Marketing Chapter 13 Marketing Channels Copyright ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter 13 Marketing Channels LOS Explain the importance of the retailer within the channel and the U.S. economy List and understand the different types of retailers Explain why nonstore retailing is on the rise and list the advantages of its different forms Discuss the different retail operations models and understand why they vary in strategy and format

lo2 Explain how retail marketing strategies are developed and executed Chapter 14 Retailing lo2 Explain how retail marketing strategies are developed and executed Discuss how services retailing differs from goods retailing Understand how retailers address product/service failures and discuss the opportunities that service failures provide Summarize current trends related to customer data, analytics, and technology

Retailer: Channel intermediary that sells mainly to consumers Retailing Chapter 14 Retailing LO 1 All activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use Retailer: Channel intermediary that sells mainly to consumers Retail industry in America Comprises mostly small businesses Dominated by a small number of large companies Retailing has enhanced the quality of our daily lives. It provides millions of goods and services that mirror the needs and styles of U.S. society. The retailing industry is one of the largest employers. It affects all of us directly or indirectly. Discussion/Team Activity Take a poll in class to see how many of the students have worked or are working in the retail industry. How many are pursuing careers in the retail industry?

Classification of Retail Operations Chapter 14 Retailing LO 2 Based on: Type of ownership Level of service Product assortment Price A retail establishment can be classified according to its ownership, level of service, product assortment, and price. Retailers use the latter three variables to position themselves in the competitive marketplace. These variables can be combined in several ways to create distinctly different retail operations.

14.1 Types of Stores and Their Characteristics Chapter 14 Retailing LO 2 14.1 Types of Stores and Their Characteristics This exhibit differentiates retailers by level of service, product assortment, price, and gross margin. Gross margin is the amount of money a retailer makes as a percentage of sales after the cost of goods sold is subtracted.

Types of In-Store Retailers Operations Chapter 14 Retailing LO 2 Department stores Specialty stores Supermarkets Drugstores Convenience stores Discount stores Restaurants A department store carries a wide variety of products and specialty goods, including apparel, cosmetics, housewares, electronics, and sometimes furniture. A specialty store specializes in a given type of merchandise. A supermarket is a large, departmentalized, self-service retailer that specializes in food and some nonfood items. A drugstore stocks pharmacy-related products and services as its main draw. It also carries an extensive selection of cosmetics, health and beauty aids, seasonal merchandise, greeting cards, toys, and some non-refrigerated convenience foods. A convenience store can be defined as a miniature supermarket, carrying only a limited line of high-turnover convenience goods. A discount store competes on the basis of low prices, high turnover, and high volume. A restaurant straddles the line between retailing establishments and service establishments.

Categories of Discount Stores Chapter 14 Retailing LO 2 Full-line discount stores Supercenters Specialty discount stores Category killer Warehouse club Off-price retailers Factory outlets Used goods retailers Full-line discount stores offer consumers very limited service and carry a vast assortment of well-known, nationally branded goods. Supercenters extend the full-line concept to include groceries and a variety of services such as pharmacies, dry cleaning, hair salons, optical shops, and restaurants. Specialty discount stores offer a nearly complete selection of merchandise within a single category. A category killer is a specialty discount store that heavily dominates its narrow merchandise segment. Warehouse clubs sell bulk quantities of merchandise to customers at volume discount prices in exchange for a periodic membership fee. Off-price retailers sell products at prices 25 percent or more below traditional department store prices because they buy inventory with cash and do not require return privileges. Factory outlets and used goods retailers are types of off-price retailers.

Enables shopping without visiting a physical store location Forms Nonstore Retailing Chapter 14 Retailing LO 3 Enables shopping without visiting a physical store location Forms Automatic vending Direct retailing Direct marketing Online retailing (e-tailing) Nonstore retailing is growing faster than in-store retailing because of changes in culture and society. It adds a level of convenience for customers who wish to shop from their current locations. Automatic vending entails the use of machines to offer goods for sale. Self-service technologies (SST) comprise a form of automatic vending where services are the primary focus. Direct retailing representatives sell products door-to-door, in offices, or at in-home sales parties. Direct marketing includes techniques used to elicit purchases from consumers’ homes, offices, and other convenient locations. Telemarketing, direct mail, and shop-at-home television networks are forms of direct marketing. Online retailing allows customers to shop over the Internet.

Retail Operations Models Chapter 14 Retailing LO 4 Tradeoffs inherent to restrictive operating models have led to the emergence of hybrid retail operating models and online-only retailers Online-only retailers have low operating costs An operating model is a set of guiding principles. Specialty shops keep high amounts of floor stock and back stock in order to accommodate a broad range of customer demands. This operating model implies higher prices for customers and does not guarantee stocks. Such tradeoffs have led to the emergence of hybrid retail operating models and online-only retailers. Most decisions taken by retail managers are based on the retailing mix.

Retail Marketing Strategy Chapter 13 Marketing Channels LO 5 Developed based on the goals established by stakeholders and the overall strategic plans developed by company leadership Strategic tasks that precede tactical decisions Defining and selecting a target market Developing the retailing mix Strategic retailing goals focus on increasing sales, reducing costs of goods sold, and improving financial ratios. Tactical retailing goals include increased store traffic, higher sales of a specific item, developing a more upscale image, and creating heightened public awareness of the retail operation and its products or services.

14.2 Retailing Mix LO 5 Chapter 14 Retailing The retailing mix consists of six Ps: the four Ps of the marketing mix (product, price, promotion, and place) plus presentation and personnel. The combination of the 6 Ps projects a store’s image, which influences consumers’ perceptions.

Retailing Decisions for Services Chapter 13 Marketing Channels LO 6 Service industries are customer oriented, and service quality is a priority Service distribution focuses on: Minimizing wait times Managing service capacity Improving service delivery Establishing channel-wide network coherence

Service Recovery Chapter 13 Marketing Channels LO 7 Best retailers have plans in place to recover and benefit from lapses in service Actions that might be taken Notifying customers in advance of stockouts Implementing liberal return policies Issuing product recalls in conjunction with promotional offers The best retailers treat customer disappointments as opportunities to interact with and improve relations with their customers.

Emerging Technologies Used by Retailers Chapter 13 Marketing Channels LO 8 Big data analytics Beacon Facial recognition and biometric sensors Shopper marketing Retailers are constantly innovating. They are always looking for new products and services (or ways to offer them) that will attract new customers or inspire current ones to buy in greater quantities or more frequently. Big data analytics Process of discovering patterns in large data sets for the purposes of extracting knowledge Beacon Sends out connecting signals to customers’ smartphones and tablets in order to bring them into a retail store or improve their shopping experience Shopper marketing Understanding how target consumers behave in different channels and formats Information is leveraged to generate sales or other positive outcomes Manufacturers and retailers use shopper analytics to understand customer shopping attitudes, emotions, and behaviors Helps fine-tune, develop, or change market offerings

Developments in Retail Management Chapter 13 Marketing Channels LO 8 Showrooming and data analytics have led to the development of virtual reality apps and retail channel omnification Click-and-collect enables customers to buy something online and then pick up the merchandise from a physical store Robots are replacing or augmenting retail employees Retail channel omnification is the reduction of multiple retail channel systems into a single, unified system for the purpose of creating efficiencies or saving costs.

Key Terms Retailing Convenient store Retailer Discount store Independent retailer Chain store Franchise Franchisor Franchisee Gross margin Department store Specialty store Supermarkets Drugstore Convenient store Discount store Full-line discount store Supercenter Specialty discount store Category killer Warehouse club Off-price retailer Factory outlet Used goods retailer Restaurant Nonstore retailing

Key Terms (continued) Automatic vending Self-service technologies Direct retailing Direct marketing Telemarketing Direct mail Microtargeting Shop-at-home television networks Online retailing Floor stock Back stock Retailing mix Brand cannibalization Destination store Atmosphere Layout Big data analytics Beacon Shopper marketing Shopper analytics Retail channel omnification Click-and-collect

Summary Retail establishments are classified according to the type of ownership, level of service, product assortment, and price Each operating model can be summarized as a set of guiding principles Strategic retailing goals focus on increasing sales, reducing costs of goods sold, and improving financial ratios Service recovery is handled proactively by stores to maximize the customer experience