Chapter 1. Welcome to the World of Retailing
Have you ever thought beyond shopping at your favourite store to a business or a career in retail?
Retail is a big business.
In terms of sales volume and number of employees, retailing is one of the largest sectors of most economies. This is hardly surprising as it includes almost everything from haberdashery and home-ware to clothes, food and electrical goods and many others, making the list of retailers practically endless.
What is Retailing?
Retailing includes all the activities involved in selling products and/or services to the final consumer. It covers diverse products such as apparels, footwear, financial services and leisure.
There are two types of retailers: store retailers and non-store retailers.
Store retailers usually operate from a fixed location and serve walk-in customers. Examples of store retailers that sell products are Robinsons, Takashimaya, Giant, Carrefour, Toys ‘R’ Us, etc. Examples of store retailers that sell services are dentists, hair salons, etc.
Non-store retailers reach out to customers at their homes or offices by:
• Electronic or online formats (e.g. books retailer – Amazon.com)
• Catalogues or mail order (e.g. clothing retailer – Lands’ end)
• Door-to-door selling (i.e. selling by knocking at consumers’ home)
“Hello! Is anyone home?”
• Telemarketing (i.e. selling of goods or services by phone)
• Television or radio (i.e. selling of goods or services via some advertisements to encourage consumers to call in to place an order)
• Vending machines (i.e. selling of goods or services by a machine)
E-tailing is a term that is used for retail businesses that utilise the Internet or other electronic formats for their consumer transactions.
Today, many retailers sell their products and services through multiple formats and channels. They not only sell through their physical store but also offer customers the convenience of buying selected products through the Internet.
Why is Retailing Important?
Retailers are an important link in the channel of distribution. A typical channel of distribution consists of a manufacturer, a distributor (or wholesaler or middleman) and a retailer. The retailer is the final link between consumers and manufacturers.
Retailers add value to products by making the products available to the consumer at the right place, right time and right price.
Christmas light up at Orchard Road by Singapore Tourism Board to promote shopping
(courtesy of Kingsmen Creatives Ltd)
In other words, the retailers add value to the products by:
• Ensuring the right products are bought to meet the needs of the customers
• Displaying the products for customers to touch and feel before they make a purchase decision
• Allowing the customers to buy in individual or multiple units
• Making available sales associates to demonstrate the products or answer any product queries
• Selling the product at a competitive price
• Allowing customers to exchange or refund a product that is not suitable
• Offering other personalised services such as delivery, gift wrapping, repairs, etc.
“Can I wrap this up for you?”
Functions of Retailers
The retailer performs five basic functions to facilitate the transaction between the retailer and the customer.
1. Merchandising, a process which includes the purchase of an appropriate assortment of products and to ensure the profitable sale of these products.
2. Operations, also known as store management, includes activities such as store maintenance, receipt and distribution of merchandise, as well as offer sales-support activities and customer service.
3. Promotions, include all activities that concern with communicating the retailer’s message to the public through advertising, displays, publicity, public relations, special events and promotional activities of the store.
4. Control, which deals with the financial aspects of the business, that is, accounting procedures, employees’ payroll, sales tallies, customer and supplier bills.
5. Personnel, which involves employee selection, training, advancement and welfare.
All the above functions performed by retailers help to increase the value of the goods and services they sell to the consumers and facilitate the distribution of these products and services for those who produce them. The value created from these functions includes providing assortment of products, selling in single or smaller quantities, keeping stocks and providing customer services.
Major Formats of Retailing
A retail format is the overall appearance or impression of a store as it is presented to its customers. It includes the external look and internal layout, the range of products offered and the pricing approach.
The table on page 8 shows the major types of retail stores by product line.
Concerns of Retailers
Today’s potential customer is most likely a savvy shopper with a keen eye for price, service and convenience. They are more sophisticated and more demanding. As markets become more competitive, customers’ demands for quality product and service increase.
“The customer is king”.
As a result,
Delivering a unique in-store experience is a key goal for retailers today.
The key retail issues faced by retailers in order to achieve this goal include:
Description
Approach
• Respond to customers’ inquiries promptly
• Be friendly and approachable
• Have a clearly defined customer service policy
• Attentive to details
• Anticipate customers’ needs and go the extra mile to help them
• Honour any promises made
Offering the right product to the customers
Description
Approach
• Know your customers.
• Determine their needs.
• Know the market.
• Choose products that you can establish long-term sales.
• Offer quality products.
• Include a selection of trendy products to boost your business but these products need to be bought at the beginning of the product’s life cycle
• Negotiate with suppliers to obtain these products
• Continuously source for products that are compatible with your type of business, your location and your market
Presenting the products to the customers: Interior and window display
Description
Approach
• Attract attention (e.g. by using light, colour, etc.)
• Arouse interest (e.g. by showing how it works)
• Create desire (e.g. by demonstrating the product qualities, use and benefits)
• Win confidence (e.g. by displaying related products to show how the retailer can help them put things together)
Location and site characteristics
Description
Approach
• The demographics of the site
• The type of competition you are facing
• Retail compatibility, that is, whether the retailers near your store will generate traffic to your store
• The landlord (e.g. how responsive is the landlord to the needs of the retailers)
• Surrounding areas (e.g. will there be new developments, construction of highways, changes in traffic, etc. that will enhance or create barriers to your business)
• Other considerations (eg. is parking space available and adequate, is the area well served by public transport, is the population density of the area sufficient, etc.)
Description
1. Initial impressions (which will influence the customer’s decision to shop)
2. Ease of browsing (which will affect the customer’s decision to buy)
3. Making payment (which will influence the customer’s decision of whether to return)
Approach
• Customer relationship management software to gain customer knowledge
• Radio frequency identification (RFID) tags for tracking product movement
• Point-of-purchase (POS) system which include scanners, kiosk and self-serve checkout and
• Web technologies for online shopping
MINI Habitat – Exterior facade, interior design and customer service
(courtesy of Kingsmen Creatives Ltd)
The above approaches will be discussed in detail in the next few chapters.
The Future of Retailing
Retail is an extraordinary business, with an ever-shifting landscape. Many retail markets in the world have been particularly eventful in recent years, with increasing competition, margin pressure, and greater merger and acquisition activity.
Many people have asked: “Will store retailers survive in the near future with the presence of online retailers?” Some manufacturers have also joined in the competition by taking over the retail function themselves. They may not set up a store but they sell the goods over the Internet.
So, what is the future for store retailers?
Store retailers will continue to exist especially those retailers who offer personal services like hair salons, optical, medical and dental care, etc. Personal services require one-to-one and face-to-face interaction.
While consumers love to find the product information themselves via the Internet, shopping is still their favourite past time. Consumers will still want to have the opportunity to see, touch, feel or try out the products before they make any buying decision.
Today’s shoppers want a total customer experience which includes superior products that meet their needs, as well as retailers who treat them with respect, connect with them emotionally, and offer fair prices and convenience. Showing respect for customers not only includes having cheerful and motivated sales associates to serve them but also includes having a clear walkway, an organised store with appropriate signage and competitive prices.
However, the slowdown in population growth, greater competition and newer types of retailers, changing consumer lifestyle and spending patterns, and rising costs mean that retailers can no longer enjoy sales and profit growth through natural expansion in current and new markets.
Retailers of the future will have to choose their target segments carefully and position themselves strongly. Essentially, retailers can no longer continuously use the same successful formula to run their businesses. The need to keep up with the pace of change, as well as new developments in technology, simply increases the pressure on retailers to remain one step ahead of the competition.
To remain successful, retailers must keep adapting.
I need help...: How do I Boost my sales?
• Their business name clearly states what they offer. When I looked in the mall directory, I saw a name ‘Nail Spa’ and I immediately knew what type of business they are in.
• They were ‘visible’. The shop is strategically located with a bright and clear signage. There is a service menu available on a stand located at the door entrance.
• They have enough staff and thus, were able to attend to my needs. The nail salon that I visit regularly is strictly by appointment only. This shop has three staff working, so they could manage to attend to my request.
• They not only offer a variety of magazines to read but those magazines were of the latest issues.
• They enticed me to buy more by attractively pricing a package of two services. I went in for a manicure which costs $25. A pedicure service costs $35. However, a manicure and pedicure together cost only $50. So, I decided to take both.
Make the Store Inviting
Develop Customer Loyalty
