RETAIL ACTORS

Consumers

I asked students, from their reading, studies, and/or experience, to write down “what drives consumers’ behavior?” 
The oral responses were great:
“Consumers are rational.”
“Consumers follow trends and fads.”
“Consumers make impulse purchases: most decisions are made in less than a minute.”
“Consumers maximize utility, buying something if the value to them is greater than the price.”

Then another student and I built a verbal explanation that recognized that utility is a vague word, and that it includes the expected value that a consumer hopes to get, including the value of something being popular – and that packaging and other signals may promise more expected value than is really there.

I explained the concept of opportunity cost:  the value or productivity of the best alternative use for a resource.

Using these concepts, consumers are rational, purchasing what they think will bring the most utility, recognizing the opportunity cost of the money and time they spend.

I then wrote on the board:
Three assumptions drive much of what we’ll study:
1. People shop where it’s convenient (cost, location, and/or confidence in finding what they want in one place).
2. People shop where they’re comfortable (“I won’t spend my money where I’m not wanted!”).
3. People are comfortable with similar people: in residence and shopping. (“Birds of a feather flock together”).


Retail outlets

To the extent the above assumptions hold, retailers:
• will want to be located conveniently to likely customers,
• will want to provide the prices and selection those customers want, and
• will probably find potential customers “near” existing customers, in terms of geographic and demographic proximity.

I (and the reading) presented other important aspects of retail outlets.  Review your notes and check the assigned reading.


Retail chains

We didn't do much with this in class -- my major point is that the development of chains allows
  • purchasing power for the retailer
  • advertising power and the power of strong brand names, and
  • greater access to capital.

Retail developers

I used the question "Where do developers build different types of retail space?" as the entry point for a presentation on urban land rents and location of activity within a metropolitan area, and distributed this handout.

revised 1 April 2010