Unit 4: Retailing
Major types of retail stores
1.) General-merchandise retailers 2.) Specialty retailers
Television home shopping
A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card
General-merchandise retailers
A retail establishment that offers a variety of product lines that are stocked in considerable depth Include: Department stores Discount Stores Convenience stores Supermarkets Superstores Hypermarket Warehouse clubs Warehouse shows
Category management
A retail strategy of managing groups of similar, often substitutable, products produced by different manufacturers ex: Cosmetics, foods, clothing The assortment of merchandise a store chooses through category management is strategic and meant to improve sales and enhance customer satisfaction. Successful category management involves collecting and analyzing data on sales and consumers and sharing the information between the retailer and manufacturer.
Convenience stores
A small self-service store that is open long hours and carries a narrow assortment of products, usually convenience items such as chips, sodas, newspaper, gasoline , ATMs less than 5,000 sq. ft and are open 24 hours, 7 days a week stock about 500 items ex: 7-Eleven
Direct-response Marketing
A type of marketing in which a retailer advertises a product and makes it available through mail, telephone orders, or online orders e: television commercial offering exercise machines, cosmetics, or household cleaning products available through a toll-free number, and a newspaper or magazine products must be priced above $20 to justify the advertising
Catalog Marketing
A type of marketing in which an organization provides a catalog from which customers make selections and place orders by mail, telephone, or the Internet
Power Shopping center
A type of shopping center that combines off-price stores with category killers These centers may be anchored by popular stores, such as the Gap, Toys 'R' Us, PetSmart, and Home Depot. Power shopping centers can take a variety of formats, all vying (compete eagerly with someone in order to do or achieve something.) for the same retail dollar ex: WIllowcreek Mall
Lifestyle shopping center
A type of shopping center that is typically open air and features upscale specialty, dining, and entertainment stores they are often located near affluent neighborhoods and may have fountains, benches, and other amenities that encourage "casual browsing." Appealing architectural design is an important aspect of these "mini-cities," which may include urban streets or parks, and is intended to encourage consumer loyalty by creating a sense of place.
Category Killer
A very large specialty store that concentrates on a major product category and competes on the basis of low prices and product availability they expand rapidly and gain sizable market shares, taking business away from smaller, higher-cost retail outlets ex: home depot (home improvement), Staples (office supplies), Pest smart (pet supplies)
Commission agents
Agents that receive goods on consignment from local sellers and negotiate sales in large, central markets
Retailing
All transactions in which the buyer intends to consume the product through personal, family, or household use
Franchise
An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration
Wholesaler
An individual or organization that sells products that are bought for resale, for making other products, or for general business operations can include services
Retailer
An organization that purchases products for the purpose of reselling them to ultimate consumers
Services provided by wholesalers
By initiating sales contacts with a producer and selling diverse products to retailers, wholesalers serve as an extension of the producer's sales force. Wholesalers also provide financial assistance. They often pay for transporting goods, reduce a producer's warehousing expenses and inventory investment by holding goods in inventory, extend credit and assume losses from buyers who turn out to be poor credit risks, and can be a source of working capital when they buy a producer's output in cash. Wholesalers also serve as conduits for information within the marketing channel, keeping producers up-to-date on market developments and passing along the manufacturers' promotional plans to other intermediaries. Using wholesalers, therefore, gives producers a distinct advantage because the specialized services wholesalers perform allow producers to concentrate on developing and manufacturing products that match customers' needs and wants. Wholesalers support retailers by assisting with marketing strategy, especially the distribution component. Wholesalers also help retailers select inventory. They are often specialists on market conditions and experts at negotiating final purchases. In industries in which obtaining supplies is important, skilled buying is indispensable. Effective wholesalers make an effort to understand the businesses of their customers. They also must now understand digital marketing and digital communications. Wholesalers can also reduce a retailer's burden of looking for and coordinating supply sources. If the wholesaler purchases for several different buyers, expenses can be shared by all customers. Furthermore, whereas a manufacturer's salesperson offers retailers only a few products at a time, independent wholesalers always have a wide range of products available. Thus, through partnerships, wholesalers and retailers can forge successful relationships for the benefit of customers.
Direct Marketing
Communicating via media with end consumers who can then purchase products through that media Types of direct marketing: • Catalogs • Direct Responses • Telemarketing • TV home shopping • Online retailing 8.7% of U.S. GDP
web-rooming
Consider that most shoppers now research products online and then head to the nearest store to make the actual purchase—a practice sometimes
Multichannel retailing
Employing multiple distribution channels that complement their brick-and-mortar stores with websites, catalogs, and apps where consumers can research products, read other buyers' reviews, and make actual purchases The most effective multichannel retail strategies integrate the firm's goals, products, systems, and technologies seamlessly across all platforms so that a customer can research a product through the firm's website at home, find specific information about the product and locate the nearest one through an app on their smartphone while in the car, and check out in a store or online.
Direct selling limitation
Expensive However, because commissions for salespeople are high, around 30 to 50 percent of the sales price, and great effort is required to isolate promising prospects, overall costs of direct selling make it the most expensive form of retailing. ome customers view direct selling negatively, owing to unscrupulous and fraudulent practices used by some direct sellers.
Limited-line wholesalers
Full-service wholesalers that carry only a few product lines but many products within those lines such as groceries, lighting fixtures, or oil-well drilling equipment, but offer an extensive assortment of products within those lines.
Specialty-line wholesalers
Full-service wholesalers that carry only a single product line or a few items within a product line Rack jobber
General-merchandise wholesalers
Full-service wholesalers with a wide product mix but limited depth within product lines They deal in products such as drugs, nonperishable foods, cosmetics, detergents, and tobacco
Rack jobbers
Full-service, specialty-line wholesalers that own and maintain display racks in stores
Superstore
Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products Superstores combine features of discount stores and supermarkets and generally carry about four times as many items as supermarkets. Superstores also offer additional services, including dry cleaning, automotive repair, check cashing, and bill paying. Examples include Walmart Super-centers, some Kroger stores, SuperTarget stores, and Super Kmart Centers. Sales volume is typically two to three times that of supermarkets, partly because locations near good transportation networks help generate the in-store traffic needed for profitability. Tall shelving 200,000 square feet ex: Walmart Super-centers, Super Target
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 For instance, H&M is positioned as a low-priced fashion-forward retailer. However, in an effort to be associated with fair business practices, the chain announced that prices would increase to allow the retailer to pay its employees a living wage, repositioning itself as a socially responsible retailer—not just a very low-priced one.
Manufacturers' agents
Independent intermediaries that represent two or more sellers and usually offer customers complete product lines
Merchant Wholesalers
Independently owned businesses that take title to goods, assume ownership risks, and buy and resell products to other wholesalers, business customers, or retailers
Brokers
Intermediaries that bring buyers and sellers together temporarily
Selling agents
Intermediaries that market a whole product line or a manufacturer's entire output
Agents
Intermediaries that represent either buyers or sellers on a permanent basis
Advantages of a Franchise
It enables a franchisee to start a business with limited capital and benefit from the business experience of others. Generally speaking, franchises have lower failure rates than independent retail establishments and are often more successful because they can build on the established reputation of a national brand. Nationally advertised franchises, such as Subway and Burger King, are often assured of sales as soon as they open because customers already know what to expect. If business problems arise, the franchisee can obtain guidance and advice from the franchisor at little or no cost. Also, the franchisee receives materials to use in local advertising and can benefit from national promotional campaigns sponsored by the franchisor. Through franchise arrangements, the franchisor gains fast and selective product distribution without incurring the high cost of constructing and operating its own outlets. The franchisor, therefore, has more available capital for expanding production and advertising. It can also ensure, through the franchise agreement, that outlets are maintained and operated according to its own standards. Some franchisors do permit their franchisees to modify their menus, hours, or other operating elements to better match their target market's needs. The franchisor benefits from the fact that the franchisee, being a sole proprietor in most cases, is likely to be very highly motivated to succeed. Success of the franchise means more sales, which translates into higher income for the franchisor
Direct Selling Benefit
It gives the marketer an opportunity to demonstrate the product in a comfortable environment where it most likely would be used. The seller can give the customer personal attention, and the product can be presented to the customer at a convenient time and location.
Department stores
Large retail organizations characterized by a wide product mix and organized into separate departments to facilitate marketing efforts and internal management departments: cosmetics, housewares, appliances, etc ex: Macy's, Sears, JCPenney At typical department stores, a large proportion of sales come from apparel, accessories, and cosmetics Often, each department functions as a self-contained business, and buyers for individual departments are fairly autonomous in their decision making.
Supermarket
Large, self-service stores that carry a complete line of food products, along with some nonfood products Supermarkets are arranged by department for maximum efficiency in stocking and handling products, but have central checkout facilities. They offer lower prices than smaller neighborhood grocery stores, usually provide free parking, and may also provide services such as check cashing. Consumers make the majority of all their grocery purchases in supermarkets 20,000 sq. ft ex: Kroger
Warehouse club
Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing buying clubs, warehouse clubs offer the same types of products as discount stores but in a limited range of sizes and styles. warehouse club handles only 3,500 to 5,000 products, usually brand leaders little to no marketing ex: Sam's Club Costco
Mail-order wholesalers
Limited-service wholesalers that sell products through catalogs
Drop Shippers
Limited-service wholesalers that take title to goods and negotiate sales but never actually take possession of products
Truck wholesalers
Limited-service wholesalers that transport products directly to customers for inspection and selection
Cash-and-carry wholesalers
Limited-service wholesalers whose customers pay cash and furnish transportation
Sales branches
Manufacturer-owned intermediaries that sell products and provide support services to the manufacturer's sales force
Sales offices
Manufacturer-owned operations that provide services normally associated with agents
Direct Selling
Marketing products to ultimate consumers through face-to-face sales presentations at home or in the workplace ex: Avon
Full-service wholesalers
Merchant wholesalers that perform the widest range of wholesaling functions Although full-service wholesalers often earn higher gross margins than other wholesalers, their operating expenses are also higher because they perform a wider range of functions.
Limited-service wholesalers
Merchant wholesalers that provide some services and specialize in a few functions charge lower rates and have smaller profit margins than full-service wholesalers.
Benefits of Television home shopping
Products can be demonstrated easily, and an adequate amount of time can be spent showing the product so viewers are well-informed. The length of time a product is shown depends not only on the time required for performing demonstrations but also on whether the product is selling. Once the calls peak and begin to decline, hosts switch to a new product. Other benefits are that customers can shop at their convenience and from the comfort of their homes. This method is particularly popular among older consumers, who tend to be less comfortable with online shopping and are less mobile to physically go to a store.
Warehouse showroom
Retail facilities in large, low-cost buildings with large on-premises inventories and minimal services few services, few personnel ex: Ikea
Location of Retail stores
Retailers consider various factors when evaluating potential locations, including position of the firm's target market within the trading area, kinds of products being sold, availability of public transportation, customer characteristics, and placement of competitors' stores.
Extreme-value stores
Retailers that are a fraction of the size of conventional discount stores and typically offer very low prices on smaller size name-brand nonperishable household items generally $1-$10 Dollar stores and single-price stores ex: Dollar tree, 99 cent store, dollar general offer lower per unit prices than discount stores but often charge more when priced per ounce than stores whose customers can afford to stock up on supersized items
Online retailing
Retailing that makes products available to buyers through computer connections Online retailing satisfies an increasing expectation among consumers to have multiple channels available to obtain the goods and services they desire at their convenience.
Discount stores
Self-service, general-merchandise stores that offer brand-name and private-brand products at low prices Discounters accept lower profit margins than conventional retailers in exchange for high sales volume. To keep inventory turnover (how many times they sale and replenish items) high, they carry a wide but carefully selected assortment of products, from appliances to housewares to clothing. Major discount establishments also offer food products, toys, automotive services, garden supplies, and sports equipment. offer everyday low prices rather than having a lot of sales handle 40,000 products second line brand names ex: Walmart and Target
Strategic issues in retailing
Store location Technology Retail positioning Store image Category management
Off-price retailers
Stores that buy manufacturers' seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts offer limited lines of national-brand and designer merchandise, usually clothing, shoes, or housewares. perform well in recessions charge 20 to 50 percent less than department stores for comparable merchandise but offer few customer services. Some of these stores do not take returns or allow exchanges. ex: Burlington, Marshall's
Traditional specialty retailers
Stores that carry a narrow product mix with deep product lines Sometimes called limited-line retailers, they may be referred to as single-line retailers if they carry unusual depth in one product category. Specialty retailers commonly sell such shopping products as apparel, jewelry, sporting goods, fabrics, computers, and pet supplies. Because they are usually small, specialty stores may have high costs in proportion to sales, and satisfying customers may require carrying some products with low turnover rates. Specialty stores usually offer better selections and more sales expertise than department stores, their main competitors. By capitalizing on fashion trends, service, personnel, atmosphere, and location, specialty retailers position themselves strategically to attract customers in specific market segments. ex: The limited, GAP, American eagle
Hypermarket
Stores that combine supermarket and discount store shopping in one location 225,000 to 325,000 square feet offer 45,000 to 60,000 types of low priced products 40% to 50% of space allocated to groceries and rest to general merchandise lease to banks, optical shops ex: Carrefour, walmart
Disadvantages of a Franchise
The franchisor can dictate many aspects of the business: décor, menu, design of employees' uniforms, types of signs, hours of operation, and numerous details of business operations. In addition, franchisees must pay to use the franchisor's name, products, and assistance. Usually, there is a one-time franchise fee and continuing royalty and advertising fees, often collected as a percentage of sales. Franchisees often must work very hard, putting in 10- to 12-hour days six or seven days a week. In some cases, franchise agreements are not uniform, meaning one franchisee may pay more than another for the same services. Finally, the franchisor gives up a certain amount of control when entering into a franchise agreement with an entrepreneur. Consequently, individual establishments may not be operated exactly according to the franchisor's standards.
Telemarketing
The performance of marketing-related activities by telephone Telemarketing can help to generate sales leads, improve customer service, speed up payments on past-due accounts, raise funds for nonprofit organizations, and gather marketing data
Atmospherics
The physical elements in a store's design that appeal to consumers' emotions and encourage buying Retailers can use different elements—music, color, and complexity of layout and merchandise presentation—to influence customer attention, mood, and shopping behavior.
Non-store Retailing
The selling of products outside the confines of a retail facility
Automatic Vending
The use of machines to dispense products . It is one of the most impersonal forms of retailing, and it accounts for a very small minority of all retail sales.
Store image
To attract customers, a retail store must project an image—a functional and psychological picture in the consumer's mind—that appeals to its target market. Store environment, merchandise quality, and service quality are key determinants of store image.
Wholesaling
Transactions in which products are bought for resale, for making other products, or for general business operations It does not include exchanges with ultimate consumers.
Interior atmospheric elements
aesthetic considerations, such as lighting, wall and floor coverings, dressing facilities, and store fixtures. Interior sensory elements contribute significantly to atmosphere.
point-of-sale systems
allow salespeople to view a customer's requests and needs online, an innovation lab, apps, mobile checkout, support for salespeople texting, a cloud-based men's personalized clothing service, and it began to use social media to build relationships with consumers and generate buzz.
Exterior atmospheric elements
appearance of the storefront, display windows, store entrances, and degree of traffic congestion are particularly important to new customers, who tend to base their judgment of an unfamiliar store on its outside appearance and may not ever enter if they feel intimidated by the appearance of the façade or if the location is inconvenient or inhospitable.
Advantages of Catalog Marketing
efficiency and convenience for customers because they do not have to visit a store The retailer benefits by being able to locate in remote, low-cost areas, save on expensive store fixtures, and reduce both personal selling and store operating expenses.
Specialty retailers
emphasize narrow and deep assortments specialty retailers do not sell specialty items Instead, they offer substantial assortments in a few product lines. Traditional specialty retailers Category Killers Off-price retailers
Factory outlet malls
feature discount and factory outlet stores carrying traditional manufacturer brands, such as Polo Ralph Lauren, Nike, and Guess. The advertisement highlights the Banana Republic factory store, which sells last season's Banana Republic fashions at discounted prices. This advertisement displays the low starting price of its products, $17.99, and includes a coupon for an additional 20 percent off. Many outlet centers feature upscale products from last season, discounted for quick sale. Manufacturers own these stores and make a special effort to avoid conflict with traditional retailers of their products. Manufacturers place these stores in noncompetitive locations, often outside of metropolitan areas. Factory outlet centers attract value-conscious customers seeking quality and major brand names. They operate in much the same way as regional shopping centers, but usually draw customers, some of whom may be tourists, from a larger shopping radius. Promotional activity is at the heart of these shopping centers. Craft and antique shows, contests, and special events attract a great deal of traffic.
Regional shopping centers
have the largest department stores, widest product mixes, and deepest product lines of all shopping centers Many shopping malls are regional shopping centers, although some are community shopping centers. With 150,000 or more consumers in their target market, regional shopping centers must have well-coordinated management and marketing activities. Target markets may include consumers traveling from a distance to find products and prices not available in their hometowns. Because of the expense of leasing space in regional shopping centers, tenants are likely to be national chains. Large centers usually advertise, have special events, furnish transportation to some consumer groups (such as seniors), maintain their own security forces, and carefully select the mix of stores.
Disadvantages of Catalog Marketing
inflexible, provides limited service, and is most effective for a selected set of products.
Super-regional centers
often have special attractions beyond stores, such as skating rinks, amusement centers, or upscale restaurants. Mall of America, in the Minneapolis area, is the largest shopping mall in the United States with 520 stores, including Nordstrom and Bloomingdale's, and 50 restaurants. The shopping center also includes a walk-through aquarium, a museum, a seven-acre Nickelodeon theme park, a 14-screen movie theater, hotels, and many special event The largest of these centers, sometimes called super-regional shopping centers, have the widest and deepest product mixes and attract customers from many miles away
Community shopping centers
one or two department stores and some specialty stores, as well as convenience stores. They draw consumers looking for shopping and specialty products not available in neighborhood shopping centers. Because these offer a wider variety of stores, they serve larger geographic areas and consumers are willing to drive longer distances to community shopping centers to shop. Community shopping centers are planned, and retailer efforts are coordinated to attract shoppers. Special events, such as art exhibits, automobile shows, and sidewalk sales, stimulate traffic. Managers of community shopping centers look for tenants that complement the centers' total assortment of products. Such centers have wide product mixes and deep product lines.
beacons
send real-time messages and offers to customers with Bluetooth-enabled smartphones. For this technology to work, however, customers must have downloaded the retailer's app onto their smartphones. The inexpensive beacons can activate apps that consumers may not otherwise use once they've downloaded them, thereby advancing a firm's engagement with the customer.
Neighborhood shopping centers
strip malls, usually consist of several small convenience and specialty stores, such as small grocery stores, gas stations, and fast-food restaurants. These retailers consider their target markets to be consumers who live within two to three miles of their stores, or 10 minutes' driving time. they do not coordinate selling efforts product mixes consist of essential products, and depth of the product lines is limited. consists of 7-elevens and specialty store such as Home depot
