1. Retailing Positioning issues Margins Retail pricing strategies
Strategic developments in retailing

2. Positioning Issues Some ways to profitability:
Low cost, high volumes, low unit margins, low to moderate service (profit on volume)
Higher priced, higher per unit margins, lower sales
“Stuck in the Middle”--midlevel retailers (e.g., Sears, J. C. Penney) face competition both from above and below

3. Margins
Margins
Gross = sale price - price paid to wholesaler
Per unit
Per dollar
Per unit of space
Net margin = gross margin vs. allocated overhead
Very large increases in sales volumes are needed to “break even” on low prices

4. Two Types of Retail Pricing
“High-low”
High everyday prices
Frequent sales
Profit on price discrimination--only some people will bother to
Shop while sale is on
Switch brands
Every Day Low Price (EDLP)
Consistent prices--theoretically no sales, but lower non-sale prices
Typically lower service
Note that retailers provide for many promotions

5. Strategic Issues Importance of convenience
Increasing power of retailers
Private label branding
Lower price but higher margins
Longer history in Europe

6. Retail Trends Power retailers
Early purchases
Investment in technology
Consistent “fair” prices
Consistent but modest gross margins
Category “killers”: Specialize--significant selection at low prices

7. Retailing Polarity Trend toward either
Low price--e.g., Wal-Mark, Kmart, Sports Authority
High quality--e.g., Nordstrom’s, Starbuck’s