B3EL108 Retail operations
Lecture 1: Introduction to retail operations
Introduction to retail operations
Retail operations definitions:
- The sale of small quantities of items to end costumers, as opposed to wholesale, which
involves selling to business or instrumental costumers
- Activities involved in the selling of physical goods or services to ultimate costumers for
personal or household consumption
Origin of the word retail
- Derived from the old French verb tailer, which means something like to cut off, clip, pare,
divide in terms of tailoring
- 1433 meaning ‘a sale in small quantities’
- Middle French ‘a piece cut off, shred, scrap, paring’
Purpose of retail:
- Break up bulk
- Holding inventory
- Offer an assortment (provide variety)
- Lower consumer search costs (one stop shopping)
- Offer services (e.g., curation, expertise, return handling)
Costs of retail:
The costs of channel 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
Manufacture -> wholesaler -> retailer, everyone wants a profit, so it gets added and added to the
costs in every channel
Solved by vertical integration -> lower price
o 20% of GDP is de costs of selling goods
o Retail is pretty much always growing, so people spend more money because de GDP gets
bigger
Turnover vs sales volume
- Turnover = price x quantity
- Sales volume -> corrects for price changes
o The turnover grew with 4% while the sales volume declined with 3%
Some defining characteristics -> what makes retail special?
- Highly regulated (local, national, Europe) -> regels
- Low productivity -> labor intensive, trying to grow productivity in order to be competitive
1. Labor productivity = sales per employee
2. Online retail is more productive because you don’t have to deal with employees etc. ->
automated
- Thin profit margins: net profit margin: net income / revenue x 100
- Globalizing
- Rapid influx of technology
Retail value chain:
, = forward supply chain
Reverse value chain:
- Is concerned with retrieving, reusing and recycling end-of-life products
- Legislation (regelgeving) may force retailers to engage in reverse supply chain activities
collecting, reusing, recycling goods
- Headache for retailers, why?
A lot of extra costs and steps: storage, fuel costs, etc.
Forced by regulations
Online retail
Why the rise of online retail?
- Time, effort, etc.
o Less real estate and more inventory pulling: benefiting from aggregating things into one
place
o Consolidation: bundle items so they can go in one truck
o Cost perspective, but they have a bunch of variety
- Less real estate + inventory pooling
Offline retail: selling popular items
- The scattered inventory problem
Fulfilment of the warehouse:
- Returns no longer are free, because of the weight it carries on the health of the earth, stores
are becoming more important
Online marketplace:
- Platform: buyers and sellers are brought together
- Regulation of online marketplaces: (because they have a lot of power)
- Tightening regulations to ensure that it is clear who is the vendor, and what can be done in
case dissatisfaction with the product or service
- Fines for antitrust -> retail
Trend: There are retailers who are start a marketplace too
- Create a more engaging product range
- Source of additional revenue
- No inventory necessary
Effect of covid-19 on retail:
- E-commerce has grown 5 times more
- It was higher in covid-19 times, but now it is almost back to normal, not as dramatic as
people believe
- People like going to physical stores
, - More time at home -> the more people buy online (similar graphs) -> is a huge problem for
certain sector, like people walking to work to get a coffee on their way and they suddenly
don’t go to the office but work from home
- Dutch retail, online retail is losing share
Key takeaways
Retail provides many useful services to manufactures and consumers
Retail is a sizeable part of the economy
There are many regional differences in the size and nature of retail
Retail is built on highly optimized forward and reverse supply chains
Retail is subject to several developments
Online penetration and market share is increasing across the board
The covid pandemic has accelerated several developments
However, physical retail is still very much alive
Lecture 2: The omnichannel (r)evolution
Omnichannel revolution
From single to multi-channel
- Single -> multi-channel
- Multi -> cross channel: connecting the channels (e.g., click and collect, buy in store home
delivery)
- Cross -> omni channel: simultaneity (e.g., in store targeting, QR codes)
Omnichannel retail
- Providing customers with seamless journeys across all
available channels
Omnichannel customer journeys ->
Touchpoints:
- Narrow definition: all the moments in which the costumer comes into contact with your
brand, directly or indirectly, throughout his or her costumer journey
Lecture 1: Introduction to retail operations
Introduction to retail operations
Retail operations definitions:
- The sale of small quantities of items to end costumers, as opposed to wholesale, which
involves selling to business or instrumental costumers
- Activities involved in the selling of physical goods or services to ultimate costumers for
personal or household consumption
Origin of the word retail
- Derived from the old French verb tailer, which means something like to cut off, clip, pare,
divide in terms of tailoring
- 1433 meaning ‘a sale in small quantities’
- Middle French ‘a piece cut off, shred, scrap, paring’
Purpose of retail:
- Break up bulk
- Holding inventory
- Offer an assortment (provide variety)
- Lower consumer search costs (one stop shopping)
- Offer services (e.g., curation, expertise, return handling)
Costs of retail:
The costs of channel 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
Manufacture -> wholesaler -> retailer, everyone wants a profit, so it gets added and added to the
costs in every channel
Solved by vertical integration -> lower price
o 20% of GDP is de costs of selling goods
o Retail is pretty much always growing, so people spend more money because de GDP gets
bigger
Turnover vs sales volume
- Turnover = price x quantity
- Sales volume -> corrects for price changes
o The turnover grew with 4% while the sales volume declined with 3%
Some defining characteristics -> what makes retail special?
- Highly regulated (local, national, Europe) -> regels
- Low productivity -> labor intensive, trying to grow productivity in order to be competitive
1. Labor productivity = sales per employee
2. Online retail is more productive because you don’t have to deal with employees etc. ->
automated
- Thin profit margins: net profit margin: net income / revenue x 100
- Globalizing
- Rapid influx of technology
Retail value chain:
, = forward supply chain
Reverse value chain:
- Is concerned with retrieving, reusing and recycling end-of-life products
- Legislation (regelgeving) may force retailers to engage in reverse supply chain activities
collecting, reusing, recycling goods
- Headache for retailers, why?
A lot of extra costs and steps: storage, fuel costs, etc.
Forced by regulations
Online retail
Why the rise of online retail?
- Time, effort, etc.
o Less real estate and more inventory pulling: benefiting from aggregating things into one
place
o Consolidation: bundle items so they can go in one truck
o Cost perspective, but they have a bunch of variety
- Less real estate + inventory pooling
Offline retail: selling popular items
- The scattered inventory problem
Fulfilment of the warehouse:
- Returns no longer are free, because of the weight it carries on the health of the earth, stores
are becoming more important
Online marketplace:
- Platform: buyers and sellers are brought together
- Regulation of online marketplaces: (because they have a lot of power)
- Tightening regulations to ensure that it is clear who is the vendor, and what can be done in
case dissatisfaction with the product or service
- Fines for antitrust -> retail
Trend: There are retailers who are start a marketplace too
- Create a more engaging product range
- Source of additional revenue
- No inventory necessary
Effect of covid-19 on retail:
- E-commerce has grown 5 times more
- It was higher in covid-19 times, but now it is almost back to normal, not as dramatic as
people believe
- People like going to physical stores
, - More time at home -> the more people buy online (similar graphs) -> is a huge problem for
certain sector, like people walking to work to get a coffee on their way and they suddenly
don’t go to the office but work from home
- Dutch retail, online retail is losing share
Key takeaways
Retail provides many useful services to manufactures and consumers
Retail is a sizeable part of the economy
There are many regional differences in the size and nature of retail
Retail is built on highly optimized forward and reverse supply chains
Retail is subject to several developments
Online penetration and market share is increasing across the board
The covid pandemic has accelerated several developments
However, physical retail is still very much alive
Lecture 2: The omnichannel (r)evolution
Omnichannel revolution
From single to multi-channel
- Single -> multi-channel
- Multi -> cross channel: connecting the channels (e.g., click and collect, buy in store home
delivery)
- Cross -> omni channel: simultaneity (e.g., in store targeting, QR codes)
Omnichannel retail
- Providing customers with seamless journeys across all
available channels
Omnichannel customer journeys ->
Touchpoints:
- Narrow definition: all the moments in which the costumer comes into contact with your
brand, directly or indirectly, throughout his or her costumer journey
