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Principles of Marketing

Retailing

What is Retailing?

selling goods or services directly to final consumers for personal, non-business use.

Major Retailer Types


Specialty storenarrow product line Department store several product lines Supermarketlarge, lowcost, low-margin, highvolume, self-service store designed to meet total needs for food and household products Convenience store small store in residential area, often open 24/7, limited line of high-turnover convenience products plus take out
Discount storestandard or specialty merchandise; lowmargin, high-volume stores Off-price retailerleftover goods, overruns, irregular merchandise sold at less than retail Superstorehuge selling space, routinely purchase food and household items, plus services (laundry, shoe repair, dry cleaning, check cashing; category killer) Catalog showroom broad selection of high-markup, fastmoving, brand-name goods sold by catalog at discount

An Example of a Large Retail Chain

Levels of Retail Service


Self servicemany customers will to locatecompare-select process to save money Self selectioncustomers find their own goods, although they can ask for assistance Limited serviceretailers carry more shopping goods and services such as credit and merchandise-return privileges Full servicesalespeople are ready to assist in every phase of the locate-compareselect process

Nonstore Retailing
Direct selling multilevel selling and network marketing selling door-to-door, or at home sales parties Direct marketing direct mail, catalog marketing, telemarketing, television direct-response marketing, electronic shopping Automatic vending variety of merchandise, impulse goods, hosiery, cosmetics, hot food, etc. Buying service storeless retailer servicing a specific clienteleusually employees of a large organizationwho are entitled to buy from a list of retailers that have agreed to give discounts in return for membership

Major Types of Corporate Retail Organizations


Corporate chain store two or more outlets owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise (GAP) Voluntary chain wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising (Independent Grocers Alliance) Retailer cooperative independent retailers using a central buying organization and joint promotion efforts (ACE Hardware) Consumer cooperative retail firm owned by its customers. Members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends Franchise organization contractual association between a franchisor and franchisees (McDonalds) Merchandising conglomerate corporation that combines several diversified retailing lines and forms under central ownership, with some integration of distribution and management (Allied Domeq PLC with Dunkin Donuts and Baskin-Robbins, plus a number of British retailers and a wine and spirits group

Department Store Model: The Showcase Store

What is a Franchising System?


A franchising system is a system of individual franchisees, a tightly knit group of enterprises whose systematic operations are planned, directed, and controlled by the operations franchisor.

Franchise Operations
The franchiser develops a good marketing strategy and the retail franchise holders carry out the strategy in their own units. Strong legal contracts govern the relationship. Franchisers have been successful with newcomers. especially popular with service operations Franchise sales account for about half of all retail sales.

Characteristics of Franchises
The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments The franchisee pays for the right to be part of the system The franchisor provides its franchisees with a system for doing business

Changes in the Retail Environment


New retail forms and combinations Growth of intertype competition Competition between store-based and non-store-based retailing Growth of giant retailers Decline of middle market retailers Growing investment in technology Global profile of major retailers

New Retail Forms and Combinations


Combination retailerssome supermarkets includes bank branches; bookstore feature coffee shops, etc. Pop-ups lt retailers promote brands, reach seasonal shoppers for a few weeks in busy areas and create buzz (JC Penney unveiled designer Chris Maddens home, bath, and kitchen line in a 2,500-square-foot Rockefeller Center space for one month only. Showcase storesSome stores not only sell other companies brands but get the vendors of the brands to take responsibility for stock, staff, and even the selling space. The vendors then hand over a percentage of the sales to the stores owner

Retailers Marketing Decisions


Target marketprofile of customer Product assortment breadth and depth Procurement merchandise sources Pricesdecided in relation to the target market Servicespre-purchase, post-purchase, ancillary

Retailers Marketing Decisions (cont.) Store atmosphere Store activitiesbrick-and-mortar and e-commerce Communicationsadvertisement, special sale, money-saving coupons, etc. Locations

Store Atmosphere
Walls Lighting Signage Product placement Floors Surface space Music

Retail Category Management


Define the category Figure out its role Assess performance Set goals Choose the audience Figure out tactics Implement the plan

Retailer Services Mix


Pre-purchase services accepting telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours, fashion shows, and trade-ins Post-purchase services shipping and delivery, gift wrapping, adjustments and returns, alterations and tailoring, installations Ancillary services general information, check cashing, parking, restaurants, repairs, interior decorating, credit, rest rooms, and baby-attendant service

Location Decision
General business districtsdowntown Regional shopping centerslarge suburban malls containing 40 to 200 stores, typically featuring one or two nationally known anchor store, such as JC Penney or Lord & Taylor Community shopping centerssmaller malls with one anchor store and between 20 and 40 smaller stores Strip malls stripscluster of stores, usually housed in one long building, serving a neighborhoods needs for groceries, hardware, laundry, shoe repair, and dry cleaning Location within a larger storecertain well-known retailersMcDonalds, Starbucks, Nathans, Dunkin Donuts locate new, smaller units as concession space within larger stores or operations, such as airports, schools, or department stores

Tips for Increasing Sales in Retail Space


Keep shoppers in the store Dont make them hunt Make merchandise available to the reach and touch Note that men do not ask questions Remember women need space Make checkout easy

Indicators of Sales Effectiveness


Number of people passing by % who enter store % of those who buy
Average amount spent per sale

Private Label Brands


Private labels (reseller, store, house, or distributor brand) is a brand that retailers and wholesalers develop Consumer accepts private labels Private-label buyers come from all socioeconomic strata Private labels are not a recessionary phenomenon Consumer loyalty shifts from manufacturers to retailers

Private Labels

Recent trends in Retailing


A Slowed Economy and Tighter Consumer Spending New Retail Forms, Shortening Retail Life Cycles, and Retail Convergence The Rise of Mega Retailers Growth of Nonstore Retailing Growing Importance of Retail Technology Green Retailing Global Expansion of Major Retailers

Retailer Size and Profits


Large retail stores do most of the business
Only about 11% of stores sell over $5 million annually but they account for almost 70% of retail sales Yet, some small retailers control "their" market

Larger stores enjoy economies of scale Corporate chain stores also enjoy economies of scale
Account for about half of all retail sales (and much higher in some product categories) Continuing to grow

Independent retailers form chains


Cooperative chains are retailer sponsored Voluntary chains are wholesaler sponsored

Retailing and the Internet


Growing fast, but still in very early stages Convenience not defined by location of product assortment More information of some types but not others
More technical detail Less touch and feel

Generally requires more advance planning


Delivery takes time and adds costs

Competitive effects impact other retailers New types of specialists and intermediaries will continue to develop