RetailingIs it a Love-Hate

Relationship?

Retailing• consists of the sale and all activities

related to the sale of goods and services to the ultimate consumer for personal, non-business use and has enhanced the quality of our daily lives.

Retailing• form of middlemen that serve as

purchasing agents for their customers and as sales specialists for their suppliers

Retailers vs. Wholesalers• Retailer

– completes transactions to the final consumer

– more than 50% of revenue must come from final customer sales

• Wholesaler– sells products for resale

Fortune 500 Leading Retailers

• Walmart (1)• CVS (12)• Kroger (24)• Home Depot (33)• Amazon (35)• Target (36)• Walgreens (37)• Lowe’s (52)

Retailer Characteristics

• Sell Smaller Quantities, More Frequently

• Provide Assortment of Goods• Provide a Pleasant Shopping

Environment and Emphasize Atmospherics and Layout

Retail Classification According to Ownership

• Corporate Chains– two or more centrally owned and

managed stores

– Three Factors Differentiate a Chain from a contractual VMS or an independent• number of units• central ownership• lack of autonomy of units

• Independent Stores– single retailer not affiliated with any type of

contractual VMS– most retailers are independent and quite small

• Contractual VMS– independently owned firms that join together under

a contract• voluntary chains• retailer coops• Franchising

– Avis, McDonald’s, Subway, Holiday Inn

Classification by Ownership

Classification According to Marketing Strategies

• Three Factors Used to Classify– depth and breadth

of product assortment

– price level– amount of

customer service

Retailer Classifications by Strategy

• Department Stores– Selective Distribution

• Discount Stores – Supercenters (Walmart) and Full Line Discount Stores (Walmart)

• Specialty Stores

• Supermarkets– Scrambled merchandising

Types of Retail Operations• Drugstores

– Pharmacy related goods main draw

• Drugstores– Pharmacy related goods main draw

• Convenience Stores– Intensive Distribution

• Warehouse Clubs

• Off-price Retailer

• Restaurants

NonStore Retailing• Direct Selling – declining; why?• Telemarketing – “no call” lists• Automatic Vending• Direct Retailing (Marketing)

– Catalogs – book form of presentation• Send out 10-20 catalogs for every order received• Target time constrained working women

– tv shopping– online ordering

Vending Machines • Traditionally coin operated, now accept credit cards

and bills• Requires minimal space, but investment in equipment• Best suited to non-perishable, low priced products

such as candy, drinks, cigarettes• Cigarette vending declining because of lack of

control over minor shoppers• Technology increasing willingness to buy higher

priced items i.e., airport locations feature Best Buy vending machines

Retailing Mix• PLACE

– Physical Facilities• Location - #1

– Shopping Centers• classified by predominant

retailer

• convenience• neighborhood• community• Regional

– DESTINATION STORES

Retail Management (cont’d)

• Positioning via Product and Price– product assortment – depth, breadth– Price – skimming, penetration– Promotion – national advertising, social media– Service Levels– Examples:

• Two Variables– high price/high service– low price/low service

• Three Variables– retailer offers different brands– service and personality augmentation

Retailing Mix

• PRESENTATION– Design – interior materials, fixtures– merchandise type and density– Layout– Odors– Sound– Visual Factors– COLOR

• warm (home-like and comfortable) vs. cool (elegance)

Retail Management (cont’d)

• Pricing– Markups

• amount retailer adds to product’s cost to determine selling p

• % of cost or % of selling price

– Example• Markup % on Selling Price = Amount Added to cost/

Selling Price

• ($6-$4)/$6 = 33.3%

• This is a relatively low markup!

Markdowns• amount by which the retailer

reduces the original selling price

• Markdown % = Dollar Amount of Markdown/Sale or New Price

• Example– ($50-$39)/$39 = 11/39 = 28.2%

Trends in Retailing• Changing demographics and industry

structure• Expanding computer technology• Emphasis on convenience and service• Scrambled Merchandising• Increasing polarity in retail trade• Experimentation• Growth in NonStore Retailing

Issues of Interest/Trends• Consumer Fraud

– Walmart and the modification of return policies

• Shoplifting– layout issues– favored items

•accessories, cosmetics, jewelry, music

– Slotting Allowances• impact customer choice and new product

introductions

Wheel of Retailing• Developed by McNair to help explain

evolutionary changes

• Basically states:– retailers enter the market with low cost, low price

approach and consumers respond favorably

– In time, start to trade up to attract a broader market, achieve higher margins and gain more status

– Sooner or later, becomes vulnerable to new competitors that are low cost/low price

Retail Life Cycle• Introduction

– Aggressive entrepreneur– Unique approach to

business

• Growth – Catches on with

shoppers

• Maturity – Intense competition– Profits decline

• Department stores

• Decline– Innovation hurts

• Full service gas stations