MODULE 1
Retail Management
College of Business and Accountancy
Central Philippine University
Curriculum Goals
After studying this unit, you should be able to:
• State the meaning and scope of retailing
• Discuss the functions of retailing/retailer
• Realize the Marketing-Retail equation
• Trace the rise of the retailer
• Get an overview of the global retail market
• Access retail as a career
In-class Activity
• What is “Retailing”?
Introduction to Retailing
• Retailing comes at the end of the marketing distributive
channel.
• The word ‘retail has been derived from the French word
“retaillier” and means ‘to cut a piece’ or ‘to break bulk’.
• Retailing is a high-intensity competition industry and
second largest globally.
• The reason for its popularity lies in its ability to provide
easier access to a variety of products, freedom of choice,
and many services to consumers.
• Retailing is the world’s largest private sector
contributing to 8% of the GDP and it employs one sixth
of the labor force.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Meaning and Scope of Retail
• Retailing can be defined as the business products and services to
the final consumers for their own use.
• According to Kotler, “Retailing includes all the activities involved
in selling goods or services to the final consumers for personal,
non business use”.
• It is concerned with getting goods in their finished state into the
hands of customers who are prepared to pay for the pleasure of
eating, wearing or experiencing particular product items.
• Retailing is all about the distribution of goods and services
because retailers play a key role in the route that products take
after originating from a manufacturer, grower or service-provider
to reach the person who consumes.
• Retailing is also one of the key elements of a marketing strategy
facilitating the targeting process, making sure that a product
reaches particular groups of consumers.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Meaning and Scope of Retail
• Retailers provide a collection of service benefits to their
customers such as being located in convenient places,
editing product ranges according to shopping tasks, and
selling goods in quantities that match personal
consumption levels.
• The term retailing applies not only to the selling of
tangible products like loaves of bread or pairs of shoes,
but also to the selling of service products like doctor’s
exam, a haircut or a home delivered pizza.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailer’s Role in Supply Chain
• Channel members, or marketing intermediaries as they are
sometimes referred to, take on activities that a manufacturer
does not have the resources to perform, such as displaying
the product alongside related or alternative items in a
location that is convenient for consumer to access for
shopping.
• Retailer is a business that sells products and/or services to
consumers for their personal or family use.
• Retailers are a key component in a supply chain that links
manufacturers to consumers.
• A supply chain is a set of firms that make and deliver goods
and services to consumers.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailer’s Role in Supply Chain
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailer’s Role in Supply Chain
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailer’s Role in Supply Chain
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailer’s Role in Supply Chain
• Retailing consists of the sale of goods or merchandise from a
fixed location, such as a department store or kiosk, or by
post, in small or individual lots for direct consumption by
the purchaser.
• In commerce, a retailer buys goods or products in large
quantities from manufacturers or importers, either directly
or through a wholesaler, and then sells smaller quantities to
the end-user.
• Retail establishments are often called shops or stores.
• The term “retailer” is also applied where a service provider
services the needs of a large number of individuals, such as
a public utility like electric power.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Manufacturing, Wholesaling &
Retailing
•Vertical Integration – firm performs more than one set of activities in the
channel
•Ex: retailer invests in wholesaling or manufacturing
•Backward Integration – retailer performs some distribution and
manufacturing activities
•Ex: JCPenney sells Arizona jeans (Private Label)
•Forward Integration – manufacturers undertake retailing activities
•Ex: Ralph Lauren (New York Jones, Liz Claiborne) operates its
own stores
•Large retailers engage in both wholesaling and retailing
•Ex: Wal-Mart, Lowe’s, Safeway, Brown Shoe Company
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Do Retailers Add Value?
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Why not get rid of the
Middlemen?
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
How Retailers add Value
■Provide Assortment
Buy other products at the same time
■Break Bulk
Buy it in quantities customers want
■Hold Inventory
Buy it at a convenient place when you want it
■Offer Services
See it before you buy; get credit; layaway
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Manufacturing, Wholesaling &
Retailing
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Self-Assessment
State whether the following statements are true or
false:
1. Retailing is the last link in the supply chain that
delivers goods to the final consumers.
2. Retailing is concerned with selling of goods only
to the final consumers.
3. Retailing is a part of manufacturer’s overall
distribution strategy.
Retailers Create Value
• Retailers are crucial players in the emerging market
scenario.
• Retailers perform various functions like providing
assortments, sorting, breaking the bulk, rendering
services, bearing risk, serve as a channel of
communication, transportation, advertising and
holding inventory.
• They significantly contribute towards increasing the
product value and satisfying the consumers.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
1. Providing assortments: Offering an assortment
enables customers to choose from a wide selection of
brands, designs, sizes, colors, and prices in one
location. Manufacturers specialize in producing
specific types of products. If each of the manufacturers
had its own stores that they could sell their own
products, consumers will have to go to many different
stores to buy groceries needed to prepare a single
meal. Retailers offer assortment of multiple products
and brands for consumer convenience.
Ex. Kellogg’s makes breakfast cereals, Knorr makes soups.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
2. Sorting: Manufacturers make one single line or multiple
product lines and will always prefer to sell their entire output to
few buyers to reduce their costs. Final consumers will prefer to
choose from a large variety of goods and services and then
usually buy in smaller quantities. Retailers have to strike a
balance between demands of both the sides, by collecting a
combination of goods from different producers, buying them in
large quantities and selling them to individual consumers in
smaller quantities.
Ex. A shopping supermarket of Iloilo Supermart sells more than
20,000 assortments from 900 companies. Customers can choose
from such a basket in just one location.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
3. Breaking Bulk: Retailers offer the products in smaller
quantities tailored to individual consumers and
household consumption patterns. This reduces
transportation costs, warehouse costs and inventory
costs. This is called breaking bulk.
Ex. Manufacturers produces in volume while consumers
will only buy few items.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
4. Rendering Services: Retailers render services that make it
easier for customers to buy and use products. They provide
credit facilities to the customers. They display products, which
attract the customers. Retailers keep ready information on hand
to answer queries of the customers. They provide services by
which the ownership can be transferred from manufacturer to
the end consumers with convenience. They also provide
product guarantee from owner’s side, after sales service and
also deal with consumer complaints
Ex. Retailers also fill orders, promptly process, deliver and install
the product at customer point most especially appliances or house
fixtures. Retail sales people answer the customer complaints and
demonstrate the product for the customer to evaluate before
making a choice. They also help in completing a transaction and
realizing the sale.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
5. Risk Bearing: Retailers bear a different kind of risk to
the manufacturers and wholesalers. Even the
customers can come back to the retail point and return
the product. In that case, the risk of product ownership
many times rests with the retailers. Many companies
have buy back schemes and return schemes whereby
the retailers can always return the unsold items to the
manufacturer.
Ex. Theft of physical items, customer injuries, inventory
damage
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
6. Holding Inventory: A major function of retailers is to
keep inventory so that products will be available for
consumers. Thus, consumers can keep a much smaller
inventory of products at home because they can easily
access more from the nearby retailers. Retailer’s
inventory allows customers instant availability of the
products and services.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
7. Channel of Communication: Retailers are the bridge
between the manufacturer or his representative and
the end customers. They serve as a two-way channel of
communication. The manufacturer collects customer
choice and preference data and provides information
about existing and new products through the retailers.
Ex. The shoppers get a chance to learn about products and
services from the stores and even acquire trial habits by
seeing others buying a product or service in the store. The
manufacturer too collects customer data, data on gaps in
demand and supply cycles and customer satisfaction from
retail points.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retailers Create Value
• Following are the functions of a retailer/retailing:
8. Transportation: Retailers also help in transport and
advertising function. The larger assortments are
transported from wholesaler’s point to retailers point
by retailer’s own arrangements and many times, the
retailer delivers the goods at final consumer’s point.
Retailers provide assistance in storage, transportation
and pre-payment merchandise.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Self-Assessment
Fill in the blanks:
4. Retail offers an ......................... that enables
customers to choose from a wide selection of
brands, designs, sizes, colors, and prices in one
location.
5. Under ......................... process, the retailer
undertakes activities and performs functions
that add value to the products and services while
selling them to consumers.
6. Retailer’s ......................... allows customers instant
availability of the products and services.
Marketing Retail Equation
• Marketing has been defined as “the process by which
individuals and groups obtain what they want and need
through creating, offering and freely exchanging
products and services of value with others”.
• Meaning of marketing is to identify the customer needs
and satisfy those needs as desired by the customer.
• Marketing need to focus on long term profitable
customers.
• The only way put up the best action plan in relationship
building.
• For that the purpose every marketer is quoting their
own business equations.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Marketing Retail Equation
• The Retail Equation is a software company contracted
by retailers to gather their return information, store it
securely, and analyze the data to develop and follow
return policies for those retailers.
• The Retail Equation works as an application service
provider and call center for each retailer.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Dimensions of Retail Equation
We can look at in two perspectives:
a. Manufacturer point of view
b. Retailer point of view
a. Manufacturer point of view
Most producers no longer sell their product to the final
consumer. The marketing channel design is largely based
on the level of service desired by the target consumer.
Here, the retailer provides valuable inputs to the
manufacturers on the products and the consumers.
Manufacturers or suppliers who offer products for
immediate consumption are known as direct
manufacturers or suppliers.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Dimensions of Retail Equation
b. Retailer’s point of view
The other perspective of looking at the marketing-retail
relationship is from that of the retail industry itself. Every
retailer needs marketing.
Modern marketing theory may have stemmed from
producers of fast moving consumer goods; more recent
developments such as relationship marketing and
interactive marketing have evolved from the needs of
service providers.
These new marketing activities gained the immense
popularity which can act as a bridge between customer
and manufacturer.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Dimensions of Retail Equation
Retailing needs to cross the following hurdles:
• The first challenge facing the organized retail sector is the
competition from unorganized retail sector.
• Customer service expectations are high at a time when more
retailers offer self-service and automated systems. At the same
time, many retailers remain unsure what to do with the web;
they are still grappling with the emphasis to place on image
enhancement, customer information and feedback, and sales
transactions.
• In retail sector, automatic approval is not allowed for foreign
investment.
• Lack of trained work force
• Intrinsic complexity of retailing – rapid price changes, threat of
product obsolescence and low margins.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Economic and Social
Significance of Retailing
a. Role in Developed Economies
- When consumer spend more money buying goods and services from
retailers, a country’s economy flourishes.
- Retailers are also large employees
b. Role in Developing Economies
- Reduces worldwide poverty as consumers in low-income (base of
pyramid or BoP) still have significant spending power
- Requires innovative approaches (lack access to mass media or modern
technology)
c. Role in Society
- Includes considering the needs and objectives of all its stakeholders.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Economic and Social
Significance of Retailing
Conscious marketing – entails a sense of purpose for the firm
higher than simply making a profit by selling products and
services.
1. Recognition of retailing firm’s greater purpose
2. Consideration of stakeholders and their interdependence
3. The presence of conscious leadership, creating a corporate
culture
4. The understanding that decisions are ethically based
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Management and
Entrepreneurial Opportunities
a. Management Opportunities
- Due to changing demographics, senior managers will be retiring
soon.
- There will be a competition for available managers that are left
behind.
- Managers must be comfortable with emerging technologies
- Retail management is financially rewarding
b. Entrepreneurial Opportunities
- Provides opportunities to those who wish to start business
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Rise of the Retailer
• The retail sector is changing at ever increasing rate and
this is leading to greater competitor activity.
• Such activity leads to a need to improve the way
companies approach retail marketing.
• Retailing is a major part of U.S. and world commerce.
Retail sales and employment are vital economic
contributors, and retail trends often mirror trends in a
nation’s overall economy.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Rise of the Retailer
a. Large and Increasing Contribution of GDP
The increasing importance of the retail sector is reflected in its
contribution to GDP. This implies that a very significant
proportion of the economy is linked to retailing hence public
policy tends to recognize its importance as a driving force and
aims to promote its sustained growth.
b. Major Employer
A significant historical reason underlying the perceived
increasing importance of retailing is that its contribution to the
economy is much more visible in the modern era than it was
in the past. All products are available under one roof. There by
you can save the time, efforts, save money and enjoy the
shopping.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Rise of the Retailer
c. Retailers as Gatekeepers
Retailers are becoming less important in their role as gatekeepers within
the channel of distribution. In the past, when suppliers were dominant,
retailer supplied the merchandise that was on offer and consumers
selected from this. However, as retailer have become significantly more
powerful they are more able to exert their power over supplier and stock
only the brands they wish to sell, depending on their overall retail
strategy and supplier relationship.
d. Retailers Diversifying their Activities
Large retail multiple chains are increasingly looking for new
opportunities – new area in which to grow their business. The strategy of
expansion has been for retailers to move away from their core business
and into broader retail activities. Moving from the food sector to clothing
or diversifying financial services. It is in part of a reflection of the high
esteem in which retailer are held that many of the personal banking
services are providing to be a success.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Rise of the Retailer
e. Organizations Growing on an International Scale
Increasingly retailers are also expanding their business by moving
internationally. Although there have long been examples of international
retailers, they have focused mainly on the luxury goods markets; it was
not until the late 1980s that the process of retail internationalization
occurred on any significant scale.
f. Grow on Cost Perspective
From a cost perspective, retailing is a significant field of study. In the
U.S.A, on an average, 31 cents of every dollar spent in department stores,
44 cents spent in furniture and home furnishings stores, 27 cents spent in
grocery stores go to the retailer to cover the operating costs, activities
performed, and profits. Cost includes rent, display, wages, ads and
maintenance. Only a small part of each dollar is profit.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Global Retail Market
• Retailing is increasingly a global business.
• A more structured retail industry with more multiple
• retailers (those with more than one outlet) is a sign that an
economy is developing, as organizations specialize and gain
economies of scale.
• Additionally, when disposable incomes rise, retailers play an
active part in distributing increasingly discretionary goods
to centers of population.
• Emerging markets are a real (although highly complex)
opportunity for experienced retailers, especially if they are
faced with high levels of retail provision and therefore
competition in their traditional markets.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Global Retail Market
• As the artificial barriers to trade, such as import duty
and quota restrictions, are removed from the global
economy, many retailers will view the world as their
marketplace and make sourcing and outlet operation
decisions on a set of criteria that are relevant across the
globe.
• However, long distances, political and cultural
complexities are huge challenges to retailers, which can
only be overcome by the strongest contenders.
International retailing activities have often stemmed
from retailers seeing opportunities for formats that are
underrepresented in new markets, such as the entry by
the ‘hard discount’ supermarket operators.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retail Management Decision Process
a. Retail Managers need to know the environments in
which they operate
❖ Macroenvironment (PESTEL)
❖ Microenvironment (Competitors and Customers)
b. Develop a Retail Strategy
c. Implement Retail Strategy
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retail Management Decision Process
a. Retail Managers need to know the environments in
which they operate
Competitors
-retail with the same type is called intratype competition
-Scrambled merchandising – retailers offer merchandise not
typically associated with their type of store. It increase
intertype competitors sells similar merchandise using
different types of retail outlets. (drugstore offering clothing).
Customers
-Retailers must respond to broad demographic and lifestyle
trends in our society.
-Retailers must understand why customers shop, how they
select the store thus must create and implement an effective
strategy
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retail Management Decision Process
b. Retail strategy –identifies (1) target market (2) the nature
of the merchandise that satisfy target market (3) how the
retailer will develop unique assets that enable it to achieve
long-term advantage over its competitors.
Ex. Walmart vs Toys R US
• Walmart target market are small towns vs Toys R Us
suburbans
• Walmart offers variety of merchandise vs Toys R US
specializes in toys and children’s apparel
• Walmart is self-service, Toys R US Customized services
- Strategic Decision Areas – key strategic decisions a retailer
makes are defining its target market and financial objectives
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Retail Management Decision Process
c. Implementing Retail strategy – retailer’s develop a retail
mix that satisfies the needs of its target market better than
that of its competitors.
Retail mix – a set of decisions retailer make in order to satisfy
customer needs and influence their purchase decisions.
Elements in the retail mix include the type of merchandise,
store designs, merchandise pricing, advertising and
promotional programs, merchandise display, assistance to
customers provided by sales people, and convenience of store
locations.
Ian Jade E. Lozada, MBA College of Business and Accountancy
Central Philippine University
Review and Recap
• Retailing in simple term can be defined as “Retailing is the
business activity of selling goods and services to the final
consumer”. Retailing can be defined as the business
products and services to consumers for their own use. It has
its origin in the French word, retailer meaning ‘to cut a piece
off’.
• The term retailing applies not only to the selling of tangible
products like loaves of bread or pairs of shoes, but also to the
selling of service products.
• Retailing, one of the largest sectors in the global economy,
has become the most active and attractive sector of the last
decade.
Review and Recap
• Retailers perform various functions like providing assortments, sorting,
breaking the bulk, rendering services, bearing risk, serve as a channel
of communication, transportation, advertising and holding inventory.
They significantly contribute towards increasing the product value and
satisfying the consumers.
• This unit also addresses the question of how the Marketing Mix
framework can be used to analyze the competitive standing of a retail
business organization and how the outcome of this analysis can then be
translated into practical tactics which capitalize on the organization’s
strengths.
• To build a competitive advantage that can be sustained, retailers need
to pay special attention to aspects like target market, price, location,
merchandise, service and communications.
• There are a number of retail opportunities out there. It can be
management or entrepreneurial.
