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
Gucci
Specialty Store
Convenience
Stores
Low
Turnover
High
Turnover
Old Navy
Specialty Store
KMart
Low Margin
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ASSORTMENT STRATEGY #2
Deep
Old Navy
Specialty Store
May Company
Department Stores
Narrow
Wide
Gucci
Specialty Store
Convenience
Stores
KMart
Shallow
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SERVICE / PRICE STRATEGY
High Price
Gucci
Specialty Store
Convenience May Company
Department Stores
Stores
Low
Margin
High
Margin
KMart
Low Price
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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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TRADITIONAL CLASSIFICATIONS
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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TRADITIONAL CLASSIFICATIONS
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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TRADITIONAL CLASSIFICATIONS
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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TRADITIONAL CLASSIFICATIONS
Discount stores, superstores, extremevalue 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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TRADITIONAL CLASSIFICATIONS
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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TRADITIONAL CLASSIFICATIONS
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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TRADITIONAL CLASSIFICATIONS
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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TRADITIONAL CLASSIFICATIONS
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
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Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
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RETAIL STRATEGIC MARKETING
Defining and
selecting a target
market
The marketing mix,
plus 2
Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
•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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RETAIL STRATEGIC MARKETING
Defining and
selecting a target
market
The marketing mix,
plus 2
Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
• 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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RETAIL STRATEGIC MARKETING
Defining and
selecting a target
market
The marketing mix,
plus 2
Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
• 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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RETAIL STRATEGIC MARKETING
Defining and
selecting a target
market
The marketing mix,
plus 2
Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
• 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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RETAIL STRATEGIC MARKETING
Defining and
selecting a target
market
The marketing mix,
plus 2
Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
• The key to successful instore 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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RETAIL STRATEGIC MARKETING
Defining and
selecting a target
market
The marketing mix,
plus 2
Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
• 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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RETAIL STRATEGIC MARKETING
Defining and
selecting a target
market
The marketing mix,
plus 2
Product
(assortment)
Pricing
Promotion
Place (distribution)
Personnel
Presentation
• 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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