Retailing Positioning issues Margins Retail pricing strategies Strategic developments in retailing

Positioning Issues Some ways to profitability: Low cost, high volumes, low unit margins, low to moderate service (profit on volume) Higher priced, higher per unit margins, lower sales “Stuck in the Middle”--midlevel retailers (e.g., Sears, J. C. Penney) face competition both from above and below

Margins Margins Gross = sale price - price paid to wholesaler Per unit Per dollar Per unit of space Net margin = gross margin vs. allocated overhead Very large increases in sales volumes are needed to “break even” on low prices

Two Types of Retail Pricing “High-low” High everyday prices Frequent sales Profit on price discrimination--only some people will bother to Shop while sale is on Switch brands Every Day Low Price (EDLP) Consistent prices--theoretically no sales, but lower non-sale prices Typically lower service Note that retailers provide for many promotions

Strategic Issues Importance of convenience Increasing power of retailers Private label branding Lower price but higher margins Longer history in Europe

Retail Trends Power retailers Early purchases Investment in technology Consistent “fair” prices Consistent but modest gross margins Category “killers”: Specialize--significant selection at low prices

Retailing Polarity Trend toward either Low price--e.g., Wal-Mark, Kmart, Sports Authority High quality--e.g., Nordstrom’s, Starbuck’s