CHAPTER 16Retailing:

Bricks and Clicks

M A R K E T I N GReal People, Real Choices

Fourth Edition

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Retailing

• The process by which products are sold to consumers for personal use

• 1 in 5 US workers are in retailing

• Over 1.2 million retail firms

• Only 8% have annual sales of over 2.5 million

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The Wheel of Retailing

• New types of retailers find it easiest to enter the market by offering goods at lower prices than competitors; after they gain a foothold, they gradually trade up, improving facilities and increasing the quality and assortment of merchandise, and offering special amenities; upscaling increases costs causing prices to rise; higher prices open the door for a new entrant charging lower prices

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Retail Life Cycle

• Retailers are also products because they provide benefits and must offer a competitive advantage to survive– Introduction: new retailer takes a unique approach to

doing business– Growth: retailer catches on with shoppers, sales and

profits rise, others start to copy it so retailer expands offerings

– Maturity: many have copied it and an entire industry has formed, profits decline

– Decline: retail format becomes obsolete

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What’s in Store for the Future

• Demographics– Working consumers

• Drive up windows• Expanding store hours• Shopping consultants• Mail / internet / phone orders

– Catering to younger age segments (with greater purchasing power)

• E.g. Pacific Sunwear, Hot Topic– Ethnic diversity

• Increasing Spanish & Asian populations

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What’s in Store for the future

• Technology– Instant data capture and integration with ordering

systems e.g. JC Penney– Skipping checkout lines– Virtual displays (e.g. furniture in your living room;

clothes on your body, etc.)

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Classifying Retailers by what they sell

• Grocery stores, departmental stores, fast food restaurants, gas stations, etc.

• Some lines still blurred

– scrambled merchandising – strategy of carrying a combination of food and nonfood items

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Classifying Retailers by Service

• Trade-off between service levels and prices

• Self-service retailers e.g. Sam’s Club

• Full-service retailers e.g. Neiman Marcus, Saks.

• Limited-service retailers e.g. Walmart, Target, Old Navy, Kohl’s, etc.

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Classifying by Merchandise Selection

• Merchandise breadth is the number of different product lines available– Narrow assortment (e.g. convenience

store) – Broad assortments (e.g. warehouse club)

• Merchandise depth is the variety of choices available for each specific product– Shallow assortment (e.g. factory outlet for

Polo)– Deep assortments (e.g. departmental

store)

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Store Types

• Convenience stores (e.g. 7-Eleven)– Pay higher prices for close

to home shopping

• Supermarkets– Grocery stores like Food

Lion, etc.

• Specialty stores– Narrow and deep

inventories (e.g. cigars & tobacco stores in malls)

• Department stores– E.g. Macys, Dillards, etc.

• Discount stores– General

merchandise discount stores (e.g. Walmart, Kmart)

– Off-price retailers (e.g. TJ Maxx)

– Warehouse clubs (e.g. Costco)

– Factory outlet stores• Hypermarkets – four to

five times larger than a supermarket - Carrefours

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Nonstore Retailing

• Any method a firm uses to complete an exchange that does not require a customer visit to a store

– Direct selling

– Automatic vending

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Direct Selling

• Direct selling occurs when a salesperson presents a product to one individual or a small group, takes orders, and delivers the merchandise– Door-to-Door Sales– Parties and Networks

• party plan systems (e.g. Tupperware parties)

• multilevel pyramid schemes (e.g. Amway)

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Automatic Vending

• Appealing for selling convenience goods because of small space required, and minimal personnel to maintain and operate

• New innovations:

– Ore-Ida French fries

– Software

– Levi’s jeans

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E-Commerce and the Customer

• Benefits– Shop 24/7– Less travel– More choices– More information– Price competition– Fast delivery

• Limitations– Lack of security– Fraud– Can’t touch items– Hard to

distinguish color/ texture online

– Expensive to return

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E-Commerce and the Marketer

• Benefits– The world is your

marketplace– Decreases costs– Tracking of

consumer behavior

• Limitations– Lack of security– Must maintain site – Price competition– Conflicts with

conventional retailers

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Developing a Store Positioning Strategy

• Store image– how should the target market perceive the

store – exciting (REI stores), old-fashioned (Wilkins, furniture), edgy and hip (Hot Topic), elegant and refined (Saks), etc.

• Atmospherics– the use of color, lighting, scents,

furnishings, sounds, and other design elements to create a desired setting

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Store Design: Setting the Stage

• Store layout and traffic flow (e.g. grid layout in a grocery store)

• Fixture type and merchandise density (e.g. wooden racks vs. metal racks); clutter, sitting areas, etc.

• The sound of music (e.g. Nordstrom)• Color and lighting (warm colors stimulate

appetite, pink preferred by women’s cosmetics)

• The Actors: Store Personnel; uniformed ushers, etc.

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Building the Store: Store Location

• Types of locations

– Business District (downtown)

– Shopping centers (Malls)

• Lifestyle centers (e.g. Manchester Village)

– Freestanding retailer (Walmart, IKEA)

– Non-traditional locations: carts, kiosks, etc.