Marketing: Real People, Real Decisions Retailing and E-tailing Chapter 15 Lecture Slides Solomon, Stuart, Carson, & Smith Your name here Course title/number.

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Retailing and E-tailing

Chapter 15

Lecture Slides

Solomon, Stuart, Carson, & Smith

Your name here

Course title/number

Date

©Copyright 2003 Pearson Education Canada Inc. 15-2

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Chapter Learning Objectives

When you have completed your study of this chapter, you should be able to:

• Define retailing and describe how retailers evolve over time.

• Understand the importance of store image to a retail positioning strategy, and explain some of the actions a retailer can take to create a desired image in the marketplace.

• Classify retailers by their selection of merchandise.

• Describe the opportunities and barriers to e-tailing.

• Describe the major forms of non-store retailing.


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Introduction to the Topic

• Our previous discussion focused on distribution and the use of marketing intermediaries to provide the place utility that consumers are looking for. Most of the discussion was on middle companies.

• This chapter looks at the final step in the distribution process, which is retailing.

• Retailing is big business: 1 in 8 Canadians work in the over 180,000 stores in Canada, which represents 6.2% of the gross domestic product for the country.

• Retailing is also changing, with new forms emerging to suit the needs and wants of today’s consumers.


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Retailing

• Retailing: the final step in the distribution channel by which goods and services are sold to consumers for their personal use.

• Retailing is a broad category that includes traditional stores, as well as direct selling using mail or in person, vending machines, catalogues, and now electronic merchants via the Internet.

• Wheel-of-retailing hypothesis: a theory that explains how retail firms change, becoming more upscale as they go through their life cycle.

• This is based on the observation that many retailers enter and gain a foothold in the market by offering lower prices. These stores eventually move upscale in response to new entrants.

• Sears, Zellers, and now Wal-Mart?


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Trends in Retailing

• Retail life cycle: a process that focuses on the various retail life cycle stages from introduction to decline. This is similar to the product life cycle, except that it applies to retailers, not products.

• The points to recognize are that consumers are easily bored, and good new ideas in retailing are quickly copied by competitors.

• Future trends affecting retailing:

• Demographics: – extra hours to cope with single parent

and dual career families,

– value-added services,

– catering to specific age groups

– recognizing ethnic diversity


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Trends in Retailing (continued)

• Technology:– The use of in-store video and computers to communicate with

shoppers.

– In-store price scanners to allow consumers to check prices

– In-store terminals to allow consumers to look up inventory availability

– Wireless networks to allow consumers to scan their own purchases without line-ups.

– Holographic imaging to produce exact sizing information, which could be linked to a mass-customization production system.


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Trends in Retailing (continued)

• Point-of-sale (POS) systems: retail computer systems that collect sales data and are hooked directly into the store’s inventory control system.

• POS systems deserve a special mention for how they have changed retailers’ operations since their adoption.

• In the old days, retailers depended on price tags and checkout people who could type them in on a cash register, hopefully with some degree of accuracy.

• Inventory re-ordering was done by walking around the store and looking for empty shelves, a slow and inefficient process!

• Scanners have changed everything, allowing for unprecedented control and quality of information.


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Classifying Retailers by What They Sell

• Merchandise mix: the total set of all products offered for sale by a firm, including all product lines sold to all consumer groups.

• Merchandise assortment: the range of products sold.

• Merchandise breadth: the number of different product lines available.

• Merchandise depth: the variety of choices available for each specific product.

• Inventory turnover: the average number of times a year a retailers expects to sell its inventory. Also known as stock turns.

Figure 15.1


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Classifying Retailers by Store Type

• Scrambled merchandising: a merchandising strategy that offers consumers a mixture of merchandise items that are not directly related to each other.

• Convenience stores: a small store located near a residential area that is open long hours, seven days a week and carries a limited line of high-turnover convenience goods.

• Supermarkets: large, low-cost, low-margin, high-volume, self-service stores that carry a wide variety of food, laundry, and household products.

• Loblaws, Provigo, and Sobeys are the major players in this industry.


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• Specialty stores: a retail store that carries a narrow product line with deep assortment within that line.

• Off-price retailers: retailers that buy excess merchandise from well-known manufacturers and pass the savings on to customers.

• Warehouse (wholesale) clubs: off-price retailers that sell a limited selection of brand-name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to members who may have to pay annual membership fees to belong.


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• Factory outlets: off-price retailing operations that are owned and operated by manufacturers and that normally carry the manufacturer’s surplus, discontinued, or irregular goods.

• These types of outlets sometimes congregate in small towns to become a destination for shopping. Examples: North Conway, New Hampshire, or Kittery, Maine.

• Department stores: a retail organization that carries a wide variety of product lines-typically clothing, home furnishings, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers.

• Examples: Sears, Zellers, and Wal-Mart


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• Superstore: a store almost twice the size of a regular supermarket that carries a large assortment of routinely purchased food and non-food items, and offers such services as dry cleaning, post offices, photo-finishing, cheque cashing, bill paying, lunch counters, and car or pet care.

• Hypermarkets: retailers with the characteristics of both warehouse stores and supermarkets; hypermarkets are several times larger than other stores and offer virtually everything from grocery items to electronics.

• These types of stores are more popular in Europe and Latin America.

• The question for the future will be: what happens when people decide they don’t want to do all of the walking necessary to shop in these large stores?


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Retailing as Theatre

• Today’s consumers want not only to acquire the goods they are looking for, but also to be entertained while they are doing it.

• Store image: the way a retailer is perceived in the marketplace relative to the competition. The image of the store should be consistent with the products sold and the interests of the target markets selected.

• Atmospherics: the use of colour, lighting, scents, furnishings, and other design elements to create a desired store image.

• The goal is to get consumers to stay in the store longer, because this equates to more money spent.


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Retail Store Design

• Store design is important to creating the image that the retailer wishes to convey as well as providing the functional elements that facilitate the storage and display of merchandise, as well as the movement of people through its spaces.

• Observational research can be used to help design stores that work better.

• Traffic flow: the direction in which shoppers move through the store and what areas they pass or avoid.

• Modern grocery stores place the staple products at the four corners to encourage customers to walk through the whole store, which encourages impulse buying. Figure 15.2


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Retail Store Design (continued)

• Other aspects of store design: – Fixture type

– Merchandise density– Sounds and music used– Colour and lighting

• Store personnel:– Number available– Quality of service provided

including friendliness, empathy, and knowledge of products.

– This can be difficult, given the low wages typically paid to young people, who make up the largest group working retail.

• The store design and atmospherics should also be consistent with the pricing policy used.


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Retail Store Location

• Store location is very important to attracting the consumers that are being targeted by the retailer. There are many factors that influence how this decision is made, including the nature of the products sold, the customers, costs, and availability.

• Four types of locations:– Business districts– Shopping centres– Free-standing retailers, in or out of

retail parks.– Non-traditional locations, such as

carts or kiosks in high traffic areas.

• Trade area: a geographic zone that accounts for the majority of a store’s sales and customers.


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E-tailing and Non-Store Retailing

• Non-store retailing: any method used to complete an exchange with a product end user that does not require a customer visit to a store. Can include direct marketing using television, mail, people, or the Internet, catalogues, and vending machines.

• E-tailing: offering products for sale directly to consumers via the Internet. Originally known as e-commerce.

• Direct marketing: exposing a consumer to information about a good or service through a non-personal medium and convincing the customer to respond with an order.


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Benefits to Consumers of E-tailing

• E-tailing offers consumers a number of benefits which helps to explain its popularity.

• Amazon.com was one of the early pioneers of e-tailing, who have struggled to make a profit despite their size and volume.

• Bots: electronic robots or shopping agents that help consumers find products and prices on the Internet.

Figure 15.5


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Factors Limiting E-tailing

• There are still a number of factors that limit the success of e-tailing via the Internet.

• One of the biggest problems is the lack of differentiation between e-tailers, which forces them into competing on the basis of price, which kills any hope of profitability.

Figure 15.4


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Products Suited to E-tailing

Table 15.1


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Other Aspects of E-tailing

• Push technology: Internet tools that allow marketers to send information they think is relevant to consumers directly to their computers.

• Portals: gateways to the Internet that assist consumers to navigate the Internet and customize their experience.

• Webcast: real-time transmission of encoded video under the control of a server to multiple recipients, who all receive the same content at the same time.

• Scalability: the ability of organizations to get bigger without a big rise in expenses.


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Other Forms of Non-store Retailing

• Catalogue: a collection of products offered for sale in book form, usually consisting of product descriptions accompanied by photos or illustrations of the items.

• Catalogues have benefited from the Internet, as it saves them on the costs of printing and mailing, and allows for faster updating of pricing and availability of products offered.

• Direct mail: a brochure or pamphlet offering offering a specific product or service at one point in time.

• Also known as junk mail, this industry has developed much more precise ways to target individuals using geodemographic information.


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Direct Selling

• Direct selling: an interactive sales process, in which a salesperson presents a product to one individual or a small group, takes orders, and delivers the merchandise.

• Party plan system: a sales technique that relies heavily on people getting caught up in the “group spirit” buying things they would not normally buy if alone. Example: Tupperware uses this technique.

• Multilevel marketing: a system in which a master distributor recruits other people to become distributors, sells the company’s products to recruits and receives commission on all the merchandise they sell.

• Examples: Amway, Melaluca


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Other Forms of Non-store Retailing

• Pyramid schemes: an illegal sales technique, in which the initial distributors profit by selling merchandise to other distributors, with the result that consumers buy very little product.

• Telemarketing: a sales technique, in which direct selling is conducted over the telephone.

• Automatic vending: using vending machines to distribute products directly to consumers. Used extensively for, but not limited to snack foods and beverages.

• Direct-response TV: television programming, such as infomercials or shopping channels, that elicits direct orders for products from the viewing public.


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Famous Last Words…

• Retailing is a fast-paced industry that is attempting to adapt itself to the whims of the consumer.

• Today’s consumers want it all, and they want to be entertained while they are doing it.

• The trick is trying to stay ahead of these trends.

Marketing: Real People, Real Decisions Retailing and E-tailing Chapter 15 Lecture Slides Solomon, Stuart, Carson, & Smith Your name here Course title/number.

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