Most consumers shopping in their local stores dont realize that retailing is a high-tech, global

industry.
Retailing is the set of business activities that adds value to the products and ser- vices sold to
consumers for their personal or family use. Often people think of retailing only as the sale of
products in stores, but retailing also involves the sale of services such as overnight lodging in a
motel, a doctors exam, a haircut, a DVD rental, or a home-delivered pizza.
Not all retailing is done in stores. Examples of nonstore retailing include Internet sales of hot
sauces (www.firehotsauces.com), the direct sales of cosmetics by Avon, catalog sales by L.L.
Bean and Patagonia, and DVD rentals through Redboxs kiosks.
Some retailers, like Costco and Home Depot, function as both retailers and wholesalers: They
perform retailing activities when they sell to c onsumers, but they engage in wholesaling
activities when they sell to other b usinesses, such as restaurants or building contractors.
Vertical integration means that a firm performs more than one set of activities in the channel,
as occurs when a retailer engages in wholesaling activities by operating its own distribution
centers to supply its stores.
Back- ward integration arises when a retailer performs some wholesaling and manufacturing
activities, such as operating warehouses or designing private- label merchandise.
Forward integration occurs when a manufacturer undertakes retailing and wholesaling
activities, such as Ralph Lauren operat- ing its own retail stores.
These value-creating activities include (1) providing an assortment of products and services, (2)
breaking bulk, (3) holding inventory, and (4) providing services.
Thus, retail- ers employ people with expertise and interests in finance, accounting, human
resource management, supply chain management, and computer systems, as well as marketing.
This competition between the same type of retailers is called intratype competition .
When retailers offer merchandise not typically associated with their type of store, such as
clothing in a drugstore, the result is scrambled merchan- dising .
Scrambled merchandising increases intertype competition , or competi- tion between
retailers that sell similar merchandise using different types of stores, such as discount and
department stores.
But the intensity of competition is greatest among retailers located near one another whose
offer- ings are viewed as very similar.
The retail strategy indicates how the retailer plans to focus its resources to accomplish its
objectives. It identifies (1) the target market, or markets, toward which the retailer will direct its
efforts; (2) the nature of the merchandise and ser- vices the retailer will offer to satisfy the
needs of the target market; and (3) how the retailer will build a long-term advantage over its
competitors.
The key strategic decision areas for a firm involve the definition of its market, financial status,
location, organizational and human resource structure, information systems, supply chain
organization, and customer relationships.