Chapter 13 Retailing

Introduction Employs 15 million people in the U.S. Retailer An intermediary involved in selling goods and services to ultimate consumers (examples?) Wholesaler 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: Picking a target market: size and profit potential. POSITION. Developing a retailing mix to satisfy the chosen target market 4Ps + Personnel & Presentation used to create a retail image

The Retailing Mix Target Market Product Price Place Promotion Personnel Presentation

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.

Personnel and Customer Service Suggestion Selling Trading Up Two Common Selling Techniques

Price and payment options : how important? The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted. Price and payment options : how important? http://www.youtube.com/watch?v=kMimygVTgbU

Classification of Retail by Ownership (independent, franchise chain) Service level (Nordstrom vs. Wal-mart) Assortment (CVS vs. Smith’s) Price (Tiffany vs. jewelry kiosk)

Department Stores (1) General Merchandise retailer: Variety of product lines with considerable depth. Dept stores: mid 1800s Wide lines -- at least 25 people. Product lines organized into separate departments. Service-oriented Service Level Assort- ment Price Gross Margin High Broad High High

Specialty Stores (2) Specialty Stores Assort- ment Price Gross Margin Narrow High Type of Retailer Specialty Store Service Level

Specialty Discount Stores (3) OR Category Killers Assort- ment Price Gross Margin Narrow Low Type of Retailer Specialty Discount Store Service Level Deep Assortment

Discount Stores (4) Shallow Assortment Discount stores: Self-service. Brands and store brands at low prices. Discount Low Service Broad Assortment Low price Low margin Shallow Assortment

Off-Price Retailer (5) Low margins Off-price Retailer Low service Less wide; but deep. Low margins Off-price Retailer Low service Narrow Line Prices Low prices

Supercenters (6) Supermarket Low service Broad Moderate prices Low margins

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

Warehouse Clubs Warehouse club / wholesale club (Sam’s, Costco) No frills, members only (why?) Bulk purchases: price competition, homogeneous shopping goods

Convenience Stores Convenience products Often with gas stations Convenience stores: fill-in your “regular” shopping Competition (fast food also) 24/7 is more important We pay for the convenience

Non-Store Retailing Vending: hi costs; hi prices (flat sales) Vending is a $40 billion U.S. market Cashless vending=wave of future Direct 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 Price Assortment Narrow Broad

Comparison between Discount, Specialty and Specialty Discount Attribute Specialty Specialty Discount Discount Margin High Low

Wheel of Retailing Newer, low-price types of retailing arise to challenge older established “bigger” retailers.

Wheel of Retailing 3 4 2 1 Motel Motel New Entrant Motel + Free Breakfast + HBO Motel + Free Breakfast + HBO + Happy Hour 4 2 New Entrant Motel + Free Breakfast 1 No Frills Motel a theory to explain the institutional changes

eTailing and DTC eTail= electronic retail DTC= Direct to consumer Shrinking use of wholesalers? (bypassing wholesalers more and more) eBay: hybrid etailer/online auction site Even sells services online (examples of services on ebay?)

eTail More innovative e-tail sites Printing online www.printresponsibly.com Nike ID http://nikeid.nike.com Zappos http://www.zappos.com

Future of re[E]tailing http://www.youtube.com/watch?v=jtiJaX6q1i0