retail strategy financial strategy 2 chapter objectives explain target markets. discuss market...
TRANSCRIPT
Chapter Objectives
Explain target markets.
Discuss market segmentation.
Explain competitive advantage.
Describe the types of retail business expenses.
Explain the importance of business credit.
Explain types of retail business risks.
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Retailing, Products, and the Customer
In this chapter, you will learn:
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How retailers determine which
customer groups they
want to target.
How retailers determine which
products and services to offer.
The financial decisions that
retailers have to make before opening for
business and on every day a
store is open.
What Is Retail Strategy?
Retailers avoid leaving anything to chance by using a retail strategy called retail mixretail mix.
retail mix the combination of decisions retailers make to create and operate a store
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What is Retail Strategy?
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Retail-Mix Decisions
Merchandise and services
Prices to charge Location of store
Advertising Displays Sales associates
Target Market
When retailers begin the decision-making process, they must first determine who their target markettarget market will be.
target market the specific group of people on whom a retailer focuses merchandising and service decisions
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Target Market
A retailer can identify characteristics of the target market by creating a target-market profiletarget-market profile.
Retailers are continually updating their target-market profiles.
target-market profile a description of the target- market customers
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Target Market
Market segmentationMarket segmentation allows retailers to get specific information about customers.
market segmentation a way of analyzing a market by specific characteristics in order to create a target market
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Target Market
The four major categories of market segmentation are:
demographics statistics that describe a population in terms of personal characteristics
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DemographicsDemographics
PsychographicsPsychographics
GeographicsGeographics
psychographics consumer lifestyles as reflected in attitudes, interests, and opinions
geographics information about where customers live
Product benefits
Target Market
Three strategies involved in retail mix are:
product mix the types of merchandise that a retailer offers for sale
Product mixProduct mix
Services mixServices mix
Goods and services mix
services mix the number and kinds of services offered by a retail establishment
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Competitive Advantage
Customer service and attention to detail are two factors that can give retailers a competitive competitive advantageadvantage.
competitive advantage an intangible factor that makes one retail store more desirable to customers than its competitors
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Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses.
Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service.
Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com.
How can online retailers find out who their target markets are when they never see them? Services such as Media Metrix conduct online and offline research to find out and predict the
Who’s on My Site?
behavior of online consumers. They combine demographics with user statistics to determine which sites are used by certain types of people and why. With this information, retailers can tailor their sites to appeal to their customers.
For more information on retailing, go to marketingseries.glencoe.com.
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Why is determining a target market important?
What are the four major categories of market segmentation?
Why is it important for a retailer to develop a competitive advantage?
1.
2.
3.
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Retail Business Expenses
Some of the most important decisions retailers make concern the finances of the business.
Every business generates expenses before it opens its doors.
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Retail Business Expenses
The three major categories of business expenses are:
operating expenses everyday expenses such as office supplies, telephone, salaries, and utilitiesOperating expensesOperating expenses
Interest expensesInterest expenses
Cost of goods soldCost of goods sold
interest expenses expenses paid to finance loans a business obtains
cost of goods sold the price a retailer pays for the merchandise that is for sale
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Retail Loans
Most businesses, at one time or another, have to borrow money.
Banks help retailers by assisting them with loans to support their businesses.
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Types of Retail Loans
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Short-Term
Long-Term
>
>
Repaid over 30 days, 60 days,
or 90 days
Repaid over five to 30 years
Helps retailers purchase seasonal merchandise and pay for unplanned
expenses
Helps retailers with major purchases such as buying
a store or remodeling
>
>
Loan Type Term Use
Business Credit
The “Five Cs of Credit” are:
Capacity—ability to pay
Character—reliability
Credit history—amount of past debt and record of repayment
Capital—assets owned after debt
Collateral—property or valuable owned for security
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Retail Store Profit
ProfitProfit is the retailer’s reward for running an efficient and effective business.
profit the money left after expenses are deducted from sales
sales – expenses = profit
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Retail Business Risk Management
Businesses must deal with riskrisk.
risk a situation or occurrence that can lead to financial loss for a business
Dealing with business risks in a retail setting is called risk managementrisk management.
risk management handling business risks in a way that minimizes negative impact on the business
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Retail Business Risk Management
The three categories of business risks are:
Economic risks
Natural risks
Human risks
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What are the three types of retail business expenses?
Name two types of loans a retailer might use.
What are the three categories of business risks?
1.
2.
3.
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Explain target markets.
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Name four categories used when describing a business's market segmentation.
Discuss how retailers determine their product mix and their services mix.
A target market is the specific group of people to whom a retailer tailors its merchandising and service-offering decisions.
1. Demographics, psychographics, geographics, and product benefits
2. They apply target-market information to product selection.
3.
Checking Concepts
continued
1.
2.
3.
Define competitive advantage.
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Describe the three categories of retail business expenses.
Explain the importance of business credit.
It is an intangible factor that makes one retail store more desirable to customers than its competitors.
4. Operating expenses, interest expenses, and cost of goods sold
5. It allows retailers to purchase merchandise, fixtures, and supplies when they need them, and then pay for them later.
6.
Checking Concepts
continued
4.
5.
6.
Define profit using a mathematical equation.
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Critical Thinking
Name the three types of business risks. Explain why one risk is more common than other risks.
sales – expenses = profit
7. The three types of business risks are economic, natural, and human. Natural risks are most common and frequent because they result from natural occurrences such as hurricanes, floods, tornadoes, earthquakes, and fires.
8.
Checking Concepts
7.
8.