Chapter 12 - Deliver the customer experience: goods and services via bricks and clicks

customer profiling

the act of tailoring the level of customer service based on a customer's perceived ability to pay

service encounter

the actual interaction between the customer and the service provider

servicescape

the actual physical facility where the service is performed, delivered, and consumed

perishability

the characteristic of a service that makes it impossible to store for later sale or consumption

intangibility

the characteristic of a service that means customers can't see, touch, or smell good service

variability

the characteristic of a service that means that even the same service performed by the same individual for the same customer can vary

inseparability

the characteristic of a service that means that it is impossible to separate the production of a service from the consumption of that service

retail borrowing

the consumer practice of purchasing a product with the intent to return the non defective merchandise for a refund after it has fulfilled the purpose for which it was purchased

disintermediation

the elimination of some layers of the channel of distribution in order to cut costs and improve the efficiency of the channel

retailing

the final stop in the distribution channel in which organizations sell goods and services to consumers for their personal use

merchandise breadth

the number of different product lines available

capacity management

the process by which organizations adjust their offerings in an attempt to match demand

merchandise assortment

the range of products a store sells

merchandise mix

the total set of all products offered for sale by a retailer, including all product lines sold to all consumer groups

digital wallets

the use of Bluetooth technology that connects with customer smartphones and allows customers to pay for items without cash or even swiping a credit card

retailainment

the use of retail strategies that enhance the shopping experience and create excitement, impulse purchases, and an emotional connection with the brand

merchandise depth

the variety of choices available for each specific product line

digitally influenced purchases

when consumers do online research before making a product purchase in a traditional store

shopping cart abandonment

occurs when e-commerce customers leave an e-commerce site with unpurchased items in their cart

B2C e-commerce

online exchanges between companies and individual consumers

m-commerce

promotional and other e-commerce activities transmitted over mobile phones and other mobile devices, such as smart phones and personal digital assistants

perpetual inventory unit control system

retail computer system that keeps a running total on sales, returns, transfers to other stores, and so on

point-of-sale (POS) systems

retail computer systems that collect sales data and are hooked directly into the store's inventory-control system

automatic reordering system

retail reordering system that is automatically activated when inventories reach a certain level

organized retail crime (orc)

retail shoplifting by organized gangs of thieves that get away with thousands of dollars in goods in a single day

pop-up stores

retail stores, such as Halloween costume stores, that "pop up" one day and then disappear after a period of one day to a few months

off-price retailers

retailers that buy excess merchandise from well-known manufacturers and pass the savings on to customers

specialty stores

retailers that carry only a few product lines but offer good selection within the lines that they sell

general merchandise discount stores

retailers that offer a broad assortment of items at low prices with minimal service

combination stores

retailers that offer consumers food and general merchandise in the same store

department stores

retailers that sell a broad range of items and offer a good selection within each product line

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

experiential shoppers

shoppers who shop because it satisfies their experiential needs, that is, their desire for fun

variety stores

stores that carry a variety of inexpensive items

Distressed inventory

term used to indicate retailer inventory that may not sell and is sold to online liquidators

supercenters

large combination stores that combine economy supermarkets with other lower-priced merchandise

shrinkage

losses experienced by retailers as a result of shoplifting, employee theft, return fraud, and administration and paperwork errors

place marketing

marketing activities that seek to attract new businesses, residents, or visitors to a town, state, country, or some other site

12.1 retailing, 21st-Century style

12.1 Define retailing and understand how retailing evolves. Wow! If you need a box of crackers or a pair of shoes or a ticket for a vacation to Cancun, where do you shop? At a supermarket, a large mall, a travel agency? Or do you shop from your living room, wearing your PJs and those cute fuzzy slippers your mother gave you for Christmas, using your laptop or your smartphone? There seems to be something in the news every week about retailing and how it is changing. Retailing remains the final stop on the distribution path—the process by which organizations sell goods and services to consumers for their personal use. But that's about all that you can count on staying the same about retailing. Changes of note include the following: New to the U.S. in 2014, extreme-value food retailer Aldi only has 1.5 percent of the U.S. grocery market but is growing at 15 percent a year, whereas the retailing giant Walmart, currently with 22 percent of the market, has a growth rate of about 2 percent a year.1 Have you been to the mall lately? It seems like a lot of other people haven't: There are literally thousands of empty stores in the giant shopping malls located all across the country. Resale stores that sell previously owned merchandise, including thrift stores where proceeds go to charity and consignment stores that sell used merchandise and pay the owner after the items are sold, are growing at about 7 percent a year. More and more brick-and-mortar retailers sell online, while online retailers open brick-and-mortar stores. In 2017, e-commerce represented 13 percent of total retail sales. Amazon alone accounted for 49 percent of that growth. In this chapter, we'll talk first about the world of retailing and about how it has changed and continues to change today. Then, we'll explore the many different types of brick-and-mortar retailers before we look at types of nonstore retailing, including the exciting ascent of online retailing. We'll also discuss ethical problems faced by retailers and how services and other intangibles are a part of the retail scene. All the while, we'll keep one question in mind: How does retailing—whether store or nonstore (selling via TV, mobile phone, vending machine or the Internet)—successfully make its goods and services available to the consumer? So, this chapter has plenty "in store" for us. Let's start with an overview of where retailing has been and where it's going. Retailing: A Mixed (Shopping) Bag Retailing is big business. In 2018, U.S. retail sales totaled about $5.16 trillion, with 10 percent coming from e-commerce.2 More than 1 million retail businesses employ nearly 16 million workers—more than 1 of every 10 U.S. workers.3 Although we tend to associate huge stores such as Walmart and Sears with retailing activity, in reality, most retailers are small businesses. Certain retailers, such as Home Depot and Costco, are both wholesalers and retailers because they provide goods and services to both businesses and end consumers. As we said in Chapter 11, retailers are members of a channel of distribution. As such, they provide time, place, and ownership utility to customers. Some retailers save people time or money when they provide an assortment of merchandise under one roof. Others search the world for the most exotic delicacies; they allow shoppers access to goods they would otherwise never see. Still others, such as Starbucks, Apple, or REI, provide us with interesting environments in which to spend our leisure time and, they hope, our money. Service retailers such as banks, hospitals, and hair stylists satisfy our needs and wants for intangible products. Retailing has different faces in different parts of the world. In some European countries, don't even think about squeezing a tomato to see if it's too soft or picking up a cantaloupe to see if it smells ripe. Such mistakes will quickly gain you a reprimand from the store clerk, who will choose your oranges and bananas for you. In developing countries like those in Asia, Africa, and South America, retailing often includes many small butcher shops where you won't find hygienically sealed packages of steaks and lamb chops. Instead, sides of beef and lamb proudly hang in store windows so everyone will be assured that the meat comes from healthy animals. Other vendors sit cross-legged on the sidewalk where they sell lettuce, tomatoes, and cucumbers while men and boys offer passersby watermelons, neatly stacked on a donkey cart. Women cook small breakfast items and sell them in the front of their homes for workers and schoolchildren who pass by in the mornings. While consumers in developed countries may find neat store shelves stacked with bottles of shampoo,as we said in Chapter 10, retailers in other countries offer hanging displays that hold one-use sized sachets of shampoo and fabric softener, the only size that a woman can afford to buy and then only for special occasions. Street vendors may sell cigarettes one at a time. The local pharmacist may also give customers injections and recommend antibiotics and other medicines for patients who come in with a complaint and who can't afford to see a doctor. Don't feel like cooking tonight? There's no drive-through window for pickup, but even better—there's delivery from McDonald's, Hardee's, KFC, Pizza Hut, Fuddruckers, Chili's, and a host of local restaurants via motor scooters that dangerously dash in and out of traffic just a few minutes away. You can even order your Big Mac or a spicy vegetable dragon roll for delivery online through sites such as Egypt's Otlob.com or Mumbai's Foodkamood.com.

Types of retailers

12.2 Understand how we classify traditional retailers. The field of retailing covers a lot of ground—from mammoth department stores to service retailers like Massage Envy, websites like Amazon.com, and restaurants like Eskimo Joe's. Retail marketers need to understand the possible ways they might offer their products in the market, and they also need a way to benchmark their performance relative to other, similar retailers.

12.3

12.3 Describe business- to-consumer (B2C) e-commerce and the other common forms of nonstore retailing. Stores like Justice succeed because they put cool merchandise in the hands of young shoppers who can't get it elsewhere. But competition for shoppers' dollars comes from sources other than traditional stores that range from bulky catalogs to dynamic websites. Debbie in Dubuque can easily log on to Forever21.com at 3:00 a.m. and order the latest belly-baring fashions without leaving home. As the founder of the Neiman Marcus department store once noted, "If customers don't want to get off their butts and go to your stores, you've got to go to them."21 Indeed, many products have been available in places other than stores for a long time. The Avon Lady, the Fuller Brush man, and Tupperware parties are all part of the rich history and present reality of retailing. These along with the fast-growing world of e-commerce are part of nonstore retailing. Of course, it's really hard to separate e-commerce from conventional retailers, especially as more merchants aggressively move toward an omnichannel strategy. Most—from upscale specialty stores such as Tiffany's to discounter Walmart to warehouse club Costco—have found it critical to offer nonstore websites for customers who want to buy their merchandise online. For other companies, such as Internet retailer Amazon.com, nonstore retailing is almost their entire business (though the company is also starting to move into brick-and-mortar with its recent acquisition of Whole Foods). In Chapter 14, we will discuss what direct marketing retailers do through the mail, telephone, and TV. In this section, we'll look at different types of nonstore retailing, shown in Figure 12.3: B2C e-commerce, direct selling, and automatic vending. B2C E-Commerce B2C e-commerce is the online exchange between companies and individual consumers. According to Forrester Research, e-commerce sales are expected to reach $453.46 billion in 2017, representing 13 percent of all retail sales.22 Consumers are increasingly using their smartphones to make m-commerce purchases. Mobile devices, such as phones and tablets, are projected to generate 39.6 percent of e-commerce sales in 2018, increasing to nearly 54 percent of e-commerce sales by the year 2021.23 Forrester Research estimates that by 2022, 58 percent of all U.S. retail sales will involve the Web in some way—that means either a direct purchase of a product online or a digitally influenced purchase in which consumers do online research before making a product purchase in a traditional store.24 A number of factors prevent online sales from growing even more. Most consumers prefer stores where they can touch and feel items and avoid issues with returns and shipping costs. Also, many consumers don't like to buy online because they want the product immediately. To address some of these issues, many retailers, such as Best Buy, have merged their online and in-store sales functions. Consumers can select an item and pay for it online, then pick it up at their local store within hours—instant gratification with a mouse click!

12.4 the evolution continues

12.4 Understand the ways that retailing will continue to evolve in the future. As our world continues to change rapidly, retailers scramble to keep up. A few of the factors that motivate innovative merchants to reinvent the way they do business are the economic environment, changing demographics and consumer preferences, technology, and globalization. Economic Evolution Recently, changes in the economic environment have been especially important both to consumers and to retailers. The economic downturn that began in 2007 meant that consumers worldwide were less willing to spend their discretionary income. Retail sales, including the all-important Christmas sales, fell in nearly all retail segments.43 Sales for most upscale retailers were especially vulnerable, whereas stores such as TJ Maxx, Marshalls, Dollar General, and online retailer Amazon.com that offer consumers low prices or discounted merchandise thrived. A number of retailers filed for bankruptcy, including Sharper Image, Circuit City, CompUSA, and Waldenbooks.44 During the economic downturn, some stores changed their merchandise assortment to meet consumers' desires for lower- or value-priced products. Sales of private label brands increased dramatically during that time and continue to flourish today, reaching $122.3 billion in sales.45 Amazon, Target, and other mass merchandisers responded to this trend by developing more lines of their own private label brands, which contributed to the continued growth of sales in this category.

12.5 ethical problems in retail

12.5 Understand the problems retailers face with unethical behavior by consumers and employees. Dishonest Behaviors Retailers must deal with ethical problems that involve both their customers and their employees. Losses resulting from shrinkage are a growing problem. Shrinkage is the term retailers use to describe stock losses due to shoplifting, employee theft, damage to merchandise, and a variety of errors. Shrinkage cost retailers $48.9 billion, or 1.44 percent, of all retail sales in 2016.62 Guess who winds up paying for these "five-finger discounts"? Most shrinkage comes from four different sources: shoplifting in which individuals steal goods from a retailer while pretending to be a customer, dishonest employees, return fraud, and administration and paperwork errors. Shoplifting In the U.S., shoplifting accounts for 36.5 percent of the total $48.9 billion in shrinkage. The average cost to the retailer for each shoplifting incident in 2016 was $798.48, about double the average in 2015. These thefts in turn drive consumer prices up and hurt the economy, sometimes even causing smaller retailers to go out of business.63 Increasingly, shoplifting is an organized criminal activity. Gangs that commit organized retail crime (ORC) use store floor plans and foil-lined bags to evade security sensors and get away with thousands of dollars in goods in a single day.64 A survey of 59 retail-loss prevention executives by the National Retail Federation (NRF) on retail crime found that all of them had experienced ORC in the past year. In 2016, ORC cost retailers $700,259 per $1 billion in sales. ORC is facilitated by boosters who steal the merchandise and fencers who sell it. While many boosters work alone and steal relatively small amounts of merchandise, others team up with a partner or group of other criminals to operate regionally or even nationally. Smaller fencers directly resell products to consumers and may appear to be a legitimate business, such as a corner market or a booth in a flea market. Larger fencers repackage stolen products (typically in rented houses or storage units) and resell to diverters who sell stolen products back to retailers.65 The NRF survey also found an increase in e-fencing. Instead of selling their stolen watches or t-shirts on street corners, criminals can now join those who sell their legitimate items on online auction sites such as eBay and Etsy. Over half (58 percent) of retailers surveyed by NRF say they were able to identify stolen merchandise on online auction sites. In addition to the online auction sites, thieves sell stolen retail merchandise on Amazon.com, online classified sites such as Craigslist, mobile apps such as LetGo, and the "deep Web,"66 places on the Web that you can't access with most search engines and that provide a means for criminals to connect to buy and sell stolen or illegal items for cryptocurrency, such as Bitcoin.67 Of course, not only professionals shoplift. Some amateurs are just not that clever. One woman in California was caught stashing expensive items in her purse each time employees turned their backs. But after three trips into the store to steal, her luck ran out when she wrote down her real name and address while signing up for a raffle contest the store was hosting.68 It's a safe bet to say she wasn't the sharpest tool in the shed. Employee Theft A second major source of shrinkage in retail stores is employee theft of both merchandise and cash. In the U.S., it accounted for 30 percent of shrinkage in 2016.69 The NRF Survey on retail crime found that the average dishonest employee cost the retailer $1,922.80 with a median loss of $962.60 compared to a lower median loss of $622 reported for 2015. Employees not only have access to products but also are familiar with the store's security measures. "Sweethearting" is an employee practice in which a cashier consciously undercharges, gives a cash refund, or allows a friend to walk away without paying for items.70 Sometimes a dishonest employee simply carries merchandise out the backdoor to a friend's waiting car. Retail Return Fraud Another cause of retail shrinkage is retail return fraud. Retail return fraud occurs when someone returns an item that they did not purchase—almost always a stolen item—for a refund. Whether by amateurs or professional criminals, return fraud is a growing concern to retailers. The NRF study on retail crime reported that retail return fraud would cost retailers $1.5 billion in 2017 with an average cost of $1,766.27 and a median of $171. In apparel, the average cost of each incident of return fraud was $968.81 in 2016, almost as high as shoplifting. The NRF estimates that customers return as much as 11 percent of total retail sales each year and more than 10 percent of those returns are fraudulent. The retail fraud thieves frequently use self-checkouts and have become better at counterfeiting store receipts. One solution to the retail fraud problem that many retailers have adopted is to require identification for a return, thus enabling the retailer to track individuals who frequently return merchandise. Another tactic is to only give refunds in the form of store credits. Technological advancements such as facial recognition should improve retail fraud prevention. Retail Borrowing A similar although not clearly criminal source of shrinkage is an unethical consumer practice the industry calls retail borrowing. Merchants over recent decades have developed liberal policies of accepting returns from customers because the product performs unsatisfactorily or even if the customer simply changes her mind. Retail borrowing refers to the return of nondefective merchandise for a refund after it has fulfilled the purpose for which it was purchased.71 Popular objects for retail borrowing include a dress for a high school prom, a new suit for a job interview, and a large-screen TV for a big football game. For the consumer, the practice provides short-term use of a product for a specific occasion at no cost. For the retailer, the practice results in lower total sales and in damaged merchandise, unsuitable for resale.

12.6 selling

12.6 Understand the marketing of services and other intangibles. As we said at the beginning of this chapter, retailing is about selling goods and services to consumers for their personal use. Thus, to understand retailing, we must also understand services and how marketers provide consumers with quality services (and other intangibles) that meet their needs. What do a Rihanna concert, a college education, a Cubs baseball game, and a visit to Walt Disney World have in common? Easy answer—each is a product that combines experiences with physical goods to create an event that the buyer consumes. You can't have a concert without musical instruments (or maybe a pink wig, in Rihanna's case), a college education without textbooks (Thursday night parties don't count), a Cubs game without a hot dog, or a Disney experience without the mouse ears. But these tangibles are secondary to the primary product, which is some act that, in these cases, produces enjoyment, knowledge, or excitement. In this section, we'll consider some of the challenges and opportunities that face marketers whose primary offerings are intangibles: services and other experience-based products that we can't touch. The marketer whose job is to build and sell a better football, automobile, or smartphone—all tangibles—deals with issues that are somewhat different from the job of the marketer who wants to sell tickets to a basketball game, limousine service to the airport, or allegiance to a hot new rock band. Services are one type of intangible that also happens to be the fastest-growing sector in our economy. As we'll see, all services are intangible, but not all intangibles are services. Services are acts, efforts, or performances exchanged from producer to user without ownership rights. In 2014, service industry jobs accounted for four out of every five jobs in the U.S.75 and almost 78 percent of the gross domestic product.76 If you pursue a marketing career, it's highly likely that you will work somewhere in the services sector of the economy. Got your interest? Marketing Services The service industry includes many consumer-oriented services, ranging from dry cleaning to body piercing. It also encompasses a vast number of services directed toward organizations. Some of the more common business services include vehicle leasing, information technology services, insurance, security, legal advice, food services, cleaning, and maintenance. In addition, businesses also purchase some of the same services as consumers, such as electricity, mobile phone service, and natural gas. Characteristics of Services Services come in many forms, from those done to you, such as a massage or a teeth cleaning, to those done to something you own, such as having your computer tuned or getting a new paint job on your classic 1965 Mustang. Regardless of whether they affect our bodies or our possessions, all services share four characteristics, which Figure 12.4 summarizes: intangibility, perishability, inseparability, and variability. The discussion that follows shows how marketers can address the unique issues related to these characteristics of services that don't pop up when they deal with tangible goods. Intangibility: Marketing of services might be called "marketing the product that isn't there." The essence is that unlike a bottle of Izzo soda or a Samsung 60-inch 4K Ultra HD TV—both of which have physical, tangible properties—services do not assume a tangible form. Intangibility means customers can't see, touch, or smell good service. This makes it much more difficult for consumers to evaluate many services. Although it may be easy to evaluate your new haircut, it is far less easy to determine whether the dental hygienist did a great job when she cleaned your teeth. Because they're buying something that isn't there, customers look for reassuring signs before they purchase, so marketers must ensure that these signs are readily available. That's why they try to overcome the problem of intangibility by providing physical cues to reassure the buyer. These cues for a service provider (such as a bank) might be the "look" of the facility—its furnishings, logo, stationery, business cards, the appearance of its employees, or well-designed advertising and websites. Perishability: This term refers to the characteristic of a service that makes it impossible to store for later sale or consumption; it's a case of use it or lose it. When rooms go unoccupied at a ski resort, there is no way to make up for the lost opportunity to rent them for the weekend.As we discussed in Chapter 10, a company may use yield management pricing or another marketing strategy to encourage demand for the service during slack times. Carnival Cruise Lines, after a series of service fiascos including what was dubbed the "Poop Cruise" (where stranded customers had no working toilets for five days), began offering heavily discounted tickets in an effort to lure customers back to its empty ships. Cabins could be purchased for as little as $50 a day—assuming you were willing to chance it, of course.77 Capacity management is the process by which organizations adjust their services in an attempt to match supply with demand. This strategy may mean adjusting the product, or it may mean adjusting the price. In the summer, for example, the Winter Park ski resort in Colorado combats its perishability problem when it opens its lifts to mountain bikers who tear down the sunny slopes. Capacity management is the reason behind United Airlines' new Basic Economy fares described in the Marketing in Action case at the end of Chapter 10. Variability: A National Football League quarterback may be red hot one Sunday and ice cold the next, and the same is true for most services. Variability means that over time, even the same service that the same individual performs for the same customer changes—even if only in minor ways. It's rare when you get exactly the same cut from a hairstylist each time you visit him or her. Even your physician might let a rough day get in the way of his or her usual charming bedside manner with patients. It's difficult to standardize services because service providers and customers vary. Think about your experiences in your college classes. A school can standardize its offerings to some degree—course catalogs, course content, and classrooms are fairly controllable. Professors, however, vary in their training, life experiences, and personalities, so there is little hope of being able to make teaching uniform (not that we'd want to do this anyway). And because students with different backgrounds and interests vary in their needs, the lecture that you find fascinating might put your friend to sleep (trust us on this). The same is true for customers of organizational services. Differences in the quality of individual security guards or cleaning personnel mean variability in how organizations deliver these services. The truth is, if you really stop and think about it, we don't necessarily want standardization when we purchase a service. Most of us desire a hairstyle that fits our face and personality and a personal trainer who will address our unique physical training needs. Businesses like McDonald's, Wendy's, and Burger King want their ad agencies to create unique advertising campaigns to set them apart from each other. Inseparability: This means that it is impossible to divide the production of a service from the consumption of that service. Think of the concept of inseparability this way: A firm can manufacture goods at one point in time, distribute them, and then sell them later (likely at a different location than the original manufacturing facility). In contrast, by its nature, a service can take place only at the time the actual service provider performs an act on either the customer or the customer's possession.

factory outlet

A discount retailer, owned by a manufacturer and normally found only in outlet malls, that sells defective merchandise and excess inventory.

proximity marketing or beacon marketing

A retail marketing strategy in which beacon devices are placed strategically throughout a store and emit a 3 signal to communicate with shoppers' smartphones as they browse the aisles of the store.

outlet store

A retailer-owned store where excess merchandise or special buys from vendors, not offered in the regular retail stores, is available at lower prices.

experiential merchandising

A tactic to convert shopping from a passive activity into a more interactive one by engaging the customer in a participatory experience in the store.

fair trade

As we learned in Chapter 1, many consumers and marketers have adopted a triple-bottom-line orientation. This means that marketing organizations, including retailers, are concerned about their social bottom line—that is, their contribution to communities in which the company operates. This idea is especially relevant when it comes to products produced in developing countries—the same countries that produce most of the clothing and much of the food that we in the U.S. and other developed countries buy. Often workers in these countries must work overtime without extra pay or their employers may even physically punish them for minor infractions. In many of these countries, the minimum wage is less than a living wage; that is, minimum wage doesn't provide enough money for a family to meet basic needs of food and shelter. Sometimes you will see the phrase "fair trade good," "fair trade certified," or something similar on a product label. Fair Trade USA, the organization that provides fair trade certification, defines fair trade as "a global movement made up of a diverse network of producers, companies, shoppers, advocates, and organizations putting people and planet first . . . .The Fair Trade movement promotes greater equity in international trading partnerships, encourages sustainable development, and secures the rights of marginalized producers and workers in developing countries." Because they recognize that many consumers prefer to buy fair trade goods, retailers including Costco, Aldi, Food Lion, Kroger, Sam's Club, Safeway, Target, Sprouts Farmers Market, Walmart, Whole Foods, and Earth Fare, just to name a few, offer customers a selection of these items.74

the future of services

As we look into the future, we recognize that service industries will continue to play a key role in the growth of both the U.S. and the global economy. Figure 12.5 provides several trends for us to consider that will provide both opportunities and challenges for the marketers of services down the road (that means you). In the future, we can expect services we can't even imagine yet. Of course, they will also provide many new and exciting job opportunities for future marketers. These trends include the following: Changing demographics: As the population ages, service industries that meet the needs of older consumers will see dramatic growth. Companies that offer recreational opportunities, health care, and living assistance for seniors will be in demand. Technology: Some of the most exciting changes in services relate to the explosion of the sharing economy that uses technology to allow everyday people to provide as well as consume services. A recent major survey reported that 44 percent of U.S. adults (more than 90 million people) have participated in the sharing economy, playing the roles of lenders and borrowers, drivers and riders, hosts and guests.89 Need to use a car? Go to Zipcar and rent one by the hour. How about a camera, a power drill, or a blender? Go to SnapGoods and rent one of those too. Park your pet with a dogsitter rather than an impersonal kennel at Dog Vacay. You can even get a low interest loan from other individuals at Lending Club. The sharing economy is revolutionizing industries including taxis (Uber and Lyft), hospitality (Airbnb), used books (Bookmooch), and even errand running (TaskRabbit).90 Globalization: The globalization of business will increase the need for logistics and distribution services to move goods around the world(discussed in Chapter 11) and for accounting and legal services that facilitate these global exchanges. In addition, global deregulation will affect the delivery of services by banks, brokerages, insurance, and other financial service industries because globalization means greater competition. For example, many "medical tourists" now journey to countries like Thailand and India to obtain common surgical procedures that may cost less than half what they would in the U.S. Meanwhile, hospitals back home often look more like luxury spas as they offer amenities such as adjoining quarters for family members, choice of different ethnic cuisines, and in-room Internet access. In the hotel industry, demand for luxury properties is growing around the world. Hyatt Worldwide is aggressively expanding its Waldorf-Astoria and Conrad brands in China, with at least 16 luxury properties either open or scheduled to open by 2020.91

customer evolution

As we noted in Chapter 7, keeping up with changes in population characteristics, including demographics and product preferences, is at the heart of many marketing efforts. Here are some of the ways changing consumer demographics and preferences are altering the face of retailing. Retailers can no longer afford to stand by and assume that their customer base is the same as it has always been. Costco, for example, built its success on selling to upscale baby boomers and Gen Xers who own their own homes. As that demographic is replaced by Generation Y and millennial consumers who prefer to shop online on Amazon.com, stores like Costco may have to reinvent themselves.46 As more time-challenged consumers (especially women) participate in the workforce, they demand greater convenience. In response, retailers adjust their operating hours and services to meet the needs of working consumers who have less time to shop. Other retailers, including banks, dry cleaners, and pharmacies, add drive-up windows to meet the needs of both working consumers and older consumers. Walmart added the convenience of grocery pick-up, where consumers can order online and schedule a pick-up time. Check in once you arrive, and a Walmart associate will bring your fresh grocery order to the car—and even load it for you!47 And people are flocking to walk-in medical clinics located in strip malls, shopping centers, or pharmacies where retailers not only provide convenience but also save both patients and insurers money on routine care.48 Although members of every ethnic group can usually find local retailers that cater to their specific needs, larger companies must tailor their strategies to the cultural makeup of specific areas. For example, in Texas, California, and Florida, where there are large numbers of customers who speak only Spanish, many retailers make sure that there are sales associates who "habla Español." We all love to be entertained (yes, even your marketing professor!). Entertainment cures boredom and satisfies our need for excitement and thrills. Many retailers recognize this aspect of human nature and know that shopping is more than just making a purchase. Now there are experiential shoppers, or people who shop because it satisfies their experiential needs, that is, their desire for fun. When the retail experience includes surprise, excitement, and a unique experience, experiential shoppers are more likely to make impulsive purchase decisions.49 Thus, brick-and-mortar retailers need to provide people with additional reasons to get out of their PJs, turn off the computer, and actually travel to a physical store. They might choose to practice experiential merchandising, or a tactic to convert shopping from a passive activity into a more interactive one by engaging the customer in a participatory experience in the store. After all, if you're just picking up an item and throwing it in your cart, why bother to get out of bed when you can get the same thing delivered with a few mouse clicks? Retailtainment is all about marketing strategies that enhance the shopping experience. Retailers from Disney to Bass Pro Shops create excitement, encourage impulse purchases (that are made spur-of-the-moment), and foster an emotional connection with the brand. Would you like to visit a brick-and-mortar store where Snow White's magic mirror is a reality? In Rebecca Minkoff stores in New York, San Francisco, and Los Angeles, consumers can use interactive mirrors to adjust the mood lighting, browse virtual racks of clothes, ask that a different size or color be brought to the dressing room, and even check out, all while drinking a glass of bubbly.50 When Samsung opened its "Un-Store" (the only thing you could buy was from a café on the top floor), Samsung 837, in the meat-packing district of New York City in 2016, Forbes magazine called it "one of the world's top three brand experiences."51 The 837 experience includes multiple hands-on product zones, interactive art, virtual reality, comfortable lounge areas, and a recording studio where customers can record and stream live performances. And in the center was a three-story display using 96 55-inch screens. As Samsung America's Senior Director of Store Development commented, "Online is for research and purchase and instore is for validation and experience." This renewed focus on the shopping experience even leads some marketers to become a destination retailer: a store that consumers view as distinctive enough to go out of their way to shop there. Destination retailers come with different faces: an upscale strategy for status-conscious consumers, a convenience strategy for customers wanting easier shopping, and a unique way of doing business for bored consumers. Verizon has become a destination retailer with its 10,000 square foot retail space in Bloomington, Minnesota. Not your typical store, it's an interactive playground in the Mall of America that tends to blur the lines between online experiences and traditional brick-and-mortar retail. As more and more consumers spend more time with their smartphones and tablets, retailers' physical environments must compete with the online virtual world. Verizon's Destination Store demonstrates how mobile technologies can enhance everyday living using digital signage and video walls. The store's Lifestyle Zones include (1) Get Fit, (2) Amplify It (with an Amplify It Music Mixer and a Wall of Sound with 299 speakers), (3) Have Fun (a virtual golf course), (4) Home and On the Go (with smart home accessories guests can try out), (5) Anywhere Business (with business-friendly smart accessories), and (6) Customize It (with a digital photo booth).52 With the tremendous growth of online retailing, brick-and-mortar retailers have to do more than just sell stuff.53

technological evolution

As with everything else in our lives, technology is disrupting the way retailers do business—both behind the scenes and as part of the shopping experience: Advanced electronic point-of-sale (POS) systems contain computer brains that collect sales data and connect directly to the store's inventory-control system. Stores may use POS systems to create perpetual inventory unit control systems that keep a running total on sales, returns, transfers to other stores, and so on. This technology allows stores to develop computerized automatic reordering systems that are activated when inventories decline to a certain level.54 The Amazon Go store in Seattle eliminates checkout lines. Instead, a mobile app allows customers to scan their smartphone as they enter the store. Customers then simply pick up their purchases, and their Amazon account is debited as they shop.55 Lowe's home improvement store introduced automated assistants in its San Jose, California, store. These robots find the products you are looking for—and they even speak several languages.56 As we noted in Chapter 8, beacons can be placed strategically throughout a store and use a Bluetooth signal to communicate with shoppers' smartphones that have the store's app as they browse the aisles. A beacon can share a coupon with your phone or reward you with points or discounts for specific merchandise just as you "coincidentally" stand next to the item. Macy's, Target, and American Apparel are among the large retailers that are starting to deploy proximity marketing (also known as beacon marketing) to keep in touch with what shoppers do in real-time. Beacon technology allows mobile apps to listen for signals using Bluetooth technology.57 But wait, it gets scarier: Some retailers, including Uniqlo, Lord & Taylor, and Saks, are trying a version of beacons that get embedded inside store mannequins. These supposedly lifeless bodies can talk to you on your phone as you pass by a store window and even send you photos of the outfits they're wearing.58 The store of the future will use RFID tags (and other technology) to assist the shopper in ways we haven't even thought of. For example, an RFID tag on a bottle of wine can tip off a nearby plasma screen that will project an ad for Barilla pasta and provide a neat recipe for fettuccine with bell peppers and shrimp. Some restaurants already use technology to let diners order their food tableside directly from a screen complete with photos of the dishes they offer. These e-menus help customers because they can see what every item on the menu will look like and, it is hoped, avoid a surprise when the waiter arrives.59 This innovation also increases sales at the restaurant—who can avoid that mouth-watering picture of the eight-layer chocolate cake with peppermint stick ice cream on top? As we saw in Chapter 8, digital wallets, which allow you to pay for items without cash or even swiping a credit card, are making it even easier to burn through your paycheck. Already many of us routinely pay for small items with apps like Google Wallet, PayPal, Square, LevelUp, and Venmo. Individual retailers also offer payment opportunities through their own apps. Chick-fil-A allows consumers to load money onto their account and pay with a simple scan of their loyalty app.60 Finally, as Alex and Ani discovered, omnichannel (also spelled omni-channel) marketing is a strategy that provides a seamless shopping experience, whether the customer is shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store. New technology enables the sales associate in the store to access the customer's preferences, previous purchases, returns, frequency of shopping, and all the other data that are currently only available when the shopper engages in a web chat with a customer service representative. As the shopper moves from a desktop to a tablet to a smartphone, his or her search history and online shopping "basket" will remain intact, and if they choose, they can then pick up their purchase in the store of their choice the same day as they order it online.61

limitations of B2C

But all is not perfect in the virtual world. E-commerce does have its limitations. One drawback compared to shopping in a store is that customers must wait a few days to receive most products, which are often sent via private delivery services, so shoppers can't achieve instant gratification by walking out of a store clutching their latest "finds." The electronics chain Best Buy thinks it can address this issue with a new form of hybrid retailing we discussed previously; a customer can order a big-screen TV on the company's website and then drive to a brick-and-mortar store to pick it up the same day. Of course, some e-commerce sites still suffer from poor design that frustrates consumers and leads to shopping cart abandonment, where customers leave the site with unpurchased items in their carts. Believe it or not, this happens in almost 7 out of 10 online shopping trips! Why do people get that far and then give up? Most shoppers cite expensive shipping and "just browsing" as the reason.32 Customers are less likely to return to sites that are difficult to navigate or that don't provide easy access to customer service personnel, such as the online chats that better sites provide. Customers are often frustrated with sites where their shopping baskets "disappear" as soon as they leave the site. Retailers need to take these navigational problems seriously. When consumers have problems shopping on a site, they are less likely to return to shop another day. Online security is a huge concern to both consumers and marketers. We regularly hear news of yet another retail chain's data system being hacked and information from millions of consumers' credit cards stolen. Although in the U.S. an individual's financial liability in most theft cases is limited because credit card companies usually absorb most or all of the loss, the damage to one's credit rating can last for years. And it's possible for cyberthieves to steal your identity and do all sorts of mischief in your name. Not a pretty picture. Consumers also are concerned about Internet fraud. Although most of us feel competent to judge a local brick-and-mortar business by its physical presence, by how long it's been around, and from the reports of friends and neighbors who shop there, we have little or no information on the millions of Internet sites offering their products for sale—even though sites like eBay and the Better Business Bureau try to address these concerns when they post extensive information about the reliability of individual vendors. And, as with catalogs, even though most online companies have liberal return policies, some companies do not pay return shipping costs, so the consumer may get stuck with these charges for items that don't fit or simply aren't the right color. Developing countries with primarily cash economies pose yet another obstacle to the global success of B2C e-commerce. In these countries, few people use credit cards, so they can't easily pay for items they purchase over the Internet. Furthermore, banks are far less likely to offer consumers protection against fraudulent use of their cards, so a hacked card number can literally wipe you out. For consumers in these countries, there are a growing number of alternatives for safely paying for online purchases. PayPal is a global leader in online payments. Founded in 1998 and acquired by eBay in 2002, PayPal has more than 237 million active customer accounts and services customers in over 200 countries where customers can get paid in more than 100 currencies.33 In 2017, PayPal processed 7.6 billion payments around the world.34 Twitpay is a service that permits consumers to send payments using the social network site Twitter. Twitpay's RT2Giv service offers consumers the opportunity to easily make payments to not-for-profits. For example, the not-for-profit group Malaria No More joined with Twitter to raise money for its Help Us End Malaria campaign. Donations were used to buy mosquito nets for African children and their families.35 Also, as major marketers beef up their presence on the web, they worry that inventory they sell online will cannibalize their store sales(we discussed the strategic problem of cannibalization in Chapter 9). This is a big problem for companies like bookseller Barnes & Noble, which has to be careful as it steers customers toward its website and away from its chain of stores bursting with inventory. Barnes & Noble has to deal with competitors such as Amazon (with 300 million worldwide customers and annual sales of not only books but myriad products from apparel to cell phones of more than $177 billion in 2017), which sells its books and music exclusively over its 13 global websites and so doesn't have to worry about this problem.36 Of course, today, books, including textbooks like the awesome one you're reading now, have gone digital and can be purchased and downloaded online. Tablet e-book readers, such as Amazon's Kindle and Apple's iPad, make e-books even more attractive. Does the growth of B2C e-commerce mean the death of brick-and-mortar stores as we know them? Don't plan any funerals for your local stores prematurely. Although some argue that virtual distribution channels will completely replace traditional ones because of their cost advantages, this is unlikely. For example, although a bank saves 80 percent of its costs when customers do business online from their home computers, Wells Fargo found that it could not force its customers to use PC-based banking services. And for many products, people need "touch-and-feel" information before they buy. For now, clicks will have to coexist with bricks. However, this doesn't mean that physical retailers can rest easy. Stores as we know them will continue to evolve to lure shoppers away from their computer screens. In the future, the trend will be destination retail; that is, consumers will visit retailers not so much to buy a product as for the entertainment they receive from the total experience. As we saw in our discussion of retailtainment, many retailers already offer ways to make the shopping in brick-and-mortar stores an experience rather than just a place to pick up stuff. Bass Pro Shops Mega Outdoor Stores are a store, museum, and art gallery all built into one. Hand-painted murals, 15,000-gallon saltwater aquariums, wildlife exhibits, a full-service restaurant, and a gift and nature center beckon customers to linger. In fact, the average Bass Pro Shop customer spends two and a half hours in the store after driving an average distance of 50-plus miles to get there.37 This is definitely not your grandfather's bait-and-tackle store! Direct Sellers Direct selling occurs when a salesperson presents a product to one individual or a small group, takes orders, and delivers the merchandise. The Direct Selling Association reported that in 2016, 20.5 million people were engaged in direct selling in the U.S., and these activities generated over $35.5 billion in sales.38 Of this, 72 percent of revenues came from face-to-face sales and 21 percent from party plan or group sales. The major product categories for direct sales include home/family care products (such as cleaning products), wellness products (such as weight loss products), personal care products (such as cosmetics), clothing and accessories, and services. Major players in this huge industry include Amway, Mary Kay, Avon, Rodan & Fields, AdvoCare, Scentsy, and Tupperware. At home shopping parties, also called in-home selling, a company representative known as a consultant, distributor, or adviser makes a sales presentation to a group of people who have gathered in the home of a friend.39 One reason that these parties are so effective is that people who attend may get caught up in the "group spirit" and buy things they would not normally purchase if they were alone—even Botox injections to get rid of those nasty wrinkles. We call this sales technique a party plan system. Perhaps the most famous home shopping parties were the Tupperware parties popular in the 1950s. Today, though, you're more likely to go to a Thirty-One or Scentsy party. Another form of direct selling, which the Amway Company epitomizes, is multilevel or network marketing. In this system, a master distributor recruits other people to become distributors. The master distributor sells the company's products to the people he or she entices to join and then receives commissions on all the merchandise sold by the people he or she recruits. Today, Amway has over 3 million independent business owners who distribute personal care, home care, and nutrition and commercial products in more than 100 countries and territories.40 Amway and other similar network marketers use revival-like techniques to motivate distributors to sell products and find new recruits.41 Despite the popularity of this technique, some network systems are illegal. They are really pyramid schemes: illegal scams that promise consumers or investors large profits from recruiting others to join the program rather than from any real investment or sale of goods to the public. Often, large numbers of people at the bottom of the pyramid pay money to advance to the top and to profit from others who might join. At recruiting meetings, pyramid promoters create a frenzied, enthusiastic atmosphere complete with promises of easy money. Promoters also use high-pressure tactics to get people to sign up, suggesting that if they don't sign on now, the opportunity won't come around again. Some pyramid schemes are disguised as multilevel marketing—that is, people entering the pyramid do not pay fees to advance, but they are forced to buy large, costly quantities of nonreturnable merchandise.42 That's one of the crucial differences between pyramid schemes and legitimate network marketers.

marketing people, places, and ideas

By now, you understand that services are intangibles that marketers work hard to sell. But as we said previously, services are not the only intangibles that organizations need to market. Intangibles such as people, places, and ideas often need to be "sold" by someone and "bought" by someone else. Let's consider how marketing is relevant to each of these. Marketing People As we saw in Chapter 1, people are products too. If you don't believe that, you've never been on a job interview or spent a Saturday night in a singles bar! Many of us find it distasteful to equate people with products. In reality, though, a sizable number of people hire personal image consultants to devise a marketing strategy for them, and others undergo plastic surgery, physical conditioning, or cosmetic makeovers to improve their "market position" or "sell" themselves to potential employers, friends, or lovers.83 Let's briefly touch on a few prominent categories of people marketing. Sophisticated consultants create and market politicians when they "package" candidates (clients) who then compete for "market share" as measured by votes. We trace this perspective all the way back to the 1952 and 1956 presidential campaigns of Dwight Eisenhower. Advertising executive Rosser Reeves (one of the original "Mad Men" who shaped the industry) repackaged the bland but amiable U.S. Army general as he invented jingles and slogans such as "I like Ike" and contrived man-on-the-street interviews to improve the candidate's market position.84 For better or worse, Reeves's strategies revolutionized the political landscape as people realized they could harness the tactics they use to sell soap to sell candidates for public office. Today, the basic idea remains the same, even though the techniques are more sophisticated. Metrics Moment In order to consistently provide high quality service to customers, we have to be able to measure service quality. Fortunately, the SERVQUAL scale is a well-tested and popular instrument to measure customers' perceptions of service quality. SERVQUAL identifies five dimensions, or components, of service quality: Tangibles: The physical evidence of service quality, such as the physical facilities and equipment, professional appearance of personnel, and the look and functionality of the website Reliability: The ability to provide dependably and accurately what was promised to the customer Responsiveness: The willingness to help customers and provide prompt service Assurance: The knowledge and courtesy of employees and the ability to convey trust and confidence Empathy: The degree to which the service provider genuinely cares about customers and takes the customer perspective into account when delivering service81 The SERVQUAL scale is reliable and valid (concepts discussed in Chapter 4), and service businesses usually administer the scale in a survey format through a written, online, or phone questionnaire to customers. Firms often track their own SERVQUAL scores over time to understand how their service quality is, it is hoped, improving. They also can use it to collect data on customers' service quality perceptions of key competitors and then compare those scores to their own to see where to improve. Apply the Metrics Think back on a service encounter you've had in the past few days. This could be either in person or by phone. Rate the quality of the service on each of the five SERVQUAL dimensions (consider if each aspect was low, medium, or high), and then give an overall rating for the service encounter. Explain why you gave the ratings you did. For any of the SERVQUAL dimensions that scored low or medium, come up with some specific ideas for how the service provider can improve the service performance on those dimensions. From actors and musicians to athletes and supermodels, the famous and near-famous jockey for market position in popular culture. Agents carefully package celebrities as they connive to get their clients exposure on TV, starring roles in movies, recording contracts, or product endorsements.85 Like other products, celebrities even rename themselves to craft a "brand identity." They use the same strategies marketers use to ensure that their products make an impression on consumers, including memorability (Flo Rida), suitability (fashion designer Oscar Renta reverted to his old family name of de la Renta because it sounded more elegant), and distinctiveness (Alicia Beth Moore became Pink). In addition to these branding efforts, there are other strategies marketers use to "sell" a celebrity, as Table 12.4 shows. These include the following: The pure selling approach: An agent presents a client's qualifications to potential "buyers" until he or she finds one who is willing to act as an intermediary. The product improvement approach: An agent works with the client to modify certain characteristics that will increase his or her market value. The market fulfillment approach: An agent scans the market to identify unmet needs. After identifying a need, the agent then finds a person or a group that meets a set of minimum qualifications and develops a new "product." Table 12.4Strategies to Sell a Celebrity Marketing Approach Implementation Pure selling approach Agent presents a client to the following: Record companies Movie studios TV production companies Talk show hosts Advertising agencies Talent scouts Product improvement approach Client is modified: New name New image Voice lessons Dancing lessons Plastic surgery New backup band New music genre Market fulfillment approach Agent looks for market opening: Identify unmet need Develop a new product (band or singer) to the specifications of consumer wants Marketing Places Place marketing strategies regard a city, state, country, or other locale as a brand. Marketers use the marketing mix to create a suitable identity so that consumers choose this brand over competing destinations when they plan their travel. Because of the huge amount of money tourism generates, the competition to attract visitors is fierce. There are about 1,600 visitors' bureaus in the U.S. alone that try to brand their locations. In addition, almost every town or city has an economic development office charged with luring new businesses or residents. Marketers invite would-be tourists to come and visit "Pure Michigan." In the commercials, which feature the calm, soothing voice of actor Tim Allen, the state of Michigan shows off its off-the-beaten path outdoor beauty as well as its big-city adventures. And these popular ads pay off; they brought in $1.2 billion in revenue in 2013. In addition to the current U.S. campaign, "Pure Michigan" commercials are set to air soon in Canada, Germany, and China, reaching ever more consumers and bringing in ever more revenue.86 Then, there's the more unfortunate campaign in 2016 to brand the state of Rhode Island. Intense social media criticism forced the state's chief marketing officer to resign after she spent more than $500,000 to develop the slogan: "Cooler & Warmer." Let's just say Rhode Island's residents were cooler rather than warmer to the idea. Of course, it didn't help that some of the footage planned for use in the accompanying tourism ad campaign actually came from Iceland.87 Marketing Ideas You can see people. You can stand in a city. So how do you market something you can't see, smell, or feel? Idea marketing refers to strategies that seek to gain market share for a concept, philosophy, belief, or issue. Even religious organizations market ideas about faith and desirable behavior when they adopt secular marketing techniques to attract young people. Some evangelists offer slickly produced services complete with live bands and professional dancers that draw huge audiences.88 But make no mistake about it; the marketing of ideas can be even more difficult than marketing goods and services. Consumers often do not perceive that the value they receive when they recycle garbage or designate a driver or even when they conserve to reduce global warming is worth the cost—the extra effort necessary to realize these goals. Governments and other organizations use marketing strategies, often with only limited success, to sell ideas that will save the lives of millions of unwilling consumers or that will save our planet.

shoplifting

Criminal activity in which individuals steal goods from a retailer while pretending to be a customer

e-fencing

Criminal activity of selling stolen merchandise online auction sites such as eBay and Etsy

Dept stores

Department stores sell a broad range of items and offer a deep selection organized into different sections of the store. Grand department stores dominated urban centers in the early part of the 20th century. In their heyday, these stores sold airplanes and auctioned fine art. Lord & Taylor even offered its customers a mechanical horse to ensure the perfect fit of riding habits. Department stores offer customers a broad variety or products and a deep assortment. They offer services such as credit, and they are organized into distinct departments to effectively display merchandise. The largest U.S. department store chains are Macy's, Kohl's, JCPenney, and Nordstrom. Historically, department stores have sold both soft goods (nondurables such as clothing, cosmetics, and bedding) and hard goods (durable goods such as appliances, furniture, and electronics). With the growth of category killers, many department store chains have focused on soft goods and abandoned or de-emphasized hard goods. In many countries, department stores continue to thrive, and they remain consumers' primary place to shop. In Japan, department stores are always crowded with shoppers who buy everything from takeaway sushi dinners to strings of fine pearls. In Spain, a single department store chain, El Corte Inglés, dominates the market. Its stores include huge departments for electronics, books, music, and gourmet foods, and each has a vast supermarket covering one or two floors of the store. The amenities that attracted customers to grand department stores in their heyday—a visit with Santa in a snow-covered wonderland or perhaps a makeover in the cosmetics department—just don't justify paying higher prices for many shoppers. Today, department stores face declining market share as they get attacked on two fronts: On the one hand, specialty stores lure department store shoppers away with deeper, more cutting-edge fashion selections and better service. On the other hand, they also get squeezed by discount stores, catalogs, and online stores that offer the same items at lower prices because they don't have the expense of rent, elaborate store displays and fixtures, and high salaries for salespeople. This decline of middle-of-the-market retailing as a result of the popularity of both low-end discount/variety stores and upscale specialty retailing is called bifurcated retailing.16 To combat declining sales, department stores are increasing the amount of private label merchandise and exclusive national brand merchandise, adding e-commerce sites, keeping in touch with customers through aggressive permission e-mail marketing activities, and providing increased service. Indeed, the success of the upscale Nordstrom chain shows that, at least for shoppers with deep pockets who value attentive salespeople, there is a future for department stores—though only the best will survive as the rest get run over by the infamous wheel of retailing. Hypermarkets Hypermarkets combine the characteristics of warehouse stores and supermarkets. A European invention, these are huge establishments several times larger than other stores. A supermarket might be 40,000 to 50,000 square feet, whereas a hypermarket takes up 200,000 to 300,000 square feet, or four football fields. They offer one-stop shopping and feature restaurants, beauty salons, and children's play areas. The French company Carrefour has more than 10,000 stores in 33 countries around the globe including about 1,500 hypermarkets; each carries 20,000 to 80,000 food and nonfood items.17 More recently, Carrefour is expanding to developing countries and now has 236 hypermarkets in China, where a burgeoning population and a lack of large retailers provide hyperopportunities. Category Killers The category killer, or category specialist, is one type of specialty store that has become especially important in recent years. This label describes a very large specialty store that carries a vast selection of products in its category. Some examples of category killers are Home Depot, Best Buy, and Staples. Why the name? By offering a complete assortment in one category, they "kill" a category for other retailers. Most have a general self-service approach, but there is some assistance available for customers who need it. This is especially important at electronics category killers, such as Best Buy. Because of high levels of competition from the giant online sellers, such as Amazon and Walmart, and their inability to quickly respond to consumers' move to online shopping, category killers are being forced out of business due to shrinking sales and profits. Some of these that have or are expected to file for bankruptcy include Toys "R" Us, Claire's, Sears, Gymboree, David's Bridal, and General Nutrition Centers (GNC).18 Pop-Up Stores Pop-up stores are retail experiences that "pop up" one day and then disappear after a period of one day to a few months. In addition to being a low-cost way to start a business, pop-up stores provide a number of advantages, including building consumer interest, creating buzz, and testing marketing products and locations. Seasonal pop-up stores are frequently opened to sell Halloween costumes, Christmas gifts and decorations, and fireworks. In addition, traditional retailers, such as Target, Kate Spade, Gucci, and Louis Vuitton, have experimented with pop-ups. Resale Stores The U.S. resale industry generated approximately $17 billion in sales in 2016. Resale stores are primarily thrift stores, like Goodwill and Salvation Army stores, and consignment stores plus a smaller number of antique stores.19 Resale stores accept used merchandise and sell a wide range of previously owned clothing, furniture, household items, sporting goods, and musical equipment. The profit from thrift stores normally goes to charity, while consignment stores return a portion to the original owner. Approximately 15 percent of Americans shop at resale stores at least once a year; this is more than the number who shop at outlet malls (11 percent) and almost as many as those who shop at apparel stores (20 percent) and major department stores (21 percent). Customers of resale stores benefit by paying substantially lower prices than they would for new clothing and furniture. In addition, buying from resale stores is eco-friendly, it allows consumers to express themselves with unique vintage clothing, and it provides entertainment, as there are always lots of new and different items, usually at bargain prices.20 The Consumer Protection Safety Commission's regulations also apply to resale stores, yard sales, and flea markets. Many used products have caused injuries and even death.

hard goods

Durable goods such as appliances, furniture, and electronics.

destination retailer

Firm that consumers view as distinctive enough to become loyal to it. Consumers go out of their way to shop there.

Benefits of B2c

For both consumers and marketers, B2C e-commerce provides a host of benefits and some limitations. Table 12.2 lists some of these. Table 12.2Benefits and Limitations of E-Commerce Benefits Limitations For the Consumer Shop 24 hours a day Less traveling Can receive relevant information in seconds from any location More product choices More information for evaluating products Live chats Expanded market presence (don't have to drive across the country to get to a certain store) Can check your purchase history and buy or not buy the same item again Most sites keep items in your online "cart" so you can wait to make the purchase More products available to less developed countries Greater price information through shopbots Lower prices, so less affluent can purchase Participate in virtual auctions on eBay and similar sites Fast and often free delivery More products are available For the Consumer Lack of security Potential for fraud Can't touch or taste items Exact colors may not reproduce on computer monitors Can be expensive to order and then return Potential breakdown of human relationships For the Marketer The world is your marketplace Decreases costs of doing business Very specialized businesses can succeed Real-time pricing For the Marketer Lack of security Must maintain site to reap benefits Fierce price competition due to total transparency for branded products Conflicts with conventional retailers Legal issues not resolved From the consumer's perspective, electronic marketing increases convenience because it breaks down many of the barriers time and location create. You can shop 24/7 without leaving home. Consumers in even the smallest of communities can purchase funky shoes or a hot swimsuit from Bloomingdales.com, just like big-city dwellers. Gap offers customers the opportunity to choose from one of five body types and then, using augmented reality, try on several outfits in 3D and in a customized environment of their choosing.25 At the red-hot WarbyParker.com, you can upload your photo and virtually try on different sunglasses before you buy. The company will even send you several pairs if you're undecided; you just return the ones you don't want. In less developed countries, the Internet lets consumers purchase products that may not be available at all in local markets. Thus, the Internet can improve the quality of life without the necessity of developing costly infrastructure, such as opening retail stores in remote locations. Although most online consumers engage in goal-directed behavior and want to satisfy their shopping goal as quickly as possible, between 20 and 30 percent shop online because they enjoy the "thrill of the hunt" as much as or more than the actual acquisition of the item. The desire to be entertained motivates these online experiential shoppers, and they linger at sites longer. Consequently, marketers who wish to attract these customers must design websites that offer surprise, uniqueness, and excitement. Today, marketers provide virtual experiential marketing when they offer unique brand experiences using technology like augmented realty, virtual reality, artificial intelligence, and Big Data analytics.26 Because more than half of all retail customers say that friends influence their purchases, some online retailers have developed groups of "brand friends" who will share the news from the retailer.27 Marketers realize equally important benefits from e-commerce. Because an organization can reach such a large number of consumers online, it is possible to develop very specialized businesses that could not be profitable if limited by geographic constraints. The Internet provides an excellent opportunity to bring merchants with excess merchandise and bargain-hunting consumers together.28 When retailers become concerned that, due to economic downturns or other factors, consumers may not buy enough, they may use online liquidators, such as Overstock.com and Bluefly.com, that offer consumers great bargains on apparel and accessories, items that retailers refer to as "distressed inventory." At the same time, the Internet provides consumers with price transparency, making it harder for online retailers to compete at prices that are higher than those of their competitors. Even high-fashion designers whose retail outlets we associate with Rodeo Drive in Los Angeles, Fifth Avenue in New York, and the Magnificent Mile in Chicago are setting up shop on the Internet to sell $3,000 skirts and $5,000 suits. In 2017, $289 billion of personal luxury goods were purchased online—33 percent of that was in the U.S. alone.29 According to Google, 100 percent of affluent shoppers use technology daily, and 75 percent of them do online research before a purchase.30 The luxury fashion site Net-a-Porter.com sells designer clothing and accessories from Givenchy, Jimmy Choo, Victoria Beckman, and other top designers.31 Bottega Veneta bolero jackets sell for $5,600, and Oscar de la Renta lace and tulle gowns sell for $9,290. As we discussed in Chapter 11, one of the biggest advantages of e-commerce is that it's easy to get price information. Want to buy a new Hellboy action figure, a mountain bike, an MP3 player, or just about anything else you can think of? Instead of plodding from store to store to compare prices, many web surfers use search engines or "shopbots," such as Ask.com, that compile and compare prices from multiple vendors(recall our discussion of shopbots in Chapter 6). With readily available pricing information, shoppers can browse brands, features, reviews, and information on where to buy that particular product. E-commerce also allows businesses to reduce costs. Compared to traditional brick-and-mortar retailers, e-tailers' costs are minimal—no expensive mall sites to maintain and no sales associates to pay. And, for some products, such as computer software and digitized music, e-commerce provides fast, almost instantaneous delivery. Newer entertainment downloads have gone a step further with sites such as Amazon.com, Netflix, and iTunes that offer online shoppers the opportunity to purchase or rent movies. Just download a flick to your new high-definition LED smart TV and pop some corn. You're set for the evening.

how we provide quality service

If a service experience isn't positive, it can quickly turn into a disservice with nasty consequences. Quality service ensures that customers are satisfied with what they have paid for. However, satisfaction is relative because the service recipient compares the current experience to some prior set of expectations. That's what makes delivering quality service tricky. What may seem like excellent service to one customer may be mediocre to another person who has been "spoiled" by earlier encounters with an exceptional service provider. So, marketers must identify customer expectations and then work hard to exceed them. In air travel, lots of "little things" that used to be considered a normal part of the service are now treated by most airlines as extras. Many fliers believe the airlines are "nickel and diming" them for extra bag weight, blankets and pillows, small snacks and drinks, and prime seat locations. Soon they'll be charging us to use the restroom in flight! Southwest, though, has continued to offer all these perks as part of the basic service. Thus, by essentially doing nothing different from what they've always done, Southwest now stands out from the crowd and exceeds customer expectations. No surprise that year after year Southwest continues to be ranked among the top three in customer satisfaction among low-priced carriers by J.D. Power and Associates. In 2017, they scored the top spot for the first time.80 We've seen that delivering quality is the goal of every successful service organization. What can the firm do to maximize the likelihood that a customer will choose its service and become a loyal customer? Because services differ from goods in so many ways, decision makers struggle to market something that isn't there. But, just as in goods marketing, the first step is to develop effective marketing strategies. Table 12.3 illustrates how three different types of service organizations might devise effective marketing strategies. Table 12.3Marketing Strategies for Service Organizations Dry Cleaner City Opera Company A State University Marketing objective Increase total revenues by 20 percent within one year by increasing business of existing customers and obtaining new customers Increase to 1,000 the number of season memberships to opera productions within two years Increase applications to undergraduate and graduate programs by 10 percent for the coming academic year Target markets Young and middle-aged professionals living within a five-mile radius of the business Clients who attend single performances but do not purchase season memberships Primary market: prospective undergraduate and graduate students who are residents of the state Other local residents who enjoy opera but do not normally attend local opera performances Secondary market: prospective undergraduate and graduate students living in other states and in foreign countries Benefits offered Excellent and safe cleaning of clothes in 24 hours or less Experiencing professional-quality opera performances while helping ensure the future of the local opera company High-quality education in a student-centered campus environment Strategy Provide an incentive offer to existing customers, such as one suit cleaned for free after 10 suits cleaned at regular price Correspond with former membership holders and patrons of single performances, encouraging them to purchase new season memberships Increase number of recruiting visits to local high schools; arrange a special day of events for high school counselors to visit campus Use newspaper and direct mail advertising to communicate a limited-time discount offer to all customers Arrange for opera company personnel and performers to be guests for local TV and radio talk shows Communicate with alumni encouraging them to recommend the university to prospective students they know Of course, no one (not even your marketing professor) is perfect, and mistakes happen. Some failures, such as when your dry cleaner places glaring red spots on your new white sweater, are easy to see at the time the firm performs the service. Others, such as when the dry cleaner shrinks your sweater, are less obvious, and you recognize them only at a later time when you're running late and get a "smaller than expected surprise." But no matter when or how you discover the failure, the important thing is that the firm takes fast action to resolve the problem. A timely and appropriate response means that the problem won't occur again (it is hoped) and that the customer's complaint will be satisfactorily resolved. The key is speed; research shows that customers whose complaints are resolved quickly are far more likely to buy from the same company again than from those that take longer to resolve complaints.82 To make sure that they keep service failures to a minimum and that, when they do blow it, they can recover quickly, managers should first understand the service and the potential points at which failures are most likely to occur so they can plan how to recover ahead of time. That's why it's so important to identify critical incidents. In addition, employees should be trained to listen for complaints and be empowered to take appropriate actions immediately. Many hoteliers allow front-desk employees the discretion to spend up to a certain amount per service failure to compensate guests for certain inconveniences.

boosters

Individual who facilitate organized retail crime by stealing the merchandise boosters who steal the merchandise

the service encounter

It's difficult if not impossible to detach the expertise, skill, and personality of a provider or the quality of a firm's employees, facilities, and equipment from the service offering itself. The central role that employees play in making or breaking a service underscores the importance of the service encounter, or the interaction between the customer and the service provider.78 The most expertly cooked meal is just plain mush if a surly or incompetent waiter brings it to the table. To minimize the potentially negative effects of bad service encounters and to save on labor costs, some service businesses turn to disintermediation, which means removing the "middleman" and thus eliminating the need for customers to interact with people at all. Examples include self-checkouts at the supermarket or home improvement store, self-service gas pumps, and bank ATMs. Even salad and dessert bars reduce reliance on a restaurant server. As we said previously, the Internet provides many opportunities for disintermediation, especially in the financial services area. Banking customers can access their accounts, transfer funds from one account to another, apply for a loan, and pay their bills with the click of a mouse. Earlier, we said that a service encounter occurs when the customer comes into contact with the organization—which usually means he or she interacts with one or more employees who represent that organization. The service encounter has several dimensions that are important to marketers.79 First, there is the social contact dimension—one person interacting with another person. The physical dimension is also important; customers often pay close attention to the environment where they receive the service. Despite all the attention (and money) firms pay to create an attractive facility and deliver a quality product, this contact is "the moment of truth"—the employee often determines whether the customer will come away with a positive or a negative impression of the service. Our interactions with service providers can range from the most superficial, such as when we buy a movie ticket, to telling a psychiatrist (or bartender) our most intimate secrets. In each case, though, the quality of the service encounter exerts a big impact on how we feel about the service we receive. In other words, the quality of a service is only as good as its worst employee. However, the customer also plays a part in the type of experience that results from a service encounter. When you visit a doctor, the quality of the health care you receive depends not only on the physician's competence, it's also influenced by your ability to accurately and clearly communicate the symptoms you experience and how well you follow the regimen he or she prescribes to treat you. In the same way, the business customer must provide accurate information to his or her accounting firm. As we noted previously, because services are intangible, marketers have to be mindful of the physical evidence that goes along with them. An important part of this physical evidence is the servicescape: the environment in which the service is delivered and where the firm and the customer interact. Servicescapes include facility exteriors—elements such as a building's architecture, the signage, parking, and even the landscaping. They also include interior elements, such as the design of the office or store, equipment, colors, air quality, temperature, and smells. For hotels, restaurants, banks, airlines, and even schools, the servicescape is quite elaborate. For other services, such as an express mail drop-off, a dry cleaner, or an ATM, the servicescape can be very simple. Marketers know that carefully designed servicescapes can have a positive influence on customers' purchase decisions, their evaluations of service quality, and their ultimate satisfaction with the service. Thus, for a service such as a pro basketball game, much planning goes into designing not only the actual court but also the exterior design and entrances of the stadium, landscaping, seating, restrooms, concession stands, and ticketing area. Similarly, marketers pay close attention to the design of other tangibles that facilitate the performance of the service or provide communications. For the basketball fan, these include the signs that direct people to the stadium, the game tickets, the programs, the team's uniforms, and the hundreds of employees who help to deliver the service.

soft goods

Nondurables such as clothing, cosmetics and bedding.

Major brick-and-mortar retailing formats

Now that we've seen how retailers differ in the breadth and depth of their assortments, let's review some of the major forms these retailers take. Table 12.1 provides a list of these types and their characteristics. Some of these have been around for a long time while others are pretty new. Table 12.1Different Retailers Offer Varying Product Assortments, Levels of Service, Store Sizes, and Prices Type Merchandise Level of Service Size Prices Examples Convenience stores Limited number of choices in narrow number of product lines; frequently purchased and emergency items Self-service Small Low-priced items sold at higher than average prices 7-Eleven Supermarkets Large selection of food items and limited selection of general merchandise Limited service Medium Moderate Publix, Kroger Limited assortment supermarkets or extreme-value food retailers Limited selection of food items; many store brands Self-service Bag your own purchases Medium Low Aldi Specialty stores Large selection of items in one or a few product lines Full service Small and medium Moderate to high Yankee Candle Co., Alex and Ani Resale stores (thrift stores and consignment stores) Used clothing, furniture, household items, and musical instruments Self-service Small and medium Low Goodwill and Salvation Army stores Category killers Large selection of items in one or a few product lines Full service Large Moderate Toys "R" Us, Home Depot, Best Buy Leased departments Limited selection of items in a single product line Usually full service Small Moderate to high Picture Me portrait studios in Walmart stores Variety stores Small selection of items in limited product lines; low-priced items; may have a single price point Self-service Small Low Dollar General, Dollar Tree General merchandise discount stores Large selection of items in a broad assortment of product lines Limited service Large Moderate to low Walmart, Kmart Off-price retailers Moderate selection of limited product lines; buy surplus merchandise Limited service Moderate Moderate to low T.J. Maxx, Marshall's Warehouse clubs Moderate selection of limited product lines; many items in larger than normal sizes Self-service Large Moderate to low Costco, Sam's Club, BJ's Outlet stores and factory outlets Limited selection from a single manufacturer or retailer Limited service Small Moderate to low Gap Outlet, Nike Outlet, Nordstrom Rack, Off 5th Department stores Large selection of many product lines Full service Large Moderate to high Macy's, Nordstrom, Bloomingdale's Hypermarkets Large selection of items in food and a broad assortment of general merchandise product lines Self-service Very large Moderate to low Carrefour Pop-up stores Often a single line or brand; frequently used for seasonal products Self-service Very small Low to moderate Halloween costume pop-ups Convenience Stores Convenience stores carry a limited number of frequently purchased everyday items, including snacks, soft drinks, candy, over-the-counter drugs, toiletries, and emergency products, such as drain cleaner. Convenience stores typically are small (3,000 to 5,000 square feet) and offer customers speedy checkout so they can quickly be in and out. In recent years, many have added beer, wine, and other grocery items. In 2016, the more than 150,000 U.S. convenience stores had total sales of $564.9 billion. The largest U.S. convenience store chain is 7-Eleven Inc. with over 8,000 stores.10 Convenience stores cater to consumers willing to pay a premium for the ease of buying staple items close to home. In other words, convenience stores meet the needs of those who are pressed for time, who buy items in smaller quantities, or who shop at irregular hours. But these stores are starting to change, especially in urban areas, where many time-pressed shoppers prefer to visit these outlets even for specialty items. Store chains such as 7-Eleven and Wawa now offer customers a coffee bar, fresh sandwiches, and pastries. A great example of the wheel of retailing at work! Supermarkets Supermarkets are food stores that carry a wide selection of edible and nonedible products. The typical supermarket carries around 30,000 SKUs, half of which are higher-margin perishables: meat, produce, baked goods, and dairy products. Although the large supermarket is a fixture in the U.S., it has not caught on to the same extent in other parts of the world. In many European countries where small, compact towns dominate, for example, consumers walk or bike to small stores near their homes. They tend to have smaller food orders per trip and to shop more frequently, partly because many lack the freezer space to store a huge inventory of products at home. Wide variety is less important than quality and local ambiance to Europeans, but their shopping habits are starting to change as huge hypermarkets become popular around the globe. While supermarkets remain the number one retail destination for foods, the line between them and other types of retailers are blurring as drugstores, online retailers, and discount stores now offer food and supermarkets increase their offerings of nonfood items. To differentiate themselves, many supermarkets now carry private label and green (organic, fair trade, natural, or ethnic merchandise) products and may include a Starbuck's coffee kiosk or a café to improve the shopping experience. Limited-Assortment Supermarkets Limited-assortment supermarkets, or extreme-value food retailers, while carrying much the same types of products as the larger supermarkets, carry only around 1,500 SKUs. German limited-assortment supermarket Aldi, which we mentioned at the beginning of this chapter, carries only one or two brands of canned tomatoes instead of the numerous options a regular supermarket is likely to stock.11 Aldi is able to charge lower prices (the company says 21 percent lower than its lowest-priced competitors) as it offers significant savings on meat, produce, milk, and other perishables—and no free bags. In 2017, Aldi had 1,600 stores in the U.S. with plans to grow that number to 2,000 in 2018. But Aldi is not alone in this category: A second German discount chain, Lidl, is opening 100 U.S. stores a year, and Amazon.com, Inc., is testing brick-and-mortar formats and a grocery delivery service.12 Specialty Stores Specialty stores have narrow and deep inventories. They do not sell a lot of product lines, but they offer a good selection of brands within the lines they do sell. For a woman with curvy figure, shopping at a store that sells only swimsuits means there will be an adequate selection so she can find a suit that really fits. The same is true for larger, taller men who can't find suits that fit in regular department stores but who have lots of choices in stores that cater to big-and-tall guys. Specialty stores can tailor their assortment to the specific needs of a targeted consumer, and they often offer a high level of knowledgeable service. Specialty stores such as Bed Bath & Beyond and Sephora have deep assortments but carry relatively few products compared to a department store. A specialty store will typically carry 15,000 SKUs and 200 brands. Leased Departments Leased departments are departments within a larger retail store that an outside firm rents. This arrangement allows larger stores to offer a broader variety of products than they would otherwise carry. Some examples of leased departments are in-store banks, photographic studios, pet departments, fine jewelry departments, and watch and shoe repair departments. Variety Stores Variety stores originated as the five-and-dime or dime stores that began in the late 1800s. In these early variety stores, such as the iconic Woolworth's, all items were sold for a nickel or a dime. Today's variety stores carry a variety of inexpensive items from kitchen gadgets to toys to candy and candles. It's tough to buy something for a dime today, but many variety stores still stick to a single price point, and some offer products that don't cost more than a dollar. Some examples of today's variety stores include Dollar General, Family Dollar, and Dollar Tree. Discount Stores General merchandise discount stores, such as Target, Kmart, and Walmart, offer a broad assortment of items at low prices and with minimal service and are the dominant outlet for many products. Discounters are tearing up the retail landscape because they appeal to price-conscious shoppers who want easy access to a lot of merchandise. These stores increasingly carry designer-name clothing at bargain prices, as companies like Liz Claiborne create new lines just for discount stores.13 The glow may have faded on some general merchandise stores. Early in 2016, Walmart announced that it would close 269 stores, 154 of them in the U.S., as a result of increased competition from online retailers like Amazon.14 Since then, Walmart has focused more on its own online business and is now a major competitor of Amazon. Off-Price Retailers T.J. Maxx, Tuesday Morning, Marshalls, HomeGoods, Burlington Coat Factory, Big Lots, and Ross Stores are a few of the growing number of off-price retailers. Sometimes well-known manufacturers produce too many of an item. Department stores may cancel an order for items that are not "moving." These are the items that off-price retailers buy at very low prices. While some of the merchandise may be seconds with minor imperfections, most are first-quality items. TJX Companies, Inc.—owner of T.J. Maxx, Marshalls, HomeGoods, and Sierra Trading Post—says this on its website: "Our stores are constantly changing as we offer a continual flow of fresh and rapidly changing merchandise. Each store receives several deliveries per week, with each delivery containing thousands of items." This means off-price retailers, like resale stores, provide new and different items every few days. The merchandise in off-price stores provides a form of "retailtainment." Customers visit the stores frequently, just to "see what's new that I can't possibly live without." Warehouse Clubs Warehouse clubs, such as Costco and BJ's, are a newer version of the discount store. These establishments do not offer any of the amenities of a full-service store. Customers buy many of the products in larger-than-normal packages and quantities—nothing like laying in a three-year supply of paper towels or five-pound boxes of pretzels, even if you have to build an extra room in your house to store all this stuff! These clubs often charge a membership fee to consumers and small businesses. A recent survey showed that the typical warehouse shopper shops about once a month, is intrigued by bulk buying, hates long lines, and is drawn to the club retailer because of specific product areas, such as fresh groceries.15 And, consistent with the wheel of retailing, even these stores "trade up" in terms of what they sell today; shoppers can purchase fine jewelry and other luxury items at many warehouse clubs. Warehouse clubs provide little service, and they show up in areas where property is less expensive. On the plus side for customers, they do offer samples of their food products. On Fridays and Saturdays, there may be enough different samples available that you can literally eat dinner for free. Warehouse clubs have both wholesale (business) and individual memberships. Because warehouse clubs cater to both groups, they are the only source or the source of choice for small businesses, such as restaurants. Outlet Stores and Factory Outlets Factory outlet stores began in the 1930s as a means for a manufacturer to salvage some revenue from products produced with imperfections. These "irregulars" or "seconds" were sold to employees first and later to the public in retail stores at the site of, and often within, the manufacturing plant. With manufacturing quality improvement through such programs as TQM and Six Sigma, the amount of merchandise with imperfections has diminished. Today factory outlets are manufacturer-owned brick-and-mortar or online retail stores that sell only a single brand and are almost always located in an outlet mall with other similar stores. Increasingly, factory outlets sell merchandise that is specifically made for the outlets and is not available in larger retail outlets where higher-priced items are available. An outlet store is more often owned by a retailer and offers merchandise that has not sold well or that, as with an off-price retailer, was purchased from a vendor at a very low price. For example, Saks Fifth Avenue runs Saks Off 5th, Nordstrom's operates Nordstrom Rack, and Neiman Marcus has its Last Call stores. Just as the original outlet stores were a place where a manufacturer could gain a little extra revenue from otherwise unacceptable merchandise, today's factory outlets and outlet stores give firms an opportunity to increase revenue or to provide an additional channel.

service retailers

Organizations that offer consumers services rather than merchandise. Examples include banks, hospitals, health spas, doctors, legal clinics, entertainment firms, and universities.

deep web

Places on the Web that you can't access with most search engines and that provide a means for criminals to connect to buy and sell stolen or illegal items.

thrift stores

Resale stores that give their profits to charities

consignment stores

Resale stores that take used merchandise, resell it, and return a portion of the proceeds to the original owner.

resale stores

Retail stores that accept and sell used merchandise, including clothing, furniture, household items, and musical instruments.

the evolution of retailing

Retailing has taken many forms over time, including the peddler who hawked his wares from a horse-drawn cart, a majestic urban department store, an intimate boutique, and a huge "hyperstore" that sells everything from potato chips to snow tires. But now the cart you see inside at your giant local mall that sells new-age jewelry or monogrammed golf balls to passersby has replaced the horse-drawn cart, and you've traded the local hypermarket for your computer, tablet, or smartphone. As the economic, social, and cultural pictures change, different types of retailers emerge, and they often squeeze out older, outmoded types. How can marketers know what the dominant types of retailing will be tomorrow or 10 years from now? One of the oldest and simplest explanations for these changes is the wheel-of-retailing hypothesis. Figure 12.1 shows that new types of retailers begin at the entry phase with low-end strategies as they offer goods at lower prices than their competitors.4 After they gain a foothold, they gradually trade up as they improve facilities and upgrade merchandise. Finally, retailers move on to a high-end strategy with even higher prices, better facilities, and amenities such as parking, gift wrapping, and maybe even spa treatments. Upscaling results in greater investment and operating costs, so the store must raise its prices to remain profitable. This makes it vulnerable to still newer entrants that can afford to charge lower prices. And so the wheel turns. That's the story behind Pier 1 Imports. Pier 1 started as a single store in San Mateo, California, in 1962 that sold low-priced beanbags, love beads, and incense to post-World War II baby boomers. Today, it sells quality home furnishings and decorative accessories to the same customers, who are now among the more affluent of the American population.5 Unfortunately, like many other retailers, Pier 1 has suffered declining sales in recent years, and there are concerns about its future success.6 No retailer lives forever—at least in the same format. Competition is fierce, and there always are new formats that will challenge older ones. The wheel turns. The wheel of retailing helps us explain the development of some but not all forms of retailing. For example, some retailers never trade up; they simply continue to occupy a niche as discounters. Others, such as upscale specialty stores, start out at the high end and then move "downscale," as when Gap Stores opened Old Navy.

limited assortment supermarkets

Stores that carry edibles and related products but in far fewer number, on average around 1,500 SKUs, and at much lower prices than supermarkets.

bifurcated retailing

The decline of middle-of-the-market retailing due to the increasingly popular low-end, discount stores and the increasing popularity of upscale specialty retailing.

idea marketing

marketing activities that seek to gain market share for a concept, philosophy, belief, or issue by using elements of the marketing mix to create or change a target market's attitude or behavior

fair trade

movement made up of diverse network of producers, companies, shoppers, advocates, and organizations that promotes greater equity in international trading partnerships, encourages sustainable development, and secures the rights of marginalized producers and workers in developing countries

convenience stores

neighborhood retailers that carry a limited number of frequently purchased items and cater to consumers willing to pay a premium for the ease of buying close to home

ethical treatment of customers

The other side of the retail ethics issue is how retailers and their employees treat customers. Although it may be illegal if a store doesn't provide equal access to consumers of different ethnic groups, behavior that discourages customers who appear economically disadvantaged or socially unacceptable from shopping at a store is not. One study, for example, showed that restaurant servers based their level of service on the customer's perceived ability to pay and leave a good tip.72 In other customer profiling situations, where the level of customer service is tailored based on a customer's perceived ability to pay, some customers were followed around the store by associates and made so uncomfortable that they left before making a purchase, or the customer was ignored altogether to the point he or she left the store disgusted and angry.73 As a classic scene in the movie Pretty Woman starring Julia Roberts depicted, stores that try to maintain an image of elite sophistication may not be helpful to customers who don't look like they belong there. Many critics argue that retailers have an obligation not to sell products to customers if the products can be harmful. For example, for many years some teens and young adults abused potentially harmful over-the-counter medicines. While government regulations removed many of these drug products from store shelves in recent years, retailers still have to carefully police their distribution. The same is true for products such as alcohol and cigarettes, which by law are limited for sale to adult customers.

Classifying retailers by what they sell

To keep this discussion of retailers from being confusing, we need to discuss two different ways we talk about services and service. First, there are retailers whose main products are services—your dry cleaner who cleans your clothes, the salon where you get your hair cut, and the garage that repairs your car. We also use the word service to refer to the extras we receive when we buy goods (e.g., the delivery and set-up of your new washer, instructions on how to set your new home security system, and, at the supermarket, bagging your groceries and helping you put them in your car). In classifying retailers by what they sell, we will first distinguish between retailers who primarily sell goods and those who primarily sell services. For a goods-oriented retailer, one of the most important strategic decisions is what to sell—its merchandise mix. Service retailers similarly decide what services they will offer consumers. Massage Envy, for example, as their name says, specializes in massages. Canyon Ranch Health Resort in Arizona offers exercise, nutrition instruction, a selection of indoor and outdoor pools complete with underwater treadmills, manicures, pedicures, beauty treatments, and even massages. Later in this chapter, we'll talk more about retailers whose main business is to provide consumers with quality services and other intangibles that meet their needs. If a store's merchandise mix is too limited, it may not have enough potential customers, whereas if it is too broad, the retailer runs the risk of being a "jack of all trades, master of none." Because what the retailer sells is central to its identity, one way we describe retailers is in terms of their merchandise mix. Although, as we learned in Chapter 9, a manufacturer's product line consists of product offerings that satisfy a single need, in retailing, a product line is a set of related products a retailer offers, such as kitchen appliances or leather goods. The Census of Retail Trade that the U.S. Bureau of the Census conducts classifies all retailers by North American Industry Classification System (NAICS) codes(the same system we described in Chapter 6 that classifies industrial firms). A retailer that wants to identify direct competition simply looks for other firms with the same NAICS classification codes. However, a word of caution: As marketers experiment with different retail merchandise mixes, it's getting harder to make these direct comparisons. For example, even though marketers like to distinguish between food and nonfood retailers, in reality, these lines are blurring. Combination stores offer consumers food and general merchandise in the same store. Supercenters, such as Walmart Supercenters and SuperTargets, are larger stores that combine an economy supermarket with other lower-priced merchandise. Retailers like CVS, RiteAid, and Walgreens drugstores carry limited amounts of food. We can also classify retailers by their merchandise assortment, or the selection of products they sell. Merchandise assortment has two dimensions: breadth and depth. Merchandise breadth, or variety, is the number of different product lines available. A narrow assortment, such as we encounter in convenience stores, means that shoppers will find only a limited selection of product lines, such as candy, cigarettes, and soft drinks. A broad assortment, such as what a warehouse store like Costco or Sam's Club offers, means there is a wide range of items from pizzas to barbecue grills. Merchandise depth is the variety of choices available within each specific product line. A shallow assortment means that the selection within a product category is limited, so a factory outlet store may sell only white and blue men's dress shirts (all made by the same manufacturer, of course) and only in standard sizes. In contrast, a men's specialty store may feature a deep assortment of dress shirts (but not much else) in varying shades and in hard-to-find sizes. Figure 12.2 illustrates these assortment differences for one product: science fiction books. Classifying Retailers by Level of Service In addition to classifying goods retailers by the merchandise they sell, we also characterize them by the amount of extra help and assistance—that is, the services—they offer customers who buy their merchandise. Firms recognize that there is a trade-off between service and low prices, so they tailor their strategies to the level of service they offer. Customers who demand higher levels of service must be willing to pay for that service, and those who want lower prices must be willing to give up services. Retailers like Sam's Club that promise cut-rate prices often are self-service operations. When customers shop at self-service retailers, they make their product selection without any assistance, they often must bring their own bags or containers to carry their purchases, and they may even handle the checkout process with self-service scanners. A new supermarket in Sweden called Näraffär Viken pushes the envelope to the extreme: It has no employees at all. Shoppers use a smartphone app to open the doors, scan barcodes, and pay for items. Note: The store operates on an honor system, but just in case, it's also monitored by CCTV.7 Contrast that experience to visiting a full-service retailer. Department stores like Bloomingdale's and specialty stores like Victoria's Secret provide supporting services, such as gift wrapping, and they offer trained sales associates who can help you select that perfect gift. Nordstrom, an upscale department store, is recognized for its exceptional service. The sales associates, known as "Nordies," have even been known to procure a desired item from another retailer for the shopper if it's not available at a good price in the Nordstrom inventory. Other specialized services are available based on the merchandise the store offers. For example, many full-service clothing retailers will provide alteration services. Retailers like Macy's, Bed Bath & Beyond, Best Buy, and even Amazon.com that carry china, silver, housewares, appliances, electronics, and other items that brides (and grooms) might want may also offer special bridal consultants or bridal gift registries. Limited-service retailers fall in between self-service and full-service retailers. Stores like Walmart, Target, Old Navy, and Kohl's offer credit and merchandise return but little else. Customers select merchandise without much assistance, preferring to pay a bit less rather than have more assistance from sales associates. Before we leave our discussion of retailers classified by level of service, we must mention vending machines, which could be called no-service retailers. Coin-operated vending machines are a tried-and-true way to sell convenience goods, especially snacks and drinks. These machines are appealing because they require minimal space and personnel to maintain and operate. Some of the most interesting innovations are state-of-the-art vending machines that dispense everything from Legos (but only in Germany!) to nail polish (to update your toes on the go!).8 Chinese customers can purchase live crabs from vending machines, and in Japan customers can buy draft beers. In the U.S., vending machines that use touchscreens and accept credit card or mobile payments dispense pricey items like Beats by Dr. Dre headphones and Ray-Ban sunglasses.9 In general, however, vending machines are best suited to the sales of inexpensive merchandise, food, and beverages. Most consumers are reluctant to buy pricey items from a machine. New vending machines may spur more interest, however, as technological developments loom on the horizon, including video kiosk machines that let people see the product in use, have the ability to accept credit card or mobile payments, and have inventory systems that signal the operator when malfunctions or stock-outs occur.

servqual

a multiple-item scale used to measure service quality across dimensions of tangibles, reliability, responsiveness, assurance, and empathy

omnichannel (omni-channel) marketing

a retail strategy that provides a seamless shopping experience, whether the customer is shopping online from a desktop or mobile device, by telephone or in a brick-and-mortar store

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 they were alone

multilevel or network marketing

a system in which a master distributor recruits other people to become distributors, sells the company's product to the recruits, and receives a commission on all the merchandise sold by the people recruited

wheel-of-retailing hypothesis

a theory that explains how retail firms change, becoming more upscale as they go through their life cycle

category killer, or category specialist

a very large specialty store that carries a vast selection of products in its category

diverter

an entity that facilitates the distribution of a product through one or more channels not authorized for use by the manufacturer of the product

pyramid schemes

an illegal sales technique that promises consumers or investors large profits from recruiting others to join the program rather than from any real investment or sale of goods to the public

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

virtual experiential marketing

an online marketing strategy that uses enhancements, including colors, graphics, layout and design, interactive videos, contests, games, and giveaways, to engage experiential shoppers online

nonstore retailing

any method used to complete an exchange with a product end user that does not require a customer visit to a store

retail return fraud

criminal activity when someone returns an item they obtained without making a purchase

leased departments

departments within a larger retail store that an outside firm rents

warehouse clubs

discount retailers that charge a modest membership fee to consumers who buy a broad assortment of food and nonfood items in bulk and in a warehouse environment

intangibles

experience-based products

supermarkets

food stores that carry a wide selection of edibles and related products

fencers

individuals who facilitate organized retail crime by selling the merchandise to consumers or businesses

services

intangible products that are exchanged directly between the producer and the customer