GS MKT 306 CH 11 Retailing

Retailers generate more than

$4.6 trillion in annual sales in the United States, about two-thirds of the total U.S. gross domestic product.2 (See Figure 11.1.) In 2015, about one out of every eight American workers, 15 million in total, were employed in the retail sector.

1 of 4 Classifying Retailer Dimensions : level of service

3 Types: • Self-Service • Full-Service • Limited Service refers to amount of care and attention the retailer provides the consumer. That level can vary considerably depending on either the customer or the complexity of the goods and services offered. In order to meet these varying service-level needs, retailers may elect to provide some combination of self-service, full service, or limited service.

People tend to think of retailing in terms of very large organizations. But retail very much remains a "mom-and-pop"-type business. Almost

9 out of 10 retail companies employ fewer than 20 employees; over 95 percent of retailers operate just one store.

Prior to breaking ground on the space, corporate managers had to take into account a variety of factors: 1. Whether to lease and remodel existing retail space or build a new store. 2. How compatible are other nearby retailers in terms of store image and clientele. 3. Whether to build a freestanding structure or acquire space in a downtown business district, strip mall, or shopping center. These types of considerations generally fall under the domain of location type and site selection decisions.

After a retailer evaluates alternative trading areas and identifies a trading area, it must next decide on the preferred type of location. There are three different location types: • An isolated store is a freestanding retail outlet located on either a highway or major road. There are no adjacent retailers with which a freestanding store shares traffic. • An unplanned business district is a type of retail location where two or more stores are situated together or in close proximity. In this location, the overall mix of stores is not the result of prior long-range planning. For instance, a downtown business district may consist of a department store, a gastropub, a women's fashion boutique, and a pharmacy. A planned shopping center is a group of architecturally unique business establishments on a site that is centrally owned or managed. These sites are designed and operated as a unit, with tenants selected to limit direct competition. Dedicated parking is another typical feature. Examples include large regional shopping malls and neighborhood strip malls. More recently, lifestyle shopping centers have gained in popularity. These retail centers usually feature upscale retail operations as well as fine dining and entertainment options and are often located within affluent neighborhoods.

3 of 3 Differentiating Factors of Retail : Physical Stores

Although digital technologies are transforming the way we shop, most retail transactions still occur in physical stores. The truth is that many people enjoy the experience of shopping. They like to have the ability to touch, smell, and even try out (or try on) new products. Once they have made a purchase decision, many individuals prefer the immediate gratification of taking a new purchase home with them rather than waiting for delivery. Rather than viewing e-commerce and in-store retailing as sharply contrasted alternatives, consumers are increasingly integrating their digital and in-store shopping experiences. Retailers are responding by designing new, technology-enhanced shopping experiences for their customers.

2 of 4 Retailing Strategic Issues : Store Image and Retailer Positioning : Store Atmospherics Consumer views of a retailer's image are heavily grounded in the store's "atmosphere"—the psychological feeling a person gets when visiting the retail store, catalog, vending machine, or website. These feelings can arise even before a shopper sets foot in the store, based upon storefront and location. After entering the store, consumer feelings are influenced by lighting, music, width of aisles, and displays.

Atmospherics refers to sensory-based stimuli within the retailer's environment—the sights, sounds, smells, and other attributes—that project an image and draw customers to the store. Retail atmospherics have been shown to contribute greatly to people's shopping enjoyment. They also influence consumer behaviors such as time spent in the store, willingness to engage with store personnel, likelihood of purchase, purchase size, and future patronage.

Automated Vending Many consumers think of automated vending primarily in terms of cash-operated machines used to distribute inexpensive food items, such as snacks and soft drinks. However, most people use automated vending systems regularly to acquire valuable services as well.

Automated vending is the most impersonal form of retailing. Yet the small space requirements and 24/7 availability make automated vending a cost-efficient alternative for certain products, particularly in high-traffic areas.

3 of 4 Classifying Retailer Dimensions : Breadth and Depth of Merchandise Assortment Retailers may also be classified by merchandise assortment (or mix). An assortment is the selection of merchandise a retailer carries. It includes both the breadth of product categories and the depth of product lines offered within each category.

Breadth of assortment refers to the number of distinct goods or service product lines that a retailer carries. Depth of assortment refers to the number of individual items offered within any single product line. For instance, many specialty retailers do not carry items in a variety of many different categories. Instead, they choose to offer a deep assortment of goods or services within just a few select, interrelated categories.

Catalog marketing is a retail sales technique used to group many items together in a printed piece or an online store. Consumers use information in the catalog to buy directly from the catalog-sender by phone, mail, or online. Some catalog marketers act as intermediaries between consumers and manufacturers; they buy products from a variety of manufacturers and sell them to consumers. Businesses with more than a few items usually just create their own catalogs.

Catalogs have been one of America's favorite ways to shop for over 200 years. In fact, garden and seed catalogs were in circulation in the United States before the Revolutionary War. Marketers are increasingly challenged to produce a specific return on investment for their efforts. The sales effect of a commercial or social media campaign can be difficult to determine. But catalogs—with their definitive mail dates and customer identifiers—are easier to track. Targeting the right customers is also much easier now. With increased online ordering, marketers are able to sync up internal customer databases with large industry databases that contain detailed data on millions of households. This combination gets the right catalogs into the right hands.

2 of 4 Retailing Strategic Issues : Store Image and Retailer Positioning : Merchandise Management Merchandising consists of the activities involved in acquiring particular goods and services and making them available at the places, times, prices, and quantities that enable a retailer to achieve its goals. A retailer should align its merchandising approach with the needs of its target-market consumers, its marketplace positioning, its internal capabilities, and the strengths of its supplier network.

Category management is a merchandising technique that focuses on the performance of a product category rather than individual brands. Essentially, each category is run like a "mini-business." Retailer managers make merchandising decisions based upon maximizing the total return on all assets assigned to their category. Frequent users of category management are supermarkets, drugstores, hardware stores, and discount retailers.

3 of 12 : Types of Stores : Warehouse Clubs (also known as wholesale clubs or membership warehouses) operate in warehouse-like facilities that offer merchandise in bulk quantities, at ultra-low prices, to shoppers who pay an annual fee to join. These stores offer few frills. Members also enjoy surprise deals on selected branded and private-label merchandise. Examples of warehouse clubs are Costco, Sam's Club, and BJ's.

Costco is now the number two U.S. retailer after Walmart but is number one in warehouse clubs. Costco keeps its prices low by buying in bulk and religiously limiting its markups to a maximum of 15 percent (supermarkets average 25 percent markup by comparison). 1. A culture that emphasizes simplicity, sustainability, and frugality 2. An impressive understanding of retail consumer psychology

Direct Selling Some companies distribute their products and services through direct selling (or direct retailing). In this form of retailing, an independent representative of a company conducts retail and sales-related activities away from a fixed retail location, most often at consumers' homes or place of business. Companies like Mary Kay Cosmetics, Amway, Avon, and The Pampered Chef are well-known direct retail organizations.

Direct selling consists of two main business models: • Single-level marketing, in which a direct seller makes money by buying products from a parent organization and selling them directly to customers. • Multi-level marketing (also known as network marketing or person-to-person marketing), in which the direct seller makes money from both direct sales to customers and by sponsoring new direct sellers and earning a commission from their efforts. Direct retail sales representatives often introduce their products via some sort of party or event at the home of a customer. The customer invites relatives, friends, and neighbors to watch or participate in product demonstrations, and typically receives a small discount on her order.

Direct Selling (continued) According to the World Federation of Direct Selling Associations (WFDSA), direct selling accounted for 2013 retail sales of more than $178 billion through the activities of more than 96.2 million independent sales representatives. For independent representatives, the cost to start a direct retailing business is typically very low compared to franchising opportunities. These low start-up costs can also lead to high turnover rates. However, direct selling remains an attractive option for individuals looking for career flexibility or a secondary source of income. Nearly 90 percent of direct sellers elect to work part-time, offering busy parents, caregivers, military spouses, veterans, and others flexibility and work-life balance.

Direct selling is currently attracting includes a growing number of millennial, female, and minority entrepreneurs. For instance, in announcing its fifteenth consecutive year of at least 300,000 new independent beauty consultants, cosmetics retailer Mary Kay, Inc. noted that in 2015: • 47 percent of the more than 325,000 people who started a Mary Kay business in the U.S. were between ages 18 and 34. • 51 percent of the women who started a Mary Kay business were Latina, Asian, or African American. • 35 percent of new Mary Kay beauty consultants were Latinas, who comprise 22 percent of the company's total sales force.33 Direct selling is not for everyone. Individuals who lack the commitment and self-discipline to build up a reliable network of customers typically struggle to create financial independence through their direct retailing business. However, this model remains a highly popular and successful form of nonstore retailing.

6 of 12 : Types of Stores : A specialty store is a store that concentrates on selling one line of goods or services, such as jewelry, tea, batteries, tools, young women's apparel, or hair dressing. It usually carries a narrow but deep merchandise assortment and tailors its strategy to a specific market segment. Examples of specialty retailers include Tiffany & Co. (jewelry), Joseph A. Banks (men's apparel), Pearlvision (eye wear), Ann Klein (apparel), Lululemon (yoga/athletic wear), Sunglass Hut (sunglasses), and Northern Tool.

Due to their specialized nature, specialty stores often can offer greater selection and more knowledgeable, personalized service than can discount stores and department stores. Because they do not have aisles of unrelated products, specialty stores can also offer a more intimate and intuitive shopping experience. Among the most popular categories of specialty stores are apparel, personal care, auto supply, home furnishings, electronics, books, pet supplies, jewelry, and athletic wear. As many consumers have reduced their spending, specialty retailers like H&M, Forever 21, and Zara have turned apparel retail on its head with their "fast fashion" retail stores. Fast fashion refers to the rapid translation of high-fashion design trends by lower-cost manufacturer-retailers. The Spanish retailer Zara is a pioneer in this field. Using its supply chain expertise, Zara re-stocks its stores twice each week with on-trend, knock-off fashion apparel at bargain prices. Shopping for inexpensive clothing provides customers with a source of cheap, endlessly available entertainment. Consumers also appreciate the ability to frequently update their wardrobe with fresh, new, affordable clothing items. From the perspective of retailers, fast fashion encourages customers to make frequent visits to stores and encourages impulse shopping. Despite its advantages for customers, fast fashion has been criticized on the grounds that it encourages a "throw-away" attitude that is ultimately harmful to the environment. The trend has also been criticized on intellectual property grounds: Some designers allege that their designs have been illegally mass-produced by fast-fashion retailers. It will be interesting to see what the future holds for this fascinating retail trend.

11 of 12 : Types of Stores : Factory outlet stores are manufacturer-owned retail establishments that sell the excess merchandise resulting from closeouts, cancelled orders from other retailers, discontinued goods, and irregular items. The chief aim of some outlets is to enable the retailer to unload excess inventory and defective merchandise.

Each season, a certain percentage (typically between 5 and 10 percent) of a manufacturer's output either goes unsold through regular distribution or is returned by customers. In recent years, manufacturers have shown greater interest in opening factory outlet stores, which offer several advantages: 1. Manufacturers can control where their discounted merchandise is sold. Most outlet centers are at least 20 miles from urban or suburban shopping destinations. By opening outlet stores at some distance from other channels, manufacturers avoid alienating their specialty and department store clients by cannibalizing their sales. 2. Even after accounting for reduced prices on merchandise, outlets can be highly profitable. They typically have lower operating costs and higher margins than department and specialty stores. Outlet stores provide manufacturers with a way to generate new revenues while reducing risks associated with new items and product lines. 3. In contrast to working with off-price retailers, outlet stores enable the manufacturer to better protect their brand image. The manufacturer can control marketing-mix variables, such as pricing and sales promotion, and ensure that discontinued items and irregulars are disposed of properly.

11 of 12 : Types of Stores : Factory outlet stores (continued) Today, many outlet stores operate in clusters to attract greater customer traffic. These outlet malls are often located near major attractions, vacation spots, and population centers.

Even as retailers across the U.S. close hundreds of locations, leaving behind near-empty shopping malls, outlet mall operators like Tanger and Simon Properties continue to break ground on new outlet centers in the U.S. and Canada. These new retail locations boast store occupation rates exceeding 95 percent.

2 of 12 : Types of Stores : Supermarkets carry a wide and complex line of groceries, meat, dairy, produce, and baked goods plus a limited array of nonfood products like beauty aids, prescription drugs, and general merchandise. Everyone needs to eat. U.S. consumers make 1.5 grocery trips per week, making supermarkets the most frequently visited type of retail store. As a result, grocery stores represent a large portion of overall retail in the United States, accounting for annual sales of over $560 billion; the average supermarket generates about $516,000 in sales each week!

Even at the height of the 2008-2009 recession, consumer spending on food and beverages remained more or less stable, according to economic data from the Bureau of Economic Analysis. However, growth in the supermarket sector has consistently declined over the past decade. There are several causes for the slowdown: • Increased competition from full-line discount stores, convenience stores, warehouse clubs, drugstores, and even online retailers such as Amazon.com. • Lower population growth. • Societal changes that have increased out-of-home eating (see Table 11.2) Although consumers make frequent grocery trips, profit margins on canned and packaged goods, such as tomato sauce and cake mixes, are very low, However, the perishable items that supermarkets sell, such as bakery goods, produce, and dairy, typically carry relatively higher prices and gross margins. As a result, perishable items account for nearly half of supermarket sales. Mainstream supermarket chains have adapted by adding organic food and new varieties of products to cater to the demands of consumers. Adding in-store offerings like juice bars

1 of 3 Differentiating Factors of Retail : The Average Amount of a Single Sales Transaction

First, the average amount of a single sales transaction is much less in retail than in other types of business, typically well under $100 per visitor. Because of the smaller per-transaction revenue, retailers must be very conscious of controlling costs associated with each transaction. This places great demands on in-store operations, merchandise management, inventory control, and logistics. Low per-transaction revenue also means that retailers need to optimize the number of customers walking through the door. This means using advertising and sales promotions to increase store traffic. Once the customers are in the store, effective design, signage, displays, and checkout processes can lower cart abandonment rates and increase Page 351order size. Similar activities are needed to optimize the number of customers visiting a retailer's website. Finally, the comparatively low revenue per transaction requires retailers to think in terms of the lifetime value of each customer. Retailers invest in information systems and develop ongoing processes that enable them to calculate customer lifetime value. These systems identify profitable customers and help marketers to enact strategies that lead to long-term, mutually beneficial relationships.

8 of 12 : Types of Stores : Department stores (continued) "Department stores are not exactly dead, but they're obviously troubled," according to retail historian Jack Thomas of the website www.deadmalls.com. "Everyone wants one-stop shopping. The problem with department stores and malls is nobody wants to go to multiple stores to get what they need."13 Recognizing the macro-environmental trends that have reshaped consumer preferences and shopping behaviors in this century, some department stores are starting to take pages from the playbooks of their rivals in search of a resurgence.

For example, many department stores have invested heavily in their e-retail websites. They have sought to integrate customer experiences across the physical and online channels, a practice known as omni-channel retailing. In an effort to attract millennials, Macy's recently opened an Etsy Shop in its flagship midtown Manhattan location.

Online Retail Trends Two important trends in online retailing today are retail channel migration and the growing importance of online user experience. We discuss these briefly below. Bricks or clicks? The distinction is no longer clear-cut. Many traditional "brick-and-mortar" (physical-store) retailers have introduced online retail websites. This "bricks-and-clicks" strategy allows shoppers to purchase the same merchandise available in their stores from the comfort of their couch. Similarly, nonstore retailers, such as catalog retailers Lands' End and Eddie Bauer, have incorporated online retail into their distribution networks.

Getting customers is one thing; keeping them is something quite different. In the race to retain customers, retailers are focusing greater attention on improving shopper experiences. Today's consumer is more informed and connected than ever. Millennial shoppers expect much more from the products they buy and the brands they support. Therefore, retailers must design online sites and applications that are intuitive and work well on any device or browsing platform. Uber's invisible and automatic payment system is a great example: Users tap once to choose their pickup location and then tap again to both schedule and pay for the ride. The experience is user-friendly and the checkout is virtually seamless.

5 of 12 : Types of Stores : Drugstores are specialty retailers that concentrate on selling over-the-counter (OTC) and prescription pharmaceutical products as well as health products, personal grooming items, and general merchandise. As insurance providers and the federal government continue to seek ways to streamline health care costs, some drugstore chains have started offering additional health-maintenance services, such as blood pressure tests, diabetes monitoring, and immunizations.

However, prescription pharmaceuticals still represent almost 70 percent of drugstore sales. Figure 11.4 shows U.S. drugstore sales from 1992 to 2013. In recent years, drugstores have faced growing competition; other types of retailers, like full-line discounters and grocery stores, have increasingly added pharmacy services. However, this trend may now be reversing. Pharmacy retailer CVS Health recently paid $1.9 billion to acquire all 1,700 of Target's in-store pharmacies and clinics.11 The deal promises to deliver incremental sales to CVS through additional store locations.

2 of 4 Classifying Retailer Dimensions : Ownership and Organization : Franchise Organizations Another common form of retail organization is franchising, which is an arrangement in which a supplier (or franchisor) grants a dealer (or franchisee) the right to sell products Page 354in exchange for some type of financial consideration. Of course, franchising has been particularly prominent in areas such as the quick-service restaurant industry (for instance, Taco Bell, Chick-fil-A); automotive services (Firestone); real estate (Century 21); and tax preparation services (H&R Block). But would it surprise you to learn that about 40 percent of retail sales in the U.S. are accounted for by franchise operations?

In a typical franchise system, the franchisee agrees to pay a lump sum plus a royalty on future sales in return for the right to operate a business in a specific location. There are two different types of franchising relationships: business format franchising and product distribution franchising. In a business format franchise relationship, the franchisor provides to the franchisee not just its trade name, products, and services but an entire system for operating the business. The franchisee generally receives site selection and development support, operating manuals, training, brand standards, quality control, a marketing strategy, and business advisory support from the franchisor. Product distribution franchising, while less common, actually accounts for a larger percentage of franchise-based sales. In a product distribution franchise arrangement, the focus is not on the system of doing business, but is instead based on the franchisee gaining preferred or exclusive access to the products manufactured or supplied by the franchisor.

1 of 4 Classifying Retailer Dimensions : level of service : Full-Service

In contrast, full-service retailers commonly seek to assist customers through every step of the shopping process. Specialty stores (e.g., Tiffany) and high-end department stores (e.g., Nordstrom and Neiman Marcus) and boutiques are examples of full-service retailers. In most instances, the products that full-service retailers offer are of a higher-perceived quality or possess added or more complex features than those in the standard offering in its class. Store customers who seek out full-service retailers typically have higher amounts of disposable income and favor customized service and premium brands. Much higher levels of employee knowledge and personalized attention to customers are required to sell premium-quality items. Also, the customers expect to find engaging, sometimes elegant, store environments. As a result, prices and margins for products sold in full-service retail settings tend to be comparatively higher.

4 of 12 : Types of Stores : Convenience Stores Are small, self-service stores that are open long hours and carry a limited number of frequently purchased items. Usually located along highly trafficked roads, they aim to capture sales from those who are willing to pay premium prices in exchange for an easy, in-and-out shopping experience. Convenience stores account for 34 percent of all retail outlets in the United States (more than 150,000 stores in total).8 Most convenience stores (80 percent) sell gasoline, but the retail profit margins for fuel are incredibly thin. As a result, many convenience stores also offer some assortment of basic food products, snacks, beverages, and newspapers.

In recent years, many convenience stores have sought to shed their gritty, gas station image in an effort to attract more females and business travelers. Few convenience stores have attracted as many avid fans as Sheetz, a family-owned chain based out Page of Altoona, Pennsylvania, with more than 500 stores located across the Mid-Atlantic region. "Everything they do is focused on food and delighting customers inside the store," says Jeff Lenard, a spokesman for the National Association of Convenience Stores, an Alexandria, Virginia, trade group.

8 of 12 : Types of Stores : Department stores carry a wide variety of product lines, with each line operated as a separate department and managed by specialist merchandisers and buyers. Common department store product lines include clothing, shoes, home furnishings, household goods, tools, and hardware.

Industry observers generally cluster department stores into three tiers: • The upper tier includes upscale chains, like Nordstrom, Neiman Marcus, and Lord & Taylor. • The mid-tier includes chains such as Macy's and Dillards. • The lower tier includes chains like Sears, Kohl's, and JCPenney. The golden age of the big department store began in the 1920s. Iconic retail palaces known for their ornate design and bewildering array of merchandise were designed by the leading architects of the day and built in busy downtown business districts. During the 1950s and 1960s, department store chains boomed as they followed population growth into the outer rings of large cities. They often anchored the new, suburban shopping malls.

1 of 4 Classifying Retailer Dimensions : level of service : Limited Service

Limited service falls somewhere in between the two extremes and would include the majority of retailers. For instance, department stores like JCPenney or big-box stores like Best Buy would typically be considered limited-service retail operations. In such outlets, one would typically expect to find a higher percentage of shopping goods offered as part of the store's merchandise assortment. In some limited-service settings, customers may need additional information and reassurance in order to feel comfortable purchasing items like larger appliances and flat-screen TVs. In general, though, it is rare to find the same level of highly skilled, personalized attention in limited-service settings that one might find in full-service settings.

3 of 4 Classifying Retailer Dimensions : Breadth and Depth of Merchandise Assortment (continued) If you were pressed for time and needed to buy a greeting card or flowers, where would you shop? If you are like many consumers, the answer is not a card shop, like Hallmark, or a local florist. Probably many people would think of going to a drugstore or supermarket.

Many retailers seek to increase their breadth of assortment via scrambled merchandising, adding goods and services that may be unrelated to each other and to the firm's original business. Scrambled merchandising is popular for several reasons. Retailers are always looking to increase overall revenues; consumers like one-stop shopping. Adding fast-selling, highly profitable goods and services leads to more impulse purchases by consumers. In some cases, scrambled merchandising also provides a retailer the opportunity to access new customers and grow its base. At the same time, offering a broader assortment can increase store costs. Another potential limitation is that retailers may lack expertise in buying, selling, and servicing the new items. The greatest implication of the spread of scrambled merchandising is increased competition across different types of retailers. For instance, drugstores, florists, and bookstores are all deeply affected by supermarkets selling items such as prescription drugs, flowers, and books. In response, drugstores have sought to fill the sales void by practicing scrambled merchandising themselves, offering food and drink items, toys, greeting cards, and the like.

Tiphany Hall Lopez Account Manager Galderma Laboratories

My job is largely consultative: I help medical practices promote services and products, execute patient events, understand the financial implications of their pricing strategies, and coach and educate on product use. I help them with everything from how to answer the phone and book an appointment to deciding their marketing and advertising budget for the year. What has been the most important thing in making you successful at your job? I've worked hard to forge strong relationships with my customers, so that they depend on me as a trusted advisor and colleague. I never want to be seen as a "sales rep" trying to fill the shelves with product. Instead, I want to offer opportunities to grow the business, drive the category, and change the marketplace. My mission is to make my customers successful, and in the process, I'm also successful. What advice would you give soon-to-be graduates? Great careers are built on skillsets, not on industries or job titles. I spent so much time thinking about the industry I preferred or the type of job I wanted. Once I reflected on the things I did well and the type of work I valued, it was so much easier to find a role that fit me! No matter the industry or the job, great companies always have opportunities for great people to advance their careers! Focus on building a well-balanced portfolio of skills and abilities instead of worrying about the job titles or the industry. Honestly assess your gaps in knowledge or experience and tackle them. If you're an agile learner who is eager to self-develop, you will continue to climb the ladder, no matter where you start. What do you consider your personal brand to be? I am an organizational champion committed to helping people, businesses, and communities to not only build a strategy for success but also execute it. I enjoy shaping the vision and anticipating the future, but at my core, I believe that to deliver upon that vision and carry out a plan to bring it to life is the true measure of a job well done. I strive to be far more than the "idea person"—I am the one in the trenches doing what it takes to finish the job.

1 of 4 Retailing Strategic Issues : Retailer Operational Efficiency The Great Recession of 2008-2009 and subsequent mild recovery have resulted in widespread underemployment and flat wage growth. In response, many consumers have become cautious spenders. It seems quite likely that these economic conditions will have a long-term impact in shaping consumer behavior and spending, much as the Great Depression affected a generation of Americans who came of age during the 1930s and 1940s.

Of course, some retailers actually thrive in a down economy. Even when they reduce discretionary spending, consumers always need to purchase staple items such as food and gasoline. As we saw earlier in the chapter, many bargain-seeking consumers have transitioned their spending away from higher-margin department stores and specialty stores; they now are searching for deals from discount stores, off-price retailers, and warehouse clubs. However, no matter where a specific retailer or retail business format falls on the price spectrum, the shift in overall consumer preference toward a desire for greater value means that all retailers must strive to constantly reduce costs by improving operational efficiency.

7 of 12 : Types of Stores : Off-price retail stores feature brand-name (sometimes designer) merchandise bought at less-than-regular wholesale prices and sold at less-than-retail prices. They sell a broad array of merchandise, everything from shoes to shirts to picture frames, at major discounts from department store prices.

Off-price retail chains, such as T.J. Maxx and Ross, employ opportunistic buying: They negotiate especially low prices for certain categories of merchandise; these include goods whose sales have not lived up to expectations, end-of-season goods, products returned by consumers to the manufacturer or other retailers, and closeouts. These stores target the same shoppers as low- and mid-tier department stores. However, off-price retailers offer prices reduced by 40 to 50 percent and a constantly updated array of merchandise. Shoppers realize that many items are likely to be gone within a day or two. This sense of scarcity compels consumers to visit the store more often to hunt for what's new, and when they find it, to buy it.

4 of 4 Classifying Retailer Dimensions : Merchandise Pricing Another way to classify retailers is by the relative prices they charge for goods and services. The distribution of retailers along a price continuum follows a bell-curve: Most retailers offer standard pricing, accompanied by moderate levels of service.

On the low-price end, extreme-value retailers and discount retailers tend to offer extremely limited service in exchange for a broader selection of low-to-moderate quality merchandise. On the high-price end are specialty store boutiques and upscale department stores. They offer a limited selection of high-margin, premium merchandise along with knowledgeable, personalized customer service.

Online retailing, also known as e-retailing, is B2C electronic commerce in which individual consumers directly buy goods or services over the Internet.

Online retailing is thriving. Forrester Research reports that online retail sales made up approximately 10 percent of all U.S. sales in 2015—about $334 billion.19 Even more impressive was the influence of web-based technologies on in-store purchases: Forrester found that 42 percent of goods and services that were ultimately purchased in stores were actually influenced by online activity.

Online retailing (continued) The growing importance of online retailing is due to several factors: • improved performance of e-retail websites, • greater consumer comfort with online buying, • improved website performance, and the • growth of mobile commuting and e-commerce apps.

Online retailing provides many benefits for consumers and marketers, including convenience and lower prices. Online retail sites have certain limitations, though: • For some consumers, shopping in a physical store is an inexpensive and pleasurable form of entertainment. Online shopping fails to provide that enjoyable experience. • Online shopping does not provide the sensory elements of shopping that many customers enjoy, the hustle and bustle of the mall, the feel and smell of a new garment. • Many goods and services actually require the physical presence of a consumer, such as fitting a wedding dress, or getting a haircut, or having your car tires rotated. These factors likely place some constraints on the ultimate growth of e-retail.

2 of 3 Differentiating Factors of Retail : Impulse Purchasing

Retail consumers tend to make many unplanned, impulse purchases. Study after study shows that the actual shopping behaviors of a large percentage of consumers are greatly influenced by in-store displays and attractive store layouts. Similar behaviors occur when shoppers use well-organized catalogs and websites. Since so many retail purchases are unplanned, it is difficult for retail managers to forecast sales, order merchandise, and maintain adequate staffing levels at all times.

The store location decision is an important one for retailers. Opening a retail store involves high costs and commits company resources for a period of time, even when leasing property.

Regulatory factors, changing demographics, and economic factors make it hard to identify and secure good locations. As a result, competition for premium retail locations is high. Retail managers must take into account a number of considerations when making site location decisions: • population characteristics; traffic congestion and other transportation infrastructure issues; • parking availability; and • distance to major housing communities, employers, and business districts.

2 of 4 Classifying Retailer Dimensions : Ownership and Organization : Voluntary Chain

Retailers such as Independent Grocers Alliance (IGA), Western Auto, and Do it Best hardware stores are part of another form of independent retailer alliance Voluntary chains operate very similarly to retailer cooperatives; they are groups of independent retailers who band together for increased buying power. The most significant difference is that since voluntary chains are wholesaler-sponsored, there tends to be much greater consistency across stores in terms of merchandising and promotions.

1 of 4 Classifying Retailer Dimensions : level of service : Self Service

Self-service requires customers to perform certain tasks on their own in order to save time or money. Common self-service activities are locating items and checking out without the help of a store employee. Typically, self-service makes the most sense for retailers that sell a large percentage of low-margin products. In many instances today, self-service activities are powered by information technologies, like smartphone apps and kiosks. By enabling customers to perform these types of actions on their own, retailers are able to become more efficient while at the same time better meeting customer price and convenience preferences.

12 of 12 : Types of Stores : services retailers primarily offer mechanical or human efforts (services), rather than merchandise, to consumers. There are a wide variety of services retailers. Some, such as movie theaters and quick-service restaurants, solely target end-consumers. Other providers, such as airlines and premium hotels chain, offer the same mix of goods and services to both consumers and business customers.

Services retailers also differ in terms of distribution and service delivery strategies. Does the nature of the service or the firm's positioning strategy require customers to be in direct physical contact with its personnel, equipment, and facilities? If so, do customers have to visit the facilities of the service organization, or will the service provider send personnel and equipment to the customer's site? Alternatively, some services retailers, such as iTunes or Google Play Store, deliver value to customers virtually through use of telecommunications or electronic channels of distribution.

2 of 4 Retailing Strategic Issues : Store Image and Retailer Positioning : Store Layout and Product Display (continued) After allocating space and establishing traffic flows, the last step in store layout planning involves arranging individual merchandise and placing in-store signage and displays. Ideally, the most profitable products appear in the best locations: End-of-aisle, eye-level, and checkout counter positions are the most likely to increase sales for individual products.

Similarly, for online retailers, the layout of product pages and links that enable the user to move intuitively from page to page are critical to customer conversion and a positive online store experience. Product arrangement is so critical in some retail environments that manufacturers are often willing to pay slotting allowances to the retailer. These are payments that manufacturers make to retailers, to ensure products are preferentially displayed by the retailer. All changes in store location for higher demand and more profitable items should be carefully thought through to avoid consumer confusion.

2 of 4 Classifying Retailer Dimensions : Ownership and Organization

The majority of retail operations are independent retailers, owned and operated by a single person or group; they are not operated as part of a larger network. Other retailers are bound together under some form of corporate or contractual organization. The major forms of retail organizations are • corporate chains, • retailer cooperatives, • voluntary chains, and • franchise organizations.

A proactive approach to customer experience, whether online or store-based, is essential in this day and age. Consumer expectations with respect to their retail experiences are changing quickly. This change is being driven largely by

The millennial generation. These 80 million consumers have been raised online, have had smartphones since childhood, and have low tolerance for obsolete processes getting in the way of their shopping pleasure. Today's younger retail customers have come of age lacking the sense of limitations in commerce that their elders have long been forced to accept. They don't believe that commerce needs to take place on one channel to the exclusion of another.38 Leading retailers today are realizing that they must act to create omni-channel customer experiences that are in line with these expectations.

9 of 12 : Types of Stores : A leased department is a section within a retail store that is rented to an outside party. The leased department proprietor is responsible for all aspects of its business, including fixtures and equipment; it normally pays a percentage of sales as rent.

The retail store sets operating restrictions for the leased department to ensure overall consistency and coordination. Leased departments are usually found in supermarkets and in full-line discount and department stores. For instance, the Starbucks location within your college bookstore or a bank within your local supermarket are excellent examples of leased departments. Leasing space to retail partners has the potential to bring in new customers and to generate direct revenues from the leased space. This arrangement can help the larger store generate new revenues, by offering a broader range of goods and services than it would otherwise be able to carry. By selecting the right type of companies to which it can lease departments, a department store may also generate interest in the overall department store and bring in new customers from different demographics. Some common examples include in-store banks, photo studios, hair and nail salons, and coffee shops.

2 of 4 Classifying Retailer Dimensions : Ownership and Organization : Retailer Cooperative

The rising dominance of corporate chain stores in the 1960s and 1970s led many independent retailers to increase their competitiveness by seeking out new ways to align their resources and combined buying power. One result of this movement is the emergence of the retailer cooperative, which is a group of independent retailers that band together to set up a jointly owned, central wholesale operation that also conducts joint merchandising and promotion. By facilitating cooperation among independent retailers, cooperatives such as Ace Hardware, Best Western hotels, and NAPA auto parts stores provide their independently owned members with the economies of scale needed to combat their lower-priced chain rivals.

4 of 4 Retailing Strategic Issues : Competing on Customer Experience In retailing, touch points are those critical moments when the consumers interact directly with the brand on their way to purchase. Companies have long emphasized the importance of improving their performance during each touch point.

The truth is that retailers have only limited power to control interactions with consumers. Customers interact with retailers in whatever way they want (in store or online), and whenever they want (pre- or post-purchase).

The practice of retailing encompasses

all of the business activities involved in the sales of goods and services to the ultimate consumer for their personal, family, or household use.

Shop-at-Home Television Networks Lights. Camera. Action! With lineups of trusted celebrities and a changing array of new merchandise, shop-at-home television networks have become a very popular form of nonstore-based retailing.

The two biggest shop-at-home networks are HSN (formerly known as the Home Shopping Network) and QVC. Regardless of the day or hour you tune in, these networks are always selling something. Both networks have adapted to changes in the retail environment remarkably well. HSN has a sophisticated social media plan in place to deepen relationships with shoppers. Its merchandising strategy is entirely data-driven, and e-commerce now accounts for 43 percent of sales.29 QVC has centered its strategy on the "second screen," the tendency to watch TV while also swiping and tapping on a smartphone or table. Over half of its sales come from customers using mobile devices to order from its website, making it one of the largest mobile commerce retailers in the U.S.

2 of 4 Retailing Strategic Issues : Store Image and Retailer Positioning Store image refers to how consumers perceive a retailer. To succeed, a retailer must communicate a clear, distinctive, and consistent image. Numerous factors contribute to shaping a retailer's image.

These include: • Quality of a store's customer service • Merchandise attributes • Brand communications (including social media) • Characteristics of the retailer's physical facilities or website It is the totality of these impressions that contribute to forming an overall image. Crafting and maintain a distinct, favorably received store image does not happen by accident. It involves a thoughtfully managed, ongoing process. This task is even more complex for marketing managers working for chain retailers, franchisees, and global retailers. They must find ways to maintain image consistency across far-flung branch locations. Here, we discuss the importance of store atmospherics, store layout, and merchandise management as tools for managing retailer image.

wholesalers

They provide goods and services to other businesses as well as to consumers.

Example of Reilly's law Let's apply this formula using real data. Assume the following information: Ba = 200,000 population for city a Bb = 50,000 population for city b D = 25 miles distance between the two cities

This result means that the optimal location of a store located in city b is 8.3 miles away from city a.

Three factors differentiate retail marketing from marketing practiced in other types of business:

Three factors differentiate retail marketing from marketing practiced in other types of business: 1. The average dollar amount of a single sales transaction. 2. Impulse purchasing. 3. Physical stores.

Lessons Learned Amazon.com (www.amazon.com) is probably the most famous online retailer in the world today. Founded by former Wall Street investment banker Jeff Bezos as an online bookseller in 1995

Two of Mr. Bezos's guiding principles for the firm are (1) thinking for the long term and (2) always putting the customer first. Thinking for the long term has meant forgoing short-term financial gains and continuously reinvesting profits into its technology. Putting customers first, the company has successfully introduced a long string of retail innovations that have reduced obstacles to purchase and built incredible loyalty among Amazon's customer base. Examples include: • One-click ordering, which allows customers to purchase with the single press of a button. • The Kindle e-reader, which revolutionized bookselling. • The introduction of Prime membership, which initially cost $79 per year (it's now $99) and provided free two-day shipping. The idea seemed to make little sense in terms of the immediate balance sheet, but eventually justified its existence. Amazon customers became addicted to the almost instant gratification of having purchases reliably appear two days after they ordered them.

Dr. Carl D. Marci Chief Neuroscientist Nielsen Consumer Neuroscience

What has been the most important thing in making you successful at your job? Persistence. When we set out to start Innerscope (acquired by Nielsen Consumer Neuroscience in 2015), I didn't think we were ahead of the market, but the discipline of consumer neuroscience has had a turbulent ride. When the Great Recession hit, marketing budgets were cut, including marketing research budgets. Getting through that required a lot of persistence, faith, and confidence. But the Great Recession taught people to do more with less. That is the second most important thing in creating success: Drawing from expertise across multiple domains and different fields initially was a survival mechanism. It ultimately turned into a success strategy. Finally, flexibility also played, and continues to play, a strong part in success. When we started, we were measuring marketing and media content with a single platform: biometrics. That gave us the ability to monitor skin conductance response and heart rate, and it was a powerful technology. But the ability to be adaptable and flexible is critical. What advice would you give soon-to-be graduates? My advice would be to cast a broad net in terms of the companies you work for and the role you play. The more involved you are, in as many different aspects as possible, the more it will help you long-term. Marketing is a very big and complex field with lots of different disciplines. I also suggest exposing yourself to both traditional and new market research thinking. Examples of traditional market research thinking would be what does a good survey look like, what makes a good focus group, how do you write and frame questions, and how do you know when someone is over-claiming versus making appropriate claims. New market research thinking would be focused on metrics in neuroscience, digital, data science, big data sets, automation, and understanding the impact of mobile. Underlying both types of market research is a solid foundation in statistics. Staying broad in terms of companies, roles, and approaches will give you a strong base before specializing. I see too many graduates trying to become specialists right off the bat. The more you know about different facets of marketing, the better marketer and/or market researcher you'll be. How is marketing relevant to your role at Nielsen Consumer Neuroscience? The relevance of marketing to our goals as a business means maintaining a steady presence with consistent touch points to both existing and potential clients as well as educating the general public about what we do. What do you consider your personal brand to be? Having a leadership position and a very visible presence for over a decade now, people identify me with the consumer neuroscience industry. Part of my own personal brand is trying to maintain a high standard of integrity with both clients and media and answering questions honestly about consumer neuroscience and its applications. A client once said, "What I like about you is that you're honest about what you can do but equally importantly, you also tell us what you can't do and why." I think this has stemmed from my medical background. What are some issues that you believe will be important to the future of retailing? Retailing is a very big and complex field with lots of changes ahead that will affect the marketplace. Future retailing and marketing will be much more focused on metrics, digital, data science, automation, and understanding the impact of mobile technologies on traditional retailers.

2 of 4 Retailing Strategic Issues : Store Image and Retailer Positioning : Merchandise Management (continued) Many retailers today are incorporating analytics into their category-management decisions, practicing techniques such as micro-merchandising and cross-merchandising.

With micro-merchandising, a retailer adjusts its shelf-space allocations in response to overall consumer demand as well as differences in local markets. In cross-merchandising, a retailer carries complementary goods and services to encourage shoppers to buy more.

1 of 11 : Types of Stores : Discount Stores

are general merchandise outlets that offer brand-name and private-label products at low prices. Discount retailers are willing to accept lower margins on their merchandise in exchange for more customers and higher sales volume. In order to maintain high inventory turnover, discount stores choose breadth over depth: They carefully select merchandise across a number of categories, from appliances and electronics to housewares, clothing, and toys. Poor-selling items are quickly discontinued. Discount retailers can be broadly grouped into two categories: • full-line discount stores and • specialty discount stores.

2 of 4 Classifying Retailer Dimensions : Ownership and Organization : Corporate Chains

are two or more retail outlets that are commonly owned and controlled. By virtue of their size, retail chains are often able to buy merchandise and supplies in greater quantities at much lower prices. Due to the promise of greater sales volume through a single channel, chains also tend to receive more promotional support and supply chain cooperation from manufacturers and wholesalers. As the corporate chain grows in size, these scale-related advantages also enable them to gain advantages by hiring more specialized managers in areas such as e-commerce, merchandising, promotions, inventory control, pricing, and sales forecasting.

1 of 11 : Types of Stores : Discount Stores : full-line discount stores

carry a wide assortment of merchandise across popular categories. Full-line discount stores like Walmart and Target sell apparel, cosmetics, sporting goods, toys, electronics, kitchenware, home furnishings, garden accessories, and automotive items. Over the past 20 years, full-line discount stores have created massive economies of scale by opening hundreds of new stores each year around the globe. In the U.S. alone, more than 90 percent of the entire population lives within a 15-minute drive to a Walmart. Some full-line discount stores have expanded facilities to a supercenter format, which includes grocery, pharmacy, and services. For companies like Target and Walmart, supercenters represent avenues for revenue growth. Although groceries offer lower margins, food is a nondiscretionary spending category, making the segment resistant to macroeconomic shifts. Supercenter customers are drawn in to buy groceries but often make additional unplanned purchases. Since the introduction of its P-Fresh store format in 2009, which features expanded selection of fresh food and grocery items, Target food sales have grown to about 20 percent of overall revenues.

When considering the alternatives, managers must assess the pros and cons of each of the general locations and specific sites contained within them. Because different retailers need

different kinds of locations, the merits of any given site will depend upon the nature of a given retailer's business. For instance, a convenience store would rather be in an area with heavy vehicular traffic; it does not need to be close to other stores. On the other hand, a shoe store would likely benefit from heavy pedestrian traffic and proximity to department stores and other specialty stores.

11 Types of Stores

• Full-Line Discount Store • Specialty Discount Store • Conventional Supermarket • Warehouse Club • Convenience Store • Specialty Store • Off-Price Retailer • Upscale Department Store • Low- and Mid-Tier Department Store • Extreme-Value Retailer • Factory Outlet

The modern retail environment is one that is increasingly

global and dynamic. Industry consolidation and flattening sales growth in established markets have led more retailers to seek out global and online growth opportunities. Today, dozens of large, multinational retailers do business across multiple countries.

A retailer is

is any organization that sells directly to end-user consumers.

1 of 12 : Types of Stores : Discount Stores : Specialty discount stores

offer a wide selection of merchandise within a single category. Examples are Dick's Sporting Goods and Bed, Bath and Beyond. Specialty discount stores compete on the basis of low prices, wide selection, and product availability. Specialty discount stores are sometimes referred to as category killers because they are able to gain high market share within their chosen category. Higher-margin rivals and discounters find it difficult to compete effectively within that space. Examples of category killers include Best Buy (consumer electronics), Home Depot and Lowe's (home improvement), and Office Depot OfficeMax (office supplies).

Reilly's law of retail gravitation is one of the

oldest and most commonly used trading area models. It describes in simple terms how consumers decide where to buy the goods and services they consume. The model calculates a "break point" in retail trade between two communities as: where Ba, Bb = Population sizes of cities a and b (b is the smaller community) Db = Break point distance of trade to center b D = Distance between centers a and b

The wheel of retailing theory is

probably the best-known framework for explaining changes in retail institutions. This classic framework suggests that new types of retailers typically enter the market as low-margin, low-priced, low-prestige merchants. Following this entry phase, they enter a trading-up phase; in that phase, they provide new services and improve their facilities. As the business succeeds, competition leads them to add even more services and improvements, further increasing costs. At this point, these stores, which now have high costs, are vulnerable to competition from new, low-cost, no-frills retail entries.

Consumer interest in lower prices and intensified competition are driving several strategic issues in 21st-century retailing:

operational efficiency, store image and positioning, shopper insights from Big Data, and enhanced customer shopping experiences.

In essence, Reilly's law states that the size of a trading area increases as

population density decreases. That is, people in less-populated areas will be more willing to drive a longer distance to do their shopping. Although our example focused on two cities, this type of break point analysis can be calculated between more than two localities. In addition, the formula can be modified in several ways, for example, by substituting driving time for distance or replacing population with the square footage of existing retail floor space within a community. However, marketing decision makers should keep in mind that actual distance or driving time may not correspond with individuals' perceptions of distance or time. A store with few services and crowded aisles is likely to be perceived as more distant than a similarly located store with a more pleasant shopping atmosphere. Likewise, trading areas can vary by type of good sought, which is not reflected in the standard model.

According to the latest U.S. Census Bureau statistics, there were approximately 649,000 retail organizations in 2012, operating

roughly 1.065 million separate retail establishments.

f a retailer wishes to improve its customers' experiences with the brand, it must take a more holistic approach in understanding the entire customer path, not simply during sales interactions. Leading retailers often use "journey mapping" to trace the end-to-end experiences of their consumers. Journey mapping is

technique that helps companies identify points in their customers' journey where the process breaks down. It provides retailers with a road map of opportunities to reduce friction points that keep a consumer from moving forward in the relationship. By using journey mapping, retailers are better able to design customer experiences that move the consumer from awareness and discovery to purchase, use, and advocacy of a good or service.

Retailing often takes place in physical stores or service locations, but

the concept also includes nonstore-based retail (such as online shopping or sales through vending machines).

Retailers are the last stage in

the distribution channel. Retailing includes all of the functions involved in both the physical movement and the transfer of ownership of goods and services from producer to end-consumer.

The rise of the commercial Internet and development of business-to-consumer (B2C) commerce have likewise changed the face of modern retailing. This is exemplified by

the growth of online retail giants like Amazon.com. These same technologies have also enabled the rise of consumer-to-consumer (C2C) commerce, in which millions of individuals around the globe sell items on a regular basis through platforms such as Amazon Marketplace, eBay, and Alibaba. Global retail sales exceeded $22 trillion in 2014, with online sales contributing around 5 percent, or $1.32 trillion. Figure 11.3 provides global retail and e-commerce sales projections through 2018.

Unless they shop online, target-market consumers typically shop at

the nearest retail outlet that meets their needs. Therefore, applying geographic information systems (GIS) and mathematical techniques to identify the respective trading area for each prospective store location has become very common in store location decisions.

3 of 4 Retailer Efficiencies : Facilitating functions

• Facilitating functions: Retailers provide a collection of services—termed facilitating functions—that ease and enhance the selling and buying of goods. For instance, they offer credit to customers and accept returned merchandise. Depending on the product, retailers may also deliver, install, and service the products they sell. In some cases, they may even add value to products before distributing them to customers, such as by adding after-market parts or by bundling the product with other goods and services.

Retailers create overall efficiencies for their suppliers and value for the end-consumer by performing several key channel functions:

• Breaking bulk and providing assortment • Communication • Facilitating functions • Completing transactions

1 of 4 Retailer Efficiencies : Breaking bulk and providing assortment

• Breaking bulk and providing assortment: In the pursuit of efficiency, manufacturers often produce large quantities at a time. All things being equal, it is more profitable for them to sell large quantities to as few buyers as possible. On the other hand, consumers usually buy only a few or even just one product at a time. Also, to save time and money, consumers typically wish to purchase a variety of goods during any given shopping trip. Retailers make the overall marketing channel work more efficiently by buying large quantities of goods from a variety of suppliers and distributing them to store locations that are conveniently located for the end-consumers.

2 of 4 Retailer Efficiencies : Communication

• Communication: Retailers communicate with consumers as well as with manufacturers and wholesalers. Shoppers learn about availability of goods and services, their features and benefits, store hours, special sales and promotion, and so forth from retailer ads, salespeople, store circulars, and displays. Because they are closer to customers and end-users, retailers can provide manufacturers and wholesaler partners with a wealth of useful and timely information on customer preferences. This can include consumer likes and dislikes, sales forecasts, inventory status, and product defects. Manufacturers can then modify their goods and services to correct problems and better meet the needs of local consumers.

4 of 4 Retailer Efficiencies : Completing Transactions

• Completing transactions: Finally, retailers complete transactions with end-consumers. They offer convenient locations, fill orders promptly and accurately, and process payments.

10 of 12 : Types of Stores : Extreme-value retailers are heirs to the traditional Main Street "five-and-dime" variety stores from decades past. These stores carry an assortment of inexpensive and popularly priced merchandise, such as apparel, costume jewelry, toys, small wares, candy, and party supplies. Broadly speaking, there are two types of extreme value retailers:

• Dollar discount stores, such as Dollar General and Family Dollar, offer a wide range of merchandise, both off-brand goods and closeouts of name-brand items, at very low prices. • Closeout chains, such as Big Lots, sell similar types of merchandise as dollar stores, but feature closeouts and production overruns. The dollar-discount sector has been ratcheting up growth in both sales and square footage for the past several years. According to retail research firm Conlumino, about 6,000 of these stores opened across the U.S. in just four years (from 2011 through 2015). During the same time, the category's sales increased from $30.4 billion to $45.3 billion, nearly a 50 percent growth rate that easily outpaced the 17 percent increase in overall retail sales.16 Dollar stores have proven to be formidable competitors for discount stores like Target and Walmart. In early 2016, Walmart was forced to abandon its smaller footprint store concept, Walmart Express, which was designed to compete directly with extreme-value dollar stores. The growth and resilience of stores like Dollar General come largely from management's commitment to meeting the needs of its underserved target market of low-income and rural consumers. Family Dollar has recently begun testing a larger, 6,000-square-foot store prototype that features more refrigerators and freezers for food items as well as an enhanced checkout experience.

8 of 12 : Types of Stores : Department stores (continued) In recent years, however, shopping malls and department stores have struggled. Low- and mid-tier operators, especially, have had to close hundreds of store locations nationwide. What were the root causes of this downturn? More importantly, can better marketing lead to a turnaround for the department store format? As Figure 11.5 shows, department store retail sales have been on the decline since the start of the century. Two consumer trends have contributed to this decline:

• Since 2000, access to broadband Internet and B2C e-commerce has grown rapidly. Consumers now have convenient, fingertip access to dozens of retail outlets for virtually any good or service they desire, even on their mobile devices. • There have been two significant economic downturns since 2000 and only a weak recovery from the more recent 2008-2009 recession. This weak economic growth has conditioned many consumers to seek out value. Rather than choosing superior service at higher-priced department stores, they are pursuing low prices on high-demand items at full-line discounter and big-box specialty stores.

2 of 4 Retailing Strategic Issues : Store Image and Retailer Positioning : Store Layout and Product Display Store layout also has an impact on retailer image. Stores must consider the following in their layouts: Store layout also encompasses traffic flow patterns within the store. For instance, many supermarkets, drugstores, and convenience stores employ a gridiron traffic flow pattern, in which display and aisles are laid out in a rectangular grid. Department stores often encourage more of a curving traffic flow, placing aisles and display in more of a free-flowing pattern. Some retailers utilize a combination of these approaches in their designs. Whichever approach is used, the goal is to optimize shopper convenience while creating an enjoyable environment and encouraging browsing behavior.

• Total amount of floor space allocated to selling (e.g., display areas, counters, checkout areas) • Merchandise storage • Customer space (e.g., aisle width, fitting rooms, lounge area, public restrooms) • Personnel space (e.g., break rooms, employee restrooms)

That said, a few giant organizations do play an outsized role in the retail sector. Consider a few of the following facts about Walmart:

• Walmart employs more than 2.2 million associates, making it the third-biggest employer in the world, behind the U.S. Department of Defense and the Chinese army. • Walmart's 2015 sales exceeded the combined sales of the next four largest U.S. retailers. • In addition, a staggering 37 million people shop at Walmart every day, which is more than the entire population of Canada.3 • If Walmart were a country, it would be the 28th-largest economy in the world, behind Norway and ahead of Austria.

3 of 4 Retailing Strategic Issues : Big Data and Retail Analytics Retailers are constantly finding innovative ways to draw insights from the ever-increasing amount of structured and unstructured information available about their customers' behavior. Big Data analytics is now being applied at every stage of the retail process:

• Working out what the popular products will be by predicting trends • Forecasting where the demand will be for those products • Optimizing pricing for a competitive edge • Identifying the customers likely to be interested in the products and working out the best way to approach them • Figuring out what to sell next Data science and analysis allow retailers to collect and fuse data from multiple customer touch points such as web, store, social media, and call centers. Another leading application for retail analytics is sales forecasting. Office products retailer Staples has adopted a new approach to sales forecasting that was originally used for making real estate decisions on over 5,000 potential store sites. Staples takes Page 3788 million data transactions each week as input and forecasts weekly and daily sales for more than 1,100 U.S. stores.

Marketers commonly classify retailers along four key dimensions:

• level of service, • ownership and organization, • breadth and depth of merchandise assortment, and • merchandise pricing.