Chapter Eleven Retailing Strategies

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Presentation transcript:

Chapter Eleven Retailing Strategies

Chapter Objectives Summarize the local retail landscape Provide an overview and description of the store and nonstore retailing categories. Address strategic issues in retailing related to retailer organization, merchandise and service mix, location, atmospherics, and future trends in retailing.

Retailing Defined Retailing in Rhode Island Retailing: All the activities involved in the final stage of distribution, i.e., selling to final consumers Functions performed by retailers: Creating convenience for consumers Informing consumers Serving the other channel members Retailing in Rhode Island

Retailing Formats Overview of Retail Formats General Merchandise Retail Specialty stores Department stores General merchandise Discount stores Off-Price retailers Catalog showrooms Food Retailing Conventional supermarkets Warehouse clubs or wholesale clubs Convenience Stores Non-Store Retailing Internet retailing Vending machines Television home shopping Catalog retailing and direct mail retailing Direct selling

Top U.S. Retail Categories (based on sales)

General Merchandise Retailing Specialty Stores Narrow product line Wide assortment Specialize in a product category. The Gap, Victoria’s Secret, Barnes & Nobles, Footlocker Category killers (very large specialty stores) Home Depot, Circuit City, Toys “R” Us Department Stores Broad variety Fashions, appliances, electronics, furnishings Sears, JC Penney, Dillard’s, Nordstrom Anchor stores Leased departments (cosmetics, jewelry)

General Merchandise Retailing General Merchandise Stores General merchandise discount stores sell high volumes of merchandise, offer limited service, and charge lower prices. All-purpose discount stores Offer a wide variety of merchandise and limited depth, e.g., Wal-Mart Category specialists Carry a narrow variety of merchandise and offer a wide assortment, e.g., OfficeMax Wal*Mart 1

General Merchandise Retailing Off-Price Retailers Brand name and designer merchandise Priced below regular retail prices Overruns, irregular products, out-of-season merchandise, excess inventories Types of off-price retailers Factory outlet stores, e.g., Ralph Lauren outlet store Department store outlets, e.g., Off Fifth for Saks Fifth Ave Close-out retailers, e.g., TJ Maxx Single-price retailers, e.g., Dollar Store Catalog Showrooms High turnover merchandise Brand names at discount prices Orders placed from catalogs Traditional catalog showrooms have disappeared (e.g., Service Merchandise)

Food Retailers Conventional supermarkets Superstores Self-service retailers with annual sales higher than $2 million Less than 20,000 square feet of store space Superstores Stores with more than 20,000 square feet of space and $17 million in sales Combine supermarket, discount, and warehouse retailing Facilitate one-stop shopping Carry food and drug items, as well as non-food items Superstores are called supercenters in the USA and hypermarkets in Europe and Latin America.

Food Retailers Warehouse Clubs Convenience Stores Requires members to pay an annual fee Operate in low-overhead, large warehouse-type facilities Offer limited lines of brand name and dealer-brand groceries, apparel, appliances, and other goods at a substantial discount Sell to final consumers who are affiliated with different institutions, as well as to businesses, e.g., Sam’s Club, Costco Convenience Stores Small retailers located in residential areas, convenient to consumers. Carry high turn-over necessities (bread, milk, coffee, medicine, gasoline) but also allows one-stop shopping, e.g., 7-11. In the U.S., there are about 124,500 convenience stores that generate annually revenues of $283 billion. To be competitive, many have added specialty services like a fast food restaurant or a car wash.

Nonstore Retailing Internet Retailing Internet Retailing is becoming a very popular way of conducting business. Traditional retailers They try to use the Internet to penetrate the market, provide convenience, and to diversify customer base. New dot.com companies, e.g., ebay Many traditional retailers are now starting to use this option as well, e.g., Ikea is also selling on their website.

Non-store Retailing Vending Machines Television Home Shopping Vending machines are becoming more popular and advanced: More vending machines accept credit cards. Some actually show short videos of the product. They are more conveniently located. They offer 24-hour convenience. They eliminate the need for a salesperson. In Japan you can get almost anything in vending machines, e.g., jewelry, flowers, beer, bread, etc. Television Home Shopping Television home shopping includes: Cable channels selling to consumers in their homes Infomercials Direct-response advertising shown on broadcast and cable television. The primary television networks in the U.S. are QVC (sales totaling $3.9 billion) and Home Shopping Network. Catalog and Direct Selling Catalog retailing Direct mail Catalogs and direct mail are especially popular with 30–39 year olds because of ease of shopping and time pressure. Direct selling Network marketing (multi-level marketing)

The Organization of Retailing Ownership categories: Independent retailer: Operates one outlet that is conveniently located to the customer Retail chains: Two or more outlets, and involves central purchasing and decision-making Retail franchises: Here a franchisor allows the franchisee to operate one or more units of the franchisor. Retailer cooperatives: Associations of independent retailers who engage in centralized buying and promotion, e.g., Ace Hardware Stores

Strategic Issues in Retailing Atmospherics refer to the physical attributes of the store or nonstore retailer, e.g., lighting, fixtures, tempo of music played, colors, and store layout. These are likely to create a particular mood for the customer and enhance the buying experience, increase the shopping time, and overall purchase amount. Pricing*: Initial vs. Maintained Mark-up Assortment*: Scrambled Merchandising Location: Shopping Centers Neighborhood, Community, Regional Mall of America West Edmonton Mall World's Largest Malls

Retail Performance Issues*

Trends in Retailing New retailers need to be innovative and proactive to survive. Shortening retail life cycles: New forms of retail simply evolve faster, e.g., internet retail as opposed to department stores. Wheel of retailing: Retailers start off as low-margin, low-cost, and low-price store.  Their success drives them to seek a broader customer base by including more services.  Increased service leads to higher costs.  Higher costs lead to higher prices.  Higher prices lead to the loss of the initial customer  New innovative retailers take away their customers.

Trends in Retailing (cont.) Technology-based developments: Technology is facilitating the retailing function, eliminating the need for sales people, and increasing the accuracy of transactions. Many retailing functions have been transferred to machines. For example, pumping gas today is largely a self-service transaction, as is banking. Optical scanners have greatly facilitated the checkout process, ensuring accurate calculation, and facilitating inventory control. At many stores today, consumers can scan their own groceries and pay for them with credit cards, thus lowering the cost of human resources for the retailer. The Internet enables traditional retailers to further penetrate their current market, diversify, and expand their market. Broadening competitive base Face greater competition from other retail categories Scrambled merchandising International expansion of retailers