The Nature of Retailing Retailing Transactions

The Nature of Retailing • Retailing – Transactions in which ultimate consumers are the buyers • Retailers – Organizations that purchase products for the purpose of reselling them to ultimate consumers • Retailers add value—shopping convenience, services, and purchasing assistance to customers • Retailers create utility—time, place, possession, and form – Success in retailing comes from having a strong customer focus coupled with desired levels of service, product quality, and innovation. Copyright © Houghton Mifflin Company. All rights reserved. 1

Major Types of Retail Stores • General-Merchandise Retailers – A retail establishment that offers a variety of product lines – Department stores • Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management • Goldsmiths, Dillards – Discount stores • Self-service, general merchandise stores offering brand name and private brand products at low prices • Walmart, Target – Supermarkets • Large, self-service stores that carry a complete line of food products, along with some nonfood products • Kroger, Schnucks, Albertsons Copyright © Houghton Mifflin Company. All rights reserved. 2

Major Types of Retail Stores (cont’d) • General-Merchandise Retailers (cont’d) – Superstores • Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products • Walmart Supercenters – Hypermarkets • Stores that combine supermarket and discount shopping in one location • Carrefour (France), not successful in U. S. – Warehouse clubs • Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing (fewer items, large volume) • Costco beats Sams Club! • Costco in Japan…. Copyright © Houghton Mifflin Company. All rights reserved. 3

Major Types of Retail Stores (cont’d) • General-Merchandise Retailers (cont’d) – Warehouse showrooms • Retail facilities in large. low-cost buildings with large onpremise inventories and minimal services (consumers must do a lot themselves) • IKEA – Catalog showrooms • A form of warehouse showroom where consumers can shop from a catalog and products are stored out of buyers’ reach • Service Merchandise? Beat out by Warehouse clubs. • Brookstone – still doing well for xmas. Copyright © Houghton Mifflin Company. All rights reserved. 4

Major Types of Retail Stores (cont’d) • Specialty Retailers – Traditional specialty retailers • Also called “limited-line” and “single-line” retailers • Carry a narrow product mix with deep product lines (e. g. , pet supplies) • Have higher costs and higher margins • Provide more product selection (first-line brands), product expertise, and high levels of personal service –Foot Locker –Dilday TV –http: //www. buildabear. com/ Copyright © Houghton Mifflin Company. All rights reserved. 5

Major Types of Retail Stores (cont’d) • Specialty Retailers (cont’d) – Off-price retailers • Buy manufacturers’ seconds, overruns, returns, and offseason merchandise for resale to consumers at deep discounts • Charge less than do department stores for comparable merchandise and offer few customer services • Have established long-term relationships with suppliers for continuing supplies of reduced-price goods –TJ Maxx, Steinmart, Burlington Coat Factory – Category killers (rising in popularity! Killing small bus!) • Concentrate on a major product category and compete on the basis of low prices and product availability –Sports Authority, Home Depot, Bed Bath and Beyond, Toys R Us, Office Depot Copyright © Houghton Mifflin Company. All rights reserved. 6

Non. Store Retailing • Nonstore Retailing Defined – The selling of products outside the confines of a retail facility – Growth sector of retailing due to • Consumers are less willing to devote personal time to shopping in retail stores. • Poorly trained and informed retail personnel can’t offer needed sales assistance. • Growing population of older shoppers who tend to shop less in large stores. –Category Killers and Discounters –Overwhelming! –What happened to small hardware store? Copyright © Houghton Mifflin Company. All rights reserved. 7

Non. Store Retailing (cont’d) • Direct Selling – The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace • Party plans: hosting groups to view a product demonstration and encouraging participants to purchase the products • Tupperware, Mary Kay (now opening stores), Amway! – Benefits • Personal attention to customer • Convenience of time and place of presentation – Limitations • High costs make it the most expensive form of selling • Negative consumer view of direct selling Copyright © Houghton Mifflin Company. All rights reserved. 8

Non. Store Retailing (cont’d) • Direct Marketing – The use of telephone and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet Copyright © Houghton Mifflin Company. All rights reserved. 9

Types of Direct Marketing • Catalog Marketing – A type of marketing in which an organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet • Consumer advantages are efficiency and convenience • Marketer advantages are lower location, facility, selling, and operating costs. • Disadvantages are inflexibility and limited selection and local service availability. • Speigel, Land’s End, JCrew • Frontgate • Victoria’s Secret (combines • With retail stores) Copyright © Houghton Mifflin Company. All rights reserved. 10

Direct Marketing (cont’d) • Direct-Response Marketing – A type of marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders • Telemarketing – The performance of marketing-related activities by telephone Copyright © Houghton Mifflin Company. All rights reserved. 11

Direct Marketing (cont’d) • Television Home Shopping – A form of selling in which products are presented to television viewers, who can buy them by calling a tollfree number and paying with a credit card • Online Retailing – Retailing that makes products available to buyers through computer connections • Automatic Vending – The use of machines to dispense products Copyright © Houghton Mifflin Company. All rights reserved. 12

Franchising • Franchising – An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration • Franchiser furnishes equipment, buildings, management know-how, and marketing assistance. –Holiday Inn Express • Franchisee supplies labor and capital, and operates the business by the provisions of the franchise agreement. –Manager of local HI Express Copyright © Houghton Mifflin Company. All rights reserved. 13

Copyright © Houghton Mifflin Company. All rights reserved. 14

Franchising (cont’d) • Advantages – Enables business startup with limited capital – Provides developed and proven business to franchisee – Attracts customers with established brand name – Allows immediate market entry – Motivates franchisee to succeed • Disadvantages – Control over aspects of the business and its operations by franchiser – Expense of continuing franchise royalties and advertising fees – Lack of control of franchisees by franchisor Copyright © Houghton Mifflin Company. All rights reserved. 15

Strategic Issues in Retailing • Retail Store Location – Location, location • Types of Locations – Free-standing structures • Position relative to competition • Customer access and parking – Traditional business districts • Redevelopment of decaying downtown infrastructure Copyright © Houghton Mifflin Company. All rights reserved. 16

Strategic Issues in Retailing (cont’d) • Traditional Shopping Centers – Neighborhood shopping centers • Usually consist of several small convenience and specialty stores. – Community shopping centers • Include one or more department stores (anchors), some specialty stores, and convenience stores. – Regional shopping centers • Have the largest department stores, the widest product mix, and the deepest product lines of all shopping centers. Copyright © Houghton Mifflin Company. All rights reserved. 17

Strategic Issues in Retailing (cont’d) • Nontraditional Shopping Centers – Factory outlet malls • Shopping centers that feature discount and factory outlet stores carrying traditional brand name products – Miniwarehouse mall • Loosely planned centers that lease space to retailers running retail stores out of warehouse bays – Nonanchored malls • Do not have traditional department store anchors; instead combine off-price and category killer stores in a “power center” format –Home Depot is the anchor instead of department stores Copyright © Houghton Mifflin Company. All rights reserved. 18

Strategic Issues in Retailing (cont’d) • 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 • Neiman Marcus • Store Image – Atmospherics • The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying • Interior layout, colors, furnishings, and lighting • Exterior storefront and entrance design, display windows, and traffic congestion Copyright © Houghton Mifflin Company. All rights reserved. 19

Strategic Issues in Retailing (cont’d) • 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 – Intent of scrambled merchandising • • Convert stores into one-stop shopping centers Generate more customer traffic Realize higher profit margins Increase impulse purchases – Walgreens Copyright © Houghton Mifflin Company. All rights reserved. 20