1. Chapter 16 Retailing: Bricks and Clicks

2. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-2 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

3. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-3 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

4. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-4 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

5. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-5 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 are employed in retailing  Retailers belong to a channel of distribution, providing time, place, and ownership utility to customers

6. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-6 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

7. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-7 Wheel of Retailing Pier 1 Imports initially sold low- priced beanbags and love beads, but today shoppers find much higher quality items Can you think of another retail chain or restaurant that exemplifies the wheel of retailing?

8. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-8 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

9. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-9 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 Visit National Retail FederationNational Retail Federation

10. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-10 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

11. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-11 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

12. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-12 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

13. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-13 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

14. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-14 Figure 16.1 Classification of Retailers by Merchandise Mix

15. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-15 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)

16. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-16 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

17. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-17 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

18. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-18 Classifying Retail Stores  Major forms retailers take: –Convenience stores –Supermarkets –Specialty stores –Discount stores General discount stores Warehouse clubs Factory outlet stores –Department Stores –Hypermarkets

19. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-19 Convenience Stores 7-Eleven’s new “urban store” upgrades the convenience store shopping experience with a huge coffee bar, fresh-made deli sandwiches and pastries

20. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-20 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

21. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-21 Nonstore Retailing  Forms of direct selling –Door-to-door sales –Party plan system –Multilevel networking (a master distributor recruits other people to become distributors) –Automatic vending See unique Japanese vending machinesJapanese vending machines

22. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-22 It’s Debatable Class Discussion Question Modern vending machines are capable of selling a broad range of products, from cigars to live bait (as shown at left). What are the advantages and disadvantages of selling bait via a vending machine? Would you try it if you were a retailer? How about as a customer? Where do you stand?

23. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-23 B2C E-Commerce  Business-to-consumer (B2C) e-commerce: Online exchange between companies and individual consumers –Growth is still the name of the game

24. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-24 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

25. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-25 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

26. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-26 Benefits of B2C Commerce Ideeli is one of a new breed of social networking sites that lets users dish about fashion items in addition to buying them— membership is by invitation only

27. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-27 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

28. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-28 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

29. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-29 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 Visit Mall of AmericaMall of America

30. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-30 Retailing as Theatre In the future, stores will double as entertainment centers and social hubs that will let shoppers hungry for stimulation shop, eat, network, and play all at once

31. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-31 Developing a Store Positioning Strategy: Retailing as Theater  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 Visit Storeimage.comStoreimage.com

32. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-32 Figure 16.2 Mapping a Store’s Personality

33. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-33 Atmospherics The atmospherics at Bass Pro Shops include an outdoor-oriented décor featuring indoor fish tanks, waterfalls or streams; fishing lure, rod, and reel decorations; fish, deer, and beer replicas; and judicious use of wood, stone, and other natural materials in wall and counter construction

34. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-34 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)

35. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-35 Figure 16.3 Grid Layout

36. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-36 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

37. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-37 Figure 16.4, Part A Types of Store Locations

38. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-38 Figure 16.4, Part B Types of Store Locations

39. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-39 Developing a Store Positioning Strategy: Retailing as Theater  Build the theatre: store location –Site selection is critical “Location, location, 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

40. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-40 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

41. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall16-41 Copyright © 2009 Pearson Education, Inc. 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.