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Walton’s .5 & .10
© The McGraw-Hill Companies, Inc., 2000
Definition of Retailing
Retailing includes . . . .
all activities involved in selling, renting, and providing goods and services to ultimate customers for personal, family or household use. In the channel of distribution, retailing is where the
customer meets the product. It is through retailing that
BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 2000
Retailing Creates Value
• Retailing’s economic value is represented by: 1. People employed in retailing, and 2. The total amount of money exchanged in retail sales. • Utilities provided by retailers create value for customers. Time, place, possession, and form utilities are offered by most retailers.
© The McGraw-Hill Companies, Inc., 2000
which reduce their space allotted to toys after the holiday season. financing.com _____ MARKETING. Saturn dealers have adopted a one-price strategy that eliminates the need for negotiating. now offers the Levi’s Original Spin program which allows customers to create their own jeans by selecting from three models. trade-ins. this company is what every kid dreams about. The jeans are delivered in 2 to 3 weeks for $55. two flys. a huge selection of toys is always available at Toys “R” Us. and many color and fabric options. Unlike most stores. five leg types. Can you match them? Time Place Possession Form Saturn Levi Strauss www. Test drives. all customers are offered the same price. Wells Fargo is intensifying it’s drive to reach retail customers by opening minibanks in supermarkets. Levi Strauss & Co. 6/e BERKOWITZ _____ KERIN HARTLEY RUDELIUS _____ _____ Irwin/McGraw-Hill © The McGraw-Hill Companies.toysrus.Which Company Best Represents Which Utilities? Wells Fargo One of the best-run banks in the United States.com Toys “ R ” Us www. 2000 .levi. Inc.. which already dispense 75% of the bank’s cash. and leasing are all offered to encourage customers to purchase a Saturn. Walking into a Toys “R” Us store is like living under a Christmas tree. A distinctive toy store with a backwards R. This new form of banking is designed to complement ATMs. Instead.
433 315.194 Irwin/McGraw-Hill Drug and Discount Home Improvement Home Shopping Specialty Retailers MARKETING.124 18. Inc. 6/e BERKOWITZ © The McGraw-Hill Companies.472 27.511 43. in billions) 49.620 81.699 16.The Largest Retailers (2005 Sales) Category Department stores Apparel Consumer Electronics Retailer(s) Sears (K-Mart) J C Penney Limited TJX Circuit City Best Buy Wal-Mart Target Home Depot Lowe’s Service Merchandise Fingerhut Costco Toys R Us KERIN HARTLEY RUDELIUS Sales ($..654 52.935 11.243 3.058 10. 2000 .781 9.327 1.912 52.
6/e © The McGraw-Hill Companies. are retailers. Inc. In 1997.S. Wal-Mart.. and JC Penny together employ more than 1. Wal-Mart has 603 stores outside the U.6 million people.S. BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill • • MARKETING. Wal-Mart’s $119 billion in sales surpassed the gross domestic product of Finland for the same year.Global Economic Impact of Retailing • • Four of the 30 largest businesses in the U.. Kmart. including joint ventures in China and Korea. Sears. 2000 .
6/e BERKOWITZ . etc.2 12. 2000 .9 5.5 325 650 RUDELIUS Irwin/McGraw-Hill Sales ($billions) KERIN HARTLEY © The McGraw-Hill Companies. hardware.9 6.9 16.6 4.2 9.7 5.8 9.Retail Sales By Type of Business Automotive dealers Food stores General merchandise group Eating and drinking places Gasoline service stations Building material. Furniture and home furnishings stores Apparel and accessory stores Drug and proprietary stores Liquor stores Other 0 MARKETING.. Inc.9 3.7 24.
2000 .Form of ownership. -. Inc. How many different types of products a store carries and in what assortment. Who owns the outlet.Merchandise line. The degree of service provided to the customer.Level of service. MARKETING. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. -.Classifying Retail Outlets Retail outlets can be classified in several ways: -..
. 2000 . Inc.Classifying retail outlets METHOD OF CLASSIFICATION Form of ownership DESCRIPTION OF RETAIL OUTLET Independent retailer Corporate chain Contractual system • Retailer-sponsored cooperative • Wholesaler-sponsored voluntary chain Franchise Self-service Limited service Full-service Depth • Single line • Limited line Breadth • General merchandise • Scrambled merchandise Level of service Merchandise line MARKETING. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.
953 80 Automobile fluid service $208.000 Radio Shack Barbizon Electronic accessories School of Modeling $67.500 19. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS © The McGraw-Hill Companies.The possibilities and costs of franchising FRANCHISE TYPE OF BUSINESS TOTAL STARTUP COSTS NUMBER OF FRANCHISES McDonald’s Merry Maids Jiffy Lube Mail Boxes Etc.000 Postal Services $55.000-$229. 2000 .000 Laundry and snack bar $60.500 700 667 2. Inc..500-$124.500 $69. Duds ’N Suds Fast-food restaurant Cleaning Service $385.000-$520.000 $27.000-$75.000 Irwin/McGraw-Hill 1.934 65 MARKETING.500-$40.
such as shoe stores that offer running shoes. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. -. -. Inc.scrambled merchandising refers to retailers that offer several unrelated product lines in a single store. 2000 .hypermarkets are very large retail outlets that have the goal of offering customers everything at one outlet. -. • Breadth of product line refers to the variety of different items a store carries. and children’s shoes.Depth and Breadth of Product Line • Depth of product line means that the store carries a large assortment of each item.. MARKETING. dress shoes.Supercenters are retailers that combine a typical merchandise store with a grocery store.
Breadth vs. Inc. Depth of Merchandise Lines Breadth: Number of different product lines Men’s Clothing Shoes Appliances CDs Depth: Number of items within each product line Nike running shoes Florsheim dress shoes Top Sider boat shoes Adidas tennis shoes Amana refrigerator Sony TV sets JVC videocassette recorders General Electric dishwashers Sharp microwave ovens Classical Rock Jazz Country Western Suits Ties Jackets Overcoats Socks Shirts MARKETING. 2000 .. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.
2000 .000 KERIN HARTLEY 15%-16% 100.000-80.000 Irwin/McGraw-Hill BERKOWITZ © The McGraw-Hill Companies.Differences in Store Concepts DISCOUNT STORE 70.000 RUDELIUS 7%-8% 60. Inc.000 200-300 $10-$20 300-350 $20-$50 400-600 $75-$100 18%-19% 60. 6/e 150.000 230.000 SUPERCENTER HYPERMARKET Average size (in square feet) Number of employees Annual Sales ($ millions per store) Gross margin Number of items stocked MARKETING.000-70..
2000 . 6/e Active retailer involvement BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill High © The McGraw-Hill Companies..Forms of Non-store Retailing High Active customer involvement Direct selling Telemarketing On-line retailing Television home shopping Direct mail and catalogs Automatic vending Low Low MARKETING. Inc.
Irwin/McGraw-Hill MARKETING. Inc. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS © The McGraw-Hill Companies.Automatic Vending • Non-store retailing that makes it possible to serve customers where stores cannot..8 million are soft drink machines. • Maintenance and operating costs are high. 2000 . 1. • Of the 3 million vending machines now in use. • Small convenience products are available in vending machines.
Direct Mail & Catalogs • Marketing efficiency is improved through segmentation and targeting. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. • A typical household receives 50 catalogs each year. • Customer value is enhance by providing a fast and convenient means of making a purchase. • In 1998 Americans increased their catalog spending to $87 billion. 2000 . MARKETING.. Inc.
Inc..Television Home Shopping • TV home shopping is possible when consumers watch a shopping channel on which products are displayed. orders are placed over the telephone. • Two popular home shopping programs reach 60 million homes and have combined sales of $2 billion. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. 2000 . • TV home shopping programs traditionally attract 40-50 year old females. MARKETING. • Limitations of TV shopping have been the lack of buyer-seller interaction and the inability of consumers to control the items they see.
and order products through the Internet. 6/e Irwin/McGraw-Hill BERKOWITZ KERIN HARTLEY RUDELIUS © The McGraw-Hill Companies. • The advantages of online retailing are: – ability to comparison shop – privacy – variety • Forecasts suggest that current annual sales of $10 billion could reach $100 billion in just a few years.. evaluate. Inc.Online Retailing • Online retailing allows consumers to search for. MARKETING. 2000 .
MARKETING. Inc.Telemarketing • Telemarketing involves using the telephone to interact with and sell directly to consumers. • According to the American Telemarketing Association. telemarketing sales exceed $500 billion.. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. 2000 . Congress. consumer privacy has become a topic of discussion among consumers. and businesses. • As the use of telemarketing grows. the Federal Trade Commission.
as retail chains begin to carry similar products at discount prices. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. MARKETING.. but are declining in the U. 2000 .S. • Many direct selling retailers are expanding into international markets to offset the decline in domestic sales.Direct Selling • Direct selling involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office. • Industry sales are more than $16 billion. and the increasing number of dual-career households reduces the number of potential buyers at home. Inc.
and/or prestige. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.Retail Positioning Matrix • The retail positioning matrix positions retail outlets on two dimensions: breadth of product line and value added. MARKETING. product reliability. 2000 . • Breadth of product line is the range of products sold through each outlet. • Value added includes such elements as location. Inc..
6/e BERKOWITZ KERIN Value added HARTLEY RUDELIUS High Irwin/McGraw-Hill © The McGraw-Hill Companies. Inc..Retail Positioning Matrix Broad Kmart Bloomingdale’s Breadth of product line Just for Feet Tiffany Narrow Low MARKETING. 2000 .
2000 . and at the same time are recognized and valued by consumers. Inc.. it must have an identity which has some advantages over competitors. MARKETING. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.Key to Retail Positioning For a store to be successfully positioned.
Goods and services 2.. 2000 . Inc. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.The Retailing Mix The retailing mix includes: 1. Communications tactics chosen by a store. MARKETING. Physical distribution 3.
. 2000 .The Retailing Mix Store location Distribution centers Warehousing Transportation Handling goods Packing Variety and assortment Sales assistance Customer services Pricing Credit Guarantees and exchanges Alterations and adjustments Store image and atmosphere Parking Delivery Personal selling Consumers Advertising Window displays Internal displays Public relations Store layout Catalogs Telephone sales MARKETING. Inc. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.
leader High price/high margin Store Ambiance Economies of scale--volume Image--”good guys”.Implications of the Retail Positioning Mix Types of Retailers High Value-added/ Broad Line (Bloomingdales) Keys to Success Creative merchandising image-excitement. conveniences Low price/low margin Low or self-service Efficiency of operations Unique of high quality products Image--exclusive specialty High price/high margin Personal service/advice Expensive presentation Specialty mass merchandising Image--value conscious. 2000 . loss leaders Little or self-service “Cookie-cutter” stores Low Value-added/ broad line (Kmart) High Value-added/ narrow line (Tiffany) Low Value-added narrow line (Just for Feet) MARKETING. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. Inc.. consistent Low price.
Inc. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.Retail Pricing Terminology • Markup refers to how much should be added to the cost the retailer paid for the product to reach a final selling price.. MARKETING. 2000 . • Original markup is the difference between the retailer’s original cost and initial selling price. • The maintained markup is the difference between the final selling price and retailer cost and is also the gross margin.
2000 . • Shrinkage is theft of merchandise by customers and employees.Retail Pricing Terminology • Markdown occurs when the product does not sell at the original price and an adjustment is necessary.. MARKETING. The difference between the off-price retailer and a discount store is that off-price merchandise is bought by the retailer from manufacturers excess inventory at prices below wholesale prices. • Off-price retailing involves selling brand name merchandise at lower than regular prices. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. Inc.
. 2000 . Inc. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.Store Location Types of Store Locations • Central business district • regional shopping centers • community shopping centers • strip location • power center MARKETING.
The Wheel of Retailing As more time passes. Outlet starts with: Low prices Low margins Low status 4. 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies. Outlet now has: Still higher prices Still higher margins Still higher status As time passes. outlet adds services Passage of time 1. 2000 . Outlet now has: Higher prices Higher margins Higher status 3. Inc. outlet adds still more services 2. New form of outlet enters retailing environment with characteristics of outlet in Box 1 MARKETING..
2000 . Inc..Market share or profit Early growth Value-retail stores The Retail Life Cycle MARKETING. 6/e On-line retailers Single-brand stores BERKOWITZ Single-price stores Factory outlet stores Accelerated development KERIN HARTLEY Warehouse clubs Fast food outlets Convenience stores Supermarkets Department stores Profit Market share Maturity Decline RUDELIUS Irwin/McGraw-Hill Malls (?) Catalog Retailers General store © The McGraw-Hill Companies.
.Future Changes in Retailing Impact of Technology Changing Shopping Behavior Importance of Brands MARKETING. Inc. 2000 . 6/e BERKOWITZ KERIN HARTLEY RUDELIUS Irwin/McGraw-Hill © The McGraw-Hill Companies.