1. Chapter Eleven Retailing Strategies

2. Chapter Objectives Summarize the local retail landscape
Provide an overview and description of the store and nonstore retailing categories.
Address strategic issues in retailing related to retailer organization, merchandise and service mix, location, atmospherics, and future trends in retailing.

3. Retailing Defined Retailing in Rhode Island
Retailing: All the activities involved in the final stage of distribution, i.e., selling to final consumers
Functions performed by retailers:
Creating convenience for consumers
Informing consumers
Serving the other channel members
Retailing in Rhode Island

4. Retailing Formats Overview of Retail Formats
General Merchandise Retail
Specialty stores
Department stores
General merchandise
Discount stores
Off-Price retailers
Catalog showrooms
Food Retailing
Conventional supermarkets
Warehouse clubs or wholesale clubs
Convenience Stores
Non-Store Retailing
Internet retailing
Vending machines
Television home shopping
Catalog retailing and direct mail retailing
Direct selling

5. Top U.S. Retail Categories (based on sales)

6. General Merchandise Retailing
Specialty Stores
Narrow product line
Wide assortment
Specialize in a product category.
The Gap, Victoria’s Secret, Barnes & Nobles, Footlocker
Category killers (very large specialty stores)
Home Depot, Circuit City, Toys “R” Us
Department Stores
Broad variety
Fashions, appliances, electronics, furnishings
Sears, JC Penney, Dillard’s, Nordstrom
Anchor stores
Leased departments (cosmetics, jewelry)

7. General Merchandise Retailing General Merchandise Stores
General merchandise discount stores sell high volumes of merchandise, offer limited service, and charge lower prices.
All-purpose discount stores
Offer a wide variety of merchandise and limited depth, e.g., Wal-Mart
Category specialists
Carry a narrow variety of merchandise and offer a wide assortment, e.g., OfficeMax
Wal*Mart 1

8. General Merchandise Retailing Off-Price Retailers
Brand name and designer merchandise
Priced below regular retail prices
Overruns, irregular products, out-of-season
merchandise, excess inventories
Types of off-price retailers
Factory outlet stores, e.g., Ralph Lauren outlet store
Department store outlets, e.g., Off Fifth for Saks Fifth Ave
Close-out retailers, e.g., TJ Maxx
Single-price retailers, e.g., Dollar Store
Catalog Showrooms
High turnover merchandise
Brand names at discount prices
Orders placed from catalogs
Traditional catalog showrooms have disappeared (e.g., Service Merchandise)

9. Food Retailers Conventional supermarkets Superstores
Self-service retailers with annual
sales higher than $2 million
Less than 20,000 square feet of store space
Superstores
Stores with more than 20,000 square feet of space and $17 million in sales
Combine supermarket, discount,
and warehouse retailing
Facilitate one-stop shopping
Carry food and drug items, as well as non-food items
Superstores are called supercenters in the USA and hypermarkets in Europe and Latin America.

10. Food Retailers Warehouse Clubs Convenience Stores
Requires members to pay an annual fee
Operate in low-overhead, large warehouse-type facilities
Offer limited lines of brand name and dealer-brand groceries, apparel, appliances, and other goods at a substantial discount
Sell to final consumers who are affiliated with different institutions, as well as to businesses, e.g., Sam’s Club, Costco
Convenience Stores
Small retailers located in residential
areas, convenient to consumers.
Carry high turn-over necessities (bread, milk, coffee, medicine, gasoline) but also allows one-stop shopping, e.g., 7-11.
In the U.S., there are about 124,500 convenience stores that generate annually revenues of $283 billion.
To be competitive, many have added specialty services like a fast food restaurant or a car wash.

11. Nonstore Retailing Internet Retailing
Internet Retailing is becoming a very popular way of conducting business.
Traditional retailers They try to use the Internet to penetrate the market, provide convenience, and to diversify customer base.
New dot.com companies, e.g., ebay
Many traditional retailers are now starting to use this option as well, e.g., Ikea is also selling on their website.

12. Non-store Retailing Vending Machines Television Home Shopping
Vending machines are becoming more popular and advanced:
More vending machines accept credit cards.
Some actually show short videos of the product.
They are more conveniently located.
They offer 24-hour convenience.
They eliminate the need for a salesperson.
In Japan you can get almost anything in vending machines,
e.g., jewelry, flowers, beer, bread, etc.
Television Home Shopping
Television home shopping includes:
Cable channels selling to consumers in their homes
Infomercials
Direct-response advertising shown on broadcast and cable television.
The primary television networks in the U.S. are QVC (sales totaling $3.9 billion) and Home Shopping Network.
Catalog and Direct Selling
Catalog retailing
Direct mail
Catalogs and direct mail are especially popular with
30–39 year olds because of ease of shopping and time pressure.
Direct selling
Network marketing (multi-level marketing)

13. The Organization of Retailing
Ownership categories:
Independent retailer: Operates one outlet
that is conveniently located to the customer
Retail chains: Two or more outlets, and
involves central purchasing and decision-making
Retail franchises: Here a franchisor
allows the franchisee to operate one
or more units of the franchisor.
Retailer cooperatives: Associations of independent retailers who engage in
centralized buying and promotion,
e.g., Ace Hardware Stores

14. Strategic Issues in Retailing
Atmospherics refer to the physical attributes of the store or nonstore retailer, e.g., lighting, fixtures, tempo of music played, colors, and store layout. These are likely to create a particular mood for the customer and enhance the buying experience, increase the shopping time, and overall purchase amount.
Pricing*: Initial vs. Maintained Mark-up
Assortment*: Scrambled Merchandising
Location: Shopping Centers
Neighborhood, Community, Regional
Mall of America West Edmonton Mall World's Largest Malls

15. Retail Performance Issues*

16. Trends in Retailing
New retailers need to be innovative and proactive to survive.
Shortening retail life cycles: New forms of retail simply evolve faster, e.g., internet retail as opposed to department stores.
Wheel of retailing:
Retailers start off as low-margin, low-cost, and low-price store.
 Their success drives them to seek a broader customer base by including more services.
 Increased service leads to higher costs.
 Higher costs lead to higher prices.
 Higher prices lead to the loss of the initial customer
 New innovative retailers take away their customers.

17. Trends in Retailing (cont.)
Technology-based developments:
Technology is facilitating the retailing function, eliminating the need for sales people, and increasing the accuracy of transactions.
Many retailing functions have been transferred to machines. For example, pumping gas today is largely a self-service transaction, as is banking.
Optical scanners have greatly facilitated the checkout process, ensuring accurate calculation, and facilitating inventory control.
At many stores today, consumers can scan their own groceries and pay for them with credit cards, thus lowering the cost of human resources for the retailer.
The Internet enables traditional retailers to further penetrate their current market, diversify, and expand their market.
Broadening competitive base
Face greater competition from other retail categories
Scrambled merchandising
International expansion of retailers