CHAPTER 16 Retailing: Bricks and Clicks M A R K E T I N G Real People, Real Choices Fourth Edition CHAPTER 16 Retailing: Bricks and Clicks

Retailing The process by which products are sold to consumers for personal use 1 in 5 US workers are in retailing Over 1.2 million retail firms Only 8% have annual sales of over 2.5 million

The Wheel of Retailing New types of retailers find it easiest to enter the market by offering goods at lower prices than competitors; after they gain a foothold, they gradually trade up, improving facilities and increasing the quality and assortment of merchandise, and offering special amenities; upscaling increases costs causing prices to rise; higher prices open the door for a new entrant charging lower prices

Retail Life Cycle Retailers are also products because they provide benefits and must offer a competitive advantage to survive Introduction: new retailer takes a unique approach to doing business Growth: retailer catches on with shoppers, sales and profits rise, others start to copy it so retailer expands offerings Maturity: many have copied it and an entire industry has formed, profits decline Decline: retail format becomes obsolete

What’s in Store for the Future Demographics Working consumers Drive up windows Expanding store hours Shopping consultants Mail / internet / phone orders Catering to younger age segments (with greater purchasing power) E.g. Pacific Sunwear, Hot Topic Ethnic diversity Increasing Spanish & Asian populations

What’s in Store for the future Technology Instant data capture and integration with ordering systems e.g. JC Penney Skipping checkout lines Virtual displays (e.g. furniture in your living room; clothes on your body, etc.)

Classifying Retailers by what they sell Grocery stores, departmental stores, fast food restaurants, gas stations, etc. Some lines still blurred scrambled merchandising – strategy of carrying a combination of food and nonfood items

Classifying Retailers by Service Trade-off between service levels and prices Self-service retailers e.g. Sam’s Club Full-service retailers e.g. Neiman Marcus, Saks. Limited-service retailers e.g. Walmart, Target, Old Navy, Kohl’s, etc.

Classifying by Merchandise Selection Merchandise breadth is the number of different product lines available Narrow assortment (e.g. convenience store) Broad assortments (e.g. warehouse club) Merchandise depth is the variety of choices available for each specific product Shallow assortment (e.g. factory outlet for Polo) Deep assortments (e.g. departmental store)

Store Types Convenience stores (e.g. 7-Eleven) Supermarkets Pay higher prices for close to home shopping Supermarkets Grocery stores like Food Lion, etc. Specialty stores Narrow and deep inventories (e.g. cigars & tobacco stores in malls) Department stores E.g. Macys, Dillards, etc. Discount stores General merchandise discount stores (e.g. Walmart, Kmart) Off-price retailers (e.g. TJ Maxx) Warehouse clubs (e.g. Costco) Factory outlet stores Hypermarkets – four to five times larger than a supermarket - Carrefours

Nonstore Retailing Any method a firm uses to complete an exchange that does not require a customer visit to a store Direct selling Automatic vending

Direct Selling Direct selling occurs when a salesperson presents a product to one individual or a small group, takes orders, and delivers the merchandise Door-to-Door Sales Parties and Networks party plan systems (e.g. Tupperware parties) multilevel pyramid schemes (e.g. Amway)

Automatic Vending Appealing for selling convenience goods because of small space required, and minimal personnel to maintain and operate New innovations: Ore-Ida French fries Software Levi’s jeans

E-Commerce and the Customer Benefits Shop 24/7 Less travel More choices More information Price competition Fast delivery Limitations Lack of security Fraud Can’t touch items Hard to distinguish color/ texture online Expensive to return

E-Commerce and the Marketer Benefits The world is your marketplace Decreases costs Tracking of consumer behavior Limitations Lack of security Must maintain site Price competition Conflicts with conventional retailers

Developing a Store Positioning Strategy Store image how should the target market perceive the store – exciting (REI stores), old-fashioned (Wilkins, furniture), edgy and hip (Hot Topic), elegant and refined (Saks), etc. Atmospherics the use of color, lighting, scents, furnishings, sounds, and other design elements to create a desired setting

Store Design: Setting the Stage Store layout and traffic flow (e.g. grid layout in a grocery store) Fixture type and merchandise density (e.g. wooden racks vs. metal racks); clutter, sitting areas, etc. The sound of music (e.g. Nordstrom) Color and lighting (warm colors stimulate appetite, pink preferred by women’s cosmetics) The Actors: Store Personnel; uniformed ushers, etc.

Building the Store: Store Location Types of locations Business District (downtown) Shopping centers (Malls) Lifestyle centers (e.g. Manchester Village) Freestanding retailer (Walmart, IKEA) Non-traditional locations: carts, kiosks, etc.