1. Retailing and Direct Marketing17
Retailing and Direct Marketing

2. The Nature of Retailing Major Types of Retail Stores Direct Marketing
Agenda
The Nature of Retailing
Major Types of Retail Stores
Direct Marketing
Other Types of Nonstore Retailing
Franchising
Strategic Issues in Retailing
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3. The Nature of Retailing
Transactions in which ultimate consumers are the buyers
Retailers
Organizations that purchase products for the purpose of reselling them to ultimate consumers
Retailers add value — shopping convenience, services, and purchasing assistance to customers
Retailers create utility — time, place, possession, and form
Success in retailing comes from having a strong customer focus coupled with desired levels of service, product quality, and innovation.
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4. Major Types of Retail Stores
General-Merchandise Retailers
A retail establishment that offers a variety of product lines
Department stores
Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management
Discount stores
Self-service, general merchandise stores offering brand name and private brand products at low prices
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5. Major Types of Retail Stores (cont’d)
General-Merchandise Retailers (cont’d)
Supermarkets
Large, self-service stores that carry a complete line of food products, along with some nonfood products
Superstores
Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products
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6. Major Types of Retail Stores (cont’d)
General-Merchandise Retailers (cont’d)
Warehouse clubs
Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing
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7. Major Types of Retail Stores (cont’d)
Specialty Retailers
Traditional specialty retailers
Also called “limited-line” and “single-line” retailers
Carry a narrow product mix with deep product lines (e.g., pet supplies)
Have higher costs and higher margins
Provide more product selection (first-line brands), product expertise, and high levels of personal service
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8. Traditional Specialty Retailer
© Carol Lundeen
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9. Major Types of Retail Stores (cont’d)
Specialty Retailers (cont’d)
Off-price retailers
Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts
Charge less than department stores for comparable merchandise and offer few customer services
Have established long-term relationships with suppliers for continuing supplies of reduced-price goods
Category killers (“big box”)
Concentrate on a major product category and compete on the basis of low prices and product availability
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10. Examples of Category Killers
Toys ‘R’ Us
Home Depot
Best Buy
Office Depot
PETsMart
Barnes & Noble
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11. Direct Marketing Nonstore Retailing Direct Marketing
The selling of products outside the confines of a retail facility
Direct Marketing
The use of telephone and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet
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12. Direct Marketing (cont’d)
Catalog Marketing
A type of marketing in which an organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet
Consumer advantages are efficiency and convenience
Marketer advantages are lower location, facility, selling, and operating costs.
Disadvantages are inflexibility and limited selection and local service availability.
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13. Direct Marketing (cont’d)
Direct-Response Marketing
A type of marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders
Telemarketing
The performance of marketing-related activities by telephone
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14. Customers’ Reactions to Telemarketing Calls
How can telemarketers be more effective in reaching customers?
Source: “Do Not Disturb,” American Demographics, May 2001, p. 28. Adapted with permission.
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15. Direct Marketing (cont’d)
Television Home Shopping
A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card
Online Retailing
Retailing that makes products available to buyers through computer connections
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16. Satisfaction Scores for Online Retailers
American Customer Satisfaction Index Year-to-Year Comparison
E-Retail Online Brand
2002
2003
% Change
Amazon.com 88 0%
Barnesandnoble.com 87 86
-1.1%
Buy.com 80
1-800-Flowers.com 78 76
-2.6%
All others 82 83
1.2%
Average e-tailer 84
Source: ACSI as reported in American Demographics, April 2004, p.16.
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17. Satisfaction Scores for Online Retailers (cont’d)
American Customer Satisfaction Index Year-to-Year Comparison
E-Travel Online Brand
2002
2003
% Change
Expedia 80 78
-2.5%
Orbitz 76 77
1.3%
Travelocity.com 0%
All others
Average e-travel score
Source: ACSI as reported in American Demographics, April 2004, p.16.
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18. Other Types of Nonstore Retailing
Direct Selling
The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace
“Door-to-door”
Party plans: hosting groups to view a product demonstration and encouraging participants to purchase the products
Benefits
Personal attention to customer
Convenience of time and place of presentation
Limitations
High costs make it the most expensive form of selling
Negative consumer view of direct selling
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19. Other Types of Nonstore Retailing (cont’d)
Automatic Vending
The use of machines to dispense products
Can include items such as candy, chewing gum, soft drinks, cigarettes, newspapers, and coffee
Advantages: small amount of space needed and no sales personnel
Disadvantages: high costs of equipment and frequent servicing
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20. Franchising Franchising
An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration
Franchiser furnishes equipment, buildings, management know-how, and marketing assistance.
Franchisee supplies labor and capital and operates the business by the provisions of the franchise agreement.
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22. Franchising (cont’d) Advantages Disadvantages
Enables startup with limited capital
Provides developed and proven business to franchisee
Attracts customers with established brand name
Allows immediate market entry
Motivates franchisee to succeed
Disadvantages
Control over aspects of the business and its operations by franchiser
Expense of continuing franchise royalties and advertising fees
Lack of control of franchisees by franchisor
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23. If You Had the Financial Resources to Purchase a Franchise, Which Company Would You Select? Why?
Reprinted with permission of Papa John’s International, Inc.
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24. Strategic Issues in Retailing
Retail Store Location
Factors affecting location
Intended target market
Kinds of products
Suitability site for customer access
Characteristics of existing retail operations
Types of Locations
Free-standing structures
Traditional business districts
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25. Strategic Issues in Retailing (cont’d)
Traditional Shopping Centers
Neighborhood shopping centers
Usually consist of several small convenience and specialty stores.
Community shopping centers
Include one or more department stores (anchors), some specialty stores, and convenience stores.
Regional shopping centers
Have the largest department stores, the widest product mix, and the deepest product lines of all shopping centers.
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26. Strategic Issues in Retailing (cont’d)
Nontraditional Shopping Centers
Factory outlet malls
Feature discount and factory outlet stores carrying traditional brand name products
Miniwarehouse mall
Loosely planned; lease space to retailers running retail stores out of warehouse bays
Nonanchored malls
Do not have traditional department store anchors; combine off-price and category killer stores in a “power center” format
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27. Strategic Issues in Retailing (cont’d)
Retail Positioning
Identifying an unserved or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment
Store Image
Atmospherics
The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying
Interior layout, colors, furnishings, and lighting
Exterior storefront and entrance design, display windows, and traffic congestion
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28. How to Succeed in Retailing as a Small Business
1. Differentiate your product from that of the other stores (avoid direct competition).
2. Determine your specific niche…you can’t please everyone.
3. Select a location with easy access and high visibility.
4. Offer products with selling features.
5. Train your employees to develop strong employee/customer relationships.
6. Plan store-related events to create excitement.
7. Focus your ad dollars on one medium versus inadequately buying many media.
Source: Reprinted with permission from Arthur Andersen Retailing Issues Letter, July 1995, Vol. 7, No. 4, p. 5. Used with permission.
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