2001 SouthWestern College Publishing

1
CHAPTER ELEVEN

• RETAILING

Prepared by Jack Gifford Miami University (Ohio)
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THE ROLE OF RETAILING

• Retailing - all the activities directly related
  to the sale of goods and services to the ultimate
  consumer for personal, non-business use has
  enhanced the quality of our daily lives.
• Retailing affects all of us directly in our daily
  lives.
• Retailing includes obvious businesses like
  department stores and supermarkets, but also
  hotels, movie theatres, restaurants, and
  professional sports games.

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THE RETAILING INDUSTRY

• Employs over 20,000,000 people in the United
  States, representing 1 out of 5 workers
• Retailers in the US ring up over 2.2 trillion in
  sales each year, representing over 25 of our GDP
• Although retailing has many small and large
  retailers, the largest 10 do over one-half of
  the total retail dollars and employ 40 of all
  retail workers.

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CLASSIFICATION OF RETAIL OPERATIONS

• Retail ownership can be classified according to
  its
• Ownership
• Level of Service
• Product assortment
• Price
• Margin
• Turnover
• In-store vs Out-of-store

We can best understand the meaningful differences
and similarities between retailers by discussing
in four pairs.
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ASSORTMENT STRATEGY 1
High Margin
Convenience Stores
Gucci Specialty Store
High Turnover
Low Turnover
Old Navy Specialty Store
KMart
Low Margin
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ASSORTMENT STRATEGY 2
Deep
Old Navy Specialty Store
May Company Department Stores
Wide
Narrow
Gucci Specialty Store
KMart
Convenience Stores
Shallow
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SERVICE / PRICE STRATEGY
High Price
Gucci Specialty Store
May Company Department Stores
Convenience Stores
Low Margin
High Margin
KMart
Low Price
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CLASSIFICATION BY OWNERSHIP AND PHYSICAL PRESENCE

• Ownership
• Independent
• Chain
• Franchise
• Physical Presence
• In-store
• Non-store presence
• Door-to-door
• Telemarketing
• Internet marketing
• Direct-response
• Direct-mail and catalog
• Catalog

A careful examination of any form of retailing
against these eight dimensions provides a fairly
clear picture of the nature of that organization
and how the marketing mix will be best applied to
support their corporate objectives.
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TRADITIONAL CLASSIFICATIONS

• Department stores
• Moderately high margin and medium high turnover
• High service and moderate price
• Deep and wide assortment
• Mostly large chains and in-store presence
• Current market strategies
• Trying to gain back market share from specialty
  stores
• Reduce prices and costs through consolidation and
  acquisitions

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TRADITIONAL CLASSIFICATIONS

• Specialty Stores
• Almost always narrow and deep
• Moderately high margin and moderately high
  turnover
• High service and low to high price
• Independent, chain or franchise
• In-store or non-store
• Trends
• High growth around niche markets
• Distinctive atmospherics

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TRADITIONAL CLASSIFICATIONS

• Supermarkets
• Small margins, high turnover, scrambled
  merchandising, limited service
• Increase in specialty foods, ethnic foods and
  pre-prepared meals
• Movement toward superstores that combine food and
  non-food products
• Increasing emphasis on loyalty programs

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TRADITIONAL CLASSIFICATIONS

• Drugstores
• Expanding depth and breadth of merchandise
• Increasing use of information technology to
  better serve regular customers
• Aging marketplace should provide strong demand in
  the coming years
• Electronic and direct mail pharmacy services are
  challenging in-store pharmacies

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TRADITIONAL CLASSIFICATIONS

• Discount stores, superstores, extreme-value
  stores and hypermarkets
• Stores such as Wal-Mart, Kmart, and Target are
  doing extremely well because of tight cost
  control, economies of scale, high turnover,
  every-day-low-prices (EDLP), and huge merchandise
  depth and breadth. They are also expanding
  overseas and experimenting with various
  superstore and smaller supermarkets.

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TRADITIONAL CLASSIFICATIONS

• Discount specialty stores and category killers
• Represent a blending of a specialty store and a
  deep discount store to offer a very large
  selection of a narrow category of merchandise and
  low prices (Toys R Us, Circuit City, PetsMart,
  Office Depot)
• Low margin, high turnover operations, with tight
  cost controls

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TRADITIONAL CLASSIFICATIONS

• Other major classifications of retailers include
• Warehouse clubs
• Factory outlets
• Non-store retailing
• Automatic vending
• Direct retailing (door-to-door, office-to-office,
  home sale parties)
• Direct-response marketing (direct mail,
  catalog's, telemarketing, shop-at-home networks
  (TV and telephone)

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TRADITIONAL CLASSIFICATIONS

• Other major classifications of retailers include
  (continued)
• Non-store retailing(continued)
• Online retailing
• Although currently small, growing at over 100
  per year
• Has been very successful in selling specialty
  products, including music, books, computers, and
  software

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TRADITIONAL CLASSIFICATIONS

• Franchising
• In the United states, there are over 500,000
  franchisers with combined sales approaching 1
  trillion, or one-third of all retailing.
• Product and trade name franchising (Coca-Cola)
  and business format franchising (Burger King) are
  the two basic forms of franchising
• Franchising has aggressively expanded
  internationally, with 27 McDonald franchises in
  Moscow, The Russian Federation, alone.

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RETAIL STRATEGIC MARKETING

• Retailers must develop marketing strategies based
  upon overall goals and strategic plans.
• Key tasks in strategic retailing are...

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

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RETAIL STRATEGIC MARKETING

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

• Successful retailing has always been based upon
  knowing the customer
• Target markets are often defined by demographics,
  geographies, and psychographics
• Defining a viable target market for the present
  and the future is essential before deciding on a
  retail marketing mix

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RETAIL STRATEGIC MARKETING

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

• Retailers must have the right product at the
  right time in the right amounts. Any wrongs
  will spell disaster in todays competitive
  marketplace.
• The appropriate depth and breadth must be
  carried.
• The appropriate mix of national brands, designer
  brands, and private label is essential.

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RETAIL STRATEGIC MARKETING

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

• Customers have become very sophisticated in
  terms of price comparisons, and shop between
  competing forms of retailers for many products.
• A strong distinctive competitive advantage today
  is to be the low cost, and subsequently the low
  price, outlet of a major product category.

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RETAIL STRATEGIC MARKETING

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

• Includes advertising, public relations, and
  sales promotion
• Retailers are experimenting with new media and
  changing mixes of promotions to most effectively
  reach the customer.
• Increased use of direct mail, catalog programs,
  and frequent shopper plans

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RETAIL STRATEGIC MARKETING

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

• The key to successful in-store retailing is
  location, location, and location!
• Store may be free standing or part of central
  business district or shopping center
• Shopping centers come in various sizes, from the
  small strip cluster to enormous super-regional
  centers containing over 850 stores.

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RETAIL STRATEGIC MARKETING

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

• All retailers, including self service retailers,
  are emphasizing the importance of knowledgeable
  and friendly sales personnel.
• Personnel shortages, low wages, and a low image
  have made it difficult for retailers to attract
  and retain qualified sales personnel.
• This difficult situation will become an
  increasing problem in the coming years.

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RETAIL STRATEGIC MARKETING

• Defining and selecting a target market
• The marketing mix, plus 2
• Product (assortment)
• Pricing
• Promotion
• Place (distribution)
• Personnel
• Presentation

• Presentation relates to the visual impact of a
  store on customers and its ability to generate
  high sales per square foot.
• Retailers must think of their stores as a stage,
  with sounds, lights, smells, props (fixtures),
  colors, and layout all supporting the
  atmospherics and theme of the store and the
  message it is try to convey.

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GLOBAL RETAILING

• The world is becoming a single marketplace, with
  US retailers opening new stores outside the US,
  foreign retailers entering the US market, and the
  combining of retail entities and formats across
  national boundaries to the advantage of all
  parties.
• With the creation of NAFTA, the EC, and Mercosur,
  tariff and trade barriers are disappearing.

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TRENDS IN RETAILING INCLUDE...

• Entertainment
• Convenience and efficiency
• Share of customer
• The communications and electronic revolution
• Consolidation and integration
• Strategic alliances
• Internationalization
• ..and much, much more!