week 1
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Week 1. FM10211 – Retail Operations. Chapter 1: Retailing Formats and Structures Various ways to classify businesses. Let’s see your schedules!. Why are you here?. What do you want to do?. Industrial Classification. What does the business do? SIC Standard Industrial Classification - PowerPoint PPT PresentationTRANSCRIPT
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Week 1
Chapter 1: Retailing Formats and StructuresVarious ways to classify businesses
FM10211 – Retail Operations
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Let’s see your schedules!
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Why are you here?
What do you want to do?
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Industrial Classification• What does the business do?• SIC
– Standard Industrial Classification– Old System
• NAICS– North American Industry Classification System– As of 2002
• Why use codes?– Classifies businesses in standard categories– Words can be vague– One business may fall into multiple categories
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Why Classify?
• Identify businesses independent of current business lingo
• Business Census taken every 5 years
• Data can be used for a variety of purposes:– zapdata.com – prospect lists, mailing lists– infousa.com – mailing lists
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Types of Ownership
• Who owns the business?
• Several business structures to choose from– Each has benefits and drawbacks
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Types of Ownership:Sole Proprietorship
• A company owned by one person
• Benefits– Simple!– Fully controlled by the owner– Taxed once
• Drawbacks– Full personal liability
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Types of Ownership: Partnership
• A company owned by two or more persons, each with a financial interest
• Benefits– Simpler than a corporation– Shared workload– Taxed once
• Drawbacks– Shared decisions– Can be personally liable, depending on type
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Types of Ownership: Corporation
• A company that exists as an independent entity• Owned by shareholders• Benefits
– No personal liability
– Easier to raise money through sale of stock
• Drawbacks– More complicated
– Double Taxation (depending on type)
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Types of Stores
• Who owns the store?
• Are there others?
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Types of Stores: Independent• A single unit owned by an individual, small group,
or family• 1.5 million in operation today• Trend is away from independent stores
– Very hard to survive– 1/3 of all new retailers fail within the first year
• Largest Independent Department Stores?– Nordstrom– Dillard’s
• Other examples?
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Types of Stores: Chain
• Multiple retail units owned by one company– Can be as few as two, usually many more
• Usually has centralized buying and management
• Examples?
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Types of Stores: Franchise
• Contractual arrangement between a franchiser (the licensor) and a franchisee (the individual owner)
• Company may own some, but not all, stores• License can include:
– Name
– Operating Procedures
– Buying rights
– Etc.
• Examples?
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Types of Retailers
• Wide variety, offering various types of – Merchandise– Service level– Price level
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Stored Retailers
• Has a physical location
• Classifications have changed over time
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Department Stores• Extensive assortment• Organized by department• U.S. Bureau of Census definition:
– At least 25 employees– At least $10 million in sales– Carries:
• Dry goods and household items• Family apparel• Furniture• Home furnishings
• What about Nordstrom, Saks, etc?• Criteria has been relaxed
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Specialty Stores
• Limited type and/or assortment
• Specialized service
• Examples– Gap– Home Depot– Best Buy
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Other Stored Retailers - I• Boutiques
– Small specialty stores– Often owned or franchised by designer
• Variety stores– Wide assortment
• Mom and Pop stores– Small– Privately owned
• Discount stores– Lower Prices– Lower operating costs – why?
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Other Stored Retailers - II• Mass merchandisers
– Large discount stores
• Off-price stores– Sell brand-name merchandise lower than department
stores, due to low overhead and overruns
• Catalog showrooms– Samples on floor
– Order from catalog
– Filled from warehouse
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Other Stored Retailers - III
• Warehouse stores– Discounters– No-frills setting – no credit cards?– Often make special purchases of brands– Sometimes have membership fee
• Factory outlets– Manufacturer-owned (traditionally)– Closeouts, overruns, discontinued items
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Non-stored Retailers – I• Catalog/Mail order
– Independent or an extension of a store’s business– Can be highly specialized– Serves specific customers
• not necessarily within one geographical area
• Direct marketing– Mailed catalogs– Flyers– Radio– Telemarketing– TV Home Shopping
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Non-stored Retailers – II• Home parties
– Opening your home to guests– Tupperware parties– Pickle parties
• Kiosks– Small stationary facilities– Order through a computer
• Temporary retailers– Small vendors who set up carts– More recently short-term rentals
• Halloween stores
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Non-stored Retailers – III
• Door-to-door selling– Personal contact with the consumer at home or
office– Avon, Avon Mark– Mary Kay
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Malls and Shopping Centers• Large Malls
– Anchor store• One or more large retailers
• Usually located at the ends of the mall
• Traditionally department stores, but no longer a rule
– Specialty stores
• King of Prussia Mall– 8 Anchors!
– Over 400 Specialties!
• Why malls?
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Other Malls
• Factory outlet malls– No longer attached to factories– Can include clearance centers– Where are they located?
• Strip malls (shopping centers)– May have supermarket or other type of anchor– Attracting larger retailers
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International Retailing
• Going global: opening stores international– Increase their business– Overseas investors buying parts of American
companies– Examples
• Gap
• Benetton
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Mergers and Integration
• Combines businesses– Sustain or enhance growth– Create competitive advantage– Diversify– Share overhead
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Vertical integration
• Acquiring a company or developing a function above or below in the supply chain
• Examples– The Limited acquired Mast
Industries, which manufactured the company’s apparel
– Designer Boutiques
• Why?
The Marketing Chain
Fibers
Yarn
Fabric
Garment/Final Product
Design and Marketing
Retail
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Horizontal integration• Buying or forming a
company on the same level of the marketing chain
• The Limited owns:• Victoria’s Secret
• Express
• Bath & Body Works
• The White Barn Candle Co.
• Aura Science
• Henri Bendel
• Why?
The Marketing Chain
Fibers
Yarn
Fabric
Garment/Final Product
Design and Marketing
Retail
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Private-Label Merchandising
• Retailers have products made for them to sell exclusively
• A form of vertical integration
• Eliminates the buying level
• Examples– The Limited– Gap
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Instructor
• Instructor: Max Minkoff
• Teaching style: Interactive!
• To contact me: [email protected]
• Other availability: Immediately after class
• Website: www.planetminkoff.com/AIPh/RetailOps/
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Course Content• Teaching Strategies
– Interactive Class Discussion– PowerPoint w/printed notes
• Textbook: – Retail and Merchandise Management, Rabolt
and Miler
• Technology Needed: – Word Processing– PowerPoint
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Evaluation
• 40%: Class Participation– including attendance
• 15%: Midterm Exam
• 15%: Final Exam
• 20%: Project
• 10%: Case Presentation
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Attendance Policy
• Two absences = one full grade drop
• A third absence = an additional grade drop
• Four absences = Failure
• NOTE: – There are NO excused absences. – Lates and/or early departures add up!
I WILL FAIL YOU IF I HAVE TO!
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How to do well in this class
• I’m not here to test your memory!
• Come to class– Don’t be late – they add up!
• Participate– We all know about retail
• Think about retail– Why have companies decided to do what they do?
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Case Presentations
• Every student must present a case at some point during the quarter
• Sign up be end of class week 2• Cases are first come, first served• No more than 5 cases per week!• Presentation should be about 5 minutes
– 5-8 slides
• Follow with Major Question and 2+ Study Questions• Presentations cannot be made up!
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Design Guidelines
• Use a pre-established design schemes– In the form of a grid.
• All type should be at least 20-24pt• Use standard type fonts
– Helvetica, Times, and Arial
• Use a low-key design template, or none at all• Maintain a consistent theme. • Use minimal or no animation.• Don't use sound effects.
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More Design Guidelines
• Your presentation is a visual aid. – Support what you say, not duplicate it.
• Provide talking points, not a script. – Do not read from the screen!
• Unless a quote, each point should fit on one line– If it doesn't, it's probably too long.
• Do not talk "to" the screen
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Example: Case 7: The Limited
• Created in 1963 by Leslie Wexner– Borrowed $5,000 from his aunt– Now a billionaire
• 2,400 Limited Stores– 7 different market segments– Huge increases in sales and profit
• By-passed traditional production system– Created global manuf. & distrib. Network
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The Limited’s Strengths
• Specialty Fashion chains - newest trend
• Unrelenting acquisition strategy
• In touch with trends - example:– President was in Italy in 1983– Saw teens buying bulky yachting sweaters– Knocked off sweaters, sold millions
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Limited Merchandise Meeting
• Spring offensive: safari clothing– Established by Banana Republic– Basis for new line
• Banana Republic safari jacket
• Flower print shirt from Laura Ashley
• Tan cotton pants from Europe
– Other elements to be added– New line named Outback Limited
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Market Test
• Late November:– Samples sent to handful of Southern stores– Results monitored daily– Final results after Thanksgiving weekend– It’s a hit!
• Certain adjustments necessary
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The Plan• 500,000 garments in stores w/in 10 weeks
– Can’t patent - must establish first!– Most retailers must deal with middlemen
• Could take 10 months!
• Limited had bought Mast Industries in ‘78– Knows how to get things done in Far East– Track down fabric– Get products through customs– Etc.
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Delivery: Late January• On jets to New York and California• Then trucked to Columbus Distribution Center
– Wexner wants airfield in Columbus OK’d• Would cut trip from 6 days to 3
• Efficient, computerized sorting and packing– Price tagged
– Sorted
– Packed
– Out the door in 48 hours• Most retailers could take weeks!
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In Stores
• Centralized visual merchandising– Every two weeks– No deviation allowed
• “We don’t want 100 managers out there deciding what the stores should look like” - Limited President
• Industry analysts report no markdowns– Suggests line is successful– “The could be a $500 million line”
• Would be 4th largest U.S. women’s sportswear brand
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Major Question:
• How Does The Limited get its product to the consumer faster than conventional manufacturer selling to retailers?
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Question 2
• Discuss how operations of The Limited (a chain) are different from department stores and small independent stores in terms of product acquisition.
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Question 4 & 5
• Why would Verna Gibson (president of The Limited division) want to check the potential for sales appeal for the Outback Red line before she commits to production?
• Why would The Limited test market the new Outback Red line in November in Southern cities?