Chapter 13Retailing

IntroductionAn intermediary involved

in selling goods and services to ultimate consumers (examples?)

Wholesaler

Retailer

An intermediary that takes title to the goods it handles and redistributes them to retailers, other distributors, and sometimes end consumers

•Employs 15 million people in the U.S.

•Accounts for $4.5 trillion to the U.S. economy

STRATEGIC IMPLICATIONS: RETAIL MARKETING STRATEGY

A retailer develops a marketing strategy based on the firm’s goals and strategic plans

Two fundamental steps:1. Picking a target market: size and profit

potential. POSITION. 2. Developing a retailing mix to satisfy

the chosen target market1. 4Ps + Personnel & Presentation used to

create a retail image

TargetTargetMarketMarket

ProductProduct

PricePrice

PlacePlace

PromotionPromotion

PersonnelPersonnel

PresentationPresentation

The Retailing Mix

Choosing the Merchandising Mix

The mix of products offered to the

consumer by the retailer; also called

the product assortment or

merchandise mix.

Merchandising (Product) Strategy

Category management: Retailing strategy which views each product category as an individual profit center.

Slotting Allowances: lump-sum payments by manufacturers for stocking new products.

Scrambled Merchandising: Combining dissimilar product lines to boost sales volume.

Growth of Store brands – Battle for shelf space

Presentation of the Retail Store - Atmosphere

The overall impression

conveyed by a store’s physical

layout, décor, and

surroundings.

Five Senses.

Suggestion SellingSuggestion Selling

Trading UpTrading UpTwo Common Two Common

SellingSellingTechniquesTechniques

Personnel and Customer Service

Price

Price and payment options : how important?http://www.youtube.com/watch?v=kMimygVTgbU

Price and payment options : how important?http://www.youtube.com/watch?v=kMimygVTgbU

The amount of money the retailer

makes as a percentage of sales after

the cost of goods sold is subtracted.

Classification of Retail by

1. Ownership (independent, franchise chain)

2. Service level (Nordstrom vs. Wal-mart)3. Assortment (CVS vs. Smith’s)4. Price (Tiffany vs. jewelry kiosk)

Department Stores (1)

Assort-Assort-mentment PricePrice GrossGross

MarginMargin

Broad High High

Service Service LevelLevel

High

Specialty Stores (2)

Specialty StoresSpecialty Stores

Assort-Assort-mentment PricePrice GrossGross

MarginMargin

Narrow High High

Type of RetailerType of Retailer

Specialty Store

Service Service LevelLevel

High

Specialty Discount Stores (3) OR Category Killers

Specialty DiscountStores

Specialty DiscountStores

Assort-Assort-mentment PricePrice GrossGross

MarginMargin

Narrow Low Low

Type of RetailerType of Retailer

Specialty Discount Store

Service Service LevelLevel

Low

Deep Assortment

Discount Stores (4)

Broad Assortment Low price Low marginDiscount Low Service

Shallow Assortment

Off-Price Retailer (5)

Narrow Line PricesLow prices Low marginsOff-price Retailer Low service

Supercenters (6)

Broad Moderate prices

Low marginsSupermarket Low service

SupermarketsLarge, self-service retailer with grocery specialtySelf-scanning trend: what is your take?Self-scanning trend: what is your take?Competition: fierce, 1% profit on many items

Warehouse ClubsWarehouse club / wholesale club (Sam’s,

Costco)No frills, members only (why?)Bulk purchases: price competition,

homogeneous shopping goods

Convenience StoresConvenience productsOften with gas stations

Convenience stores: fill-in your “regular” shoppingCompetition (fast food also)24/7 is more importantWe pay for the convenience

Non-Store RetailingVending: hi costs; hi prices (flat sales)Vending is a $40 billion U.S. marketCashless vending=wave of futureDirect Marketing (Mail, Catalog, Telemarketing)E-tailing (TV shopping, online)M-commerce: buy from mobile devices(e.g., cell phones)

Comparison between Discount, Specialty and Specialty Discount

Attribute Specialty Specialty Discount

Discount

Example TCBY Yogurt

Toys R us Wal-Mart

Service High Low Low

Price High Low Low

Assortment Narrow Narrow Broad

Comparison between Discount, Specialty and Specialty Discount

Attribute Specialty Specialty Discount

Discount

Margin High Low Low

Wheel of RetailingNewer, low-price types of retailing arise to

challenge older established “bigger” retailers.

No Frills No Frills MotelMotel

MotelMotel+ Free Breakfast+ Free Breakfast

MotelMotel+ Free Breakfast+ Free Breakfast+ HBO+ HBO

MotelMotel+ Free Breakfast+ Free Breakfast+ HBO+ HBO

+ Happy Hour+ Happy Hour

New EntrantNew Entrant

Wheel of Retailing

1

2

34

a theory to explain the institutional changes

eTailing and DTCeTail= electronic retailDTC= Direct to consumerShrinking use of wholesalers? (bypassing

wholesalers more and more)eBay: hybrid etailer/online auction siteEven sells services online(examples of serviceson ebay?)

eTailMore innovative e-tail sites Printing online www.printresponsibly.comNike ID http://nikeid.nike.comZappos http://www.zappos.com

Future of re[E]tailinghttp://www.youtube.com/watch?

v=jtiJaX6q1i0