Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Introduction to Marketing

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Chapter 12 Objectives 1.Understand the role of retailing in the US economy, differentiation strategies used by retailers, and the retail life cycle. 2.Describe the major types of retail formats, including traditional stores and e-tailers.

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Chapter 12 Objectives 3.Recognize the components of the retailing mix and how it is designed to attract and retain customers. 4.Understand the role of wholesaling in the US economy.

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Retailing and Wholesaling Retailing consists of the final activities needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer. Wholesalers are those persons or establishments that sell to retailers and/or other organizational buyers for industrial, institutional, and commercial use, but do not sell in significant amounts to ultimate customers.

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Reaching the Consumer When discussing the various types of retailers, one must first consider if they are selling from a fixed physical location or not. Other alternatives include the internet, mail, or over the phone. Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Current Retail Trends The Classification of Retailers: Number of Outlets and the Growth of Chain Stores Profit Margin versus Inventory Turnover Location Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Number of Outlets and the Growth of Chain Stores The US Census Bureau classifies chain stores into two size categories: 2-10 stores or 11 or more. Standard Stock List- requires that all stores in a retail chain stock the same merchandise. Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Number of Outlets and the Growth of Chain Stores Optional Stock List- allows each store the flexibility to tailor its merchandise mix to local tastes and demands. Private label branding- occurs when a retailer, or its wholesaler, develops its own brand name and contracts with a manufacturer to produce the product with the retailer’s brand on it. Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Margins versus Inventory Turnover Gross Margin Percentage- shows how much gross margin (net sales minus the cost of goods sold) the retailer makes as a percentage of sales. Inventory Turnover- the number of times per year, on average, that a retailer sells its inventory. Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Margins versus Inventory Turnover Retailers can make profit by earning (high gross margin percentage) and/or by turning (high inventory turnover). Four Types of Retailers (neglects service retailers and e-tailers): Low-margin/ low-turnover Low-margin/ high-turnover High-margin/ low-turnover High-margin/ high-turnover Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Location Four basic types of locations from which a store- based retailer can select: –Business Districts –Shopping Centers/Malls –Freestanding Units –Nontraditional Locations Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Differentiating the Retail Experience Physical differentiation of the product Selling process After-purchase satisfaction Locational Never being out-of-stock Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. The Role of Retailing in the US Evolution of Retail Competition Wheel of Retailing Theory Retail Life Cycle 1.Introduction 2.Growth 3.Maturity 4.Decline Objective 1

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Major Types of Retail Formats Store-based Retailers operate from a fixed location that requires consumers to travel to the store to view and select merchandise and/or services. Nonstore-based Retailers attempt to reach the consumer at home, work, or any place other than a store where they might be susceptible to purchasing. Objective 2

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Major Types of Retail Formats Store-based Retailers Department Stores Specialty Stores Supermarkets Supercenters Category Killers Convenience Stores Objective 2

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Major Types of Retail Formats The Supermarket Concept 1.Self-service and self-selection displays 2.Centralization of customer services at the checkout counter/desk 3.Large-scale, low-cost physical facilities 4.A strong price emphasis 5.A broad assortment of merchandise to facilitate multiple-item purchases Scrambled Merchandising- unrelated lines of merchandise being carried by a single retailer. Objective 2

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Major Types of Retail Formats Nonstore-based Retailers Street Peddling Direct Selling Mail Order Automatic Merchandising Machine Operators Electronic Shopping Objective 2

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Major Types of Retail Formats Several facts to consider about e-tailing: 1.The Internet will not increase overall consumer demand. 2.Clicks-and-bricks strategies that integrate a single message will be more powerful than a pure e-tailing strategy. 3.E-tailers must pay better attention to customer service. 4.Internet shoppers would probably buy more online if they could return items more easily. Objective 2

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Managing the Retail Mix Retail Mix- a combination of merchandise, price, advertising and promotion, customer services and selling, and store layout and design. Atmospherics- the use of merchandise, level of service offered by employees, fixtures, floor layout, sound, and odor to influence customers’ perceptions. Objective 3

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Managing the Retail Mix Attracting Consumers The Store’s Image –Merchandise carried in the store –Retailer’s promotional activities –Customer service –Sales force –Physical appearance of store itself Objective 3

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Managing the Retail Mix Factors that impact the retailer’s ability to attract customers: –Store compatibility –Natural Forces –Economic Forces Objective 3

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Managing the Retail Mix Turning Consumers into Loyal Customers Two ways to grow sales once customer is in the store: 1.Increase the average number of units sold of typically purchased product lines. 2.Motivate the customer to purchase additional products, not normally purchased in this store. Objective 3

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Managing the Retail Mix Operating in the Most Efficient Manner The more merchandise customers are exposed to, that is presented in an orderly manner, the more they tend to buy. Shrinkage- the loss of merchandise through theft Objective 3

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Managing the Retail Mix Category Management A process of managing and planning all stock keeping units within a product category as a distinct business so that they can optimally utilize the shelf space in order to generate the highest profits. Objective 3

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Wholesaling in the US Economy Wholesaling is a larger sector of the US Economy than retailing. Wholesalers sell not only to retailers, but also to manufacturers and other wholesalers. Objective 4

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Wholesaling in the US Economy Types of Wholesalers Manufacturer’s sales branches Merchant wholesalers Agent/Brokers Objective 4

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Wholesaling in the US Economy Manufacturer’s Sales Branches Include both sales outlets and sales offices owned by the manufacturer. Objective 4

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Wholesaling in the US Economy Merchant Wholesalers Full-Service Wholesalers: 1.General Merchandise Wholesalers 2.Single-line Wholesalers 3.Specialty Wholesalers Limited Service Merchant Wholesalers: 1.Drop Shipper 2.Cash and Carry Wholesalers 3.Truck Jobbers 4.Rack Jobbers Objective 4

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Wholesaling in the US Economy Agent/Brokers Manufacturer’s Agents- independent middlemen who handle a manufacturer’s marketing functions by selling part or all of a manufacturer’s product line in an assigned geographic area. Brokers- independent middlemen who bring buyers and sellers together and provide market information to one or both parties. Objective 4

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Wholesaling in the US Economy Selecting Wholesalers 1.Management Skills 2.Financial Characteristics 3.Physical Facilities 4.Objectives and Policies 5.Marketing Skills/Strengths Objective 4

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved. Wholesaling in the US Economy Managing Wholesalers Manufacturers should offer financial, promotional, training, and general management aids. Objective 4