Retailing

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Retailing
2
Objectives

• To Understand the Functions of Retailers in the
  Marketing Channel
• To Identify the Major Types of Retailers
• To overview the Major Types of Franchising
• To identify Strategic Issues in Retailing

3
Retailing

• Retailers implement and conclude the actual sale
  of products to the final consuming units, the
  ultimate user.

Possession Utility
Time, place, form information utility
4
Importance Of Retailing

• Impact on the Economy - 18
  of employment (24 mil 2005)
• Distribution Functions -
  Time, Place
• Marketing Functions -
  Information Possession Utility

5
A Retailing Career
Salary
Geographic mobility
Societal Perspective
Retail Career
Career Progression
Women in retailing
6
Prerequisites for Success
Analytical Skills
Hard Work
Flexibility
Leadership
Decisiveness
Perseverance
Success
Organization
Enthusiasm
Initiative
Creativity
Stress Tolerance
Risk Taking
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Retailing Major Types of Product (Retail Stores
Services)

• General Merchandise Retailers
• - Department Stores --Discount Store
• - Supermarket -- Superstore--Hypermarket
• - Warehouse Club --- Catalog Showroom
• Specialty Retailers
• - Limited Line
• - Off Price Retailers
• - Category Killers
• - Convenience stores

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Department Store

• Chain operations
• Wide variety selection
• Full service - delivery, credit, returns, repair
  
• Examples
• Boscovs, Macys
• Bloomingdales

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• Supermarkets - Large, self service stores with
  wide variety of food some nonfood products
• Low mark ups profit margins, Departmentalized
  with Centralized checkout, Ex Albertsons,
  Safeway

• Superstores Very large outlets that carry food
  and nonfood products found in supermarkets, plus
  most routinely purchased consumer products

10
Hyper-markets A Sure - Fire Hit, Bombs
Discount Store
Super Center
Hypermarket
.
Average size (in square feet)
70,000
150,000
230,000
200 - 300
300 - 350
400 - 600
Employees
Annual sales per store (in millions)
10 - 20
20 - 50
75 - 100
15 - 16
7 - 8
18 - 19
Gross profit margins
Stock-keeping units (Number of different kinds of
items stocked)
60,000 - 70,000
60,000 - 80,000
100,000
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Specialty Stores
Convenience Stores

• Deep Selection (Product line)
• Fashion response leader
• Personalized service
• Narrow Variety (Product line)
• High markup
• Ex The GAP, a SPA, bookstore
• Wallpapers to Go,

• Limited variety
• Shallow selection
• Fast service, High markup
• Examples 7-11, Wawa Circle K, Sheetz

STOP GO
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Other Types of In-Store Retailing

• General mass merchandiser
• Catalog showroom
• Warehouse club
• Specialty mass merchandiser
• Off-price retailer
• Category Killer - Ex.
  Toys R US

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Category Killers
Just For Feet, the category killer in the
athletic footware and apparel sector founded in
1977, cruised through the 1990s. However, Just
For Feet has suffered financial setbacks from
a lack of adapting to changes in the
evolving retail landscape.
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The Wheel of Retailing
- retailers usually enter the market with low
service, low margin price operations but evolve
into higher service, cost price merchants.
High status, margin, price (Specialty store)
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Wheel of Retailing
High Prices Markups,
Small general stores
Factory outlets

Department Stores



Many services,

Members Only



Expensive Surroundings,







discount
outlets
Enter Department stores



Category killers













Low prices Low markups,

Low price
s


Entry of Discount stores
markups, few
few services,
Department
,
services

(austere) surroundings
stores

austere






1955
-
1970


1990s

1890
-
1910


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History

• In 1936,at age 30, Paul D'Amour , a bread route
  salesman for the Wonder Bread Baking Co.
  purchased the Y Cash Market in Mass.
• In 1947, it was incorporated, Big Y Foods, Inc.
  In 1952, they leased a 10,000 square foot store
  (Springfield)
• In the 1980s it was a technology leader in
  scanning, information systems security.

Progressive Grocer, Mar. 2003
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Their goal is to exceed their customers' evolving
expectations by seeking better ways to create and
deliver world class service and value.

• MARCH 25, 2003 -- It expanded its online
  shopping service to include Unlimited Choices, a
  program to give customers access to more than
  30,000 additional products such as ethnic
  special dietary foods A wide assortment of
  non-food items, including toys, books, housewares
  and gifts not carried in a typical Big Y store. A
  typical 55,000 square foot Big Y store carries
  some 35,000 different items.( bigy.com)

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3 Major Types of Non Store Retailing

• A. Direct Selling
• (face to face)
• B. Direct Marketing
• (non personal mediums)
• C. Automatic Vending

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A. Forms of Direct Selling

• Direct Selling
• Bank Retailing

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B. Forms of Direct Marketing
Direct-Response Marketing

• Catalog Marketing

Television Home Shopping
Telemarketing
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On line Retailing (E-Tailing) Advantages
Forms of Direct Marketing
Not location bound
Interactive
Convenient
Shopbots
E-tailing was about 20 billion dollars in 2000
and estimated to rise to over 100 billion by 2005.
22
Percentage of Sales Online by Retail Segment
Source Investors Business Daily, Wednesday,
September 5, 2001, p. A6.
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Internet Retailing Disadvantages
Forms of Direct Marketing
Privacy/Security
Examination
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C. Forms of Automatic Vending

• The use of machines to dispense products includes
  items such as candy, chewing gum, soft drinks,
  cigarettes, newspapers, and coffee
• Advantages small amount of space needed and no
  sales personnel
• Disadvantages high costs of equipment and
  frequent servicing

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Strategic Retailing IssuesThe Marketing Mix
Merchandise Assortment Store Atmospherics Customer
Service
Retail List Price Discounts Credit
Product Price
1 Customers
Advertising Personal Selling Publicity
Sales Promotion
Location, Location, Location!
Place Promotion
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Strategic Issue 1. Retail Store Location

• Factors affecting location
• Intended target market
• Type of products
• Suitability of site for customer access
• Characteristics of existing retail operations

Three most important words in retailing Location
location location!
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Strategic Issues 1. Location Dynamics

• Consumers want convenience, a subjective
  measurement
• Convenience Measurements
• - Distance - Parking
• - Time - Traffic congestion
• ? Convenience

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LOCATION sets the trading area

• Free standing structure
• Central Business District (CBD)
• Shopping Malls (avg. age 23 yrs 2002)
• - Neighborhood shopping center
• - Community shopping center
• - Regional shopping center
• Non Traditional Shopping Center
• - Factory Outlets
• - Mini warehouse mall

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Consumer Shopping Patterns

• of Retail Chains Customers also
  shopping at
• Retail Chains Sears Penny
  K-Mart
• Sears X 66
  81
• Penny 75 X
  80
• K-Mart 69 60
  X

Locate near to competitors for comparison shopping
Source Scarborough Research, Cross Shopping
Patterns, Stores (June 1986), p. 13.
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Strategic Issue 2 Merchandise Assortment

• Retail buyers must match their product selection,
  quality, price with constantly changing consumer
  wants.
• Scrambled merchandising- adding unrelated
  products to generate traffic higher margins

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Types of Merchandise Change

• - The retail store merchandise must change as
  consumer wants change
• Product Selling Cycles
• Fad..a relatively short term selling life cycle
  - (under six months)
• Fashion.a relatively enduring selling lifecycle
  - (over 1-2 years)

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Strategic Issue 2 Merchandise Assortment Plus
Store Location
Store Promotions
Store Hours
Targeted Customers
Store Layout/Image
Store Services
Store Personnel
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Many consumers value finding bargains.
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Store Atmospherics

• The sum total of all store stimuli, interior
  exterior physical characteristics that appeal to
  emotions (psychological field)
• Components Ambient factors, Design and Social
  Factors.

• Ambient Factors (Perceptions)
• - lighting
  - sounds
• - smell

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Store Atmospherics

• Design Factors (Perceptions)
• - Floor covering - Ceilings
  -
  Wall coverings - Dressing Rooms -
  Displays/Fixtures - Aisles
• - Color - Layout
• - Cleanliness - Signage
• - Furnishings - windows

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Store Atmospherics

• Social factors In store service
  (sales personnel social emotional labor)
• - Courteous ? Rude behavior
• - Knowledgeable ? Low information
• Service ? Insincere
• Employee dress norms (casual ??)
• Make it convenient pleasurable for customers to
  shop and pay for merchandise

Body Scan computers
personal service,
selling awareness?
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In Store Pre sale Service

• Personal Service Climate- Calls for a highly
  motivated, experienced well paid work force
• - Retail jobs often pay poorly, are not
  challenging and produce high turnover

Average length of employee tenure with retailers
Estimates 2005
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Post-Sale Services

• Complaints and adjustments
• Credit Policies
• Product maintenance
• Product information
• Pick up/Delivery

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Strategic Issue Retailer Advertising

• Location Merchandise Services Atmospherics
  ? ? Store Image

Advertising Medium(s) Newspapers - Television -
Radio - Magazine - Direct Mail - Videos-Web
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Ideal Stores What factors are most important in
deciding where to shop? surveyed women said

• Price and Value
• Quality and Selection of Merchandise
• Service
• Shopping Environment

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11
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Source Newspaper Advertising Bureau Inc. (1986)
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Retail Positioning

• Identifying an underserved market niche, or
  segment, and serving it through a strategy that
  distinguishes the retailer from others in the
  minds of consumers in that segment

Example Wal-Mart

• Target Market - Middle class family
• Position - Price Leadership
• Every Day Low Prices
• Rollback gimmick
• Special Buys

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Segmentation, targeting and positioning

• Sam Walton computerized operations to lower costs
  to lower prices to meet target market needs with
  four different retail concepts
• Wal-Mart discount stores
• Supercenters
• Neighborhood Markets
• Sams Club

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Packaged Retail Environments

• Functional Advantages
• - Focus on customer satisfaction
• - Integrate total product offerings
• Result
• - Added value to product
• - Consumer loyalty increases

Examples Disneyland, Sea Cruises, Destination
Resorts
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Potential Channel Conflicts

• Retailers Suppliers
• Exclusive Distribution Intense Distribution
• Store Loyalty Brand Loyalty
• High Markup Volume Low Markup/High Volume
• Love - Hate Relationship

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• Perception as an Excellent Company
•    Company               Executives          Analy
  sts
• --------------------------------------------------
  --------------------
• BJ's (BJ)                 
   44                81
• Costco (COST)                54           
      100
• Dillard's (DDS)        
      63                  6
• Federated (FD)          
     33                56
• --------------------------------------------------
  --------------------
• J.C. Penney (JCP)           40                24
  
• --------------------------------------------------
  --------------------
• Kmart (KM)                  33                 0
  
• --------------------------------------------------
  --------------------
• Kohl's (KSS)                46                94
  
• --------------------------------------------------
  --------------------
• May (MAY)                   46                50
  
• --------------------------------------------------
  --------------------
• Saks (SKS)                  52                 6
  
• --------------------------------------------------
  --------------------
• Sears (S)                   57                11
  

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Consumer Relevancy Awards

• Consumer Relevancy Awards, Criteria
• Easy to shop/access
• Price/Value
• Product Assortment
• Service
• Enjoyable Shopping experience

• Consumer Rankings of store attributes
• 1. Cleanliness
• 2. Courtesy Respect
• 3. Easily visible prices
• 4. Well packaged products to avoid damage
• 5. An honest price

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Consumer Relevancy Award Winners (2001)

• Department Stores
• Grocery Chain
• Drug Store Chain
• Electronic Stores
• Specialty Store
• Clothing, shoes accessories
• Discount Store Chain
• Overall . . . . . . . . . . .

• J C Penny
• Publix
• CVS
• Best Buy
• Barnes Noble
• GAP
• Wal-Mart
• ???

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RESEARCHKnowing Your Customer
Level of Customer Service? High - - - Low
Sales Personnel? Hurried - - - Apathetic
Retail Store Characteristics
Product Selection? Broad - - - Narrow
Consumer Profile? Sex Age Education Income
Store Image? Conservative - - - Modern?
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Dual Wage Earners and Their Effect on Hours Spent
Shopping
Dual incomes rose ...
200
12
8
Families with Dual Incomes (1965 - 100)
Shopping Hours per
Month
and shopping hours dropped
4
100
0
1965 1980
1995 Year
SOURCE Vision for the New Millennium . .
.(Atlanta Kurt Salmon Associates, 1997). Used
with permission
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Hypothesis
Applied Research In Retailing
Congruency of scent and music as a driver of
in-store behavior

• Matching high arousal scent and high arousal
  music conditions will lead to enhanced
• (a) pleasure,(b) store environment, (c) impulse
  buying and (d) satisfaction, compared to
  mismatched conditions (ie. high/low or low/high).

Matilla,A.J.Wortz, Jrl of Retailing,Sumr2001
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ExperimentVariables

• For Scents
• Lavender low arousal scent
• Grapefruit high arousal scent
• For Music
• Slow tempo classical low arousal music
• Fast tempo classical high arousal music

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• Survey Method
• 343 customers were asked/270 participated
• Most were female and under 20
• 62 said they purchased something in the store

• Matching conditions produced higher responses
  than the mismatching conditions.
• Ex) When low arousal music was paired with low
  arousal scent, the perceived pleasure was higher
  than when low arousal music was paired with high
  arousal scent.

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Focus Group InterviewConsumer Summary (1 of 2)

• Overall Evaluation
• Merchandise Positive Negative
• Selection -
• Quality (Mixed) -
• Prices -
• Store
• Variety -
• Personnel -
• Appearances

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Focus Group InterviewConsumer Summary (2 of 2)

• Overall Evaluation
• Store Positive Negative
• Hours -
• Merchants -
• Bloomsburg Town
• Convenience
• Parking -
• Atmosphere
• Malls

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Bloomsburg Retailing Viewed From Three Distinct
Perspectives

• Older Consumers Working Consumers
• - limited expenditures - economy is causing
  minimum
• - buy basics purchases
• - sees average/good - sees limited variety
• variety - mobile, parking is inconvenient
• - captured in town - willing to travel to
  get it
• market
• College Student
• - spending limited amounts - waits to go
  home
• - sees poor variety - very selective
• - can walk to stores

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Retail Information System (RIS) and Merchandise
Management Issues
Company Goals
RFID
Technology updates Computer Body Scanner

Internet Strategy
Merchandise Information System
Human Resources Information
Promotion Information
Accounting and Financial Information
Operating Information
Database Marketing
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Franchising

• A franchiser licenses (to the franchisee) the
  right to distribute/sell specified products
  (trademark s) according to operational
  guide-lines (Time, place, price, supplies, etc.)
• Develops controls marketing strategies

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Franchising Advantages

• Less Capital Required
• Use the Experience of Others
• Assurance of Customers
• Rapid Product Distribution
• Smaller Probability of Failure
• Advertising Assistance
• Highly Motivated owner/operators

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Franchising Disadvantages

• Controlled by Franchiser (Power)
• Cost of Franchise
• Hard Work and Long Hours
• Reduced Personal Control