1.0 Literature Review
The Retailing process includes the business actions involved in selling goods and services to consumers for their personal or household use.
Retailing also consists of the final actions and steps needed to position a product made in a different place into the hands of the consumer or the act of providing any kind of services to the consumer. In actual fact retailing is the last step in the supply chain. So basically any firm that sells a product or provides a service to a consumer whether that would be in store, by email or over the phone that is considered the true essence of retailing. (Patrick M. Dunne, 2008)
Retailing generally can be described as the business activities that have a process that in the end delivers a product or a service to the consumer.
Retailing is defined by a statistic in South Africa as the resale of new or used product to the final consumer for use personally or for household this is done by shops, department stores, stalls. So this definition concludes that a retailer is the main player in the activities of the supply chain and plays an important role in delivering value to the consumer. (M. C. Cant, 2007)
International retailing for several retailers now is no longer an unfortunate result precipitated by limited development potentially domestically, but is now seen as a massive opportunity to expand their operating base into markets where their products will be appreciated by an unreached customer base. (Alexander, 1997)
The growing importance of retailing can be seen in the economy of a nation and its economical structure because retailing shapes and has a direct impact on them. Retailing today is not an individual function or independent but has a multiple chain characteristics which has resulted in more profits and has taken its place as an important part in the economy of a country.
The importance of the retail sector can be seen in the more importance in visibility in the economy it causes and in the major source of employment for people it provides and a major contribution to the GDP of a country and an important source of information. (londhe, 2006)
Chain stores are related types of shops that are geographically spread out to a city or a country but are controlled by a head office meaning they are a number of stores that are work under a common ownership that control’s it.
The United States bureau of the census of the United States department of commerce defines a chain as a group of practically related stores in the same field who sell similar products and are operating under one single ownership and management. The United States bureau has also set a limit of four stores as a minimum for a store to be called a chain store while others think it could be more or less. (Coles, 1978)
A chain as an organization is basically is the ownership and controlling over interest in two or more organizations which sell significantly similar merchandise at a retail store. Ordinarily people think of a chain retail store as being incorporated concern performing both with the wholesale and the retail functions, the chain typically has a central buying office which controls and buys goods for its various stores and distributes that merchandise to their stores.
Chain stores has proven to be a true advantage to their customer on the pricing basis because their prices are somehow lower than the goods offered in other types of stores and this advantage the chain stores have can be explained because chain stores have a buying/ bargaining advantage because they buy in large quantities and their ability to pay cash, their low cost of doing business and their low wage scale.
And also they have an ability of buying directly from the manufacturer and they also have standardized accounting, advertising and selling. (Coles, 1978)
There has been many criticisms against chain retails that accused chain retailers of taking money out of the community, not paying a share of their local taxes which can be explained because chain retailers since they carry a smaller stock of goods in contrast to independent dealers, paying wages that are very low that they deny employees of having a standard living and finally not giving an opportunity for young business men to enter the market. (Coles, 1978)
A national chain store like Wal- Mart which is aware of the variations of provincial tastes and uses the optional stock list approach which gives each individual store the flexibility of choice to change their merchandise to local tastes and demands.
Chain retailers have an advantage of taking a leadership role in the supply chain meaning once a chain retailer achieves a massive in purchases they can get wholesalers and manufacturers to settle and engage in some things like compromises to finish the deal like for example direct to store delivery or special packages and sizes and much more. (M. C. Cant, 2007).
History of Chain Stores
A chain store is an institution owning and controlling interest in two or more organizations which offers for the consumer similar merchandise at retail. The chain type of organizations may be used by either manufacturers, wholesalers or by retailers. Ownership in chains can be by individuals, partners or corporations. (Coles, 1978)
Chains selling convenience merchandise are more successful and essential than those selling shopping goods because basically people need food all the time and it’s a good that can’t be stored for a long time so its purchases is done on a daily or weekly basis which proves that they are very successful and profitable also variety stores has carried on more than 8 percent of the sales of the 4 percent of stores sales. (Coles, 1978)
Chain stores first appeared in the late 19th century but they did not become important in the economy of the United States until the 1920’s. In 1900 chain stores accounted for only 3 percent of the United States retail sales and by 1933 they controlled over 25 percent of the market.
Chain stores experienced an explosive period of boom and growth between the 1980’s and 1990’s thus resulting in attaining a large share of retail sales and thousands of local retails have closed. And of course the most outstanding Wal-Mart captures more than 7 percent of all the U.S retail spending. First founded in 1962 when Sam Walton decided to open a single five and dime store. Wal-Mart today is the largest business in the world with $220 billion in revenue in 2001 and more than 4,400 stores worldwide. (Karen Christensen, 2003)
A number of circumstances favored the growth of chain stores like the need existed for the a broad development of large scale retailing to distribute efficiently goods made available under a system of mass production, with a daily rising standards of living. Unquestionably one of the most important contributions to the booming success of chain retailing is the inefficiency and the indifference of the independent retailers and the uneconomical and inefficient methods of distribution and the fact that many retailers had for a very long time little or no effort of reducing their prices to attract customers or improving store arrangements to attract customers. (Coles, 1978)
Almost every type or kind of merchandise, product, gods and services is now available in chain stores although there is a great variety to the merchandise they sell standardized products like food, tobacco and variety goods are the most profitable and the most in generating sales. They also offer branded and UN branded goods and sometimes under their own brands which has been proven to be inferior in sales compared merchandise of carrying other brand names.
One of the advantages that chain stores have over independent stores is their ability to offer merchandise at a lower competing price in comparison to others without actually affecting their profits negatively and the fact that is criticized by people that chain stores offer low minimum wages is also an advantage to chain stores since wages is the largest operating expense in any business. (Coles, 1978)
The predictions on how the future of chain stores will be is quite interesting some believe that chain stores are here to stay and will always maintain their success and others view chain stores in the sense that they will reach a maxim growth and afterwards the growth will be extremely slow this can be true because the fact that chain stores appeal and target a certain category of consumers which means that they will never dominate solely the retail ground also the problem of limited independence and the fact that there is several layers of managers and the fact that manager’s as a rule are not interested and careful and anxious about the business’s success or failure because they don’t see a future or an upgrade as in comparison to owners.
Wal-Mart has undeniably changed a lot in the world of retail in many aspects the harmful and sometimes wasteful routine of other stores is lessened and eliminated and the establishment of the highest efficiency and lower prices for consumers. Wal-Mart has a profound effect that has changed the shape of doing business, work, the well being of the society it operates in and the daily life in the Unites States and all over the world. (Fishman, 2006)
The Case study
For this case study I have chosen Wal-mart as it is the number one chain store leading in the retail market nowadays.
Firstly some statistics in the last couple of years Wal-Mart had revenues of $191 billion. Wal-Mart’s 2002 sales topped $218 billion. Its net income was $ 6.7 billion in 2002 only; Wal-Mart has 1,283,000 employees (www.fortune.com).
Today Wal-Mart is the number one retail store in the United States, and is said to be bigger and better than any other retail chain in the world. Currently Wal-Mart control over 4,150 retail facilities worldwide. Also, the corporation is the leading retail store in Canada, Mexico, and the United Kingdom (www.walmart.com). According to the Fortune 500 guide of the wealthiest and most powerful corporations in the world, Wal-Mart is in the number one spot, ranked based on its total sales.
Wal-Mart offers broad-spectrum of merchandise like family apparel, health & beauty aids, household needs, electronics and shoes. Also, the corporation runs a pharmacy department, Tire & Lube Express, and Photo processing center as well (www.walmart.com).
In the early 1970s, the competition in the retail industry became very high but at the same time the economy became fragile due to price rises. Sears was the leading retailer in the nation, during the 1970s, however the inflation and recession affected them badly. Wal-Mart’s main strategy was to try to win a better position than its competitors and lower overhead expenses.
Wal-Mart has a great management strategy that emphasizes how important it is to listen to the needs of its workforce so that each employee is able and is willing to recommend improvements to company strategies and practice’s. The company also offers generous financial rewards for employees. In addition, the company provides comprehensive training programs for all employees (Vance, 75).
A means approach of Wal-Mart is to dominate and lead the retail market. Wal-Mart is first and foremost a discount retailer because they sell their goods at the lowest possible prices this is the most important thing that distinguishes Wal-mart than any other retail store in the world. Walton states that the core meaning of a successful discount retailing store is to cut the price on an item as much as possible and earning profits on the increased volume of sales. (www.walmart.com).Wal-Mart is now the largest retailer in Canada and the UK.
The success of Wal-Mart and how the organization has reached the success it reached can be explained in a number of attributes according to (Soderquist, 2005):
Wal- Mart was built on a vision of helping consumers and how they can offer them the best they can and it wasn’t solely based on the profits aspect but they developed strategies of resources and all things needed to reach a desirable profit and sustainability which is the ultimate goal of any organization but Wal-mart has achieved this without drifting away from their initial vision of serving the best to the customer’s.
They have invested significant amounts of their capital in the application of technology with a desirable return achieved because they have made the technology serve and focused most importantly on the customer and tailored this technology to serve their needs and to achieve satisfaction which in return gave Wal-mart a competitive advantage over their rivals.
The relationship between Wal-mart and their suppliers has received a lot of fostering along the years based on trust and of course mutual benefits the recognition of the importance of such a relation has helped in building loyalty and success on both parts Wal-mart and their suppliers.
The fact that Wal-mart offers a large variety of merchandise in many sectores i.e food, clothing, hardware it might be facing limitations in flexibility as opposed to their more focused competitors. (Patrick Hayden, 2002)
There are many issues of concern that face Wal-Mart. These can be separated up into categories: Extensive labor relations problems, Community Relations Problems, and Miscellaneous PR Problems.
Labor groups reported a number of labor problems like Wage issues, shift scheduling, and workplace rights abuses. This seems to go in opposition to its founding philosophy of respect for employees. The corporation is also in regular legal dilemmas with regulators and union groups in the courts (Quinn 89-115).
For instance, Wal-Mart keeps its wages lower than the normal industry standards. The normal supermarket employee makes $10.35 per hour. Sales clerks at Wal-Mart in contrast, made only $8.23 per hour on average. About one-third of Wal-Mart’s employees are part timers which limits their right to use to benefits. These low wages, to say the least, complicate employee’s ability to obtain essential benefits, such as health care and attaining a desirable standard of living. (Miller, 2004)
Community relations problems are meant to be present with a corporation of the size of Wal-Mart because it’s safe to say that when a corporation is as successful as Wal-mart, many haters will challenge criticize and scrutinize the company practices. The most common crime that the interested communities accuse Wal-Mart of doing is destroying the local retail environment. Simply because they put them out of business driving them to declining profits and eventually going out of business. Moreover Wal-mart is accused of monopolistic actions. It wages aggressive price wars, and uses its power to intimidate their suppliers. (Patrick Hayden, 2002)
Many in the retail business view Wall-mart as a bully and a dictator. They give the notion of a corporate evil that destroys communities and clamps down on workers’ rights and wages. Another different strategy obtainable to Wal-Mart is to take on a friendlier corporate approach. Although they demonstrate a joyful manner in public, off camera they are quite aggressive. Coming to an understanding and a settlement with organized labor to satisfy them is highly considered necessary. They must ease their way into foreign markets, instead of barging in and buying up companies. Certainly, there is nothing wrong with being violent in the marketplace. However, Wal-Mart has gone about it in such a way as to seem cruel. The public perception of Wal-Mart is that it can destroy a community. Wal-Mart does not help this observation when it comes in and shuts down all the local businesses and then proceeds to move in on other areas. In order To change this negative image, Wal-Mart must stop trying to avoid laws when building new facilities. It must make it as obvious as possible how it can be a good neighbor to regain the public’s affection.
Secondly, Wal-Mart needs to relax its anti-unionization procedures and allow its employees to freely choose to organize themselves in a union. Wal-Mart’s fight to keep out unions forces the company to be in a controversial battle with its employees, fight legal battles with local regulators, and to look bad in the media. They also should offer their employees the chance of being stockholder’s or partners and upgrading them into a different level where they will feel safe and more loyal.
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