Retailing Bricks and Clicks Chapter Sixteen © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

16-2 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Chapter Objectives  Define retailing; understand how retailing evolves and some ethical issues in retailing  Understand how we classify retailers  Describe the more common forms of nonstore retailing including B2C e-commerce  Understand the importance of store image to a retail positioning strategy and explain how a retailer can create a desirable image in the marketplace

16-3 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Time at Eskimo Joe’s  Which strategy should Stan pursue? Option 1: Convert the beer bar into a full-service restaurant Option 1: Convert the beer bar into a full-service restaurant Option 2: Continue operating as a beer bar and try to offset lost beer sales with an increase in apparel sales Option 2: Continue operating as a beer bar and try to offset lost beer sales with an increase in apparel sales Option 3: Close Eskimo Joe’s and refocus resources on building the growing apparel business Option 3: Close Eskimo Joe’s and refocus resources on building the growing apparel business

16-4 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Retailing: Special Delivery  Retailing The final stop in the distribution channel in which organizations sell goods and services to consumers for their personal use

16-5 © 2012 Pearson Education, Inc. publishing as Prentice-Hall.  Retailing is big business: 2009 U.S. sales totaled $4.5 trillion 2009 U.S. sales totaled $4.5 trillion More than one of every ten U.S. workers is employed in retailing More than one of every ten U.S. workers is employed in retailing  Retailers: Belong to a channel of distribution Belong to a channel of distribution Provide time, place, and ownership utility to customers Provide time, place, and ownership utility to customers Retailing is different around the globe Retailing is different around the globe Retailing: A Mixed (Shopping) Bag

16-6 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Evolution of Retailing  The wheel-of-retailing hypothesis Theory that explains how retail firms change, becoming more upscale as they go through their life cycle New types of retailers enter the market by offering lower-priced goods New types of retailers enter the market by offering lower-priced goods They gradually improve facilities, quality and assortment of merchandise, and amenities as they increase prices They gradually improve facilities, quality and assortment of merchandise, and amenities as they increase prices  Explains development of some but not all forms of retailing

16-7 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Evolution of Retailing  The retail life cycle Retailers are born, grow and mature, and eventually die or become obsolete Retailers are born, grow and mature, and eventually die or become obsolete  Introduction stage: Aggressive entrepreneurs, pop-up retailers  Growth stage: Sales grow, competition enters, stores must expand offerings  Maturity stage: Multiple competitors, profits decline, new products are offered  Decline stage: Retail offerings become obsolete

16-8 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. The Evolution Continues: What’s “In Store” for the Future?  Factors motivating retail innovation: The changing economy The changing economy   Retailers must respond to changes Demographics Demographics   Retailers must find new ways to sell to diverse groups Technology Technology  Technology changes the shopping experience Globalization Globalization   Offers access to growth markets, but firms need to adjust to different conditions around the world

16-9 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Ethical Problems in Retailing  Shrinkage problems may stem from customers or employees and can include: Shoplifting Shoplifting Employee theft Employee theft Retail borrowing Retail borrowing  Ethical treatment of customers Not discouraging certain types of customers from shopping Not discouraging certain types of customers from shopping Not selling harmful products to at risk groups Not selling harmful products to at risk groups

16-10 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. From Mom-and-Pop to Super Walmart: Classifying Retail Stores  The classification of retail stores provides a method by which retailers can benchmark performance  Several classification methods exist: Classifying by what they sell (the merchandise mix) Classifying by what they sell (the merchandise mix) Classifying by level of service Classifying by level of service Classifying by merchandise selection Classifying by merchandise selection

16-11 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Classifying Retail Stores  Classifying by what they sell: Merchandise mix: The total set of products offered for sale by a retailer, including all product lines sold to all consumer groups. Example: food retailers Merchandise mix: The total set of products offered for sale by a retailer, including all product lines sold to all consumer groups. Example: food retailers Difficult to use for benchmarking Difficult to use for benchmarking Combination stores vs. superstores Combination stores vs. superstores

16-12 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Classifying Retail Stores  Classifying by level of service: Self-service retailers: Shoppers make selections without any help Self-service retailers: Shoppers make selections without any help Limited service retailers: May offer credit service and merchandise return services but little else; the majority of shopper selection is done without assistance Limited service retailers: May offer credit service and merchandise return services but little else; the majority of shopper selection is done without assistance Full-service retailers: Offer supporting services such as gift wrapping; trained sales associates assist buyers Full-service retailers: Offer supporting services such as gift wrapping; trained sales associates assist buyers

16-13 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Classifying Retail Stores  Classifying by merchandise selection uses two dimensions: Merchandise breadth: Number of different product lines Merchandise breadth: Number of different product lines Merchandise depth: Choices available in each product line Merchandise depth: Choices available in each product line  Retailers classified in this manner take several forms

16-14 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Classifying Retail Stores  Major types of retailers include: Convenience stores Convenience stores Supermarkets Supermarkets Box stores Box stores Specialty stores Specialty stores Leased departments Leased departments Variety stores Variety stores Discount stores Discount stores Department stores Department stores Hypermarkets Hypermarkets

16-15 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Nonstore Retailing  Nonstore retailing: Any method used to make an exchange with a product end user that does not require a customer visit to a store  One type is direct selling: An interactive sales process in which a salesperson presents a product to one individual or a small group, takes orders, and delivers merchandise An interactive sales process in which a salesperson presents a product to one individual or a small group, takes orders, and delivers merchandise

16-16 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Nonstore Retailing  Types of direct selling include: Door-to-door sales Door-to-door sales Party plan system Party plan system Multilevel networks and activities Multilevel networks and activities  Beware of illegal pyramid schemes: These promise large profits from recruiting others to join the program rather than from any real investment or sale of goods

16-17 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Automatic Vending and B2C E-Commerce  Automatic vending Usually best suited to low-cost convenience goods Usually best suited to low-cost convenience goods  Business-to-consumer (B2C) e-commerce: Online exchange between companies and individual consumers Offers many benefits to consumers and marketers Offers many benefits to consumers and marketers

16-18 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. B2C E-Commerce  Benefits to consumers: Increases convenience for consumers Increases convenience for consumers  24/7 shopping, less traveling Greater product availability; greater choice Greater product availability; greater choice Greater, faster access to information Greater, faster access to information  Pricing information, electronic communities Lower prices; virtual auctions Lower prices; virtual auctions Fast delivery Fast delivery Electronic communities Electronic communities

16-19 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. B2C E-Commerce  Benefits to marketer: Facilitates exchanges in global marketplace Facilitates exchanges in global marketplace Allows businesses to reduce costs Allows businesses to reduce costs Allows specialized businesses to succeed Allows specialized businesses to succeed Makes real-time price information easily available Makes real-time price information easily available

16-20 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. B2C E-Commerce  Limitations from consumer perspective: Lack of security Lack of security Potential for fraud Potential for fraud No chance to “touch-and-feel” goods No chance to “touch-and-feel” goods Poor color reproduction on the Internet Poor color reproduction on the Internet Expensive to order and return items Expensive to order and return items Potential exists for a breakdown in human relationships Potential exists for a breakdown in human relationships

16-21 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. B2C E-Commerce  Limitations from the marketers perspective: Lack of security Lack of security Must maintain site to reap benefits Must maintain site to reap benefits Fierce price competition Fierce price competition Conflicts with conventional retailers Conflicts with conventional retailers Legal issues not resolved Legal issues not resolved

16-22 © 2012 Pearson Education, Inc. publishing as Prentice-Hall.  Virtual channels are unlikely to replace traditional ones  Stores must continue to evolve to lure shoppers away from computers In destination retailing, consumers will visit stores for the total entertainment experience In destination retailing, consumers will visit stores for the total entertainment experience B2C’s Effect on Retailing’s Future

16-23 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Developing a Store Positioning Strategy: Retailing as Theater  Store image: The way a retailer is perceived in the marketplace relative to the competition  Store design: Atmospherics Atmospherics Traffic flow design Traffic flow design Visual merchandising Visual merchandising Music Music Color and lighting Color and lighting

16-24 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Developing a Store Positioning Strategy: Retailing as Theater  Store personnel: Should complement a store’s image Should complement a store’s image Dress, attitude, and knowledge are important Dress, attitude, and knowledge are important  Pricing policy: Price points are price ranges of a store’s merchandise Price points are price ranges of a store’s merchandise Price points play a role in establishing its image Price points play a role in establishing its image

16-25 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Developing a Store Positioning Strategy: Retailing as Theater  Build the theatre by store location Types of store locations include: Types of store locations include:  Business districts  Shopping centers  Freestanding retailers  Nontraditional store locations Site selection is critical Site selection is critical  “Location, location, location”

16-26 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Developing a Store Positioning Strategy: Retailing as Theater  Site selection: choose where to build Trade area A geographic zone that accounts for the majority of a store’s sales and customers Trade area A geographic zone that accounts for the majority of a store’s sales and customers Factors considered in site selection include: Factors considered in site selection include:  Site evaluation  Age profile  Community life cycle  Competition

16-27 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Made at Eskimo Joe’s  Stan chose option 1 Why do you think Stan chose to convert the beer bar and reopen Eskimo Joe’s as a trendy restaurant? Why do you think Stan chose to convert the beer bar and reopen Eskimo Joe’s as a trendy restaurant?

16-28 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America