Lamb, Hair, McDaniel
2010-2011
CHAPTER 15
Retailing
1
Learning Outcomes
LO 1 Discuss the importance of retailing in the U.S.
economy
LO 2 Explain the dimensions by which retailers can be
classified
LO 3 Describe the major types of retail operations
LO 4 Discuss nonstore retailing techniques
2
Learning Outcomes
LO 5 Define franchising and describe its two
basic forms
LO 6 List the major tasks involved in developing a
retail marketing strategy
LO 7 Describe new developments in retailing
3
The Role of Retailing
Discuss the
importance of
retailing in the U.S.
economy
LO1
4
Retailing
Retailing
All the activities directly
related to the sale of goods
and services to the ultimate
consumer for personal,
non-business use.
LO1
5
The Role of Retailing
 Over 1.6 million U.S. retailers employ
more than 24 million people
 Retailers account for 11.6 percent of U.S.
employment
 Retailing accounts for 13 percent of U.S.
businesses
 Retailers ring up almost $4 trillion in
sales—nearly 40 percent of the U.S. GDP
 Industry is dominated by a few giant
organizations, such as Wal-Mart
LO1
6
Beyond the Book
Stress “Value” to Attract Customers
LO1
Because of the recession, customers are in a
particularly cost-conscious mood and focusing on
value. To grab their attention retailers can:
 Offer unique value propositions, i.e. prices, customer
services, loyalty programs
 Use innovative marketing concepts that will resonate with
consumers, e.g. pop-up shops or a “green emphasis
 Appeal to time-strapped customers with an efficient
multi-channel shopping experience
SOURCE: Larry Freed, “Satisfied and Buying,” online at http://www.internetretailer.com.
7
REVIEW LEARNING OUTCOME
The Importance of Retailing
Retailing as a %
of U.S. employment
11.6%
Retailing as a %
of U.S. businesses
Retailing as a %
of GDP
13%
40%
LO1
8
Classifying Retailers
Explain the
dimensions by
which retailers
can be classified
LO2
9
Classification
of Retail Operations
Ownership
Level of Service
Product Assortment
Price
LO2
10
Classification
of Ownership
Independent
Retailers
Owned by a single person or
partnership and not part of a
larger retail institution
Chain Stores
Owned and operated as a group
by a single organization
Franchises
The right to operate a business
or sell a product
LO2
11
Level of Service
Self Service
Factory outlets
Warehouse clubs
LO2
Full Service
Discount stores
Exclusive stores
12
Types of Stores and
Their Characteristics
Type of Retailer
Service
Level
Assortment
Price
Gross
Margin
Department Store
Mod Hi-High
Broad
Mod-High
Mod High
Specialty Store
High
Narrow
Mod-High
High
Supermarket
Low
Broad
Moderate
Low
Convenience Store
Low
Med-Narrow Mod High
Mod High
Drugstore
Low-Mod
Medium
Moderate
Low
Full-line Discounter
Mod-Low
Med-Broad
Mod Low
Mod Low
Specialty Discounter
Mod-Low
Med-Broad
Mod Low-low
Mod Low
Warehouse Clubs
Low
Broad
Low-very low
Low
Off-price Retailer
Low
Med-Narrow Low
Low
Restaurant
Low-High
Narrow
Low-High
LO2
Low-High
13
Price
Gross
Margin
LO2
The amount of money
the retailer makes as a
percentage of sales after
the cost of goods sold is
subtracted.
14
Major Types of Retail
Operations
Describe the
major types of
retail operations
LO3
15
Major Types of Retail
Operations
Department Stores
Specialty Stores
Supermarkets
Drugstores
Convenience Stores
Discount Stores
http://www.walgreens.com
Restaurants
LO3
Online
16
Categories of
Discount Stores
Full-Line
Discounters
Specialty Discount
Stores
Warehouse
Clubs
Off-Price
Discount Retailers
LO3
17
Discount Stores
Mass
Merchandising
LO3
Retailing strategy using
moderate to low prices
on large quantities of
merchandise and lower
service to stimulate
high turnover of
products.
18
Discount Stores
Supercenter
Full-line discounter
LO3
Retail store combining
groceries and general
merchandise goods with a
wide range of services.
Retailer offering consumers
very limited service and
carrying a broad assortment of
well-known, nationally branded
“hard goods”.
19
Specialty Discount Stores
Category
Killers
Specialty discount
stores that heavily
dominate their narrow
merchandise
segment.
LO3
20
Types of Retail Operations
Department
Stores
Shopping
Specialty
Goods
Specialty
Stores
Distinctive
Products
Customer
Service
Supermarket
Drugstores
Food
Products
Medications
Health and
Beauty
Cosmetics
Specialty
Scrambled
Merchandising
Convenience
Stores
High
Turnover
Goods
Discount
Stores
Restaurants
supercenter
Full-line
extremevalue
Specialty
category
killer
Warehouse
LO3
Off-price
factory
outlet
21
Aldi
Started in 1976 in Iowa, ALDI is increasing
its market presence as a discount grocer.
Offering a slim 1,400 products as ALDI
select brands, the chain is able to give
consumers deep discounts through
supplier deals and their no-frills approach.
Products must meet national brand
standards, but consumers purchase for up
to 50% less.
LO3
22
Nonstore Retailing
Discuss nonstore
retailing techniques
LO4
23
Nonstore Retailing
Automatic Vending
Direct Retailing
Direct Marketing
Electronic Retailing
LO4
24
Direct Retailing
Door-to-Door
Office-to-Office
Home Sales Parties
http://www.avon.com
LO4
Online
25
Types of Direct Marketing
Direct Mail
Catalogs & Mail Order
Shop-at-home networks
Online retailing
Telemarketing
Electronic Retailing
LO4
26
Beyond the Book
Top E-Tailers by Sales Volume
LO4
America's Top Ten Retail Businesses
Rank
Company
Web Sales Volume
(in billions)
1
Amazon.com Inc.
$19.2
2
Staples Inc.
$5.6
3
Dell Inc.
$4.8
4
Office Depot Inc.
$4.8
5
Apple Inc.
$3.6
6
OfficeMax Inc.
$3.1
7
Sears Holding Corp.
$2.7
8
CDW Corp.
$2.6
9
Newegg.com
$2.1
10
Best Buy
$2.0
27
Top E-Tailers by Customer Satisfaction
Customer Satisfaction (out of 100 points)
Netflix.com
86
QVC.com
84
Amazon.com
83
DrsFosterSmith.com
81
Apple.com
80
Newegg.com
80
Shutterfly
80
SOURCE: Larry Freed, “Satisfied and Buying,” online at http://www.internetretailer.com.
LO4
28
Nonstore Retailing Techniques
Nonstore Retailing
Vending
Direct retailing
LO4
Direct marketing
direct mail
catalogs
telemarketing
Electronic retailing
online
shop at home
29
Vending Machine Variety
• Reverse Vending Machines
– Input recyclables and the machine sorts, compresses,
and pays out refunds based on the container.
• Used Golf Ball Vending Machines
– Tilly-Miss fills candy-style dispensers with reclaimed
golf balls.
• Kosher Hot Dog Vending Machines
– Kosher Cart cooks hot dogs and other kosher foods
• Custom Juice Drinks Vending Machines
– Select and mix custom juice drinks
• Moobella Custom Ice Cream Vending Machines
– Make custom ice cream by mixing base flavors and
mix-ins
4
30
LO
Franchising
Define franchising
and describe its
two basic forms
LO5
31
Basic Forms of Franchising
Product and Trade Name
Franchising
Business Format
Franchising
LO5
32
Franchising
LO5
Product and
Trade Name
Franchising
Dealer agrees to sell in
products provided by a
manufacturer or wholesaler.
Business
Format
Franchising
An ongoing business
relationship between a
franchiser and a franchisee.
33
Largest U.S. Franchisors
1.
2.
3.
4.
5.
Subway
McDonald’s
Liberty Tax Services
Sonic Drive-In Restaurants
InterContinental Hotels
Group
6. Ace Hardware Corp.
7. Pizza Hut
8. The UPS Store/Mail Boxes
Etc.
9. Circle K
10. Papa John’s International Inc.
LO5
11. Jiffy Lube International Inc.
12. Instant Tax Service
13. Baskin-Robbin’s USA Inc.
14. KFC Corp.
15. Jani-King
16. Dairy Queen
17. Super 8 Worldwide
18. Arby’s
19. JAN-PRO Franchising International
Inc.
20. Taco Bell Corp.
34
Retail Marketing Strategy
List the major tasks
involved in developing
a retail marketing
strategy
LO6
35
Retail Marketing Strategy
Define & Select
a Target Market
Develop the
“Six Ps”
LO6
36
Defining a Target Market
Demographics
STEP 1:
Segment the Market
Geographics
Psychographics
LO6
37
Choosing the Retailing Mix
STEP 2:
Choose the
Retailing Mix
Product
Place
Price
Personnel
Promotion
Presentation
http://www.publix.com
LO6
Online
38
The Retailing Mix
Product
Personnel
Place
Target
Market
Presentation
LO6
Promotion
Price
39
Choosing the Retailing Mix
Product
Offering
LO6
The mix of products
offered to the consumer
by the retailer; also
called the product
assortment or
merchandise mix.
40
Retail Promotion Strategy
Advertising
Public Relations
Publicity
Sales Promotion
LO6
41
The Proper Location
Choosing a Community
Choosing a Site
Economic growth
potential
Freestanding Store
Competition
Shopping Center
Geography
Mall
LO6
42
Important Factors
for Site Choice
 Neighborhood
socioeconomics
 Traffic flows
 Land costs
 Zoning regulations
 Public transportation
 Site’s visibility, parking,
entrances and exits,
accessibility, and safety
 Fit with other stores
LO6
43
Shopping Center
and Mall Locations
Advantages
• Design attracts
shoppers
• Activities and
anchor stores draw
customers
• Ample parking
• Unified image
• Sharing of common
area expenses
LO6
Disadvantages
• Expensive leases
• Failure of common
promotion efforts
• Lease restrictions
• Hours of operation
• Anchor store
domination
• Direct competitors
• Consumer time limits
44
Retail Prices
Low Price
Good Value
Single Price Point
EDLP
LO6
High Price
Quality
Image
45
Presentation
of the Retail Store
Atmosphere
LO6
The overall
impression conveyed
by a store’s physical
layout, décor, and
surroundings
46
Presentation
of the Retail Store
Employee type and density
Merchandise type and density
Fixture type and density
Sound
Odors
http://www.apple.com
Visual factors
LO6
Online
47
Personnel and
Customer Service
Trading Up
Two Common
Selling
Techniques
Suggestion Selling
LO6
48
Customer Service
for On-Line Retailers
Easy-to-use Web site
Product availability
Simple returns
LO6
49
PRODUCT
Width and depth of product
assortment
Developing a
Retail Marketing
Strategy
LO6
PLACE
Location and hours
Promotion
Advertising, publicity,
public relations
PRICE
PRESENTATION
Layout
and atmosphere
Personnel
Customer
service and
personal
selling
TARGET
50
New Developments
in Retailing
Describe new
developments
in retailing
LO7
51
New Developments in Retailing
Interactivity
Consumers are
involved in the
retail experience.
M-commerce
Purchasing goods
through mobile
devices.
LO7
52