Chapter 15
Retailing
Introduction
 An intermediary involved in selling
Retailer
Wholesaler
goods and services to ultimate
consumers (examples?)
An intermediary that takes title
to the goods it handles and
redistributes them to retailers,
other distributors, and
sometimes end consumers
•Employs 24 million people in the U.S.
•Accounts for $4.5 trillion to the U.S. economy
STRATEGIC IMPLICATIONS: RETAIL
MARKETING STRATEGY
A retailer develops a marketing strategy based on
the firm’s goals and strategic plans
 Two fundamental steps:

Picking a target market: size and profit potential.
POSITION.
2. Developing a retailing mix to satisfy the chosen target
market
1.
1.
4Ps + Personnel & Presentation used to create a retail image
The Retailing Mix
Product
Personnel
Place
Target
Market
Presentation
Promotion
Price
Choosing the Merchandising Mix
The mix of products offered to the
consumer by the retailer; also called
the product assortment or
merchandise mix.
Merchandising (Product) Strategy
 Category management: Retailing strategy which views
each product category as an individual profit center.
 Slotting Allowances: lump-sum payments by
manufacturers for stocking new products.
 Scrambled Merchandising: Combining dissimilar
product lines to boost sales volume.
 Growth of Store brands – Battle for shelf space
Presentation of the Retail Store Atmosphere
The overall impression
conveyed by a store’s physical
layout, décor, and
surroundings.
Five Senses.
Personnel and Customer Service
Two Common
Selling
Techniques
Trading Up
Suggestion Selling
Price
The amount of money the retailer
makes as a percentage of sales after
the cost of goods sold is subtracted.
Price and payment options : how important?
http://www.youtube.com/watch?v=kMimygVTgbU
HOW THE VIEWS OF THESE
STORES' REGULAR SHOPPERS
COMPARE
Target
Neiman
Marcus and
Saks
Macy's
J.C. Penney
Optimistic about
the economy in
next 6 months
33%
35%
36%
33%
Shopping closer
to home
38%
26%
36%
44%
Shopping for sales
more often
42%
22%
39%
45%
Spending less on
clothing
39%
28%
35%
42%
Taking fewer
shopping trips
39%
11%
34%
44%
Age 18-34
Age 35-64
Age 65 and older
Education high
school
Education college
Target
Neiman
Marcus
Macy's
104
110
69
82
99
112
70
71
92
110
82
78
89
105
97
92
112
88
115
91
113
91
105
95
56
75
116
120
186
122
Household size
two or fewer
Income less than
63
55
$40,000
Income $40,000121
96
$99,000
Income $100,000
155
240
and more
Compared to US pop as a whole: 100 is average.
J.C. Penney
Classification of Retail by
Ownership (independent, franchise chain)
2. Service level (Nordstrom vs. Wal-mart)
3. Assortment (CVS vs. Smith’s)
4. Price (Tiffany vs. jewelry kiosk)
1.
Types of Retailers
Department Stores
Service
Level
High
Assortment
Broad
Price
High
Gross
Margin
High
Specialty Stores
Specialty Stores
Type of Retailer
Specialty Store
Service
Level
High
Assortment
Narrow
Price
High
Gross
Margin
High
Specialty Discount Stores OR Category
Killers
Specialty Discount
Stores
Type of Retailer
Service
Level
Specialty Discount Store Low
Assortment
Narrow
Price
Low
Deep
Assortment
Gross
Margin
Low
Discount Stores
Discount
Low Service
Broad
Assortment
Low price
Shallow
Assortment
Low margin
Off-Price Retailer
Off-price Retailer
Low service
Narrow Line LowPrices
prices Low margins
Supercenters
Supermarket
Low service
Broad
Moderate
prices
Low margins
Supermarkets
 Large, self-service retailer with grocery specialty
 Self-scanning trend: what is your take?
 Competition: fierce, 1% profit on many items
Warehouse Clubs
 Warehouse club / wholesale club (Sam’s, Costco)
 No frills, members only (why?)
 Bulk purchases: price competition, homogeneous shopping
goods
Convenience Stores
 Convenience products
 Often with gas stations
 Convenience stores: fill-in your “regular” shopping
 Competition (fast food also)
 24/7 is more important
 We pay for the convenience
Non-Store Retailing
 Vending: hi costs; hi prices (flat sales)
 Vending is a $40 billion U.S. market
 Cashless vending=wave of future
 Direct Marketing (Mail, Catalog, Telemarketing)
 E-tailing (TV shopping, online)
 M-commerce: buy from mobile devices
(e.g., cell phones)
Wheel of Retailing
 Newer, low-price types of retailing arise to
challenge older established “bigger” retailers.
Wheel of Retailing
Motel
3
Motel
+ Free Breakfast
+ HBO
+ Free Breakfast
+ HBO
+ Happy Hour
2
New Entrant
Motel
+ Free Breakfast
No Frills
Motel
1
a theory to explain the institutional changes
4
eTailing and DTC
 eTail= electronic retail
 DTC= Direct to consumer
 Shrinking use of wholesalers? (bypassing wholesalers more
and more)
 eBay: hybrid etailer/online auction site
 Even sells services online
(examples of services
on ebay?)
eTail
 More innovative e-tail sites
 Printing online www.printresponsibly.com
 Nike ID
 Zappos
http://nikeid.nike.com
http://www.zappos.com
Future of re[E]tailing
 http://www.youtube.com/watch?v=jtiJaX6q1i0