Retailing: Bricks and Clicks Chapter 16 Retailing: Bricks and Clicks

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 Describe B2C e-commerce and its benefits, limitations, and future promise Understand the importance of store image and how a retailer can create a desirable image Copyright 2009 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 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 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Retailing: Special Delivery Retailing: The process by which goods and services are sold to consumers for their personal use The retailer adds or subtracts value from the offering with its image, inventory, service quality, location, and pricing policy Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Retailing: A Mixed (Shopping) Bag Retailing is big business: 2007 U.S. sales totaled $4.5 trillion More than one of every ten U.S. workers is employed in retailing Retailers belong to a channel of distribution, providing time, place, and ownership utility to customers Copyright 2009 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 They gradually improve facilities, quality and assortment of merchandise, and amenities as they increase prices Copyright 2009 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 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 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

The Evolution Continues: What’s “In Store” for the Future? Factors motivating retail innovation: Demographics: Retailers must find new ways to sell to diverse groups Offering convenience for working consumers Catering to specific age segments Recognizing ethnic diversity Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

The Evolution Continues: What’s “In Store” for the Future? Factors motivating retail innovation: Technology: Changing the shopping experience Internet created the e-tailing age Point-of-sale system advances Social shopping RFID chips E-menus Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

The Evolution Continues: What’s “In Store” for the Future? Factors motivating retail innovation: Globalization: Offers access to growth markets, but firms need to adjust to different conditions around the world Merchandise mix changes Local production requirements Cultural differences Competition Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ethical Problems in Retailing Shrinkage problems may stem from customers or employees: Shoplifting Employee theft Retail borrowing Ethical issues in customer dealings: Discouraging certain types of customers from shopping Selling harmful products to at risk groups Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

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 level of service Classifying by merchandise selection Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Classifying Retail Stores Classifying by what they sell (the merchandise mix) 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 due to merchandise overlap between different store types (e.g., “Super” Wal-Marts carry food) Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Classifying Retail Stores Classifying by level of service 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 Full-service retailers: Offer supporting services such as gift wrapping; trained sales associates assist buyers Copyright 2009 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 depth: Choices available in each product line Retailers classified in this manner take several forms Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Classifying Retail Stores Major forms retailers take: Convenience stores Supermarkets Specialty stores Discount stores General merchandise discount stores Warehouse clubs Factory outlet stores Department stores Hypermarkets Copyright 2009 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 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Nonstore Retailing Forms of direct selling Door-to-door sales Party plan system Multilevel networking (a master distributor recruits other people to become distributors) 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 Automatic vending Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2C E-Commerce Business-to-consumer (B2C) e-commerce: Online exchange between companies and individual consumers Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2C E-Commerce Benefits to firm of B2C e-commerce Facilitates exchanges in global marketplace Allows businesses to reduce costs Allows specialized businesses to succeed Makes real-time price information easily available Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2C E-Commerce Consumer benefits of B2C e-commerce Increases convenience for consumers 24/7 shopping, less traveling Greater product access and choice Greater, faster access to information Pricing information, electronic communities Lower prices; virtual auctions Fast delivery Can fulfill experiential needs Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2C E-Commerce Limitations of B2C e-commerce from the firm’s perspective Security challenges and constant site maintenance Developing countries with cash economies can’t easily pay for Internet purchases Online sales may cannibalize major retailer store sales Price competition is intense Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2C E-Commerce Limitations of B2C e-commerce from consumer perspective Must wait for delivery of non-digital goods Lack of security and potential for fraud No chance to “touch-and-feel” goods Poor color reproduction on the Internet Expensive to return items Potential exists for a breakdown in human relationships Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2C’s Effect on Retailing’s Future 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 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing a Store Positioning Strategy: Retailing as Theater Shopping is part buying, part entertainment, and part social outlet Store image: The way a retailer is perceived in the marketplace relative to the competition Atmospherics: The use of color, lighting, scents, furnishings, sounds, and other design elements to create a desired store image Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing a Store Positioning Strategy: Retailing as Theater Store design: setting the stage Store layout: Arrangement of merchandise in the store that determines traffic flow (grid layout vs. free-flow layout) Fixture type and merchandise density The choice of music Color and lighting (set a moods) Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing a Store Positioning Strategy: Retailing as Theater Store personnel should complement a store’s image Dress, attitude, and knowledge are important Pricing policy Price points are price ranges of a store’s merchandise Price points play a role in establishing its image Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing a Store Positioning Strategy: Retailing as Theater Build the theatre: store location Types of store locations Business districts Shopping centers Freestanding retailers Nontraditional store locations Site selection is critical “Location, location, location” Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing a Store Positioning Strategy: Retailing as Theater Build the theatre: store location Site selection must take into account the store’s trade area, or geographic zone that accounts for the majority of its sales and customers Saturated trade areas Understored trade areas Overstored trade areas Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Real People, Real Choices: Decision Made at Woodtronics Stan chose option 1 Implementation: Eskimo Joe’s reopened as a trendy restaurant, and achieved immediate success. Stan only hires employees who fit the business culture he developed. Apparel sales continue to grow Measuring success: Table turnover, average sale per customers for restaurant; profit per square foot for clothing sales Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 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. Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice Hall Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall