Food Retailing and Consumer Behavior
02/11/2025:
● Retailing: a set of business activities that add value to products and services sold to
consumers for their personal or family use
● Retailer: an entity that sells goods, merchandise, or services directly to consumers
through various distribution channels, with the goal of earning a profit
○ Profit = TR-TC (total revenue- total cost)
○ TR= P*Q
○ TC= FC+VC (fixed cost + variable cost)
● Retailers add value by providing an assortment of goods that can satisfy consumers’
needs
● Retailers create value
○ 1) providing an assortment
○ 2) providing services
○ 3) breaking bulk
○ 4) holding inventory
● Value-creating activities increase the costs of products and services
● The costs in the supply chain can be almost as much as the cost to make the product
● Wholesaling and production activities
○ Vertical integration: a firm performs more than one level of activity in the channel
○ Backward integration: a retailer performs some distribution and manufacturing
activities
○ Forward integration: a manufacturer undertakes its own retailing activities
● Distribution channels around the world
○ U.S. has the largest retail market in the world
■ Have scale economies to operate their own warehouses, eliminating the
need for wholesalers
○ Result is an efficient distribution system
○ Indian and Chinese distribution systems have small stores operated by relatively
small firms and a large independent wholesale industry
○ Infrastructure not well developed
○ Supply chain costs are higher
○ Modernizing with attention to e-commerce
○ China is the world’s fastest growing retail market and leads the world in
e-commerce sales
● Economic and social significance of retailing
○ Role in developed economies
○ Retail sales
■ $5.3 trillion in annual U.S. sales in 2019
■ 5.5% of the U.S. GDP comes from retailing
, ○ Employment
■ Employ 26 million people in the U.S.
○ Role in developing economies - the base of the pyramid
■ 9% of world population lives on under $2 a day
■ Base of the pyramid (low-income consumer segment)
■ Difficult to communicate and complete transactions
■ Lack access to mass media, the Internet, or credit cards
■ Rural, remote: high cost of transporting goods
○ Role in society
○ Stakeholders:
■ Current and prospective customers
■ Supply chain partners
■ Employees
■ Shareholders
■ Government agencies
■ Members of the firm’s communities
○ Corporate social responsibility (CSR)
■ Voluntary
■ Meets or exceeds the ethical, social, and environmental impacts of its
operations; and concerns of stakeholders
○ Conscious marketing
■ Recognition of the retailer’s greater purpose
■ Consideration of stakeholders and their interdependence
■ The presence of conscious leadership, creating a conscious corporate
culture
■ The understanding that decisions are ethically based
○ Examples of social responsibility
■ TOMS provides free shoes to residents of poor nations
■ Patagonia invented a reusable climbing piton that didn’t damage the rock
■ Ben and Jerry’s supports social justice movements
2/13/2025:
● Evolution of the Retail Industry
○ More than 80% of retail sales still made in stores
○ The COVID-19 pandemic drove more people to online purchases
○ 250 of the top-earning retailers take in revenues in excess of $4.5 trillion
● U.S. Food Retail Industry
○ Retail and food service sales reached 8.3 trillion USD in 2023
■ Increase of more than 9% from 2021
○ Walmart, Costco, and Kroger
02/11/2025:
● Retailing: a set of business activities that add value to products and services sold to
consumers for their personal or family use
● Retailer: an entity that sells goods, merchandise, or services directly to consumers
through various distribution channels, with the goal of earning a profit
○ Profit = TR-TC (total revenue- total cost)
○ TR= P*Q
○ TC= FC+VC (fixed cost + variable cost)
● Retailers add value by providing an assortment of goods that can satisfy consumers’
needs
● Retailers create value
○ 1) providing an assortment
○ 2) providing services
○ 3) breaking bulk
○ 4) holding inventory
● Value-creating activities increase the costs of products and services
● The costs in the supply chain can be almost as much as the cost to make the product
● Wholesaling and production activities
○ Vertical integration: a firm performs more than one level of activity in the channel
○ Backward integration: a retailer performs some distribution and manufacturing
activities
○ Forward integration: a manufacturer undertakes its own retailing activities
● Distribution channels around the world
○ U.S. has the largest retail market in the world
■ Have scale economies to operate their own warehouses, eliminating the
need for wholesalers
○ Result is an efficient distribution system
○ Indian and Chinese distribution systems have small stores operated by relatively
small firms and a large independent wholesale industry
○ Infrastructure not well developed
○ Supply chain costs are higher
○ Modernizing with attention to e-commerce
○ China is the world’s fastest growing retail market and leads the world in
e-commerce sales
● Economic and social significance of retailing
○ Role in developed economies
○ Retail sales
■ $5.3 trillion in annual U.S. sales in 2019
■ 5.5% of the U.S. GDP comes from retailing
, ○ Employment
■ Employ 26 million people in the U.S.
○ Role in developing economies - the base of the pyramid
■ 9% of world population lives on under $2 a day
■ Base of the pyramid (low-income consumer segment)
■ Difficult to communicate and complete transactions
■ Lack access to mass media, the Internet, or credit cards
■ Rural, remote: high cost of transporting goods
○ Role in society
○ Stakeholders:
■ Current and prospective customers
■ Supply chain partners
■ Employees
■ Shareholders
■ Government agencies
■ Members of the firm’s communities
○ Corporate social responsibility (CSR)
■ Voluntary
■ Meets or exceeds the ethical, social, and environmental impacts of its
operations; and concerns of stakeholders
○ Conscious marketing
■ Recognition of the retailer’s greater purpose
■ Consideration of stakeholders and their interdependence
■ The presence of conscious leadership, creating a conscious corporate
culture
■ The understanding that decisions are ethically based
○ Examples of social responsibility
■ TOMS provides free shoes to residents of poor nations
■ Patagonia invented a reusable climbing piton that didn’t damage the rock
■ Ben and Jerry’s supports social justice movements
2/13/2025:
● Evolution of the Retail Industry
○ More than 80% of retail sales still made in stores
○ The COVID-19 pandemic drove more people to online purchases
○ 250 of the top-earning retailers take in revenues in excess of $4.5 trillion
● U.S. Food Retail Industry
○ Retail and food service sales reached 8.3 trillion USD in 2023
■ Increase of more than 9% from 2021
○ Walmart, Costco, and Kroger
