© 2000 South-Western College Publishing 1 CHAPTER FOURTEEN RETAILING Prepared by Jack Gifford Miami...

© 2000 South-Western College Publishing

1

CHAPTER FOURTEEN

RETAILING

Prepared by Jack Gifford

Miami University (Ohio)


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THE ROLE OF RETAILING

Retailing - all the activities directly related to the sale of goods and services to the ultimate consumer for personal, non business use has enhanced the quality of our daily lives.

Retailing affects all of us directly in our daily lives Retailing includes obvious businesses like

department stores and supermarkets, but also hotels, movie theatres, restaurants and professional sports games.


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THE RETAILING INDUSTRY

Employs over 20,000,000 people in the United States, representing 1 out of 5 workers

Retailers in the US ring up over 2.2 trillion dollars in sales each year, representing over 25% of our GDP

Although retailing has many small and large retailers, the largest 10% do over one-half of the total retail dollars and employ 40% of all retail workers.


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CLASSIFICATION OF RETAIL OPERATIONS

Retail ownership can be classified according to its… Ownership Level of Service Product assortment Price Margin Turnover In-store vs Out-of-store

We can best understand the meaningful differences and similarities between retailers by discussing in four pairs.


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ASSORTMENT STRATEGY #1

High Margin

Low Margin

HighTurnover

LowTurnover

ConvenienceStores

Old NavySpecialty Store

GucciSpecialty Store

KMart


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ASSORTMENT STRATEGY #2

Deep

Shallow

WideNarrow


ConvenienceStores

KMart

Old NavySpecialty Store

May CompanyDepartment Stores


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SERVICE / PRICE STRATEGY

High Price

Low Price

HighMargin

LowMargin


KMart

ConvenienceStores

May CompanyDepartment Stores


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CLASSIFICATION BY OWNERSHIP AND PHYSICAL PRESENCE

Ownership Independent Chain Franchise

Physical Presence In-store Non-store presence

Door-to-door Telemarketing Internet marketing Direct-response Direct-mail and

catalog Catalog

A careful examination of any form of retailing against these eight dimensions provides one with a fairly clear picture of the nature of that organization and how the marketing mix will be best applied to support their corporate objectives.


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TRADITIONAL CLASSIFICATIONS

Department stores Moderately high margin and medium high

turnover High service and moderate price Deep and wide assortment Mostly large chains and In-store presence

Current market strategies Trying to gain back market share from specialty

stores Reduce prices and costs through consolidation

and acquisitions


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Specialty Stores Almost always narrow and deep Moderately high margin and moderately high

turnover High service and low to high price Independent, chain or franchise In-store or non-store

Trends High growth around niche markets Distinctive atmospherics


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Supermarkets Small margins, high turnover, scrambled

merchandising, limited service Increase in specialty foods, ethnic foods and

pre-prepared meals Movement toward superstores that combine

good and non-food products Increasing emphasis on loyalty programs


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Drugstores Expanding depth and breadth of merchandise Increase use of information technology to

better serve regular customers Aging marketplace should provide strong

demand in the coming years Electronic and direct mail pharmacy services

are challenging in-store pharmacies


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Discount stores, superstores, extreme-value stores and hypermarkets Stores such as Wal-Mart, Kmart and Target are

doing extremely well because of tight cost control, economies of scale, high turnover, every-day-low-prices (EDLP) and huge merchandise depth and breadth. They are also expanding overseas and experimenting with various superstore and smaller supermarkets.


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Discount specialty stores and category killers Represent a blending of a specialty store and a

deep discount store to offer a very large selection of a narrow category of merchandise and low prices (Toys R Us, Circuit City, PetsMart, Office Depot)

Low margin, high turnover operations, with tight cost controls


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Other major classifications of retailers include… Warehouse clubs Factory outlets Non-store retailing

Automatic vending Direct retailing (door-to-door, office-to-office, home

sale parties) Direct-response marketing (Direct mail, catalog's,

telemarketing, shop-at-home networks (TV and Telephone)


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Other major classifications of retailers include (continued)… Non-store retailing(continued)

Online retailing Although currently small, growing at over 100%

per year Has been very successful in selling specialty

products, including music, books, computers and software


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Franchising In the United states, there are over one-half million

franchisers with combined sales approaching one trillion dollars, or one-third of all retailing.

Product and trade name franchising (Coca-Cola) and business format franchising (Burger King) are the two basic forms of franchising

Franchising has aggressively expanded internationally, with 27 McDonald franchises in Moscow, The Russian Federation, alone.


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RETAIL STRATEGIC MARKETING

Retailers must develop marketing strategies based upon overall goals and strategic plans.

Key tasks in strategic retailing are...

Defining and selecting a target market

The marketing mix, plus 2

Product (assortment)

Pricing Promotion Place (distribution) Personnel Presentation


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•Successful retailing has always been based upon knowing the customer

•Target markets are often defined by demographics, geographies, and psychographics

•Defining a viable target market for the present and the future is essential before deciding on a retail marketing mix


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• Retailers must have the right product at the right time in the right amounts. Any “wrongs” will spell disaster in today’s competitive marketplace

•The appropriate depth and breadth must be carried.

•The appropriate mix of national brands, designer brands, and private label is essential


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• Customers have become very sophisticated in terms of price comparisons, and shop between competing forms of retailers for many products.

•A strong distinctive competitive advantage today is to be the low cost, and subsequently the low price outlet of a major product category


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• Includes advertising, public relations, and sales promotion

•Retailers are experimenting with new media and changing mixes of promotions to most effectively reach the customer

•Increased use of direct mail, catalog programs, and frequent shopper plans


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• The key to successful in-store retailing is location, location and location!

•Store may be free standing or part of central business district or shopping center

•Shopping centers come in various sizes, from the small strip cluster to enormous super regional centers containing over 850 stores.


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• All retailers, including self service retailers, are emphasizing the importance of knowledgeable and friendly sales personnel.

•Personnel shortages, low wages, and a low image have made it difficult for retailers to attract and retain qualified sales personnel.

•This difficult situation will become an increasing problem in the coming years


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• Presentation relates to the visual impact of a store on customers and its ability to generate high sales per square foot.

•Retailers must think of their stores as a stage, with sounds, lights, smells, props (fixtures), colors, and layout all supporting the atmospherics and theme of the store and the message it is try to convey.


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GLOBAL RETAILING

The globe is becoming a single marketplace, with US retailers opening new stores outside the US, foreign retailers entering the US market, and the combining of retail entities and formats across national boundaries to the advantage of all parties

With the creation of NAFTA and the EC, tariff and trade barriers are disappearing.


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TRENDS IN RETAILING INCLUDE...

Entertainment Convenience and

efficiency Share of customer The communications and

electronic revolution Consolidation and

integration Strategic alliances Internationalization ..and much, much more!

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