Chapter 15 Retailing

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Chapter 15RetailingIntroductionAn intermediary involved in selling goods and services to ultimate consumers (examples?)WholesalerRetailerAn intermediary that takes title to the goods it handles and redistributes them to retailers, other distributors, and sometimes end consumersEmploys 24 million people in the U.S.Accounts for $4.5 trillion to the U.S. economy2STRATEGIC IMPLICATIONS: RETAIL MARKETING STRATEGYA retailer develops a marketing strategy based on the firms goals and strategic plansTwo fundamental steps:Picking a target market: size and profit potential. POSITION. Developing a retailing mix to satisfy the chosen target market4Ps + Personnel & Presentation used to create a retail image

3http://www.youtube.com/watch?v=qBo8dF1pnScTargetMarketProductPricePlacePromotionPersonnelPresentationThe Retailing Mix4Choosing the Merchandising MixThe mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.5Merchandising (Product) StrategyCategory 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

6Presentation of the Retail Store - AtmosphereThe overall impression conveyed by a stores physical layout, dcor, and surroundings.Five Senses.

7Suggestion SellingTrading UpTwo Common SellingTechniquesPersonnel and Customer Service8PricePrice and payment options : how important?http://www.youtube.com/watch?v=kMimygVTgbUThe amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted.9HOW THE VIEWS OF THESE STORES' REGULAR SHOPPERS COMPARETargetNeiman Marcus and SaksMacy'sJ.C. PenneyOptimistic about the economy in next 6 months 33%35%36%33%Shopping closer to home38%26%36%44%Shopping for sales more often42%22%39%45%Spending less on clothing39%28%35%42%Taking fewer shopping trips39%11%34%44%Target

Neiman MarcusMacy's

J.C. Penney

Age 18-34104999289Age 35-64110112110105Age 65 and older69708297Education high school82717892Education college112115113105Household size two or fewer88919195Income less than $40,00063555675Income $40,000-$99,00012196116120Income $100,000 and more155240186122Compared to US pop as a whole: 100 is average.Classification of Retail byOwnership (independent, franchise chain)Service level (Nordstrom vs. Wal-mart)Assortment (CVS vs. Smiths)Price (Tiffany vs. jewelry kiosk)

12Types of Retailers

13Department Stores

Assort-mentPriceGrossMarginBroadHighHighService LevelHigh

14General Merchandise retailer:Variety of product lines with considerable depth.

Dept stores:mid 1800sWide lines -- at least 25 people.Product lines organized into separate departments.Service-orientedSpecialty Stores Specialty Stores

Assort-mentPriceGrossMarginNarrowHighHighType of RetailerSpecialty StoreService LevelHigh

15Specialty Discount Stores OR Category Killers

Specialty DiscountStoresAssort-mentPriceGrossMarginNarrowLowLowType of RetailerSpecialty Discount StoreService LevelLow

Deep Assortment16Discount Stores

Broad AssortmentLow priceLow marginDiscountLow ServiceShallow Assortment17Discount stores:Self-service.Brands and store brands at low prices.Off-Price Retailer

Narrow Line PricesLow pricesLow marginsOff-price RetailerLow service18Less wide; but deep.

Supercenters BroadModerate pricesLow marginsSupermarketLow service

19SupermarketsLarge, self-service retailer with grocery specialtySelf-scanning trend: what is your take?Competition: fierce, 1% profit on many items

20Warehouse ClubsWarehouse club / wholesale club (Sams, Costco)No frills, members only (why?)Bulk purchases: price competition, homogeneous shopping goods

21Convenience StoresConvenience productsOften with gas stations Convenience stores: fill-in your regular shoppingCompetition (fast food also)24/7 is more importantWe pay for the convenience

22Non-Store RetailingVending: hi costs; hi prices (flat sales)Vending is a $40 billion U.S. marketCashless vending=wave of futureDirect Marketing (Mail, Catalog, Telemarketing)E-tailing (TV shopping, online)M-commerce: buy from mobile devices(e.g., cell phones)

23Wheel of RetailingNewer, low-price types of retailing arise to challenge older established bigger retailers.24

No Frills Motel

Motel+ Free Breakfast

Motel+ Free Breakfast+ HBO

Motel+ Free Breakfast+ HBO+ Happy Hour

New EntrantWheel of Retailing1234a theory to explain the institutional changes 25eTailing and DTCeTail= electronic retailDTC= Direct to consumerShrinking use of wholesalers? (bypassing wholesalers more and more)eBay: hybrid etailer/online auction siteEven sells services online(examples of serviceson ebay?)

26http://www.youtube.com/watch?v=FKC_c5sQ5A4eTailMore innovative e-tail sites Printing online www.printresponsibly.comNike ID http://nikeid.nike.comZappos http://www.zappos.com

27Future of re[E]tailinghttp://www.youtube.com/watch?v=jtiJaX6q1i0