Utility to consumers

1
Utility to consumers
2
Example

• Soho Natural Soda, a startup producer of natural
  carbonated beverages, was operating out of a
  Brooklyn kitchen. With no money to build, rent or
  operate any bottling facilities, it persuaded a
  regional beer company to use its excess capacity
  to bottle the beverages. Soho then got brewer
  Anheuser-Busch to distribute the product. It soon
  grew from a kitchen table operation to 11
  million in sales, with little overhead or cost.
• The relationship between Soho and Anheuser Busch
  is an example of a ______________

Strategic channel alliance
3
Channel conflict

• Disagreement between channel members over goals,
  rewards and roles
• Horizontal conflict occurs among firms at the
  same level in the channel
• Example Holiday inn franchisees complaining
  about other franchisees endangering the hotel
  image
• Vertical conflict occurs among firms at different
  levels in the channel
• Disintermediation, Profit sharing, Attention

4
Channel conflict example Elizabeth Arden

• Elizabeth Taylor Black Pearls fragrance launch in
  Sept. 1995 delayed due to channel conflict
• Vertical conflict. Elizabeth Arden cut the
  contribution paid to department store retailers
  to help cover salaries of retail salespeople to 3
  percent of retail sales from the industry
  standard of 5 percent.
• Horizontal conflict. Elizabeth Arden elected to
  broaden distribution of Black Pearls beyond
  upscale department stores such as May, Dillard,
  and Federated department stores and include Sears
  and JCPenney stores.
• Consequences
• Upscale department stores decided not to carry
  the brand
• Elizabeth Taylor was upset and rumored to be
  considering a lawsuit!
• Cost of not launching was estimated at 15
  million
• The President of Elizabeth Arden resigned
• Finally launched in mid 1996 only through upscale
  stores with 5 margin

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Retailing

• 04/08/09

6
Retailing

• All activities involved in selling, renting, and
  providing goods and services to ultimate
  consumers for personal, family, or household use

7
Types of retailers

• Form of ownership
• Level of service
• Merchandise line

8
Form of ownership

• Independent Retailer (Mais restaurant)
• Higher level of service but more expensive to
  keep up with corporate competitors
• Personalization
• Corporate Chain (Nordstroms, Target)
• Standardized service levels
• Economies of scale
• Brand image driven
• Contractual Systems
• Franchises (Subway, MacDonalds)

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Franchising

• Benefits to franchisor
• Widespread distribution
• Lower cost
• Relatively greater control
• Benefits to franchisee
• Franchisor brand advantages
• Cheaper than building own brand

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Top 5 franchises (Entrepreneur Magazine)

• 2006
• Subway
• Quiznos
• Curves
• UPS store
• Jackson Hewitt tax service

• 2008
• 7-11 Inc.
• Subway
• Dunkin Donuts
• Pizza Hut
• MacDonalds

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Level of service

• Self-service
• ATMs, FedEx drop boxes
• Limited service
• Target, Wal-Mart
• Full service
• Bloomingdales, Nordstroms

12
Merchandise line
Breadth

• Breadth vs. Depth of line
• High depth
• Specialty stores (limited line, single line)
• Category killers
• High breadth
• General merchandise/department stores
• High breadth and depth
• Hypermarkets
• Supercenters

Shoes Shirts CDs Perfume DVD X X
X X X X X X X
X X X
Depth
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Breadth of line Scrambled merchandising
(1)
(2)
(3)
(4)
Scrambled merchandising leads to intertype
competition
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Retail marketing mix
Merchandise Assortment Store Atmospherics Customer
Service
Retail List Price Discounts
Product Price
Customers
Advertising Personal Selling Publicity Promotion
Location, Location, Location!
Place Promotion
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Price

• Retail list price
• Markup (Original vs. Maintained)
• Benchmark or signpost items prices used to
  determine merchandise value
• Discounts or markdowns
• Shrinkage
• Types of retailers by price
• Discount Stores (K-Mart, Wal-Mart)
• Buy merchandise at full wholesale price but takes
  less of a markup than traditional department
  stores.
• Off-price Retailers (T.J. Maxx, Warehouse Clubs,
  Outlet Stores, Single price stores)
• Buy merchandise at less than regular wholesale
  price and charges consumers much less than retail
  price.

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Wheel of retailing
17
Forms of non-store retailing
Active customer involvement
High
Direct selling
Tele- marketing
On-line retailing
Television home shopping
Direct mail and catalogs
Automatic vending
Low
Active retailer involvement
Low
High
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Future of retailing Multichannel

• Multichannel retailers utilize a combination of
  traditional store formats with non store formats
• Convenience for consumers
• Greater reach for retailers
• Is cannibalization a concern?

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Multichannel multiplier
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Future of retailing Technology

• Smart cards
• RFID tags
• Smart shopping carts
• ...Concierge is an 8.5-inch computer screen that
  attaches to the handle of the cart, leaving
  enough room for a child to sit in the toddler's
  seat. The store gives you an electronic key,
  which you plug in to the cart's computer to
  activate Concierge. (When not in use, the key is
  small enough to fit on a keychain.) The key
  signals your identity, your grocery list and your
  shopping habits. As you walk down an aisle, the
  screen displays items from your shopping list
  located in that aisle. When you scan an item on
  the cart's scanner, the computer takes the item
  off your shopping list. The computer also keeps a
  running tab of how much you're spending. And for
  any given product, you can call up detailed
  nutritional information and recipe ideas ...