1. Retailing: Bricks and Clicks
Chapter 16
Retailing: Bricks and Clicks

2. Chapter Objectives
Define retailing; understand how retailing evolves and some ethical issues in retailing
Understand how we classify retailers
Describe the more common forms of nonstore retailing
Describe B2C e-commerce and its benefits, limitations, and future promise
Understand the importance of store image and how a retailer can create a desirable image
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

3. Real People, Real Choices: Decision Time at Eskimo Joe’s
Which strategy should Stan pursue?
Option 1: Convert the beer bar into a full-service restaurant
Option 2: Continue operating as a beer bar and try to offset lost beer sales with an increase in apparel sales
Option 3: Close Eskimo Joe’s and refocus resources on building the growing apparel business
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

4. Retailing: Special Delivery
Retailing: The process by which goods and services are sold to consumers for their personal use
The retailer adds or subtracts value from the offering with its image, inventory, service quality, location, and pricing policy
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

5. Retailing: A Mixed (Shopping) Bag
Retailing is big business:
2007 U.S. sales totaled $4.5 trillion
More than one of every ten U.S. workers is employed in retailing
Retailers belong to a channel of distribution, providing time, place, and ownership utility to customers
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

6. The Evolution of Retailing
The wheel-of-retailing hypothesis
Theory that explains how retail firms change, becoming more upscale as they go through their life cycle
New types of retailers enter the market by offering lower-priced goods
They gradually improve facilities, quality and assortment of merchandise, and amenities as they increase prices
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

7. The Evolution of Retailing
The retail life cycle
Retailers are born, grow and mature, and eventually die or become obsolete
Introduction stage: Aggressive entrepreneurs, pop-up retailers
Growth stage: Sales grow, competition enters, stores must expand offerings
Maturity stage: Multiple competitors, profits decline, new products are offered
Decline stage: Retail offerings become obsolete
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

8. The Evolution Continues: What’s “In Store” for the Future?
Factors motivating retail innovation:
Demographics: Retailers must find new ways to sell to diverse groups
Offering convenience for working consumers
Catering to specific age segments
Recognizing ethnic diversity
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

9. The Evolution Continues: What’s “In Store” for the Future?
Factors motivating retail innovation:
Technology: Changing the shopping experience
Internet created the e-tailing age
Point-of-sale system advances
Social shopping
RFID chips
E-menus
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10. The Evolution Continues: What’s “In Store” for the Future?
Factors motivating retail innovation:
Globalization: Offers access to growth markets, but firms need to adjust to different conditions around the world
Merchandise mix changes
Local production requirements
Cultural differences
Competition
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

11. Ethical Problems in Retailing
Shrinkage problems may stem from customers or employees:
Shoplifting
Employee theft
Retail borrowing
Ethical issues in customer dealings:
Discouraging certain types of customers from shopping
Selling harmful products to at risk groups
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

12. Classifying Retail Stores
The classification of retail stores provides a method by which retailers can benchmark performance
Several classification methods exist:
Classifying by what they sell (the merchandise mix)
Classifying by level of service
Classifying by merchandise selection
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

13. Classifying Retail Stores
Classifying by what they sell (the merchandise mix)
Merchandise mix: The total set of products offered for sale by a retailer, including all product lines sold to all consumer groups. Example: food retailers
Difficult to use for benchmarking due to merchandise overlap between different store types (e.g., “Super” Wal-Marts carry food)
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

14. Classifying Retail Stores
Classifying by level of service
Self-service retailers: Shoppers make selections without any help
Limited service retailers: May offer credit service and merchandise return services but little else; the majority of shopper selection is done without assistance
Full-service retailers: Offer supporting services such as gift wrapping; trained sales associates assist buyers
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

15. Classifying Retail Stores
Classifying by merchandise selection uses two dimensions:
Merchandise breadth: Number of different product lines
Merchandise depth: Choices available in each product line
Retailers classified in this manner take several forms
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

16. Classifying Retail Stores
Major forms retailers take:
Convenience stores
Supermarkets
Specialty stores
Discount stores
General merchandise discount stores
Warehouse clubs
Factory outlet stores
Department stores
Hypermarkets
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

17. Nonstore Retailing
Nonstore retailing: Any method used to make an exchange with a product end user that does not require a customer visit to a store
One type is direct selling:
An interactive sales process in which a salesperson presents a product to one individual or a small group, takes orders, and delivers merchandise
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

18. Nonstore Retailing Forms of direct selling Door-to-door sales
Party plan system
Multilevel networking (a master distributor recruits other people to become distributors)
Beware of illegal pyramid schemes: These promise large profits from recruiting others to join the program rather than from any real investment or sale of goods
Automatic vending
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

19. B2C E-Commerce
Business-to-consumer (B2C) e-commerce: Online exchange between companies and individual consumers
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

20. B2C E-Commerce Benefits to firm of B2C e-commerce
Facilitates exchanges in global marketplace
Allows businesses to reduce costs
Allows specialized businesses to succeed
Makes real-time price information easily available
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

21. B2C E-Commerce Consumer benefits of B2C e-commerce
Increases convenience for consumers
24/7 shopping, less traveling
Greater product access and choice
Greater, faster access to information
Pricing information, electronic communities
Lower prices; virtual auctions
Fast delivery
Can fulfill experiential needs
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

22. B2C E-Commerce
Limitations of B2C e-commerce from the firm’s perspective
Security challenges and constant site maintenance
Developing countries with cash economies can’t easily pay for Internet purchases
Online sales may cannibalize major retailer store sales
Price competition is intense
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

23. B2C E-Commerce Limitations of B2C e-commerce from consumer perspective
Must wait for delivery of non-digital goods
Lack of security and potential for fraud
No chance to “touch-and-feel” goods
Poor color reproduction on the Internet
Expensive to return items
Potential exists for a breakdown in human relationships
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

24. B2C’s Effect on Retailing’s Future
Virtual channels are unlikely to replace traditional ones
Stores must continue to evolve to lure shoppers away from computers
In destination retailing, consumers will visit stores for the total entertainment experience
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

25. Developing a Store Positioning Strategy: Retailing as Theater
Shopping is part buying, part entertainment, and part social outlet
Store image: The way a retailer is perceived in the marketplace relative to the competition
Atmospherics: The use of color, lighting, scents, furnishings, sounds, and other design elements to create a desired store image
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

26. Developing a Store Positioning Strategy: Retailing as Theater
Store design: setting the stage
Store layout: Arrangement of merchandise in the store that determines traffic flow (grid layout vs. free-flow layout)
Fixture type and merchandise density
The choice of music
Color and lighting (set a moods)
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

27. Developing a Store Positioning Strategy: Retailing as Theater
Store personnel should complement a store’s image
Dress, attitude, and knowledge are important
Pricing policy
Price points are price ranges of a store’s merchandise
Price points play a role in establishing its image
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

28. Developing a Store Positioning Strategy: Retailing as Theater
Build the theatre: store location
Types of store locations
Business districts
Shopping centers
Freestanding retailers
Nontraditional store locations
Site selection is critical
“Location, location, location”
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

29. Developing a Store Positioning Strategy: Retailing as Theater
Build the theatre: store location
Site selection must take into account the store’s trade area, or geographic zone that accounts for the majority of its sales and customers
Saturated trade areas
Understored trade areas
Overstored trade areas
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

30. Real People, Real Choices: Decision Made at Woodtronics
Stan chose option 1
Implementation: Eskimo Joe’s reopened as a trendy restaurant, and achieved immediate success. Stan only hires employees who fit the business culture he developed. Apparel sales continue to grow
Measuring success: Table turnover, average sale per customers for restaurant; profit per square foot for clothing sales
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

31. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Copyright © 2009 Pearson Education, Inc.  
Publishing as Prentice Hall
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall