channel captain
L O 2

Number of Outlets (4 of 5)
Private label branding: Occurs when a retailer develops own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name
Also called store branding
L O 2

Number of Outlets (5 of 5)
The major shortcoming of using the number-of-outlets scheme for classifying retailers is that it addresses only traditional bricks-and-mortar retailers
L O 2

Margins Versus Turnover (1 of 3)
Gross-margin percentage: Measure of profitability derived by dividing gross margin by net sales
Gross margin: Difference between net sales and cost of goods sold
Operating expenses: Expenses the retailer incurs in running the business other than the cost of the merchandise
L O 2

Margins Versus Turnover (2 of 3)
Inventory turnover: The number of times per year, on average, that a retailer sells its inventory
High-performance retailers: Produce financial results substantially superior to the industry average
Low-margin/low turnover retailer: Operates on a low gross margin percentage and a low rate of inventory turnover
L O 2

Margins Versus Turnover (3 of 3)
Low-margin/high turnover retailer: Operates on a low gross margin percentage and a high rate of inventory turnover
High-margin/low turnover retailer: Operates on a high gross margin percentage and a low rate of inventory turnover
High-margin/high turnover retailer: Operates on a high gross margin percentage and a high rate of inventory turnover
L O 2

Location
The most significant of the new nontraditional shopping locations could be the one which combines culture with entertainment or shopping

L O 2

Size
The reason for classifying by size is that the operating performance of retailers tends to vary according to size
With advances in technology, using classification of size is unclear
L O 2

Exhibit 1.5 – Retailing’s Two Career Paths

L O 3

Career Path (1 of 2)
Store management: The retailing career path that involves responsibility for:
Selecting
Training
Evaluating personnel
In-store promotions
Displays
Customer service
Building maintenance
Security
L O 3

Career Path (2 of 2)
Buying: The retailing career path whereby one uses quantitative tools to develop appropriate buying plans for the store’s merchandise lines
L O 3

Common Questions About a Retailing Career (1 of 2)
Salary – Entry-level retail managers or buyers who do exceptionally well can double or triple their incomes in three to five years
Career progression – Person capable of handling increasing amounts of responsibility can move up quickly
L O 3

Common Questions About a Retailing Career (2 of 2)
Geographic mobility – Person must be willing and able to make several moves, even if the changes may not be attractive in terms of an individual’s lifestyle
Societal perspective – Leading retail executives are well-rounded individuals with a high social consciousness
L O 3

Prerequisites for Success
Hard work
Analytical skills
Creativity
Decisiveness
Flexibility
Initiative
Leadership
Organization
Risk taking
Stress tolerance
Perseverance
Enthusiasm
L O 3

The Study and Practice of Retailing
Analytical method
Creative method
A two-pronged approach
A proposed orientation
L O 4

Analytical Method
The analytical retail manager is a finder and investigator of facts
Analytical perspective can result in a standardized set of procedures, success formulas, and guidelines
A small retailer can consider watching the Russell 2000 Index
Forecasting tool for future business conditions
L O 4

Creative Method
The creative retail manager is an idea person
Trader Joe’s has sales higher than leading competitors due to its creative business model of clerks in Hawaiian shirts giving high-fives and free cookies

L O 4

Two-Pronged Approach
Involves the synthesis of creativity and analysis
Retailers are duplicators rather than originators
To decide who or what to duplicate requires creativity and an analysis of the strategies that other retailers are pursuing
Sales and profits = Creativity
Profit and sales statistics = Analysis
L O 4

A Proposed Orientation
Four major orientations:
Environmental – Allows the retailers to anticipate and adapt continuously to external forces in the environment
Management planning – Helps the retailers to adapt systematically to a changing environment
Profit – All retail decisions will have an effect on the firm’s financial performance
Decision making – Allows the retailers to focus on the need to collect and analyze data to make intelligent retail decisions
L O 4

Exhibit 1.6 – The Importance of Proactive Planning
A. Standard Performance

B. Reacting to Competitor’s Attack (Old Method)

C. Proactive Planning

L O 4

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