Chapter 01 – Introduction to the World of Retailing
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CHAPTER 1
INTRODUCTION TO THE WORLD OF RETAILING
ANNOTATED OUTLINE
INSTRUCTOR’S NOTES
I. Introduction
• Retailing is a common part of our everyday lives. For most
people, retailers simply are places to buy things.
Ask students about where they
bought their school supplies. One
will likely get a mix of responses,
II. What Is Retailing?
• Retailing is the set of business activities that adds value to
the products and services sold to consumers for their
personal or family use.
LO 1-1 Identify retailing activities.
See PPT 1-3, 1-4.
Ask students to give examples of
retailers. One ice-breaking activity
is to ask each student to list as
Chapter 01 – Introduction to the World of Retailing
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retailers and multichannel
retailers like Amazon.com or
Delta.
A. The Retailer’s Role in a Supply Chain
• A retailer is a business that sells products and/or services
to consumers for their personal or family use. Retailers are
See PPT 1-8, 1-9, 1-10.
A typical supply chain network is
illustrated in PPT 1-10.
B. Retailers Create Value
• Retailers undertake business activities and perform
PPT 1-5, 1-6, 1-7 illustrate the
value question for retailers.
1. Providing Assortments
• Offering an assortment enables customers to choose from
Ask students to describe the
2. Breaking Bulk
• To reduce transportation costs, manufacturers and
wholesalers typically ship cases/cartons of products to
retailers.
How many students have made
purchases at Sam’s
Club/BJ’s/Costco? What items
have the students or their family
members purchased in bulk?
Discuss the advantages of buying
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3. Holding Inventory
• A major value-providing activity performed by retailers is
Discuss product categories for
which holding inventory is
particularly appealing (e.g.,
4. Providing Services
• Retailers provide services such as credit, product displays,
salespeople, and websites to make it easier for customers
to compare, buy, and use products.
Ask the students what kind of
services retailers provide. Some
services are: acceptance of credit
cards, alteration of merchandise,
assembly of merchandise, bridal
C. Costs of Channel Activities
• While the value-creating activities undertaken by channel
members provide benefits to customers, they also increase
the cost of products and services.
Exhibit 1–2 illustrates the supply
chain costs of getting a T-shirt
from the manufacturer to the
consumer.
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D. Retailers Perform Wholesaling and Production Activities
• Wholesalers buy and store merchandise in large quantities
from manufacturers and then resell the merchandise
(usually in smaller quantities) to retailers or industrial or
business users.
• Forward integration occurs when a manufacturer
undertakes its own retailing activities, such as Apple
opening its own retail stores.
Discuss the advantages and
disadvantages of being vertically
integrated.
Advantages:
Develop unique merchandise only
E. Differences in Distribution Channels around the World
• Compared with distribution channels in the European
Union, China. and India, the U.S. retail industry has the
greatest retail density (retail stores per person) with the
PPT 1-11, 1-12, illustrate these
different distribution channels.
Ask students to consider several
reasons for differences in
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• Northern European retailing is most similar to the U.S.
system. Southern European retailing is more fragmented
across all sectors. Central European retailing has changed
from a highly-concentrated structure to one of extreme
fragmentation (involving small family owned stores).
III. Economic and Social Significance of Retailing
• Realize the importance of retailing in the U.S. and world
economies.
LO 1-2 Realize the importance of
retailing in the U.S. and world
economies.
See PPT 1-14
A. Role in Developed Economies
• Consumer spending plays a critical role in the economies
of the United States and other developed countries. When
consumers spend more money buying goods and services
from retailers, a country’s economy flourishes.
B. Role in Developing Economies—The Bottom of the Pyramid
• Retailers need to also focus on opportunities available by
serving the needs of the 3 billion people living at the
lowest end of the income distribution.
Discuss technologies that are in
abundant supply in developed
markets and how those may
impact retail at BoP markets.
What can be done to lessen this
gap?
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goods higher.
C. Role in Society
• In addition to providing goods and services to their
customers, some retailers are realizing that their
responsibility includes considering the needs and
objectives of all its stakeholders.
Ask students which retailers are
actively engaged in CSR.
1. Recognition of the retailing firm’s greater purpose.
• Retailers recognize that its purpose should be more than
just making profits.
2. Consideration of stakeholders and their interdependence.
• Retailers that embrace the notion of conscious marketing
3. The presence of conscious leadership, creating a
corporate culture.
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4. The understanding that decisions are ethically based.
• Retailers that are engaged in conscious marketing make
decisions that are based on sound business ethics.
IV. The Growing Importance of Retailers and Retailing
LO 1-3 Analyze the changing
retail industry.
See PPT 1-17
A. Evolution of the Retail Industry
• Fifty years ago, the retail industry consisted of small,
independent, local retailers competing against other small,
independent retailers in the same community.
• Large retailers in particular are becoming increasingly
international in geographic scope.
• Exhibit 1-4 lists the 20 largest global retailers.
The largest retailers in the world
are shown in Exhibit 1–4
Are students surprised by any
companies on the list? Why or
why not?
traveling abroad? How do these
experiences compare to the
students’ experiences in the local
marketplace?
Chapter 01 – Introduction to the World of Retailing
• Though 2014 revenues for 250 of the world’s top retailers
approached $4.5 trillion, an estimated $100 billion of that
amount went to just four massive retailers. About one-
quarter of the retailers included in the top 250 list actually
account for less than $5 billion in revenues total.
B. Role of Information Systems
• Retailers are inundated with data about the thousands of
Ask students what type of
information may be found on the
transactional data (receipts). How
V. Management and Entrepreneurial Opportunities
• Retailing provides personal opportunities to work for a
company in an exciting, challenging environment or to
start an entrepreneurial venture.
LO 1-4 Recognize the
opportunities for you in
retailing.
A. Management Opportunities
• Retailers employ people with expertise and interests in
finance, accounting, human resource management, supply
chain management, and computer systems, as well as
See PPT 1-18, 1-19, and 1-20 for
more information and examples
of opportunities in the retailing
field.
B. Entrepreneurial Opportunities
• Retailing provides opportunities for people wishing to start
their own business. Many retail entrepreneurs are among
the wealthiest people in the United States.
Examples of entrepreneurs in
retail are shown in PPT 1-21 and
1-22.
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VI. The Retail Management Decision Process
• The book is organized around the management decisions
LO 1-5 Understand the strategic
retail management decision
process.
A. Understanding the World of Retailing (Section I)
• Retail managers need a good understanding of their
environment, especially their customers and competition,
before they can develop and implement effective
See PPT 1-23 for the Retail
Management Decision Process
Ask students about some changes
occurring in the environment now
1. Competitors
• A retailer’s primary competitors are those with the same
format. Thus, department stores compete against other
department stores and supermarkets compete with other
supermarkets. This competition between retailers with the
same format is called intratype competition.
See PPT 1-25
In going through this section, you
might pick a specific local retailer.
Ask students to identify the
retailer’s customers, intratype
competitors, intertype
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a store’s proximity to competitors is a critical factor in
identifying competition.
Works or McDonald’s.
2. Customers
• Retailers are responding to broad demographic and life-
style trends in our society, such as the growth in the
elderly and minority segments of the U.S. population and
Query students on the specific
impacts of an aging population or
dual-income households on
B. Developing a Retail Strategy (Section II)
• Understanding of the macro- and microenvironments is
needed to formulate and implement a retail strategy.
See PPT 1-32.
1. The retail strategy indicates how the firm plans to focus its
resources to accomplish its objectives.
• The retail strategy identifies: (1) the target market, (2) the
How can one retailer gain long-
term competitive advantage over
competitors in the marketplace?
2. Strategic Decision Areas
• Key strategic decision areas include the determination of
market strategy, financial strategy, location strategy,
organizational structure and human resource strategy,
information systems and supply chain strategies, and
customer relationship management (CRM) strategies.
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• The retailer’s market strategy must be consistent with the
firm’s financial objectives. Location decisions are
important for both consumer and competitive reasons. A
retailer’s organizational design and human resource
C. Implementing the Retail Strategy (Sections III and IV)
• To implement the retail strategy, management develops a
retail mix that satisfies the needs of its target market
better than its competitors.
See PPT 1-33 for Key Decision
Variables for Retailers.
Ask students what McDonald’s
needs to do to implement its
VII. Summary
• Retailing provides considerable value to consumers while
giving people opportunities for rewarding and challenging
careers.