Chapter 15 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
Lamb, Hair, McDaniel
CHAPTER 15
Retailing
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Chapter 15 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2
Retailing
All the activities directly
related to the sale of goods
and services to the ultimate
consumer for personal,
non-business use.
RetailingRetailing
LO1
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The Role of Retailing
U.S. retailers employ nearly 25 million people
Retailers account for 11.6 percent of U.S. employment
Retailing accounts for 13 percent of U.S. businesses
Retailers ring up almost $4 trillion in sales—nearly 40 percent of the U.S. GDP
Industry is dominated by a few giant organizations, such as Wal-Mart
LO1
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Classification of Retail Operations
OwnershipOwnership
Level of ServiceLevel of Service
Product AssortmentProduct Assortment
PricePrice
LO2
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IndependentRetailers
IndependentRetailers
Chain StoresChain Stores
FranchisesFranchises
Owned by a single person or partnership and not part of a larger retail institution
Owned by a single person or partnership and not part of a larger retail institution
Owned and operated as a group by a single organizationOwned and operated as a group by a single organization
The right to operate a business or to sell a productThe right to operate a business or to sell a product
LO2
Classification of Ownership
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Level of Service
LO2
Full Full ServiceService
Self Self ServiceService
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Product Assortment
Classification based on BREADTH and DEPTH of product lines.
LO2
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Price
The amount of money
the retailer makes as a
percentage of sales after
the cost of goods sold is
subtracted.
GrossMargin
GrossMargin
LO2
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LOLO22
Types of Stores and Their Characteristics
Assort-Assort-mentment PricePrice GrossGross
MarginMargin
BroadBroad
NarrowNarrow
BroadBroad
Med-NarrowMed-Narrow
MediumMedium
Med-BroadMed-Broad
Med-BroadMed-Broad
BroadBroad
Med-NarrowMed-Narrow
NarrowNarrow
Mod-HighMod-High
Mod-HighMod-High
ModerateModerate
Mod HighMod High
ModerateModerate
Mod LowMod Low
Mod Lo-lowMod Lo-low
Low-very lowLow-very low
LowLow
Low-HighLow-High
Mod HighMod High
HighHigh
LowLow
Mod HighMod High
LowLow
Mod LowMod Low
Mod LowMod Low
LowLow
LowLow
Low-HighLow-High
Type of RetailerType of Retailer
Specialty StoreSpecialty Store
SupermarketSupermarket
Convenience StoreConvenience Store
DrugstoreDrugstore
Full-line DiscounterFull-line Discounter
Specialty DiscounterSpecialty Discounter
Warehouse ClubsWarehouse Clubs
Off-price RetailerOff-price Retailer
RestaurantRestaurant
Service Service LevelLevel
Mod Hi-HighMod Hi-High
HighHigh
LowLow
LowLow
Low-ModLow-Mod
Mod-LowMod-Low
Mod-LowMod-Low
LowLow
LowLow
Low-HighLow-High
Department StoreDepartment Store
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Nonstore Retailing
Automatic VendingAutomatic Vending
Direct RetailingDirect Retailing
Direct MarketingDirect Marketing
Electronic RetailingElectronic Retailing
LO4
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Top E-Tailers by Sales Volume
America's Top Ten Retail Businesses
Rank Company Web Sales Volume (in billions)
1 Amazon.com Inc. $24.5
2 Staples Inc. $9.8
3 Dell Inc. $4.5
4 Apple Inc. $4.2
5 Office Depot Inc. $4.1
6 Walmart.com $3.5
7 OfficeMax Inc. $2.7
8 Sears Holdings Corp. $2.7
9 CDW Corp. $2.4
10 Best Buy Co. $2.4
LO4B
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The Basic Forms of Franchising
Product and Trade Name Franchising
Product and Trade Name Franchising
Dealer agrees to sell in products provided by a manufacturer or wholesaler.
Dealer agrees to sell in products provided by a manufacturer or wholesaler.
BusinessFormat
Franchising
BusinessFormat
Franchising
An ongoing business relationship between a franchiser and a franchisee.
An ongoing business relationship between a franchiser and a franchisee.
LO5
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Top 10 Franchisors
LO5
1.1. SubwaySubway2.2. McDonald’sMcDonald’s3.3. 7-Eleven Inc.7-Eleven Inc.4.4. Hampton Inn/Hampton Inn Hampton Inn/Hampton Inn
& Suites& Suites5.5. SupercutsSupercuts6.6. H & R BlockH & R Block7.7. Dunkin’ DonutsDunkin’ Donuts8.8. Jani-KingJani-King9.9. ServproServpro10.10. ampmampm
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Retail Marketing Strategy
Develop a Retailing Mix
Define & Select a Target Market
LO6
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Defining a Target Market
STEP 1:Segment the Market
STEP 1:Segment the Market
DemographicsDemographics
GeographicsGeographics
PsychographicsPsychographics
LO6
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Choosing the Retailing Mix
STEP 2:Choose the Retailing Mix
STEP 2:Choose the Retailing Mix
ProductProduct
PromotionPromotion
PersonnelPersonnel
PlacePlace
PricePrice
PresentationPresentation
LO6
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LO6
Exhibit 15.3Exhibit 15.3The Retailing MixThe Retailing Mix
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Choosing the Retailing Mix
ProductOffering
ProductOffering
The mix of products
offered to the consumer
by the retailer; also
called the product
assortment or
merchandise mix.
LO6
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Retail Promotion Strategy
Public RelationsPublic Relations
PublicityPublicity
Sales PromotionSales Promotion
LO6
AdvertisingAdvertising
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The Proper Location
Economic growth potential
Economic growth potential
CompetitionCompetition
GeographyGeography
Choosing a Community
LO6
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The Proper Location
Socioeconomic characteristics
Socioeconomic characteristics
Traffic flowsTraffic flows
Land costsLand costs
Choosing a Specific Site
Zoning RegulationsZoning Regulations
Public TransportationPublic Transportation
Choosing the Type of Site
Freestanding StoreFreestanding Store
Shopping CenterShopping Center
MallMall
LO6
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Mall Stores Try to Shrink
• Traditional mall retailers like Gap and AnnTaylor are trying to restructure the size of their mall stores.
• Sales per square foot have sunk in recent years.
• By shrinking the store size, retailers hope to provide a more intimate shopping experience while maximizing store efficiency.
Source: Elizabeth Holmes, "Sizing Up Property, Mall Stores Try to Shrink," March 19, 2010, B1.
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Retail Prices
QualityImage
High PriceHigh Price Low Price Low Price
Good ValueSingle Price Point
LO6
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Presentation of the Retail Store
AtmosphereAtmosphere The overall impression
conveyed by a store’s
physical layout, décor,
and surroundings
LO6
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Presentation of the Retail Store
LO6
Employee type and densityEmployee type and density
Fixture type and densityFixture type and density
SoundSound
OdorsOdors
Visual factorsVisual factors
Merchandise type and densityMerchandise type and density
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Personnel and Customer Service
Suggestion SellingSuggestion Selling
Trading UpTrading Up
Two Common Two Common SellingSelling
TechniquesTechniques
LO6
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Customer Service for On-Line Retailers
Easy-to-use Web site Easy-to-use Web site
Product availabilityProduct availability
Simple returnsSimple returns
LO6
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New Developments in Retailing
InteractivityInteractivityConsumers areinvolved in the retail experience.
Consumers areinvolved in the retail experience.
M-commerceM-commercePurchasing goods through mobile devices.
Purchasing goods through mobile devices.
LO7
Chapter 15 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29
Assignment
• Best Buy Case
• In groups of 5-7, discuss the answers to the questions in the case.