1. Part Four Distribution Decisions16
Retailing
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PowerPoint Presentation by Charlie Cook

2. Chapter Learning Objectives
To understand the purpose and function of retailers in the marketing channel
To identify the major types of retailers
To recognize the various forms of nonstore selling
To examine major types of franchising and its benefits and weaknesses
To explore strategic issues in retailing
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3. Chapter Outline The Nature of Retailing Major Types of Retail Stores
Nonstore Retailing
Franchising
Strategic Issues in Retailing
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4. 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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5. Copyright © Houghton Mifflin Company. All rights reserved.

6. 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
Supermarkets
Large, self-service stores that carry a complete line of food products, along with some nonfood products
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7. Major Types of Retail Stores (cont’d)
General-Merchandise Retailers (cont’d)
Superstores
Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products
Hypermarkets
Stores that combine supermarket and discount shopping in one location
Warehouse clubs
Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing
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8. Major Types of Retail Stores (cont’d)
General-Merchandise Retailers (cont’d)
Warehouse showrooms
Retail facilities in large. low-cost buildings with large on-premise inventories and minimal services
Catalog showrooms
A form of warehouse showroom where consumers can shop from a catalog and products are stored out of buyers’ reach
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9. 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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10. 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 do 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
Concentrate on a major product category and compete on the basis of low prices and product availability
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11. NonStore Retailing Nonstore Retailing
The selling of products outside the confines of a retail facility
Growth sector of retailing due to
Consumers are less willing to devote personal time to shopping in retail stores.
Poorly trained and informed retail personnel can’t offer needed sales assistance.
Growing population of older shoppers who tend to shop less in large stores.
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12. NonStore Retailing (cont’d)
Direct Selling
The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace
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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13. NonStore Retailing (cont’d)
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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14. Direct Marketing 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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15. 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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16. 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
Automatic Vending
The use of machines to dispense products
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17. 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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18. Copyright © Houghton Mifflin Company. All rights reserved.

19. Major Types of Retail Franchises
Manufacturer Authorization
Product producer licenses retailers to sell its brand name product(s)
Distributor Authorization
Product producer licenses distributors to sell its brand name product to retailers
Producer Authorization
Franchiser supplies brand names, production techniques, or other services to franchisee while maintaining development and control of marketing strategies
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20. Franchising (cont’d) Advantages Disadvantages
Enables business 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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21. 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
Position relative to competition
Customer access and parking
Traditional business districts
Redevelopment of decaying downtown infrastructure
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22. 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.
Copyright © Houghton Mifflin Company. All rights reserved.

23. Strategic Issues in Retailing (cont’d)
Nontraditional Shopping Centers
Factory outlet malls
Shopping centers that feature discount and factory outlet stores carrying traditional brand name products
Miniwarehouse mall
Loosely planned centers that lease space to retailers running retail stores out of warehouse bays
Nonanchored malls
Do not have traditional department store anchors; instead combine off-price and category killer stores in a “power center” format
Copyright © Houghton Mifflin Company. All rights reserved.

24. 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
Copyright © Houghton Mifflin Company. All rights reserved.

25. Strategic Issues in Retailing (cont’d)
Scrambled Merchandising
The addition of unrelated products and product lines to an existing product mix, particularly fast-moving items that can be sold in volume
Intent of scrambled merchandising
Convert stores into one-stop shopping centers
Generate more customer traffic
Realize higher profit margins
Increase impulse purchases
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26. Strategic Issues in Retailing (cont’d)
The Wheel of Retailing
A hypothesis holding that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants.
Maybry’s at the Mall
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27. The Wheel of Retailing FIGURE 16.1
Source: Adapted from Robert F. Hartley, Retailing: Challenge and Opportunity, 3rd ed., p. 42. Copyright © 1984 by Houghton Mifflin Company. Used by permission.
FIGURE 16.1
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28. After reviewing this chapter you should:
Understand the purpose and function of retailers in the marketing channel
Be able to identify the major types of retailers
Recognize the various forms of nonstore retailing
Have examined the major types of franchising and franchising’s strengths and weaknesses
Have explored the strategic issues in retailing
Copyright © Houghton Mifflin Company. All rights reserved.

29. Chapter 16 Supplemental Slides
16–29
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30. Key Terms and Concepts
The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion.
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select “Slide Sorter” under View on the main menu.
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31. Important Terms Retailing Retailers General-Merchandise Retailers
Transactions in which ultimate consumers are the buyers
Retailers
Organizations that purchase products for the purpose of reselling them to ultimate consumers
General-Merchandise Retailers
A retail establishment that offers a variety of product lines that are stocked in depth
Copyright © Houghton Mifflin Company. All rights reserved.

32. Important Terms Department stores Discount Stores Supermarkets
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
Supermarkets
Large, self-service stores that carry a complete line of food products, along with some nonfood products
Copyright © Houghton Mifflin Company. All rights reserved.

33. Important Terms Superstores Hypermarkets Warehouse Clubs
Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products
Hypermarkets
Stores that combine supermarket and discount shopping in one location
Warehouse Clubs
Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing
Copyright © Houghton Mifflin Company. All rights reserved.

34. Important Terms Warehouse Showrooms Catalog Showrooms
Retail facilities in large. low-cost buildings with large on-premise inventories and minimal services
Catalog Showrooms
A form of warehouse showroom where consumers can shop from a catalog and products are stored out of buyers’ reach
Traditional Specialty Retailers
Carry a narrow product mix with deep product lines
Copyright © Houghton Mifflin Company. All rights reserved.

35. Important Terms Off-Price Retailers Category Killers
Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts
Category Killers
Concentrate on a major product category and compete on the basis of low prices and product availability
Nonstore Retailing
The selling of products outside the confines of a retail facility
Copyright © Houghton Mifflin Company. All rights reserved.

36. Important Terms Direct Selling Direct Marketing Catalog Marketing
The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace
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
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
Copyright © Houghton Mifflin Company. All rights reserved.

37. Important Terms Direct-Response Marketing Telemarketing
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
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
Copyright © Houghton Mifflin Company. All rights reserved.

38. Important Terms Online Retailing Automatic Vending Franchising
Retailing that makes products available to buyers through computer connections
Automatic Vending
The use of machines to dispense products
Franchising
An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration
Copyright © Houghton Mifflin Company. All rights reserved.

39. Important Terms Manufacturer Authorization Distributor Authorization
Product producer licenses retailers to sell its brand name product(s)
Distributor Authorization
Product producer licenses distributors to sell its brand name product to retailers
Producer Authorization
Franchiser supplies brand names, production techniques, or other services to franchisee while maintaining development and control of marketing strategies
Copyright © Houghton Mifflin Company. All rights reserved.

40. Important Terms 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.
Copyright © Houghton Mifflin Company. All rights reserved.

41. Important Terms Factory outlet malls Miniwarehouse mall
Shopping centers that feature discount and factory outlet stores carrying traditional brand name products
Miniwarehouse mall
Loosely planned centers that lease space to retailers running retail stores out of warehouse bays
Nonanchored malls
Do not have traditional department store anchors; instead combine off-price and category killer stores in a “power center” format
Copyright © Houghton Mifflin Company. All rights reserved.

42. Important Terms Retail Positioning Atmospherics
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
Atmospherics
The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying
Scrambled Merchandising
The addition of unrelated products and product lines to an existing product mix, particularly fast-moving items that can be sold in volume
Copyright © Houghton Mifflin Company. All rights reserved.

43. Important Terms The Wheel of Retailing
A hypothesis holding that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants.
Copyright © Houghton Mifflin Company. All rights reserved.

44. Transparency Figure 16C General Merchandise Retailers
Type of Retailer Examples
Department store Foleys,
Lord &Taylor, Sears
Discount store Wal-Mart, Kmart,
Target
Supermarket Food Lion, A&P,
Ralph’s, Safeway,
Krogers
Superstore Wal-Mart
Supercenter
Hypermarket Carrefour’s
Warehouse club SAM’s, Price-Costco
Warehouse showroom lkea Furniture
Catalog showroom ServiceMerchandise
Copyright © Houghton Mifflin Company. All rights reserved.

45. Transparency Figure 16E Examples of Category Killers
Toys “R” Us
Home Depot
Best Buy
Office Depot
PETsMart
Barnes & Noble
Can you think of others?
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46. Transparency Figure 16G 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.
Copyright © Houghton Mifflin Company. All rights reserved.

47. Transparency Table 16H Percentage of Online Shoppers Who Have Experienced Problems Sometimes or Frequently
Source: “Houston, We Have A Problem,” American Demographics, The Marketing Tools Directory, 2002, p. D60. Adapted with permission.
Copyright © Houghton Mifflin Company. All rights reserved.