Retailing

1
Retailing

• Positioning issues
• Margins
• Retail pricing strategies
• Strategic developments in retailing

2
Positioning Issues

• Some ways to profitability
• Low cost, high volumes, low unit margins, low to
  moderate service (profit on volume)
• Higher priced, higher per unit margins, lower
  sales
• Stuck in the Middle--midlevel retailers (e.g.,
  Sears, J. C. Penney) face competition both from
  above and below

3
Margins

• Margins
• Gross sale price - price paid to wholesaler
• Per unit
• Per dollar
• Per unit of space
• Net margin gross margin vs. allocated overhead

• Very large increases in sales volumes are needed
  to break even on low prices

4
Two Types of Retail Pricing

• High-low
• High everyday prices
• Frequent sales
• Profit on price discrimination--only some people
  will bother to
• Shop while sale is on
• Switch brands

• Every Day Low Price (EDLP)
• Consistent prices--theoretically no sales, but
  lower non-sale prices
• Typically lower service
• Note that retailers provide for many promotions

5
Strategic Issues

• Importance of convenience
• Increasing power of retailers
• Private label branding
• Lower price but higher margins
• Longer history in Europe

6
Retail Trends

• Power retailers
• Early purchases
• Investment in technology
• Consistent fair prices
• Consistent but modest gross margins

• Category killers Specialize--significant
  selection at low prices

7
Retailing Polarity

• Trend toward either
• Low price--e.g., Wal-Mark, Kmart, Sports
  Authority
• High quality--e.g., Nordstroms, Starbucks