Chapter 17
Retailing And Direct
Marketing
Objectives
• Understand purpose and function of retailers in
the marketing channel
• Identify major types of retailers
• Understand direct marketing and two other
forms of nonstore retailing
• Examine major types of franchising and benefits
and weaknesses of franchising
• Explore strategic issues in retailing
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Retailing
All transactions in which the buyer intends to
consume the product through personal, family,
or household use
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Retailer
An organization that purchases products for the
purpose of reselling them to ultimate consumers
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Importance Of Retailing
In The U.S. Economy
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Retailers Enhance Value
• Provide services
• Assist in product selection
• Make shopping experience more
convenient
• Location facilitates comparison shopping
• Demonstrate product
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Retailers Create Utility
• Time
• Place
• Possession
• Form
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Keys To Retailing Success
• a strong customer focus
• a retail strategy that
provides the level of
service, product quality,
and innovation that
consumers desire
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General-Merchandise Retailers
A retail establishment that offers a variety of product
lines that are stocked in considerable depth
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General-Merchandise Retailers
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Department Store
A large retail organization characterized by a wide
product mix and organized into separate
departments to facilitate marketing efforts and
internal management
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Department Store’s Total
Product Could Include:
• Credit
• Delivery
• Personal Assistance
• Merchandise Returns
• Pleasant Atmosphere
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Convenience
Store Characteristics
• Less than 5,000 sq. ft.
• Open
• 24 hours
• 7 days/week
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• Stock about 500 items
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Supermarket
A large, self-service store that carries a
complete line of food products, along with
some nonfood products
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Superstore
A giant retail outlet that carries food and
nonfood products found in supermarkets,
as well as most routinely purchased
consumer products
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Warehouse Clubs
A large-scale, members-only establishment
that combines features of cash-and-carry
wholesaling with discount retailing
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Warehouse Showroom
A retail facility in a large, low-cost building
with large on-premise inventories and
minimal services
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Characteristics Of
Warehouse Showroom
• Large, low-cost building
• Warehouse materials handling technology
• Vertical merchandise displays
• Large on-premises inventories
• Minimal services
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Catalog Showroom
A warehouse showroom in which customers
use catalogs to place orders for products,
which are then filled directly in the warehouse
area and picked up by buyers in the
showroom
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Direct Marketing
The use of the telephone, Internet, and
nonpersonal media to communicate product
and organizational information to customers,
who can then purchase products via mail,
telephone, or the Internet
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Nonstore Retailing
The selling of products outside the confines
of a retail facility
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Catalog Marketing
The type of marketing in which an
organization provides a catalog from which
customers make selections and place orders
by mail, telephone, or the Internet
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Advantages Of
Catalog Retailing
• Customer
– Efficiency
– Customer convenience
• Retailer
– Remote , low-cost location
– Save on store fixtures
– Reduce
• Personal Selling
• Store operating expense
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Direct-Response Marketing
A type of marketing in which a retailer
advertises a product and makes it available
through mail or telephone orders
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Telemarketing
The performance of marketing-related
activities by telephone.
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Television Home Shopping
A form of selling in which products are
presented to television viewers, who can
buy them by calling a toll-free number and
paying with a credit card
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Benefits Of
TV Home Shopping
• Product easily demonstrated
• Adequate time to show product
• Customer shop in convenience of home
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Online Retailing
Retailing that makes products available to
buyers through computer connections
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Other Types Of
Nonstore Retailing
• Direct Selling- marketing products to
consumer through face-to-face sales
presentations
• Automatic vending- use of machines to
dispense products
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Franchising
An arrangement in which a supplier
(franchiser) grants a dealer (franchisee) the
right to sell products in exchange for some
type of consideration
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Top 20 U.S. Franchises
And Their Startup Costs
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Top 20 U.S. Franchises And Their
Startup Costs (contd.)
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Advantages Of Franchising
(Franchisee)
•
•
•
•
•
Start business with limited capital
Benefit from others’ business experience
Often assured customers at opening
Guidance/advice
Generally more successful
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Advantages Of Franchising
(Franchisor)
• Fast/selective product distribution
• No major financial outlay
• Capital devoted to production and
advertising
• Franchisee held to standards
• Franchisee highly motivated
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Drawbacks To Franchising
• Franchiser controls many aspects of
business
• Franchisee must pay
– Franchise fee
– Royalty
• Uneven franchise agreements
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Location Of
Retailing Stores
• Freestanding
• Traditional business districts
• Shopping centers
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Types And Characteristics
Of Shopping Centers
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Neighborhood Shopping Center
A shopping center usually consisting
of several small convenience and
specialty stores
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Community Shopping Center
A shopping center with one or two
department stores, some specialty stores,
and convenience stores
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Regional Shopping Center
A type of shopping center with large
department stores, a wide product mix,
and deep product lines
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Superregional Shopping Center
A type of shopping center with the largest
department stores, the widest product mix,
and the deepest product lines of all
shopping centers
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Lifestyle Shopping Center
A type of shopping center that is typically
open-air and features upscale specialty,
dining, and entertainment stores
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Outlet Shopping Centers
A type of shopping center that features
discount and factory outlet stores carrying
manufacturer brands
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Retail Positioning
Identifying an unserved or underserved
market segment and serving it through a
strategy that distinguishes the retailer from
others in the minds of consumers in that
segment
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Store Image
Key Determinants
• Store environment - atmospherics
• Category management
• Merchandise quality
• Service quality - reputation for integrity
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Atmospherics
The physical elements in a store’s design
that appeal to consumers’ emotions and
encourage buying.
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Category Management
A retail strategy of managing groups of
similar, often substitutable products
produced by different manufacturers
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Scrambled Merchandising
The addition of unrelated products and
product lines to an existing product mix,
particularly fast-moving items that can be
sold in volume
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Strategy Of
Scrambled Merchandisers
• Convert stores into one-stop shopping
centers
• Generate more traffic
• Realize higher profit margins
• Increase impulse purchases
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Wheel Of Retailing
A hypothesis holding that new retailers
usually enter the market as low-status, lowmargin, low-price operators but eventually
evolve into high cost, high price merchants
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