RETAILING

What is Retailing?

• Retailing includes all activities involved in selling, renting, and providing good and services to ultimate consumers for personal, family, or household use.

Utilities Retailing Offers to Consumers

• Utilities are benefits or value received by users of a product

Utilities Retailing Offers to Consumers

• Time Utility – Having the good/service for the customer when they want/need it

• Place Utility – Having the good/service available to the customer where they want/need it

• Form Utility – Production or alteration of a good/service for the customer

• Possession Utility – Make a product/service easy for customer purchase

Classifying Retail Outlets

• Form of Ownership

• Level of Service

• Merchandise Line

Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?

• Independent Retailer– Most common form of retail ownership– An individual owns the business– “Be your own boss”– Personal service– Anastasia’s Attic, Bud’s Tire

Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?

• Corporate Chain– Multiple outlets under the same ownership– Purchasing and decision making is

centralized– Great negotiation power– Consumer can expect pretty much the same

items in every outlet

Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?

• Contractual SystemsIndependently owned stores that band together to act

like a chain– Retailer sponsored cooperatives are when small,

independent, retailers form an organization that operates from a wholesale facility cooperatively

• Buying power• Perceived as a chain• Pricing and promotions can be coordinated together

Classifying Retail OutletsForm of Ownership

Who owns the retail outlet?

• Contractual SystemsIndependently owned stores that band together

to act like a chain– Wholesaler sponsored voluntary chains are

when a wholesaler develops a contractual relationship with small, independent retailers to standardize and coordinate buying practices, merchandise programs, and inventory management efforts

• Volume discounts

Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?

• Contractual Systems– Franchises

• An individual or firm (franchisee) contracts with a parent company (the franchisor) to set up a business or retail outlet

• Advantages– Franchisor helps find location, set up facility, train

employees, and helps with advertising• Franchisee pays a “franchisee fee” and yearly royalties

Classifying Retail OutletsForm of OwnershipWho owns the retail outlet?

• Contractual Systems– Franchises

• Good for franchisees because well-known business, can get business advice

• Franchisors loose control but gets name out in more places

Classifying Retail OutletsLevel of Service

How much service is provided by the retail outlet?

• Self-Service – Little to no services provided by outlet

• Limited Service – Some service provided by outlet

• Full Service – A lot of services provided by outlet– Bridal and Formal Shoppe

Classifying Retail OutletsType of Merchandise Line

How many different types of product an outlet carries and in what assortment.

• Depth of Product Line – The store carries a large assortment of each item– Limited-line stores have a lot of depth in a

related line of products– Single-line stores have a lot of depth in one

primary line

Classifying Retail OutletsType of Merchandise Line

How many different types of product an outlet carries and in what assortment.

• Breadth of Product Line – The variety of different items a store carries– Department Stores– Scrambled merchandising is having several

unrelated product lines in a single store• Supercenters

Nonstore Retailing

• Automatic Vending– Products usually cost more than they do in stores– Soft drinks, candy

• Direct Mail and Catalogs– No store locations and store employees, less

expense– Easier to segment markets than traditional outlets– Specialty catalogs for certain customers

Nonstore Retailing

• Television Home Shopping– Products shown on tv and you call and

purchase or purchase online

• Telemarketing– Calling customers on phone to sell products– Good way to target customers– Do Not Call lists

Nonstore Retailing

• Online Retailing– Available 24/7– Private– Easy to compare prices– Problem for retailers: 2/3 of customers place

product in shopping cart and leave, 70% never come back

• booksamillion.com offers a place to compare prices with amazon.com, barnesandnoble.com, and borders.com

Nonstore Retailing

• Online Retailing– Interactive parts of websites give advantage

over competition

Nonstore Retailing

• Direct Selling– “Door-to-door retailing” – direct sales of goods

and services to consumers through personal interaction and demonstrations in their home or office

Nonstore Retailing

• Direct Selling– U.S. direct selling has declined

• Retail chains have similar items for cheaper prices• Less stay-at-home moms/wives

– Outside U.S. sales are increasing• Distribution channels may not be as strong, so

“door-to-door” is more important• People do not know brands, so one-on-one is

important

Retailing Strategy

• Retail Positioning Matrix– Breadth of Product Line (range of products

sold)– Value Added (Includes location, product

reliability, prestige)

Retailing Strategy

Retailing Strategy

• Retailing Positioning Matrix– 1 – High value added, broad product line

• Store design is important• Products have high profit margin, high quality• High levels of service

Retailing Strategy

• Retailing Positioning Matrix– 2 – Low value added, broad product line

• Low price, high sales volume• Low service• Price oriented

– 3 – High value added, narrow product line• Product status is important• High levels of service

Retailing Strategy

• Retailing Positioning Matrix– 4 – Low value added, narrow product line

• Targeted at value-conscious customers• All the stores are “cookie cutter”

– Basically same store design and merchandise– Achieve economies of scale by centralized

advertising, merchandising, buying, and distribution

Retailing Strategy

• Retailing Positioning Matrix– Can have stores in different places on the

matrix, done with different store names

Retailing Strategy – Retail Mix

• Retail Mix– The activity related to managing the store and

the merchandise in the store• Price• Store Location• Retail Communication• Merchandise

Retailing Strategy – Retail Mix

Retail Price

• Markup – How much is added to the product cost to get the selling price that the customer pays– Original markup = Initial selling price – Retail

cost– Maintained markup = Final selling price –

Retail cost

Retailing Strategy – Retail Mix

Retail Price

• Markdown – Discounting a product– Some stores use markdowns as part of

everyday strategy• Dangerous because some people perceive quality

based on price

– Shrinkage

Retailing Strategy – Retail Mix

Retail Price

• Off-pricing retailing is selling brand name merchandise at lower than regular prices– Off-price retailers buy excess inventory below

wholesale prices– Discount stores buy at wholesale price and

add little mark-up

Retailing Strategy – Retail Mix

Retail Price – Off-price Retailers

• Outlet Store– 20%-30% less than MSRP– Use to get rid of excess inventory

• Single-Price Retailers– Relatively small stores– “Value”

Retail Price – Off-price Retailers

• Warehouse Club– Large stores– Very plain, no decoration– Charge annual membership fee– Not a lot of services provided

Retailing Strategy – Retail Mix

Retailing Strategy – Retail Mix

Store Location – Where? How Many?

• Central Business District– Downtown– Original retail outlets– Bad parking– Older area

Retailing Strategy – Retail Mix

Store Location

• Regional Shopping Centers– Usually 50-100 stores– Serves a large trading area– Usually between 300,000 – 850,000 sq. ft.– Has 1 or 2 full-line department stores

• Well-known, “anchors”

Retailing Strategy – Retail Mix

Store Location• Community Shopping Center

– Usually a discount store or jr. department store as main tenant

– Usually between 100,000 – 450,000 sq. ft.– Maybe 20 – 40 stores

• Strip Location– Clusters of stores– Unplanned variety of stores

Retailing Strategy – Retail Mix

Store Location

• Power Center– Large shopping strip– Multiple anchors– Convenient location– Combination of malls, strip locations, and

others

Retailing Strategy – Retail Mix

Retail Communication

• How is store image portrayed?– Prices– Layout– Merchandise– Design

Retailing Strategy – Retail Mix

Merchandise

• Want the right breadth and depth of products for your target market

• Category management– A manager is assigned the responsibility for

selecting all products that customers in a market segment view as substitutes for each other

Future of Retailing

• Multichannel Retailing– Using a combination of traditional store and

nonstore formats– Simple, convenient– Options!!

Future of Retailing

• Shopping Behavior– Consumers want convenience and service