RETAILING

What is Retailing? Retailing includes all activities involved in selling, renting, and providing good and services to ultimate consumers for personal, family, or household use.

Utilities Retailing Offers to Consumers Utilities are benefits or value received by users of a product

Utilities Retailing Offers to Consumers Time Utility – Having the good/service for the customer when they want/need it Place Utility – Having the good/service available to the customer where they want/need it Form Utility – Production or alteration of a good/service for the customer Possession Utility – Make a product/service easy for customer purchase

Classifying Retail Outlets Form of Ownership Level of Service Merchandise Line

Classifying Retail Outlets Form of Ownership Who owns the retail outlet? Independent Retailer Most common form of retail ownership An individual owns the business “Be your own boss” Personal service Anastasia’s Attic, Bud’s Tire

Classifying Retail Outlets Form of Ownership Who owns the retail outlet? Corporate Chain Multiple outlets under the same ownership Purchasing and decision making is centralized Great negotiation power Consumer can expect pretty much the same items in every outlet

Classifying Retail Outlets Form of Ownership Who owns the retail outlet? Contractual Systems Independently owned stores that band together to act like a chain Retailer sponsored cooperatives are when small, independent, retailers form an organization that operates from a wholesale facility cooperatively Buying power Perceived as a chain Pricing and promotions can be coordinated together

Classifying Retail Outlets Form of Ownership Who owns the retail outlet? Contractual Systems Independently owned stores that band together to act like a chain Wholesaler sponsored voluntary chains are when a wholesaler develops a contractual relationship with small, independent retailers to standardize and coordinate buying practices, merchandise programs, and inventory management efforts Volume discounts

Classifying Retail Outlets Form of Ownership Who owns the retail outlet? Contractual Systems Franchises An individual or firm (franchisee) contracts with a parent company (the franchisor) to set up a business or retail outlet Advantages Franchisor helps find location, set up facility, train employees, and helps with advertising Franchisee pays a “franchisee fee” and yearly royalties

Classifying Retail Outlets Form of Ownership Who owns the retail outlet? Contractual Systems Franchises Good for franchisees because well-known business, can get business advice Franchisors loose control but gets name out in more places

Classifying Retail Outlets Level of Service How much service is provided by the retail outlet? Self-Service – Little to no services provided by outlet Limited Service – Some service provided by outlet Full Service – A lot of services provided by outlet Bridal and Formal Shoppe

Classifying Retail Outlets Type of Merchandise Line How many different types of product an outlet carries and in what assortment. Depth of Product Line – The store carries a large assortment of each item Limited-line stores have a lot of depth in a related line of products Single-line stores have a lot of depth in one primary line

Classifying Retail Outlets Type of Merchandise Line How many different types of product an outlet carries and in what assortment. Breadth of Product Line – The variety of different items a store carries Department Stores Scrambled merchandising is having several unrelated product lines in a single store Supercenters

Nonstore Retailing Automatic Vending Direct Mail and Catalogs Products usually cost more than they do in stores Soft drinks, candy Direct Mail and Catalogs No store locations and store employees, less expense Easier to segment markets than traditional outlets Specialty catalogs for certain customers

Nonstore Retailing Television Home Shopping Telemarketing Products shown on tv and you call and purchase or purchase online Telemarketing Calling customers on phone to sell products Good way to target customers Do Not Call lists

Nonstore Retailing Online Retailing Available 24/7 Private Easy to compare prices Problem for retailers: 2/3 of customers place product in shopping cart and leave, 70% never come back booksamillion.com offers a place to compare prices with amazon.com, barnesandnoble.com, and borders.com

Nonstore Retailing Online Retailing Interactive parts of websites give advantage over competition

Nonstore Retailing Direct Selling “Door-to-door retailing” – direct sales of goods and services to consumers through personal interaction and demonstrations in their home or office

Nonstore Retailing Direct Selling U.S. direct selling has declined Retail chains have similar items for cheaper prices Less stay-at-home moms/wives Outside U.S. sales are increasing Distribution channels may not be as strong, so “door-to-door” is more important People do not know brands, so one-on-one is important

Retailing Strategy Retail Positioning Matrix Breadth of Product Line (range of products sold) Value Added (Includes location, product reliability, prestige)

Retailing Strategy

Retailing Strategy Retailing Positioning Matrix 1 – High value added, broad product line Store design is important Products have high profit margin, high quality High levels of service

Retailing Strategy Retailing Positioning Matrix 2 – Low value added, broad product line Low price, high sales volume Low service Price oriented 3 – High value added, narrow product line Product status is important High levels of service

Retailing Strategy Retailing Positioning Matrix 4 – Low value added, narrow product line Targeted at value-conscious customers All the stores are “cookie cutter” Basically same store design and merchandise Achieve economies of scale by centralized advertising, merchandising, buying, and distribution

Retailing Strategy Retailing Positioning Matrix Can have stores in different places on the matrix, done with different store names

Retailing Strategy – Retail Mix The activity related to managing the store and the merchandise in the store Price Store Location Retail Communication Merchandise

Retailing Strategy – Retail Mix Retail Price Markup – How much is added to the product cost to get the selling price that the customer pays Original markup = Initial selling price – Retail cost Maintained markup = Final selling price – Retail cost

Retailing Strategy – Retail Mix Retail Price Markdown – Discounting a product Some stores use markdowns as part of everyday strategy Dangerous because some people perceive quality based on price Shrinkage

Retailing Strategy – Retail Mix Retail Price Off-pricing retailing is selling brand name merchandise at lower than regular prices Off-price retailers buy excess inventory below wholesale prices Discount stores buy at wholesale price and add little mark-up

Retailing Strategy – Retail Mix Retail Price – Off-price Retailers Outlet Store 20%-30% less than MSRP Use to get rid of excess inventory Single-Price Retailers Relatively small stores “Value”

Retailing Strategy – Retail Mix Retail Price – Off-price Retailers Warehouse Club Large stores Very plain, no decoration Charge annual membership fee Not a lot of services provided

Retailing Strategy – Retail Mix Store Location – Where? How Many? Central Business District Downtown Original retail outlets Bad parking Older area

Retailing Strategy – Retail Mix Store Location Regional Shopping Centers Usually 50-100 stores Serves a large trading area Usually between 300,000 – 850,000 sq. ft. Has 1 or 2 full-line department stores Well-known, “anchors”

Retailing Strategy – Retail Mix Store Location Community Shopping Center Usually a discount store or jr. department store as main tenant Usually between 100,000 – 450,000 sq. ft. Maybe 20 – 40 stores Strip Location Clusters of stores Unplanned variety of stores

Retailing Strategy – Retail Mix Store Location Power Center Large shopping strip Multiple anchors Convenient location Combination of malls, strip locations, and others

Retailing Strategy – Retail Mix Retail Communication How is store image portrayed? Prices Layout Merchandise Design

Retailing Strategy – Retail Mix Merchandise Want the right breadth and depth of products for your target market Category management A manager is assigned the responsibility for selecting all products that customers in a market segment view as substitutes for each other

Future of Retailing Multichannel Retailing Using a combination of traditional store and nonstore formats Simple, convenient Options!!

Future of Retailing Shopping Behavior Consumers want convenience and service