Chapter 15 Retailing

Introduction An 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 24 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 market 1. 4Ps + Personnel & Presentation used to create a retail image

Target Market Product Price Place Promotion Personnel Presentation 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 Selling Trading Up Two Common Selling Techniques Personnel and Customer Service

Price Price and payment options : how important? 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.

HOW THE VIEWS OF THESE STORES' REGULAR SHOPPERS COMPARE Target Neiman Marcus and SaksMacy'sJ.C. Penney Optimistic about the economy in next 6 months 33%35%36%33% Shopping closer to home 38%26%36%44% Shopping for sales more often 42%22%39%45% Spending less on clothing 39%28%35%42% Taking fewer shopping trips 39%11%34%44%

TargetNeiman Marcus Macy's J.C. Penney Age Age Age 65 and older Education high school Education college Household size two or fewer Income less than $40, Income $40,000- $99, Income $100,000 and more Compared to US pop as a whole: 100 is average.

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)

Types of Retailers

Department StoresAssort-mentPrice Gross Margin BroadHigh ServiceLevel

Specialty Stores Assort-mentPrice Gross Margin NarrowHigh Type of Retailer Specialty Store ServiceLevel High

Specialty Discount Stores OR Category Killers Specialty Discount Stores Specialty Discount Stores Assort-mentPrice Gross Margin NarrowLow Type of Retailer Specialty Discount Store ServiceLevel Low Deep Assortment

Discount Stores Broad Assortment Low priceLow margin Discount Low Service Shallow Assortment

Off-Price Retailer Narrow Line PricesLow pricesLow margins Off-price Retailer Low service

Supercenters Broad Moderate prices Low margins Supermarket Low service

Supermarkets Large, self-service retailer with grocery specialty Self-scanning trend: what is your take? 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)

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

No Frills Motel Motel + Free Breakfast Motel + Free Breakfast + HBO Motel + Happy Hour New Entrant Wheel of Retailing 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 Nike ID Zappos

Future of re[E]tailing