C H A P T E R © 2007 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Retailing 14

14-2 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Learning Objectives After studying this chapter, you should be able to:  Understand the economic importance of retailing and its role in the marketing channel.  Cite evidence of the globalization of retailing.  Discuss some of the advances in retailing technology.  Explain the reasons behind the growth of nonstore retailing.  Describe key factors in the retail marketing environment, and understand how they relate to retail strategy.  Cite important ethical and legal issues facing retailers.

14-3 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Best Buy Best Buy, the nation’s largest seller of electronics, is doing what many retail analysts believe all retailers should do: Focus on certain types of customers and ignore the rest. For the chosen customers, Best Buy is creating more value by concentrating on their needs and preferences. For those not chosen, Best Buy would be happy if those customers took their business elsewhere.

14-4 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Retailers’ Uniqueness in Channel Retailers’Uniqueness Sell Smaller Quantities, More Frequently ProvideAssortments EmphasizeAtmospherics

14-5 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed The Role of Retailing Retail Sales Retail sales are sales to final consumers; wholesale sales are those to other businesses that in turn resell the product or service, or use it in running their own businesses. Retailing An important part of many marketing channels, includes all the activities involved in selling products and services to the ultimate, or final, consumer..

14-6 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Retail versus Wholesale To be classified as a retailer, a firm’s retail sales must equal or exceed 50 percent of its total revenues. Firms with less than 50 percent retail sales are classified as wholesalers. Wal-Mart was reminded of the distinction when its Sam’s Wholesale Club was forced to change its name to Sam’s Club in states in which its retail sales exceeded the 50 percent benchmark. Ultimately, the word wholesale was dropped from all Sam’s Club store names.

14-7 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Economic Importance Retailing is a major force in the economy. Three million U.S. retailers employ 14 million people and generate an astonishing $2.5 trillion in annual revenues. This translates into a $9,100 retail expenditure for every man, woman, and child in the United States.

14-8 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Chains A retail chain owns and operates multiple retail outlets. By far, chain stores sell more merchandise than any other category of retailers. IndependentRetailers Independent retailers own and operate only one retail outlet – they account for more than three-fourths of all retail establishments. more Types of Retailers

14-9 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Retail franchising is a form of chain ownership in which a franchisee pays the franchisor fees or royalties and agrees to run the franchise by prescribed norms, in exchange for use of the franchisor’s name. more Types of Retailers (con’t)

14-10 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Cooperatives Responding to competitive pressures exerted by the buying power of chain stores, independent retailers sometimes band together to form retail cooperatives. Although each store remains independently owned, the retail cooperative generally adopts a common name and storefront. Types of New Products (con’t) LeasedDepartments Leased departments are sections in a retail store that the owner rents to a second party.

14-11 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Trends in Retailing GlobalRetailing CustomerService TechnologicalAdvances Trends in Retailing

14-12 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Nonstore Retailing Nonstore retailing: sales outside a physical structure. DirectSelling Vending Machine Sales Direct selling: the sale of a consumer product or service, person-to-person, away from a fixed retail location. Vending machines allow customers to purchase and receive merchandise from a machine. DirectRetailing Direct retailing is the portion of direct marketing in which ultimate consumers, not business customers, do the buying.

14-13 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Customer Service in Retailing Customer service refers to the activities that increase the quality and value customers receive when they shop and purchase merchandise. Retailers rush to give lip service to the importance of customer service, but many still fall woefully short of providing it.

14-14 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Nonstore Retailing Consumers can buy almost anything via nonstore retailing. Amazon.com, which began as an online bookseller, now offers thousands of products ranging from home electronics to baby toys.

14-15 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Developing Retail Strategy The scope of retail products and services and the demands of consumers combine to produce a constantly changing business environment. A successful retailer must effectively manipulate the factors it can control to survive in a largely uncontrollable environment. Exhibit 14-4

14-16 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Evaluating Retail Locations The old saying—and experts confirm it—is that the three most important factors in retailing are location, location, and location.

14-17 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Scrambled Merchandising The practice of adding unrelated product categories to existing product lines is referred to as scrambled merchandising. Exhibit 14-6

14-18 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Scrambled Merchandising

14-19 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed Ethical and Legal Issues in Retailing Ethical and Legal Issues RetailTheft ConsumerFraud SupplierLaborPractices SlottingAllowances Use of CustomerInformation EcologicalConsiderations

14-20 © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5 th Ed SummarySummary After studying this chapter, you should be able to:  Understand the economic importance of retailing and its role in the marketing channel.  Cite evidence of the globalization of retailing.  Discuss some of the advances in retailing technology.  Explain the reasons behind the growth of nonstore retailing.  Describe key factors in the retail marketing environment, and understand how they relate to retail strategy.  Cite important ethical and legal issues facing retailers.