What is Retailing?
• Retailing includes all activities involved in selling, renting, and providing good and services to ultimate consumers for personal, family, or household use.
Utilities Retailing Offers to Consumers
• Utilities are benefits or value received by users of a product
Utilities Retailing Offers to Consumers
• Time Utility – Having the good/service for the customer when they want/need it
• Place Utility – Having the good/service available to the customer where they want/need it
• Form Utility – Production or alteration of a good/service for the customer
• Possession Utility – Make a product/service easy for customer purchase
Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?
• Independent Retailer– Most common form of retail ownership– An individual owns the business– “Be your own boss”– Personal service– Anastasia’s Attic, Bud’s Tire
Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?
• Corporate Chain– Multiple outlets under the same ownership– Purchasing and decision making is
centralized– Great negotiation power– Consumer can expect pretty much the same
items in every outlet
Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?
• Contractual SystemsIndependently owned stores that band together to act
like a chain– Retailer sponsored cooperatives are when small,
independent, retailers form an organization that operates from a wholesale facility cooperatively
• Buying power• Perceived as a chain• Pricing and promotions can be coordinated together
Classifying Retail OutletsForm of Ownership
Who owns the retail outlet?
• Contractual SystemsIndependently owned stores that band together
to act like a chain– Wholesaler sponsored voluntary chains are
when a wholesaler develops a contractual relationship with small, independent retailers to standardize and coordinate buying practices, merchandise programs, and inventory management efforts
• Volume discounts
Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?
• Contractual Systems– Franchises
• An individual or firm (franchisee) contracts with a parent company (the franchisor) to set up a business or retail outlet
• Advantages– Franchisor helps find location, set up facility, train
employees, and helps with advertising• Franchisee pays a “franchisee fee” and yearly royalties
Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?
• Contractual Systems– Franchises
• Good for franchisees because well-known business, can get business advice
• Franchisors loose control but gets name out in more places
Classifying Retail OutletsLevel of Service
How much service is provided by the retail outlet?
• Self-Service – Little to no services provided by outlet
• Limited Service – Some service provided by outlet
• Full Service – A lot of services provided by outlet– Bridal and Formal Shoppe
Classifying Retail OutletsType of Merchandise Line
How many different types of product an outlet carries and in what assortment.
• Depth of Product Line – The store carries a large assortment of each item– Limited-line stores have a lot of depth in a
related line of products– Single-line stores have a lot of depth in one
primary line
Classifying Retail OutletsType of Merchandise Line
How many different types of product an outlet carries and in what assortment.
• Breadth of Product Line – The variety of different items a store carries– Department Stores– Scrambled merchandising is having several
unrelated product lines in a single store• Supercenters
Nonstore Retailing
• Automatic Vending– Products usually cost more than they do in stores– Soft drinks, candy
• Direct Mail and Catalogs– No store locations and store employees, less
expense– Easier to segment markets than traditional outlets– Specialty catalogs for certain customers
Nonstore Retailing
• Television Home Shopping– Products shown on tv and you call and
purchase or purchase online
• Telemarketing– Calling customers on phone to sell products– Good way to target customers– Do Not Call lists
Nonstore Retailing
• Online Retailing– Available 24/7– Private– Easy to compare prices– Problem for retailers: 2/3 of customers place
product in shopping cart and leave, 70% never come back
• booksamillion.com offers a place to compare prices with amazon.com, barnesandnoble.com, and borders.com
Nonstore Retailing
• Online Retailing– Interactive parts of websites give advantage
over competition
Nonstore Retailing
• Direct Selling– “Door-to-door retailing” – direct sales of goods
and services to consumers through personal interaction and demonstrations in their home or office
Nonstore Retailing
• Direct Selling– U.S. direct selling has declined
• Retail chains have similar items for cheaper prices• Less stay-at-home moms/wives
– Outside U.S. sales are increasing• Distribution channels may not be as strong, so
“door-to-door” is more important• People do not know brands, so one-on-one is
important
Retailing Strategy
• Retail Positioning Matrix– Breadth of Product Line (range of products
sold)– Value Added (Includes location, product
reliability, prestige)
Retailing Strategy
• Retailing Positioning Matrix– 1 – High value added, broad product line
• Store design is important• Products have high profit margin, high quality• High levels of service
Retailing Strategy
• Retailing Positioning Matrix– 2 – Low value added, broad product line
• Low price, high sales volume• Low service• Price oriented
– 3 – High value added, narrow product line• Product status is important• High levels of service
Retailing Strategy
• Retailing Positioning Matrix– 4 – Low value added, narrow product line
• Targeted at value-conscious customers• All the stores are “cookie cutter”
– Basically same store design and merchandise– Achieve economies of scale by centralized
advertising, merchandising, buying, and distribution
Retailing Strategy
• Retailing Positioning Matrix– Can have stores in different places on the
matrix, done with different store names
Retailing Strategy – Retail Mix
• Retail Mix– The activity related to managing the store and
the merchandise in the store• Price• Store Location• Retail Communication• Merchandise
Retailing Strategy – Retail Mix
Retail Price
• Markup – How much is added to the product cost to get the selling price that the customer pays– Original markup = Initial selling price – Retail
cost– Maintained markup = Final selling price –
Retail cost
Retailing Strategy – Retail Mix
Retail Price
• Markdown – Discounting a product– Some stores use markdowns as part of
everyday strategy• Dangerous because some people perceive quality
based on price
– Shrinkage
Retailing Strategy – Retail Mix
Retail Price
• Off-pricing retailing is selling brand name merchandise at lower than regular prices– Off-price retailers buy excess inventory below
wholesale prices– Discount stores buy at wholesale price and
add little mark-up
Retailing Strategy – Retail Mix
Retail Price – Off-price Retailers
• Outlet Store– 20%-30% less than MSRP– Use to get rid of excess inventory
• Single-Price Retailers– Relatively small stores– “Value”
Retail Price – Off-price Retailers
• Warehouse Club– Large stores– Very plain, no decoration– Charge annual membership fee– Not a lot of services provided
Retailing Strategy – Retail Mix
Retailing Strategy – Retail Mix
Store Location – Where? How Many?
• Central Business District– Downtown– Original retail outlets– Bad parking– Older area
Retailing Strategy – Retail Mix
Store Location
• Regional Shopping Centers– Usually 50-100 stores– Serves a large trading area– Usually between 300,000 – 850,000 sq. ft.– Has 1 or 2 full-line department stores
• Well-known, “anchors”
Retailing Strategy – Retail Mix
Store Location• Community Shopping Center
– Usually a discount store or jr. department store as main tenant
– Usually between 100,000 – 450,000 sq. ft.– Maybe 20 – 40 stores
• Strip Location– Clusters of stores– Unplanned variety of stores
Retailing Strategy – Retail Mix
Store Location
• Power Center– Large shopping strip– Multiple anchors– Convenient location– Combination of malls, strip locations, and
others
Retailing Strategy – Retail Mix
Retail Communication
• How is store image portrayed?– Prices– Layout– Merchandise– Design
Retailing Strategy – Retail Mix
Merchandise
• Want the right breadth and depth of products for your target market
• Category management– A manager is assigned the responsibility for
selecting all products that customers in a market segment view as substitutes for each other
Future of Retailing
• Multichannel Retailing– Using a combination of traditional store and
nonstore formats– Simple, convenient– Options!!