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Lamb, Hair, McDaniel

CHAPTER 15

Retailing

2010-2011

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LO 1 Discuss the importance of retailing in the U.S. economy

LO 2 Explain the dimensions by which retailers can be classified

LO 3 Describe the major types of retail operations

LO 4 Discuss nonstore retailing techniques

Learning OutcomesLearning Outcomes

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LO 5 Define franchising and describe its two basic forms

LO 6 List the major tasks involved in developing a retail marketing strategy

LO 7 Describe new developments in retailing

Learning OutcomesLearning Outcomes

4

Discuss the importance of

retailing in the U.S. economy

The Role of Retailing

LO1

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Retailing

All the activities directly

related to the sale of goods

and services to the ultimate

consumer for personal,

non-business use.

RetailingRetailing

LO1

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The Role of Retailing

Over 1.6 million U.S. retailers employ more than 24 million people

Retailers account for 11.6 percent of U.S. employment

Retailing accounts for 13 percent of U.S. businesses

Retailers ring up almost $4 trillion in sales—nearly 40 percent of the U.S. GDP

Industry is dominated by a few giant organizations, such as Wal-Mart

LO1

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Beyond

the

Book

Stress “Value” to Attract Customers

SOURCE: Larry Freed, “Satisfied and Buying,” online at http://www.internetretailer.com.

Because of the recession, customers are in a particularly cost-conscious mood and focusing on value. To grab their attention retailers can:

Offer unique value propositions, i.e. prices, customer services, loyalty programs

Use innovative marketing concepts that will resonate with consumers, e.g. pop-up shops or a “green emphasis

Appeal to time-strapped customers with an efficient multi-channel shopping experience

LO1

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REVIEW LEARNING OUTCOME

The Importance of Retailing

11.6% 13%

40%

Retailing as a %of U.S. employment

Retailing as a %of U.S. businesses

Retailing as a %of GDP

LO1

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Explain the dimensions by which retailers

can be classified

Classification of Retail Operations

LO2

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Classification of Retail Operations

OwnershipOwnership

Level of ServiceLevel of Service

Product AssortmentProduct Assortment

PricePrice

LO2

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IndependentRetailers

IndependentRetailers

Chain StoresChain Stores

FranchisesFranchises

Owned by a single person or partnership and not part of a larger retail institution

Owned by a single person or partnership and not part of a larger retail institution

Owned and operated as a group by a single organizationOwned and operated as a group by a single organization

The right to operate a business or sell a productThe right to operate a business or sell a product

LO2

Classification of Ownership

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Level of Service

Full Service Self Service

Discount stores Exclusive storesFactory outlets Warehouse clubs

LO2

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Types of Stores and Their Characteristics

Assort-Assort-mentment PricePrice GrossGross

MarginMargin

Broad

Narrow

Broad

Med-Narrow

Medium

Med-Broad

Med-Broad

Broad

Med-Narrow

Narrow

Mod-High

Mod-High

Moderate

Mod High

Moderate

Mod Low

Mod Low-low

Low-very low

Low

Low-High

Mod High

High

Low

Mod High

Low

Mod Low

Mod Low

Low

Low

Low-High

Type of RetailerType of Retailer

Specialty Store

Supermarket

Convenience Store

Drugstore

Full-line Discounter

Specialty Discounter

Warehouse Clubs

Off-price Retailer

Restaurant

Service Service LevelLevel

Mod Hi-High

High

Low

Low

Low-Mod

Mod-Low

Mod-Low

Low

Low

Low-High

Department Store

LO2

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Price

The amount of money

the retailer makes as a

percentage of sales after

the cost of goods sold is

subtracted.

GrossMargin

GrossMargin

LO2

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Describe the major types of

retail operations

Major Types of Retail Operations

LO3

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Major Types of Retail Operations

Department StoresDepartment Stores

Specialty StoresSpecialty Stores

SupermarketsSupermarkets

DrugstoresDrugstores

Convenience StoresConvenience Stores

Discount StoresDiscount Stores

RestaurantsRestaurantsOnline

http://www.walgreens.com

LO3

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Categories of Discount Stores

Full-LineDiscounters

Specialty Discount Stores

WarehouseClubs

Off-PriceDiscount Retailers

LO3

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Discount Stores

MassMerchandising

MassMerchandising

Retailing strategy using moderate to low prices on large quantities of merchandise and lower service to stimulate high turnover of products.

LO3

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Discount Stores

SupercenterSupercenter

Retail store combining groceries and general merchandise goods with a wide range of services.

Retail store combining groceries and general merchandise goods with a wide range of services.

Full-line discounterFull-line discounter

Retailer offering consumers very limited service and carrying a broad assortment of well-known, nationally branded “hard goods”.

Retailer offering consumers very limited service and carrying a broad assortment of well-known, nationally branded “hard goods”.

LO3

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Specialty Discount Stores

CategoryKillers

CategoryKillers

Specialty discount stores that heavily dominate their narrow merchandise segment.

LO3

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Types of Retail Operations

Department Stores

Department Stores

Specialty Stores

Specialty Stores SupermarketSupermarket DrugstoresDrugstores Convenience

Stores

Convenience Stores

Discount Stores

Discount Stores RestaurantsRestaurants

ScrambledMerchandising

ScrambledMerchandising

Full-line

supercenter

extreme- value

categorykiller

factoryoutlet

ShoppingSpecialty Goods

Distinctive ProductsCustomer Service

Food Products

MedicationsHealth and Beauty

Cosmetics

Specialty

High TurnoverGoods

Specialty

Warehouse

Off-priceLO3

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Aldi

Started in 1976 in Iowa, ALDI is increasing its market presence as a discount grocer. Offering a slim 1,400 products as ALDI select brands, the chain is able to give consumers deep discounts through supplier deals and their no-frills approach.

Products must meet national brand standards, but consumers purchase for up to 50% less.

LO3

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Discuss nonstore retailing techniques

Nonstore Retailing

LO4

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Nonstore Retailing

Automatic VendingAutomatic Vending

Direct RetailingDirect Retailing

Direct MarketingDirect Marketing

Electronic RetailingElectronic Retailing

LO4

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Direct Retailing

Door-to-DoorDoor-to-Door

Office-to-OfficeOffice-to-Office

Home Sales PartiesHome Sales Parties

Online

http://www.avon.com

LO4

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Types of Direct Marketing

TelemarketingTelemarketing

Catalogs & Mail OrderCatalogs & Mail Order

Direct MailDirect Mail

Electronic RetailingElectronic Retailing

Shop-at-home networksOnline retailing

LO4

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Beyond

the

Beyond

the

Book

Book

Top E-Tailers by Sales Volume

America's Top Ten Retail Businesses

Rank Company Web Sales Volume (in billions)

1 Amazon.com Inc. $19.2

2 Staples Inc. $5.6

3 Dell Inc. $4.8

4 Office Depot Inc. $4.8

5 Apple Inc. $3.6

6 OfficeMax Inc. $3.1

7 Sears Holding Corp. $2.7

8 CDW Corp. $2.6

9 Newegg.com $2.1

10 Best Buy $2.0

LO4

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SOURCE: Larry Freed, “Satisfied and Buying,” online at http://www.internetretailer.com.

Customer Satisfaction (out of 100 points)

LO4

Top E-Tailers by Customer Satisfaction

Netflix.com 86

QVC.com 84

Amazon.com 83

DrsFosterSmith.com 81

Apple.com 80

Newegg.com 80

Shutterfly 80

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Nonstore Retailing Techniques

Vending

Direct retailing

Direct marketing

Electronic retailing

direct mailcatalogstelemarketing

onlineshop at home

Nonstore RetailingNonstore Retailing

LO4

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Vending Machine Variety

• Reverse Vending Machines– Input recyclables and the machine sorts, compresses,

and pays out refunds based on the container.• Used Golf Ball Vending Machines

– Tilly-Miss fills candy-style dispensers with reclaimed golf balls.

• Kosher Hot Dog Vending Machines– Kosher Cart cooks hot dogs and other kosher foods

• Custom Juice Drinks Vending Machines– Select and mix custom juice drinks

• Moobella Custom Ice Cream Vending Machines– Make custom ice cream by mixing base flavors and

mix-insLO4

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Define franchising and describe its two basic forms

Franchising

LO5

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Basic Forms of Franchising

Business FormatFranchising

Business FormatFranchising

Product and Trade Name Franchising

Product and Trade Name Franchising

LO5

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Franchising

Product and Trade Name Franchising

Product and Trade Name Franchising

Dealer agrees to sell in products provided by a manufacturer or wholesaler.

Dealer agrees to sell in products provided by a manufacturer or wholesaler.

BusinessFormat

Franchising

BusinessFormat

Franchising

An ongoing business relationship between a franchiser and a franchisee.

An ongoing business relationship between a franchiser and a franchisee.

LO5

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Largest U.S. Franchisors

1. Subway 2. McDonald’s 3. Liberty Tax Services 4. Sonic Drive-In Restaurants 5. InterContinental Hotels

Group 6. Ace Hardware Corp. 7. Pizza Hut 8. The UPS Store/Mail Boxes

Etc. 9. Circle K 10. Papa John’s International Inc.

11. Jiffy Lube International Inc. 12. Instant Tax Service 13. Baskin-Robbin’s USA Inc. 14. KFC Corp. 15. Jani-King 16. Dairy Queen 17. Super 8 Worldwide 18. Arby’s 19. JAN-PRO Franchising International

Inc. 20. Taco Bell Corp.

LO5

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List the major tasks involved in developing

a retail marketing strategy

Retail Marketing Strategy

LO6

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Retail Marketing Strategy

Develop the “Six Ps”

Define & Select a Target Market

LO6

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Defining a Target Market

STEP 1:Segment the Market

STEP 1:Segment the Market

DemographicsDemographics

GeographicsGeographics

PsychographicsPsychographics

LO6

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Choosing the Retailing Mix

STEP 2:Choose the Retailing Mix

STEP 2:Choose the Retailing Mix

ProductProduct

PricePrice

PromotionPromotion

PlacePlace

PersonnelPersonnel

PresentationPresentation

Online

http://www.publix.com

LO6

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The Retailing Mix

TargetTargetMarketMarket

ProductProduct

PricePrice

PlacePlace

PromotionPromotion

PersonnelPersonnel

PresentationPresentation

LO6

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Choosing the Retailing Mix

ProductOffering

ProductOffering

The mix of products

offered to the consumer

by the retailer; also

called the product

assortment or

merchandise mix.

LO6

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Retail Promotion Strategy

AdvertisingAdvertising

Public RelationsPublic Relations

PublicityPublicity

Sales PromotionSales Promotion

LO6

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The Proper Location

Economic growth potential

Economic growth potential

CompetitionCompetition

GeographyGeography

Choosing a Community Choosing a Site

Freestanding StoreFreestanding Store

Shopping CenterShopping Center

MallMall

LO6

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Important Factorsfor Site Choice

Neighborhood socioeconomics

Traffic flows

Land costs

Zoning regulations

Public transportation

Site’s visibility, parking, entrances and exits,accessibility, and safety

Fit with other stores

LO6

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Shopping Center and Mall Locations

• Design attracts shoppers

• Activities and anchor stores draw customers

• Ample parking

• Unified image

• Sharing of common area expenses

• Expensive leases

• Failure of common promotion efforts

• Lease restrictions

• Hours of operation

• Anchor store domination

• Direct competitors

• Consumer time limits

Advantages Disadvantages

LO6

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Retail Prices

QualityImage

High PriceHigh Price Low Price Low Price

Good ValueSingle Price Point

EDLP

LO6

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Presentation of the Retail Store

AtmosphereAtmosphereThe overall

impression conveyed

by a store’s physical

layout, décor, and

surroundings

LO6

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Presentation of the Retail Store

Employee type and densityEmployee type and density

Merchandise type and densityMerchandise type and density

Fixture type and densityFixture type and density

SoundSound

OdorsOdors

Visual factorsVisual factorsOnline

http://www.apple.com

LO6

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Personnel and Customer Service

Suggestion SellingSuggestion Selling

Trading UpTrading Up

Two Common Two Common SellingSelling

TechniquesTechniques

LO6

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Customer Service for On-Line Retailers

Easy-to-use Web site Easy-to-use Web site

Product availabilityProduct availability

Simple returnsSimple returns

LO6

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TARGET

Developing a Retail Marketing Strategy

PLACELocation

Promotion

PRICE

Advertising,

PRODUCT

Personnel

PRESENTATION

and depth of product assortment

Width

and hours

public relationspublicity,

Customer service

Layoutand atmosphere

andpersonalselling

LO6

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Describe new developments

in retailing

New Developments in Retailing

LO7

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New Developments in Retailing

InteractivityInteractivityConsumers areinvolved in the retail experience.

Consumers areinvolved in the retail experience.

M-commerceM-commercePurchasing goods through mobile devices.

Purchasing goods through mobile devices.

LO7