MARKETING
Real People, Real Choices
Fourth Edition
CHAPTER 16
Retailing:
Bricks and Clicks
Retailing
• The process by which products are sold
to consumers for personal use
• 1 in 5 US workers are in retailing
• Over 1.2 million retail firms
• Only 8% have annual sales of over 2.5
million
16-2
The Wheel of Retailing
• New types of retailers find it easiest to
enter the market by offering goods at
lower prices than competitors; after they
gain a foothold, they gradually trade up,
improving facilities and increasing the
quality and assortment of merchandise,
and offering special amenities; upscaling
increases costs causing prices to rise;
higher prices open the door for a new
entrant charging lower prices
16-3
Retail Life Cycle
• Retailers are also products because they
provide benefits and must offer a competitive
advantage to survive
– Introduction: new retailer takes a unique
approach to doing business
– Growth: retailer catches on with shoppers,
sales and profits rise, others start to copy it
so retailer expands offerings
– Maturity: many have copied it and an entire
industry has formed, profits decline
– Decline: retail format becomes obsolete
16-4
What’s in Store for the Future
• Demographics
– Working consumers
• Drive up windows
• Expanding store hours
• Shopping consultants
• Mail / internet / phone orders
– Catering to younger age segments (with greater
purchasing power)
• E.g. Pacific Sunwear, Hot Topic
– Ethnic diversity
• Increasing Spanish & Asian populations
16-5
What’s in Store for the future
• Technology
– Instant data capture and integration with ordering
systems e.g. JC Penney
– Skipping checkout lines
– Virtual displays (e.g. furniture in your living room;
clothes on your body, etc.)
16-6
Classifying Retailers by what they sell
• Grocery stores, departmental stores,
fast food restaurants, gas stations, etc.
• Some lines still blurred
– scrambled merchandising – strategy
of carrying a combination of food and
nonfood items
16-7
Classifying Retailers by Service
• Trade-off between service levels and
prices
• Self-service retailers e.g. Sam’s Club
• Full-service retailers e.g. Neiman
Marcus, Saks.
• Limited-service retailers e.g. Walmart,
Target, Old Navy, Kohl’s, etc.
16-8
Classifying by Merchandise Selection
• Merchandise breadth is the number of
different product lines available
– Narrow assortment (e.g. convenience
store)
– Broad assortments (e.g. warehouse club)
• Merchandise depth is the variety of choices
available for each specific product
– Shallow assortment (e.g. factory outlet for
Polo)
– Deep assortments (e.g. departmental
store)
16-9
Store Types
• Convenience stores
(e.g. 7-Eleven)
– Pay higher prices for close
to home shopping
• Supermarkets
– Grocery stores like Food
Lion, etc.
• Specialty stores
– Narrow and deep
inventories (e.g. cigars &
tobacco stores in malls)
• Department stores
– E.g. Macys, Dillards, etc.
• Discount stores
– General
merchandise
discount stores (e.g.
Walmart, Kmart)
– Off-price retailers
(e.g. TJ Maxx)
– Warehouse clubs
(e.g. Costco)
– Factory outlet stores
• Hypermarkets – four to
five times larger than a
supermarket Carrefours
16-10
Nonstore Retailing
• Any method a firm uses to complete an
exchange that does not require a
customer visit to a store
– Direct selling
– Automatic vending
16-11
Direct Selling
• Direct selling occurs when a salesperson
presents a product to one individual or a small
group, takes orders, and delivers the
merchandise
– Door-to-Door Sales
– Parties and Networks
• party plan systems (e.g. Tupperware
parties)
• multilevel pyramid schemes (e.g. Amway)
16-12
Automatic Vending
• Appealing for selling convenience
goods because of small space required,
and minimal personnel to maintain and
operate
• New innovations:
– Ore-Ida French fries
– Software
– Levi’s jeans
16-13
E-Commerce and the Customer
• Benefits
– Shop 24/7
– Less travel
– More choices
– More information
– Price competition
– Fast delivery
• Limitations
– Lack of security
– Fraud
– Can’t touch items
– Hard to
distinguish color/
texture online
– Expensive to
return
16-14
E-Commerce and the Marketer
• Benefits
• Limitations
– The world is your
– Lack of security
marketplace
– Must maintain site
– Decreases costs
– Price competition
– Tracking of
– Conflicts with
consumer behavior
conventional
retailers
16-15
Developing a Store Positioning Strategy
• Store image
– how should the target market perceive the
store – exciting (REI stores), old-fashioned
(Wilkins, furniture), edgy and hip (Hot
Topic), elegant and refined (Saks), etc.
• Atmospherics
– the use of color, lighting, scents,
furnishings, sounds, and other design
elements to create a desired setting
16-16
Store Design: Setting the Stage
• Store layout and traffic flow (e.g. grid layout in
a grocery store)
• Fixture type and merchandise density (e.g.
wooden racks vs. metal racks); clutter, sitting
areas, etc.
• The sound of music (e.g. Nordstrom)
• Color and lighting (warm colors stimulate
appetite, pink preferred by women’s
cosmetics)
• The Actors: Store Personnel; uniformed
ushers, etc.
16-17
Building the Store: Store Location
• Types of locations
– Business District (downtown)
– Shopping centers (Malls)
• Lifestyle centers (e.g. Manchester
Village)
– Freestanding retailer (Walmart, IKEA)
– Non-traditional locations: carts,
kiosks, etc.
16-18